ML20236N758

Forwards Regulatory Documents Comprising Regulatory History of Notice of Final Rulemaking Entitled, Self-Guarantee of Decommissioning Funding by Non-Profit & Non-Bond Issuing Licensees, Which Amended 10CFR30,40,50,70 & 72

ML20236N758
Person / Time
Issue date:	07/09/1998
From:	Prichard C NRC OFFICE OF NUCLEAR MATERIAL SAFETY & SAFEGUARDS (NMSS)
To:	NRC
Shared Package
ML20236N762	List: ML20236N758 ML20236P706 ML20236P787
References
FRN-63FR29535, RULE-PR-30, RULE-PR-40, RULE-PR-50, RULE-PR-70, RULE-PR-72 AF64-2-001, AF64-2-1, NUDOCS 9807150246
Download: ML20236N758 (13)

Text

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i UNITED STATES g

,j NUCLEAR REGULATORY COMMISSION

'C WASHINGTON, D.C. 20555-0001 49....,o July 9, 1998 MEMORANDUM TO: Nuclear Document Systen (NUDOCS)

FROM:

Clark Prichard Regulation and Guidance Branch Division of Industrial and Medical Nuclear Safety, NMSS

SUBJECT:

REGULATORY HISTORY INDEX (63 FR 29535)

Attached for your processing are the regulatory documents comprising the regulatory history of the Notice of Final Rulemaking entitled "Self-Guarantee of Decommissioning Funding by Non-Profit and Non-Bond issuing Licensees" which amended 10 CFR Parts 30,40,50,70, and 72.

This notice was published in the Federal Hegister on June 1,1998 (63 FR 29535).

If you have any questions or if we can be of further assistance, please call me at 415-6203.

Attachments:

1. Regulatory History Index

2. Regulatory History Documents cc.

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REGULATORY HISTORY INDEX 10 CFR Parts 30,40, 50,70, and 72 Self-Guarantee of Decommissioning Funding by Non-Profit and Non-bond issuing Licensees

1. Comment letters from 16 commenters on proposed rule.

2. Memo to OMB regarding SBREFA determination,8/1/97

3. Detailed comment analysis.

4. Memo from D. Cool to Office Directors,1/16/98.

5. SECY-98-046,3/9/98.

6. SRM, Hoyle to Callan,5/13/98.

7. Final rule publication,63 FR 29535,6/1/98.

AFM-2.

NMIL Federal Register /Vol. 63, No.104 / Monday, June 1,1998 / Rules and Regulations 29535 Committee's recommendation, and Materials Safety and Safeguards, U.S.

Background

other information, it is found that Nuclear Regulatory Ccmmission-On December 29,1993 (58 FR 68726),

finalizing the interim final rule, without Washington, DC 20555-0001, telephone change, as published in the Federal.

(301)415-6203, e-mail cwp@nrc. gov.

as corrected on January 12,1994 (59 FR 1618), the NRC published a notice of R:glster (63 FR 11585: March 10.1998) SUPPLEMENT ARY INFORMATION :

will tend to effectuate the declared final rulemaking that allows financially Licensees subject to 10 CFR parts 30, strong corporations with A or better policy of the Act.

40, 70, and 72, whose operations bond ratings the option of using self-List of Subjects in 7 CFR Part 989 involve the use of substantial amounts guarantee as a mechanism for Grapes, Marketing agreements, f nuclear materials, and those subject complying with the regulations on Raisins, Reporting and recordkeeping to 10 CFR Part 50 whc are applicants financial assurance for requirements.

for, or holders of, operating licenses for decommissioning. Self-guarantee was production or utilization facilities must added to the list of financial assurance PART 989-RAISINS PRODUCED Provide financial assurance for mechanisms as a cost-saving option for FROM GRAPES GROWN IN decommissioning funding by selecting licensees that are able in meet the CALIFORNIA from a variety of mechanisms: surety stringent financial test.

bond or letter of credi', prepayment, The NRC's decision to add self-Accordingly, the interim final rule insurance, an external sinking fund guarantee to the list of approved emending 7 CFR part 989 which was coupled with a surety or insurance, financial assurance mechanisms for published at 63 FR 11585 on March 10, parent company guarantee for licensees qualified licensees came in response to 1998, is adopted as a final rule without that have a qualifying corporate parent, a petition for rulemaking filed bv change.

and, for certain financially strong General Electric and Westinghouse Dzted: May 26,1998, corporations, self-guarantee. A (PRM-30-59, Notice of receipt Robert C. Keeney, statement of intent regarding obtaining published September 25,1991 (56 FR Deputy Administrator, Fruit and Vegetable funds to satisfy decommissioning 48445)). The petition presented a case Pmgrams.

obligations may be used by some for allowing self guarantee as a cost-

[FR Doc. 98-14422 Filed 5-29-98; 8:45 ami licensees that are governmental entities saving option for corporate licensees nuMG CODE SU0-02-.P or example, publiC universities whose that are able to pass a stringent financial charter provides for a direct link to the test.

State Government).

Subsequent to the December 29,1993.

NUCLEAR REGULATORY To date, self guarantee has not been final rule, the Commission initiated a COMSSION available to norprofit licensees such as study to determine whether criteria hospitals and universities, or to for, could be developed and applied by NRC 10 CFR Parts 30' 40' 50,70, and 72 Profit licensees who do not issue bonds, for nonprofit licensees and non-bond-because the financial test for self, issuing commercial licensees to use self-RIN 3150-AF64 guarantee uses the rating of the bonds guarantee while maintaining the Self-Guarantee of Decommissioning issued by the licensee as one measure of required level of confidence regarding Funding by Nonprofit and Non-Bonc;-

the licensee's financial resources and the availability of decommissioning lxulng Licensees ability to fund decommissioning, funds when needed. The study, The NRC is extending the use of self-

" Analysis of Potential Self-Guarantee AIENCY: Nuclear Regulatory guarantee, previously limited to bond.

Tests for Demonstrating Financial Commission.

Issuing industrial corporations, to Assurance by Nonprofit Colleges and

%CTION: Final rule' additional categories of qualified Universities and Hospitals and by licensees. By selecting appropriate Business Firms that Do Not issue

SUMMARY

The Nuclear Regulatory financial criteria for self-guarantee, this B nds, NUREG/CR-65142 Oune 1997),

Commission is amending its regulations extension can be made without identified a variety of financial criteria to allow additional materials licensees jeopardizing the present high level of that could be applied to additional and non-electric utility reactor licensees financial assurance that the categ ries flicensees regarding the use who rneet certain financial criteria to of se gu rante he nnancial criteda decommissioning obligation requires.

self-guarantee funding for Allowing qualified nonprofit and non-in this rule were selected by the NRC decommissioning. Certain commercial bonCissuing licensees to self-guarantee based on information in this report.

corporate licensees who issue bonds are will reduce the costs of complying with Public Comments on the Proposed Rule presently allowed to self guarantee NRC financial assurance requirements The NRC published a notice of funding if they meet stringent financial for those who meet the specified proposed rulemaking on April 30,1997, criteria. This rule allows nonprofit criteria.

