ML20211H170
| ML20211H170 | |
| Person / Time | |
|---|---|
| Issue date: | 06/30/1999 |
| From: | Cyr K NRC OFFICE OF THE GENERAL COUNSEL (OGC) |
| To: | |
| References | |
| SECY-99-165, SECY-99-165-01, SECY-99-165-R, NUDOCS 9909020032 | |
| Download: ML20211H170 (40) | |
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3 r, . . . . . . . . . . . . . . . o . . e s . t POLICY ISSUE June 30.1999 (Notation Vote) SECY-99-165 FOR: The Commissioners FROM: Karen D. Cyr General Counsel
SUBJECT:
FINAL STANDARD REVIEW PLAN REGARDING FOREIGN OWNERSHIP, CONTROL, OR DOMINATION OF APPLICANTS FOR REACTOR LICENSES PURPOSE:
To provide the Commission with a proposed final Standard Review Plan (SRP) regarding foreign ownership, control, or domination, to be 'used in evaluating applicants for facility licens_es under sections 103 and 104 of the Atomic Energy Act, including proposed transferees under section 184 of the Act.
BACKGROUND:
On October 23,1998, the Office of the General Counsel forwarded to the Commission for approva! a draft SRP on foreign ownership (SECY-98-246). In a Staff Requirements Memorandum dated February 17,1999, the Commission approved the draft SRP for publication for public comment and for interim use, subject to certain specified modifications. The draft SRP was published in the Federal Registerfor public comment on March 2,1999. Four sets of comments, discussed below, were submitted on or before the deadline of April 1,1999.
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. J DISCUSSION:
The Nuclear Energy Institute (NEl), AmerGen Energy Company, LLC (AmerGen), Florida Power and Light Company (FPL), and PECO Energy (PECO) each provided comments on the draft SRP.-
NEl and FPL-
. NEl stated that, in general, the criteria and review process outlined in the interim SRP provide an " appropriate degree of regulatory flexibility." In addition, NEl specifically provided its view that "a foreign entity should be allowed to own a significant share of a nuclear power plant,"
provided that special nuclear material is not under the control of the foreign entity, the foreign J entity has no control over the day-to-day nuclear activities at the plant, and ownership would not {
be inimical to the common defense and security. Further, NEl stated its belief that foreign !
ownership of a licensee's parent company "should be allowed unless the foreign entity has legal control over the conduct of licensee activities involving common defense and security." Such i control can be " overcome" by "special arrangements, such as special operating committees,' '
which vest effective control and operation of licensed activities with U.S. citizens," acc6rding to
' NEl.'
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FPL stated that it " supports the approach set forth in the SRP." It also stated that it endorses NEl's comments, f Resoonse
- Sectior) 103d of the Atomic Energy Act of 1954, as amended, provides that no license may be issued to an alien, or to a corporation owned, controlled, or dominated by an alien, foreign corporation, or foreign government. As the SRP now indicates, a (U.S.) aoolicant that is partially owned by a foreign entity may still be eligible for a license under certain conditions.
However, NEl's comment that a foreign entity itself "should be allowed to own a significant share of a nuclear power plant" does not appear to be consistent with the statute, even if the foreign entity is simply a co-owner, and not the exclusive owner of the facility. In Public Service Co. ofindiana (Marble Hill Nuclear Generating Station, Units 1 and 2), ALAB-459,7 NRC 179, 200-01 (1978), the Appeal Board held that each proposed co-owner of a nuclear facility must be an applicant for a license. Accordingly, each co-owner is subject to the foreign ownership or control prohibition contained in the Act.
NEl's other major comment (i.e., that foreign ownership of a licensee's parent company should be allowed unless the foreign entity has legal control over common defense and security activities, which control is not overcome by special arrangements such as limiting such activities to U.S. citizens) appears to go beyond the guidance in the SRP that deals with foreign parent companies. The SRP states that (based on the Commission's determinations in the Hoffmann-LaRoche and initial Cintichem matters discussed in the attachments to the SRP), an applicant
'NEl also stated its support for amendment of the Atomic Energy Act to remove the foreign ownership prohibition, while preserving the authority to protect the common defense and security.
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e 3-with a foreign parent will not be eligible for a license, unless the Commission knows that the foreign parent's stock is largely owned by U.S. citizens, and certain conditions or "special arrangements" are imposed, such as having only U.S. citizens within the applicant's organization be responsible for special nuclear material. NEl has not presented any compelling argument why the scenario it set forth, which is devoid of any indication of ultimate control of the parent by U.S. stockholders, is consistent with the statutory prohibition on foreign control, in light of the Commission's interpretation in the Hoffmann-LaRoche and initial Cintichem matters.2 AmerGen ,
AmerGen commented that the SRP should provide more detailed guidance by establishing
" safe harbors" with respect to certain types of ownership and/or operating arrangements.
Specifically, AmerGen noted that although the SRP states that the Commission has not determined a specific threshold of stock ownership above which it would be concluded that the (foreign) owner would have control, it may be appropriate to establish a threshold below which there would be a presumption of no control, at least absent foreign involvement in management or operation. In addition, AmerGen stated that it might be helpful for the SRP to discuss specific types of activities in which a foreign entity could engage in connection with the operation of a reactor, and acknowledge that the statute does not preclude foreign nationals from " holding senior management positions with an applicant and/or managing and supervising licensed activities at a reactor site." AmerGen also stated that in the guidance section of the SRP, the SRP should discuss specific arrangements involving foreign entities that the Commission has found acceptable with the imposition of certain conditions, and confirm that similar situations would be eligible for " safe harbor" treatment.
Noting the discussion in the SRP that provides that further consideration is required concerning the ownership of a less than 100 percent interest in a reactor by a U.S. company which has a foreign parent, AmerGen stated its opinion that relevant precedents should be addressed (suggesting Marble Hilland Cintichem). AmerGen also stated that additional guidance would be helpful concerning the "further consideration," and concerning what additional information may be required from an applicant for such consideration. Finally, AmerGen believes the SRP should expressly confirm that where a particular applicant has recently been approved by the NRC subject to the imposition of certain license conditions, no material changes in the ownership or management of the applicant have since occurred, and the applicant agrees to similar conditions in connection with a subsequent application, the applicant will essentially receive summary approval.
Resoonse in general, it is recognized that articulating " safe harbors" in the SRP would be beneficial to license applicants by removing some degree of uncertainty from the license application process. However, in light of the perhaps limitless creativity involved in formulating corporate structures and arrangements, the difficulty in prescribing safe harbors is being able to account for every potential fact or circumstance that could be present in any given situation, which fact 2However, for situations involving an applicant's proposed acquisition of less than a 100% interest in a reactor, see the discussion below in response to AmerGen's comments.
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or circumstance may not be addressed in the stated safe harbor criteria, but which could still be material to a determination of foreign ownership or control.
Regarding AmerGen's suggestion that a stock threshold be considered below which there would be presumptive non-control absent foreign involvement in management or operation, it is notable that while carlier drafts of the Atomic Energy Act contained a stock threshold (five percent) above which foreign' ownership would have been barred, the final version of the Act, of course, does not. Thus, Congress declined to establish any threshold. Also, other statutes such as the Public Utilities Holding Company Act, while establishing thresholds above which control is presumed, are silent on " safe harbors." At least until further experience is gained in this area, the flexibility of the SRP in this regard should be maintained.
Concerning AmerGen's comment on stating permissible activities that a foreign entity or foreign nationals could engage in regarding the operation or management of a reactor, it should be noted at the outset that the statutory prohibition applies to the issuance of licenses. Thus, as long as foreign entities or nationals are not engaged in activities requiring a license, the foreign control prohibition does not apply specifically to them.8 This is not to say that the actual ,
licensee - the entity which does have control over licensed activities -- is unrestricted in its use of foreign entities or personnel. As provided in the Act, no license may be issued if issuance would be inimical to the common defense and security. Entering into this analysis would be the licensee's use of foreign entities or personnel. Because AmerGen's comment potentially involves considerations of the common defense and securny, it would not appear that any meaningful purpose would be served for the SRP to attempt to simply list activities or positions ,
in an organization that would presumptively not trigger the prohibition on foreign ownership or l control when it would still be necessary to conduct a full separate analysis of whether a certain degree of foreign involvement would be inimical to the common defense and security.
With respect to AmerGen's comment that the SRP should discuss specific arrangements involving foreign entities that the Commission has found acceptable, the agency's dockets presently provide access to this information, which constitutes a substantial amount of material (agreements, organizational charts, by laws, etc.) specific to each application which cannot be incorporated into the SRP, as a practical matter, due to their volume. Commission statements and analyses regarding applications involving the Babcock & Wilcox/McDermott and Union Carbide /Cintichem matters, which provide essentially a historical perspective and summary of ,
the Commission's views on the foreign ownership prohibition, and which are more difficult to i locate due to their age, are in a form that is more easily included as part of the SRP. These analyses were not published in the Federa/ Registernotice requesting comments on the SRP, but are to be attachments to the SRP as indicated in Section 6," References," of the SRP.
