ML20206E807

EDO Control of Rulemaking Package Re 10CFR50.54(w), Mandatory Property Insurance for Decontamination of Nuclear Facilities. Continuation of Rulemaking Approved

ML20206E807
Person / Time
Issue date:	11/27/1985
From:	Dircks W NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO)
To:	Kerr G NRC OFFICE OF STATE PROGRAMS (OSP)
References
NUDOCS 8606240013
Download: ML20206E807 (134)

Text

{{#Wiki_filter:7 MOV 271985 MEMORANDUM FOR: G. Wayne Kerr, Director Office of State Programs FROM: William J. Dircks Executive Director for Operations

SUBJECT:

CONTROL OF NRC RULEMAKING By memorandum of February 13, 1984, " Control of NRC Rulemaking by Offices Reporting to the EDO," Offices were directed that effective April 1, 1984, (1) all offices under EDO purview must obtain my approval to begin and/or continue a specific rulemaking, (2) resources were not to be expended on rule-makings that have not been approved, and (3) RES would independently review rulemaking proposals forwarded for my approval and make reconinendations to me concerning whether or not and how to proceed with the rulemakings. In accordance with n1y directive, the following proposal concerning rulemaking has been forwarded for my approval. Proposed revision of 10 CFR 50.54(w) to increase the mandatory property insurance for decontamination of nuclear power facilities after an accident. (Sponsored by SP - memorandum, Minogue to EDO dated October 21,1985.) I approve continuation of this rulemaking. The NRC Regulatory Agenda (NUREG-0936) should be modified to reflect the status of this rulemaking. (Signes William L Dircks William J. Dircks Executive Director for Operations cc: V. Stello Distribution: J. Roe WJDircks JHSniezek H. R. Denton VStello WSchwink J. Taylor JPhilips JHenry R. B. Minogue E00 rf Central File P. G. Norry DEDROGR cf J. G. Davis 8606250013 851127 M $0 PDR liR

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r o i f fb W f 4, UNITED STATES {i ge l'g NUCLEAR REGULATORY COMMisslON / g8 C g j WASHINGTON, D. C. 20555 s z \\***.*/ OCT 211385 MEMORANDUM FOR: William J. Dircks Executive Director for Operations FROM: Robert B. Minogue, Director Office of Nuclear Regulatory Research

SUBJECT:

CONTROL 0F NRC RULEMAXING: RES INDEPENDENT REVIEW 0F CONTINUATION OF ONG0ING RULEMAXING SPONSORED BY SP Based on our independent review of the continuation of the ongoing rulemaking, " Mandatory Property Insurance for Decontamination of Nuclear Facilities," sponsored by SP, RES agrees with the recomendation of the Director, SP, that this rulemaking effort should continue. This rulemaking would amend 10 CFR 50.54(w) by increasing the required onsite property damage insurance to $1.02 billion in order to pay the costs of cleanup following an accident at a comercial nuclear' power plant. The NRC believes that such insurance should be required so that the financing and pace of cleanup following an accident does not become a public health and safety problem such as occurred at TMI-2. At this time there has been a proposed rule amendment issued and public coments received. Of the 33 comments received on the proposed rule very few opposed increasing the amount of insurance required. The rulemaking is also considering the issue of whether a decontamination priority should be placed on insurance aroceeds received by a licensee and the issue of what the NRC should do about t1ose licensees who are prevented by State law from buying the full amount of insurance required. These issues are quite complex and engendered most of the comments received on the proposed rule. The staff is nearing the completion of its analysis of these issues and will base its recommendations to the Comission on this analysis. Because these issues affect public health and safety and because the Comission has expressed an active interest in them, the staff recommends that they continue to be treated in the rulemaking. Further rulemaking is expected to result in either a revised proposed rule or in a final rule. The basis for the RES recomendation is as follows: o The pro)osed rule amends the existing 10 CFR 50.54(w), promulgated in Marc 1 1982, which currently requires a utility to obtain onsite property damage insurance. The amendment would increase the amount of insurance which must be maintained to $1.02 billion because recent studies have shown that the amount of insurance required by current regulations is inadequate to cover postaccident cleanup costs. i

3 0- ..o William J. Dircks 2 W 21 E5 o Proceeding with rulemaking whether it results in a revised proposed rule or a final rule should result in improving the assurance of the availability of funds for cleanup following an accident. This will reduce the potential for inadequate or delayed cleanup caused by insufficient funds thus protecting public health and safety by reducing risks of unnecessary radiation exposure of the public and workers. o This action is consistent with previous Commission actions indicated in earlier Federal Register notices promulgating 10 CFR 50.54(w) which contained mandatory property insurance requirements and in the Federal Register notice proposing amendments to 10 CFR 50.54(w). o This action is referenced in the proposed rulemaking on decommissioning (50 FR 5600) and it is indicated in that rulemaking that acceptability of certain decommissioning funding methods is dependent on sufficient insurance being required by 10 CFR 50.54(w). The com lete RES independent review package has been sent to OED0 (Attention: DEDR0GR and to the Director, SP. ( Robert B. Minogue, D' ector Office of Nuclear Regulatory Research

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RES INDEPENDENT REVIEW PACKAGE 1 1 I i 1

RES INDEPENDENT REVIEW BOARD VOTING SHEET TO: RIRB FROM: F. P. Gillespie, Chairman, RIRB TITLE OF RULEMAKING: Mandatory Property Insurance for Decontamination of Nuclear Facilities A EE WITH DRAFT RES REQUEST RIRB y INDEPENDENT RECOMMENDATIONS MEETING. IN DRAFT INDEPENDENT REVIEW PACKAGE. MODIFY DRAFT RES NOT PARTICIPATING. INDEPENDENT RECOMMENDATIONS AS INDICATED BELOW. COMENTS AND SUGGESTIONS: 4 h / nnW! MEMBER, RIRB Th1/8 f DATE

RES INDEPENDENT REVIEW BOARD V0 TING SHEET T0: F. P. GILLESPIE, CHAIRMAN, RIRB FROM: K. R. Goller, Member, RIRB TITLE OF RULEMAKING: Mandatory Property Insurance for Decontamination of fluclear Facilities / AGREE WITH DRAFT RES REQUEST RIRB v/ INDEPENDENT RECOMMENDATIONS MEETING. IN DRAFT INDEPENDENT REVIEW PACKAGE. MODIFY DRAFT RES NOT PARTICIPATING. INDEPENDENT RECOMMENDATIONS AS INDICATED BELOW. COMMENTS AND SUGGESTIONS: K. R. Goller MEMBER, RIRB S//3/W DATE

RES INDEPENDENT REVIEW BOARD VOTING SHEET T0: F. P. GILLESPIE, CHAIRMAN, RIRB FROM: W. M. Morrison, Member, RIRB TITLE OF RULEMAKING: fiandatory Property Insurance for Decontamination of Nuclear Facilities AGREE WITH DRAFT RES. REQUEST RIRB INDEPENDENT RECOMMENDATIONS MEETING. IN DRAFT INDEPENDENT REVIEW PACKAGE. MODIFY DRAFT RES NOT PARTICIPATING. INDEPENDENT RECOMMENDATIONS AS INDICATED BELOW. i COMMENTS AND SUGGESTIONS: W/Hwa W. M. Morrison MEMBER, RIRB c//r/vr DATE

Y.s/ ~ y ~. (2 O S. ; ~ yp $4 s N~ ,,.f note It0UTING AND TRANSMITTAL SUP Jyy 311985 14k me esce symbol. room number. Initsats Date AssacF/Peet) g, W. M. Morrison, Member, RIRS g, K. R. Goller, Member, RIRB g G. A. Arlotto, flember, RIRB g F. P. Gillespie, Chainnan, RIRB E y-nsteen Fue posee end natum maproval For Caserence Per Conversation As Requested For Correction Propefe Reply certulate For Your Information See bee t-. J Investigate Signature t cur -. Justify asasARas " h ) ) ery frofeeYf T'e M ** C6 h'~ w ea,,,; 4,.,.c u~Joan Fa u), ltu ' i We are at step III.C.2, "RIRS deliberations," of the RES independent review procedures for the attached specific ongoing rulemaking sponsored by.S'P Please evaluate the attached dra'ft independent review package and provide RAftRB with your voting sheet indicating your position on the rulemaking. Your response by c.o.b. JUN 1 9 1985 will assist in RES' making independent recommendations i to the EDO in a timely manner. DO 900T use this form as a RECORD et approvels, eencurreness, elleposals. steerenees. and simiter estions FM3tL (Name, erg. sym / Post) Room Me.% RA!!RB staff Penne no. 443-7885 seenace grygoNAL POfted 41 (flev. 7-76) e cros nos o. ist us um N

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. # "'c % UNITED STATES + NUCLEAR REGULATORY COMMISSION WASHINGTON. D. C. 20555 MEMORANDUM FOR: William J. Dircks Executive Director for Operations FR0lt: kobert B. Minogue, Director Office of Nuclear Regulatory Research

SUBJECT:

CONTROL OF NRC RULEMAKING: RES INDEPENDENT REVIEW OF CONTINUATION OF ONGOING RULEMAKING SPONSORED BY SP l Based on our independent review of the continuation of the ongoing rulemaking, "Handatory Property Insurance for Decontamination of Nuclear Facilities" j sponsored by SP, RES agrees with the recomendation of the Director, SP, that this rulernaking effort should continue. This rulemaking would amend 10 CFR 50.54(w) by increasing the required onsite property damage insurance. The rulemaking is also considering the issue of placing a decontamination priority on insurance proceeds received by a i licensee and the issue of what the NRC should do about those licensees who are prevented by state law from buying the full amount of insurance required. The rulemaking would affect electric utility licensees. At this time, there has been a proposed rule amendment issued and public comments received. Further rulemaking is expected to result in either a revised proposed rule or in a final rule. The basis for our recomendation is as follows: o It' it is determir.ed that a revised proposed rule is to be prepared, proceeding with the rulemaking would have the benefit of enabling NRC to obtain additional industry and public input regarding the i issues noted above related to mandatory property insurance which can be factored into any subsequent rulemaking. o Proceeding with rulemaking whether it results in a revised proposed rule or a final rule should result in improving the assurance of the timely availability of funds for cleanup following an accident. This will reduce the potential for improper or delayed cleanup caused by insufficient funds and will serve to protect public health and safety by reducing risks of radiation exposure of the public and workers. l a

Uilliam J. Dircks 2 o This action is consistent with previous Comission actions indicated in earlier Federal Register notices promulgating 10 CFR 50.54(w) which contained mandatory property insurance requirements and in the Federal Register notice proposing amendnents to 10 CFR 50.54(w). The complete RES independent review package has been sent to DEDO (Attention: DEDROGR) and to the Director, SP. Robert B. Minogue, Director Office of Nuclear Regulatory Research

Enclosures:

1. Sponsoring Office Review Package

2. _ Additional Papers used to support RES staff review 3.

RES Staff Recomendations 4. RES Staff Review

l RULEMAKING REVIEW PACKAGE RECEIVED FROM SP

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MAY 011985 MEMORANDUM FOR: William J. Dircks Executive Director for Operations FROM: G. Wayne Kerr, Director Office of State Programs

SUBJECT:

OSP REVIEW AND RECOMMENDATIONS CONCERNING ON-G0ING PROPERTY INSURANCE RULEMAKING I have reviewed the enclosed analysis and recommendations prepared by my staff and request your approval of the continuation of the rulemaking to increase the amount of property damage insurance that reactor licensees are r'equired to carry. ~ .(k) G. Wayne Kerr, Director Office of State Programs

Enclosures:

1. Updated Regulatory Agenda

2. Staff Recommendations Concerning Proposed Revisions to NRC's Property Insurance Regulations l

3. Staff Analysis Concerning Proposed Revisions to NRC's Property Insurance Regulations

4. Federal Register Notice Publishing Proposed Rule

5. SECY-84-300 with enclosures ett 1. RES Mall nnd Record: Section ATTN: RAMRB for Independent Review

2. Cost Analysis Group, ORM

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TITLE: Mandatory Property Insurance for Decontamination of Nuclear Facilities CFR CITATION: 10 CFR 50 AESTRACT: The propoced rule *ould require an increase in the amount of on-site property dam ge insurance from the current minimum of $585 million to S1.03( illion. The NRC believes that such insurance 4/' should be required so that the financing and pace of cleanup following an accident does not become a public health and safety problem. Recent studies indicate that as much S1.06 billion may be required to cover on-site cleanup of the worst reactor accidents if inflation and other factors are included. Other issues addressed in the proposed rule are whether the Federal g'overnment can preempt State law that prohibits certain public utilities from buying insu:ence offered by mutual companies or requiring payment of a retrospective premium and whether a priority of payment of insurance proceeds for decontamination and cleanup can be imposed. Action in these areas is required for the samt reason as imposition of general insurance requirements, i.e. a gito (13sve'the financial aspects of recovery after an accident vi from having an adverse impact on public health and safety. Alternatives to the proposed rule that were considered included (1) requiring a lower dollar amount and (2) not explicitly requiring insurance above that currently required but rather allowing the necessity for additional insurance to be determined by economic regulators at the State level. The impact of the proposed rule on licensees would probably not be large. Most licensees currently purchase insurance in excess of $1.0A billion. Approximately 10 licensees would be required to carry mcce insurance than they otherwise would for an annual incremental premium cost of roughly S1 million per year. Thus the total impact of the rule would be approximately $10 million per year. The impact on the public would generally be positive in-that public health and safety would be better protected. The Itapact on the NRC would be minimal with respect to increasing the amount of insurance. A decontamination priority, if it were invoked, could require additional hearings with attendant costs. One-half of a staff year is required by OSP to continue the rulemaking, with minimal impact on other offices expected. 4

a PAGE 2 TITLE: 1 Mandatory Property Insurance for Decontamination of Nuclear l Facilities TIMETABLE: ANPRM 06/24/82 47 FR 27371 ~ ANPRM Comment Period Begin 06/24/82 47 FR 27371 ANPRM Comment Period End 09/22/82 NPRM 11/08/84 49 FR 44645 NPRM Comment Period Begin 11/08/84 49 FR 44645 NPRM Ccmment Period End 02/07/85 FINAL RULE FOR DIVISION REVIEW 05/17/85 OFFICE CONCURRENCE ON FINAL RULE COMPLETED 09/ W/85 7/27 FINAL RULE PACKAGE TO EDO- $f'^^'^5 /2 p. f / g [ FINAL RULE PUBLISHED 1$/31/&& / LEGAL AUTHORITY: 42 USC 2201 EFFECTS ON SMALL BUSINESS AND OTHER ENTITIES: No AGENCY CONTACT: Robert S. Wood Nuclear Regulatory Commission Office of State Programs Washington, DC 20555 301 492-9885 t -~,

Einlosure 2 Staff Recommendation Concerning Proposed Revisions to NRC's Property Insurance Regulations Based on the analysis (Enclosure 3) provided in this package, the staff recomends that the rulemaking be continued to its conclusion. A proposed rule was issued on November 8, 1984 (49 FR 44645), to which 33 comments were addressed. The staff believes that, at a minimum, required on-site property damage insurance should be increased to the extent determined to be necessary in a PNL technical report (NUREG/CR-2601). This level of insurance should be required so that the financing and pace of cleanup following an accident does not become a public health and safety problem such as occurred at TMI-2. Of the coments received on the proposed rule, very few opposed increasing the amount of insurance required. Two related issues are quite complex and engendered most of the coments received on the proposed rule. The first involves whether a decontamination priority should be placed on insurance proceeds received by the licensee. The second involves the question of what the NRC should do about those licensees who are prevented by State law from buying the full amount of insurance required. The staff is nearing the completion of its analysis of these issues and will base its recomendations to the Comission on this analysis. Because these issues affect public health and safety and because the Comission has expressed an active interest in them, the staff recommends that they continue to be treated in the rulemaking. At this point, the staff believes that the rulemaking can be completed by the issuance of a final rule upon approval by the Comission. 3 However, because of the complexities of these issues, a revised proposed l rule might be required. In either case, the staff recomends that the rulemaking be continued. l i

k Staff Analysis and Recommendations Concerning Proposed Revisions to NRC's Property Insurance Regulations A. & B. Issue and Necessity for Addressing Issue: Currently, NRC Regulations (10 CFR 50.54(w)) require substantial amounts of on-site property damage insurance (currently a minimum of $585 million) to pay for the costs of cleanup following an accident at a commercial nuclear power facility. The NRC believes that such insurance should be required so that the financing and pace of cleanup following an accident does not become a public health and safety problem such as occurred at TMI-2. Recent studies by NRC contractors indicate that as much as $1.06 billion may be required to cover on-site cleanup of the worst reactor accidents if inflation and other factors are included. (See Technology, Safety and Costs of Decomissioning Reference Light Water Reactors Following Postulated Accidents (NUREG/CR-2601), Pacific Northwest Laboratories, November 1982). Two related issues addressed by the staff upon direction from the Comission are 1) whether the Federal government can preempt State law that prohibits certain public utilities from buying insurance offered by mutual companies or requiring payment of a retrospective premium and 2) whether a priority of payment of insurance proceeds for decontamination and cleanup should be imposed. Action in these areas is required for the same reason as imposition of general insurance requirements - i.e., to remove the financial aspects of recovery after an accident from having an adverse impact on public health and safety. 7 C. Alternatives to Rulemaking Several alternatives exist to requiring $1.02 billion in insurance. First, some lower dollar amount could be required. However, no other figure is suggested either by the technical studies of the amount of insurance needed, or by the amount actually available today. Another approach, proposed in SECY-83-211, is not to explicitly (w) quire re insurance above that currently required by 10 CFR 50.54 but to allow the necessity for additional insurance to be determined by economic regulators at the State level. This approach was disapproved l by the Comission and thus is no longer proposed. There appears to be no approach other than rulemaking to provide across-the-board the l insurance determined to be necessary to protect public health and I safety. D. How the Issue Will Be Addressed Through Rulemaking l A rule was published in the Federal Register on November 8, 1984, l (49FR44645)whichproposedincreasingon-sitepropertyinsurance carried by reactor licensees to $1.02 billion. In response to that rule, the NRC received 33 comments, most of which supported the amount of required insurance proposed by the NRC. However, many of the commenters took issue with the Comission's proposal to institute a 4 modified decontamination priority, arguing among other things that such a priority would conflict with existing indenture language, and would, by being implemented by an order by the Director of Nuclear Reactor Regulation, lead to extensive hearings and would thus unduly restrict a utility's options after an accident. Some coninenters proposed alternative wording to reduce such problems, while others were against any form of decontamination priority. Other commenters suggested that the Conrnission may not have gone far enough in its decontamination priority. To ensure that funds would be available aftar an accident, insurance proceeds should be placed in a trust fund so that the indenture trustee could not refuse to release funds for cleanup. The staff is currently analyzing options in this area and will make recommendations to the Commission based on a thorough consideration of coninents. Another issue raised in the proposed rule and of considerable concern to affected licensees is that certain States essentially prohibit their publicly-owned utilities from purchasing insurance offered by mutual insurance companies (i.e., companies owned by those buying the insurance) or requiring payment of retrospective premiums after an accident has occurred. The Commission's proposed rule would require an amount of insurance such that licensees would be required to purchase both advance premium and retroactive premium and mutual insurance to be in compliance with the rule. Further, the NRC's legal analysis of this issue has concluded that the Federal government cannot preempt State law that prohibits such insurance. The NRC's options in this issue are either to exempt those affected public utilities from the requirements of the rule or to accept some tenable alternative such as self-insurance or other surety-type arrangements. E. How the Public, Industry and NRC Will Be Affected As a Result of the Rulemaking As indicated in the Regulatory Analysis enclosed with SECY-84-300, the impact on licensees of requiring $1.02 billion would probably not be large. Most licensees currently purchase in excess of $1.02 billion of insurance. Only 20 licensees currently carry less than $1.02 billion. Of these, five have been exempted by NRC from coverage in excess of $500 million and several others are not allowed to carry the full amount they desire because of State law as discussed above. The impact on those remaining licensees may be estimated by calculating the excess insurance pr emium t!.;.j.sM h:;; t: ;;y. f.;;r::t:t:1y 10 11censees woulo De requireo 1.0 carry swre irisurotice Liiasi Liit:y otherwise would for an annual incremental premium cost of roughly $1,000,000 per year. Thus the total impact of the rule would be approximately $10,000,000 per year. In addition, some licensees suggest that their capital costs might be increased if investors perceive that a decontamination priority could be implemented which threatens the recovery of their investment after an accident. However, this is a speculative assertion which no commenter supported by actual cost estimates. Consequently, no dollar value could be meaningfully developed. Impact on the public would generally be positive in that public health and safety would be better protected. Likewise, ratepayers and stockholders would be protected to the extent that extra insurance, albeit at an annual premium cost, would mitigate possible future outlays from rates or equity capital for accident recovery. The impact on the NRC should be minimal with respect to increasing the amount of insurance. A decontamination priority, were it to be invoked, could require additional hearings with attendant costs. On the other hand, adequate insurance would forestall possible NRC involvement in a licensee's financial problems if it were inadequately insured. F. NRC Resources and Scheduling Needed for the Rulemaking One half staff-year is required by OSP to continue the rulemaking. Other offices can expect minor impact on their workloads to review OSP's work. The rulemaking should be scheduled for review by the Commission during August 1985. I I h t

F kI Fed;r:I Regist:r / Vol. 49. No. 218 / Thursday. November 8.1984 / Proposed Rul:s '44645 g-d;p:rtm:ntil supirvision, es soon notics,in writing to the Administrator to do so, but cssuranca of consideration f thtreafter as practicable. within 30 days of receipt of such notice. cannot be given except as to comments a t-(ii)In any situation where the program In those instances where there are received on or before this date. is found by the Administrator to be issues of fact a hearing under AnoREsSEs: Mail written comments to: j g unacceptable, written notification shall applicable Rules of Practice, which shall Secretary U.S. Nuclear Regulatory be given to the applicant of the basis for be adopted for the proceeding, will be Commission. Washington, DC 20555 the denial.The apphcant will be provided to the establishment owner or Attention: Docketing and Service _I, afforded a reasonable opportunity to operator to resolve the conflict.The Branch. ? modify the program in accordance with Administrator's termination of approval the notification. The applicant shall also shall remain in effect pending the final Deliver comments to: Room 1121.1717 bi afforded a reasonable opportunity to determination of the proceeding. 11 Street. NW. Washington. DC. between submit a written statement in response (6)If approvalof the partialquality 8:15 a.m. and 5:00 p.m. weekdays. C to this notification of denial and/or to control program under the NTI system Copies of the regulatory analysis'. I rIquest a hearing on the denial.lf the has been terminated in accordance with OMB clearance supporting statement. cpplicant requests a hearing and the the provisions of this section, an the environmental assessment and { Administrator, after review of the application and request for approval of f nding of no significant impact. q cpplicant's answer to the notice. finds the same or modified quality control documents referenced in this notice. and Q that initial determination to be correct. program will not be evaluated by the comments received may be examined at: tha applicant must file with the flearing Administrator for at least 2 months from The NRC Public Document Room at 1717 Clerk of the Food Safety and Inspection the termination date. In order for the 11 Street. NW. Washington. DC. h{f ' request for hearing, which shall inspection required under the Act an FoR FURTHER INFORMATION CONTACT: Service the notification, answer and the Department to provide the Federal constitute the complaint and answer in establishment whose quality control Robert S. Wood. Office of State If' the proceeding, which shall thereafter be program has been terminated will be Programs. U.S. Nuclear Regulatory conducted in accordance with Rules of allowed to continus operating under the Commission. Washington, DC 20555 >y' Practice which shall be adopted for this traditional inspection system, provided Telephone (301) 492-9835. proceeding. all requirements of the Act and sUPPt.EMENTARY INFORMATION: 4 (iii) The approved partial quality regulations thereunder are met. control program constitutes an operating Done at Washington, DC. on: October 29.

Background

rgreement between the establishment {4 and the Department.The establishment On june 24,1982. an Advance Notige N Donald Wouston-of Proposed Rulemaking (ANPRM) was owner or operator shall be responsible T Ad*( trator.roadsafetyand/ngpection published in the Federal Register (47 FR ms E for the effective operation of the 8'"8- ![ approved partial quality control 27371).The notice sought comment on a program, and to obtain approval of any [n Da aan N nM us sm) report prepared for the staff by Dr. John e m cooss w " 9 changes required in that program to D. Long entitled Nuc/entProperty [ assure continuing compliance with the Insurance Status and outlook (NUREG-(. requirements of the Act and regulations 0891). which raised severalissues NUCLEAR REGULATORY p" thereunder.The Secretary shall provide Sumane to the Commission's final rule COMMISSION the Federal inspection necessary, as (47 FR 13750) adopted on March 31.1982 determined by the operating conditions to CFR Part 50 and codified as 10 CFR 50.54(w). (Copies j ct the establishment, to carry out his of NUREG4891 may be obtained under r:sponsibilities under the Act. Changes in Property Insurance the NRC/GPO Sales Program at a cost i. (3) TI e approval of the partial qualit: Requirements for NRC Licensed of $8.00 by writing to the Director. 3, control program under the NTI system Nuclear Power Plants Division of TechnicalInformation and may be terminated at sny time by the owner or operator of the official AGENCY: Nuclear Regulatory Document Control. U.S. Nuclear establishment upon written notice to the Commission. Regulatory Commission. Washington. Administrator. The establishment will ACTION: Proposed rule. DC 20555.) 10 CFR 50.54(w) currently requires operating reactor licensees to b2 provided inspection under the

SUMMARY

The Nuclear Regulatory carry both the maximum amount of remaining inspection sb' stem.

(4) The approval of t e partial quality Commission (NRC)is proposing to property insurance offered as primary h 't control program under the NTI system amend its regulations requiring licensees coverage by either American Nuclear to maintain substantial amounts of on-Insurers / Mutual Atomic Energy will terminate upon receipt by the establishment of written notice from the site property insurance to assist in the Reinsurance Pool (AN!/MAERP) or decontamination of their IIcensed Nuclear Mutual Limited (NML)-- p-Administrator (or his designee). Such ]'. notice will specify the deficiency and reactors.The changes are being currently $500 million-plus any excess l will be issued: proposed to increase the amount of coverage in an amount noless than that (l)If unwholesome or otherwise insurance required and impose a offered by either ANI/MAERP--585 edulterated poultry products are found decontamination priority on any million as of January 1,1984-or Nuclear l% by the Administrator to have been proceeds from suchinsurance. Although Electric Insurance Limited (NEIL}-$435 all commercial reactor licensees would repared for or distributed in commerce dFhn n m ( i If the esta ish en f is to comply opte, y ose do urrently Currently, the minimum required under with the partial quality control program carry the maximum property insurance the rule is $500 million primary coverage to which it has agreed, available would be affected. and $85 million excess coverage. By (5) The establishment owner or oATE: Comment period expires January buying both excess layers utilities are b operator receiving notice that approval 7.1985. Comments received after this able to purchase a total of $1.02 billion his terminated may respond to the date will be considered if it is practical in property insurance. l 8-* 8 e-

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44646 Feder:1 Reglater / V 1. 49, Ns. 218 / Thursday Novemb:r 8,1984 / Pr: posed Rul:s l f Analysis of Comments Mutual Limited (Nhit) and American publish annually the coverage carried by Nuclearinsurers/ Mutual AtomicEnergy ' all Ifcensees, and induce changes where The report by Dr. Long, together with Reinsurance Pool (AN1/MAERP) be. deemed appropriate through the state l four comprehensive questions posed by purchased. Although combining both and local political process. Althdu8h the staff to focutthe issues raised in NUREG-0891, formed the basis for plans could currently provide primary few commented on this proposal coverage of $1 billion, certain structural specifically, those that did preferred it to seeking public comment by the ANPRM. problems complicate this approach. As increasing insurance requirements The Commission received 47 comments indicated in NUREG-0891 and as directly. Some utilities opposed in response to the ANPRM. Comments several commenters developed further, reporting the coverage that they carried. were mostly from utilities or their both NML and AN!/MAERP use many Question 2:The second question counsel, but severalinsurers, of the same reinsurers to reduce their posed in the ANPRM asked whether t' individuals, and trade associations also exposure to possible accident claims. there should be special provisions for commented. Almost without exception. Some believe that reinsurers would be certain types of licensees. For example, commenters objected to the reluctant to expose themselves to the should smaller plants be allowed to buy I recommendations in NUREG-0891 same risk twice as they would do lf a less insurance because of potentially i although they stated that the report reactor bcensee were required to bbtain reducedlevels of contamination? Also, provided valuable insights and primary coverage both from ANI/ should the NRC exempt from applicable I historical perspective on the workings of MAERP and NML Thus,iflicensees portions of property insurance e nuclear property insurance. Few were required to buy insurance from requirements those uti'ities prohibited commenters appeared to object to the both offerers, the resultant combined by state law from obtaining coverage existing Commission rule on property coverage would be some indeterminate from certain types ofinsurers? Should insurance. Some utilities would have the Commission recognize in a revised rule levelless than a simple adding of utilities with multiple reactor sites be that reactor size should be considered capac! ties. Moreover, combining required to obtain coverage for each unit capacity at the primary layer might also separately, or is site. wide coverage when setting the required amount of affect the premium structure at the sufficient? insurance. A few utilities want the Commission to preempt the secondary layer. gg gg, ,g Another problem discussed in coverage limits, representatives of constitutional provisions of certain NUREG-0891 but more strongly utilities with smaller plants or unusuitl states that prohibit utilities from participating in mutual or retroactive emphasized by many commenters is design configurations (such as Fort St. assessment insurance plans. But, on the that, by requiring combmed primary Vrain, a high temperature gas cooled i whole, commenters did not object to the capacity, competition is reduced and. reactor (IITGR)) strongly urged the general thrust of the existing property possible antitrust problems are raised. Commission to allow reduced coverage Without the choice of coverage offered for them. Representatives of utilities insurance rule, nor to most of its specific provisions. With respect to the four by two competing insurers, they argued with large reactors did not comment on 5 questions posed by the NRC in the that resultant capacity might not grow this issue, indicated that no such ANPRM, a summary of the comments is as quickly as it otherwise would, terms distinction should be made, or suggested and conditions might not be as that distinctions be made by exception provided below, advantageous, and premiums might rather than the rule itself. Question 1:The first question asked what amount of insurance should be increase disproportionately. Few comments were offered on the required ifincreaned coverace is Other commenters indicated the issue cf whether the NRC should make required, what should be the' basis for difficulty in making combined coverages special allowance for those utilities such a requirement? One option compatible with the regulatory Prohibited by state law from buying proposed was that additional coverage environments within which utilities insurance from assessment or mutual could come about by the NRC publishing operate. Some utilities, either because of companies. Gcnerally, utilities in states annually the amount maintained by their own philosophy or because of with such provisions urged the each commercial reactor licensee. This constraints imposed by the state Commission to preempt state law. Other information could then be utilized by authority will not or cannot participate parties suggested that perhaps NRC market forces to optimize insurance in, for example, insurance plans that authority to preempt was not so clear provide for retroactive assessments or cut. Still other commenters suggested coverage. 1 Comments varied widely with respect that are offered by mutual companies. that a solution short of preemption may to the issue of how much insurance (Retroactive assessments are used in be available by working out this should be carried. Although some conjunction with, or to replace, i commenters believe that cleanup costs premiums payable at the beginning of problem with the states involved, associated with the TM1-2 accident are each policy year et a specified rate. although no specific course of action d revelant, others stated that TMl-2 was Retroactive assessments are made only was suggested. unique, that lessons learned from the when and if needed to pay losses Although few commented on the i accident will reduce future cleanup already incurred. Mutual companies are question of whether coverage should be g costs substantially, even if an accident structured such that the insureds by site or unit, those that did of the same severity occurs. Others become part owners of the insurance unanimously favored site. wide believe that a study is needed to company.) coverage. Some cited the example of determine what a " maximum probable Many commenters were receptive to General Pubtle Utilities, where loss" would be. Still others believe that the suFgestion that setting approximate insurance coverage was reinstated after maximum coverage should be set for limits should be left to market forces. In the accident at TMI-2. Others indicated i cach plant individually to reflect its its simplest form, this would involve that coverage by unit would increase the g particular risk. eliminating the current rule and allowing risk exposure of insurers at each Most commenters critcized the idea of utilities to purchase whatever insurance location so covered. As a result, a an NRC requirement that primary they deem necessary. Another approach reduction in insurance capacity would coverage offered both by Nuclear as suggested in the ANpRM would be to probably result. i 1 I W