licensees, such as colleges, universities, (62 FR 23394). In response to this and hcspitals, as well as some notice.16 comments were received: 2 I Pursuant to 10 CFR 50.75(e)(3). an electric from States. 6 from colleges and commercial licensees who do not issue utility can satisfy the decommissioning funding bonds, to self-guarantee funding requirements with an external sinking fund.

universities,3 from associations. 3 from Erovided theY meet similarl strinEent standing al ne. This rulernaking does not apply to Y

electric utilities and does not affect the NRC s 2 Singe copies are available from the NRC financial Criteria. Allowing additional Noitte of Proposed Rulemaking that addresses contact. copies are available ai current rates from quallfled licensees to use self-guarantce decommissioning funding assurance issues the U.S. Gover nment Printing Office. P.O. Box reduces licensee costs while providing anactated with electric utility restructuring (see 37082. Washington. DC 20402-9328 (telephone ade9uate assurance that funds for Financial Assurance Requirements for (202) 512-2249). or from the National Technical decommissioning will be available Decommissioning Nuclear Power Reactors-62 FR information Service by writing NTIS at 5285 Port 47588. September 10.1997). As part of this Royal Road. Springfield. VA 22161. Copics are when needed.

proposed rule, the NRC is considering amendmg its available for inspection or copying for a fee from EFFECTIVE DATE: July 1,1998.

defin tion of " electric utility" and clarifying th the NRC Public Document Room at 2120 L Street distinction between financial assurance NW., Washington. DC, the PDR's maihng address is FOR FURTHER INFORMATION CONTACT : Dr-mechanisms applicable to power reactor licensees Mall Stop LL-6, Washington DC 205554XX)l; Clark Prichard, Office of Nuclear and non power reactor iwensees teiephone (202) 634 -3273. fax (202) c34 -3343

d 29536 Federal Register /Vol. 63. No.104 / Monday, June 1,1998/ Rules and Regulations private corporations, I from a hospital, reasonably assume that such a college or extrapolate these extraordinary returns and I from the United States university can be allowed to self-into the future and to budget Enrichment Corporation. The guarantee for the costs of endowment spending accordingly, commenters all supported the extension decommissioning because it possesses However, in this context it is instructive of self-guarantee to qualified nonprofit sufficient financial strength to obtain to note that for a representative group of and non bond-issuing commercial the necessary funds when they are institutions, the average annual real licensees. Although some commenters needed.

return after spending for the 10-year

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urged NRC to adopt the proposed rule Even assuming the premise of the period ended June 30,1994, is 4.1 as written, most favored some type of commenter NRC does not believe that percent, but for the 20 years ended June change to the financial criteria.

reducing the multiple to 15, as the 30,1994, it is 0.9 percent." (1994

1. Financial Criteria for Colleges and commenter suggests, is desirable.

NACUBO Endowment Study, National Universities Although a real rate of return of 3 Council of College and University percent may appear low under the Business Officers,1995, p. 4)

The financial test criteria proposed for market conditions prevailing during Therefore, the NACUBO study colleges and universities were an A or certain periods, there is a substantial recommends strongly that institutions better bond rating or, for those not body of empirical evidence indicating keep their spending from endowment having a bond rating, unrestricted that it is a reasonable assumption. If a below the rate proposed by the endowment of at least $50 million or 30 licensee who has been relying on a self-commenter The report states that; times projected decommissioning costs, guarantee is required to fully fund a whichever was greater. There were no trust fund for decommissioning in the Historical precedent indicates that a fund invested approximately 60 percent in comments regarding the A or better year before the beginning of domestic and foreign stocks,30 percent in bond rating, but several commenters decommissioning, and the licensee fixed income, and 10 percent in various other objected to the non-bond criteria as too relles on earnings from endowment to asset classes inevitably experiences recurring conservative.

Create the trust, it is the annual earnings periods of absolute decline in market values Comment: A commenter stated that of the endowment for the year over 3 years. Such a decline would trigger a the selected multiple of 30 times immediately prior to the reduction in spending for an institution decommissioning costs is excessively decommissioning that must equal the sucking to a pohey of spending a fixed conservative. NRC's basis for the 30 required amount. NRC has reviewed the,Q*gy h*,7d'*y',i",,*Ing aprage 3

multiple is that an amount of money 30 information provided in Ibbotson po, fiscal times decommissioning costs invested Associates, Stocks Bonds, Bills, and year 1994, the average endowment spending rate reported by responding institutions is 6.0 1

at 3 percent would yield an annual inflation 1995 Yearbook,1995, which percent. On average, the smallest amount sufficient to fund those costs.

published a summary of market results endowments ($25 million and less) spent 1

The commenter said that it should not for the 69-year period from 1926 to 1995 more (7.2 percent) than the largest (4.5 be difficult to obtain secure investments for five categories of investments: small percent), and public institutions spent more j

yielding 6 percent; thus an appropriate company stocks, large company stocks, (6.6 percent) than private institutions (5.7 multiple would be 15 based on long term government bonds, long-term percent) * *

• With the sole exception of the investment yield.

corporate bonds, and intermediate-terrn 4.5 percent spent by the largest universities.

Response: NRC's oblective in selecting these spending rata are not compatible with government bonds'r basis, less risky financial criteria was to provide a level

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On a year-by-yea of financial assurance risk similar to the investments, such as treasmy bills, hy',

, [t hs*sN($'fficu$t financial assurance risk in the existing showed the most f equent positive possible) for the exceptionally well-managed j

t self-guarantee. However, for colleges returns, but their annual returns also institution to spend 6.0 percent of a 3-year and universities that do not issue bonds, were relatively low, Riskier investments moving aver ge of endowment market values, lack of appropriate data on default risk showed a broad distribution of returns, and still preserve purchasing power.

made a financial assurance risk analysis from very good to very poor. Overall, However :is courting disaster to spend at impossible. For these licensees NRC however, with the exception of small an annual rate of 6.0 percent toward the tail deliberately chose financial criteria and large company stocks, the average end of a long bull market. (1994 NACUBO which are conservative.

inflation-adjusted earnings (geometric Endowment Study,1995, p. 5)

NRC did state in the preamble to the mean) for these cctegories of Based on these considerations, the proposed rule, at 62 FR 32296, that investments were less than 3 percent. In NRC continues to believe that a "Ithe multiple of 30 has been chosen a number of years, earnings for stocks relatively conservative criterion, such as because this would mean that any level also were less than 3 percent. Thus, real the 30 times requirement,is a of decommissioning costs could be investment returns over a one year reasonable criterion for the covered by the annual return on an period may not even match conservative decommissioning self-guarantee test for endowment invested at 3 percent."

earnings assumptions.

