ML20234F588
| ML20234F588 | |
| Person / Time | |
|---|---|
| Issue date: | 07/01/1987 |
| From: | Chilk S NRC OFFICE OF THE SECRETARY (SECY) |
| To: | Stello V NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO) |
| References | |
| FRN-47FR27371, FRN-49FR44645, REF-10CFR9.7 AA47-2-041, AA47-2-41, M870625, NUDOCS 8707080268 | |
| Download: ML20234F588 (10) | |
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IN RESPONSE, PLEASE REFER TO:
M870625 p"" " Ns UMTED STATES j
o g"y)",7 [,g NUCLEAR REGULATORY COMMISSION W ASHINGTON,0.C. 20555 c
'o N' N :N'/ "!
July 1, 1987
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OFFICE OF THE SECRETARY MEMORANDUM FOR:
Victor Stello, Jr.
Executive Director for Operations 5
FROM:
h amuel J. Chilk, Secretary
SUBJECT:
STAFF REQUIREMENTS - AFFIRMATION / DISCUSSION AND VOTE, 10:00 A.M.,
THURSDAY, JUNE 25, 1987, COMMISSIONERS' CONFERENCE ROOM, D.C.
OFFICE i
(OPEN TO PUBLIC ATTENDANCE)
I.
SECY-87 Final Rule to Modify the Requirement that Power Reactor Licensees Maintain Property Damage Insurance The Commission, by a 5-0* vote, approved a final rule for publication in the Federal Register.
The rule amends 10 CFR j
50.54(w) to require utilities to maintain $1.06 billion in on-site property insurance to provide financial security for stabilizing and decontaminating their licensed reactor in the event of an accident.
All Commissioners also approved OGC's approach (3A) to estab-lishing a trust arrangement to provide greater assurance of availability of funds for decontamination following an accident.
j Commissioner Asselstine, while approving, would have preferred additional modifications which would set an absolute minimum of
$1.06 billion even if capacity fell below that amount and would have provided for periodic review by the staff of the amount of insurance required.
The attached editorial comments by Commissioner Carr should also be included in the Federal Register notice.
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- Section 201 of the Energy Reorganization Act, 42 U.S.C.
S5841, provides that action of the Commission shall be determined by a " majority vote of the members present."
Commissioners Bernthal and Carr were not present when this item was affirmed.
Accordingly, the formal vote of the Commission was 3-0 in favor of the decision.
Commissioners Bernthal and Carr, however, had previously indicated that they would approve this paper and had they been present they would have affirmed their prior votes.
l 8707000269 070701 PDR 10CFR PT9.7 PDR j
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The Federal Register notice should be revised as noted and forwarded for signature and publication.
(EDO)
(SECY Suspense:
7/27/87)
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Attachment:
As stated cc:
Chairman Zech Commissioner Roberts Commissioner Asselstine Commissioner Bernthal Commissioner Carr l
Commission Staff Offices GPA i
PDR - Advance DCS - 016 Phillips 1
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l neaates the continued validity of the specific studies upon which the existing exemptions were based.
T'us, the exemptions for "
amounts of property insurance recuired shnuld remain in e Hect.
J 2.
Method of Future Ad.iustment of Insurance
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YW b O P0 k +4 Summary of Comments:
dLt m e y e( w b M k t.
C Almost all who cnmmented on this issue sugges+ed that #uture
.g M'changesshouldbegfectedbyrulemakingbasedonaperiodic assessment of need, some sugaested updating the PNL raport.
Commenters generally argued that relying on some formula tied to measures of inflation or increasing insurance base'd on availability would not be appropriate.
They believe that an inflation-based formula probably would not reflect the actual needs for insurance necessary to protect public health and safety because decontamination cost changes could not be measured accurately bv i
any existing cost index.
Additionally, changes in an index might i
lead to property insurance requirements that would outstrip the availability of insurance.
Similarly, recuirements based simpiv on the capacity available would not necessarily ecual the amount necessary for decontamination.
Insurance capacity tends to increase based on the demand for it.
This demand is not only I
comprised of funds necessary for decontamination and debris removal, but also reflects the needs of insureds and their owners for compensation to replace the facility, a concern beyond the province of the NRC.
Some commenters indicated that they have mata afforts to secure equivalent protection, including surety bonds or letters nr lines i
of credit.