Fed:r:1 Register / Vol. 49. Ns 218 / Thursdiy,-Nov mb;r 8,1984 / Pr:p;s:d Rules 44M7 Question 3: The third question " overuse" of retroactive assessments situated and operating like pmperties" pert:ined to a series of interrelated could occur at some point, they did not (original emphasis). From tt is language, issues having to do with the structure, believe that such point had yet been City Dar Association determined that t:rms, and conditions of the property

reached, utility trust indentures do not in general insurance currently offered. Almost all NUREG-0891 recommended that all give bondholders any vested right to a c:mmenters expressed strong opinions proceeds from property insurance be given amount or type of coverage.

th:t. in general, the NRC has neither the used to pay for decontamination after an Further. if a trustee were to refuse to cxpertise nor authority to regulate terms accident before claims of creditors and release funds for cleanup to a utility, cnd conditions of insurance. !f the NRC owners are satisfied.Of all such action "could very well render the w:re to exercise such authority, recommendations, this perhaps company insolvent, and in the extreme c;mmenters maintained,it would hkely provoked the most negative reaction. (but not necessarily remote) case in:dvertently restrict capacity growth or hiany indicated that such a priority precipitate a bankruptcy or increase prices to the detriment of its would adversely affect ratings of utility reorganization."If this occurred, the ev:r:Il objectives. debt issues, would most likely violate Commission could take over and NUREG-Ou91 suggested that the Commission refuse to accept insurance, existing indenture agreements and operate a damaged plant under sections would otherwise adve*sely affect utility 186(a) and 188 of the Act and would whose premiums are not discounted access to capital markets. Others point likely seek reimbursement from the wh;n used in conjunction with out that a decontamination priority utility or its successor for costs incurred insurance from another carrier. Few could adversely affect nuclear fuel in decontaminating the plant. The City 3 commented directly on this proposal, leasing arrangements whose covenants Bar Association concluded "It is but those that did opposed it Even those often require physical damage insurance uncertain whether any claim made by l utilities that might theoretically benefit in which the fuel lessee and its creditors the indenture trustee on behalf of the i from reduced premiums opposed it are named loss payees. utility's bondholders to property j implicitly by their being against NRC Other commenters argued that a insurance proceeds would survive, at l regulation of terms and conditions of decontamination priority, by artificially least to the extent of the Federal policies. NhtL offered through its restricting earlier use of funds for government's claim." counsel the most comprehensive restoration of the plant, could interfere flowever, this commenter also crgument against it.This commenter with the most effective means of recognized that to respond properly to a dr:w a distinction between insurance restoring the plant and could,in an nuclear accident, a licensee may be eff;rld by the pools-in which no single extreme situation, create the very required to take a range of actions apart pool member places a significant portion financial uncertainty that the instirance from decontamination and debris cf its assets at risk-end insurance would be designed to forestaH. Another removal. Consequently, this commenter provided by NMI. by which losses are commenter presented an argument that favors priority for payrnent of p:Id by the members themselves either recognized that only when an accident decontamination and debris removal through premiums or retroactive is severe enough that a plant could expenses insofar as it is "necessary to css:ssments. Because members of NML never be restored would creditors remove any significant health or safety crI,in effect, self insuring and thus possibly exercise their rights over hazard". The commenter believes this exposing a substantially higher decontamination.If,in the courseof the goal can be accomplished if a regulation perc ntage of their assets than the decontamination process, it appeared is properly drawn, although it proposed pools, NMLis not able to be as flexible that the insurance and other financial no wording for such a regulation in its with its premium structure.The protection programs would be

comments, premiums of the two types ofinsurers insufficient to accumulate additional Question 4:The fourth and final crJ thus not comparabla.

resources, additional time would be question posed in the ANpRhl concerns NUREC4891 suggested that the use of. available to obtain necessary resources. whether the NRC should become retrorctive assessments may be The Association of the Dar of the City involved in regulating the replacement re:ching the limits of sound insurance of New York (City Dar Association) power insurance program as offered by practice and recommended that offered an analysis of both the need and Nuclear Electnc Insurance Limited (the retro:ctive insurance be eliminated from authority for a modified so-called NE!!rl coverage). This cny future coverage. Most commenters decontamination priority. First, City Dar question assumes that replacement dis: greed with this assertion, although Association found that sections 103(d), power insurance,if eliminated, would th:y often directed their comments more to2(a) and tot of the Atomic Energy Act allow increases in capacity of insurance tow:rd maintaining existing retroactive provide the Commission with authority programs more directly tied to casessment insurance. Many pointed out to require all licensees of commercial protecting pub!!c health and safety. th:t cssessment insurance was the only reactors to maintain specified levels of Most commenters opposed eliminating way availabic to ircrease property decontamination and debris removal replacement power insurance. Some 4 insurance capacity rapidly. Some drew coverage upon a proper finding that pointed out that, although it does not th2 cnalogy to the Price Anderson such a requirement was necessary or further decontamination directly, it syst:m, which instituted retroactive appropriate to protect the public health helps indirectly by reducing the large casessments in 1977 to speed the phase. and safety, financial drain faced by a utility buying cut of government indemnity. One Second, the City Dar Association replacement power after an accident. c:mmenter stated that since it is a pointed out that the utility trust Counsel for NEIL maintained that public utility rather than an insurance or indentures to which many commenters eliminatirg replacement power investment. type company,it would, directed their attention normally are insurance would not necessarily pr:fet not to have large amounts of fairly uniform in language, requiring the increase capacity for property c: pit:1 passively Invested in an utility to insure its property against loss insurance.NE!!rl's accumulated surplus. msurance program awaiting a highy or damage to the same extent that cannot simply be allocated to property Enhk:ty policy limits loss. Although this property of a similar character is usually ' insurance without infringing on the and other commenters acknowledge that' so insuredby companies similarly rights of the NE!!rl member insureds I. e

l,' dista Fed:r:1 R: gist:r / Vol. 40, N:. 218 / Thursday, November D,1981/ Prop:s;d Ruhs ] wh2 might er might n:t choose is pool N range cf cle:nup cost catablish:d Commisslin proposes t2 reviselha rule their resources to increase property in the report was from $105.2 million to to require $1.02 billion property damage j insurance capacity further. $404.5 tr.illion for the reference PWR and insurance. Experience at TMI-2 and the i Conclusions fr m $128.5 million to $420.9 million for PNL study suggest that somewhat less reference BWR. Although these costs than $1 billion is likely to be required for Results ofPNL Study > Underlying are considerably lower than would be a scenario-2 accident at a PWR. i various proposals by the NRC, Dr. Long, expected from the roughly $1 billion NUREG/CR-2001 concluded that as the utilities, the nuclear and insurance estimated to be required to clean up much as $1.06 billion could be required industries, and the public has been the TMI-2, they do not include several cost to cover a scenario-3 accident at a large F recognition 1 hat, prior to the TMI-2 components included in the TM1-2 DWR if financial carrying costs are ] l, accident, insurance for decontamination estimate. For example, $124 million for included in the cost estimate. of a reactor after an accident was base operations and maintenance and flowever, requiring the maximum inadequate. He rule issued on March $209 for cost escalation due to inflation indicated in NUREG/CR-2601 is not 31,1982 for the first time required NRC during cleanup were included in the-justified. First, the difference between~ licensees to obtain substantial amounts n!!-2 estimates but not in the PNL the proposed requirement and the of such insurance. Although some study. Other differences relating to plant maximum estimate ($1.06 billion-$1.02 utilities and other commenters opposed design, additional decontamination of . billion =$0.04 billion)is not significant adoption of any requirement for on-site the containment building. and cost of from a health and safety viewpoint, property damage insurance when the facility stabilization at TMI-2 cause the especially since these figures represent initial rule wee proposed, most pNL estimates to increase to $106 billion upper bound estimates. Furthermore, commenters now seem to recogru,ze, for the most severe accident studied and utilities should have little difficulty either tacitly or explicitly, that the somewhat less for a TMI-2 type raising a possible but unhkely $40 Commission's concerns are valid and accident. (See NUREG/CR-2601, pp. 2-million deficit over the several years that a rule,if properly drafted. 27 ff.) required for cleanup. Second, the represents appropriate public policy. The NRC has drawn several Commission cannot force additional conclusions from the results of the PNL coverage to become available by simply es o ques ion e need fo o ty insurance: rather it implicitly asks the study, First, the need for property requiring more.If such a re ufrement insurance much in excess of $1 billion were imposed, utilities wou d be forced enouk o?., llow much insurance is question,

• h does not appear to be compelling, to seek more expensive skernative Pa f the answer to this question has although this conclusion would have to means of coming up with the de,ficit in been provided by a Pacific Northwest be periodically reconfirmed by coverage.This additional cost c oes not

' Laboratory (PNL) Study. Technology additional data as they become appear to be justified by the minimal Safety and Costs of Decommissioning available.This would include any addit;onal contribution to public health Reference Ligh Irater Reactors adjustments needed to account for and safety that might be engendered by e following Postulated Accidents inflation, as discussed later, Second, requiring $1.00 million. (NUREG/CR-2601: November 1982). despite the wide range of costs Concurrently, the Commission has (Copies of this report may be obtained estimated in the PNL report, the . concluded that adequate property under the NRC/GPO Sales Program at a minimum currently required, $585 insurance coverage cannot be effected cost of $13.00 by writing to the Director, million, would be insufficient for some through merely publishing annually the Division of Technical Information and accidents. Although a significant portion amount maintained by each commercial Document Control. U.S. Nuclear of the costs for TMI-2 cleanup has reactor licensee and relying on market Regulatory Commission Washington, resulted because of financial carrying forces to set the appropriate amount. DC 20555.) costs and costs of delaying cleanup The Commission also proposes not to The study evaluated cleanup costs while awaiting sources of funding. it is increase coverage by requiring licensees following three accidents of varying not clear that such costs could be to carry both primary policies. As severity at two reference light water reduced or eliminated in any future indicated by commenters, combinia g the reactors. %e scenario t accident is accidents, particularly if the effects of primary capacity of both meurers raises postulated to result in 10T, fuel cladding inflation are included. Third, while some too many problems with respect to failure, no fuel melting moderate difference in cost due to variations in antitrust policies and reinsurance contamination of the containment reactor design appears to exist, this practice. i structure, but no significant physical difference is apparently outweighed by Likewise, requiring utilities to damage to buildings and equipmert.%e many of the other variables affecting purchase all future excess capacity, scenario 2 accident is postulated to accident cleanup cost. Similarly, PNL whatever the amount, could cause,if t result in 50% fuel cladding failure, a did not find a strong relationship that capacity grows significantly, an small amount of fuel melting, extensive between reactor size and cleanup cost. undue burden on utilities without a radioactive contamination of supporting Thus, while the smallest licensed commensurate increase in protecting buildings, and minor physical damage to reactors may not need the excess public health and safety. Nevertheless, buildings and equipment. The scenario 3 insurance currently available and may because of the possibility ofincreastd accident is postulated to result in 100% seek exemptions to the Commission's future decontamination costs from fuel cladding failure, significant fuel regulations, the Commission believes inflation or other factors, the melting and core damage, severe that a close tie between insurance Commission is interested in receiving radioactive contalmination of the required and reactor size or design is comments on how the property containment structure, moderate not justified genetically in the rule. Insurance requirement should be radioactive contamination of supporting Response to Comments ondfroposed adjusted to meet needs in the future. buildings, and major physical damage to Rule Changest The Commission has One option is to have the ComWssion structures and equipment. A Tht!-2. type concluded that some revision to the periodically review estimated accident t accident was assumed in the study to be current interim rule as codified in to cleanup costs and propose new of intermediate severity, CFR 50.54(w)is necessary. First, the rulemaking toincreaseinsurance when I 4 t

r: y, Feder:I Regist:r / V:1. 49. No. 218 / Thursd:y. Nov:mb:r 8.1984 / Proposed Rul" 44649 b o needed. Alternatively the Commission Although the state prohibitions may operate Another area where some have c:uld require utilities to purchase all to restrict a utility's available options for suggested that change to the interim rule I future increases in excess capacity. comphance with the Commission's property may be warranted is in recognizing that Those excess amounts not needed to insurancnule. c mpliance with both federal very small operating plants may not protect public health and safety could ',",d[hgNp $ y'to need the full amounts ofinsurance i i x bl oe t b2 cddressed by particular utilities d,monstrate adequate financial surety by a required. After the interim rule was through the exemption process. A third variety of means. A utility that is unable to published, owners of five small plants cption would be to periodically adjust comply will face denial ofits application or requested that the NRC exempt them th2 required amount ofinsurance by use revocation of its operating license, consistent from some portion of the property cf the consumer price index, available with federallaw. In addition, the state insurance requirements. The NRC has ind;xes of construction costs, or some prohibitions do not appear to frustrate the fully granted three requests, partially fed,,es of 8j An m no ns u le$r wer la pos " ' ^ other measure of inflation, liowever. granted one request, and denied one cny generalinflation index would not sufficient to override legitimate state mquest pending receipt of additional probably not accurately gauge reactor interests, and the state prohibitions do not information. ifovever, the NRC cccident cleanup costs. Further, if interfere with the federal objective of proposes not to exempt other small g ? Insurance capacity grows at less than ensuring umform federal safety standards for licensees generically. Because the pNL th] inflation rate, the Commission could nuclear reactors. study found only a weak relationship inadvertently require more insurance Under Pacific Cos. supro. the Atomlc between reactor size and accident thin commercially available. Energy Act provides for a system of dual decontaraination cost,it is more With respect to the issue of per' site or y,lat ofn Iea power w e appropriate to address exemptions on a y, per-unit coverage raised in question 2 in control over reactor safey and the States case by. case basis rather than th2 ANPRM. such coverage is not exercise their traditional authonty over generically in the rule, c.ff;ted by the insurers.The Commission economic matters.This suggesta that a state The Commmission has generally does not believe that such coverage is could probably decide. on economic grounds, accepted the comments directed to the nnded because the probabihty of a that nuclear util ties should be directly issues raised in question 3 of the p:rticular licensee suffering an accident prohibited from purchasing certain types of ANFRM. Thus, the Commission does not ct a second unit before reinstatement of pro rty damage insurance. An indirect state propose to regulate the terms and insurance after an accident at its first Q' ,{,*happ n to be m icipa y owned, conditions of property damage unit is extremely low. Thus, the is even more hkely to withstand a challenge insurance. Such issues include whether proposed rule clarifies that site. wide on federal preemption grounds. the Commission should refuse to accept cov: rage is acceptable and that per. unit ...The state prohibitions can coexist with insuance whose premiums are not cov: rage is not required. federal law without significantly affecting the discounted when used in conjunction' Some commenters on question 2 have commission's regulation of nuclear safety. with insurance from another carrier and sugg:sted that the NRC should preempt Few licensees would be affected, and the rule whether further use of retroactive at:t2 law where such law prohibits is sufficiently flexible to allow compliance by assessments should be curtailed. The h emete m' "E p [te Commission has concluded that thes,e utilities from buying insurance from ,, nh , p,, insurance rule to require the amount of,,,y issues do not sufficiently affect pubhc mutual insurers or where insurers use rett: active assessments. To analyze this financial surety it beheves is necessary to health and safety to warrant additional issut the staff has prepared an protect the public health and safety in the action. "An lysis of Proposed Revisions to the event of a nuclear accident without regard to flowever, the NRC believes that Property Damage Insurance Rule and the issue of federal preemption. (Report. p. tr NUREG-0891 and commenters on the issue of Federal Preemption." ff) question 3 of the ANPRM raised (Int: rested persons may examine and In its analysis. the staff determined legitimate concerns with respect to the copy for a fee a copy of this analysis at that the existing provision on the issue of requiring a decoatamination th2 NRC Public Document Room.171711 preemption question (10 CFR priority for all property it.: urance Street NW. Washington, DC. Single 50 54(w)(3)) was unnecessary. As stated obtained. Comments ofD.ed by the copl:s may be obtained from Robert S. In the report. "... it appears that the Association of the Bar of the City of Wood. Office of State Programs. U.S. provision could not be used to exempt a New York provide the most complete Nuclear Regulatory Comnussion, utility from the obligation to obtain the discussion of this issue.The W:shington DC 20555. Telephone (301) full amount of coverage required simply Commission agreta that proceeds from 492-0885 ) because of the prohibition. Consistent property insurance must be used first to This report concluded: with the Commission's responsibilities protect public health and safety. In fact. [ Th) Commission pmbably lacks the under the Atomic Energy Act.any the Commission has no reason to 6 azthority to pmmulgate a rule that would - exemption would have to be based not impose a property insurance pre:mpt these state prohibitions The Atomic on the provisions of state law but on a requirement other than to protect public Energy Act does not empressly preempt the determination of what is required to health and safety. Proceeds from I'j,f,",y,f,',[ tnt ns a e not cInce" d protect the public health and safety in insurance would be used both to assure with reactor safety. Tl us, there is no question the event of a nuclear accident.Thus, that contamination from a reactor i 50.54(w)(3) could be used to require a immediately after the accident did not of cupress or imphed,reemption based on~ utility to purchase only the amount of threaten public health and safety and federal occupation of the field or en impermissible state purpose. Indeed, the state insurance that is reasonably available to the environment and to eliminate delays prohibitions are not even concemed with it, and to permit the utility to furnish any and degradations to the cleanup process ree<. tors but rather with insurance and a additional protection required by that could cause threats to health, safety m:nicipahty's use of pubhc funde-matters alterttate means. The same result could and the environment over time. The be obtained under the general provision Commission also agrees with comments c r nely, essi n ni nt t preempt stat > law must be clear. allowing financial surety by alternate that a rigid categorical decontamination There does not appeat to be en actual means.Thus, paragraph (w)(3)is priority could present an excessive confuct between federal and state law. unnecessary and should be deleted." burd r. acensees given the benefit to ,t

Feder:1 Register / Vcl. 49, No. 218 / Thursd:y, N;vemb;r 8,1984 / Pr:pos d Rulzs j i i 44650 sectirn 50 7 clso issued under Pub. I. 95- ] f be obtained. Consequently, a modified requirement subject ta the Paperwork 801, sec.10. 92 Stat. 2951 (42 U.S.C 58511 1 decontamination priority is proposed in Reduction Act of 1980 (44 U.S.C. 3501 et Secti ns 50.571d). 50.58. 58.91, and 50 92 ofso j n 50 8 hso the rule which should not unduly affect seq.). Existing requirements were 'd d utility financial markets. The approved by the Office of Managersent %"3 (u"U 2 9 decontamination priority would take and Dudgel(approval number 3150-issued under sec.122,68 Stat. 939 (42 U.S C 2152). Sections 50.80-50.81 also issued sec. effect only pursuant to an order by the 0011). 184. e8 Stat. 954. as amended (42 U.S C 2234), Director of Nuclear Reactor Regulation Regulato'I An'al sie Section. 50. loo. 50.102 also irsued under sec. F that prompt decontamination is The Commission has prepared a draft 186. 68 Stat. 955 (42 U.S C 2236). necessary to protect pub!!c health and regulatory analysts on this proposed For the purposes of sec. 223. 68 Stat. 958. as amended (42 U.S.C 2273). ll 50.10. (bl. and I safety, In this vein, the Commission is regulation.The analysis examines the - (c),50.44, 50.48. 50.48,50.54, and 50.80(al are interested in receiving comments how it costs and benefits of the alternatives Inved under sec.telb,68 Stat.948 as could assure that insurance proceeds considered by the Commission. amended [42 U.S.C 2201(b)); il 50.10(b) and would be used for decontamination Interested persons may examine and [*,I*"d8['jefded42U.'s$ ""d rather than for paying creditors or nd bondholders in the event that a reactor copy for a fee a copy of the draft g licensee was experiencing serious regulatory analysis at the NRC Pubh,c I Sos 5(e). 50.59(b). 50.70. 50.71. 50.72. 50.73. d 50.78 are issued under sec. teto. 68 Stat. i Document Room 171711 St. NW. an Finally, with respect to question 4 the Washington, DC. Single copies of the 950, as amended (42 U.S C 2201(ol). financial problems. Commission agrees with commenters analysis may be obtained from Robert S.

2. Section 50.54 is amended as follow.s..

e, who suggested that eliminating Wood, Office of State Programs, U.S.

s. Paragraph (w)(1)is revised.

replacement power insurance would not Nuclear Regulatory Commission,

b. Paragraph (w)(2) and (w)(3) increase capacity for insurance more Washington, DC 20555, Telephone (301)

• 0 ** d' closely tied to protecting public health 492-0885.

c. Paragraph (w)(4)is redesignated as and safety, Regulatory Flexibility Act Certification (w)(2) and revised.

Commissioner Roberts approved

d. New paragraph (w)(3)is added.

As required by the Regulatory publishing this rule only to obtain more Flexibility Act of 1980,(5 U.S C. 605(b)), l 50.54 Conditions of licenses, detailed pub!!c comments lie requests the Commission certifies that this rule,if that commenters provide up-to-date j data to support their positions. adopted, will not have a significant l economic impact on a substantial g, Finding of No Significant Environmental number of smallentities.This rule minimum coverage limit for the reactor station site of no less than $1.02 billion.' impact The Commission has determined 'fn lc' lear (2)The licensee shall report on April 1 we p a t The compa es under the National Environment Policy that own these plants do not fall within of each year to the NRC as to the Act of 1909, as amended, and the the scope of the definition of"small present levels of this insurance or Commission's trgulations in Subpart A entitles" set forth in the Regulatory financial protection it maintains and the of 10 CFR Part 51, that this rule. if Flexibility Act or the Small Dusiness e urces ithisinsurance or protection; j ize Standards set out in regulations and adopted, would not be a major Federal action significantly affecting the quality S,ssued by the Small Dusiness (3)The proceeds of thisinsurance of the human environment and therefore Administration at 13 CFR Part 121. shall be used first to decontaminate the an environmentalimpact statement is List of Subjects in to CFR Part 50 licerned reactors before any other not required. Although changes in purpose when and to the extent that insurance requirements affect the Antitrust, Classified information. Fire such decontamination is required to f nancial arrangements oflicensees and prevention, incorporation by reference, protect public health and safety and is j have economic and social Intergovernmental relations, Nuclear so ordered to be used by the Director of consequences, they do not alter the power plants and reactors, Penalty, Nuclear Reactor Regulation. environmentalimpact of the fict.nsed Radiation protection, Reactor siting activities. As determined in the criteria, Reporting and recordkeeping Dated at Washington. DC this 2nd day of environmental assessment. the requirements. November 1984. alternatives to the proposed action Under the authority of the Atomic I likewise do not have any significant Energy Act of 1954, as amended, the Secretaryof the Commission. r impact on the environment and no other Energy Reorganization Act of1974.as (FR DeaMu nW H-N su ul 4 r'I documents related to this proposed amended, and 5 U.S.C. 553, the NRC is asumo caos rus sw l action exist.The environmental proposing to adopt the following assessment and finding of no significant amendment 1010 CFR Part 50. i impact on which this determination is the PART $0--DOMESTIC LICENSING OF DEPARTMENT OF TRANSPORTATION l R Pu ic cu en m, 17 PRODUCTION AND UTILIZATION Federal Aviation Administration Street NW, Washington, DC. Single FACILITIES copies of the environmental assessment 1.The authority citation for Part 50 14 CFR Part 71 and the finding of no significant impact are as alf able from Robert S. Wood, continues to read as follows: l Office of State Programs, U.S. Nuclear Authority: Secs.t03,t04,tet,t82,183.too, f Alrepace Dochst No. 64-ANM 201 j Regulatory Commission, Washington-tes. ea stat. sas e37,948. ess. es4, ess. osa, a s Proposed Establishment of Torrington, l DC 20555. Telephone (301) 492-9885. a mended. sec. 234. 83 Stat.1244. as amended Wyoming Transillon Area 142 U.S C. 2133. 2134. 2201, 2232. 2233. 2236. f Paperwork Reduction Act Statement 2239,2282): secs 201. 202,2no. as stat.1242. r AGENCY: Federal Aviation This proposed rule does not contain a 1244.124e. as amended f 42 U s C. sa41,5842. Administration (FAA), DOT. l i new or amended information collection $846). unless otherwise noted. i e I i

gr. mm__ a 9/Ja/4@ .I Encloswe 5 ~f pm i %,...../ RULEMAKING ISSUE July 25, 1984 (Notation Vote) sser_s4_3oo For: The Comissioners From: William J. Dircks Executive Director for Operations

Subject:

PROPOSED RULE TO MODIFY THE REQUIREMENT THAT POWER REACTOR LICENSEES MAINTAIN PROPERTY DAMAGE I INSURANCE

Purpose:

To inform the Comission of the staff's reevaluation of 10 CFR Part 50.54(w), which requires power reactor licensees to maintain on-site property damage insurance for recovery after an accident, and to obtain Comission approval for publication for coment of a revised rule. Discussion: On June 24, 1982, an Advance Notice of Proposed Rulemaking (ANPRM) was published in the Federal Register (47 FR 27371). The notice sought coment on a report prepared for the staff by Dr. John D. Long entitled Nuclear Property Insurance: Status and Outlook (NUREG-0891), which raised several issues gennane to the Comission's final rule (47 FR 13750) an property insurance adopted on March 31, 1982 and codified as 10 CFR 50.54(w). This rule requires electric utility licensees to purchase substantial amounts of on-site property damage insurance to be used for decontamination expenses arising from an accident. The report by Dr. Long, together with four comprehensive questions posed by the Comission to focus the issues raised in NUREG-0891, formed the basis for seeking public coment.