( )lleges and universities. The NRC does However, it is important to note that The study of endowment sponsored not accept the commenter's NRC was not assuming (1) that by the National Council of College and recommendation to adopt a institutions will in fact finance University Business Officers (NACUBO) substantially less stringent criterion.

decommissioning out of endowments:

published in 1995 also emphasized a Comment: A commenter objected to (2) that endowments can be expected in concern for this earnings variability in the requirement that unrestricted all circumstances to grow at a rate of at its analysis of college and university endowment be at least $50 million or at least 3 percent annually; or (3) that endowment investment. First, least 30 times the decommissioning cost institutions can be expected to NACUBO's study noted that current estimate, whichever is greater. The reallocate up to 3 percent of their high rates of return cannot be expected requirement should be compliance with spending from endowments in a one-to continue indefinitely. "At a time either the $50 million figure or the 30 year period. Rather, the criterion was when many public and private times decommissioning cost estimate, selected to serve as a measure of the institutions are searching for ways to but not whichever is greater.

overall financial strength of the bridge the gap between revenues and Response: As previously stated NRC institution, indicating that NRC can expenditures, it is tempting to chose conservative financial criteria for

Federal Register /Vol. 63, No.104 / Monday, June 1.1998/ Rules and Regulations 29537 non-bond-issuing colleges and up front even though decommissioning decommissioning costs) was excessively universities, aimed at assuring the activities are not completed within a conservative. It appears to reflect an financial viability of a licensee quallfled single year. For this reason NRC's expectation that the decommissioning to self-guarantee. This is the only criteria for determining whether a wlit take a short time whereas a realistic requirement that would apply to non-licensee should be allowed to self-time frame should be 2 years or more.

bond-issuing colleges and universities, guarantee the costs of decommissioning NRC should consider a multiple of 30 or whereas non-bond-issuing hospitals or must consider the possibility that the less to be appropriate.

commercial licensees would be subject licensee will be required to fully fund to multiple financial ratios as financial decommissioning in the year Response:The requirement that tests. It is designed to capture two immediately prior to the beginning of hospital operating revenues be at least measures of financial viability: (1) decommissioning activities. The 100 times decommissioning costs is a overall financial strength and (2) licensee would fund a standby trust if criterion that NRC is proposing to use to financial strength relative to size of either (1) the licensee no longer determine whether a licensee has decommissioning obligation. The qualifies to use the self guarantee t sufficient financial strength to self-overall financial strength of an provide financial assurance for guarantee. However, a Potential institution is heav0y dependent on the decommissioning, even if it was not yet c nsequence f self-guaranteeing could size of its unrestricted endowment, required to conduct decommissioning, be the need to fully fund a trust fund in Specific ability to fund or (2) a licensee using a self-guarantee a short period of time if the licensee decommissioning expenses is measured is required to carry out ceases to be capable of passing the self-by the ratio of unrestricted endowment decommissioning. NRC currently does guarantee test or if decommissioning to decommissioning costs. A financial not allow licensees to consider the must be carried out. As discussed above, t:st based only on ratio to impact of earnings during the " payout" the operating revenues multiple decommissioning cost might allow an period (the period during which funds criterion does not reflect any institution without adequate financial are being expended from the financial expectation concerning the length of strength to pass if its decommissioning assurance standby trust to pay for time during which decommissioning costs were low. A test based only on the decommissioning) in calculating the will occur. Therefore. NRC does not size of the unrestricted endowment amount of funds that must be set aside accept this recommendation.

might be inadequate for those for decommissioning. Therefore, the Comment: A commenter found the institutions with the highest NRC disagrees with the commenter's rationale that requires hospitals to meet decommissioning costs. Both threshold suggestion that the expected duration of all four financial ratios tests unclear.

requirements are needed to provide decommissioning activities should This commenter believed that using assurance that an institution can meet apply to the determination of the only the operating revenues /

decommissioning obligations when appropriate multiple.

decommissioning costs ratio would necessary-Comment: A commenter recommends Co appear to provide reasonable assuranet NRC,mment: A commenter stated that that [ based on the combination of l

implies that decommissioning costs are investment yield of 6 percent and of ability to provide decommissioning s rationale for a multiple of 30 fundinE' paid from investment yields over a 1-investment yields over 2 to 3 years year period. However, it is more rather than 1 year] the multiplication Response: The financial ratios test for factor [ bel reduced from 30 to 10 with hospitals in the rule was carefully realistic to assume that any le conse selected to provide a level of financial decommissioning activities where ar"[esponse:rvatism."

For the reasons stated in assurance risk similar to the financial financial assurance arrangements are responses to the preceding comments, assurance risk in the existing self-involved will require considerable NRC does not accept this guarantee. The four ratios in coordination with regulators and recommendation.

combination represent the financial test financial services involving 2 or 3 years to complete. This consideration also

2. Financial Criteria for Hospitals that best achieves this goal. A financial test usingjust one of these ratios would implies that the appropriate multiple The finar:cial test criteria proposed for not represent the same level of risk and should be 15 rather than 30.

hospitals was an A or better bond rating would not provide an adequate level of Response: NRC recognizes that or, for hospitals not having a bond financial assurance. Using only the ratio decommissioning may occur over a rating, a financial ratios test consisting of operating revenues to period longer than one year. The of the following:

decommissioning costs would multiple of 30 was chosen without (a) Liquidity-(current assets and completely ignore such determinants of regard to how many years it would take depreciation fund, divided by current financial strength as liquidity, to decommission a facility. The liabilities) greater than or equal to 2.55.

commenter is attempting to make this (b) Net Revenue-(Total revenues less indebtedness. and profitability. The linkage the key factor in arriving at an total expenditures divided by total financial test used for non-bond-issuing commercial licensees includes several appropriate multiple. However, revenues) greater than or equal to 0.04.

following this line of reasoning.

(c) Leverage-(Long term debt divided ratios, notjust one. The non-bond stretching out the time length of by net fixed assets) less than or equal t financial test for entleges and decommissioning would imply ever 0 67 universities does use a single ratio, but decreasing multiples.

(d) Operating Revenues at least 100 it is the ratio of unrestricted endowment NRC s objective is to ensure that times decommissioning costs.

to decom missionin8 costs. Unrestricted decommissioning will take place on a There were no comments regarding endowment is a fund readily available timely basis. The financial assurance the bond rating criterion but there were to meet decommissioning expenses.

regulations are intended to assure that several comments on the non bond Hospital operating revenues are inadequate funding does not prevent criteria.

different because these funds may not timely decommissioning. Timely Comment: A commenter believed that be readily available to meet decommissioning may require that all the selected multiple of 100 (hospital decommissioning expenses due to other decommissioning funding be available operating revenues at least 100 times hospital costs.

29538 Federal Register /Vol. 63. No.104 / Monday, June 1.1998 / Rules and Regulations

3. Prohibition on Us/ng a Guarantee in rating, despite declines in the financial accounting principles to assess Combination With AnotherF/nancial condition of the issuer.

compliance with a financial test Assurance Mechanism The problem with an insured bond designed using U.S. GAAP. Finally, the Comment:Some commenters noted fr m the standpoint of financial present financial assurance regulations that provisions in 10 CFR 30.35(f)(2),

assurance is that there is no criterion by allow the use of a broad range of 40.36(e)(2). 50.75(e)(2)(iii). 70.25(f)(2),

which NRC can identify when a financial assurance mechanisms in part and 72.30(c)(2) provide that neither a licensee / issuer n 1 nger qualties to to ensure that licensees that are unable self-guarantee. The bond can r(tain its to use a particular mechanism have Parent company Euarantee nor a guarantee by an applicant may be used high rating despite a decline in the other alternatives available. NRC does in combination with other financial financial strength of the issuer.

not expect firms to change their methods to satisfy financial assurance Furthermore, the insurance cove rage accounting practices in order to make requirements. These commenters provided by the bond insurer, walch is use of the financial test because a wanted to know the reasons for these a guarantee of payment of principsl and number of other options are avaliable.

interest in accordance with the ins tred mstrictions.