However, instruments in the amount necessary to corroly with the rule are not available.
Even if available, however, thesa commenters concluded that "the existence of such protection on a
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liability (however contingent), backed by no assets and not covered by any current revenues, would effectively preclude them from future financing needed to maintain, improve, and expand their ohvsical plant." Commanters concluded, therefore, that they would j
be unable to furnish evidence of equivalent orotection in accordance with tha oroposed rule.
Comenters suggasted that three alternatives exist.
Fi rs t,
affected utilities could continue to explore with NEIL-II the possibility that through amendment to its by-laws and charter and to its current policies, NEIL-II could offer insurance structured to compi / with State law.
Nebraska publicly-ewned utilities have done this and are awaiting a decision by the Nebraska Supreme Second, the relevant portions of State /M$ oY Court.
constitutions could j
0 be amended. However,asindicatedabove,thispouldbea protracted process with no assurance of success.
Third, licensees could seek exemption under 10 CFR 50.12 from the proposed amendments.
Several commenters mentinned that if such alternatives were unavailable, they would probably be forced to shut down their reactors at enormous cost.
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require collecting the entire amount in advance.
If funded over a period of time, it would not meet the Comission's ob.iective of providing financial assurance for decontamination and cleanup bacause an accident could occur before the full amount had been collected.
In these circumstances, the Commissinn believes that a clear j
conflict exist's between the requirements of Federal and State law.
The Commission has determinad that $1.06 billion of nuclear oroperty damage insurance is naaded to stabilire, decontaminata and I
cleanup a reactor a#ter an accident 50 as to mitigate Dntential threats to the health and safety of workers and the public and to the environment.
accordi y, the Comission is requiring reactor 4
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licensees to purchase such insurance.g,.
State law / rohibi ertain
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licensees from purchasing mutual or assessment insurance. No other insurance is available in an amount sufficient to comply with the Commission's requirement.
There are no reasnnable alternative means of financial assurance available to these licensees. Based on these chanced circumstances, the Commission believes that its j
11 property insurance rule would preempt conflicting State laws.,
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There can be no doubt that this rule is concerned w4th reactor i
safety.
Indeed, in discussing the issua of whether to imoose a decontamination priority in the proposed rule the Commission stated:
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19 In fact, the Commission has no reason to impose a property insurance requirement other than to protect the public health and safety.
Proceeds from insurance would be usad both to assure that contamination from a reactor immediately after the accident did not threaten public health and safety and the environment and to eliminate delavs and degradations to the cleanup process that could cause threats to health, safety and the environment over time.
Thus, the rule operates in an area of exclusive Federal control.
Although the State prohibitions at issue do not attempt to regulate within this area, they prohibit what the Comission's rule requires. They would, therefore, be preemoted because thev are in direct conflict with Federal law.
It shculd be noted that f
"If]ederal regulations hwe no less preemptive effect than federal statutes." Capital Cities Cable, Inc.
- v. Crisp, 81 L.Ed.2d 580, 589 (19841, cuoting Fidelity Federal Savings and Loan Assn. v.
De la Cuesta, 458 U.S. 141 (1982).
In addition, the State prohibitions concern insurance--a matter that the states have traditionally reoulated.
Accordinoly, Congressional intent to preempt must be " clear and manifest." Rice v. Santa Fe Elevator Coro.,
331 II.S. 218, 230 (1947).
Such intent is present, however, when i
the requirement of Federal and State law are in conflict.
See Florida Avocado and Limp Growers v. Paul, 373 U.S. 132, 142-4 ;
Ferebee v. Chevron Chemical Co., 736 F.2d 1529 (D.C. Cir.1984),
cert. denied,a 53 U.S.L.W. 3404 (No.84-491).
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' m In Silkwood v. Kerr-McGea Corp.)\\464 U.S.238, (1980, the Suoreme s
Court held that the atnmic Ererav Act does not preempt an award of ounitive damaces under State tort law for personal injuries or property damage from radioactive materials.
The Court examined the legislative history of the Price-Anderson Act and found amole I
evidence that Congress had assumed that remedies under State tort law would continue to be available to persons injured by nuclear incidents. There was no conflict with Federal law because licensees could pay both Federal fines and State-imposad punitive
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damages.