Contact:

Robert S. Wood, OSP 49-29885 .e

2-I ~ Based on comments received on the ANPRM and other technical reports, the staff proposed only minor revision to 10 CFR 50.54(w). A discussion and staff analysis of the public coments received was contained in SECY-83-211 dated May 31, 1983 (Enclosure 4 with Attachments). The Comission disapproved the staff's proposal and directed the staff to revise the rule in a memorandum from John C. Hoyle to William J. Dircks dated September 20, 1983. Following the Comission's coments, the staff proposes to revise the rule in two substantive respects. First, the proposed rule increases the amount of insurance required to $1.02 billion. Although the Secretary's memorandum of September 20th indicated that a minimum of $900 million should be required, this memorandum was written before additional increases in insurance became available. With recent growth in both excess layers, a total of $1.02 billion is now available ($500 million from ANI/MAERP or NML as primary $435 million fromnsurance, i million from ANI/MAERP and NEIL-2 as excess insurance). Given the conclusion inNUREG/CR-2601(Technology.SafetyandCostsof Decomissioning Reference Liqht Water Reactors Following Postulated Accidenus, Pacific. Northwest Laboratories, November 1982) that $1.06 billion may be required to cover on-site cleanup of the worst reactor accidents if inflation and other factors are included, and that $1.02 billion is now available, the staff proposes that this amount be required.* At least three alternatives exist to requiring $1.02 billion in insurance. First, some lower dollar amount could be required. However, no other figure is suggested either by the technical studies of the amount of insurance needed to cover on-site cleanup, or by the amount actually j The staff notes that in the Secretary's September 20, 1983 memorandum, it was indicated that "Comissioner Asselstine and Chairman Palladino believe that the requirement should be raised to $983 million," the i maximum amount available at that time. However, in the vote sheets Comissioner Bernthal indicated that he agrees with Comissioner l Asselstine's coments, although whether such agreement includes the amount l of insurance is not clear. --r,-en---

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-o,. available today. A second alternative would be to require the primary layer plus both excess layers, regardless of amount. This approach has the benefit of providing for potential growth in the required amount to keep pace with inflation while not having to revise the rule periodically. On the other hand, additional growth in the excess layer could cause the required amount to exceed at some point that necessary for protecting public health and safety. A third approach, proposed in SECY-83-211, is not to explicitly require insurance in addition to that now required by 50.54(w) but to leave the requirement for additional insurance to be detennined by economic regulators at the state level. This approach, of course, was disapproved by the Comission and thus is no longer proposed. As a second substantive change, the staff has added a decontamination priority to the proposed rule. This priority was drafted so that the NRC could require payment for accident decontamination costs when needed to protect public health and safety. However, the rule, by not requiring such a priority in every case, should not unduly affect utili}y financial markets which was a concern suggested in some comments on the ANPRM. Another possible modification to the rule that has been discussed is whether the Federal government buying certain types of property insurance (gainst should preempt state or local prohibitions a i.e., normally that offered by mutual insurance companies or insurers that use retroactive assessments). Based on a report dated April 17, 1984 by OELD (see Enclosure 2), the staff concludes that the NRC does not have the authority to preempt state law in this area. The staff further concludes that the section relating to the preemption issue in the current rule (10 CFR 50.54(w)(3)) is unnecessary in view of the general provision in 50.54(w) that permits a utility to demonstrate that it has an equivalent amount of protection by means other than insurance. Thus the staff proposes deleting it. e Recomendation: That the Comission: 1. A) prove the proposed rule for publication in t1e Federal Register (Enclosure 1) for a 60-day comment period. 2. Certify, in order to satisfy the requirements [ of the Regulatory Flexibility Act, 5 U.S.C. l l l l

605(b), that this rule, if promulgated,'will not have a significant economic impact on a substantial number of small entities. This certification is included in the enclosed Federal Register notice. 3. Note: a. That appropriate Congressional Comittees will be notified of the proposed rule. b. That the Commission has detemined under the National Environmental Policy Act of 1969, as amended, and the Comission's regulations in Subpart A of 10 CFR Part 51, that this rule, if adopted, would not be a major Federal action significantly affecting the quality of the human environment and therefore an environmental impact statement is not required. An Environmental Assessment and a Finding of No Significant Impact havebeenprepared(Enclosure 5). That the. proposed rule co'ntains,a c. statement that, pursuant to the Paperwork Reduction Act of 1980, the Comission has made a detemination that the rule does not impose new reporting or recordkeeping requirements and that therefore the rule does not require OMB approval. d. That a Regulatory Analysis has been prepared (Enclosu're 3). e. That this rule, if adopted, requires no new NRC resources or reprograming of f resources. e f. That the Chief Counsel for Advocacy of the Small Business Administration will be infomed of the certification and the reason for it as required by the Regulatory Flexibility Act. g. That copies of this notice will be distributed to affected licensees and other interested persons by the Office of Administration. l

Scheduling: No specific circumstance is known to staff which would require Commission action by any particular date in the near term. y L $r. 4 William 2. Dircks Executive Director for Operation

Enclosures:

1. Draft Federal Register Notice 2. Analysis of Federal preemption issue 3. Regulatory Analysis 4. SECY-83-211,w/encls. 5. Environmental Assessment and Finding of No Significant Impact Commissioners' comments or consent should be provided directly to SECY by c.o.b. August 17, 1984. Commission Staff Office comments, if any, should be submitted to the Commissioners NLT August 8, 1984, with an information copy to SECY. If the paper is of such,a natute that it requires additional time for analytical review and comment, the Commissioners and the Secretariat should be apprised of when comments msy be expected. DISTRIBUTION: Commissioners OGC OPE OI OCA OIA OPA REGIONS l EDO DEDO DEP EXEC DIR FOR REGIONAL OPS & GENERIC REQS ADM RES MGMT ELD NRR NMSS I&E RES SP AEOD I DMB l ACRS ASLBP ASLAP l SECY l

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e 9 ENCLOSURE 1 DRAFT FEDERAL REGISTER NOTICE t l l l

s Draft Federal Register Notice NUCLEAR' REGULATORY COW 4ISSION i 10 CFR Part 50 l Changes'in Property Insurance l Requirements for NRC Licensed Nuclear Power Plants i i i AGENCY: Nuclear Regulatory Comission. i l ACTION: Proposed rule. 1 StM4ARY: The Nuclear Regulatory Comission (NRC) is proposing to amend i its regulations requiring licensees to maintain substantial amounts of i on-site property insurance to assist in the decontamination of their licensed reactors. The changes are being proposed to increase the amount of insurance required and impose a decontamination priority on any proceeds from such insurance. Although all comercial reactor 11cersees would be subject to this proposed rule if adopted, only those i that do not currently carry the maximum property insurance available l would be affected. l DATE: Coment period expires (60 days after pubitcatiop]. Coments received after this date will be considered if it is practical to do so, I but assu'rance of consideration cannot be given except as to coments received on or before th'is date.

ADDRESSES: i4 ail written coments to: Secretary, U.S. Nuclear Regulatory Commission, Washington, DC 20555, Attention: Docketing and Service Branch. Deliver comments to: Room 1121, 1717 H Street, NW, Washington, DC, between 8:15 a.m. and 5:00 p.m. weekdays. Copies of the regulatory analysis, OMB clearance supporting 1 statement, the environmental assessment and finding of no significant impact, documents referenced in this notice, and comments received may be examined at: the NRC Public Document Room at 1717 H Street, NW, Washington, DC. FOR FURTHER INFORMATION CONTACT: Robert S, Wood, Office of State 1 Programs, U.S. Nuclear Regulatory Comission, Washington, DC 20555, Telephone (301)492-9885. SUPPLEMENTARY INFORMATION: BACKGROUND anAdvanceNoticeofProposedRulemaking(ANPRM)was On June 24, 1982, The notice sought publishedintheFederalRegister(47FR27371). comment on a report prepared for the staff by Dr. John D. Long entitled Nuclear Property Insurance: Status and Outlook (NUREG-0891), which raised several issues germane to the Comission's final rule (47 FR 13750)adoptedonMarch 31, 1982 andcodifiedas10CFR50.54(w). (Copies of NUREG-0891 may be obtained under the NRC/GPO Sales Program at a cost of $6.00 by writing to the Director, Division of Technical ___---_.__,--,__,v..

i ' Information and Document Control. U. S. Nuclear Regulatory Comission, l; Washington, DC 20555.) 10 CFR 50.54(w) currently requires operating reactor licensees to carry both the maximum amount of property insurance offered as primary coverage by either American, Nuclear Insurers / Mutual Atomic Energy Reinsurance Pool (ANI/MAERP) or Nuclear Mutual Limited (NML)--currently $500 million--plus any excess coverage in an amount no less than that offered by either ANI/MAERP--$85 million as of January 1, 1984--or Nuclear Electric Insurance Limited (NEIL)--$435 million as of i February 15, 1984. Currently, the minimum required under the rule is $500 million primary coverage and $85 million excess coverage. By buying both excess, layers, utilities are able to purchase a total of $1.02 billion in property insurance. I f ANALYSIS OF COMENTS l i I The report by Dr. Long, together with four comprehensive questions posed i by the staff to focus the issues raised in NUREG-0891, fomed the basis 1 t j for seeking public coment by the ANPRM. The Comission received 47 l coments in response to the ANPRM. Coments were mostly from utilities I j or their counsel, but several insurers, individuais, and trade I associations also comented. Almost without exception, comenters ( i objected to the recomendations in NUREG-0891 although they stated that the report provided valuable insights and historical perspective on the I workings of nuclear property insurance. Few comenters appeared to object to the existing Comission rule on property insurance. Some utilities would have the Comission recognize in a revised rule that reactor size should be considered when setting the required amount of i t _.m_. _ _ _

insurance. -A few utilities want the Comission to preempt the constitutional provisions of certain states that prohibit utilities from participating in mutual or retroactive assessment insurance plans. But, on the whole, commenters did not object to the general thrust of the existing property insurance rule, nor to most of its specific provisions. With respect to the four questions posed by the NRC in the ANPRM, a sumary of the coments is provided below. l Question 1: The first question asked what amount of insurance should be i required. If increased coverage is required, what should be the basis for such a requirement? One option proposed was that additional coverage could come about by the NRC publishing annually the amount l maintained by each comercial reactor licensee. This information could then be utilized by market forces to optimize insurance coverage. Coments varied widely with respect to the issue of how much insurance I should be carried. Although some commenters believe that cleanup costs associated with the TMI-2 accident are relevant, others stated that TMI-2 was unique, that lessons learned from the accident will reduce future cleanup costs substantially, even if an accident of the same severity occurs. Others believe that a study is needed to detemine what a " maximum probable loss" would be. Still others believe that maximum coverage should be set for each plant individually to reflect its particular risk. 0 9 e

Most comenters criticized the idea of an NRC requirement that primary coverage offered both by Nuclear Mutual Limited (NHL) and A'nerican Nuclear Insurers / Mutual Atomic Energy Reinsurance Pool (ANI/MAERP) be purchased. Although combining both plans couid currently provide primary coverage of $1 billion, certain structural problems complicate this approach. As indicated in NUREG-0891 and as several comenters developed further, both NHL and ANI/MAERP use many of the same reinsurers to reduce their exposure to possible accident claims. Some believe that reinsurers would be reluctant to expose themselves to the same risk twice as they would do if a reactor licensee were required to obtain primary coverage both from ANI/MAERP and NML. Thus, if licensees were required to buy insurance from both o,fferers, the resultant combined coverage would be some indeterminate level less than a simple adding of capacities. Moreover, combining capacity at the primary layer might also affect the premium structure at the secondary layer. Another problem discussed in NUREG-0891 but more strongly emphasized by many comenters is that, by requiring combined primary capacity, competition is reduced and possible' antitrust problems are raised. . Without the choice of coverages offered by two competing insurers, they argued that resultant capacity might not grow as quickly as it otherwise would, terms and conditions might not be as advantageous, and premiums might increase disproportionately. Other comenters indicated the difficulty in making combined coverages compatible with the regulatory environments within which utilities operate. Some utilities, either because.of their own philosophy or s ~. o because of constraints imposed by the state authority will not or cannot participate in, for example, insurance plans that provide for retroactive assessments or that are offered by mutual companies. (Retroactive assessments are used in conjunction with, or to replace, premiums payable at the beginning of each policy year at a specified rate. Retroactive assessments are made only when and if needed to pay losses already incurred. Mutual companies are structured such that the insureds become part owners of the insurance company.) e Many, connenters were receptive to the suggestion that setting approximate. limits should be left to market forces. In its simplest form, this would involve eliminating the current rule and allowing utilities to purchase whatever insurance they deem necessary. Another approach as suggested in the ANPRM would be to publish annually the coverage carried by all licensees, and induce changes where deemed appropriate through the state and local political process. Although few connented on this proposal specifically, those that did preferred it to increasing insurance requirements directly. Some utilities opposed reporting the coverage that they carried. Question 2: The second question posed in the ANPRM asked whether there should be special provisions for certain types of licensees. For example, should smaller plants be allowed to buy less insurance because of potentially reduced levels of contamination? Also, should the NRC exempt from applicable portions of property insurance requirements those utilities prohibited by state law from obtaining coverage from certain e e

7_ types of insurers? Should utilities with multiple-reactor Lites be required to obtain coverage for each unit separately, or is site-wide coverage sufficient? With respect to reactor size vis-a-vis coverage limits, representatives of utilities with smaller plants or unusual design configurations (such as Fort St. Vrain, a high temperature gas-cooled reactor (HTGR)) strongly urged the Comm,ission to allow reduced coverage for them. l Representatives of utilities with large reactors did not connent on this issue, indicated that no such distinction should be made, or suggested that distinctions be made by exception rather than in the rule itself. Few comments were offered on the issue of whether the NRC should make special allowance for those utilities prohibited by state law from buying insurance from assessment or mutual companies. Generally, utilities in states with such provisions urged the Commission to preempt state law. Other parties suggested that perhaps NRC authority to preempt was not so clear cut. Still other commenters suggested that a solution short of preemption may be available by working out this problem with the states involved, although no specific course of action was suggested. Although few commented on the question of whether coverage should be by I site or unit, those that did unanimously favored site-wide coverage. Some cited the example of General Public Utilities, where insurance coverage was reinstated after the accident at TMI-2. Others indicated f

. 7 that coverage by unit would increase the risk exposure of insurers at each location so covered. As a result, a reduction in insurance capacity would probably result. Question 3: The third question pertained to a series of interrelated issues having to do with the structure, terms, and conditions of the property insurance currently offered. Almost all comenters expressed strong opinions that, in general, the NRC has neither the expertise nor authority to regulate terms and conditions of insurance. If the NRC were to exercise such authority, comenters maintained, it would likely inadvertently restrict capacity growth or increase prices to the detriment of its overall objectives. NUREG-0891 suggested that the Comission refuse to accept insurance whose premiums are not discounted when used in conjunction with insurance from another carrier. Few comented directly on this proposal, but those that did opposed it. Even those utilities that might theoretically benefit from reduced premiums opposed it implicitly by their being against NRC regulation of tems and conditions of. policies. NML offered through its counsel the most comprehensive argument against it. This comenter drew a distinction between insurance offered by the pools -- in which no single pool member places a significant portion of its assets at risk -- and insurance provided by NML, by which losses are paid by the members themselves either through premiums or retroactive assessments. Because members of NML are, in effect, self-insuring and thus exposing a substantially higher t

] = ~ i percentage of their assets than the pools, NML is not able to be as flexible with its premium structure. The premiums of the two types of insurers are thus not comparable. NUREG-0891 suggested that the use of retroactive assessments may be reaching the limits of sound insurance practice and recomended that retroactive insurance be eliminated from any future coverage. Most commenters disagreed with this assertion, although they often directed their coments more toward maintain'ing existing retroactive assessment insurance. Many pointed out that assessment insurance was the only way available to increase property insurance capacity rapidly. Some drew l the analogy to the Price-Anderson system, which instituted retroactive assessments in 1977 to speed the phase-out of government indemnity. One commenter stated that since it is a public. utility rather than an insurance or investment-type company, it would prefer not to have large amounts of capital passively invested in an insurance program awaiting a i highly unlikely policy limits loss. Although this and other commenters acknowledge that " overuse" of retroactive assessments could occur at some point, they did not believe that such point had yet been reached. NUREG-0891 recommended that all proceeds from property insurance be used to pay for decontamination after an accident before claims of creditors and owners are satisfied. Of all recomendations, this perhaps provoked the most negative reaction. Many indicated that such a priority would adversely affect ratings of utility debt issues, would must likely violate existing indenture agreements and would otherwise adversely affect utility access to capital markets. Others point out that a

.a _m. ~ decontamination priority could adversely affect nuclear fuel leasing arrangements whose covenants often require physical damage insurance in which the fuel lessee and its creditors are named loss payees. Other comenters argued that a decontamination priority, by artificially restricting earlier use of funds for restoration of the plant, could interfere with the most effective means of restoring the plant and could, in an extreme situation, create the very financial uncertainty i. that the insurance would be designed to forestall. Another commenter presented an argument that recognized that only when an accident is severe enough that a plant could never be restored would creditors possibly exercise their rights over decontamination. If, in the course of the decontamination process, it appeared that the insurance and other financial. protection programs would be insufficient to accumulate additional resources, additional time would be available to obtain necessary resources. l l The Association of the Bar of the City of New York (City Bar Association) offered an analysis of both the need and authority for a l modified decontamination priority. First, City Bar Association found that Sections 103(d), 182(a) and 161 of the Atomic Energy Act provide the Commission with authority to require all licensees of comercial reactors to maintain specified levels of decontamination and debris removal coverage upon a proper finding that such a requirement was l necessary or appropriate to protect the public health and safety. 1 l l \\ ~

11 _ Second, the City Bar Association pointed out that the utility trust indentures to which many commenters directed their attention nomally are " fairly unifom in language, requiring the utility to insure its property against loss or damage to the same extent that property of a similar character is usually so insured by companies similarly situated and operating like properties" (original emphasis). From this language, City Bar Association detemined that utility trust indentures do not in general give bondholders any vested right to a given amount or type of coverage. Further, if a trustee were to refuse to release funds for cleanup to a utility, sbch action "could very well render the company insolvent, and in the extreme (but not necessarily remote) case precipitate a bankruptcy or reorganization." If this occurred, the Comission could take over and operate a damaged plant under Sections 186(a).and 188 of the Act and would likely seek reimbursement from the utility or its successor for costs incurred in decontaminating the i t plant. The City Bar Association concluded, "It is uncertain whether any claim made by the indenture trustee on behalf of the utility's bondholders to property insurance proceeds would survive, at least to l the extent of the Federal government's claim." However, this comenter also recognized that to respond properly to a nuclear accident, a licensee may be required to take a range of actions apart from decontamination and debris removal. Consequently, this comenter favors priority for payment of decontamination and debris removal expenses insofar as it is "necessary to remove any significant health or safety hazard". The comenter believes this goal can be accomplished if a regulation is properly drawn, although it proposed no wording for such a regulation in its coments. i l

Question 4: The fourth and final question posed in the ANPRM concerns whether the NRC should become involved in regulating the replacement power insurance program as offered by Nuclear Electric Insurance Limited (theso-calledNEIL-Icoverage). This question assumes that replacement power insurance, if eliminated, would allow increases in capacity of l insurance programs more directly tied to protecting public health and safety. Most comenters opposed eliminating replacement power insurance. Some pointed out that, although it does not further decontamination diroc.tly, it helps indirectly by reducing the large financial drain faced by a utility buying replacement power after an accident. Counsel for NEIL maintained that eliminating replacement power insurance would not necessarily increase capacity for property insurance. NEIL-I's accumulated surplus cannot simply be allocated to property insurance without. infringing on the rights of the NEIL-I member insureds who might or might not choose to pool their resources to increase property insurance capacity further. CONCLUSIONS Results of PNL Study: Underlying various proposals by the NRC, Dr. Long, the utilities, the nuclear and insurance industries, and the public has been the recognition that, prior to the TMI-2 accident, insurance for decontamination of a reactor after an accident was inadequate. The rule issued on March 31, 1982 for the first time required NRC licensees to obtain substantial amounts of such insurance. Although some utilities and other comenters opposed adoption of any requirement for on-site property damage insurance when the initial rule

r' ~I, was proposed, most comenters now seem to recognize, either tacitly or explicitly, that the Comission's concerns are valid and that a rule, if properly drafted, represents appropriate public policy. The reevaluation of the March 31 rule does not question the need for property insurance; rather it implicitly asks the question, "How much insurance is enough?" Part of the answer to this question has been provided by a Pacific Northwest Laboratory (PNL) study, Technology, Safety and Costs of Dec'missioning Referente Light Water Reactors Following Postulated o Accidents (NUREG/CR-2601; November 1982). (Copies of this report may be I obtained under the NRC/GP0 Sales Program at a cost of $13.00 by writing to the Director, Division of Technical Information and Document Control, U.S. Nuclear Regulatory.Comission, Washington, DC 20555.) The study evaluated cleanup costs following three accidents of varying severity at two reference light water reactors. The scenario 1 accident is postulated to result in 10% fuel cladding failure, no fuel melting, moderate contamination of the containment structure, but no significant physical damage to buildings and equipment. The scenario 2 accident is i s postulated to result in 50% fuel cladding failure, a small amount of l 4 fuel melting, extensive radioactive contamination of supporting 4 buildings, and minor physical damage to buildings and equipment. The j scenario 3 accident is postulated te result in 100% fuel cladding failure, significant fuel melting and core damage, severe radioactive contamination of the containment structure, moderate radioactive i

- 14.- contamination of supporting buildings, and major physical damage to structures and equipment. A THI-2-type accident was assumed in the study to be of intermediate severity. The range of cleanup costs established in the report was from $105.2 million to $404.5 million for the reference PWR and from $128.5 million to $420.9 million for the reference BWR. Although these costs are considerably lower than would be expected from the roughly $1 billion estimated to be required to clean up TMI-2, they do not include several cost components ' included in the TMI-2 estimate. For example, $124 million for base operations and maintenance and $209 for cost escalation due to inflation during cleanup were included _in the TMI-2 estimates but not in the PNL study. Other differences relating to plant design, additional decontamination of the containment building, and cost of facility stabilization at TMI-2 cause the PNL estimates to increase to $1.06 billion for the most severe accident studied and somewhat less for a TMI-2-type accident. (See NUREG/CR-2601, pp. 2-27 ff.) The NRC has drawn several conclusions from the results of the PNL study. First, the need for property insurance much in excess of $1 billion does not appear to be compelling, although this conclusion would have to be periodically reconfirmed by additional data as they become available. Second, despite the wide range of costs estimated in the PNL report, the minimum currently required, $585 million, would be insufficient for some accidents. Although a significant portion of the costs for TMI-2 cleanup has resulted because of financial carrying costs and other costs of delaying cleanup while awaiting sources of funding, it is not clear

I ,15 - that such costs could be reduced or eliminated in any future accidents, particularly if the effects of inflation are included. Third, while some difference in cost due to variations in reactor design appears to exist, thi,s difference is apparently outweighed by many of the other variables affecting accident cleanup cost. Similarly, PNL did not find a strong relationship between reactor size and cleanup cost. Thus, while the smallest licensed reactors may not need the excess insurance currently available, the Comission believes that a close tie between insurance required and reactor size or design is not justified. Response to Coments and Proposed Rule Changes: The Comisson has I concluded that some revision to the current interim rule as codified in l 10 CFR 50.54(w) is necessary. First, the Comission proposes to revise ', the rule to require $1.02 billion property damage insurance. NUREG/CR-2601 concluded that as much as $1.06 billion could be required to cover a scenario-3 accident at a large BWR if financial carrying costs are included in the cost estimate. Experience at TMI-2 and the PNL study suggest that somewhat less than $1 billion is likely to be required for a scenario-2 accident at a PWR. The Comission believes that requiring $1.02 billion, the maximum currently available, is justified by these cost estimates. The Comission has chosen a dollar figure because any future growth in capacity would not appear to be necessary to protect public health and l safety. Requiring utilities to purchase all future excess capacity, whatever the amount, could cause, if that capacity grows significantly, an undue burden on utilities.

-_ _ _ T Likewise, requiring the maximum indicated in NUREG/CR-2601 is not justified. First, the difference between the proposed requirement and the maximum estimate ($1.06 billion - $1.02 billion = $0.04 billion) is not significant from a health,and safety viewpoint, especially since these figures represent upper-bound estimates. Furthermore, utilities should have little difficulty raising a possible but unlikely $40 million deficit over the several years required for cleanup.

Second, the Comission cannot force additional ccverage to become available by simply requiring more.

If such a requirment were imposed, utilities would be forced to seek-more expensive alternative means of coming up with the deficit in coverage. This additional cost does not appear to be justified by the minimal additional contribution to public health and safety that might be engendered by requiring $1.06 million. Concurrently, the Commission has concluded that adequate property insurance coverage cannot be effected through merely publishing annually the amount maintained by each commercial reactor licensee and relying on market forces to set the appropriate amount. The Comission also proposes not to increase coverage by requiring licensees to carry both primary policies. As indicated by comenters, combining the primary capacity of both insurers raises too many problems with respect to antitrust policies and reinsurance practice. With respect to the issue of per-site or per-unit coverage raised in question 2 in the ANPRM, such coverage is not offered by the insurers. The Comission does not believe that such coverage is needed because the probability of a particular licensee suffering an accident at a second /

unit before reinstatement of insurance after an accident at its first unit is extremely low. Thus, the proposed rule clarifies that site-wide coverage is acceptable and that per-unit coverage is not required. Some commenters on question 2 have suggested that the NRC should preempt state law where such law prohibits utilities from buying insurance from mutual insurers or where insurers use retroactive assessments. To analyze this issue, the staff has prepared an " Analysis of Proposed Revisions to the Property Damage Insurance Rule and the Issue of Federal Preemption." (Interestedpersonsmayexamineandcopyforafeeacopy of this analysis at the NRC Public Document Room, 1717 H Street NW, Washington, DC. Single copies may be obta.ine~d from Robert S. Wood, Office of State Programs, U.S. Nuclear Regulatory Commission, Washington,DC20555. Telephone (301)492-9885.) This report concluded: The Commission probably lacks the authority to promulgate a rule that would preempt these state prohibitions. The Atomic Energy Act does not expressly preempt the field of nuclear property damage insurance, and the state prohibitions are not concerned with reactor safety. Thus, there is no question of express or implied preemption based on federal occupation of the field or an impermissible state purpose. Indeed, the state prohibitions are not even concerned with reactors, but rather with insurance and a' municipality's use of public funds

-- matters traditionally regulated by the states. Accordingly, Congressional intent to preempt state law must be clear. There does not appear to be an actual conf,lict between federal and state law. Although the state prohibitions may operate to restrict a utility's available options for compliance with the Comission's property insurance rule, compliance with both federal and state law is physically possible. The rule is j sufficiently flexible to pemit a utility to demonstrate adequate financial surety by a variety of means. A utility that is unable to comply will face denial of its application or rev..ation of its operating license, consistent with federal law. In addition, the state prohibitions do not appear to frustrate the purposes of the Atomic Energy Act. The federal interest in promoting nuclear power is not l sufficient to override legitimate state interests, and the state prohibitions do not interfere with the federal objective of ensuring unifom federal safety standards for nuclear reactors. Under Pacific Gas, supra, the Atomic Energy Act provides for a system of dual regulation of nuclear power in which the Federal Government maintains exclusive control over reactor safety and the States exercise their traditional authority over economic matters. This suggests that a state could probably decide, on economic grounds, that nuclear utilities should be directly prohibited from purchasing certain types of

I

• property damage insurance. An indirect state prohibition, affecting only those nuclear utilities that happen to be municipally owned, is even more likely to withstand a challenge on federal preemption grounds.

l l ... The state prohibitions can coexist with federal law without significantly affecting the Comission's regulation of nuclear safety. Few licensees would be affected, and the rule is sufficiently flexible to allow compliance by alternate ' means. Accordingly, the Comission should promulgate its property insurance rule to require the amount of financial surety it believes is necessary to protect the public health and safety in the event of a nuclear accident, without regard to the issue of federal preemption. (Report, p. 17 ff.) In its analysis, the staff determined that the existing provision on the preemption question (10 CFR 50.54(w)(3)) was unnecessary. As stated in the report, "... it appears that the provision could not be used to exempt a utility from the obligation to obtain the full amount of coverage required simply because of the prohibition. Consistent with the Commission's responsibilities under the Atomic Energy Act, any exemption would have to be based not on the provisions of state law but on a detemination of what is required to protect the public health and safety in the event of a nuclear accident. Thus,section50.54(w)(3) could be used to require a utility to purchase only the amount of insurance that is reasonably available to it, and to permit the utility to furnish any additional protection required by alternate means. The

same result could be obtained under the general provision allowing financial surety by alternate means. Thus, subsection (w)(3)is unnecessary and should be deleted." ) Another area where some have suggested that change to the interim rule may be warranted is in recognizing that very small operating plants may not need the full amounts of insurance required. After the interim rule was published, owners of five small plants requested that the NRC exempt i them from some portion of the property insurance requirements. The NRC has. fully granted three requests, partially granted one request, and l denied one request, pending receipt of additional information. However, the NRC proposes not to exempt other sma11' licensees generically. j Because the PNL study found only a weak relationship between reactor size and accident decontamination cost, it is more appropriate to grant any exemptions on a case-by-case basis rather than generically in the t rule. The Commission has generally accepted the coments directed to the i issues raised in question 3 of the ANPRM. Thus, the Comission does not propose to regulate the tems and conditions of property damage Such issues include whether the Comission should refuse to insurance. accept insurance whose premiums are not discounted when used in conjunction with insurance from another carrier and whether further use of retroactive assessments should be curtailed. The Comission has concluded that these issues do not sufficiently affect public health and safety to warrant additional action.

However, the NRC believes that NUREG-0891 and commenters on question 3 of the ANPRM raised legitimate concerns with respect to the issue of requiring a decontamination priority for all property insurance obtained. Comments offered by the Association of the Bar of the City of New York provide the most complete discussion of this issue. The Commission agrees that proceeds from property insurance must be used first to protect public health and safety. In fact, the Commission has no reason to impose a property insurance requirement other than to protect public health and safety. Proceeds from insurance would be used both to assure that contamination from a reactor immediately af ter an I accident did not threaten public health and safety and the environment and to eliminate delays and degradations to the cleanup process that could cause threats to health, safety and the environment over time. The Commission also agrees with comments that a rigid categorical decontamination priority could present an excessive burden on licensees given the benefit to be obtained. Consequently, a modified decontamination priority is proposed in the rule, which, by not j requiring a decontamination priority in every case, should not unduly affect utility financial markets. I Finally, With respect to question 4, the Commission agrees with i commenters who suggested that eliminating replacement power insurance would not increase capacity for insurance more closely tied to t l protecting public health and safety. i l

m FINDING OF NO SIGNIFICANT ENVIRONMENTAL IMPACT i The Comission has detemined under the National Environment Policy Act of 1969, as, amended, and the Commission's regulations in Subpart A of 10 CFR Part 51, that this rule, if adopted, would not be a major Federal action significantly affecting the quality of the human environment and therefore an environmental impact statement is not required. Although changes in insurance requirements affect the financial arrangements of licensees and have economic and social consequences, they do not alter ~ ~ the environmental impact of the licensed activities. As detemined in the environmental assessment, the alternatives to the proposed action i likewise do not have any significant impact on the environment and no other documents related to this proposed action exist. The environmental assessment and finding of no significant impact on which this detemination is based are available for inspection at the NRC Public Document Room, 1717 H Street NW, Washington, DC. Single copies of the environmental assessment and the finding of no significant impact are available from Robert S. Wood, Office of State Programs, U.S. i Nuclear Regulatory Comission, Washington, DC 20555, Telephone (301)492-9885. ~ PAPERWORK REDUCTION ACT STATEMENT 1 This proposed rule does not contain a new or amended information collection requirement subject to the Paperwork Reduction Act of 1980 (44U.S.C.3501etseq.). Existing requirements were approved by the Office of Management and Budget (approval number 3150-0011). i

REGULATORY ANALYSIS [ The Comission has prepared a draft regulatory analysis on this proposed regulation. The analysis examines the costs and benefits of the alternatives considered by the Comission. Interested persons may examine and copy for a fee a copy of the draft regulatory analysis at the NRC Public Document Room, 1717 H St. NW, Washington, DC. Single copies of the analysis may be obtained from Robert S. k'ood, Office of State Programs, U.S. Nuclear Regulatory Comission, Washington, DC 20555, Telephone (301)492-9885. REGULATORY FLEXIBILITY ACT CERTIFICATION As required by the' Regulatory Flexibility Act of 1980, (5 U.S.C. 605(b)), the Comission certifies that this rule, if adopted, will not have a significant economic impact on a substantial number of small entities. This rule affects only the licensing and operation of nuclear power plants. The companies that own these plants do not fall within the scope of the definition of "small entities" set forth in the Regulatory Flexibility Act or the Small Business Size Standards set out in regulations issued by the Small Business Administration at 13 CFR Part 121. LIST OF SUBJECTS IN 10 CFR PART 50 Antitrust, Classified information, Fire prevention, Incorporation by reference, Intergovernmental relations, Nuclear power plants and i --,w.--. .n,

reactors, Penalty, Radiation protection, Reactor siting criteria, Reporting and recordkeeping requirements. Under the authority of the Atomic Energy Act of 1954, as amended, the Energy Reorganization Act of 1974, as amended, and 5 U.S.C. 553, the NRC is proposing to adopt the following amendment to 10 CFR Part 50. PART 50 - DOMESTIC LICENSING OF PRODUCTION AND UTILIZATION FACILITIES 1. The authority citation for Part 50 continues to read as follows: AUTHORITY: Secs. 103, 104, 161, 182, 183, 186, 189, 68 Stat. 936, 937, 948, 953, 954, 955, 956, as amended, sec. 234, 83 Stat. 1244, as amended (42 U.S.C. 2133, 2134, 2201, 2232, 2233, 2236, 2239, 2282): secs. 201, 202, 206, 88 Stat. 1242, 1244, 1246, as amended (42 U.S.C. 5841, 5842, 5846),unlessotherwisenoted. Section 50.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 2951 (42U.S.C.5851). Sections 50.57(d), 50.58, 50.91, and 50.92 also issued under Pub. L. 97-415, 96 Stat. 2071, 2073 (42 U.S.C. 2133, 2239). Section 50.78 also issued under sec. 122, 68 Stat. 939 (42 U.S.C. 2152). Sections 50.80-50.81 also issued under sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234), Sections 50.100 - 50.102 also issued under sec. 186, 68 Stat. 955 (42 U.S.C. 2236).