Response:This rule makes no change bond issue's payment schedule, wil' not

6. Financial Cr/teria for Non Bond-provide any additional source of Issuing CommerciaWcensees in the already existing prohibition funding for decommissioning. NRC does The financial test proposed for non-against combining a parent or self-not agree with the commenter's bond issuing commercial licensees was:

guarantee with another type of financial suggestion that it accept ratings on (a) Cash flow divided by total assurance mechanism. The issue of whether or not to allow such a insured bonds as an acceptable crite~ ion liabilities greater than 0.15.

for self. guarantee.

(b) Totalliabilities divided by net combination is broader than the focus of worth less than 1.5.

this rule. The NRC has limited

5. Requirements for Financial (c) Net wonh greater than $10 million experience with parent and self.

Statements or at least 10 times decommissioning guarantee to date. It is expected that the Comment:Some commenters objected costs, whichever is greater.

NRC will periodically reevaluate its to the proposed requirement in Comment: A commenter objected to financial assurance program in the Appendices D and E to 10 CFR Part 30 the net worth criterion of net worth

]

future and could reassess the need for that licensees must conduct accounting greater than $10 million or at least 10 the prohibition.

by U.S. generally accepted accounting times estimated decommissioning costs.

4. Insured Bond Ratings principles (GAAP). This does not This discriminates against well-funded recognize the increasingly multi-smaller firms that could easily self-Comment:Some commenters objected national nature of materials licensees.

guarantee smaller decommissioning to the proposed financial criteria which Foreign ownership of major material projects, but could not meet the $10 deal with bond ratings. As proposed, for licensees is currently a reality (e.g.,

million net worth requirement.

Institutions that issue bonds, only a Siemens ABB, Framatome) and can be Response:The NRC's objective in bond issuance that is " uninsured" may expected to increase in the future. The setting financial criteria for non-bond-be used; an " insured" bond rating selection of accounting practices to be issuing commercial licensees was to would not be eligible. Thejustification used is a significant corporate decision make the financial assurance risk of for this limitation is not warranted affected by many factors. It is these criteria equal to the financial because bond insurers evaluate the unreasonable to require that corporate assurance risk of the financial criteria financial condition of the prospective practices of major multi-national firms for licensees that issue bonds (estimated issuers and avoid issuing policies to be changed for a licensee to be allowed to be approximately 0.13 percent per universities that are not creditworthy.

to provide self guarantee of year). According to the analysis of Consequently, the presence of bond decommissioning funding. The rule potential financial criteria carried out as insurance indicates that the issuer is in should allow licensees to certify part of the proposed rule, the financial sound financial condition.

adequate assurance that funds will be criteria in the proposed rule meet this Response: Bond insurers evaluate the available by using other recognized and objective? Firms with smaller net worth financial condition of the issuers of the accepted accounting principles.

have a larger default risk than larger bonds at the time the debt is insured.

Response: Financial statements firms. Thus, the $10 million net worth Bond rating agencies, such as Moodys prepared in accordance with foreign requirement is an essential part of the and Standard and Poors, typically accounting principles rather than U.S.

overall financial test. The NRC has assign such bonds a triple-A rating GAAP pose two problems from the retained this requirement in the final because of the insured status of the standpoint of a financial test for self-rule.

bond.

guarantee. First, the financial test was NRC,s concerns with accepting developed based on an analysis of

7. Decommissioning Cost Estimates insured bonds as a criterion of financial financial data for U.S. firms.

Comment: Several commenters raised assurance arise from the possibility that, Consequently, the financial test criteria the issue of how decommissioning costs over time, the insuted bond rating could may not be applicable or effective when were estimated. The NRC should mask adverse changes in the financial used in conjunction with financial data encourage best available information condition of the bond issuer after the that were prepared in accordance with estimates of decommissioning costs, debt has been insured. The rule foreign accounting practices. Second, based on historic plant experience in includes a requirement that the licensee allowing firms to rely on financial decommissioning and renovation, rather must ascertain whether it continues to statements prepared according to than commercial estimates by pass the financial test for self guarantee accounting principles in use in their contractors that tend to be too high.

every year. Furthermore. if the licensee own country could place a heavy no longer meets the test criteria, it must administrative burden on NRC. The y'","l",'j'[""[, ^("['"lj,f,n Anaip or Puenuai seir.cuauntee Tests for notify NRC and establish alternative examples cited by the commenter, for N npmht financial assurance. However, insured instance, might require NRC to know Busine 4 nrrns That Do Not Issue Bonds." NUREG/

p y

bonds would continue to hold their and apply German, Swiss. and French CR-cst t. p. 4 7. June 1997.

J Federal Register /Vol. 63, No.104 / Monday, June 1,1998 / Rules and Regulations 29539 Conservative assumptions, such as use adopt the essential objectives of these CFR Part 76). USEC stated that it would of rates charged by contractors and high sections in order to maintain an benefit from the opportunity to reduce estimates of waste disposal costs, adequate program. The remaining the costs of complying with NRC should not be used. A commenter also sections of the rule, including those financial assurance requirements, which noted that assuming a period for short-which allow self guarantee of certain USEC estimated would presently cost in lived isotopes to decay before commercial corporate licensees who excess of $ 100.000 per year for letters of decommissioning begins would be a issue bonds if they meet stringent credit and surety bonds.

realistic assumption. Also, a typical financial criteria, were designated as Response: Under 10 CFR 76.35(n),

licensee will not have the maximum compatibility Category D. Category D USEC (or the Corporation) is required to emount of material allowed by the means the Agreement States do not need establish financial surety arrangements license at the time of decommissioning. to adopt a compatible rule, to ensure that sufficient funds will be Response:This rulemaking makes no The final rule change, which will available for the ultimate disposal of chinges in the requirements for how extend the self-guarantee financial waste and depleted uranium, and licznsees estimate decommissioning assurance option to other material and decontamination and decommissioning costs. Decommissioning cost estimates, non-electric utility reactor licensees that activities that are the financial or use of the certification amounts in 10 meet certain financial criteria is also responsibility of the Corporation. The CFR Part 30 are already required by designated as compatibility Category D.

funding mechanisms currently listed in existing regulations on financial Under compatibility category D, the regulation as potentially acceptable tssurance. This rule simply adds an Agreement States may choose to for use by the Corporation include tdditional financial assurance maintain a more stringent rule by not prepayment, surety, insurance, and an mechanism to those already permitted adopting the self-guarantee option.

external sinking fund, but do not in NRC regulations.