Citina a failure of proof, the Court declined to decide whether an award of damages could be so larae as to conflict with the NRC's policy of avoiding penalties which would put a licensee out of business or have an adverse effect on safety. Thus, the Court did not preclude the possibility of Federal preemption in an apprcpriate case based on a conflict with Federal law.
1 Finally, the Commission rejects the notion that a conflict with Federal law could be avoided by the licensee's option of ceasing to j
operate the reactor.
Rather, the Commission believes that in 1
analyzing this issue, a court would conclude that a conflict exists where the licensee's only option is to withdraw from its Federally licensed activities. This is suggested not only by Pacific Gas, supra, but by other Federal preemption cases.
M, e.g., Ferebee, suora, 736 F.2d at 1541; Douglas v. Seacoast Products, Inc., 431 U.S. 265 (1977); Sperry v. Florida, 373 U.S. 379 (1963).
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-?6-Finally, EET interprets the Commission's proposal to allow the Director to act expeditiously without holding hearings since that could seriously delay the decisionmakino percess.
In ordar to avoid any confusion, we sugcest the Commission confirm our understanding of this process.
Other commenters suggested similar problems.
For example, by not establishing standards or criteria by which the Director of NRR is to order a decontamination priority, the resulting uncertainty would be as unsettling to investors as a more rigid priority.
Further, such an order would probably ba sub,iect to a protracted review process, open to intervention, and might so tie up funds that the cleanuo process could be hampered and oublic health and safety adversely affected.
One commenter stated that, although the NPC has authority to impos.o decontamination requirements on a licensee, it does not have authority "to jdictateeithertoinsurersortoindenturetrusteeshowtheyaretodeal with the insurance proceeds" (comment 15).
Similarly, another commenter suggested that reauiring a decontamination priority would preempt the
- overages filed by ANI/MAERP with State insurance departments and would hus be in effect a preemotion of State law, a result the NDC sought to avoid Icomment 7, p. 21
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3 ahzedseveralscenariosinwhichanaccidentcaused Another commenter ar l J
varyino amounts of damages and the resulting actions that probably would ba taken by the trus'.ae (Comment 15, p. 21:
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priority would be extended as necessary to protect public health and safety.
Thus, the principal effect of sunset provisions would be to allow for additional consideration as each order was replaced or extended.
1 Concerning the matter of hearings, the mechanism for imposing the decontamination priority would be an order to show cause by the Director of Nuclear Reactor Regulation.
The Commission's rules in 10 CFR Part 2, Subpart B afford the licensee the right to demand a hearing when the NPC staff seeks to impose requirements by order.
In addition, any person whose interest may be affected by the proceeding could request a hearing or file a petition to intervene.
If the Commisb on followed its usual practice of
'L confining the scope of the proceeding to whether the order should be sustained, only persons opposing the order could request a hearing or petition to intervene.
Petitioners who did not object to the order but might seek further corrective measures would lack 6[
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the requisite interest in the proceeding. g Bellotti v. NRC, F.2d 1380 (1983). Thus as a practical matter, the Director's ability to impose the priority without a hearing would most likely depend on the licensee's response to the order, l
With regard to the commenter's cor. ern about delay in the i
decisionmaking process, the Commission notes that, even if a hearing were held, insurance proceeds would not necessarily be tied up.
This is because the Commission's authority to impose the priority before holding a hearing would depend on the circumstances.
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nuclear and non-nuclear, to a power facility.
Payment of legitinate non-nuclear claims could be hampered if they occurred simultaneously to or in conjunction with a small nuclear accident.
As the Association admits (see p.16 of its coments) even the trusteeship arrangenent it provides would not completely eliminate the possibility of lawsuit and the conflict between the NRC and bondholders interests.
Finally, there would be costs associated with the establishment of a trusteeship arrangement.
Each reactor operatcr would be required to set up such an arrangement and designate a trustee.
If invoked, the trustee would have to be paid and insured against the risks of performing his or her function.
Although the NRC is not privy to such costs, we estimate that several thousand dollars per licensee could be required and perhaps much more if a trustee's liability insurance were to follow the sane recent premium pattern as directors' and officers' liability insurance.
The NRC also believes that an approach worth further evaluation is to seek legislation in Congress that would give preference in any bankruptcy proceeding to expenditures that mitigate threats to public health and safety. The NRC is currently studying the feasibility of this approach.
6.
Other Issues
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