For the purposes of sec. 223, 68 Stat. 958, as amended (42 U.S.C. 2273), 5550.10(a),(b),and(c), 50.44,50.46,50.48,50.54,and50.80(a)are 7 issued under sec.161b, 68 Stat. 948, as amended (42 U.S.C. 2201(b)); 1611, 68 Stat. 949, 5550.10(b) and (c) and 50.54 are issued under sec. asamended(42U.S.C.2201(1);andSQ50.55(e),50.59(b),50.70,50.71, 1610, 68 Stat. 950, as 50.72, 50.73, and 50.78 are issued under sec. P amended (42U.S.C.2201(o)). 2. Section 50.54 is amended as follows: Paragraph (w)(1) is revised. a. b. Paragraphs (w)(2) and (w)(3) are removed. Paragraph (w)(4)isredesignatedas(w)(2)andrevised. c. d. Newparagraph(w)(3)isadded. 150.54 Conditions of licenses. (w)* This insurance must have a minimum coverage limit for the reactor (1) station site of no less than $1.02 billion. (2)--EThe-14eensee-sha115-within-ninety-days-(90-days)-ef-any-4nerease l (n-pel4ey-14m4ts-fer-primary-exeess-eeverage-that-44-has-obtained-pursua te-this-paragraph -take-reasonable-steps-to-obtain-these-4nereasest-and] i i I i

(3)--EWhen-a-14eensee-4s-preh4bited-frem-purehasing-en-site-preperty damage-4nsuranee-because-of-state-or-leeti-l&W -%he-14eensee-shall-purehase 5 the-spee4f4e-amount-of-sueh-4nsuranee-found-by-the-NRG-te-be-reasonably available-te-that-lisensee -er-te-ebta4n-an-equivalent-ameunt-ef s preteet4ent-and3 (2) [(4)]The licensee shall report on April 1 of each year to the NRC l as to the present levels of this insurance or financial protection it maintains and the sources of this insurance or protection; and (3), The proceeds of this insurance shall be used first to decontaminate the licensed reactors before ani other purpose when and to the extent that such decontamination is required to protect public health and safety and is so oYdered to be used by the Director of Nuclear Reactor Regulation. Dated at Washington, DC this day of 1984. For the Nuclear Regulatory Commission. Samuel J. Chilk, Secretary of the Commission. r y

f e e o e o W ENCLOSURE 2 e 9

i ANALYSIS OF PROPOSED REVISIONS TO THE PROPERTY DAMAGE. INSURANCE RULE AND THE ISSUE OF FEDERAL PREEMPTION I.

Background

l On March 31, 1982, the Comission published a final rule requiring, among other things, that reactor licensees maintain onsite property damage insurance to be used for decontamination expenses arising from a nuclear accident. 47 Fed. Reg. 13750. Pending completion of studies evaluating the j cost of cleaning up accidents of varying severity, the Commission decided that it would not require a stated minimum amount of coverage. Rather, it l examined the minimum coverage then available from private sources, determined ~ it to be reasonable for the interim, and required power ' reactor licensees to obtain coverage in that amount. In promulgating that rule, the Comission also recognized that state or local laws might constrain a licensee's purchase of mutual or assessment insurance. M Id. at 13752. Accordingly, ' the Comission modified the rule' as proposed to provide that, in such circumstances, a licensee must either purchase the specific amount of insurance that the NRC finds is reasonably available to that licensee or obtain an equivalent amount of protection. See10CFR50.54(w)(3). y Mutual insurance is a system of insurance in which the insured persons become members of the insurance company. By paying specified premiums into a comon fund, members become eligible for indemnification in the event of a covered loss. Assessment insurance is a type of insurance that permits the insurer to require insured persons to pay additional premiums, or assessments, as needed to indemnify losses incurred during the tenn of the policy. -c- -. -,e---e-- p.,,,-an-m---------.,-.,n.- --,,---------_--,_-.------,-.-_,,-,-___,n-,.

= ! Several months later, the Commission published an advance notice of proposed rulemaking (ANPR), seeking commen't on a number of issues raised by the completed studies. Among them were the amount of coverage that the Commission should require and whether the rule should include special provisions for certain types of licensees, such as those prohibited by state law from obtaining certain types of coverage. See 47 Fed. Reg. 27371, 27372. The Commission is now considering promulgation of proposed revisions to its property damage insurance rule. It has requested the staff to draft a rule requiring a mandatory minimum coverage. In connection with this l proposal, the Commission has also requested an analysis of the issue of federal preemption of state prohibitions on the, purchase of mutual or assessment insurance. This paper discusses the types of state prohibitions i I identified, the effect of the proposed revisions, and the Commission's authority to preempt state law. It concludes that the Commission probably does not have the authority to preempt state law. Nevertheless, the proposed rule is sufficiently flexible that compliance with both federal and state law should be possible. Accordingly, the Commission should promulgate its revised property insurance rule without regard to the issue of federal preemption. O ,----w.-- --,-7 ,7,-n.-- - - --.. - - -, - - -, -,,, -,,, - -,, - - - - -, - - - - - - - - - -,,, - - - - -, - - - - - - -

l i j d II. Types of St' ate Prohibitions The existing property damage rule is structured in a manner that pennits a utility to obtain the mandatory minimum co'verage limit (currently $568 million) without having to purchase mutual or assessment insurance. E Coverage for more than that minimum is available only from mutual insurers and carries the possibility of assessments. The ANPR specifically requested consients on whether the Commission should exempt from applicable portions of its property insurance requirements those utilities prohibited by state law from obtaining coverage from certain types of insurers. 47 Fed. Reg. at l 27372. Only two nuclear utilities identified specific prohibitions that spight affect their ability to purchase nuclear property insurance. No other prohibitions were identified, although some consnenters expressed a disinclina- ~ tion to purchase assessment insurance as a matter of business practice. p The rule requires utilities to maintain insurance with a minimum coverage limit of "no less than the combined total of (1) that offered by either the American Nuclear Insurers (ANI) and Mutual Atomic Energy Reinsurance Pool (MAERP) jointly or Nuclear Mutual Limited ( L); plus (ii) that offered by Nuclear Electric Insurance Limited (NEIL, the Edison Electric Institute (EEI). ANI and MAERP jointly or NML as excess property insurance." 10CFR50.54(w)(1). The principal sources of nuclear property insurance are ANI/MAERP, NML, and NEIL. ANI-MAERP is a consortium of insurance companies of both the stock (ANI) and mutual (MAERP) type.,NML and NEIL are mutual insurers. ANI-MAERP insurance r is fully financed by stated premiums payable in advance. NML and NEIL insurance are only partially financed by such premiums and carry the possibility that additional premiums, or assessments, will be required in order to pay losses incurred during the policy year. Primary coverage of $500 million is currently available from either ANI/MAERP or NHL. ANI/MAERP currently offers excess coverage of $85 million; NEIL offers $435 million.

- _. _ - = _. . Coments on behalf of the City of San Antonio, the City of Austin, and the Houston Lighting & Power Company -- applicants for the ' proposed South Texas Project -- indicated that the Texas Constitution has been construed to l prohibit a Texas municipality from purchasing mutual or assessment insurance. These comenters pointed out that Section 52 of Article III of the Texas Constitution denies a Texas municipality the authority "to lend its credit or i to grant public money or thing of value in aid of, or to, any individual, association or corporation whatsoever, or to become a stockholder in such corporation, association, or company." The Texas Supreme Court has construed this provision as prohibiting a Texas municipality from purchasing insurance that provides for the assessment of policy holders or makes the policy holder f the equivalent of a stockholder in the company; i.e., assessment.or mutual insurance,respectively.M The Power Authority of the State of New York (PASNY) comented that its bond resolutions could be construed as prohibiting the purchase of i i insurance from an insurer not admitted to do business in the State, such as l PML and NEIL. PASNY did not indicate whether its bond resolutions have actually been so construed. For present purposes, if we assume that this l is a prohibition required by state law, it would function similarly to the state constitutional prohibitions in terms of the federal preemption l 6 See City of Tyler v. Texas Employers Insurance Assn., 288 S.W. 409 3/ (Tex. Com. App.1926, judgment adopted), reh'g denied, 299 S.W.195 Lewis v. Independent school District of Austin, (Tex. Com. App.1927); U'TIY42). 139 Tex. 831 S.W. 2d 45 l

question.O This is because it involves utility funding and insurance -- matters traditionally regulated by the states -- and would not conflict with federal law or frustrate federal regulatory objectives. Accordingly, this type of prohibition is not separately considered in the federal preemption analysis. It is difficult to determine how many utilities might be affected by' an increase in the minimum coverage requirement. The answer is dependent on the various provisions of state law (not only in state constitutions but also in statutes or regulations' governing such matters as insurance, bond resolutions,orpublicutilities),theirconstructionbystatecourts,the ownership of a particular utility, and the availability of alternate means l of protection. Many state constitutions contain provisions similar to the Texas prohibition.M However, the courts have construed these provisions differently in different states, and the issue has not yet arisen in some ( y It appears that such a prohibition should be regarded as a law enacted for the purpose of regulating public utilities rather than the business of insurance. As such, its validity would not be governed by Section 2(b) of the McCarran-Ferguson Insurance Regulation Act. 59 Stat. 34 (1945), as amended 15 U.S.C. I 1012(b). See, le.., S.E.C. v. National Securities. Inc., 393 U.S. 453 (1969) (State law aimed at protecting l the interests of persons who own stock in an insurance company is not a law regulating the business of insurance as used in that Act). 1 y See 81A C.J.S. States i 120(a) (1977). i 1 l

~. 9 jurisdictions.6/ At present, 44 of 56 reactor station sites voluntarily have over $900 million in property damage insurance, and 4 of the remaining 12areexemptfromaportionoftheexistingrequirement.E Thus, it appears l that the problem of state prohibitions is relatively limited in scope. III. Effect of the Proposed Revisions J The existing property damage insurance rule permits compliance with state law in several ways. It' allows a licensee to satisfy the i mandatory minimum coverage by either obtaining the requisite insurance or l [ demonstrating an equivalent amount of protection. It is structured so as to pemit.a licensee to obtain the necessary insurance coverage without l having to purchase mutual or assessment insurance. In addition, it I recognizes the potential for state or local prohibitions and provides that a licensee subject to such restrictions shall either purchase the amount of insurance that the NRC finds is reasonably available to the licensee or obtain an equivalent amount of protection. 6/ The letter of comment from the Assistant City Attorney for the City of Austin, Texas indicates that the Supreme Courts of Louisiana and Idaho have decided the issue in a manner similar to that.of the Texas Supreme Court. See letter of October 14, 1981, commenting on the prcposed 18,1981). p(roperty damage insurance rule, 46 Fed. Reg. 41790 (August Idaho has no nuclear reactors, and the proposed River Bend and Waterford projects in Louisiana are not municipally owned.) Courts in other juris-dictions have reached the opposite conclusion. See, e... Downinc v. Erie School District, 297 Pa. 474,147 A. 239, 2T0'-(1 Accorc ing to Baker & McKenzie, counsel for NEIL and NML, the municipally-owned WPPSS reactors may be affected because the Washington Supreme Court has not yet addressed this issue. 7/ See Memorandum for the Connissioners from John E. Zerbe. Director. Office of Policy Evaluation, dated August 10, 1983, at 1. e

, The proposed rule retains the general provision that allows a utility to demonstrate that it has an equivalent amount of protection by means otfier than insurance.- This provision is needed unless the Comission is able to find that insurance is the only available means of financial surety that will provide adequate protection of the public health and safety. Choosing among alternate means of financial surety for nuclear power reactors is not peculiarly within the expertise of the NRC. Moreover, the staff is doubtful of its ability to reject alternate means of financial surety for nuclear reactors on' safety grounds. For these reasons, the general provision per-mitting equivalent protection by alternate means should be retained. The proposed rule deletes subsection 50.54(w)(3), the provision that a utility subject to state or local p,rohibitions need purchase only the ) specific amount of insurance " reasonably available" to it or provide an equivalent amount of protection. As mentioned previously, the Comission detennined that, for the interim, a rule based on the availability of a reasonable amount of nuclear property insurance would adequately protect the public. Now that the Commission is prepared to establish a minimum coverage level bas'ed on the amount that is needed to protect the public, however, considerations of availability of insurance are of considerably lesser importance.8_/ And, contrary to what might be expected, 8/ Unlike the Commission's financial protection requirements and indemnity agreements for public liability claims in 10 CFR 140, the property damage insurance rule is not promulgated under Section 170b. of the Atomic Energy Act, which allows the Commission to require "the amount of liability insurance available from private sources" (e.nnhasis added). For this reason, it should be based primarily on need rather than availability. See pp. 11-12, infra. 1

o . deletion of that provision does not materially affect the federal preemption analysis. Although the Comission apparently included section 50.54(w)(3) to address the problem of state prohibitions on mutual or assessment insurance, on further reflection it appears that the provision could not be used to exempt a utility from the' obligation to obtain the full amount of coverage required simply because of the prohibition. Consistent with the Comission's responsibilities under the Atomic Energy Act, any exemption would have to be based not on the provisions of state law but on a oetermination of wh'at is required to protect the public health and safety in the event of a nuclear accident. Thus, section 50.54(w)(3) could be used to require a utility to purchase only the amount of insurance that is reasonably available to it, and to permit the utility to furnish any additio'nal protection required by alternate means. The same result could be obtained under the general i provision allowing financial surety by alternate means. Thus, subsection (w)(3) is unnecessary and should be deleted. Theproposedrulealsorevisessection50.54(w)(1)toincrease the minimum coverage limit to $1.02 billion. This is the amount that the Commission believes is required to cover reasonable decontamination and cleanup costs associated with the onsite property damage that could result from a nuclear accident. Assuming no increase in the availability of nuclear property insurance that is not of the mutual or assessment type, a utility subject to state or local prohibitions could no longer satisfy the l mandatory minimum coverage by insurance alone. Such a utility would have several options. It could purchase the maximum available fixed premium insurance from a stock company and provide the remainder of the required protection by alternate means, such as a

letter of credit, bond, or self insurance.

It could apply to the Comission for an exemption from tife mandatory minimum coverage. However, any such exemption would have to be based on the amount of protection required rather than the provisions of state law. The utility might seek state or local approval to purchase the prohibited insurance. Finally, it might challenge the validity of either the state prohibition or the Comission's rule. In the event that none of these options proved satisfactory, the utility would face denial of its application or revocation of its operating license, depending on the circumstances. IV. Federal Preemption Analysis The Commission requested an analysis of the advantages and disadvantages of a federal preemption approach. This assumes that the Commission has the authority to promulgate a rule that would preempt inconsistent state or local prohibitions. As explained below, the Commission probably does not have such authority. Accordingly, the analysis concentrates on whether the Comission can, rather than should, preempt state law. The Supreme Court recently outlined the general principles of federal preemption as follows: l It is well-established that within Constitutional limits Congress may preempt state authority by so stating in express terms. Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977). l Absent explicit preemptive language Congress' intent to supersede state law altogether may be found from a " scheme of federal regulation so pervasive as to make reasonable the inference that Congress left no room to supplement it," "because the Act of Congress may touch a field in which the federal interest is so I dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject " or because "the w

object sought to be obtained by the federal law and the character of obligations imposed by it may reveal the same purpose." Fidelity Federal Savings & Loan Ass'n v. de la Cuesta E 230 U.S. (1982); Rice v. Santa Fe Elevator Corp., 331 U.S. TI9T7). Even where Congress has not entirely displaced state regulation in a specific area, state law is preempted to the extent that it actually conflicts with federal law. Such a conflict arises when " compliance with both Federal and state regulations is a physical impossibility," Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-143 (1973), or where state law " stands as an obstacle to the accomplishment and execution of i the full purpose and object.ives of Congress." Hines v. Davidowitz, 312 U.S. 52, 67 (1941). Pacific Gas & Electric Co. v. 5 tate Energy Resources Conservation and Develop-ment Comission. U.S. (1983)(slipopinionat11). In Pacific Gas, the Supreme Court upheld California's moratorium on the ., certification of new nuclear power plants pending federal approval of a demonstrated technology or means for the permanent disposal of high level j radioactive wastes. The Court reasoned that, under the Atomic Energy Act, Congress provided for.a system of dual regulation of nuclear-generated electricity in which the Federal Government maintains complete control over reactor safety and the States exercise their traditional authority over economic questions, such as the need for po'wer, type of facilities to be licensed, land use, and ratemaking. Because the moratorium was based on economic rather than safety concerns and did not conflict with federal safety regulations, the Court held that the California statute was not preempted. The Atomic Energy Act does not expressly preempt state prohibitions on the purchase of mutual or assessment insurance. Nor are those prohibitions concerned with reactor safety. Thus, there is no question of express or implied preemption based on federal occupation of the field or an imper- --,-,-------,----.-n.

. missible state purpose. The inquiry then becomes whether preemption can be implied because of a conflict between federal and state law. As outlined in j Peres: v. Campbell, 402 U.S. 637 (1971), this is basically a two step process of first construing the federal and state provisions and then detennining the constitutiona'lquestionofwhethertheyareinconflict.E When the state i 1aw in question concerns a matter that the states have traditionally regulated, the Court will " start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress." Rice, supra, 331 U.S. at 230(1947). Section 182a. of the Atomic Energy Act grants the Comission broad discretion to determine the financial q'ualifications of a license applicant.E ection 1611.(3) further authorizes the Comission to S " prescribe such ragulations or orders as it may deem necessary... to govern any activity authorized pursuant to [the Atomic Energy] Act, including standards and restrictions governing the design, location, and operation of l facilities used in the conduct of such activity, in order to protect health and to minimize danger to life or property." Under this authority, the l 9/ The following analysis assumes that the state prohibitions in question are constitutional 1y valid on other than federal preemption grounds. 10f See New England Coalition on Nuclear Pollution v. NRC, 582 F.2d 87 (1st Cir. 1978).-

,, Comission promulgated 10 CFR 50.54(w), requiring. nuclear reactor licensees j to obtain on-site property damage insurance or to demonstrate that they possess an equivalent amount of protection. The purpose of the rule is to protect the public health and safety by ensuring that funds are available to cover reasonable decontamination and cleanup costs associated with the onsite property damage that could result from a nuclear accident. E The state constitutional prohibitions at issue clnarly involve matters traditionally regulated by the states. They constrain a municipality's authority to lend its credit or to use public funds for certain purposes, or to become a stockholder. Depending on their construction, they may operate to prohibit a municipality's purchase of certain types of insurance -- also a matter traditionally regulated by the states. A conflict with federal law arises where compliance with both federal and state law is physically impossible or where the state law frustrates the accomplishment of a federal objective. Such frustration could be shown, for example, if the state law would prevent the realization of a federal purpose, see Perez v. Campbell, 402 U.S. 637 (1971); discourage full compliance with - federal law, see Nash v. Florida Industrial Comission, 389 U.S. 235 (1967); or substantially limit federal regulatory cptions, see Burbank v. Lockheed I 4 11/ See 47 Fed. Reg. at 13751-52. 1 e ~ J

~ .; AirTerminal,Inc.,411U.S.624(1973).E A mere possibility of a conflict is not sufficient; rather, there must be an actual conflict between federal and state law. Goldstein v. California, 412 U.S. 546, 554-55 (1973). Under the first test, the state prohibitions at issue are not in direct conflict with the Comission's property insurance rule, i / Perez involved a conflict between Arizona's laws concerning uninsured 12 The state law provided for motorists and Federal bankruptcy law. revocation of an uninsured motorist's license and registration if a judgment against the motorist remained unsatisfied for more than 60 days, even if the judgment was discharged in bankruptcy. The purpose of the Arizona law was to protect the public from financial harm attribut-able to negligent or reckless uninsured motoHcts. The purpose of the Bankruptcy Act was to offer debtors a new opportunity and clear field for future effort. The Court held that the Arizona law interfered with the accomplishment of the objectives of the Federal law and was, there-fore, preempted. 1 In Nash, a person who filed an unfair labor practice charge was denied unemployment benefits under a Florida statute that prohibited such benefits to a person whose unemployment was due to a labor dispute. The Court found the Florida statute inconsistent with the National Labor Relations Act, which provides a comprehensive scheme for the regulation ~i of labor relations in activities affecting interstate and foreign comerce. The federal act forbid employers or unions from taking coercive or discriminatory actions against an employee for filing an unfair labor practice charge. By denying unemployment benefits to persons who filed such charges, the Florida statute had "a direct tendency to frustrate the purpose of. Congress to leave people free to l make charges." 389 U.S. at 239. Accordingly, the court held that the Florida statute was preempted. Lockheed concerned a local ordinance prohibiting aircraft takeoffs during certain hours for the purpose of noise control. The Court held that the local ordinance was preempted based on the pervasive scheme of l federal regulation of aircraft noise under the Federal Aviation Act, as amended by the Federal Noise Control Act. The Court reascned that local l control of aircraft takeoffs and landings would severely limit the flexibility of the Federal Aviation Administration in controlling air traffic, making it more difficult to schedule flights to avoid congestion l and the corresponding decrease in safety that such congestion could produce.

i because compl.iance with both federal and state law is physically possible. J The rule permits licensees to demonstrate financial surety for decontamina-4 tion and radioactive debris removal by a variety of means, one of which is the purchase of nuclear property insurance. The rule does not dictate the type of insurance that is to be purchased; rather, it requires a minimum amount of coverage available from specified nuclear insurers. Because the rule does not absolutely require the purchase of the prohibited types of; ) insurance and permits a licensee to provide the minimum coverage by alternate 1 means of financial surety, there is no inevitable conflict with state law. In short, compliance with both federal and state requirements is not a " physical impossibility." Florida Lime & Avocado Growers, supra, 373 U.S. at 143. This factor supports the conclusion that the state prohibitions at issue are not preempted. Under the second test, the state prohibitions do not appear to frustrate the accomplishment of a federal purpose. One of the objectives of the Atomic Energy Act is "to encourage widespread participation in the development and i utilization of atomic energy for peaceful purposes." 42U.S.C.I2013(b). The Supreme Court has emphasized, however, that "the promotion of nuclear power is not to be accomplished 'at all costs.'" Silkwood v. Kerr-McGee Corp., U.S. (slipopinionat18),quotingPacificGas, supra, U.S. at (slipopinionat29). Under Pacific Gas, the Act affords the states sufficient authority to slow or even stop the development of nuclear power for economic reasons. This suggests that the states could preclude nuclear utilities (or municipal corporations that own nuclear facilities) from purchasing certain type's of insurance for economic reasons as well. That i 1

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m- ---.

,. i such prohibitions.may interfere with the promotion of nuclear power would no more frustrate the accomplishment of that federal purpose than the California moratorium that the Court upheld in Pacific Gas. In short, some state interference with the goals of the Atomic Energy Act is permissible, and the Court will construe nuclear safety matters narrowly in determining whether a state law is preempted. Another federal objective, derived from the Atomic Energy Act as a whole, is to provide reasonable assurance that the public health and safety will be adequately protected through the development and application of a system of unifom federal standards for the safe construction and operation of nuclear reactors. Thus, the provisions of that Act reflect what the Supreme Court has recognized as "the federal government's express desire to maintain exclusive regulatory control over the safety aspects of nuclear power." Silkwood v. Kerr-McGee, supra. U.S. at (slipopinionat8).E The state constitutional prohibitions at issue here would not frustrate the development and application of unifonn federal standards for the safe J3/ In Silkwood, the Supreme Court held that the Atomic Energy Act does not preempt an award of punitive damages under state tort law for personal injuries or property damage due to radioactive materials. The Court examined.the legislative history of the Price Anderson Act, which amended the Atomic Energy Act, and found ample evidence that Congress had assumed that remedies under state tort law would continue to be available to persons injured by nuclear incidents. Because state prohibitions on the purchase of mutual or assessment insurance are unrelated to the continued applicability of state tort law, Silkwood is not directly relevant to the validity of those prohibitions. It does emphasize, however, that Congressional intent to preempt areas of traditional state authority must be especially clear. 2

operation of nuclear plants. Although they would limit the options for compliance available to certain reactor licenses, any lack of uniformity in the means of compliance would not be of radiological safety significance because the rule expressly pennits the use of alternate means of financial surety. The need for an NRC finding that the licensee has provided an equivalent amount of protection ensures uniformity in the level of protection that is provided. Thus, it is unlikely that a court would find the state prohibitions preempted in the interest of preserving uniform federal safety standards for nuclear power plants. Nor would the state pruibitions have the effect of discouraging compliance with federal law. Although, as noted above, the state i prohibitions would restrict a nuclear utility's options for compliance with the Connission's rule, they would not discourage full-l compliance by alternate means. If a utility could not comply with the rule. l it would face denial of its application or revocation of its license under ' federal law l Finally, the state prohibitions would not substantially limit federal regulatory options in a manner inconsistent with federal objectives. Although they would limit somewhat the Connission's flexibility in regulating financial surety for decontamination expenses following an accident, any such 1 effect would be minimal because the rule permits compliance by a variety of means. Moreover, the state prohibitions would not interfere with the federal objective of protecting the public through uniform safety or financial protection standards. Thus, this factor also suggests that the state prohibitions would not be preempted. l l .-,v--,- _,mm-,.. -. - - - _ _ _.., _ ~ ~,. _ -,----,,-c-,

V. Conclusion The Comission should amend its property damage insurance rule to delete the provision concerning state and local prohibitions on the purchase of nuclear property insurance. The provision is vague and is unnecessary in view of the general provision that pemits a utility to demonstrate that it , has an equivalent amount of protection by means other than insurance. Alternatively, the Comission should clarify that the provision concerning ~ state and local prohibitions is not intended to pemit the granting of an exemption that will result in a level of financial surety that is less than what the Commission believes is required to protect the public. Some state constitutions may be construed to prohibit municipal owners of nuclear reactors from purchasing nuclear property insurance of the mutual or assessment type. Increase of the mandatory minimum coverage to $1.02 billion million would mean that utilities subject to such prohibitions could no longer satisfy the requirement by insurance alone. They could, however, provide all or part of the required financial surety by alternate means. The Comission probably lacks the authority to promulgate a rule that would preempt these state prohibitions. The Atomic Energy Act does not expressly preempt the field of nuclear property damage insurance, and the state prohibitions are not concerned with reactor safety. Thus, there is no \\

1 ' question of express or implied preemption based.on federal occupation of the field or an impermissible state purpose. Indeed, the state prohibitions are not even concerned.with reactors, but rather with insurance and a municipality's use of public funds -- matters traditionally regulated by the states. Accordingly, Congressional intent to preempt state law must be clear. There does not appear to be an actual conflict between federal and state law. Although the state prohibitions may operate to restrict a utility's available options for compliance with the Commission's property insurance rule, compliance with both federal and state law is physically possible. The rule is sufficiently flexible to permit a utility to demonstrate adequate financial surety by a variety of means. A utility that is unable to comply will face denial of its application or revocation of its operating license, consistent with federal law. In addition, the state prohibitions do not appear to frustrate the purposes of the Atomic Energy Act. The federal interest in promoting nuclear power is not sufficient to override legitimate state interests, and the state prohibitions do not interfere with the federal objective of ensuring unifonn federal safety standards for nuclear reactors. Under Pacific Gas, supra, the Atomic Energy Act provides for a system of dual regulation of nuclear power in which the Federal Government maintains exclusive control over reactor safety and the States exercise their traditional authority over economic matters. This suggests that a state could probably decide, on economic grounds, that nuclear utilities should be a /

, r directly prohibited from purchasing certain types of property damage An indirect state prohibition, affecting only those nuclear insurance. utilities that happen to be municipally owned, is even more likely to . withstand a challenge on federal preemption grounds. This does not necessarily mean, however, that the Comission should I The state forego the proposed revision of its property insurance rule. . prohibitions can coexist with federal law without significantly affecting the Comiss. ion's regulation of nuclear safety. Few licensees would be affected, and the rule is sufficiently flexible to allow compliance by Accordingly, the Comission should promulgate its property alternate means. insurance rule to require the amount of financial surety it believes is necessary to protect the public health and safety in the event of a nuclear accident, without regard to the issue of federal preemption. l l

a _a n O e 9 9 ENCLOSUPE 3 REGULATORY ANALYSIS i l i i i i

s Regulatory Analysis Property Insurance Requirements for NRC Licensed Nuclear Power Plants 1. Statement of the Problem The proposed rule follows an interim final rule on property insurance for consnercial reactor licensees that was promulgated on March 31, 1982(47FR13750)andcodifiedas10CFR50.54(w). This interim rule was treated as an interim rule pending completion of two studies: Nuclear Property Insurance: Status and Outlook (NUREG-0891), by Dr. John Long; and a report by Pacific Northwest Laboratory (PNL), Technology, Safety and Costs of Decommissioning Reference Light Water ReactorsFollowingPostulatedAccidents(NUREG/CR-2601). On June 24, 1982, the Connission published in the Federal Register (47 FR 27371), anAdvanceNoticeofProposedRulemaking(ANPRM),whichsought connents on the issues raised in NUREG-0891. The existing rule requires substantial amounts of property damage insurance (currently a minimum of $585 million) to pay for the costs of cleanup following an accident at a coninercial nuclear power plant. The NRC believes that such insurance should be required so that the financing and pace of cleanup following an accident does not become a public health and safety problem such as occurred at TMI-2. Although significantpremiumcosts(i.e.,$1million-$3millionperfacility per year) are paid by utilities purchasing property insurance, most

purchased whatever insurance was offered prior to NRC's insurance requirement. Similarly, subsequent to the imposition of 10 CFR 50.54(w),mostutilitieshaveboughtinsurancebeyondthatrequiredby the NRC. Based on licensee reports submitted by April 1,1983, of 56 sites requiring coverage, 39 carry the maximum amount of insurance generally available. Another four sites have been exempted by the NRC from the requirement to carry excess property insurance. Only 13 i sites are presumed to carry less than $1.02 billion. The marginal cost of HRC's existing property insurance rule is minor and falls only on those few licensees who would not otherwise carry the minimum $585 million required. The only additional cost associated with the existing rule is an annual reporting requirement of les's than a page that indicates the amount carried and insurer. The cost of preparing this report is estimated to be no more than 4 i staff hours per licensee. The proposed rule would affect only those licensees not currently buying at least $1.02 billion in insurance. As indicated above, approximately 13 licensees would be affected. Some of these licensees are not buying both excess policies not because they do not want to but because they are prohibited by state law from buying insurance i i using retroactive assessments. __.__,-...-._,_,n_,

---

,,,.,---__-,.,,_e.