9. Requirement for Annua 1 Passage of include self-guarantee r statement of

" The rule es

{ndi g, e

8. Agreement State Compatibility Status Financial Test ust e e

offinancial Assurance Regulations Comment: A commenter stated that availability of funds for any activities Comment:Some commenters believed Section II.C.(2) of Appendix E to Part 30 that are required to be completed" by that the proposed regulations should be should be modified so a qualifying the Corporation.

assigned a compatibility status of Level licensee would not have to repeat USEC was created pursuant to the I with Agreement States. This will passage of the financial test for self-Energy Policy Act of 1992, it is a wholly l

ensure consistent requirements for guarantee every year. University owned government corporation, whose l

finsncial surety arrangements and will endowments are very stable. In powers are vested in a five-member j

preclude the unintended creation of addition,Section II.C.(3) provides Board of Directors appointed by the competitive disadvantages between sufficient assurance that NRC will be President of the United States and facilities in Agreement States and Non-notified when a licensee no longer confirmed by the Senate. liowever, on Agreement States.

meets the criteria for self-guarantee.

July 25,1997 a plan was approved by Response: When the proposed rule Response: Although it is true that the President under which USEC will be was published in the Federal Register university endowments are relatively sold either to another corporation or to (see 62 FR 23394, April 30,1997),it was stable and Section ll.C.(3) provides for the public through a stock offering.

designated as a Division 2 compatibility notification, the provision for qualifying Under the USEC Privatization Act, item in accordance with the licensees to annually pass the test is Congress set certain restrictions on compatibility policy in effect at that retained in the final rule. For a self-foreign involvement in USEC's time. A Division 2 level of compatibility guarantee program to provide adequate privatization and required that a allowed an Agreement State to assurance of decommissioning funding, " reliable and economical domestic promulgate equivalent, or more the annual"requalification" provision source of enrichment services" exist stringent, financial assurance is necessary. NRC must have assurance following privatization.

regulations than those of NRC.

of financial strength on a timely basis.

Although the NRC is not currently Under the new " Policy Statement on A self-guarantee relies solely on the aware of any reason why it would be Adeq'uacy and Compatibility of licensee's ability to fund inappropriate to consider expanding the Agreement State Programs," (see 62 FR decommissioning. There is no backup category of funding mechanisms 46517, September 3,1997) Agreement such as that provided by a third-party available to the Corporation to States must adopt NRC regulations financial assurance mechanism. The demonstrate the availability of funds for having particular health and safety requirement for repeating the financial the actions required under 10 CFR significance and those necessary to test yearly is not unduly burdensome on 76.35(n), NRC does not believe that it maintain compatibility with the a licensee and gives NRC information on would be feasible to do so in the current Commission's regulatory program, the financial condition of the licensee rule. First, USEC was not included in The NRC financial assurance on a timely basis. This requirement is any of the analyses performed to regulations, in effect when the new not unique to colleges and universities evaluate potential self. guarantee tests policy was implemented, were or to this rule. It is found in the self.

for demonstrating financial assurance.

designated as having health and safety guarantee financial tests applicable to NRC believes that detailed analyses significance. Specifically, sections (a),

other types of licensees, both profit and should be undertaken to ensure that all (b), and (d) of Parts 30.35,40.36 and nonprofit.

critical factors have been considered.

70.25, which require that licensees must Second. USEC's current and future consider the cost of decommissioning

10. Use ofSelf-Guarantee by the Unfred situation with respect to the costs that their facilities and that those costs must States Enrichment Corporation it might incur is substantially different l

be provided for through a financial Comment:The United States from those of the licensees included in assurance mechanism, have particular Enrichment Corporation (USEC) the current rulemaking. In particular, health and safety significance and were proposed that the NRC modify the the scope and type of activities that designated as category H&S. Under the language of the rule to include USEC must carry out under 10 CFR

)

Il&S category Agreement States should certificates (regulated by NRC under 10 76.35(n) are very different from those

l 1

29540 Federal Register /Vol. 63. No! 104 / Monday. June 1.1998 / Rules and Regulations conducted by hospitals and universities, which can be used by qualified basis. Therefore. Category D has been and the non-bond issuing firms covered nonprofit licensees and non-bond-assigned to these rule provisions.

by the proposed rule.

issuing licensees.

Third, the exact size of the obligations Appendix D is added to 10 CFR Part Finding of No Significant that USEC might ba required to cover is 30 to establish requirements for self-EnvironmentalImpact: Availability uncertain and will not be determined guarantee by non-bond issuing The amendments will allow qualified i

until a later date, although it is known commercial licensees. Appendix E is nonprofit and non bondissuing l

that many of the costs will remain the added to 10 CFR Part 30 to establish licensees tae option of using self-responsibility of the U.S. Department of requirements for self-guarantee for guarantee as a mechanism for financial Energy (DOE). Under 10 CFR 76.35(n),

nonprofit college, university. and assurance for decommissioning. For-DOE is responsible for those aspects of hospital licensees.

Profit corporate licensees that issue decontamination and decommissioning bonds are already allowed to use self-10 CFR Part 40 of the gaseous diffusion plants (GDPs) guarantee if they meet the regulatory I

assigned to DOE under the Atomic Section 40.36 is amended to permit criteria. Other licensees currently may

~

Energy Act. DOE also is responsible for self. guarantee for financial assurance elect to use a variety of financial all environmental liabilities associated which can be used by qualified assurance mechanisms, such as surety with the operation of the GDPs before nonprofit licensees and non-bond.

bonds, letters of creditand escrow July 1.1993. According to USEC's issuing licensees.

accounts to comply v %

l Annual Report for 1996. "le]xcept for 10 CFR Part 50 ec mm ssi n n8 *8mation M certain accrued liabilities that will be action is intended to offer nonprofit and specified in a memorandum of Section 50.75 is amended to permit non bond-issuing nuclear materials agreement entered into prior to self guarantee for financial assurance licensees and non-electric utility reactor privatization. all environmental which can be used by quallfled licensees greater flexibility by allowing liabilities of the Company through the nonprofit licensees and non-bond-an additional mechanism for licensees date of privatization will remain issuing licensees.

that meet the financial criteria for use of obligations of the U.S. Government."

10 CFR Part 70 Ski 3 revis o'n to the NRC's regulations (Notes to Financial Statements: 7.

Environmental Matters). Furthermore, Section 70.25 is amended to permit simply adds one more financial as of June 30.1996. USEC had accrued self-guarantee for financial assurance assurance mechanism to the liability of $303 million for which can be used by qualified mechanisms currently available. It does transportation, conversion. and nonprofit licensees and non-bond not affect the cost of decommissioning disposition of depleted uranium issuing licensees.

materials and non-power reactor currently stored at the GDPs. The 1996 10 CFR Part 72 facilities. Allowing self-guarantee for i

Annual Report states that USEC is additional types of licensees does not j

evaluating various proposals for the Section 72.30 is amended to permit lead to any increase in the effect on the 1

disposition of depleted uranium, and self guarantee for financial assurance environment of the decommissioning depending on the outcome of such which can be used by qualified non-activities considered in the final rule evaluations, the Company may be able bond issuing licensees.

published on June 27.1988. (53 FR to reduce future cost accruals * * *.