For situations involving an applicant which has, directly or indirectly, a foreign parent but which is seeking to acquire less than a 100% interest in a reactor, the attached version of the SRP has been expanded in response to AmerGen's comments concerning the "further consideration" that is required. The SRP includes new proposed language providing that "further consideration" will be given to: (1) the extent of the proposed partial ownership of the The staff has recently prepared a draft regulatory guide for approval by the Commission on the use of non-owner operators, which contains a proposed criterion to determine when a transfer of control of licensed activities occurs requiring NRC approval.
reactor; (2) whether the applicant is seeking authority to operate the reactor; (3) whether the applicant has interlocking directors or officers and details concerning the relevant companies;-
(4) whether the applicant would have any access to restricted data; and (5) details concerning ownership of the foreign parent company. The new language should provide applicants with a clear understanding of what facts will be considered and what type of information may need to be submitted.
Regarding AmerGen's interest in the SRP expressly confirming that a previously approved applicant will survive foreign ownership scrutiny where there have been no material changes ,
since the last application and the same conditions are imposed, the agency intends to apply the ]
law uniformly and consistently and not act in an arbitrary manner. Thus, there appears to be no q
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necessity in essentially restating this principle specifically in the context of the SRP.
PECO PECO commented that, at least in the context of making a non inimicality finding with respect to '
the common defense and security,"some degree of deference should be applied" when the relevant foreign applicant is from a country with close ties to the United States. In addition, PECO stated its opinion that the focus of a foreign control review as set forth in the SRP should be on "who exerts control over the ' safety and security' aspects of the licensee's operations."
I With specific reference to section 3.2 of the SRP, PECO recommended that where a license condition is necessary to limit those responsible for special nuclear material, the limitation should apply to officers and senior management of the applicant, rather than officers and employees, which latter term is used in the present SRP.
Response
- As pointed out in SECY-98 252," Preliminary Staff Views Concerning its Review of the Foreign Ownership Aspects of AmerGen, Inc.'s Proposed Purchase of Three Mile Island, Unit 1"(Oct.
30,1998), previous Commission decisions regarding foreign ownership or control did not appear to turn on which particular nation the applicant was associated with. Although the ,
j broader required finding of non-inirnicality to the common defense and security may be based, in part, on the nation involved, the SRP concerns the specific foreign ownership prohibition and )
is not intended to cover all common defense and security issues, as stated in Section 1.1 of the l SRP. Thus, no changes in consideration of PECO's first comment appear warranted.
Regarding PECO's second comment, it is true that the exertion of control over the " safety and i security aspects" of reactor operations (interpreting that phrase broadly for the purpose of this discussion) can be an important factor in the foreign ownership or control analysis. However, it may not be the only important factor, given that the statute does not limit the foreign control prohibition to only those applicants who intend to be actively engaged in operation of the plant, or intend to " exert control" over operations. A statement of the " focus" of the analysis would appear to be somewhat premature at this time, given the limited experience the Commission 5 has had in this area.
With respect to PECO's last comment concerning personnel responsible for special nuclear material, the term " employees" was used by the Commission in a previous condition of approval
that required those responsible for special nuclear material to be U.S. citizens.' It appears reasonable to seek to ensure that all those employees responsible for special nuclear material have at least U.S. citizenship, not just senior management, when there is some issue of foreign control, and PECO has not provided a compelling reason why there should be any departure from a prior Commission decision.
CONCLUSION The AmerGen comment to add more detailed guidance as to what further consideration will be given when an applicant for less than a 100% interest in a reactor has a foreign parent would be a worthwhile improvement without restricting the flexibility of the Commission in this developing area. Therefore, the comment has been incorporated into the SRP as indicated in the attached redlined version. No other modifications in response to the comments are being proposed at this time.
COORDINATION:
The Office of Nuclear Reactor Regulation concurs in the proposed final SRP.
RECOMMENDATION:
It is recommended that the Commission approve the issuance of the attached final SRP. The 1 SRP would be placed in the Public Document Room and noticed in the Federal Register. The discussion above regarding comments received and the responses to these comments will be included in the Federal Register notice.
QM -
Q Karen D. Cyr General Counsel
Attachment:
Standard Review Plan on Foreign Ownership, Control, or Domination i
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'See letter from L. Manning Muntzing, Atomic Energy Commission, to General Atomic Company (Dec.14,1973), incorporating by reference letter from General Atomic Company to L. Manning Muntzing, Atomic Energy Commission (Dec.14,1973) with attachment (General Atomic Company Resolution of the Standing Committee of the Partnership Committee Adopted at a Meeting Thereof Held on December 14,1973).
Standard Review Plan on Foreign Ownership, Control and Domination
- 1. AREAS OF REVIEW 1.1 General The NRC is issuing this Standard Review Plan (SRP) to describe the process it uses to review the issue of whether an applicant for a nuclear facility license under sections 103 or 104 of the Atomic Energy Act of 1954, as amended (AEA or Act), is owned, controlled, or dominated by an alien, a foreign corporation or a foreign govemment.
This SRP will be used as the basis for such reviews in connection with license applications for new facilities, or applications for approval of direct or indirect transfers of facilitylicenses. l 1
Where there are co-applicants, each intending to own an interest in a new facility as co-licensees, each applicant must be reviewed to determine whether it is owned, controlled, or dominated by an alien, foreign corporation or foreign govemment. If a co- 1 licensee of an existing facility owns a partial interest in the facility and is transferring !
that interest, the acquirer must be reviewed to determine whether it is owned, controlled, or dominated by an alien, foreign corporation or foreign govemment.-
The foreign control determination is to be made with an orientation toward the common defense and security. However, this SRP does not address all matters relating to the determination of whether issuance of a license to a person would be inimical to the common defense and security.
I This SRP reflects current NRC regulations and pokcy. )
1.2 Relevant Statutory And Reaulatorv Provisions l Sections 103d and 104d of the Act provide, in relevant part, that no license may be issued to:
any corporation or other entity if the Commission knows or has reason to believe it is owned, controlled, or dominated by an alien, a foreign corporation, or a foreign govemment. In any event, no license may be issued to any person within the United States if, in the opinion of the Commission, the issuance of a license to such person would be inimical to the common defense and security or to the health and safety of the public.
(Section 103d also states that no license may be issued to an alien.)
" Section 184 of the Act provides,in relevant part:
No license granted hereunder and no right to utilize or produce special nuclear material granted hereby shall be transferred, assigned or in any manner disposed of, either voluntarily or involuntarily, directly or indirectly, through transfer of control of any license to any person, unless the Commi.ssion shall, after securing full information, find that the transfer is in accordance with the provisions of this Act, and shall give its consent in writing.
10 CFR $ 50.33(d), in relevant part, provides: .
Each application shall state: >
(d)(1) If applicant is an individual, state citizenship.
(2) If applicant is a partnership, state name, citizenship and .
address of each partner and the principallocation where the partnership does business.
(3) If applicant is a corporation or an unincorporated association, state:
(i) The state where it is incorporated or organized and the principal location where it does business; (ii) The names, addresses and citizenship of its directors and of its principal officers; (iii) Whether it is owned, controlled, or dominated by an alien, a foreign corporation, l or foreign govemment, and, if so, give details. ]
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(4) If the applicant is acting as agent or representative of I another person in filing the application, identify the principal and fumish information required under this paragraph with respect to such principal.
-10 CFR 6 50.38 provides:
Any person who is a citizen, national, or agent of a foreign country, or any corporation, or other entity which the Commission 2
knows or has reason to believe is owned, controlled, or dominated by an alien, a foreign corporation, or a foreign govemment, shall be ineligible to apply for and obtain a license.
10 CFR G 50.80 provides, in pertinent part:
(a) No license for a production or utilization facility, or any right thereunder, shall be transferred, assigned, or in any manner disposed of, either voluntarily or involuntarily, directly or indirectly, through transfer of control of the license to any person, unless the Commission shall give its consent in writing.
(c) . . . [T]he Commission will approve an application for the transfer of a license,if the Commission determines:
(2) That the transfer of the license is otherwise consistent with applicable provisions of the law, regulations, and orders issued by the Commission pursuant thereto.
- 2. INFORMATION TO BE SUBMITTED BY APPLICANT 2.1 Information Reauired Bv Reaulation At the time the applicant submits its application for a license or for approval of the transfer of a license, the applicant must submit information sufficient to comply with 10 CFR @ 50.33(d).
2.2 AdditionalInformation if the reviewer, based on the information required to be submitted by 10 C.F.R. l
@ 50.33(d), has reason to believe that the applicant may be owned, controlled, or dominated by foreign interests, the reviewer should request and obtain the following ,
l additionalinformation: .