1 For future licensees, only those that would not otherwise buy all property insurance available would be affected by the proposed rule. r Because the larger plants tend to be insured for the maximum available, this action is not expected to have a regulatory impact on future licensees.. i Objectives The objective of the proposed rule is the same as that stated above for the interim final rule--that is, the financing and pace of cleanup following an accident at a commercial reactcr should not potentially ~ affect public health and safety such as occurred at TMI-2. 3. Alternatives, 4. Consequences, and 5. Decision Rationale Several alternatives were raised in NUREG-0891, the ANPRM, and comments in response to the ANPRM. As indicated in the proposed rule, One the NRC believes that additional property insurance is required. alternative to this is to keep the existing rule. A second is not to require additional excess insurance directly but rather to publish the amounts of insurance carried by each licensee and induce additional coverage where necessary through the state and local political This second alternative was posed by the staff to the process. Commission who disapproved it in favor of a more direct requirement. A third alternative is to require both excess layers of insurance regardless of amount. One benefit to this alternative is that the required level would increase as the amount of excess insurance I e ,--_,-._-,.---.--y __.._,_m__,-__

available increases. Thus, increased costs resulting from inflation could be covered without revising the rule itself. However, because, as coverage limits grow, requiring both excess layers might eventually entail the purchase of more insurance than necessary to protect public l health and safety, this alternative was not chosen. The alternative being proposed is to establish a dollar limit of $1.02 billion that would cover expected costs arising from most potential accidents. The Consnission is not privy to the premiums charged for I primary property insurance. However, annual premiums on excess coverage h, ave been reported to be $3,000.00 per million dollars of coverage for ANI/MAERP. Annual premiums for NEIL-2 excess coverage would likely be significantly less per million dollars of coverage but could, of course, entail additional assessments in the event that losses occurred. The total cost per year, not including potential assessments, to each of those 13 licensees that would be required to l buy additional excess insurance would likely range from $0.3 million l to $1.5 million. For this cost, the newly-covered licensees, their i stockholders and their customers would be protected from the potentially much largtr costs that could result from an accident. Likewise, the public would be protected from any adverse health and safety effects occurring because of delays in cleanup arising from funding shortfalls. Some additional impact on the NRC could occur if any of the thirteen or so licensees required to buy additional insurance petitioned the NRC for exemption from this requirement. If two staff-weeks of effort l l \\

5-I are required for each exemption, as much as 26 staff-weeks total additional effort by the NRC could be required. No additional impact t on other NRC programs, other organizations or individuals is The Commission therefore concludes that the benefits anticipated. gained by increasing insurance requirements outweigh the incremental costs necessary for implementation. 6. Implementation Because there is some impact on certain reactor licensees, a 90-day implementation schedule is proposed. O f 4 _. ~

6 e O e w. 9 9 e t e O 9 ENCLOSURE 4 e O Y

..[. C ENCLOSURE 4 Y g* "*% l SECY-83-211 May 31,'1983 RULEMAKING ISSUE (Affirmation) The Comissioners For: William J. Dircks From: Executi.ve Director for Operations FINAL RULE TO MODIFY THE REQUIREMENT THAT

Subject:

POWER REACTOR LICENSEES MAINTAIN PROPERTY DAMAG INSURANCE To-infonn the Comission of the staff's

Purpose:

reevaluation of 10 CFR Part 50.54(w), which requires power reactor licensees to maintain on-site property damage insurance for recovery after an accident, and to obtain Comission approval for publication of a minor revision to the current rule. Discussion: A. Background On June 24, 1982, an Advance Notice of Proposed Rulemaking was published in the Federal Register (47 FR 27371). The notice sought coment on a report prepared for the staff by Dr. John D. Long Status and entitled Nuclear Property Insurance: Outlook (NUREG-0391), which raised several issues gennane to the Comission's final rule (47 FR 13750) on property insurance adopted on March 31, 1982 and codified as 10 CFR 50.54(w). This rule requires ele:tric utility licensees to purchase substantial amounts of on-site property damage insurance to be used for decontamination expenses arising from an accident. The report by Dr. Long, together with four comprehensive questions posed by the Comission to focus the issues raised by NUREG-0891, formed the basis for seeking public coment. A copy of the notice is included as Attachment A to Enclosure 2.

Contact:

Robert S. Wood OSP 49-29885 6 S

7 The Comission:rs. B. Analysis of Coments The Cossnission received 47 coments in response to the Advance Notice. Almost without exception, comenters stated that Dr. Long's report, although providing valuable insights and historical perspective on the workings of nuclear property insurance, went too far in many of its recomendations. Most comenters now appear to accept, either implicitly or explicitly, the existing Comission rule on property insurance. Some utilities would have the Commission explicitly recognize in a revised rule that reactor size should be considered when setting the required amount of insurance. Some municipal and. state utilities want the Comission to preempt the constitutional provisions of certain states that prohibit such utilities from participating in mutual or retroactive assessment insurance plans. But, on the whole, comenters did not object to the general thrust of the existing property insurance rule, nor to most of its specific provisions. With respect to the four questions asked in the Advance Notice, the following sumary is provided. A detailed analysis of comments is provided in Enclosure 2. 1. The first question posed in the Advance Notice asked what amount of insurance should be required. If increased coverage is required, what should be the basis for such a requirement? Consnents varied widely with respect to the issue of how much insurance should be carried. Alth.ough some comenters believe that cleanup costs associated with the TMI-2 accident are in some way relevant, others stated that TMI-2 was unique, that lessons learned from the accident will reduce future cleanup costs substantially, even if an accident of the same severity occurs. Others believe that a WASH-1400-type study is needed to determine what a " maximum probable loss" would be. Still others believe that maximum coverage should be set for each plant individually to reflect its particular risk.

f 3- \\ The Commissioners l Most casunenters criticized the idea of an NRC requirement that primary coverage offered both by Nuclear Mutual Limited (NML) l and American Nuclear Insurers / Mutual Atomic j Energy Reinsurance Pool (ANI/MAERP) be 4 purchased. If licensees were required to buy insurance from both offerers, the resultant combined coverage would he some indeterminate level less than a simple adding of capacities (i.e., currently $1 billion) because of certain structural problems. Another problem discussed by Dr. Long but more strongly emphasized by l many cossnenters is that, by requiring combined capacity, competition is reduced and possible antitrust problems are raised. Other comenters have indicated the l J difficulty in making combined coverages I compatible with the regulatory environments i J within which utilities operate. 2. The second question posed in the Advance Notice asked whether there should be special i provisions for certain types of licensees. For example, should smaller plants be l allowed to buy less insurance because of potentially reduced levels of contamination? j Also, should the NRC exempt from applicable portions of property insurance requirements those utilities prohibited by state law from l obtaining coverage from certain types of insurers? Should utilities with multiple-reactor sites be required to obtain coverage for each unit separately, or is site-wide coverage sufficient? With respect to reactor size vis-a-vis coverage limits, representatives of utilities with smaller plants or unusual design configurations (such as Fort St. Vrain, an HTGR) strongly urged the Commission to allow reduced coverage for them. Representatives of utilities with large reactors either did not coment on this issue, indicated that no such distinction be made, or suggested that distinctions be made by exception rather than in the rule itself. 4 .n, ____r.____,_ _.________,.-m. -~_m_,m_

1 The Connissioners. l 1 Few coments were offered on the issue of whether the NRC should make special j allowance for those utilities prohibited by state law from buying insurance from l assessment or mutual companies. Generally, utilities in states with such provisions i urged the NRC to preempt state law. Others suggested that perhaps NRC authority to i preempt was not so clear cut. l Although few commented on the question of j whether coverage should be by site or unit, 4 those that did unanimously favored site-wide j coverage. Some pointed to the example of ~ GPU where insurance coverage was reinstated j . after the accident at TMI-2. Others i indicated that coverage by unit would i increase the risk exposure of insurers at each location so covered. As a result, a reduction in insurance capacity would probably result.' I 3. The third question pertained to a series of interrelated issues having to do with the l j structure, terms and conditions of the property insurance currently offered. Almost all comenters expressed strong opinions that, in general, the Commission has neither the expertise nor authority to i regulate terms and conditions of insurance. If the NRC were to exercise such authority, commenters maintain, it is likely that the ( NRC would inadvertently restrict capacity j growth or increase prices to the detriment of its overall objectives. j I Dr. Long suggested that the NRC refuse to accept insurance where premiums are not discounted when used in conjunction with i I insurance from another carrier. Few I commented directly on this proposal, but j those that did opposed it. j i Dr. Long also suggested that the use of retroactive assessments may be reaching the limits of sound insurance practice and j recomended that retroactive insurance be i eliminated from any future coverage. Most' comenters disagreed with this assertion. l l although they often directed their comments l l

The Comunissioners. i i )' j' more toward maintaining existing retroactive ~ assessment insurance. Many of those commenting on this issue pointed out that assessment insurance was the only way available to increase property insurance capacity rapidly. Although cossnenters acknowledge that " overuse of retroactive ) assessments could occur at some mint, they did not believe that such point lad been reached. l Dr. Long recomunended that all proceeds from property insurance be used to pay for decontamination after an accident before { claims of creditors and owners are j satisfied. Of all Dr. Long's recomunendations, this perhaps provoked the 4 i most negative reaction. Many consnenters indicated that such a priority would adversely affect ratings of utility debt l issues, would most likely violate existing indenture agreements and would otherwise i adversely affect utility access to.the i l capital markets. Other commenters argued ( that a decontamination priority, by artificially restricting earlier use of funds for restoration of the plant, could i interfere with the most effective means of restoring the plant and could, in an extreme j situation, create the very financial uncertainty that the insurance is designed i, to forestall. l However, the Association of the 5ar of the CityofNewYork(CityBarAssociation) offered an analysis of both the need and l authority for a modified decontamination priority. First, City Bar Association concludes that Sections 103(d), 182(a) and i 161 of the Atomic Energy Act provide the NRC with authority to require all licensees of cossnercial reactors to maintain specified ~ levels of decontamination and debris removal l coverage upon a proper finding that such a l requirement were necessary or appropriate to l protect the public health and safety. Second, standard language in utility trust indentures does not in general give bondholders any vested right to a given amount or type of coverage. Further, if a trustee were to refuse to release funds for

7 a The Connission:rs cleanup to a utility, such action "could very well render the company insolvent, ano in the extreme (but not necessarily remote) case precipitate a bankruptcy or reorganization." If this occurred, the NRC under Sections 186(a)perate a damaged plant could take over and o and 188 of the Act and would likely seek reimbursement from the utility or its successor for costs incurred in decontaminating the plant.* The City Bar Association concludes, "It is uncertain whether any claim made by the indenture trustee on behalf of the utility's bondholders to property insurance proceeds would survive, at least to the extent of the Federal government's claim." However, this connenter also recognized that to respond properly to a nuclear accident, a licensee may be required to take a range of actions apart from decontamination and debris removal. Consequently, this commenter favors priority for payment of decontamination and debris removal expenses insofar.as it is "necessary to remove any significant health or safety hazard." gmphasis added.) The connenter believes this goal can be accomplished if a regulation is properly drawn, although it proposed no wording. 4. The fourth and final question posed in the Advance Notice concerns whether the NRC should become involved in regulating the replacement power insurance program as offered by Nuclear Electric Insurance Limited (the so-called NEIL-I coverage). This question assumed that replacement power insurance, if eliminated, would allow increases in capacity of insurance programs more directly tied to protecting public health and safety. Most connenters opposed eliminating replacement power insurance. The staff generally agrees with this interpretation of the Connission's authority. For a detailed discussion, see NUREG-0689, " Potential Impact of Licensee Default on Cleanup of TMI-2", p. E-3. 6 6

~ The Commissioners. l Some pointed out that, although such insurance does not directly advance decontamination, it helps indirectly by reducing the large financial drain faced by i a utility buying replacement power after an accident. i C. NRC Staff Response to Coments 2 Underlying various proposals by the NRC, Dr. l Long, the utilities, the nuclear and insurance industries, and the public has been the i recognition that prior to the TMI-2 accident, i insurance for decontamination of a reactor after an accident was inadequate. The rule issued on l March 31, 1982 for the first time required NRC licensees to obtain substantial amounts-of such i insurance. Although some utilities and other comenters opposed adoption of any requirement for on-site property, damage insurance when the i i initial rule was proposed, most commenters now seem to recognize, either tacitly or explicitly, l that the'Comission's concerns are valid and that a rule, if prosecly drafted, represents i appropriate puslic policy. The reevaluation of l the March 31 rule does not question the need for l property insurance; rather it implicitly asks the j question, "How much insurance is enough?" l Part of the answer to this question has been provided by the recently published PNL study, Technology, Safety and Costs of Decomissioning Reference Licht Water Reactnrs Followinq Postulated Accidents (NUREG CR-2601; November 1982). The study evaluatec cleanup costs following three hypotheticai accidents of varying severity at two reference light water reactors-- the Trojan plant (an 1175-MWe PWR) and the WPPSS No. 2 plant (an 1155-MWe BWR). A TMI-2-type accident was assumed in the study to be of intermediate severity. The range of cleanup costs established in the report was from $105.2 million to $404.5 million for the reference PWR and f om $128.5 million to $420.9 million for the reference BWR. Although these costs are lower than would be expected from considerably $1 billion estimated to be required the roughly to clean up THI-2, they do not include several cost components contained in the TMI-2 estimate, t When such costs are added, the PNL estimates i n -,---rwmi-w-- ..w,_ ww .w-wnnmm,e----

The' Comissioners ' increase to $1.06 billion for the most severe accident studied and are somewhat less for a TMI-2-type accident. (SeeNUREG/CR-2601, pp.2-27ff.) The staff has drawn several conclusions from the results of the PNL study. First, the need for property insurance much in excess of $1 billion does not appear to be compelling. Although this conclusion would have to be periodically I reconfinned by additional data as they become available, the staff believes that an ) insufficient regulatory basis currently exists to warrant an increase in the amount of insurance l required. Second, the wide range of costs est.imated in the PNL report indicates that the minimum currently required, $568 million, is l apparently sufficient. This is because, although costs have approached $1 billion at TMI, a significant portion of such costs has resulted because of financial carrying costs and lack of adequate levels of insurance at the time of the accident. With higher levels of insurance, most of these additional costs should not; be incurred. l Third, some difference in cost due to variations in reactor design appears to exist. Although apparently outweighed by many of the other variables affecting accident cleanup cost, design variation is another reason not to foreclose allowing some differences in the amount of insurance required. Fourth, PNL did not find a strong relationship between reactor size and cleanup cost. Thus, while the smallest licensed reactors apparently do not need the excess insurance currently available, the staff believes that a close tie between insurance required and reactor size is not justified. Based on the foregoing data base, the staff has concluded that substantial revision to the rule is not necessary at this time. The staff believes that periodic monitoring of trends in accident cleanup cost should be performed with appropriate action taken as necessary. With respect to the issue of per-site or per-unit coverage, although the staff would prefer coverage by unit simply because it would make more funds available, such coverage is not l offered by the insurers. Further, the probability of a particular licensee suffering an t accident at a second unit before reinstatement of

The Commissioners ' insurance after an accident at its first unit is extremely low. Thus, the staff proposes not to change the rule except to indicate more clearly i that site-wide coverage is acceptabin. The staff also does not believe that the rule should be amended to reflect Federal preemption i of State prohibitions against utilities purchasing insurance from mutual or retroactive assessment insurers. First, utilities currently prohibited by state law from buying full coverage are still insured for $568 million. Although substantially short of the $1 billion upper limit, such coverage falls within the range suggested by the PNL report and thus does not appear to affect adversely public health and safety. As ANI excess insurance increases, available insurance to these licensees will also increase.. Second, because there may be valid state reasons for maintaining such prohibitions, 1 it is more appropriate to eliminate them through the state political process, rather than through l Federal preemption. Third, NRC authority to preempt is not clear-cut.' 1, Another area where some change to the interim rule does not appear to be warranted is in recognizing that very small operating plants may not need the full amounts of insurance required. After the interim rule was published in March l 1982, owners of four small plants requested that the NRC exempt them from some portion of the property insurance requirements. To date, the staff has granted the requests of Pacific Gas and 1 Electric Company for its Humboldt Bay unit and of Consumers Power Company for its Big Rock Point unit. Requests by Dairyland Power Cooperative for its La Crosse unit and Yankee Atomic Electric Company for its Yankee Plant remain pending I receipt of additional information. Because the ~ PNL study found only a weak relationship between 1 reactor size and accident decontamination cost, the staff believes that it is most appropriate to continue to treat small plants on a case-by-case basis rather than generically. I A final issue concerns requiring a decontamination priority for all property insurance obtained. The staff believes that both Professor Long and commenters on the Advance j 9 ,,--- w w ry-, % w,-n-,,.y-----

Th2 Commissioners. Notice raise legitimate concerns that need to be addressed. However, because tt.e NRC apparently has the authority to order licensees to decontaminate their facilities when required to protect public health and safety, the staff does not believe that an explicit decontamination priority is required in the rule. Nevertheless, although the interim rule has functioned well so far, some refinements and improvements are warranted. First, given that the goal of $1 billion in insurance appears to be at the upper level of what is justified, we propose not changing the amount required. Rather, to encourage licensees to purchase amounts of insurance that appropriately reflect the reasonable consequences of an accident at their facilities, an annual report indicating what each licensee has purchased should be issued. Although few comented specifically on this alternative posed in the Advance Notice, many that did preferred it to increasing insurance requirements l directly. Some utilities opposed reporting the l coverage that they carried. This approach has several benefits. First, the NRC would not have to determine the appropriate coverage for each licensee. Rather, beyond the minimum required in 10 CFR 50.54(w), each licensee would purchase such additional insurance that in its business and technical judgement was justified. If the regulators, customers, creditors and stockholders of the licensee did not agree with that licensee's assessment of its insurance needs, they would have a document comparing the insurance carried by their utility to that of similarly situated utilities. Having met an NRC-specified threshold level of insurance required to protect public health and safety, licensees would be encouraged or required to buy any incremental levels of available insurance warranted by particular state and local economic and political conditions that those states and localities are best equipped to judge. (Licensees are required to report to the NRC on coverage they carry by April 1,1983 and annually thereafter. These reports indicate that most are buying more than the rule requires--that is, excess insurance from both carriers rather than either as required by the rule.) - ~, -

e ~ The Connissioners. Another benefit to this approach is that the Comission can avoid becoming involved in certain structural problems if it were to require the purchase of all primary and excess layers. As indicated, by requiring combined coverage several difficult issues relating to competition, risk exposure, overuse of retroactive assessment insurance, elimination of replacement power insurance, pricing and preemption would be raised. One area of appropriate minor change is to clarify the language in 10 CFR 50.54(w)(1) to reflect current conditions in the nuclear insurance market. Initially, the nuclear and insurance industries discussed offering property insurance through several possible organizations. The rule was drafted to reflect these alternatives and was published before.the current structure of the property insurance industry was decided. Some of the organizations named in the rule are not offering and do not plan to offer property insurance. Consequently, the rule should be revised accordingly. Recommendation: That the Comission: l-1. Amrove the final rule for publication in t1e Federal Register (Enclosure 1). 2. Note: a. That because this is a nonsubstantive amendment of a clarifying and ministerial nature, further public comment pursuant to the procedures of the Administrative Procedure Act (5 U.S.C. 553) is unnecessary. For-this reason, the amendment will be effective 30 days after publication in the Federal Register. b. That appropriate Congressional Connittees will be notified of the final rule. That,pursuantto$51.5(d)(2)ofthe c. Commission's regulations, an environmental impact statement, negative declaration, or environmental impact appraisal need not be prepared in connection with the rule. l l

The Comissioners d. That the rule contains a statement that the Comission certifies that the rule will not have a significant economic impact on a substantial number of small entities, pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C. 9 605(b). e. That the rule contains a statement l that, pursuant to the Paperwork Reduction Act of 1980, the Comission has made a determination that the rule does not impose new reporting or recordkeeping requirements and that therefore the rule does not require OMB

approval, f.

That a Regulatory Analysis has been prepared (see Enclosure 3). g. This rule, if adopted, requires no new NRC resources or reprograming of resources. i Scheduling: No specific circumstance is known to staff which would require Comission action by any particular date in the near term. L ) ? ok 4 William J.*'Dircks Executive Director for Operations

Enclosures:

1. Draft Federal Register Notice 2. Analysis of Comments with Attachments A. Copy of Federal Register Notice 47 FR 27371 B. List of Commenters 3. Regulatory Analysis .+

.--_1 13 - Commissioners' comments should be provided directly to the Office of the Secretary by c.o.b. Wednesday, June 15, 1983. Commission Staff Office comments, if any, should be submitted to the Commissioners NLT Wednesday, June 8, 1983, with an information copy to the Office of the Secretary. If the paper is of such a nature that it requires additional time for analytical review and comment, the Commissionert and the Secretariat should be apprised of when comments may be expected. This paper is tentatively scheduled for affirmation at an Open Meeting during the Week of June 20, 1983. Please refer to the appropriate Weekly Commission Schedule, when published, for a . specific date and time. DISTRIBUTION: Commissioners OGC OPE OCA' CIA OPA REGIONAL OFFICES EDO ELD ASLaP ASLAP SECY l i (

9 9 g Y e m t 6 e m Q 9 s 9 e S e e e o e o 1 e I l f e I F O l

O S 9 6 e 4 m ENCLOSURE 5 f I i 1 O O e

.---..1. ..--..~ ~ ENCLOSURE 5 Environmental Assessment Proposed Amendments to 10 CFR 50.54(w) The proposed amendments to 10 CFR 50.54(w) would, if enacted, increase the amount of insurance that each comercial reactor licensee is required to maintain to clean up a licensed reactor site after an accident. The amount of required insurance would increase from a minimum of $585 million currently required to $1.02 billion. The proposed rule would also add a requirement that pr'oceeds from insurance shall be used first to decontaminate the licensed reactors befo're any other purpose when and to l the extent that such decontamination is required to protect public health and safety 'The proposed action is required to provide greater assurance that comercial reactor licensees will have sufficient funds to clean up their ~ reactors that suffer accidents. Assurance of these funds are required so that public health and safety is not adversely affected during the cleanup process. l Alternatives to the proposed action consist of maintaining the existing l rule or establishing some other limit of insurance. Neither the proposed action nor the alternatives to it have any significant impact on the environment. No other agencies or persons were contacte.d for this action. ,,y, ,.,ym_. ,..--..,,_-._.r, ,y _..-..w_.

,' '.i Finding of No Significant Impact Proposed Amendments to 10 CFR 50.54(w) The proposed amendments to 10 CFR 50.54(w) would, if enacted., increase the amount of insurance that each comercial reactor licensee is required to maintain to clean up a licensed reactor site after an accident. The amount of required insurance would increase from a minimum of $585 million currently required to $1.02 billion. The proposed rule would also add a requirement that proceeds from insurance shall be used first to decontaminate the licensed reactors before any other purpose when and to the extent that such decontamination is required to protect public health and safety. 4 The Comission has detemined that there are no significant environmental impacts resulting from the proposed ' action and thus an environmental impact statement is not required. Although changes in insurance requirements affect the financial arrangements of licensees and have economic and social consequences, they do not alter the environmental impact of the licensed activities. An environmental assessment has been prepared, but no other related environmental documents exist. Copies of the assessment and this finding may be may be examined at: the NRC Public Document Room at 1717 H Street, NW, Washington, DC. !l -. -.

2 ADDITIONAL PAPERS USED TO SUPPORT STAFF REVIEW e-n t w r-

41786 ~ ' " ~ ' + '" Proposed Rules Vet se, No. Ipo Tue..la). Aupat 18.1 set 6 This section of the FEDERAL Al GISTER ADDntSSts: Interested persons are qunhficallons trview and hr.. lings cocts.no notees to the N.A.c ut the insited io submit written a omments and required by to CFR 50.33'f} an.1 other propowd essoance of ruies es suggestions on the proposal and/or the secttons of to CI'R Part 50 as to electric l regfatons The pu pose of vmc notices supporting salue/ impact an51ysis to the utlhty appliennts for construction il to 9ma interested porsons an Secretary of the Commission.U.S. permits and operatinglicensa for opportu sty to participate an tN t>e Nudcar Regulatury Cemm% ion, nudcar power plants,which are

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• Washington, D C. anz5. Attention:

utthration facilities licensed pursunnt to Docketing and Service II:anch. Single to CFR Sn.21[h) and 50.22. or for copies of the ulue/i...p..-t analysis may pnw!uction fauhties licensed pursunnt be obtained on request frum hm C to to CFR Part 50.ne one passiblo NUCLEAR REGULATORY Petersen. Office of State Pnorams.U.S. rurption to this proposal may be that COMMISSION Nuclear Regulatory Commission. the Commisalon. in the alternative, will Washington. D C. 2035 (triephone: 301-decide to reIsin at the operating license 10 CFR Part 50 492-9883):Cuples of the salue/ impact stage that portion of the financial . analysis and of comments received bY qualifications review and findings that Financist Oustifications; Domestic the Commission may be examined in the relate to the costs for permanent Licensing of Production and Utilization Commission's Public Document Room at shutdown and maintenance of the F cilities 171711 Street.NW Washington,D.C facility in a safe condition (La AGENCv: h*uclear Regulatory Fon runTwEn INronuATioM CONTACT: decommissioning costs).If the Commission. lim C Petersen. Office of State Commission decides to retain ther AcTioec Proposed rule. Pmgrams; U.S. Nucleat Regulutory fmancial qualibcations requirements Commission. Washington. D.C. 20555 relat ng Io decommissiefiing costs. the suuuany:ne Nuclear Regulatory (telephone 301-492-0883). rule will serve as an interim rule until Commission is considering am nding its surpi.sastwtAny auronmaTsosc completion of a future rulemaking on druimmissioning that w".' c. n l lcr the regulations concerning requi truents for I.Back "od 8 ro6ts of decommissioning and the financial qualifications resiew and findings for electric utility a;plicants A. The Stature and the Pn';wedRule. necessary financial assura: es. At that that tre applying for permits or bcenses Section ta:a of the Atomic Energy Act time. the Commission mi!L if neorosary, f:t production or utihration farihties: of 1954. as amended. 42 U.S.C 2232a again amend the financial quhhcations (t)To eliminate enti ty ek-(the "Act"). provides in pertinent part: regulations to make them ccasistent renul~rements for ena** Ftnit Each apphcahon for a hcenar hereunder with thy final decommissi:cing cpplicants: and either shall be in unting and shatt spccincal!) state regulations adopted.De propoord rule (t)(1) To also eliminale entwly these such informari. n as tac Commusion. by ride abo makes certein editorial ruuirements firliiperatina beense QE 84[e*fb fcofo d anodifications to i 50.33(f) to improve its uc clarity, makes conforming changes to cPplicants: ce pd(auons n'the Want the characsar i 80.40(b) and I 80.57(a)(4).and (2)(11) To retain these requirements for d &e apphcant ee esenship d the I oper: ting license applicants Io the apphcant. or any other quahncations of the eliminates Appendix C to10 CFR Part Extint they require submission of apphcant as the Commissen snay does

60. In addition. a new pnmsaca information concerninc the costs of appropriate for the hm.ne... The discussed in Ill.. D below.mwld pennanently shuttingdown the facility Commissio:: ivy at an3 time after the Bhns ~ require power reactorlimanees to and maintaining it in a safe coWian of the onginal licatm and twfore the suaintain the ma Almum a:n.=1 of.