Compatibility of Agreement State 24018), as analyzed in the Final Generic Pursuant to the USEC Privatization Act, Regulations Environmental Impact Statement on all costs and liabilities related to the Decommissioning of Nuclear Facilities The current NRC regulation which (NUREG-0586. August 1988).4 disposition of depleted uranium allows self-guarantee of certain Promulgation of this rule does not generated prior to the privatization date commercial corporate licensees who introduce any impacts on the i

are the responsibility of DOE." Fourth, issue bonds if they meet stringent environment not previously considered until privatization has occurred, financial criteria is designated as by the NRC. Therefore, the Commission important information about USEC's compatibility Category D. This final rule has determined, under the National future corporate structure and change, which will extend the self-Environmental Policy Act of 1969, as ownership will remain uncertain. As guarantee financial assurance option to amended, and the Commission's noted above. Congress has allowed other material and non. electric utility regulations in subpart A of 10 CFR part USEC to be sold either to another reactor licensees that meet certain 51, that this rule would nc,t be a major corporation or to the public through a financial criteria, is also designated as a Federal action significantly affecting the stock offering. Thus the form in which cornpatibility Category D. Category D quality of the human environment, and privatization occurs could affect the means the agreement States do not need therefore an environmentalimpact NRC's analysis of financial assurance to adopt a compatible rule. The Category statement is not required. No other alternatives. Because of the need to D designation was determined in agencies or persons were contacted in evaluate all of these factors. NRC has accordance with the new " Policy making this determination. The NRC determined not to include 10 CFR part Statement on Adequacy and staff is not aware of any other 76 in the current rulemaking-Compatibility of Agreement State documents related to the env.ronmental Changes From the Proposed Rule Prog, rams." approved by the i

Commission on June 30.1997. The final

• copies are available at cunent rates from the There are no changes from the rule change does not involve a basic U.S Government Printing Ofnce. P.O. Box 37082.

P OPosed rule.

radiation protection standard, activities **y"g"";,$U4$$2

)orrrQ >n' e

l Section-by-Section Description of that have direct and significant effects Service by wrtung N'MS at 5285 Port Royal Road.

g, n

I Changes in multiplejurisdictions. or essential Spongficid. vA 22161. Copies are available for 10 CFR Part 30 objectives which an Agreement State inspection or copying for a fee from the NRC Pubhc should adopt to avoid conflicts, EaPs. or D curnent Room at 2120 L Street NW., Washington.

DC; the PDR s malling address is Wil Stop LL-6.

Section 30.35 is amended ta permit duplications in the regulation of washington. Dc 20sss; iclephone (202) 634-3273.

self guarantee for financial assurance agreement material on a nationwide fax (202) 634-3343.

Federal Register /Vol. 63 No.104 / Monday, June 1,1998 / Rules and Regulations 29541 impact of this action. The foregoing Regulatory Flexibility Certification Radiation prestection. Reporting and constitutes the environmental In accordance with the Regulatory me rdkeeping requirements, Scientific l

assessment and finding of no significant Flexibility Act of 1980 (5 U.S.C. 605(b)), equipment, Security measures, Special l

impact for this rule.

the Commission certifies that this rule nuclear material.

l Paperwork Reduction Act Statement will not have a significant economic 10 TFR Part 72 l

This final rule amends information impact on a substantial number of small collection requirements that are subject entities. This rule would expand the Manpower training programs, Nuclear materials. Occupational safety and j

to the Paperwork Reduction Act of 1995

${t health. Reporting and recordkeeping v

Co si (44 U.S.

3501 et seq.). These requirements. Security measures. Spent g

g requirements were approved by the I"'

Office of Management and Budget enhancing the flexibility of these (OMB), approval number 3150-0017, regulations, it is estimated that this rule For the reasons set out in the

-0020. -0011, -0009, and -0132.

w ugd result in significant cost savings preamble and under the authority of the The public reporting burden for this to qualifying licensees.

Atomic Energy Act of 1954, as amended, the Energy Reorganization Act of 1974, information collection is estimated to Backfit Analysis as amended, and 5 U.S.C. 553, the NRC average 9 to 14 hours1.62037e-4 days <br />0.00389 hours <br />2.314815e-5 weeks <br />5.327e-6 months <br /> per response.

The NRC has determined that is adopting the following amendments including time for reviewing instructions searching existing data backfitting provisions (10 CFR 50.109 to 10 CFR Parts 30,40,50,70, and 72.

and 2 2) n t e 0t sources, gathering and maintaining the PART 30-RULES OF GENERAL g

{9, g 9, that are bein8 data needed, and completing and

• nd APPLICABILITY TO DOMESTIC reviewing the information collection.

LICENSING OF BYPRODUCT g

pyt th s le au he le ces Send comments on any aspect of this ERW.

not impose a backfit as defined in 10 CFR 50.109(a)(1) or 72.62(a). The rule 1.The authority citation for Part 30 ugge ti s for ed c he b r en, to the Information and Records extends the self-guarantee alternative for continues to read as follows:

Management Branch (l'-6 F33) U.S.

dem nstratin;; decommissioning Authority: Secs. 81,82.161,182,183,186, Nuclear Regulatory Commission, financial assurance to qualified non-68 Stat. 935,948,953,954,955, as amended, Washin8 ton, DC 20555-0001, or by pr fit and non-bond issuing licensees.

sec. 234,83 Stat. 444. as amended (42 U.S.C.

Internet electronic mall at Extending the availability of this option 211I,2112.2201,2232, 2233, 2236,2282);

Bjs@NRC. GOV; and to the Desk OfHcer, does not hnpose a new burden on secs. 201, as amended. 202,206,88 Stat.

Office of Information and Regulatory licensees of commercial power reactors 1242, as amended. 1244.1246 (42 U.S C.

1 Affairs, NEOB-10202 (3150-0017),

or independent spent fuel storage 5841,5842, 5846).

J Office of Management and Budget, installations (ISFSI's). Accordingly, the Section 30.7 also issued under Pub. L.

Washington, DC 20503.

rulemaking does not constitute a backfit 95-601, sec.10,92 Stat. 2951 (42 U.S.C.

and a backfit analysis was not prepared 5851), Section 30.34(b) also issued Public Protection Notification for this final rule.

under sec.184,68 Stat,954, as amended (42 U.S C. 2234). Section 30.61 also If a document used to impose an List of Subjects information collection does not display issued under sec.187,68 Stat. 955 (42 a currently valid OMB control number, 10 CFR Part 30 U.S.C. 2237).

2. In S 30 8 paragraph (b) is revised to the NRC may not conduct er sponsor, Byproduct material, Criminal read as follows:

and a person is not required to respond penalties, Government contracts, to, the information collection.

Intergovernmental relations, Isotopes, 6 30.8 information collection l

Regulatory Analysis Nuclear materials, Radiation protection, requirements: OMB approvat.

Reporting and recordkeeping The NRC has prepared a regulatory requirements.

(b) The approved information analysis on this regulation. The analysis examines the costs and benefits of the 10 CFR Part 40 collection requirements contained in this part appear in $9 30.9,30.11,30.15, alternatives considered by the NRC. The Criminal penalties, Government 30.19,30.20,30.32,30.34,30.35,30.36, analysis is available for inspection in contracts,llazardous materials 30.37,30.38,30.50,30.51,30.55,30.56, the NRC Public Document Room. 2120 transportation, Nuclear materials, and Appendices A, C, D, and E of this L Street NW (Lower Level), Washington, Reporting and recordkeeping part.