- 1. If the applicant's equity securities are of a class which is registered pursuant to the Securities Exchange Act of 1934, copies of all current Securities and l Exchange Commission Schedules 13D and 13G, which are required to be filed i j
by owners of more than 5% of such a class with the Securities and Exchange '
Commission, the security issuer (applicant), and the exchange on which the i
issuer's securities are traded. ,
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~ 2. Management positions held by non-U.S. citizens.
- 3. The ability of forei0n entities to control the appointment of management personnel. ,
i 2.3 Neaation Action Plan If applicable under Section 4.4 infra, the applicant should hiso submit a Negation Action Plan, which is described in detail in Section 4.4. !
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- 3. ACCEPTANCE CRITERIA l 1
3.1 Basic Statutorv and Reaulatorv Limitations License applications for new facilities or applications for approval of transfers of licenses required in the case of proposed new ownership of existing facilities may involve foreign entities proposing to own all or part of a reactor facility. Sections 103d and 104d of the AEA prohibit the NRC from issuing a license to an applicant if the NRC knows or has reason to believe that the applicant is owned, controlled, or dominated by an alien, a foreign corporation, or a foreign govemment (or is an alien, in the case of ,
section 103d).
Likewise, under 10 CFR 50.38, Any person who is a citizen, national, or agent cf a foreign country, or any corporation, or other entity which the Commission knows or has reason to believe is . owned, controlled or dc.~ hated by an alien, a foreign corporation, or a foreign
. govemment, shall be ineligible to apply for and obtain'a license.
3.2 Guidance On Apolvina Basic Limitations The Commission has not determined a specific threshold above which it would be conclusive.that an applicant is controlled by foreign interests through ownership of a percentage of the applicant's stock. Percentages held of outstanding shares must be interpreted in light of all the information that bears on who in the corporate structure
. exercises control over what issues and what rights may be associated with certain types of shares.
An applicant is considered to be foreign owned, controlled, or dominated whenever a
. foreign interest has the " power," direct or indirect, whether or not exercised, to direct or decide matters affecting the management or operations of the applicant. The Commission has stated that the words " owned, controlled, or dominated" mean 4
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~ relationships where the will of one party is subjugated to the will of another. General Electric Co.,3 AEC at 101.
A foreign interest is defined as any foreign govemment, agency of a foreign govemment, or representative of a foreign govemment; any form of business enterprise or legal entity organized, chartered, or incorporated under the laws of any country other that the U.S. or its possessions and trust territories; any person who is not a citizen or national of the U.S.; and any U.S. Interest effectively controlled by one of the above foreign entities.
The Commission has stated that in context with the other provisions of Section 104d, the foreign control limitation should be given an orientation toward safeguarding the l national defense and security. Thus, an applicant that may pose a risk to national I security by reason of even limited foreign ownership would be ineligible for a keense. j Even though a foreign entity contributes 50%, or more, of the costs of constructing a reactor, participates in the project review, is consulted on policy and cost issues, and is )
entitled to designate personnel to design and construct the reactor, subject to the ;
approval and direction of the non-foreign applicant, these facts alone do not require a l finding that the applicant is under foreign control.
An applicant that is partially owned by a foreign entity, for example, partial ownership of 50% or greater, may still be eligible for a license if certain conditions are imposed, such as requiring that officers and employees of the applicant responsible for special nuclear ;
I material must be U.S. citizens.
Where an applicant that is seeking to acquire a 100% interest in the f acility is wholly ,
owned by a U.S. company that is wholly owned by a foreign corporation, the applicant will not be eligible for a license, unless the Commission knows that the foreign parent's stock is "largely" owned by U.S. citizens. If the foreign parent's stock is owned by U.S.
citizens, and certain conditions are imposed, such as requiring that only U.S. citizens within the applicant organization be responsible for special nuclear material, the applicant may still be eligible for a license, notwithstanding the foreign control limitation.
If the applicant is seeking to acquire less than a 100% interest, further consideration is required. Further consideration will be given to: (1) the extent of the proposed partial ownership of the reactor; (2) whether the applicant is seeking authority to operate the reactor; (3) whether the applicant has interlocking directors or officers and details conceming the relevant companies; (4) whether the applicant would have any access to restricted data; and (5) details conceming ownership of the foreign parent company.
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' 4. REVIEW PROCEDURES 4.1 Threshold Review and Determination The reviewer should first analyze all of the information submitted by the applicant sufficient to comply with 10 C.F.R. 50.33(d), as well as other relevant information of which the reviewer is aware, to determine whether there is any reason to believe that the applicant is an alien or citizen, national, or agent of a foreign country, or an entity that is owned, controlled, or dominated by an alien, a foreign corporation, or foreign govemment. If there is no such reason to believe based on the foregoing information, no further review is required and the reviewer should proceed to make a recommendation regarding whether there is any foreign control obstacle to granting the application. On the other hand, if there is any reason to believe that the applicant may be owned, controlled, or dominated by fo~ reign interests, the reviewer should request and obtain the additional information specified in Section 2.2.
4.2 Supolementary Review i If it is necessary to obtain the additional information specified in Section ? ?, the reviewer should consider the acceptance criteria above, and consult with the Office of the General Counsel on Commission precedent. Information related to the items listed below may be sought and may be taken into consideration in determining whether the applicant is foreign owned, controlled, or dominated. The fact that some of the below listed conditions may apply does not necessarily render the applicant ineligible for a license.
- 1. Whether any foreign interests have management positions such as directors, i officers, or executive personnel in the applicant's organization.
- 2. Whether any foreign interest controls, or is in a position to control the election, appointment, or tenure of any of the applicant's directors, officers, or executive .
personnel. If the reviewer knows that a domestic corporation applicant is held in I part by foreign stockholders, the percentage of outstanding voting stock so held should be quantified. However, recognizing that shares change hands rapidly in the intemational equity markets, the staff usually does not evaluate power reactor licensees to determine the degree to which foreign entities or individuals own relatively small numbers of shares of the licensees' voting stock. The Commission has not determined a specific threshold above which it would be conclusive that an applicant is controlled by foreign interests.
- 3. Whether the applicant is indebted to foreign interests or has contractual or other agreements with foreign entities that may affect control of the applicant.
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- 4. Whether the applicant has interlocking directors or officers with foreign corporations.
- 5. Whether the applicant has foreign involvement not otherwise covered by items 1-4 above.
4.3 Sucolementarv Determination After reviewing the additionalinformation specified in Section 2.2,if the reviewer continues to conclude that the applicant may be an alien or owned, controlled, or dominated by foreign interests, or has some reason to believe that may be the case, the reviewer shall determine:
- 1. The nature and extent of foreign ownership, control, or domination, to include whether a foreign interest has a controlling or dominant minority position.
- 2. The source of foreign ownership, control, or domination, to include identification of immediate, intermediate, and ultimate parent organizations.
( 3. The type of actions, if any, that would be necessary to negate the effects of foreign ownership, control, or domination to a level consistent with the Atomic Energy Act and NRC regulations.
l On the other hand, if the reviewer determines after reviewing the additional information specified in Section 2.2 that there is no further reason to believe that the applicant is an alien or owned, controlled, or dominated by a foreign person or entity, no additional review is necessary.
4.4 Neaation Action Plan if the reviewer continues to conclude following the Supplementary Determination that l an applicant may be considered to be foreign owned, controlled, or dominated, or that additional action would be necessary to negate the foreign ownership, control, or domination, the applicant shall be promptly advised and requested to submit a negation action plan. When factors not related to ownership are present, the plan shall provide positive measures that assure that the foreign interest can be effectively denied control or domination. Examples of such measures that may be sufficient to negate foreign control or domination include:
- 1. Modification or termination of loan agreements, contracts, and other understandings with foreign interests.
- 2. Diversification or reduction of foreign source income.
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- 3. Demonstration of financial viability independent of foreign interests.
- 4. Elimination or resolution of problem debt.
- 5. Assignment of specific oversight duties and responsibilities to board members.
- 6. Adoption of special board resolutions.
- 5. EVALUATION FINDINGS The reviewer should verify that sufficient information has been provided to satisfy the regulations and this Standard Review Plan in consideration of the guidance of this Standard Review Plan, the reviewer should then draft an analysis and recommendation, based on the applicable information specified in Sections 2 and 4 above, conceming whether the reviewer knows, or has reason to believe that the applicant is an alien, or is a corporation or other entity that is owned, controlled, or dominated by an alien, a foreign corporation, or foreign govemment, and whether there are conditions that should be imposed before granting the application so as to effectively deny foreign control of the applicant.
- 6. REFERENCES
- 1. Sections 103,104, and 184 of the Atomic Energy Act of 1954, as amended (42 USC 2133,2134, and 2234).