(i.e. decommissioningcosts). exP ti vi commercially available co-ef'.e property damnFe insurance,or an eqnalent he Commission is also considering Commission to detersune whether the

c. mending ita reguistions to require apphcation shall be granted or denied er amount of pmtection (eg le*ter of power reactor licensees to r:aintafn the whether a 1 nenac shoutd be amdtfied er credit. bond. or self insu n el from the masimum amount of com:nercially gvdad....

point in time that the f'a-man first opilable on-site property damaye (emphasis added).In New bglatuf permits ownrrahip, possessace and insurance, or an equivalent amount of. Cd's on Nuclear Ebflution v.NRC 810'*le of special nuclear ur.aterial at the pmlyction fe.g., letter or cresit, tinna, se 582 F.2d 87 (1st Cir 19 e). ofg subman alte at the nuclear reactae. sellinsurance). from the time that the PublicSerei* Ca o'Nrsr #2mpsfdry %e Commission beliews that its ' Commission first permits omvership' (Seabrook Station. Units 1 and 2). Q3-existing financial qualificates review possession, and storage of special 78-L 7 NRC 1 (19 8).the U.S Court af has done little to identity adotantial nuclear material at the site of the Appeals for the First CMeult stated that hrslth and safety conce-ns s* nuclear "" E "'*CI* the Act "shes the NEC complete power plants. llowever.there are oaTra: Comment period exp.rra October discretion to decide what fmancial auntters important to safed mb.'h enay 1R 19R1. Comments terrived after qualifications are appropriate"sa:F.2d be affected by financialr es-hiettoria Octcber 19,1981. mill be camsidered if it at 93. Conarquently, ther w. m evq ue,ge is practical to do so, but asautences of As will be d;scussed 1.clow. it is the temment rc64: ding the hpe a! NItC eenstderation cannot be 3%n eserpt as NRC's prese-t propessi in esereislag tmicw that w ould focus e*!srt.wly te / to ccmments receised on of t= fore this the discrrti.m wnfennt b Swtion u.2a. fmancialesmmicratw:u S r.4hth m 3 dati to eliminate cu rent T.r.ancial'. on adverse Impact on safeg. l

41 88 I'ederal Reghter / Vol. 46. No.159 / Tuesday. August 18. 1031 / I'rolmed Rules ~-- _. Ell. Other Basic Considerations and operating licer:sc resiew related to ,for oper dtngsnm e. e " cintain A;pi cts of the Proposed Rula financing the permanent shutdown and the maumum ampunt of cemmcrc ally A. Electric Utility andOther maintenance f the facility in a safe sisa% Lie bn: sit'e pniperty insurance, or an equMien_damaget.amodio e ndition. Alyilictmts With reFord to the finnnelal The Comm,ss,on proposes to retaln its priilcrtion %r.pryM rule is ' i i qi,.,lifications issues as re.iwd in ScobmoA. the Commission c ontinucs t'o current review under i 60.33(f) of intended tu scru as an tr.terim believe,that tegn.icaI reviews and applicants for any production or requirement stitll the Commission has utilization facility bcense. lf such aEcpporiuriTty to coniluc~t a rUleiiiaVng $','[ ,' 8 'h, l"s that applicants are not electric utilities to deteRiiine whht level Qprotectioiits I C could affect the public health and safety. having either a regulated status or the necessary to c__ ope wlth the on-site 1 !f cial se rity W set seir own taks fw raEogicMassWe_mM@m an us cat o s h s b e viewed in the electric service. ne i 50.33(f) finahcial arctdent Wh!!elhidet r6s]orltioT-Pest as Possibly an additional method of qualifications review is sloo unchanged licensees for operating power reactom as to production or utilization facilities currently maintain the maximum diterm, m.m g an opp icant.ea ity to sstisfy safety requiremrnts perience not covered by I 50.2tb or i 50.22.1.e. availabic arnount of such insurance, the medical utilization fa cilities, research Commission understan6. that some ip and development facilitics. and testing utilities do not buy the maximum e s re or n facilities. cpph. cant.ifinoncial queItfidiirsons and amount and one utility (TVA) self-the applicaritiability_tusfely_ construct B. AdditionalInformation Thof Con insures for property losses. In view of Be Required. By this proposed rule. the the substantial importance to the public g;a C" c p Commission does not intend to walve or health and sarety of adequately cieining. usually reaulattd_by. state andler nhnguish its neld,ual authority to up_mtcltstaccidents, the Commission is n ct a e unh to b m whether an applicahon should be point in time that the Commission first [houl be modi edo k d.See r c ers o t e Mani"MW"" " example,the fourth sentence of Section'"/e agencies AsEtiul.t resionalilhosts o ciel uc e rmateri at the i th* d (2) fo' all ^ =' "" a e requirements) are normally recovered thrcIiTs thit r~ alernabngprocess.See. presentpowers of the Commission with ~ M[m ndSto orIl[wh I a'r regard to the financial qualifications

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. Npv.HopeNaturalCos Co 320 review of non-utility a plicants for Part " ' " ~ " " U.S. 591 [1944) Bluefield It'oter It'oris ' 50 licenses is propose In addition, an h*gI* gh"[ [," andlmpmvement Co.v.PublicService exception to or walver from the rule. If Commission of the Store of11'est promulgated in finalform.would be

• • "'* ""' * **e m em notrew k Firyinia. 200 U.S. 879 (1923).Rese hssible torequire the submission oY ancialinformation from a particular.

Pmses.s b madmm anmW landmark court decisions established the p:inciple that_public utility electric utility applicant if special. c mmercially available on4ite property, I commissions are to establish a utihty's circumstances are shown uant to10 damage insurance or that th*y possess ritis such that altrDaonable costs of CFR 2.758 in an individuallicenslag ~ ""'9"*"**""' s;rving the public may be recovered hearing 2, Deimpact of this proposd new cs'siinina prudent managementoLDS C.Practicellotpoces. De proposd ' requirement on construction permit 619,. nerefore. one presumptinrtthet rule will.in normalcircumstanws.*. r bolders and onlicensees for operating, underlies this proposed rule is that reduce the time and effort which tg power reactors is_e_xnected an he rMiteTeTe~cIiiestilitia inTe1M able applicants. licensees the NRC staff and relativgly smallin companson to total 13 set their own rates) will be able to - NRC adjudicatory boards devote to - utility resources and the lame consumer meet the costs ior sare construtlionand reviewing the applicant's or licensee *a base for a nuclear powerfant. ne.

• cperation_of a nuclearp=letfaa a' financialqualifications.Re propo ed current property samage tesurance utilizationfacility.ne other rule aims at either reducing or premium for a two. unit alte is *.

presumption is that the more direct eliminating staff review in cases where approximately $1 million per year for methods of ensuring safety-inspection the appli: ant is an electric utility, snaalmum covnese with ee pnmium end enforcement-willbe reasonably presumed to be able to finance activities for a one-unit alte being proportionately afisctive in deterring any " comer-to be authorized under the permit or l[sJor nguMMiues.tr.surana cutting"and in remedying safety licensa. costs and the costs of comfying with problems. D. Interim Jtule Reguiriitg Property. NRC regulations are normally pa_ seed De Commission has tentatively Damqgelnsurance. A_tpesent. the . thmugh to consumers. All other utilities concluded that the present financial Commission dots not reauire licenseen - set their own rates and cea pass such

• qurlifications review can appropriately to maintain q_Unueritsdamaae insurance, costs through to consumers at their own be sliminated for electric utility a licants, which can be presunwd to be responsibibties to protect the public.

discretion. %., or Its eculvalent. , f c e to meet the financial demands of health and ufety. the Commission is IV.Propoed @ cation d the Final Rule constructing and operating nuclear concerned about the ability of a nuclear e....- power plants. As an altematise to power p!ast liernsee to finance the In summary, the Comrnission has s entirely eliminating the present financial clean-up costaleanMag 8 ~= = nurt ar-tentatively concluded that adoption of quehfication review. the Commission is. yelated accident. ne Commission is.. the proposed rule will substantially considering retaining. at least as an considerinthe adoption of an interim ' reduce the effort of demces.ating a-interim rule. that portion of the surrent.. rule sluid wou(require au beenstea. financial quehfications wioaut reducing s O e

Fedsrcl Registar / Vel 46. No.159 / Turadu). AuFust 18. 1981 / Proposed Rules 41787 B The cr. Wen's ScohrenA study of the fin,nelnl qualifira'inne of nuclear facilitics is contingent upon Decision. In Pubhc Service Company of issue (43 FR 22373.kl y 25.19 8).The the financialqualifications of the New Hampshire. et of. (Seabrook notice requested interested rue nbcrs of applicant. It stated that insufficient Station. Units 1 and 2). Cl1-78-1. 7 NRC the public to submit enmments on the financing during constntetion coutd lead 1 (w 8)(t citin. firr "ScobrooA1. the issue and to propose specific chanp : to to the use of substandard matori ls and Commission directed the staff"to the rules by July 24.1978. Sesen sets of to costly delays in construction. NCl4 initiate a rulemaking proceeding in comments were received.Six of the further suggested that NRC should which the factuallegal, and policy submittals a cre from electric utilities. promulgate a regulation requiring that. aspects of the financial quahfications the Edison Electric Institute [CCI). and nudear facilities constructed with a issue may be reexamined." 7 NRC at 20. law firms representing electric utilitics-reasonable cost of financirig and that Specifically, the staff was to examine ne seventh set of comments was from failing to do so may financially burden the relationship between the financial the National Consumer Law Center. Inc. the applicant and the applicant's owners qualifications of Part 50 applicants and ne following is a summary of the and customers. licensees and their ability to safely relevant points made in these comments. construct and operate production and ne utilities. the eel. und the law II. Separate Treatment of utilization facilities. Further, the staff firms recommended that the regulations Decornmissioning Costs was to prepare a proposed rule to serva be revised to substantially reduce the Generic study of the costs and as the basis for initiating the rulemaking scope of NRC*a financial qualificati ns financial arrangements for described by the Commission la Seabrook.. review especially as it applied to decommissioning nudear power plants. licants whose rates for semce em 11 f th I f ciliti apker self-determined or are determined f,,$,* and U cent nue to be t ted In its Seabrook decision, the. -... eit Comrnission first reviewed the statutorF-n by state and/or federalregulatory parak from Qmd 8s 8 n 8 8 - and regulatory basia leading up to the T agencies.nese commenters generaDy '

1. " "# " '. "

• S" #'""".

present financial qualifications ^ maintained that a history of succe.ssful that wem discusud.by 6e Conunission requirements set forth in 10 CFR 50.33(fk plant cotistniction and operation,' " in Sabrohidi ngard to ne Commission obseryed thal *(t]his coupled with thelegal requirements decommissioning costs. the NRC history suggests that for established - placed on economic regulators together utilities with substantial operating - constitute " reasonable assurance" that ' [ecently published two documents: Assuring the As allability of Funds for records, dose scrutiny of financial *. adequate financing can be obtained (the Decommissioning Nudear Facilities" qualifications was not viewed as .e presently. existing standard set forth in. ' necessary to assure that financial. -* I 50.33(f))/%!s group of commenters WREG-6, Revision 2. October 24 and Draft Genen,c Environmental considerations did not compromlee. - further argued that " cutting-corners"in safety."Id. at 11.%e Commission went '. construction or operation is not in the Impact Statement on wcommissioning R NucIcar Fa cilit,e_s: [NUREG-0586, on to expresa its belief that finandal , elf. interest of the utility, as it is i qualifications of a regulated public imperative that a plant provide long-January 1981)He generic sttidy d, dec mmissioning.,indudi.ng an_ utility have less bearing on assuring germ operation reliably and safely in. safety in construction and operation - ~ accordance with NRC regulations.ne applicant's financiaTability to bear the than for other applicants, even though commenters said that the financial . costs thereo!. and Ole publicat,on of a i the Commission noted. in the context of savings that could be ach!cved through Proposed rule for comment are expected to be completed by hf arch 1982. %e the present " reasonable assurance".

• corner-cuttig" would be sma!! '

Comznission's treatznent d requirement of i 50.33[f), that merely -. compared to the sums required to being a regulated public utility would decomm_ issionina and its costs 'is a s " Rot automatically satisfy I 50.33[f] as [. complete Die project.no risk oP. -detectionbyNRCInspectors a 8eParate matteris Gius expected tolead, 8PP ed to a cxinstruction persalt,. c possible resulting legal action against ~.. to a final rule on this subject. It la also li application.%e 'ammission stated; the utility were citec as additional expected that when the final policies r WhIle unenceptional in the abstract, this disincentives to violation of NRC's "' and regulations are developed, they will proposition is less compellina in the case of a - safety regulations. G.1.; G, " be imposed on allPart 50 licensees. regulated public utihty andtaged.in a -. One of the above cammanterU.,.. -. including the electric utility applicants construction pro oct whldiis liself subject se - expressed apreference for lete -' and licensees affected by these high safety stan ards and ongoing.. eliminadon d the financial cation Proposed financial qualifications '"Ttfehe,.f any aemonstmt.a 4, finaings a. now,equimd by thn, amendmenta.. connection hetwecn fina ncisi qualifications regulations. Dal commenter maintained As stated above. the Commiss. ion is and safer 3 n the utiLtywither generatty er that a causaltelationablp between Proposing a possible alternative to the - i in this caw in particular--we are left with the financial gnahkations and safety had. elunination of the entire finandal qualifications review presently required eswntish speculeuve claims of thepartass-not been demonstrated, f Id. at 1e. Finally, after characterizing the' %e National Conemmar!.aw Cannes, by I 50.33[f) for electric utilities applying link between safety and financial '. Inc. (NCII) conunented that the existing for operating licenses for nuclear power qualifications as " seemingly tenaoaC regulation la inadequate la that it does plants.%is alternative would retain the not require the filing of suffideae. present f'mancial qualifications review the Commission emphasized dired app oaches for assuring safety:"[t]ht-financial information to demonstrate and findings at_the_operatina license resultinglimited usefulness of the.g , financialqualifications fora c_ i stage _as to the_i_ssue of decommissior' ting financial qualifications inquiry construction permit or an operating ._ costs. Upon completion of Use_s_eparate ' underscores the Importance of ongoing license. NCIE provided a detailed list of ruler afi.ng on_the decommissioning ~ inspections of reactor construction types of financialinformation that issue, the Commission will re-examine snould be requ! red of applicants.NC1C the 11EaiiclaWalificaUo6s regdlatlons projects"Id. at 13,./.. C.EarlierPbMicCommenir * . besed its suggestion for NRC requirtre anTwill. If necessary, rurther amena Followir.g the Sechrook decision. the such information on the premise that them to conro m to the final rule on I NRC no*ified the public of its generic - safe, reliable construetton and operation

• d_ecommissioning. '

~ l

4.,

o

= _. t Federal Registrr / Vcl. 4fL No.1% / Tu ulay. Awont tit. Itml / Proposed Rulce. 41789 the protection of the pubhc health and sm.illliusinen found m S...non 3 of the on financial n=th-A dt-d in safety if the p oposed rule is Small finninro At t.1513 S C lta. or arction sh.s (f)p)(ij and inJ of thisal giuragraph promulgated as a final rule,it is the withm the Small fluelom 5;n Commission's present intention to make Stanitards set forth in 13 CI'R part 121. financialreview be conducted.If the it rfft ctis e imme d.atel> upon niplicant is an electrie utility applicant p g pgng,y g pubhcatior.. pursuant to 5 U.S.C. for a license to construct or operate a 5 553rd)(1) since the rule is espected to Pursuant to the prmisions of the production or utihtation facihty of the* significantly reliese the obligation of Pal'rraork Rnlurtion Att of N[ Pub. type described in i 50.:'llbl or i 50.22. certain applicants with respect to L tm 511). the NHC has made a (i)If the application is for a information required for construction prehmmary determination that this construction permit. the applicant shall permits and operating licenses, and also prvposed rule does nut impoec new submit information that demonstrates to reduce the amount of unnecessary, information rollection trquirements. the applicant possesses or has time. consuming staff review and Ei. pn> posed rule has ncs ertheless reasonable assurance of obtaining the ~ adjudicatory proceedings. In that regard. bern submitted to the Office of funds necessary to cos er estimated the Commission notes that the final rule. Mai spement and Budget for its construction costs and re!ated fuel cycle when effective wdlbe applied to consideration of un> putential or new costs.ne applicant shau submit ongoing licensing proceedings now infeimation collection requirements estimates of the total construction cost pending and to issues or contentions, pursuant to Pub. L 9G-511. of the facility and related fuel cycle . therein. Union of ConcernedScientists. Pursuant to the Atomic Energy Act of costs, and shall indicate the source [s] of

v. AEC. 499 F.2d 1069 (D.C. Cir.1974).

1954. as amended. the Ener3F funds to cover these costs. ~ In addition, the NRC neither intends Reorganization Act of1974.as amended. (ii)If the application is for an nor expects that the proposed rule. lf and *.*cclion 553 of Title 6 of the United. operatinglicense,the applicant alsall and when finally effective, would affect States Code. notice is hereby given that submit information that demonstrates the scope of any issues or contentions adopflon of one of the two following ~ the applicant possesses or has related to a cost / benefit analysis. l,,, - altgrnative amendments to 10 CFR Part reasonable assurance of obtaining the performed pursuant to the Nationa so is contemplated. funds necessary to cover estimated Environmental Policy Act of 1968, either + o[nse[on costs for the per rati in pending or future licensing

• PART 50-DOMESTIC UCENSING OF li plus the estimated costs of

. proceedings for nuclear power plants PRODUCTION AND UTILtZATIOft permar ently shutting the facility down { utilization facilities under il 5021(b) FACluTIES, and maintaining it in a safe condition. and 50.23). Under NEPA the issue is not. De authority citation for Part 30 De applicant shall subnut estimates for whether the appi; cant can demonstrate rfash as foI!ows; total annual operating costs for each of ' certeln p jecte co a eA mic A%- seem insme m m m m h Ent Ru yeam @ndon ne es Wat. en er. paa, es3. s:,4. sss. ssa, as fucility and estimates of the costs to. [ Energy Act issue deaIt wi& in &e am.c.ted (42 US C 21ss. 2134 anot. ItsL permanently shut down the facility and - proposed financial qualificatio'ns rule-- 2m t.:M secs :m. so:.2ih as Stat. nos. maintain it in a safe condition.De but rather is reerely what costs to the 1244 1:4e(cUSC seat.6n42.sese).unlese applicant shall alsolndicate the - apphcant of construction and operating othmise noted Section so ** also leeved sources ) of funds to cos er these costs. the plant pre to be put into the cost-unk occ. u:.se stat 939,42 U 8 C 3152) ' benefit balance. As is now the case. the Se<t..sn so ano et also inued under occ. ^" *pp ication to renew or extend the rule of reason will continue to govern 184 *a Stet.954.as emendedit:UAC 3:34). term of an operatirig license must of what costs are to be. Ecctuns 50 taka010: Issued under see tea, include the same financialinformation the sco$ln the balance, and the es Sut oss i42 UAC 22se) For the re,posas as required la an application for,an include of-m m sist m as amend.d ie w aiu .*6 na,,ons may,,,n s, .:s. ses 3,,,,,,etera. aub ect of litigabon. nus, financial,,.e USC a2?s).Isoatti)leeued underesc.seti. (2) Except for electric utility' es Sist. 949 (42 U S C 2:01ll1). Il SILM 10.71 applicants for construction permits and que ifications would not be expected to and tic?S lasued under sec 191o OsStat talk operetin8.ce.nses, each' applicatio,n for li become an issue or contention in an,Z ' as semended (42 US C2201[o) and &e lawe a constructen pennit w an opere NRClicensing pmceeding insofar as refemd soin Aprendices. r NEPA might be involved. e license submitted by a newly form -.. r .e. Ahernativd-.DiIntnata Entireh th'e.. entity organized for the primary purpose . Regulatory Hesibility Certificatica. FinendalQualifications Redew And ' of constructing or operating a facility In accordanz with the Regulatory Macf.ngs As To Flectric Utilities hat must also include information showing: Are %ppl ing For Construction Permits (1)nelegal and finandal - F1exibility Act of 1980. 5 U.S.C. I 805(b). 3 the Commission hereby certifies that And Operating Ucense For Prodntion relationships it has or proposes to have this rule will not. if promulgated beve a Or t tilaation Facilities with its stockholders or owners; significant economicimpact on a *

1. Paragraph (f) in 8 50.33 le redoed to (ii) neir financial ability to meet any J

aubstantial number of small entities.%e read as follon. contractual obligation to such entity. proposed rule reduces certain minar - which they have incurred or propose to Information collection requirements on {StJ3 Contents et apptcatione; general Incur.and *.. J 'r the owners and operators of nuclear 4'"*"*"- (iii) Any otherinfortnation canaldered 9 power plantslicensed pursuant to Reih application shall atste-pecessary by the Commission to enable Section 103 and toth of the Atomic 11 to determine the applicant's financial Energy Act of1954. as amended. 42. (fp Informstion sufhcirnt to dreen).trate to the Commission the qualifications.... U.S.C. Il2133.2134b.nese electric - (3) Except fo'r electric utility. , utility cc panies are d.-+=,t in their fina....:.! quhn.;.; tim.:, ut the app.unt applicants for construction permits and , service areas. Accordin.ly, there is no. to tem out.in acordentt with operating licen'ses, the Commission may significant economic impact nor are. regvbNns la this chapter, the activities request ansstablished entity or newly-such owners and operate s of nuclear for 4.h the pctmit nr liienes la wught, formed entity to submit ad.htlonal or power plants within the definition of a ? prmdrd. homewr, that no informattaa more detal. led information respecting its I

= I W s.il R*T a.ter / Ve*l. U. h 1.*i9 / Tur ud ey. Aucust 18. 1981 / Propased Ru!% i 4) ) fan.er.ri.e!.ettafeeMa.md utntus of gm**rms an eqselent amount of estmuites of the total ti n*truction r.ost funds if the Com.!?5;s.n mnsiders such pictntian a m a rmg such facility, of the f.eciht) an[rt!.it..t fu ! rpie s infu*mation.sppr:pthste.%ls may

5. p.ireig*aph (a)[4] in i 50 57 is revise d costs. and shall mdicate the sourcc[s) of t

include informatit n wendmg a to read as follows: funds to cos er these costs. licenscr's el iht) to re:.'. nut II.erein:Ist [li)If the apphc: ten n fo en'- Isas? lumee et ematweenses. operatmg hcense.the arpheunt shall of the actiuties autho ire d by the submit information that demonstrates heense and to permanently shut down the facihty and maintain it in a safe (al * *

• the applicant possesses or has

[4]Uc epplicent is technically and reasonable assurance of obtaining the condition. Imancially quehfied to engage in tha, funds necessary so cover estimated activities authorized by the operating operation costs for the period of the

2. Paragraph (b)in 5 50 40 is revised to license in acmrdanz with the license.plus the estimated costs of read as follows:

regulations in this chapter.pmrided.

• permanently shutting the facility down howcrer. that no finding of Enancial and maintaining it in a safe condition.

g 50.40 common atonearea. qualifientions shall be newssary for sa ne applicant shall submit estimates of electnc utihty apphcant for an operating total annual operating costs for each of (b) %c applicant is technically and license for a production or utilization the first five years of operntion of the finsndally quahfied to enga e in the facility of the type descnbed a fac lity and estimates of the costs to preposed activities in accor ance with l 50m(b) or i 50.22. - permanently shut down the facility and. the regulation in this chapter.prm ided! maintain it in a safe condition.ne however, that no consideration of - -. e.Part 50 is amendedby removing ~ financial qualifications shall be y applicant shaft also indicate the ntcessary for an electric utility - Appendix C/: sourcels) of funds to cover these costs.' 6 cpplicant for s license for a produ'etion

• dppendia CkRamoh Y' ;

An application to renew or extend (he, ~ term of an operatinglicetwc must er utilization facility of the type include the same financial information gitemanva 2-Ehminata m Present described in 150m(b) or 1502 - Financial Quahncauons KeMew nad as reqm' red in an applicallon for an s~M To Electric Utilities nat initiallicense. " - Are " Tor Cons _truction Parmits.] (iii)If the application is by an electric g [A ",',",p8 g ,d I o A'nTA1 mate ne finandal utility for alicense to operate a Qualific]a oiEReyitw;AndNi!Ings Al' production ~or utinzation facility of the I 50.54 CondI5one et Ocenase. h_OperatingIimana m=g= Ear Eladaic type described in 5 50m(b) or i 50.22. - , ~ >. - s.. UlIII'I's& scept Retain 'rh Portion Of. ir. formation shall be submitted that - E (v) Each electric stility licensee under hat Ranew An_d findings N1 Relates demonstrates me appa6am po_sscsses or this part for a pmduction c r utifiration Manna cat numown Ans has reasonatde assuran6 e c1 omais f;cility of the t3pe described in TiaTiilenance Of ETaBEtTla A Safe the funds necessary to cos er Gw - i 50Z(b) or i som shaft.Mthin 90 days Condition istimated costs of pe_rmanently shutting cf the date this regulation becomes 65Wtithe Iacmty anc maintainina n m a afisctive.have and ina!ntain the

1. Paragraph (f) in i 50L33 is revised to sale c9ndition.De apphcant shall mtximum available amount of.

read as follows: -subnut esumates of these costs, and a commercial on-site property damage -l50.M Contants of applicahona; general shan also Indicate the source [s] of h r.ds irJurance or demonstrate to the I"I*""*U*** .' to be used to cover thcae costs, e-ss!!sfaction of the Commission that it '~ in r.xcept xor aaecmc uGity Each applcation shallstaten > .m possesses an equivalent amount of apphanta for construction permits and ."--;.i protection coverina such fad!(ty.

4. A mew paragraph [tfis added t[;

IfX1)1nfonr.atiorisufEdentin'.:,(, operatinglioenses.each applicatio,ninr, bcenseretinn permit or en operatnag a const demonstrate to the Commission the. f l' 50.55 to read as fo* lows: financial gualincations of the applicaist - submitted by a newly formeo I 50.55 Candluons of construcuos to carry out. in accordawiwith the ~.J. ' entity organized for the primary purposa Pam regulations la this chapter,the activities. of constructing or ope { sting a facihty, for which the yennft orlicense1s' sought shall also include information showing-(f) Each electric ut.'l ty that is a proridedhowewr.noinfonnatiori on (i)&Icgal and financial construction permit holder under this financial qualificaGons described la relationships 11 has or pmposes to have withits stodhoiders er owners: Pr.rt for a production or stificatica paragraphs (TX11 fil and fli) of ens * *, (ii) m financial abilty of sudi facility of the type described in section shan De required.nor shat 1 any 150m(b) or i 502 and whois also the financialresiew of tlie~infonnetige stennlders or ownces to meet any --s (f)(1)(i) and [ti) contradual obligation to such entity holder of a license under Part 70 of this reguired by parag]rs ch pter aubrizing only ownership, be coriduclidif the applicantis na, which they have incurred or propose to possession, and stcrese ofspecial elFElric utiiin applicani for a iiwnse to inctr. and.... (iii) Any otherinformation conaldered

• guclear material at the site of die construct or operst6productian~or

studeur reactor for see as fuella utitientionfaci!Ity orIbe~typelfesafbed ' necessary by the Conumisolon to enable tth1 et i 302E. It to determine the applrrant's ficandal operation of the myrb ar teactor after inp(i) H the appUcahon is fora qualifications. issuance of an operating hoenae ander Part 50 of this chapter, shall. within 90 construcibn permit. the applicant shall - (3)he Cortmlssion may reqacst an days of the date this regulatle ibectees submit information that dernonstratee - estabtished entity or newly.fonned the app!1c.mt &- or has. entity to submit additional or rnore stlectise hase and m ia:.ia she reasondle assurance of obtaining the detailed infonnation mpoeting Ita - in:timura arenable amount of cornmercial one.le fwoperty,etamage funda heressary to cover estimated finandal arrangements and status of insnrance or democatrate to the construs%n costs and related fsel epJe funds if the Commissinn rensiders such Information)ppropriate this saay.

'I ~ eatisfaction of the Ctwnmisalon that t costs.'fhe applicant shall anbrott l

go O.

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me,-- - - - -, - -, - - - - - - - - - - - - - - - - - -,.. - -. - - - _,

'.,,,. e raderal Registtr / Vol. 46. No.159 / Tuesday. August 18. 1981 / Proposed Rules 41791 include info rnation regarding a rnaximum as ollable amount of and sales of securities. Proposed ~.ommerciut on. site propc_rg damose Regulation D. If adopted. w ould replace hcensee's ability to continue the conduct r of the actisities authorised by the insurance or demonstrate to the the existing limited offering exemptions license and to permanently shut down salisTaction of theTomMWrnh:rtit contalned in Commissinn Rules 146, sett, the facihty and maintain it in a snTe .,_possenes n tqun alent_ amount of and 242.

2. Paragraph (b) In i 50 40 is revised to. protection cov ering such facility.5. Paragraph (a)(4) in i The Commission is requesting condition.

to read as follows: the proposed rules and also wheb er the read as follows: ! = c- =- ! =.' . ' W- ='A'ra".feree4*Mc d ~ limited offering transactions particularly (b) ne applicant is technically and (a) * *

• as the relate to the capital formation financially qualified to engage in the.

[4} ne applicant is technically and needs of small businese. proposed activities in accordance with financially qualified to engage in the the regulations in this chapter. prot ided, activities authorized by the operating Dam Comments must be received on or however,that consideration of the license in accordance with the before October 5.1981. ^ financial qualifications of an electric regulations in this. chapter,provided, aponesses: All communications on this ~ utility applicant shall be made only in however, that a finding of financial matter should be submitted in triplicate the case of an operatinglicense. - qu'alification shall be made only in the to Georse A. Fitzsimmons. Secreta ry, application for a production or case of an application to' operate a Securities and Exchange Commluton, utilization Yacility of the type described ' production or utilization facility of the., 500 North Capitol Street. Washington. in i 50.21['u) or i 50.22,and shallbe type described in 5 50.21[b) or i 50.22, . D.C.20549.. Comments should refer to. limited la such a case to consideration

• and shall be limited in such a case to the. File No. 87-art and will be avallable for of an alplicant's abilityt' provide the-applicant's abi!!ty to provide the funds,'

public inspection and~ copying in the i o funds, or to show that it has masonable. or to show that it has masonable. v :. Commission _'s Public Refemnos Room,, c' UDO L Street, N.W, Washington, D.C. assurance of obtaining the funds.

• assurance of obtaining the funds,-.