DC. Single copies of the analysis may be requirements, Source material, obtained from Clark Prichard Office of Uranium.

3. In S 30.35, the introductory text of Nuclear Materials Safety and 10 CFR Part 50 paragraph (0(2) is revised to read as Safeguards, U.S. Nuclear Regulatory follows:

1 Commission, Washington. DC 20555, Antitrust, Classified information, telephone (301) 415-6203.

Criminal penalties Fire protection, 6 30.35 Financial assurance and Intergovernmental relations, Nuclear recordkeeping for decommissioning.

Small Business Regulatory Enforcement Fairness Act power plants and reacters, Radiation protection Reactor siting criteria.

(0 * *

• In accordance with the Small Reporting and recordkeeping (2) A surety method, insurance, or Business Regulatory Enforcement requirements.

other guarantee method. These methods Fairness Act of 1996, the NRC has guarantee that decommissioning costs determined that this action is not a 10 CFR Part 70 will be paid. A surety method may be

" major rule" and has verified this Criminal penalties, Hazardous in the form of a surety bond, letter of determination with the Office of materials transportation. Material credit, or line of credit. A parent Information and Regulatory Affairs, control and accounting, Nuclear company guarantee of funds for Office of Management and Budget.

materials, Packaging and containers, decommissioning costs based on a

-O

29542 Federal Register /Vol. 63. No.104 / Monday, June 1,1998 / Rules and Regulations l

financial test may be used if the company is responsible as self-guaranteeing Commission. the licensee will set up and guarantee and test are as contained in licensee and as parent-guarantor.

fund a trust in the amount of the current cost appendix A to this part. A parent (2) Assets located in the United States estimates for decommissioning.

"""ng to company guarantee may not be used in

• "jt3 a t $ ti es the total cur Appendix E to Part 30-Criteria rt nt combination with other financial decommissioning cost estimate (or the Relating to Use of Financial Tests and methods to satisfy the requirements of current amount required if certification is Self-Guarantee For Providing this section. For commercial used) for all decommissioning activities for Reasonable Assurance of Funds For corporations that issue bonds, a which the company is responsible as self-Decommissioning by Nonprofit guarantee of funds by the applicant or guaranteeing licensee and as parent.

Colleges, Universities, and Hospitals licensee for decommissioning costs guarantor.

based on a financial test may be used if (3) A ratio of cash flow divided by total

1. Introduction the guarantee and test are as contained liabilities greater than 0.15 and a ratio of total An applicant or licensee may provide in appendx C to this part. For liabilities divided by net worth less than 1.5.

reasonable assurance of the availability of B. In addition, to pass the financial test a funds for decommissioning based on commercial companies that do not issue company must meet all of the following furnishing its own guarantee that funds will bonds, a guarantee of funds by the requirements:

be available for decommissioning costs and applicant or licensee for (1) The company's independent certified on a demonstration that the applicant or decommissioning costs may be used if Public accountant must have compared the licensee passes the financial test of Section the guarantee and test are as contained data used by the company in the financial II of this appendix. The terms of the self-In appendix D to this part. For nonprofit test, which is required to be derived from the guarantee are in Section !!! of this appendix.

entities, such as colleges, universities, independently audited year end financial This appendix establishes criteria for passing and nonprofit hospitals, a guarantee of statement based on United States generally the financial test for the self-guarantee and accepted accounting practices for the latest establishes the terms for a self-guarantee, funds by the applicant or licensee may fiscal year, with the amounts in such H' Finmcial Test be used if the guarantee and test are as financial statement. In connection with that contained in appendix E to this part. A procedure, the licensee shall inform NRC A. For colleges and universities, to pass the guarantee by the applicant or licensee within 90 days of any matters that may cause financial test a college or university must may not be used in combination with the auditor to believe that the data specified meet either the criteria in Paragraph !!.A.(1) any other financial methods used to in the financial test should be adjusted and or the criteria in Paragraph !!.A.(2) of this satisfy the requirements of this section that the company no longer passes the test.

appendix.

(2) After the initial financial test, the (1) For applicants or licensees that issue or in any situation where the applicant company must repeat passage of the test bonds, a current rating for its most recent or licensee has a parent company within 90 days after the close of each uninsured, uncollateralized, and holding majority control of the voting succeeding fiscal year.

unencumbered bond issuance of AAA, AA, stock of the company, Any surety (3) If the licensee no longer meets the or A as issued by Standard and Poors (S&P) method or insurance used to provide requirements of paragraph II.A of this or Aaa Aa. or A as issued by Moodys.

financial assurance for appendix, the licensee must send notice to (2) For apph, cants or licensees that do not j

decommissioning must contain the the NRC ofintent to establish altemative issue bonds, unrestricted endowment i

following conditions:

financial assurance as specified in NRC c nsisting of assets located in the United regulations. The notice must be sent by States of at least $50 million, or at least 30 certified mail, return receipt requested, times the total current decommlisioning cost i

4 New Appendices D and E to Part 30 within 90 days after the end of the fiscal year estimate (or the current amount required if are added to read as follows..

for which the year end financial data show certification is used), whichever is greater, s the licensee no longer meets the f r all decommissioning aciivities for which Appendix D to Part 30-Criteria financial test requirements. The licensee the college or university is responsible as a Relating To Use of Financial Tests and must provide alternative financial assurance Self-guaranteeing licensee.

Self Guarantee for ProvidinE within 120 days after the end of such fiscal B. For hospitals, to pass the financial test Reasonable Assurance of Funds for Y""'

a hospital must meet either the criteria in Decommissioning by Commercial III. Company Self. Guarantee Paragraph II.B.(1) or the criteria in Paragraph ll.B.(2) of this appendir Companies That flave no Outstanding The terms of a self-guarantee which an (1) For applicants or licensees that issue Rated Bonds applicant or licensee furnishes must provide bonds, a current rating for its most recent that:

uninsured, uncollateralized, and I. Introduction A. The guarantee shall remain in force unencumbered bond issuar.ce cf AAA. AA, An applicant or licensee may provide unless the licensee sends notke of or A as issued by Standard and Poors (S&P) reasonable assurance of the availability of cancellation by certified mall, retum receipt or Aaa, Aa, or A as issued by Moodys.

funds for decommissioning based on requested, to the NRC. Cancellation may not (2) For applicants or licensees ihat do not furnishing its own guarantee that funds will occur until an alternative financial assurance issue bonds, all the following tesu must be be available for decommissioning costs and mechanism is in place, met:

on a demonstration that the company passes it The licensee shall provide alternative (a) (Total Revenues less total expenditures) the financial test of Section II of this financial assurance as specified in the divided by total revenues must be equal to appendix. The terms of the self-guarantee are regulations within 90 days following receipt or greater than 0.04.

In Section 111 of this appendix. This appendix by the NRC of a notice of cancellation of the (b) Long term debt divided by net fixed establishes criteria for passing the financial guarantee.

assets must be less than or equal to 0.67.

test for the self. guarantee and establishes the C. The guarantee and financial test (c) (Current assets and depreciation fuod) terms for a self-guarantee..

provisions must remain in effect until the divided by current liabilities must be greater Commission has terminated the license or than or equal to 2.55.