- 2. Part 50 " Domestic Licensing of Production and Utilization Facilities" of Title 10 of the Code of Federal Reaulatio_0s (10 CFR Part 50).
- 3. General Electric Co. and Southwest Atomic Energy Associates, Docket No. 50-231, 3 AEC 99 (1966).
- 4. Letter from W. Dircks to J. MacMillan (Dec. 17,1982) (Re: Babcock & .
Wilcox/McDermott) (attached).
- 5. Letter from N. Palladino to A. Simpson (Sept. 22,1983) w/ attachment (Re: Union l Carbide /Cintichem) (attached). ,
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kn NUCLEAR REGULATORY CCMMISSION wasMmotow.e.c.soses E . . *( ; ~ !
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Mr. John H. MacMillan Senior Vice president and .
Group Executive Advanced Technology Group -
Babcock & Wilcox 2250 Murrell Road p.0. Box 1260 .
Lynchburg, Virginia 24505
Dear Mr. MacMillan:
20,1982, concerning the proposed We have reviewed your letter of October '
reorganization of McDermott which will result in Babcock & Wilcox, ho Facility License CX-10, being wholly owned by McD Section 104d. of the Atomic a corporation organized under the laws of panama.
Energy Act which prohibits foreign domination and control of a licensed facility,f holding o a facility license by Babcock & Wilcox, as the foreign corporation.
'We have concluded, on the basis of the representations in your letter information regarding stock ownership in the enc However, in order to ensure continuing f j
qualify for a facility license.
compliance with the provision of section 104d. of th a licensed facility (and a7 we have discussed with Mr. George Ellis and Mr.JamesJones),BabcockiHilcox'sFacilityLicenseCX-10isherebya
. to insert the following co n{tions: j l
- 1. the president of Babcock & Wilcox, any officers of Babcock &
Wilcox having direct responsibility for the control, and any employees of Babcock & Wilcox having direct custody, of special nuclear material, as defined in the Atomic Energ citizens of the United States; f 2.
Babcock & Wilcox alone shall be responsible for the custody a of such special nuclear material; and the office i
president of Babcoct & Wilcox* !
3.
the president of Babcock & Wilcox either shall acting be charged directly or with the re bility and have the exclusive authority (ing directly to him) of f through persons designated by and report 1
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t Mr. John H. MacMillan
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ensuring",that the business and activities of Babcock & Wilcox shall at
- all times be conducted in a manner which shall be consiste protection of the comon defense and security of the United States;
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4.
Babcock & Wilcox shall report to the Comission any action by the Government of the Republic of Panama or any c Wilcox or any action by that Government regarding Wilcox licensed by the Commission.
- 5. the foregoing provisions shall apply to Babcock & W 6.
the foregoing conditions will continue to be binding on Babcock &
Wilcox unless amended or rescinded by the Direc Material Safety and Safeguards, of the Comissio Comission or any agency of the United States which shall be the successor of the Comission).
The Comission has found that:
The change in Babcock & Wilcox's parent from McDermott incorpor A.
to McDermott International is not inconsistent wit regulations in 10 CFR Chapter I; 8.
The change will not be inimical to the comon defense and security ori to the health and safety of the public; '
C.
Babcock & Wilcox continues to be qualified to be the holder of F License CX-10.
It should be stressed that our conclusion that Babcock h & Wilcox to hold Facility License CX-10 is based upon the facts It does not constitute a precedent, since of this case representations made to us.
conclusions as to whether a facility will be owned, controlled or by a foreign entity requires a factual determination based upon stances of the particular case. _ ,
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- 3-v Mr. John H. MacMillan e Since the foreign ownership, dominati6n and controlc.issues rais no action to amend nuclear materials licenses will be required. -
- FOR THE NUCLEAR REGULATORY COMMISSION
'Wi liam J. Dircks Executive Director for Operations e
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September 22, 1983 CHAIRMAN The Honorable Alan Simpson, Chairman Subcomittee on Nuclear Regulation Cc=ittee on Environment and Public Works United States Senate ~ -
Washingtor., DC 20515
Dear U.r. Chaiman:
I This is in response to the questions posed in your September 1, 1983 .
letter concerning the p.roposed retransfer of Facility Operating License No.
R-81 on behalf of Union Carbide Subsidiary "B" Inc. and Cintichem, Inc.
Your three initial questi.ons generally involve legal issues of foreign
- control and domination under the Atomic Energy Act of 1954, as amended. As.
background, I am enclosing an analysis of those issues by our staff legal office. Briefly, let me sumarize the pertinent parts of that analysis as it i f
relates to each of the first three questions, The legal basis for the conclusion that'the application for transfer is pr.ecluded by Sections 103d. and 104d. is the explicit wording of these l sections. The first sentence in"hach 'of these sections provides that no license shall be issued by the, Commission if the Comission knows or has reason to believe that the proposed licensee is owned, controlled or domi-nated by an alien, a foreign corporation or a foreign government. No dis-cretion is p'rovided for the application of this statutory prohibition, either in its terms or in its legislative history. This means that if the conclu-sion that the ultimate ownership of a proposed licensee in in foreign hands cannot be avoided, then these sections prohibit the Comission from issuing the. required license.
Such a conclusion cannot be avoided for the proposed transfer of Facility Operating License No. R-81. The parent corporation, F. Hoffman-LaF.oche and Co., Ltd. , is registered in Switzerland. We are aware of no infomation l which suggests that the foreign parent is not owned, controlled or dominated by foreign nationals. Therefore, under the circumstances,-although the .._
proposed transferee, Cintichem '-Inc;,-is a United States corporation, the Commission necessarily "has reason to believe" that it is owned, controlled or dominated by an alien, or a foreign corporation. Is long as this element of foreign control is present, Sections 103d. and 1046, prohibit our approval of the transfer.
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2 l In determining whether there is foreign ownership, control and domination, in the past the Comission has ennsidered the relationships which could lead to the ultimate power of an alien, a foreign corporation or a foreign government to direct the actions of the licensee in the conduct of licenses activities.
Question 2 implies that the " owned, controlled or dominated" by an alien, a foreign corporation or a foreign government prohibition in the Atomic Energy Act can be overcome by a finding that issuance of a license under such circunstances would not be inimical to the common defense and security or to the health and safety of the public.. Even assuming, fer the sake of dis-cussion, that we were able 'to make favorable f$ndings in that regard, the prohibition in Sections 103d. and 104d. against licensing anyone "if the Ccemission knows or has reason to believe it is owned, controlled or demi-nated by an alien, a foreign corporation or a foreign Because government" the absolute is an prohibition lan-entirely separate and absolute one.
guage applies to the circumstances revealed in the application to transfer l Facility Operating 1.icense No. R-81, there is no need to consider, and the i Commission has not considered, whether foreign ownership, control or domina-tion in this case would be inimical to the comon defense and security or to the public health and sale.ty. The Comission has not developed any standards or criteria for determining when foreign control, ownership, or domination would also be inimical to the comnon defense and security or to the health and safety of the public. - ]
- As the background attachment reveals in some detail, this case is distin-In guishable f rom the three earlier proceedings referred to in . Question 3.
this case, the conclusion that the ultimate ownership and control of the
- transferee, whether through the Yoreign registered parent company or the shareholde'rs, is in foreign hands cannot be avoided. In each of the earlier
' cases the facts did not dictate that conclusion, and thus none of them fall j within thf. Scope of the abs 61ute prohibition against foreign ownership, j control or domination, Question 4 asks for our views on matters If the which generally wishes concern the NRC legislative Congress to have )
changes to Sections 103d. and 104d.the authority to approve the trans '
as present in this case, then Sections 103d. and 104d. would have to be amended to provide the Comission with some discretion to approve license issuance even though it knows or has reason to believe there is foreign ownership, control or domination. We have not had the occasion to examine
.whether there is a compelling public interest for legislation However,'which would as a general allow licensee transfers in this particular case.
proposition, the Commission would not oppose added flexibility in this area..
These sections, however, should continue to give authority to prevent the issuance of any license which in the opinion of the Comission would be inimical to the comon defense and security or health and safety of the public.
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l If you should decide to proceed with the legislative process, you may be assured of our cooperation and support.
I trust that these responses will'be helpful.
Sincerely.
Original signed by' f.'=1zio J. Palladino .
l Nunziop.Palladino ,
Enclosure:
Legal Analysis .
cc: Senator Gary Hart .
Distribution: --
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. ATTACHMENT OELD LEGAL ANALYSIS Lecal Ouestions of Foreign Control and Domination Raised by Proposed Transfer of Facility Operating License No. R-81 from Union Carbide Subsioiary "B", Inc. to Cintichem, Inc. I A. Precosed Transfer of Facility Operating License from Union Carbice Subsidiary B, Inc. to Cintichem. Inc.