' necestasy to cover the estimated costs 20549. '"~ * ' necessary to cover the estimated costs of permanent shutdown and, of permanent shutdown and. Fon FURTHER INFORMatt0N COtrMCM

• i maintenance of the facGity in a safe maintenance of the facilityin a safe ~ : ' Paula L Chester,(202}/272-2644 Office conditionc - ? "

_.._.'_' Corporation Finance. Securities an of Small Business Policy, Division of l condition. -q

i

3. A new paragrap'h (v)is added to 6.Part so is amendedby removing Exchange Commission. 500 North I 50.54 to read as follows:

Appendix C. Capitol Street. Weshington. D.C. 30648. I 50.54 conenons et noenaea. . Appendix C-.[ Removed] SUPPL.EsfENTanY teeFORMaTI0sc%e - no ted'at washston. D.C this 13th' day of Canission is proposing for comment I Regulation D a senes of new rules (v) Each electric utility licensee under August.seet. - 3 verning the limited offer and sole of this part for a produ'etion or utilization For the Nuclear Regulatory Commission.- securities pursuant to the Securit;es Ad facility of the type described la John C H4yla, of 1933 (the " Securities Act") [1B U.S C. i 50.21[b) or 150.22 shall, within 90 days ^# errective. hn. =a --= me '8""""'*"""'"*"M-77c[b). 77d)2)]. Proposed Regulation D is of the date this rezulation becomes

1. E. -

intended to result in's more coherent Pattern of as tive alief,particular{y . maximum available amount of. - ""***'"J"' . s u *ee ne -,nai rormam.- a co _ erciai. . __ mama,e "I' I ~ ission ibatit C M SS curwntlimited offering exemptione au e o o the m l possesses an equivalent amount of ' 17 CFR Pa'rts 230"a'nd 2'39' - m.- contained in Rula 146117 CR 23&146), o, protection coserina such facuHy._ 240117 CFR 230.240), and 242l17 CFRc 5 50.55 to read as follows: IRelease nW F,Be No 87-Set] q " ' '~'",

4. A new paragraph (f)is neces to ;

7 . such as]Eua, certain commonhtms' g3a242 accredited investor" and Proposed Redalon of Certain' "y. 2 securities of the lesver an defined as. 3 so.ss conesons of eenstruenom permits. Exemptions from'the Registration 'those terms are used throughout tho' Prowlslons of the Securtues Act of regulation, and a common rule sets forth (f) Each electric utility thatis a 1933 for Transactions involving the informational requirements, the Limited Offers and Sales ' - Part for a production or utGization ' ~ limitation on the manner of the offering. construction permit holder under this _ 'actNCV: Securities and Ex&enge-the limitations on resala, the safe harbor. A Commisslos Provision with rnpoct to integrellon, - facility of the type descrbd be ~- I 50.21(b) or 150.22 and whoIs'elso b mey,o,e p,,p, ~gg,,g,my .. g';" and a uniform nottee.of sales Tor the ; - three exemptions containedin the holder of a license under Part 7e of this Regulation. In sddition. proposed chapter autho-iring only owne:5 hip, .suwwamv: We Commission is publishing possession. and storage of spedal for comment a new regulation governing Regulation D would result in a numbec - nuclear material at the site of the the offers and sales of certain securities of significant substantiie changes from' .c without regist ation under the Securities present Rules 146. 240. and 242 as nuclear reactor for use as fuella operation of the nuclear reactue eher Act of 1935. TEs action represents na, espleined below, r ..~.. issuana of an operati !!canse under effort by the hmtssion to coordinate E3*CIN""O Part 50 of this chepter, all.within 90 the yarious lirrited offering exemptions ne registration requirements of the days of the date this regulationbecomes and to streami.ne the existing .s e!Tective.hase and maintain die ' requirements applicable to private offers Securities Act and the es,empttg ~ ~ 'a. e ,j ' ~ ~ \\ .2-

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.-.2..

'. ~ 13750 Fader:1 R gis11r / W1.47.No.at / Wedneeday.M:rch 31,1982 / Rulze cnd Regulations NUCLEAR REGULATORY (2)(t) Also eliminated entirely these requirements and also requirlag COMMISSION requirements for operating Dcense licensees to demonstrate their ability to applicants; or clean up after an accident. By contrast, 10 CFR Parts 2 and 50 (ii) Retained these requirements for utilities, utility groups, and utility operatinglicense applicants to the contractors support completely ElimInstion of Review of Financial extent they require submission of eliminating the Commission's Anandal Cualifications of Electric Utilities in information concerning the costs of evalifications requirements. including Licensing Hearings For Nuclear Power permanendy shutting down the facility-decommluloning. Purther, utilities and Planta . and maintalning it in a safe condition * ,their represenfauves generally oppose Artwcy: Nuclear Regulatory (i.e., decommissionlas costs). *.,. mquiring mandatory property damage Concurrently,the Commisslon c - insurance. Commenis from legal counsel Commission. proposed amending its regulaUons to generally reflected the interests and ' require. on an interim basis. power'" ' - views of thelr utility. insurance.or Acvsom:Finst rule. reactor 11censees to " maintain the public interest ellents. Covernmental i aumuAny:%e Nuclear Regulatory maximum amount of commerdelly organizations and individuals re!!ected Commission is amending its regulations available on. site property damage a spectrum of views, although most.. Im eliminate entirely requirements for insurance, or an equivalent amount of were against eliminating the Anancial financial qualifications review and protection (e.g., letter of credit, bond, or qualifications review. Some etates and Andings for electric u"lities that are selfinsurance), from the time that the ' municipalities identified potentiel legal epplying for construction permits or. Commission Arst permits ownership,. conflicts between certain provisions of cperating licenses for production.or possession, and storage of special ' the proposed rulemaking and state law, utilization facilities. The Commission is nuclear material at the site of the A summary of the comments is clso amending its regulations to require nuclear reactor." presented below.%ose who are power reactorlicensees to obtain on. site, In the Federal Register notice, the interested may obtain copies of specific property damage insurance, or an Commission based its proposal for this ' comments from the Public Document squivalent amount of protection (e.g., ' rulemaking, in part, upon the statutory Room or the NRC Secretary under ' Letter of credit, bond, or self insurance), basis in the Atomic Energy Act of194 designation PR-50 (48 FR 41786).by from the time that the Commission Arst. as amended ("AEA") for'the Anancial writing to: Office of the Secretary, U.S. ' lasues an operatinglicense for the quellAcations regulations and its Nuclear Regulatory Cn==Insion, stuclest reactor. discussion in PublicService Company of Washington D.C. 20555. nrvncTuvs DATx:For amendments . NewHampshire.eL ol.(Seabrook g, g,g,,;,,,,,,j;,y,,g; g, aliminating financial qualifications Station. Units 1 and 2), CLI-78-1,7 NRC com,f,,j,,,s finoincial qu[fications review (62.104, Sections VI and VIII of 1 (1978)("Sechmok"). In that decisica and the proposed rulemaking, the swv/w Ros41ag agdad redudag Appendix A to Part 2. I$ 2.4,50.2, Commission affirmed its belief that the oriliminauas &e Conudssion's Appendix C to Part 50 Appendix M. Anancial qualifications review make. p ragraph 4.(b) to Part 50,550.33(f), and. existing financial valifications review four major points.First, th discount i-l 50.40). Mar. 31.1982. For amendments has done little to 1 entify substantial NRC's prnumpHon ed pu$lic utilities catablishing on-site property damage health and safety concerns at nuclear canmeet the Anancialdemands of lasurance requirement (ll 50.54(w) and power plants.However,because the 50.57), June 291982. In accordance with Commission believed that there are constructing and operating nuclear I the Paparwork Reduction Act of1980, "*Hm 185portant to safey which may (lants. Clung Seabrook, WPPSS,'IMI, - th Texas and other examples, (44 U.S C. 3507), the reporting provision ..be affected by financial considerations, commenkre mdntain ed unun chan i th:t is included in aragraph (w)(5) of it requested conunents regarding the .have experienced and wul continue to i 550.54 has been su mitted for approval type oWRC Anancialresw &at wmild experience difficulty in ralslag funds to ta the Office of Management and Budget '. focus effectively on considerations that i ,,,,,g,p,3,.operaung,and. g . (OMB).It is not effective until OMB mightadvmely affect sa4 ;. maintenance costs (particularlyla cyproval has been obtained. H. Public t'-te on the ( d, ', periods of high interest rates and y:n rvRTHEA INFOftstATION CONTACT *. . Rula ~ overcapadty), whether or not such costs Jim C.Petersen.OfBee of State Over100 comments were received on can be recovered in the rate base ush tru W Programs.U.S. Nuclear Regulatory the proposed rulemaking and have been ' ,e ha. Commission, Washington, D.C. 20555 categorized as foBows:. Se these commenters maintain that l (telephone 301-492-0883). Private citizens-se comments received the inability to recover all costs ~ I . CUPPLEMENTARYINFORs4ATIOgg Public interest groups-30 comments received provides an beendve for undes to 8' anE vod skimp on important safety components I. Background I s,d counse and quality assurance standards.Some c ,,,,,ot.1.,, is.g g On August 1a,1981, the Commission individuals-to comments received commenters cite the discussion of published a notice of proposed Utilities and otDity groups-se comments financial disincentives in the Rosaria i rulemaking in the Federal Register (46 received Report (Hive Milelsland A Reportin FR 41786) concerning requirements for. Architect-engineers and contractore-4 de Commission andde Public, MitcheR financial quellfications review and comments received .~ Rogovin. Director,}anuary 1980) to findings for electric utilities that are AD private citizen comments and aB support their views. Anotner commenter cpplying for permits orlicenses for Tut two public interest group comments suggests that utilities will be tempted to production or utilization facilities. As oppose reducing or eliminating the lowr wages which wouldlead to higher proposed, the rule would have: Commission's financial qualification turnover and, thus, to employment of - (1) nminated entirely Anancial review requirements.However, they inadequately trained personnel.nird, qualifications review requirements for - generally support imposing immediate. commenters maintain that NRC construction permit afpplicants; and decommissioning financing Inspection eff, orts and capabilities are. l

Fed;ral Register / Vd. 47. Ns. 82 / Wrdnesday. M:rch 31. 1982 / Rules and Regulations '13751 inadequate to provide enffident indicated its support for the substance the importance of decommiss'oning assurance of safety.Even if violatloan of the proposed rule-eliminauon of the funding to pub!!c health and safety, but are found, some commenters argue that financial quellfications review becausa rather recognizes that any action on NRC enforcement efforta are of the lack of any demonstrable link decommissioning is more appropria_te in inadequate. Fourth, the commenters between pubtle health and safety .the comext of the generic rulemaklag ~- assert that the Bnancial qualifications concerns and a utility's ability to make stowterngEisductellinliHWtime, review function is statutor0y required the requisite finendal showing. G= tr ri.Rhes concluded that it is %e actual financial situation. premature to indude any floal decision by 42 U.S.C.2232(a). (c) and [dk - . analyzed in that case has not changed. on decommissioning in this final rule ce Further, many of those arguing against eliminating the financial goalificauons Dere is no evidence that the safety of financial quahfications. Because the review recommend that the Commission the public has been adversely affected' generic decommissioning rule is siEhlduled to beFullished since aff %=-111 H_in 1982 J, should at least retain'that portion of the by Public Service Company of New M to review pertaining to decommissioning. Hampshire's (PSCNH) difficulties in meet any financialrequirements, king obtaining financing. It is true that to Dey state that the ongolag.. imposea as a resun of that rulema ~ decommissioning rulemaking is as raise capital.PSCNH has sold part of fis substitute for an immediate general ' ownership in the Seabrook plant, but there should be Intile practical effect in requirement to demonstrate financial such action does not have any temporarily eliminating consideration of capability to decommission a nuclear - demonstrable link to any safety decommissioning funding from licensing production on utilizaGon facility safely problems.Similarly. citing WPPSS* activities.Moreover. If decommissioning and expeditiously.Many expressed the. experience is not convincing becaus'e financ!ng issues were continued to be view that the generic' decommissioning. WPPSS* response (and that of most other allowed in currentlicensing study would notbe completed in a utilitics encountering financial proceedings. two undesirable effects reasonable time.,, difficulties) has been to postpone or may result.First there would be an By contrast, those favoring the. cancel their plants, actions clearly not increased chance that findings in such Commission's proposed reduction oc inim! cal to public health and safety , cases might contradict evolving l elimination of the financial under the Atomic Energy Act.. Commission policy in this area. Second. qualifications review function generaBy. As to the third point raised in

• one positive gain from the final rule support the Commission's reasoning that opposition to the proposed rule, in the would be countered,in that there could such a review has done litde to identify. absence of facts to the contrary.' the be expected to be little. if any, reduction substantive health and safety problems Conunission cannot accept' unsupported in the contentions before the Deensing at nuclear powerplants and that the

' statements that, as a general matter its boards on financial qualifications Commission's inspection and inspection and enforcement efforts are issues, thereby not significantly enforcement activities provide more inadequate.ne examples that reducing the time and effort devoted to effective protection of public health and commenters die (e.g., South Taxas] those issues. safety.Most utilities and their appear to substantiate.rather than B.Mondatorypropertyinsurancafor associates support complete e11mination undercut, the Commission's view that decontaminofion. Comments are. of the financial qualifications review, any violations of safety regulations are ' similarly divided on the issue of including pmvisions pertaining to being found and corrected and that. In requiring on-site pr:Tperty insurance to decommissioning.%ese commenters any event. such violations cannot be. cover decontamination axpenses, maintain that,if any regulations relating shown to arise'from a licensee's eBeged resulting from an accident. nose who to the financing of decommissioning are lack of financial qualifications. support keeping the financial adopted, they should await completion With respect to the final assertion that qualifications review generaDy support of the Commission's generic rulemaking the finandal qualifications review requiring a utility to demonstrate proof e on decommisslaning.. function is statutorily mandated. Section ofits ability to clean up after an - accidert.%e nmmissioninterprets e i ' he Commission has received no 182a of the AEA,42 U.S.C.2232(a), clearly indicates that such function la these comments as supporting comments to persuade it to change - 'significantly its reasoning on the within the Commission's discretionary mandatory property insurance. insofar proposed financlel qualifications rule. authority, but is not mandated. As noted as it covers accident cleanup costs.He ' As indicated above,many of those ' in the proposed rule, this interpretation, other commenters favoring elimination of the financialqualifications rule 3 opposing the proposed rule change have of Section saza has been appmved by. concluded that experience with the United States Court of Appeals for generaDy either (1) oppose mandatory Seabrook.WPpSS and otherplants the First Circuit in NewEngland coverage outright because of recent self-demonstrates the clos'e connection Coalition on Nuclear A>llution f. NRG - initiated moves by the utility industry to j between financial qualifica6ons and 5a2 F.2d 87.93 (1978), affirming the - obtain insurance or (2) favor substantial, NRC's Seabmok dedsiba. modification of the rule to clarify l public health and safety.%e Commission disagrees. As to the first On balance, after careful 'several ofits provisions. . consideration of the comments De first group of commenters do not point raised by commenters opposing ~ 1 i a elimination of the financial submitted and of the factors discussed - generaUy state their reasons for favoring qualifications review, the Commission in the notice of proposed rulemaking, mandatory insurance except for an does not find any reason to' consider. in therammission has. elected to undefined and non-quantifiable general a vacuum, the general ability of utilities promulgate the first of the two benefit in protecting public health and to finance Die construction ofmew alternatives outlined in the proposed safety.Some indicated that the amount generation facilities. Only when joined rule, i.e, eliminate the financial of insurance currently evallable is not with the issue of adequate protection of qualifications review of electric utilities sufBclent to cover acddents such as - the public health and safety does this entirely at the CP and OL stages. HU-2. However, because of recently lesue become pertinent. As to this, the includine eti=Instion_of=== - announcedincreases in the amount of (- commenters* second point, the. consideration Idern==t taah g coverage ava!!able and the continuing i Commission inits Seabrook decision fun s is not meant to discount, evolution in the insurance markets, this - .e e i

s 73752 - Tcdsral R2sist:r / Vcl. 47. N2 82 / Wednesday, March 31, 1982 / Rules and Regulati ns c:ncern may not be se great as might Comm!ssion disagrees with the position authority to require such additional otherwise be the case. taken by some commenters that it is information in individual cases as may As indicated above, the second group unfalt to many owners of smaller power be necessary for the Commission to af commenters-primarily utilities and reactors to require insurarce greatly determine whether an application their representatives-object more to exceeding the cost of replacing the should be granted or denied or whether the wording of certain provisions of the facility. A RG-2 type accident could .a license should be modified or revoked.. proposed on site property damage well require coverage approach e See, for example, the fourth sentence of Insurance rule than to the requirement bjlliongo matter what the origin Sectica 382a of the AEA.Similarly,no' itself. Several commenters recognize., value or size of the facility.ne change in the present powers of the i Commission expects that the reauired Commission with regard to the Ananda! that the precucal effect of requiring . m2ndetory insurance has been reduced, insurance will cover reasonable' quellfications review of non.utill particularly since the 30-2 accident. 4econtamin=rinn and channn ea *= applicants for Part 5011 censes be because most utiliues will buy whatever

admint with the nronerty de==

made.In addition, an exc tion to or amount of coverage is offered, within resulting from en accident at the"ol l walver from the rule wou17be possible reasonable limits, as a matter of good IIcensed facility._Until completion i to require the submission of financial business judgment. Other commenters L studies evaluatmg the cost of cleaning gny indicate that the Commission's up accidents of va ng severity,it is "d'y,, gg*,P', ,g pp p numates of annualpremiums required prudent to require or all power reactors for a typical reactor may have been a reasonable amount ofinsurance for are shown Pursuant to 30 CFR 2.7581a thderstated. Estimated premiums for decontamination expense, an individuallicensing heering. i esverage currently avai.able (i.e., $375

3. Several persons commented that B.Pmeticallmpacts. Also as.

er $450 million) are $3 million per year reactor licensees should not be required indicated above and in the proposed, to maintain on-site property damage rule, the Commission continues to f:r a typical two-unit alta. insurance until the operating license has expect that the final rule will, in normal In light of these comments and for the reasons stated in the proposed rule, the been received. With fuel merely stored circumstances, reduce the time and Commission has decided to retain the at a reactor, the chance of an acddent effort which applicants. lleensees, the i requirement in the final rule that electric' requiring extensive decontamination is NRC staff and NRC adjudicatory boards utilides must have on site property extremely remote.De Commissioq. devote to reviewing the applicant's or i damage insurance,but several agrees and has changed the rule licensee's finandal qualifications.%e ~ modifications have been made pursuant accordingly, so that such insurance need rule.will eliminate staff reviewin cases - ts the comments received.Re following

• be in force only when the utility is where the applicant is an electric utility.

changes have been incorporated into the licensed to operate the reactor. presumed to be able to finance activities text of the final rule on property

4. Several Texas utilities commented to.be authorized under the permit or insurance:

that the Texas constitution (and. license. e L Re definition of" maximum apparently, the Loulslans and Idaho C.lleense Amendments.He evtilable amount" has been clarified. constituttoris) prohibits certain elimination by this rule of the financial %Is term.could have been interpreted to munidpal utilities from purchas qualifications review for electric utility me:n that utilitie_s would,be required to insurance either offered by mu applicants also applie' to any electric s switch their insurance coverage to the insurance companies or involving utilities that become co. owners via carrier offering the greatest amount at retroactive assessments.He amendments to existing permits or any particular time. Another Commission has revised the rule to licenses.From time to time, original inttrpretation could be thaf utilities address these concerna, w:uld be required to obtain coverage 5.One commenter discussed the need owners of production or utilization emnts truafe fdlid", Qak ]a Mer a a portion of es from the two meJorinsurers or any other to clarify the amount of time required of insurer that decides to enter this market. the licensee to obtain not only initial ownershl inthe facili.NormaRy,an,. Fin:lly, the " maximum available" could insurance but also subsequent incress'es P h:ve included an increment no matter offered. Another suggested that many amendant mquat is en Bled,wM 'hsw highly pricedor how restrictive the regulated utilties may have difficulty la seeks to add the new partner as co-tirms and conditions.ne Commission's obtaining approval to purchase owner and co-licensee. For the purposes, of &Is rule, slmHar to ne situadon intent is neither to disrupt thelnsurance insurance within 90 days.%o relating to prelfcensing antitrust review m:rkets by forcing utilities to switch Ccmmisslon has revised the rule to - of thue am owms, the amadant ~ th11r insurance carriers unnecessarily '. reflect its view that 90 days is a aor to require utilities to obtain reasonable time in which to take. request com' prises the initiallicense insurance under unreasonable terms ' reasonable steps to obtain both initial application by the new, prospective co-and conditions.He rule has been

• and any additional on.s!te property owner, even though the amendment ch:nged to clarify the Commission's damage insurance.

request may actually be filed by the intent, specifically in 150.54(w). 6.ne phrase "commerciaDy Presentlicenses and owner.Eg,Detm/t. 2.Some commenters maintained that available" insurance could have been Edison Company (Enrico Fermi Atomic the proposed rule should apply only to construed to exclude lasurers such as Power Plant, Linit No. 2), A1AB-475 F insurance cov'ering decontamination of a NMI.and NEIL %e Commission NRC 752,755, n.7 (1978). Since the same, f:dlity suffering an accident and not to recognizes this possible but erroneous finandal qualifications review. s "all risk" property damage insurance. interpretation and has changed the considerations apply to all electric Beceuse decontamination insurance is

• wordm' g of the rule accordingly.

utility applicants, regardless of the Particular mannerin which their. the_Cominission's only con'cern from the III.O&er Consideradone - application is tendered to the NRC,it point of view of protecung public health. and s'alety, coverage to replace tae- ' A.RequirementforAdditional-should be clear that this finalrule existing facili7ty n an "all risr beals is Information. Asindicatedinthe applies to any request for an bWind.tle scopc3f the Commission's proposed rule, the Commission does ned amendment that would,if granted. cuthority. By Jbe same reasoning. the intend to waive or relinquish its residual include a new electric utility as a co- \\

Tadual Register / Vcl. 47. No. 82 / Wednsed:y March St.1982 / Rules cnd Regulatisne 13753 owner and co licensee in a production L 96-511).He date on which the sec. s. Pub. L 91-400. 84 Stat.1472 (42 US C or udllzation facility. Information collect!on requirements of 21ss). g,,y,, this rule become effective, unless advised to the contrary, accordingly,

2. In 12.4. new peregraph (s) is,added to read as follows-In summary, the Commission has reflects inclusion of the 80 day period concluded that the adoption of the rule which the Act allows for such review.

g3.4 penntilona, so e as a d wlth Regulatory Flexibility Certificaties.

• As n, sed in this part, demonstrating financial qualifi Uons of In accordance with the Regulatory -

electric utilities that are applying to. Flexibility Act of 1980. 5 U.S.C. 805(b). (s)" Electric utility" means any entity construct and operate nuclear the NRC hereby certifies that this rule that generates or distributes electricity ~ production and utilizauon facGitles. will not have a significant economic and which recovers the costs of this >0 without reducing the protection of the impact on a substantial number of smaB electricity, either directly or indirecGy. public health and safety.His portion of entitles. De rule reduces certain minor through rates established by the entity the rule will be effective immediately information collection requirements on itself or by a separate regulatory upon publication, pursuant to 5 U.S.C. the owners and operators of nuclear authority. Investor owned utilities

• g 533(d)(1), since the rule is expected to power plantslicensed pursuant to including generation or distribution relieve significantly the obligauon of sections 103 and 104b of the Atomic subsidiaries, public utility districts, certain applicants with respect to Energy Act of1954, as amended.42 municipalities. rural electric information required for construction U.S.C. 2133,2134b.nese electdc utility cooperatives, and state and federal permits and operating licenses, and also companies are dominant in their service agencies. including associations of any to reduce the amount of unnecessary, areas lAccordingly, the companies that of the foregoing, are included within the time-consuming staff review and own and operate nuclear power plants meaning of" electric utility."

adjudicatoryproceedings. Although the are not within the definition of a smaB rule will be applied to ongo licensing business found in'section 3 of the SmaD

3. In 12.104, paragraph (b)(1)(iii) and proceedings now pending an to issues Business Act.15 U.S.C. 632, or within Introductory paragraph (c)(4) are revised or contentions therein. Union of-the Small Business Size Standards set to read as follows:

Concerned Scientists v. AEC. 499 F.2d forth in 13 CFR Part 12L 33.104 Notice of hearing.

• 1069 (D.C'Cir.1974). It abould be clear Pursuant to the AtomicEnergy Act of that the NRC neither latends nor 1954, as amended, the Ene:EY f

expects that the rule will affect the Reorganization Act of1974 as amended. (b)... scope of anylasues or contentions and section 553 of'lltle 5 of the United . (1) * *

• I related to a cost / benefit analysis States Code, the following amendments (iii)Whether the applicantis 4

performed pursuant to the National. to 10 CIT Parts 2 and 50 are published financially qualified to design and EnvironmentalPcli Act of19e9. either as a document subject to codification, construct the proposed facility, except . lapendingafuture censing proceedings for nuclear power ple'nts. PART 2-RULES OF PRACTICE FOR that this subject shall not be an issue if Under NEPA the issue is not whether DOMESTIC LICENSING PROCEEDINGS, the applicant is an electric utility the applicant can demonstrate 1.Re authority citation for Part2 . seeking a license to construct a reasonable assurance of coveriq reads as follows: production or utilization facility of the type described in 350.21[b) or $ 50.23; certain projected costs, but weather is - Authority: Secs. set.1st, se Stat. ess, ess merely what costs to the applicant of (42 UAC 2am. 22:1) sec.1st. as -- AmA constructing and operating the plant are Puh L s7-ets. 7e Stat. 400 (42 UAC 3:41) {c) * *

• to be put into the cost-benefit balance.

sec. act. Pub. L esass, as Stat.1342, as (4) Whether the applicant la

• As is now the case, the rule of reason amendedbyPub.Le6-7s,BeStat.41 tu technically and financially qualified to e

wtD continue to govern the scope of NE 'k Nat. engage in the activities to be authorized - d d 1 ca.es what costs are to be included in the Sut. saa, es2. sss, em ser, ess, as amended by the operatinglicense in accordance f

• balance, and the resulting.

(42 UAC 2o7s. 2093. 2111,21ss. 22n 21ss) with the regulatiorgs in this chapter, determinations may still oe the subject sec.102. Pub. L st-1eo, as Stat. ass (42 UAC except that the issue of financial oflitigation.Dus, finartclal 4ss2h sec. 301, se Stat.1248 (42 UAC serik qualifications shall not be considered by v quanncations would not be expected to Sections 11at 11os. 2.tos.1721 she leeued the presiding officer in an operating become an issue or contention in an under secs.102. tos.104. sos.1ss.1as, es Stat. license hearing if the applicant is an NRClicensing proceeding insofar as esa, es7. esa, en ess. as amended (42 UAC electric utility seeking a license to NEPA might be involved. d*1*M* ),7,ss a . operate a production or utilization %e Commisslon has also concluded g that adoption of the on-site property oss (42 UAC 223eh sec. 20s, as Stat.124e (42. facility of the type described in USC 5s46). Sections 2.600-2.e06. 2.730 550.21(b) or 5 50.23; damage insurance requirement, as 2.772 sho issued under sec.102.Puk L. ? e e e modified. will better ensure that safety of t$rotection of the health and.., st-teo.as stat. ass (42 UAC 43:21 adequate sections 2.700s. 2.7ss also lasued under e 4.In Appendix A of Part 2. Sections e publicis achieved.%Is s USC 554. Sections 2.754.2.7e0 Vl(c)(1)(iii) and V111(b)(4) are revis to requirement Will be effective June 29, 2.770 alsoissued under 5 USC 557. read as foDows: 3ggg Section 2.790 also issued under sec.103. 3,;pendix A--Statement of General Po5cy 68 Stat. e36.as amended (42 USC 21as), Paperwork N' eduction Act Slatement Sectione 2.aoo-2.aor also issued under 5 - and Procedure: Cooduct of Proceedlage for tbdenamt cmMn Pervidh and %e Nuclear Regulatory Cornmission g $,8' [hgI'$ s'c operstlag 1Jcenses for Production and has submitted this rule to the Management and Budget for s,0ffice of. 4332). Section 2.aos also lesved under s UAC., Utinsa aF o uch ass and sec. 29. Pub. L as-2sa,71 Stat. 57s as '9 g g g review as may be appropriate under the amended by Pub. L es-20s. 91 Stat.14as (42 Energy Act of1sse.ee N,,aa Paperwork Reduction Act of1980(Pub. UAC 2039). Appendix A is also leeued under s m.

j ~ .,.r ; 13754 Federal Rigister / Vd. 47. No. 82 / Wedneed:y, M:rch 31, 1982 / Rules cnd Regulations l VI. Peetheerlos E - - t.tedudlasthe cooperatives. an'd state and federal of constructing or operating a facility initial Deciales agencies, including associations of any must also indude informaUon showing-of the foregoing. are induded within the (i)nelegaland finandal Ic) '

• meaning of " electric utility."

relationsi !ps it has or proposes to have. It) * "

7. In 150.33, paragraph (f) is revised to with its stockholders t.,i owners; liul Whether she applicant is Ananciah read as follows:

(U)nelt fanancialabui to meet any IEE'E!Ilni.T ' 19.,,c: '- '~am-.... ' Incur;and 4N u,.~. :"A '"aa"e'A*2'"tc r d-i

• .' * - Y clIctric stDity seeking a Bcense to construct a Each application must stats: s,-

(18) Any'olherinformation considered.- production or utilization facility of the type-.- ducribedin Ise21(b)erso.rs; n. - 2,*.