Union Ct.rbide Subsidiary "B." Inc. holds Facility License R-81 for a research ,
reactor located at Sterling Park Tuxedo, New York. Cintichem. Inc. is stated to be a wholly-owned Delaware subsidiary of Medi-Physics, Inc., a Delaware Corporation. Medi-Physics, Inc. is a wholly owned subsidiary of
.Hoffmann-LaRoche Inc., a New Jersey Corporation, which is owned by Curacao Pharmholding, N.V. , a Curacao corporation. Curacao Pharm-holding N.V. is wholly owned by Sapac, Ltd., a New Brunswick (Canada) corporation. Sapac, Ltd. is publicly owned with its shares traded as a unit with the shares of F.
Hoffmann-LaRoche and Co., Ltd., a corporation registered in Switzerland. In the absence of any information to the contrary, it is assumed that the stock- f holders of F. Hoffmann-LaRoche and Co., Ltd., are Swiss nationals or nationals -
of other foreign countries.
The transfer application indicates that all of the directors and principal officers of Cintichem, Inc. and Medi-Physics, Inc. are U.S. citizens. It also indicates that Cintichem agrees to acc.ept all license conditions and teres of Facility Operating License No. R-81, as amended, including any pending applications for amendment or renewal of the license. Moreover, Cintichem agrees to accept the following additional license conditions if the license transfer is approved by NRC:
.A.. The preiident of Cintichem, or any officers of Cintichem having direct responsibility for the control .of, and any employees _of Cintichem having direct custody of special nuclear material, as defined in the Atomic Energy Act of 1954, as amended, stored, used, or produced at the, Sterling Forest facility, shall be citizens of the United States.
B. Cintichem alone shall be responsible for the custody and control of such special nuclear material; and the officer of Cintichem in charge of such special nuclear material shall report directly to the president of Cintichem. . . . . . .
. C. The president of Cintichem shall be charged with the responsibility and have the exclusive oesignated authoritydirectly by and reporting (eithertoacting)directly him of ensuringor that thrcugh the persons ,
business and activities of Cintichem shall at all times be conducted in a tanner which shall be consistent with the protection of the comen defense and security of the Untied States.
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D. Cin ichem shall report to the Nuclear Regulatory Comission (HRC) any action by the Goverriment of Switzerland or any other government that would affect ownership or control of Cintichem or any action by the Government of Switzerland regarding the operation of Hoffmann-LaRoche that would affect the activities of Cintichem licensed by the Comission. ..
E. The by-laws of Cintichem shall be amended to provide for a Board of Directors consisting of three persons all of whom shall be citizens and residents of the United States at all times.
F. The initial Board of Directors of Cintichem would be subject to =*
approval by the NRC for the purpose of assuring that the members are U.S. citizens.
G. No more than one of the three directors of Cintichem may be an officer, I director, or amployee of any shareholder affiliate.
H. All officers of Cintichem will be elected solely by the Cintichem Board of Directors, and no officer of Cintichem (except the secretary and/or treasurer) may be an officer, director, or employee of a shareholder .
affiliate already covered.
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- 1. In recognition of the fact that the Comission's primary concern is with the possibility that shareholder foreign interests could seek to control Cintichem's activities in a manner detrimental to the public interest, any comunications from shareholder interests in specifically designated areas relevant to the Comission's concern would be promptly reported to the Commission.
l J. 'The cperating license will be conditioned on a prohibition against comunication by Cintichem and its personnel of specific types of information designated by the NRC and pertaining to operation of the !
reactor to any shareholder affiliate or its personnel. The NRC should not have any interest in limiting the comunication of information about the reactor that is clearly available to the general public, or that may be necessary solely for the purposes of financial planning.
Similarly, such a prohibition should not preclude comunications between Cintichem and its legal counsel where, as is contemplated, legal services' for Cintichem will be provided by counsel to Hoffmann-LaRoche Inc., a New Jersey corporation. Such a prohibition i
should be further limited to specific types of information designated by the Co mission. Advance approval would be obtained by Cintichem with respect to the comunication by Cintichem to shareholder .
affiliates of other designated types of information.
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Cintichem will promptly notify the Comission Of any economic, finan-cial, or other circumstances that may adversely affect Cintichem's ability to discharge its responsibilities under the Atomic Energy Act.
HRC rules and regulations, and the terms of the license.
L.
Cintichem will submit periodic evidence as to its initial financial' and technical qualifications and any naturally adverse changes thereto the Comission.
M.
The foregoing provisions shall apply to Cintichem and any entities in ;
which Cintichem shall have voting control.
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N. The foregoing conditions will continue to be binding d' on C Reactor Regulation of the Comission, as appropriate (or the person holding any equivalent successor positions with the Comission or any agency of the United States which shall be the successor of the Cc=ission) .
O.
Cintichem agrees to adopt all currently approved emergency response plans, including those of state and local government authorities.
P. Cintichem proposes no change in the personnel organization of theAll pe
. Sterling Forest Research Reactor facility. employed by Sub The Reactor facility will be offered employment with Cintichem.
technical qualifications of Cintichem will thereby become the same as Sub B now possesses.
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Cintichem agrees to limit access to restricted data such that no indi- ~
vidual will have access to restricted data until such individual been investigated and given security clearance. '
The change that will result from'the proposed license t will be a Swiss corporation contro11ecT by foreign nationals.
B.
Statutory Provisions Pertaining to Ownership and Control of Facilities _
Section 103d. of the Act provides, in pertinent part:
, No license'[for a comercial production or utilization *
- may b foracility) other *ent
- ity ~if the Comission knows or has reason to believe it is owned, controlled or dominated by an alien, In any '
a foreign corporation, or a foreign government.
. United States if, in.the opinion of the Comission, thee e
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4 issuance of a license to such person would be inimical to the common defense and security or to the health and safety of the public.
Section 104d., pertaining to licenses for research and development facilities, provi.d.es, in pertinent part: .
No license may be issued to any corporation or other entity if the Comission knows or has reason to believe that it is owned, controlled or dominated by an alien, a foreign corporation or a foreign government. In any event, no license may be issued to any person within the United States if, in the opinion of the Commission, the issuance of a license to such a person ,
would be inimical to the common defense and security or to the health and safety of the public.
Section 164. of the Act provides, in pertinent part:
No license granted hereunder and no right to utilize or ^
produce special nuclear material granted hereby shall be transferred, assigned or in any manner disposed of, -
either voluntarily or involuntarily, directly or indirectly, through transfer of control of any license to any person, unless the Comission shall, after securing full information, find that the transfer is in accordance with the provisions of this Act, and shall give ,
its consent in writing.
C. Discussion j
in 'the absence of criteria in sections 103ci. and 104d. for determining
" ownership", " control" or " domination", the legislative history of those sections and cases construing the provisions have been examined.
It appears that earlier drafts of the bill that eventually was enacted as l:
the Atomic Energy Act of 1954 would have prohibited the issuance of licenses * {
to a corporation or association owned or controlled by a foreign corporation l or government, or if more than 5 percent of the voting stock was owned by aliens, or if any officer, director, or trustee was not a citizen of the 'l '
United States.1/ After objection on the grounds that other statutes !
permittedahigherpercentageofalienownership(20-25%),thatmany !
stockholders, for reasons of convenience, leave their securities in the J
-names of brokers or nominees or in street names and thus the real ownership tay not often be easily known, and that there are no feasible means by which !
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1/ H.R. 8062, April 15,1954; 5. 3323, April 19,1954.
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a corporation could prevent 5 percent of its stock from being purchased by aliens,2/ the final version of the provision was passed substantially in its present form. The Conference Reports do not reveal Congress' express reason for changing the proposed version and there seems to have been no debate on the provision. * '
The first Atomic Energy Co:Sission decision construing the foreign control or domination provision of sections 103d. and 104d. was In the Matter of General Electric Company and Southwest Atomic Energy Associates (the 5EFOR case).3/ That case involved a construction permit application filed b GeneraT Electric Company and southwest Atomic Energy Associates , an (SAEA)y essociation of utility companies organized under Arkansas law. pursuant to a contract between the Comission and SAEA, a program for construction and .4 operation of the SEFOR test reactor for research and development as part of the AEC fast breeder reactor program was to be conducted.
Under a separate contract between SAEA and Gesellschaft fur Kernfurschung (GFK), a non-profit association fomed under the laws of the Federal Republic and in part by the land (State) of Baden - Wurttemberg, GFK sgreed to contribute 50 percent of the costs of construction of the SEFOR reactor.
Under the contract, GFK was entitled to participation in the project review and technical policy cor.raittees with SAEA and GE respectively, and SAEA was required to consult with GFK on all matters of policy and questions affecting costs. Furthermore, GFK was entitled to designate scientists and engineers to participate in the design and construction of the reactor and the conduct of the program, subject to approval and direction of GE. GFK -
did not own any stock in GE and SAEA or any legal interest in the physical assets of the project. Other contracts between SAEA and GE provided for construction and conduct of the tesearch s program. ,
In a supplemstal initial decision, the atomic safety and licensing board res'cinded a provisional construction permit that had been conditionally granted, because the project was found to be significantly and substantially under the control and domination of GFK. - .
The Atomic Energy Comission reversed, reinstating the construction permit.
In its decision the Commission said (p.101): .
In context with the other provisions of Section 104(d),
the limitation should be given an orientation toward ,
I safeguarding the national defense and security. We ~
believe that the words ' owned, controlled, or dominated'7 i
1 2/ 1.coislative History of the Atomic Energy Act, p. 1698, 1961-2. j e
3/ 3AEC99(1966). ,,, .
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refer to relationships where the.will of one party is \
subjugated to the will of another, and that the Congres-sional intent was to prohibit such relationships where an j
alien has the, power to direct the actions of the licensee.
The board errgd in failing to take into consideration the many aspects of corporate existence and activity in which control or domination by another would normally be manifested in giving undue significance to the voice and influence afforded contractually to Gesellschaft in the matters of participation in project planning and review of program execution. The ability -
j to restrict or inhibit compliance with the security and =*
other relations of AEC, and the capacity to control the use of nuclear fuel and to dispose of special nuclear ;
material generated in the reactor, would be of greatest '
si 5nificance.
The Co mission went on to note that GFK had no le' gal ownership or interest in the physical assets of the SEFOR project, no voice in the financial affairs of the applicants and no power to restrict compliance with the ,
safety and security requirements of the Comission. Itconcluded(p.102):
'"t!e believe that the board failed to giver proper considera-
- tion to the provisions of the contracts other than the SAEA- ;
Gesellschaft contract in reaching the$ finding of alien domina- * {
tion. The effect of those contracts is to retain positive j control of the project in the Comission and in General Electric Company, and it is provided that nothing in them is intended to ,
, confer upon Gesellschaft any measure of control over SEFOR or the related research and development program." j The rationale of the SEFOR case was reaffirmed in the lion case The
-. subsequent case of the Gulf-Royal Dutch /Shell partnership result 9 in )
the creation of General Atomic Company involved more complicated --
f considerations.
By an agreement dated November 19,1973,' Gulf 011 Corporation (" Gulf") and Royal Dutch /Shell entered into a joint venture in the nuclear energy and related fields to conduct the business presently conducted by Gulf Energy J and Environmental Systems Company, Gulf General Atomic Company and Gulf .
l Environnental Systems Company, divisions of Gulf. The joint venture took j/ In the Matter of Comenwealth Edison Ccmpany, (Zion Station Units 1 anc 2); 4 AEC 23), Apri} 9,1969.
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. 1 the form of two partnerships, both situated in the United States, one to conduct 'the U.S. business of the joint venture. The partnership conducting the U.S. business was organized under the California Uniform Partnership Act, owned 50/50 by Gulf and Scallop Nuclear, Inc.l. a Delaware corporation whose shares were owned by Scallop Holding, Inc., whose shares in turn were owned by Shell petroleum K.V., a Hetherlands company which was owned 40%
by Shell Trans;;rt and Trading, a British group and 60% by Royal Dutch Petroleum, a Dutch group.
Gulf preocsed to transfer to the U.S. partnership its interests in and rights under various AEC facility licenses issued under Section 104 of the Act, including licer.ses for (1) three TRIGA reactors (2) the Barnwell nuclear fuel reorocessing plant then being constructed at Barnwell, South Carolina, by Allied Chetical Products. Inc., and (3) the export of certain reactor components required for a TRIGA reactor to be constructed in Ro.ania. Gulf applied to the Atomic Energy Comission for the transfer of these licenses to the U.S. partnership. Gulf had also acquired 100% of the stock of the Guif United Nuclear-Fuels Corporation (" Gulf United"), formerly owned SM by Guif and 43% by United Nuclear Corporation, liquidated such corporation ir.to Gulf, and proposed to transfer to the U.S. partnership two research reactors ther. held by Gulf United (either through the parent corporation, Gulf, or directly to the partnership).
- The property, including the physical assets of Gulf Energy, Gulf General Atomic, and Gulf Environmental Systems, was also to be transferred to the U.S. partnership. The cor.tribution of Scallop, the Delaware corporation set .
up by the Royal Dutch /Shell Group to enter into the joint venture, was to be primarily in the form of money.
'Since the U.S. partnership would be 50% owned by Scallop, a company of the Royal Dutch /5'.eil Group, a foreign " group", questions arose as to whether ~
the partnership to which the Gulf licenses would be transferred would be owned, controlled or dominated by an alien or a foreign corporation.
The AEC approved the transfer, in a letter dated December 14, 1973 from the'l Director of Regulation to General Atomic Company. The approval was subject to certain cencitions: - .
(1) the presicent and any officers of.the partnership having direct responsibility for the control, and any employees having direct custody ef, special r.uclear material must be U.S. citizens.
(2). a' separate departtent of General Atomic rust be responsible for special n. clear material, and the head of the department must ,
report directly to the president.
(3) the presider.t shall be charged with the responsibility and exclu-sive authcrity of ensuring that the business and activities of 4
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. the partt.ership are at all times conducted 'in a manner consistent wi;h the protection of the comon defense and security of the
-Ur.ited States. ,
(4) the foregoing conditions apply to the partnership and any entities
'in which the partnership shall have voting control. ,
(5) General Atomic will not change any of the foregoing conditions without approval of the Director of Regulation of the AEC or of the person holding any equivalent successor position with the Com.ission or its successor.
Subsequently, a foreign domination and control question arose in connection "#-
with the prcpesed acquisition of a research reactor owned by a New Jersey i corporation, Industrial Research Laboratories, by HLR Radiopharmaceutical l (HLRR). HLRR was in turn, a wholly-owned subsidiary of Hoffmann-LaRoche',
Inc. (HLR), the same Delaware corporation involved here, and accordingly, ultimately centro 11ed by Hoffmann-LaRoche & Company, Ltd., a Swiss corporation, the ultimate foreign owner as in the instant case.
It was then argued by counsel for HLRR that the corporate veil should not be However, the AEC staTT pierced to'the foreigh-dominated holding company.
infomally advised counsel for HLRR that the staff would oppose the transfer., l on the basis of the section 104d. prohibition against issuance of a license- i to an entity _ owned, contro11eu or dominated by an alien, foreign corporation or foreign government. No letter or other writing was sent to HLRR concerning
, the matter. However, a letter dated March 17, 1975 to Senator Williams of New Jersey in response to his letter inquiring into the matter, confirmed this conclusion.
In the instant case, Cintichem, Inc., seeks to insulate itself from the l
prohibitions in sections 103d. and 104d. against foreign control and l domination of a licensed facility by proposing the license conditions set I out above, some of which are si;nilar to those imposed by the Comission on 1 Babcock & Wilcox when it became a subsidiary of McDermott International, a Panamanian corporation. However, in the Babcock & Wilcox case, the Com-mission was provided with information as to the stockholders of McDermott International.,the proposed parent company, which sh6wed that the great majority of the stockholders were U.S. citizens. No such information has been provided by Cintichem, Inc. or Hoffmann-LaRoche.
The submission by the applicant for transfer of the facility operating license argues, in Attachment 5 to the application, that approval of the retransfer would not " violate the prescribed NRC tests for avoiding foreign ownership, domination or control of a U.S. production or utilization .
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. f a cility. however, the~ attachment relies on the SEFOR case, 3 AEC 99, the Ger.aral Atomic case and i 27 of the Restatement of the Foreign Relations Law of the United States, comment d.
The SEFOR case is'not applicable to the instant request. In that case, the fereign associatiori involved, GFK, had no ownership interest, direct or indirect, in the license applicants, General Electric Company and Southwest Atomic Energy Associates. GFK had agreed to contribute 50% of the costs of construction of the SEFOR reactor, was entitled to participate in project review and technical policy committees, to be consulted on matters of policy and ouestions affecting costs, and was entitled to designate scientists and engineers to participate in the design and construction of the program, subject to approval and direction of GE. It did not own any stock in GE or d-1 SAEA or any legal interest in .the physical assets of the project. Its participation could roughly be characterized as capital contributor and consultant.
Nor is the Restatement of the Foreign Relations La'w of the United States, i 27, comment d. supportive of the applicant's case. The comment states:
"d. Corporation owned or controlled by nationals f of another state. When the nationality of a corpora-tion is cifferent from the nationality of the persons (individual or corporate) who own or control it, the state of the nationality of such' persons has juris- ,
diction to prescribe, and to enforce in its territory, rules of law governing their conduct. It is thus in a '
position to' control the conduct of the corporation even ,
though it does not have jurisdiction to prescribe rules-
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f directly applicable to the corporation." .