• necessary by the Cosimission to enable (f)(1)Information sufBelent to -

it to determine the applicant's Anancial, demonstrate to the Commission the '

• qualifications.. lectricstuity -
• vin.ProcedMppbMe k Operonas y

Anandal qualincations of the applicant (3) Except for e h Freceedimo,s to carry out. in accordance with applicants for construction permits and g)... regulations la this chapter, the activitie,s operating licenses, the Commission may (4) Whether the applicant is technicaDy forwhich the permit orlicenseis t. request an established entity or newly-cod AnanciaDy qualified to engage in the However, no information on fine formed entity to submit additional or l cctivities to be authorised by the operating qualifications, including that in more detailed information respecting its license in accordance with the Commission's paragraphs (f)(1) (i) and (ii) of this financial arrangements and status of regulations, except that the issue of Snancial section, is required in any application, funds if the Commission considers this i qutlifications shan not be considered by the nor shad any Anancialreviewbe information appropriate.%Is may botrd if the applicant is an electric utility conducted,if the applicant is an electric indude information regarding a tfhza of scribe la utility appli construct or. cant for a license to licensee's ability to continue the conduct operate a production or of thepetivities authorized by the isom(b) er isatt. utaization facility of the type described licante and to permanendy shut down e in i 50.21(b) or 5 50.22. the facility and maintainitin a safe PART 50-DOMESTIC UCENSING Op -(1)If the applicationis for,a. condition.. 1 PRODUCTION AND UTILIZATION. construction permit, the applicant shaB FACILITIES-submit information that demonstrates 3 In $ 50.40, paragraph (b)is revised ~ the applicant possesses or has to read as foDows: 5.%e authority dtation for part 50 la reasonable assurance of obtaining the revise,d to read as follows: Rands necessary to cover estimated ~ 950.40 Commonstandania, Authertsy: seca. sea, sos.1st. saa, ass, see, construction costs and related fuel cycle -. es stat.eso,esr. sea,ess,est.ess,en as. costs.De applicant shad submit (b)De applicant is technicaDy and

• cmended (42 UAc atss,21s4.22o1,22:2,.

estimates of the total construction costs finandaDy qualified to in the 22ss,223e) sm. act, son, soe, as stat. sass-of the facility and related fuel cycle " " prpposed activities in a with - ,pg%A sset.sa42 ssakup costs,and shallindicate the source (s)of the regulations in this chapter.However. 3 secti sars, l ander sec.122, es stat. ase (42 UAC 2152). funds to cover thepe costa.... -- no consideration of finantent sections somNiast aho issued under sac.. (11)If the application is for an. qualifications is necessaryfor an sea, se titat. est, as===naA=d (42 UAC 22:4). operating Bcense, the applicant shaB., electric utility applicant for a license for Sections satoNatos issued under sec.see. sdmit information that demonstrates a production or utilisation facDity of the es stat. ass (42 UAC 2236). For the purposes the applicant possesses or has .. type desalbed in 350.21(b) or 55022. d sec. 22s, as stat sea, as amended (42 UAC* reasonable assurance of obtaining the .e g {sa _,,,,,. Funds necessary to cover estimated s.In 850.54, a new paragraph (w)is a e saas* seth, es stat. sea, as amended (42 UAc. cPeradon costs for the period of the, added to read as foBews: 2202(b}): Si saio(b) and(c)and sas4 are. license,plus the estimated costs of taswd under wi_ sets, as stat. ete, as. permanendy shutting the facility down. 650.54 Comstions of Boonssa. amended (42 UAC 2202(II) and 55 sass (el, and maintaining it in a safe condition. sase(b), sa7o, sart. sar2, and sare ese %e applicant shaB submit estimates for .[w) Each electric stuity Bcensee under issued under sec.1sto, as stat. escL as. total annual operating costs for esch of. this part for a production or stihzation amended (42 UAc 2aos[oD- ~ .the first five years of operation of the. facility of the type described in

a. In i 50.2. a new paragraph [x)1s.

facility and estimates of the costs to ' 55a21(b) or 5 5a22 shad.by June as, cdded to read as foDows: permanently shut down the facDity and 1982, take' reasonable steps to obtain on-maintain it in a safe condition.%e site propertv dan -- 8--- I 50J Definitions-applicant shad also indicate the avauable at reasonable costs and on As used in this past. source (s) of funds to cover these ex>sts. reasoname terms trom private sources An application to renew or extend the or so aemonstrate to the satisfaction of (x) " Electric utGity" means any entity - term of an operating license must the Commission that it possesses na th:t generates or distributes electricity include the same financialinformation equivalent amount ofprotection cnd which recovers the costs of this as required in an application for an " covering the facility.hovMed, that: elsetricity, either direcdy or indirecdy, through rates established by the entity ~initiallicense. (1)%Is insurance must haye a (2) Except for electric utility.. minimum coverage limit no less than the Itself or by a separate regulatory - applicants for construction permits and combined total of(i) that offered by . authority.1nvestor. owned utDities, operating licenses, each application for either American Nuclear Insurers (ANI). Including generation or distribution - a construction permit or an opera

• and Mutual Atomic Energy Reinsurance subsidiaries. public utility districts, -

. license submitted by a newly.fo Pool (MAERP) joindy or Nuclear Mutual municipalitie,s ruralelectric entity organized for the primary purpose 1.tmited.(NMI.); plus (11) that offered by S' O m o

'??oe ; FadIrd Register / Vcl. 47. Ns. 62 / Wednesday March 31. 1982 / Rules cnd Regulations 13755 Nuclear Electric Insurance Limited Anancial protection it maintains and the ILin Appendix M to Part 50. (NEll.). the Edison Electric Institute sources of this insurance or protection, paragraph 4.(b)is revised to read as (EEI). ANI and MAERP jointly, or NML

10. In 5 50.57, paragraph (a)(4) is follows:

~ as excess property insurance; revised to read as follows: Appendix M-Standardizouon of Design; (2) The licensee shall, within n!nety Manufacture of Nudear Power Reactore: (90) days of any increases in policy lM.57' asunce of operatin9 Ncoms-Construcuon and Operauon of Nuclear Powse limits for primary or excess coverage (a) * *

• Reactors Manufactured Pursuant to C**"I**

that it has obtained pursuant to thia finan) *Ihe applicant is technically and, (4 paragraph, take reasonable steps to cially qualified to engage in the ,f',,, obtain these increases; and activities authorized by the operating (b) e financialinformauon submitted (3) When a licensee is prohib!!ed fro,m license in accordance with the pursuant to $ 50.33[f) shall be directed at a purchasing on s!!e property damage regulations in this chapter. However. no dr monstration of the financial qualificauons g. insurance because of state or locallaw. finding of financial qualifications is of the app!! cant for the manufacturing license the licensee shall purchase the specific necessary for an electric utility to cany out the manufacturina acticy foe amount of such insurance found by the applicant for an operating license for a which the license is sought. NRC to be reasonably available to that production or utilization facility of the as%on.DC this 24th dez of licensee, or to obtain an equivalent type described in 5 50.21(b) or $ 50.22. e y amount of protection; and Foribe Nuclear Regulatory Comrnission. (4) The licensee shall report on Aprill of each year to the NRC as to the Appendix C-{ Removed) Samuel J.Ch!!k. present levels of this insurance or 11 P 50is amended by removing $,e,,ga,y,y, am,;,,;,,. salmo coot ree++w a. \\ o ~ e e G ~ 7 e e e e 9 8 4 e S e / \\ ~ ~ e e 9 e g 9

_ Enclosure 3 Regulatory Analysis Property Insurance Requirements for l NRC Licensed Nuclear Power Plants 1. _ Statement of t'he Problem The proposed rule follows an interim final rule on property insurance for comercial reactor licensees that was promulgated on March 31, 1982(47FR13750)andcodifiedas10CFR50.54(w). This interim rule was treated as an interim rule pending completion of two studies: Nuclear Property Insurance: StatusandOutlook(NUREG-0891),by Dr. John Long; and a report by Pacific Northwest Laboratory (PNL), _ Technology, Safety and Costs of Decommissioning Reference Light Water Reactors Following Postulated Accidents (NUREG/CR-2601). On June 24, 1982, the Comission. published in the Federal Register (47 FR 27371), an Advance Notice of Proposed Rulemaking (ANPRM), which sought comments on the issues raised in NUREG-0891. The existing rule requires substantial amounts of property damage insurance (currently a minimum of $585 million) to pay for the costs of cleanup following an accident at a comercial nuclear power plant. i The NRC believes that such insurance should be required so that the ~, financing and pace of cleanup following an accident does not become a public health and safety problem such as occurred at TMI-2. Although significant premium costs (i.e., $1 million-$3 million per facility per year) are paid by utilities purchasing property insurance, most t a

nu e purchased whatever insurance was offered prior to NRC's insurance requirement. Similarly, subsequent to the imposition of 10 CFR 50.54(w), most utilities have bought insurance beyond that required by the NRC. Based on licensee reports submitted by April 1, 1983, of 56 sites requiring coverage 39 carry the maximum amount of insurance generally available. Another four sites have been exempted by the NRC from the requirement to carry excess property insurance. Only 13 sites are presumed to carry less than $1.02 billion, l 1 I The marginal cost of NRC's existing property insurance rule is minor and falls only on those few licensees who wot$1d not otherwise carry l the minimum $585 million required. The only. additional cost ) l associated with the existing rule is an annual reporting requirement of less than a page that' indicates the amount carried and insurer, l The cost of preparing this report is estimated to be no more than 4 I staff hours per licensee. e4 The proposed rule would affect only those licensees not currently buying at least $1.02 billion in insurance. As indicated above, approximately 13 licensees would be' affected. Some of these licensees are not buying both excess policies not because they do not want to but because they are prohibited by state law from buying insurance using retroactive assessments. s .4_ .n

Gr 8 For future licensees, only those that would not otherwise d rule. property insurance available would be affected'by the propos Because the larger plants tend to be insured for the maximum ~ t on available, this action is not expected to have a regulatory im future licensees. 0bjectives The objective of the proposed rule is the same as that sta l for the interim final rule--that is, the financing and pace of i lly following an accident at a commercial reactor should not po affect public health and safety such as occurred at TMI-2. Alternatives _, 4. _ Consequences _, and 5. Decision Rationa ,f 3. Several alternatives were raised in NUREG-0891, the A As indicated in the proposed rule, coments in response to the ANPRM. i d One the NRC believes that additional property insurance is requ A second is not to alternative to this is to keep the existing rule. blish the require additional excess insurance directly but rather to p dditional amounts of insurance carried by each licensee and induce a i l coverage where necessary through the state and local po l This second alternative was posed by the staff to the t process. Comission who disapproved it in fav'or of a more direc A third alternative is to require both excess layers of in One benefit to this alternative is that th regardless of amount. ce required level would increase as the amount of excess l

' available increases. Thus, increased costs resulting from inflation could be covered without revising the rule itself. However, because, as coverage Ifmits grow, requiring both excess layers might eventually entail the purchase of more insurance than necessary to protect public health and safety, this alternative was not chosen. The alternstive being proposed is to establish a dollar limit of $1.02 billion that would cover expected costs arising from most potential accidents. The Commission is not privy to the premiums charged for primary property insurance. However, annual premiums on excess coverage have been reported to be, $3,000.00 per million dollars of coverage for ANI/MAERP. Annual premiums for NEIL-2 excess coverage would likely be significantly less per million dollars of coverage but could, of course, entail additional assessments in the event that losses occurred. The total cost per year, not including potential assessments, to each of those 13 licensees that would be required to buy additional excess insurance would likely range from $0.3 million to $1.5 million. For this cost, the newly-covered licensees, their stockholders and their customers would be protected from the potentially much larger costs that could result from an accident. Likewise, the public would be protected from any adverse health and safety effects occurring because of delays in cleanup arising from funding shortfalls. Some additional impact on the NRC could occur if any of the thirteen or so licensees required to buy additional insurance petitioned the NRC for exemption from this requirement. If two staff-weeks of effort

- rg fahQi tw; .4' - are required for each exemption, as much as 26 staff-weeks total f No additional impact additional effort by the NRC could be required. on other HRC programs, other organizations or individuals is The Comission therefore concludes that the benefits anticipated. gained by increasing insurance requirements outweigh the incr j costs necessary for implementation. 6. Implementation _ Because there is some impact on certain reactor licensees, a 90-day implementation schedule is proposed. P E, - ^ ^ - - - - - - - - " ~ " ' ' '

ENCLOSURE 5 Environmental Assessment Proposed Amendments to 10 CFR 50.54(w) The proposed amendments to 10 CFR 50.54(w) would, if enacted, increase the f amount of insurance that each commercial reactor licensee is required to maintain to clean up a licensed reactor site after an accident. The amount of required insurance would increase from a minimum of $585 million currently required to $1.02 billion. The proposed rule would also add a requirement that proceeds from insurance shall be used first to decontaminate the licensed reactors before any other purpose when and to the extent that such decontamination is required to protect public health and safety. ~ The proposed action is required to provide greater assurance'that comercial reactor licensees will have sufficient funds to clean up their reactors that suffer accidents. Assurance of these funds are required so that public health and safety is not adversely affected during the cleanup process. Alternatives to the proposed action consist of maintaining the existing rule or establishing some other limit of insurance. Neither the proposed action nor the alternatives to it have any significant impact on the environment. No other agencies or persons were contacted for this action. l l i .I r

.. +- ~ ~ Finding of No Significant Impact Proposed Amendments to 10 CFR 50.54(w) The proposed amendments to 10 CFR 50.54(w) would, if enacted, increase the r.~ \\ j' amount of insurance that each commercial reactor licensee is required to maintain to clean up a licensed reactor site after an accident. The amount of required insurance would increase from a minimum of $585 million currently required to $1.02 billion. The proposed rule would.also add a requirement that proceeds from insurance shall be used first to decontaminate the licensed reactors before any other purpose when and to the extent that such decontamination is required to protect public health and safety. The Commission has determined that there are no significant environmental impacts resulting from the proposed action and thus an environmental impact statement is not required. Although changes in insurance requirements affect the financial arrangements of licensees and have economic and social consequences, they do not alter the environmental impact of the licensed activities. I An environmental assessment has been prepared, but no other related environmental documents exist. Copies of the assessment and this finding may be may be examined at: the NRC Public Document Room at 1717 H Street, NW, Washington, DC. I

1 = 0 RES TASK LEADER RECOMMENDATIONS e

\\ Draft RES Recomendation Related to The Continuation of the Ongoing Rulemaking On " Mandatory Property Insurance for Decontamination of Nuclear Reactors" Based on the detailed RES draft independent review of the continuation of ongoing rulemaking, it is the staff's draft recommendation that the NRC should proceed with this rulemaking, specifically that rulemaking for the purpose of amending 10 CFR 50.54(w) be continued. The sponsoring office review package indicated this will be done by preparing either a revised proposed rule for public comment or a final rule for Comission consideration. Either of these actions are satisfactory based on this review. Judgements regarding the more general questions of the exact content of the rulemaking are more preliminary in nature since certain issues are still being analyzed and will have to be developed in more detail when this information is known. This draft recomendation is based on our finding that there is a need for the rulemaking, that it is important relative to accomplishing NRC's mandate of protecting public health and safety, that it is consistent with applicable policies, and that it appears to provide a benefit without imposing an undue cost. These findings are discussed below. The need for this rulemaking is to assure that there are sufficient funds available in a timely manner to pay for decontamination and cleanup activities at a reactor following an accident so that lack of funds does not contribute to delayed or improper decontamination and cleanup efforts and thus that the public's health and safety are protected. Previous Comission statements in rulemakings for 10 CFR 50.54(w) have indicated that the Comission was concerned about the ability of nuclear power plant licensees to finance the cleanup costs resulting from a nuclear related accident, especially in light of how funding problems affected the cleanup efforts at THI-2. The Comission has also indicated in these earlier statements that the amount of insurance required by the current regulation is inadequate based on recent studies of cleanup costs, that there is a need to set a priority that insurance proceeds be used first to decontaminate the reactor so as to protect the public health and safety, and that there is a need to consider how the requirements are affected by State' laws which prevent affected licensees from purchasing the full amount of insurance required. Based on the need indicated above, this rulemaking would require an increase in the amount of insurance currently required. The latter two issues are still being analyzed by SP and so the exact content of the rulemaking regarding these issues is not complete.

2 This action is consistent with other earlier Commission actions specifically as noted above in the original rulemaking for 10 CFR 50.54(w) in which the Commission noted in the supplementary inforraation that adoption of onsite property insurance will better ensure protection of the public health and safety. In addition continuation of this rulemaking is consistent with previous Commission statements in the supplementary information supporting the proposed rule amendments to 10 CFR 50.54(w). Benefits of proceeding with this action include providing industry and the public the opportunity for additional input to decisions made in the NRC rulemaking process if it is decided to prepare a revised proposed rule. With regard to final rulemaking proceeding from this action the benefit cannot be definitively stated yet since the exact contents of the rule are not yet known since, as noted above, two issues are still being analyzed. However, our preliminary assessment is that it will have the benefit of providing a clear licensing policy for all nuclear power reactor licensees and of assuring that adequate funds will be available in a timely manner to cover costs of carrying out post-accident decontamination activities with a minimum of delay in a manner which contributes to protection of the health and safety of the public and plant workers. As is the case for benefits, a preliminary assessment of i costs associated with final rulemaking is that NRC and industry staff time involved in implementing the amendments should be minimal because basic requirements for insurance ~ currently exist and most licensees have sufficient insurance to meet the amended requirements. Another impact would be the cost of the added insurance required. However this impact is not as significant as it could be since most utilities already maintain levels sufficient to meet the new requirements. These impacts are balanced by the potential for benefit in having sufficient funds available for a post-accident cleanup on a timely basis and that costly delays in cleanup are not caused by a lack of funds. 4 i i I i o L

RES STAFF REVIEW l i l l

RES Staff Review of Continuation of Ongoing Rulemaking on " Mandatory Property Insurance for Decontamination of Nuclear Facilities" The RES staff review consists of three parts: the quality control evaluation, the detailed draft independent review, and the summary of staff preliminary judgements. A. Quality Control Evaluation The rulemaking package was reviewed and evaluated with regard to the procedures and guidelines set out in the tools identified in section I.D of " Procedures for Conducting RES Independent Review of Rulemakings (Revision 1) 1985," Working Draft March 29, 1985, in particular with regard to the CRGR charter requirements. Our review of the rulemaking package noted that it clearly contained the generic requirements being proposed, pertinent background documents, an indication of major actions necessary to comply with the rule, an indication of affected licensees, and an implementation schedule. The rulemaking package also contained an environmental assessment in which a finding of no significant impact as a result of the rulemaking was made; it contained a regulatory analysis presenting a statement of the problem and ~ analyzing the alternatives, benefits and costs, consequences, and decision rationale; and it contained an analysis for the Paperwork Reduction Act and the Regulatory Flexibility Act. The rulemaking package was submitted to CRGR and on July 17, 1984 CRGR indicated that they would not review the package. On the basis of the above the contents of the package appear satisfactory. B. Detailed RES Draft Independent Review 1. Introduction The following contains the details of the RES staff evaluation of the ongoing property insurance rulemaking. This review consists of i 4

2 considerations and preliminary judgements related to (a) the issue to be addressed, (b) the necessity and urgency for addressing the issue, (c) alter-natives to rulemaking, (d) how the issue will be addressed through rulemaking, (e) how the public, industry, and NRC will be affected as a result of rulemaking, and (f) NRC resources and scheduling needed for the rulemaking. This review is based on the information available at this stage of rulemaking. This information consists of the SP Office Finding on the rulemaking containing proposed amendments to the existing property insurance regulations, as well as other information contained in earlier rules and related Federal Register notices and pertinent Commission papers, including the regulatory analysis. 4 2. Details of RES draft review a. Issue to be Addressed The problem to be addressed is to assure there are sufficient funds available in a timely manner to pay for cleanup of a reactor following an accident. This availability contributes to preventing stalled or improper decontamination and cleanup efforts following an accident thus aiding in the protection of public health and safety. The specific issues being addressed in this amendment to the existing rule is increasing the required onsite property damage insurance, whether a decontamination priority should be placed on insurance proceeds received by the licensee, and how to handle those licensees who are prevented by State law from buying the full amount of insurance required. b. Necessity and Urgency for Addressing this Issue The rulemaking indicates that there is a need for an amendment to HRC's mandatory property insurance regulations in the areas indicated in 2a. above. The basic need for mandatory property insurance has been discussed

3 in detail in 46 FR 41786, August 1981, and 47 FR 13750 March 1982, which proposed and made effective 10 CFR 50.54(w), respectively. These documents pointed out that the Commission was concerned about the ability of nuclear power plant licensees to finance the cleanup costs resulting from a nuclear related accident. This was especially true considering the funding problems and related cleanup problems at Three Mile Island, Unit 2, analyzed by the NRC i in NUREG-0689, November 1980, " Potential Impact of Licensee Default on Cleanup of THI-2." In 47 FR 13750 the Commission concluded that adoption of the onsite property damage insurance requirement would better ensure that adequate protection of the public health and safety will be achieved. Subsequent to that resolution of the basic need, the Comission identified, in l 49 FR 44645, additional issues needing to be addressed in order to assure that financial aspects of recovery after an accident do not have an adverse impact on public health and safety. In 49 FR 44645 the Comission indicated that the following issues needed to be addressed: increasing the amount of insurance required, imposing a decontamination priority on any proceeds from such insurance, and what requirements should be placed on those utilities which are prevented by state law from buying the full amount of insurance required. The increased amount of insurance was based on a study performed for the NRC by Battelle Pacific Northwest Laboratory, NUREG/CR-2601, which showed that the j costs of accident cleanup were potentially greater than the minimum amount currently required. The decontamination priority was based on the need to l assure that the property insurance be used first to protect public health and safety prior to other licensee uses. The need to consider how state laws affect the property insurance requirements arises due to conflicting state laws on types of insurance which may be purchased. i l 4 1 -...m. ,_-.,-,yy ,n -.7 .m,_ m-._-. ,c-.

4 Based on the original need expressed by the Comission in 46 FR 41786 and 47 FR 13750 and on the current need to amend the existing regulations as expressed by the Comission in 49 FR 44645, it appears that a final rule amending 10 CFR 50.54(w) is needed in assuring that sufficient and timely funding is available for cleanup following an accident at a power reactor so as to protect the public health and safety. There is some urgency associated with continuing this effort since the Federal Register notices noted above indicate the importance of having proper amounts of insurance stipulated for decontamination and cleanup activities following an accident. Failure to have this insurance could result in a situation similar to TMI-2 where insufficient property damage insurance contributed to a pace of accident cleanup and recovery marked by delays with resultant potential impact on public health and safety. The fact that it has been six years since the accident at THI-2, that the original rule on this issue was proposed four years ago, and that it is indicated in the SP office findings that it may be necessary to issue a revised proposed rule due to the complex issues involved with resultant additional time involved for public comment and resolution of coments means that it is necessary to get on with this task. c. Alternatives to Rulemaking 1. No action One alternative is to take no further action on this matter. This alternative would result in retaining the current requirements in 10 CFR 50.54(w) regarding mandatory property insurance. However, as noted above this alternative does not seem viable due to the problems with the rule as currently written as identified by the Comission in 49 FR 44645. Since these problems still exist, it seems incorrect not to continue with this rulemaking in light of earlier NRC actions. . -. - - - - - ~, _ - - - - - -. -

) i ~ 5 2. Other Guidance Regulatory guides could be used to address the particulars of mandatory property damage insurance. However, the NRC position that the licensee provide insurance in specific amounts in a specific manner could not be effectively accomplished in this manner. Codification in rules would provide a legal basis and assure more consistent and standardized application, reducing challenges and the need for time-consuming case-by-case evaluations. ] 3. Rulemaking The Office Review Package proposes that the rulemaking effort amending the property insurance regulations be continued. As noted j above, a proposed rule amending the existing 10 CFR 50.54(w) was issued for j public commment in November 1984. Continuation of this rulemaking would result in the issuance of a final rule upon approval by the Commission. Because of the complexities of the issues involved, the Office Review Package indicates that it is possible that a revised proposed rule might be issued. A final rule would provide clearly implementable requirements by stating the 4 standards by which the NR(, staff would evaluate the adequacy of utility I property insurance for decontamination. If it is decided to issue a revised - proposed rule, then following a period of public coment on this revision, the Commission would then consider these comments in proceeding with this rulemaking. ( Continuation of rulemaking would lessen uncertainty in the licensing process l by providing detailed requirements for property insurance for post-accident decontamination in a manner which protects public health and safety. If it is f decided to prepare a revised proposed rule, this would provide an opportunity to allow all affected parties to provide further input to development of such standards. 1 I

6 A precedent for this action is that, as noted above, in promulgating 10 CFR j 50.54(w) the Commission stated that adoption of onsite property damage insurance will better ensure protection of the public health and safety and that in the supplementary information to the proposed amendment to 10 CFR 50.54(w) the Commission stated it is proposing to amend its regulations requiring licensees to maintain substantial amounts of onsite property insurance to assist in the decontamination of their licensed reactors by increasing the amount of insurance required, imposing a decontamination priority, and deleting specific reference to State law effects on the insurance requirements. These precedents indicate previous Commission policy in this area and continuation of this rulemaking is consistent with this policy. 1 d. How the Issue will be Addressed Through Rulemaking Three specific issues as discussed above are addressed in the rulemaking. The first, how much insurance is enough, is addressed by increasing the amount of insurance required to $1.02 billion. This is an increase of the amount which could be obtained as a minimum under the existing regulations which is $585 million. This amount is based in part on a study done by Battelle Pacific Northwest Laboratory, NUREG/CR-2601, Technology, Safety and Costs of Deconsnissioning Reference LWRs Following Postulated Accidents, November 1982, which analyzed a range of accidents and indicated the potential for the cleanup costs to be approximately $1 billion. This amount was set forth in the proposed rule (in 49 FR 44645), the Office Review Package indicates that most commenters favored it, and will presumably be in the final rule. The second issue, a decontamination priority on insurance proceeds, was addressed in the proposed rule by requiring licensees to use the proceeds to l first decontaminate the licensed reactors before any other purpose when that decontamination is necessary to protect public health and safety. The Office l r

i I i Review Package indicates that many comments were received on this issue most objecting to its use as restricting utility options, being difficult to interpret and potentially causing extensive hearings. The Office Review Package indicates that SP is currently analyzing this issue and hence specific information on the contents of the rule regarding this issue is not yet j available. The third issue, state law prohibitions on purchase of the required insurance, also has resulted in several coments. The Office Review Package indicates that SP is also currently analyzing this issue and hence specific information on the details of how this issue will be handled in the rulemaking is not yet available. Because of the complexity of the two issues still being analyzed, the Office Review Package indicates that a revised proposed rule may be issued seeking public comment. Whether a revised proposed rule is issued or SP proceeds at this time with a final rule, the Office Review Package indicates that the final rule will be based on analysis of public responses to the proposed rule as well as on other pertinent information. It is presumed in this review that the content of an 4 effective rule when it is prepared will reflect the coments and consider the benefits of the rule versus impacts to the licensees. e. How the Public, Industry and NRC will be affected as a Result of Rulemaking, including Benefits and Costs 1. Benefit If a revised proposed rule is issued, it will have the benefit of giving the industry and the public additional opportunity to provide input into the NRC decisionmaking process. It will also have the benefit of providing NRC with industry and public input so that the decisions with regard to rulemaking can be more responsive to the public. i i 9

8 With regard to final rulemaking proceeding from the proposed rule, it is somewhat premature to definitively state the benefit since the exact content of the rulemaking is not known. However, based on the preliminary assess-ment of what might be in the rulemaking the following appear to be benefits: NRC The NRC will have the benefit of having in place a clear policy for all nuclear power reactor licensees regarding mandatory property insurance which is sufficient to cover the costs of post-accident decontamination activities. This will assure that NRC's mission of protecting public health and safety is carried out by reducing risks associated with radiation exposure to the public and workers during this period. With the timely availability of funds for post-accident decontamination, NRC staff will not have to be involved in time consuming review and licensing activities associated with difficulties and delays in decontamination and cleanup of an accident damaged facility where adequate funds are not available as has occurred at TMI-2 and interfaces with a concerned public regarding inadequate funds for the cleanup. Industry If a revised proposed rule is issued, this will assure industry has an input to the final decisionmaking regarding such important questions as decontamination priority and the impact of State laws on the NRC insurance requirements. Industry will benefit from final rule in that funds will be available in a timely manner to pay for post-accident cleanup. Public The benefit to the public will be a reduced risk of radiation exposures resulting from inadequate or delayed post-accident cleanup activities caused by lack of funds. This reduction in risk would apply to both the general

} 9 public and workers who might be involved in the activities. The risk associated with inadequate or delayed cleanup activities could result from either direct exposure to contamination or releases of radioactivity from a contaminated facility. 2. Impacts / Costs If a revised proposed rule is issued, it itself will not cause undue impact or cost to the public, industry, or NRC since it is only a request for comments on proposed rulemaking. With regard to final rulemaking proceeding from the. cur' rent proposed rule or the revised proposed rule it is somewhat premature to definitively state the impact or costs to licensees since the exact conteni of the final rule is not known. Information on the costs associated with the requirement for an increased level of insurance is given in the Office Review Package and is discussed below. It is expected that at the time of final rulemaking more detail on the impacts and costs to the NRC, licensee and the public associated with decontamination priorities and impacts of State laws both of which are still being analyzed will be carefully considered and balanced against the benefits. A preliminary estimate of all of these impacts / costs is the following: NRC The impact on the NRC will be the staff time necessary to complete rulemaking. This will include primarily SP With some minor input from other offices, including *.RR, RES, and OELD, in reviewing the rulemaking. Following the final rule, increase in NRC staff time should be minimal as a result of the increase in required amounts of insurance since a certain funding level is already required. However, the regulatory analysis prepared for the proposed

1 i 10 rule amendment indicates it is possible that licensees carrying less than the new required amount could potentially request exemption from the new levels. If this were done it could potentially result in an estimated additional NRC staff time of 26 man-weeks if all of the affected licensees requested exemption. Consideration involved with the issues of decontamination pri.ority and state law impacts could result in additional NRC staff time due to the potential for such activities as additional hearings. However, the overall amount of time should be minimal due to the limited number of states having laws which impact on this requirement and the fact that hearings on decontamination priority would be held following an accident which is itself a low probability event. Industry Industry already is required by 10 CFR 50.54(w) to obtain onsite property insurance for the purpose of cleanup following an accident. The primary impact on licensees of this rulemaking would be as a result of the increased amount of insurance required, however this impact would probably not be large because most licensees already purchase an amount of insurance in excess of the new requirement. Only 20 licensees currently carry less than the new required amount of which 5 are exempted by NRC for size considerations and several others are not permitted to carry the higher amount they prefer due to state law as discussed above. The impact on the 10 remaining licensees who would have to carry higher levels of insurance than they would otherwise is estimated in the SP Office Review Package as being approximately $1 million per year pe. license. The impact of decontamination priority and state law considerations is not as well defined and no estimate of actual impact is given in the Office Review Package. These issues are still being analyzed by SP and more information on their impact should result. It is likely that their impact is less than the cost of the increased insurance.

~ 11 f. NRC Resources and Scheduling Needed for Rulemaking i i The SP Office Review Package indicates that the resources necessary for continuing the rulemaking are about 0.5 SY. The schedule calls j for review of the rule by the Comission in August 1985. An indication of the difference between schedules for a revised proposed rule and a final rule is not given. No information is given in the package regarding resources for rule enforce- { ment following the rulemaking. This is likely dependent on the comments received on any revised proposed rule and/or as part of the analysis leading to the final rule. It is expected that the NRC resources and scheduling j i expended in any revised proposed rulemaking would be commensurate with that expended to date on this effort. The number of licensees affected overall would be the same as those affected by the current regulations in 10 CFR 50.54(w) although as noted above the actual number affected would be less. Hence staff time involved in enforcement of this rule would be similar to that i for the existing parts of 10 CFR 50.54(w). Better definition of the staff time involved will be available upon completion of the current SP analysis of the issues involved, i C. Sumary of RES Staff Preliminary Judgements Developed from the RES l Draft Independent Review of Proposed Rulemaking on " Mandatory Property Insurance for Decontamination of Nuclear Facilities" i i Based on the detailed draft independent review of the proposed rulemaking on "Handatory Property Insurance for Decontamination of Nuclear Facilities" it I is the staff's preliminary judgement that the NRC should proceed with this rulemaking effort, specifically that a revised proposed rule be prepared for i l l

12 I public comment or that a final rule be prepared for Commission consideration. Judgements regarding the more general question of the exact content of the rulemaking are more preliminary in nature since certain issues are still being analyzed and will have to be developed in more detail based on the exact contents of the rulemaking package. At this time, RES staff agrees with the recommendation of the Director, SP, that this rulemaking effort should continue because based on the detailed review in A.2a through f above, there is a need for the rulemaking, it is consistent with applicable policies, and it appears to be important relative to accomplishing NRC's mandate, namely, protecting the public health and safety. l 1 1 i l

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