While that coment supports the view that mere foreign incorporation does not preclude the state of the nationality of the persons who own or control it from prescribing and enforcing rules of law governing the conduct of such persons, it coes not stand for the proposition that the foreign incorporation of the ultimate parent of Medi-physics does not preclude the transfer of the license where the ultimate parent foreign corporation is owned and controlled by aliens, foreign corporations or a foreign government.
The General Atomic case involved a partnership in which one partner was a subsiciary of a foreign corporation.....The facts pertaining to foreign ~
dominution in that ' case are sufficiently different from the instant proposal
- so as to preclude approval of the proposed license transfer on the basis of that precedent. In that case, a United States corporation had a fifty per cent -
interest in the partnership. The AEC, in consenting to the transfer of the facility license to the partnership, imposed conditions that assured freedom from foreign control. In the instant case, however, while license .
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conditions might prevent foreign control, the conclusion that the ultimate ownarship of the transfer'ee, whether a corporate entity or the shareholders, is in foreign hands cannot be avoided. J Conclusion )
The proposed transfer of Facility Operating License No,' R-B1 to Cintichem. Inc.,
a subsidiary of a foreign corporation, is precluded by Sections 103d. and 104d.
of the Atomic Energy Act of 1954, as amended.
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& IN TE R N A T >ON AL P80G8 4 '.$5 March 31,1999 DOCKET NUMBER i PROPOSED RULEES MSC Ms. Annette Vietti Cook (MFR /0/66)
Secretary U.S. Nuclear Regulatory Commission ,
Washington, D.C. 20555-0001 )
ATTENTION: Rulemakings and Adjudications Staff SulkTECT: Nuclear Energy Institute's Comments on the NRC Draft Standard Review Plan on Foreign Ownership, Control or Domination (64 Fed. Reg.10166, March 2,1999)
Dear Ms. Vietti-Cook:
These comments are submitted by the Nuclear Energy Institute (NEI)1 on behalf of the nuclear energy industry in response to the Nuclear Regulatory Commission's Federal Register Notice seeking public comment: on its proposed Standard Review Plan (SRP) on Foreign Ownership, Control or Domination (64 Fed. Reg.10166, March 2,1999). . ;
NEI supports the clarification of the Atomic Energy Act requirements reflected in the Standard Review Plan, and the proposed NRC review process for assessing foreign ownership, control and domination issues during a licensing proceeding for the issuance or transfer of an operating license. The criteria and review process provide an appropriate degree of regulatory flexibility while still preserving the intent of the Act in regard to foreign ownership, which is principally to ensure protection of public health and safety and the common defense and security.
1 NEl is the organization responsible for establishing unified nuclear industry policy on matters affecting the nuclear energy industry, including regulatory aspects of generic operational and technical issues. NEl members include all utilities licensed to operate commercial nuclear power plants in the United States, nuclear plant designers, major architect / engineering firms, fuel fabrication facilities, materials licensees, and other organizations and individuals involved in the nuclear energy industry.
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'Ms. Annette Vietti Cook
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March 31,1999 i Page 2 We agree with the statements in the SRP, that foreign ownership provisions should not impose an unnecessary burden or place prospective buyers at an unnecessary disadvantage, when control and domination are not issues in the transfer proceedings. As such, a foreign entity should be allowed to own a significant share of a nuclear power plant providing: .(1) special nuclear material is not'under the direct or indirect control of the foreign entity; (2) the sale and transfer of the operating license is not inimical to the. common defense and security of the United States; and (3) the sale and transfer should not constitute a transfer of effective control of nuclear activities at the plant- i i.e., the foreign entity has no direct or indirect control over the day-to-day ;
activities at the plant.
The industry believes that foreign ownership of a licensee's parent company should be allowed unless the foreign entity has legal control over the conduct oflicensee activities involving common defense and security. Typicalindicia of foreign control can be overcome by special arrangements, such as special operating committees, which vest effective control and operation oflicensed ,
activities with U.S. citizens. We agree with the SRP that a foreign entity I could own a financialinterest of more than 50 percent in a licensed plant as l long as it does not exercise control over the day-to day activities at the plant, or over any special nuclear material.
Although we support the Commission's interpretation and proposed review process as described in the draft SRP, we believe it is only an interim step toward a permanent solution. The Act's foreign ownership provisions were drafted in the infancy of the nuclear age, when international relations and considerations were vastly different than exist today. Sections 103d and 104d of the Atomic Energy Act should be amended to remove the statutory prohibition on foreign ownership-provided the host nation of the prospective foreign owner accords U.S. companies similar privileges-and to reflect the new global business environment, where large capital-intensive projects (e.g.,
offshore oil development, nuclear power plants, etc.) are routinely developed by large multi-national corporations, and financed through international credit .
markets. The amended language should, of course, preserve the NRC's authority to take all steps necessary to protect the common defense and security of the United States.
We urge the Commission to continue its efforts to pursue and support amendments to the foreign ownership provisions in the Atomic Energy Act to ;
make the Act more compatible with and appropriate for today's global market, '
while recognizing the continuing need to prer.erve the Commission's mandate to take appropriate steps to protect national Security interests. The industry is ready to work with the Commission and its staff to effect the necessary i
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March 31,1999 Page 3 changes in the Act to allow appropriate levels of foreign investment in the U.S.
nuclear generating industry. l l
If you have any questions in regard to our comments, please contact me or )
Richard Myers of the NEI staff at 202.739.8021 (e-mail rjm@nei.org).
Sincerely, S
Marvin S. Fertel c: The Honorable Shirley A. Jackson, Chairman, NRC The Honorable Greta J. Dicus, Commissioner, NRC The Honorable Nils J. Diaz, Commissioner, NRC The Honorable Edward McGaffigan, Jr., Commissioner, NRC The Honorable Jeffrey S. Merrifield, Commissioner, NRC Dr. William D. Travers, EDO/NRC l
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[$ I [ Ol U N s E L o R 5 AT law Fat 202-467-7176 .cQ PFF -4 Kevin P. Gallen 202 467-7462 April 1,1999 DOCKET NUMBER PROPOSED RULE EO Af1.5c (MFR/ot%)
HAND DELIVERED Secretary U.S. Nuclear Regulatory Commission 11555 Rockville Pike Rockville, MD 20852-2738 Attn: Rulemakings and Adjudications Staff l l
Dear Sir / Madam:
AmerGen Energy Company, LLC (AmerGen) is pleased to have the opportunity to submit the comments set forth herein on the Nuclear Regulatory Commission (NRC or Commission) Standard Review Plan (SRP) on Foreign Ownership, Control, or Domination published in the Federal Register at 64 Fed. Reg.10166 (Mar. 2,1999).
In general, AmerGen believes that the SRP, as drafted, will provide the NRC Staff, NRC license applicants, and other interested parties with useful guidance concerning the nature and extent of foreign participation in the ownership and operation of nuclear power reactors that is permissible under Sections 103d. and 104d. of the Atomic Energy Act of 1954, as amended. However, AmerGen also believes that the SRP should be expanded to provide more detailed guidance, based upon the Commission's prior decisions and recent developments in this area, concerning the permissible lev,els of foreign participation by establishing " safe harbors" with respect to certain types of ownership and/or operating arrangements. These " safe harbors" would (1) create a rebuttable presumption that the level of foreign participation associated with W3A'5149 i PNtadelpNa WasNngton New York Los Angeles Mwn Harnsburg Pnnceton London Brussets Frankfurt Tokyo
Secretary E April 1,1999
, Page 2' a specific ownership and/or operating arrangement would comply with the requirements set forth in Section 103d. and 104d., and (2) provide foreign and domestic utility companies and investors participating in the ongoing restructuring of the electric utility
. industry in the United States with greater confidence and certainty concerning the )
potential regulatory implications associated with different types ofinvestments and transactions. AmerGen's specific comments on various sections of the SRP are as follows:
3.2. Guidance on Apolving Basic Limitations At the start of this section, the Commission indicates that it "has not determined a specific threshold ahnvg which it would be conclusive that an applicant is controlled by foreign interests through ownership of a percentage of the applicant's stock."
AmerGen believes, however, that it may be appropriate to establish a specific threshold l of stock ownership by foreign entities below which it could be presumed that an )
applicant is not owned, controlled, or dominated by foreign interests, absent some other form of foreign participation in the management or operation of the applicant. Such an ,
applicant would, of course, still have to demonstrate that the foreign ownership interest I would also not be inimical to common defense and security in accordance with the separate requirements imposed under Sections 103d. and 104d. with respect to this !
issue.
Later in this section, the SRP indicates that in situations where a foreign entity that contributes "50%, or more, of the costs of constructine a reactor" and engages in .
other activities related to the desien and construction of a reactor,"these facts alone'do
. not require a finding that the applicant is under foreign control." In light of the current status of the commercial nuclear power industry in the United States, this example might be more helpful ifit were revised, or supplemented, to discuss the specific types of activities in which a foreign entity or foreign nationals could engage in connection with the operation of a reactor without requiring a finding that an applicant would be under foreign control. In this regard, AmerGen believes that the SRP should also acknowledge that there is no statutory prohibition against individual foreign nationals holding senior management positions with an applicant and/or managing and supervising licensed activities at a reactor site. -
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1 Mo Lewis Secretary 6 hs ur April 1,1999 Page 3 i
~ AmerGen also believes that the examples provided in this section should be !
expanded to (1) discuss the ownership and operating arrangements in other relevant i decisions by the Commission in which the Commission determined that the level of foreign participation was permissible, subject to the imposition of certain conditions ~, i and (2) confirm that similar arrangements would be eligible for " safe harbor" treatment l
under similar conditions in the future. See e.g., Letter from Atomic Energy (
Commission to General Atomic Company re: Approval of License Transfer (Dec.14, j 1973). >
Finally, at the end of this section, a distinction is made between an applicant which is " wholly owned by a U.S. company that is wholly owned by a foreign corporation" seeking to acquire "a 100% interest in the facility" and a similar applicant seeking to acquire "less than a 100% interest." In the former case, the SRP indicates
- that the applicant will ordinarily not be eligible for a license. In the latter case, the SRP indicates that "further consideration is required." This suggests that there may be i circumstances under which it would be permissible for a foreign corporation to acquire l a 100% ownership interest in a U.S. company that owns an undivided minority ownership interest in a reactor. .If so, the discussion in this section of the SRP should be expanded to address some of the other relevant precedents in this area, e.g., the Appeals Board decision in the Marble Hill case requiring all of the co-owners of a reactor to be I licensees, and the Commission's original views on the proposed Cintichem transfer to 1 the effect that 100% fbreign ownership of a reactor licensee was prohibited under )
Sections 103d. and 104d. See Public Service Company ofIndiana (Marble Hill 1 and )
2), ALAB-459,7 NRC 179,200-201 (1978); Letter dated Sept. 22,1983 from Nunzio J. I Palladino, Chairman, U.S. Nuclear Regulatory Commission to Honorable Alan Simpson, Chairman Subcommittee on Nuclear Regulation, Committee on Environment and Public Works, United States Senate (Proposed Transfer of Facility Operating License R-81 to Cintichem, Inc.). It would also be helpful if additional guidance could be provided concerning the "further consideration" that would be appropriate, and the additional information that a prospective applicant would be expected to provide, in such a situation.
WA03A/5149.1 j
7 Mo Lewis
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Secretary 6 M us April 1,1999 . j Page 4 j l
4.1 Threshold Review and Determination I
AmerGen believes that the guidance contained in this section should be
- expanded to confirm that in situations where (1) the Commission has recently made a ,
determination that a particular applicant is not owned, controlled, or dominated by I foreign interests, subject to the imposition of certain license conditions, (2) there has been no material change in the ownership or management of the applicant which would call the continuing validity of the Commission's prior determination on this issue into question, and (3) the applicant has agreed to the imposition of similar license conditions j in connection with the application under review, the reviewer, after consultation with l the Office of the General Counsel, should conclude that there is no reason to believe .
that the applicant is owned, controlled, or dominated by foreign interests. .
l AmerGen sincerely appreciates the opportunity to provide comments on this important SRP.
Very truly yours,
. i evin P. Gallen
' Counsel for AmerGen Energy Company, LLC i
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, Florida Power & Light Co,rn amy, P ,0 Box 14000, Juno Beach. FL 33408 0420 5:PL APR - 11999 9 W -6 P 3 :44 L-99-83 Ms. Annette L. Vietti-Cook Secretary CL j U.S. Nuclear Regulatory Commission gp 90CKFTNUMBER Washington, DC 20555 PROPOSED RULEN At /,5c Re: Florida Power & Light Company Comments ( hYFRI o tt,(,,J Draft Standard Review' Plan on Foreign Ownership, Control and Domination I (64 Fed. Reg.10166 (March 2,1999) )
Dear Ms. Vietti-Cook:
j Florida Power & Light Company (FPL), the entity licensed to operate the St. Lucie Nuclear Plant, Units 1 and 2, and the Turkey Point Nuclear Plant, Units 3 and 4, hereby submits the following comments on the above-referenced draft Standard Review Plan on Foreign Ownership, Control, and Domination (SRP).
FPL supports the approach set forth in the SRP toward reviewing whether an applicant for an NRC license is owned, controlled, or dominated by an alien, foreign corporation, or foreign government. FPL believes that the tiered approach set forth in the SRP, including initial screening of applications, requests for additional information, and allowing the applicant to submit a negation action plan in the event that the Staff finds that the applicant is owned, controlled, or dominated by a foreign interest, will enable the Commission to satisfy its statutory obligations under Sections 103 and 104 of the Atomic Energy Act.
At the same time, this approach provides a flexible framework whereby ownership arrangements of nuclear assets involving foreign investment can be reviewed and licensing actions can be tailored to address the facts of a particular case. Such an approach will help encourage investment in and transfers of nuclear assets, thereby helping to preserve nuclear energy as a ,
competitive source ofgeneration in a deregulated electricity supply environment. Additionally, l FPL endorses NEI's comments on this subject.
FPL appreciates the opportunity to comment on the draft SRP on foreign ownership, control, and domination. i Sincerely yours,
/
,. ' ..ye/ ;
R. John Gianfrancesco, Jr. 3 Manager, Administrative l Support & Special Projects an FPL Group company .
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, ct tlon Support D ptriment n .
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PECO NUCLEAR nco m,w c_
%5 Chesterbrook Boulevard A Unit of PECO Energy co ppg , ,s , Wayne, PA 19087-5691 niv .Q,, ,
Ai.,. . .
March 31,1999 DOCKET NUMBER PROPOSED RUl.E Eb Al l.5 c j
( WFR/0/ M) i Mr. John C. Hoyle !
Secretary of the Commission .
U.S. Nuclear Regulatory Commission j Washington, DC 20555-0001 ;
Subject:
Comments Conceming Standard Review Plan on Foreign Ownership, Control, or Domination (64FR10166, dated March 2,1999)
Dear Mr. Hoyle:
This letter is being submitted in response to the NRC's request for comments conceming a Standard Review Plan (SRP) on " Foreign Ownership, Control, or Domination" published in the Federal Register (i.e.,64FR10166, dated March 2,1999). This SRP documents procedures and guidance to be used by the NRC to analyze applications for reactor licenses, or applications for !
the transfer of control of such licenses, with regard to issuing a license to an entity that is owned, controlled, or dominated by foreign interests.
PECO Energy appreciates the opportunity to comment on this SRP We offer the following comments for consideration by the NRC.
General Comments The SRP does not appear to address the commentary in SECY-98-252, page 5, regarding consideration that should be given to the fact that the foreign entity is a close ally of the ,
United States, and a member of a number of non proliferation-related organizations, as well {
as signatories to relevant intemational conventions and treaties to which the United States is l also a party. The NRC notes, and PECO Energy agrees, that while these facts are not !
dispositive of the foreign ownership or controlissue, they nonetheless should be given !
" substantial weight" when making a non-inimicality finding with respect to protecting the {
common defense and security of the U.S. Some degree of deference should be applied when the foreign entity has close ties to the U.S. such as the United Kingdom (U.K.),
Canada, or France. ,
Further, the focus of the SRP review criteria should not be on which entity has control, but f
rather who exerts control over the " safety and security" aspects of the licensee's operations, such that safeguarding of the national defense and security is preserved. This consideration should be used in connection with the additional criteria of Section 4.2," Supplementary t
Review," item 4, "Whether the applicant has interlocking directors and officers with foreign corporations."
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I Specific Comments Section 3.2," Guidance On Applying Basic Limitation," sixth paragraph states:
"An applicant that is partially owned by a foreign entity, for example, partial ownership of 50% or greater, may still be eligible for a license if certain conditions are imposed, such as requiring that officers and employees of the applicant responsible for special nuclear materialmust be U.S. citizens."
PECO Energy recommends that a definition be provided for " employees of the applicant responsible for special nuclear material." As written, the phrase is somewhat vague and could be construed to mean any individual from the worker level assigned a task or job associated with the Special Nuclear Material (SNM), up through the organization to the j corporate officer level. The intent of the statement would appear to mean a " responsible" position of authority, rather than any " employee." Such a condition / restriction could also be construed to apply to outside refueling contractors.
Therefore, we recommend that the wording in this SRP section be revised to require that the officers and senior management of the applicant responsible for special nuclear material must be U.S. citizens.
If you have any questions, please do not hesitate to contact us.
1 Very truly yours, 99'1 Jn Garrett D. Edwards Director - Licensing l
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