II. Financial Test until another financial assurance method (d) Operating revenues must be at least 100 A. To pass the financial test a company acceptable 'o the Commission has been put times the total current decommissioning cost must meet the fcllowing criteria:

in effect by the licensee.

estimate (or the current amount required if (1) Tangible net worth greater than $10 D. The applicant or licensee must provide certification is used) for all decommissioning million, or at least 10 times the total current to the Commission a written guarantee (a activities for which the hospital is decommissioning cost estimate (or the written commitment by a corporate officer) responsible as a self. guaranteeing license.

wurrent amount required if certification is which states that the licensee will fund and C. In addition, to pass the financial test. a used), whichever is greater, for all carry out the required decommissioning licensee must meet r.;l the following decommissioning acuvities for which the activities or, upon issuance of an order t y the requirements:

Federal Register /Vol. 63. No.104 / Monday. June 1,1998 / Rules and Regulations 29543

11) The licensee's independent certified PART 40-DOMESTIC LICENSING OF or in any situation where the applicant public accountant must have ec npared the SOURCE MATERIAL data used by the licensee in the financial test, or licensec has a parent company which is required to be derived fram the

5. The authority citation for Part 40 holding majority control of the voting independently audited year end financial continues to read as follows:

stock of the company. Any surety method or insurance used to provide statements, based on United States generally Authority: Sccs. 62,63,64,65.81.161, financial assurance for accepted accounting practicos, for the latest 182,183,186,68 Stat. 932,933,935. 948, fiscal year, with the amounts in such 953,954,955, as amended, secs. Ile(2),83 decommissioning must contain the financial statement. In connection with that 84, Pub. L.95-604, 92 Stat. 3033, as following conditions:

procedure, the licensee shall inform NRC amended. 3039, sec. 234. 83 Stat. 444 as within 90 days of any matters coming to the amended 42 U

.C.

014(e) 2) 2092 2093 attention of the auditor that cause the auditor PART 50-DOMESTIC LICENSING OF 2233l 2236l 2282); sec. 274. P'ub. L.'86-373 PRODUCTION AND UTILIZATION n nc al t t s ou d a 5 ed n at the d

0,2 8 5 at.

as licensee no longer passes the test

• amended, 1244,1246 (4' U.S.C. 5841. 5842,

7. The authority citation for Part 50 (2) After the initial financial test, the 5846); sec. 275. 92 Stat. 3021, as amended by continues to read as follows:

licensee must repeat passage of the test Pub. L.97-415,96 Stat. 2067 (42 U.S.C.

within 90 days after the close of each 2022).

Authority: Secs. 102.103,104,105,161, succeeding fisc

• year.

Section 40.7 also issued under Pub. L.95-948. 953,954l 955',956, as amended, sec."

182,183.186 189 68 Stat. 936. 937. 938 (3) If the licensee no longer meets the 601, sec.10. 92 Stat. 2951 (42 U.S.C. 5851).

requircracats of Section I of this appendix.

Section 40.31(g) also issued under sec.122 234. 83 Stat.1244 as amended (42 U.S.C.

the licensee must send notice to the NRC of 68 Stat. 939 (42 U.S.C. 2152). Section 40.46 2132,2133,2134,2135,2201,2232,2233 its intent to establish attemative financial also issued under sec.184,68 Stat. 954, as 2236,2239,2282); secs. 201, as amended assurance as specified in NRC regulations.

amended (42 U.S.C. 2234). Section 40.71 als 202. 206,88 Stat.1242, as amended.1244, d

1246 (42 U.S.C. 5841,5842,5846).

The notice must be sent by certified mall.

I ub' under sec.187. 68 Stat. 955 (42 U.S.C.

Section 50.7 also issued under Pub. L.95-223 return receipt requesied within 90 days after 601, sec.10. 92 Stat. 2951 (42 U.S.C. 5851).

the end of the fiscal year for which the year

6. In S 40.36 the introductory text of Section 50.10 also issued under secs.101, end financial data show that the licensee no paragraph (e)(2) is revised to read as 185,68 Stat. 936,955. as amended (42 U.S.C.

longer meets the financial test requirements. follows:

2131. 2235); sec.102. Pub. L.91-190. 83 Stat.

The incensee must provide alternate financial 853 (42 U.S.C. 4332). Sections 50.13.

assurance within 120 days after the end of

$ 40.36 Financial assurance and 50.54(dd), and 50.103 also issued under sec.

such fiscal year.

recordkeeping for decommissioning.

108,68 Stat. 939 as amended (42 U.S.C.

III. Self-Cuarantee 2138). Sections 50.23. 50.35. 50.55, and 50.56 (e) * *

• also issued under sec.185. 68 Stat. 955 (42 The terms of a self-guarantee which an (2) A surety method insurance, or U.S.C. 2235). Sections 50.33a. 50.55a and applicant or licensee furnishes must provide other guarantee method. These methods A pendix Q also issued under sec.102. Pub.

P that-A. The guarantee shall remain in force guarantee that d'. commissioning costs L.91-190. 83 Stat. 853 (42 U.S.C. 4332).

unless the licensee sends notice of will be paid. A surety method may be Secti ns 50.34 and 50.54 also issued under cancellation by certified mail, and/or retum in the form of a surety bond, letter f sec. 204,88 Stat.1245 (42 U.S C. 584 4).

Sections 50.58,50.91, and 50.92 also issued receipt requested. to the Cornmission.

credit, or line of credit. A parent under Pub. L.97-415,96 Stat. 2073 (42 Cancellation may not occur unless an company guarantee of funds for U.S.C. 2239). Section 50.78 also issued under alternative financial assurance mechanism is decommissioning costs based on a sec.112, 68 Stat. 939 (42 U.S.C. 2152).

financial test may be used if the Sections 50.80-50.81 also issued under sec.

T e licensee shall provide alternative Euarantee and test are as contained in 184. 68 Stat. 954, as amended (42 U.S C.

financial assurance as specified in the appendix A to part 30. A parent

4) A ndiX l l "ed nder sec.

g g5S 22 Commission's regulations within 90 days company guarantee may not be used in foil wing receipt by the Commission of a combination with other financial g'. In S 50.75, the introductory text of notite of cancellation of the guarantee.

methods to satisfy the requirements of paragraph (e)(2)(iii) is revised to read as C. The guarantee and financial test this section. For commercial ggg, '

provisions must remain in effect until the corporations that issue bonds, a

$ 50.75 Reporting and recordkeeping for Commission has terminated the license er guarantee of funds by the applicant or decommissioning planning.

until another financial assurance method licensee for decommissioning costs acceptable to the Commission has been put based on a financial test may be used if (e) * *

• in effect by the licensee.

the guarantee and test are as contained (2) * *

• D. The applicant or licensee must provide in appendix C to part 30. For (iii) A surety method, insurance, or to the Commission a written guarantee f" commercial companies that do not issue other guarantee method. These methods written commitment by a corporate eticer or officer of the institution) which wates that bonds, a guarantee of funds by the guarantee that decommissioning costs the licensee will fund and car; y out the applicant or licensee for will be paid. A surety method may be required decommissioning e. ttvities or, upon decommissioning costs may be used if in the form of a surety bond, letter of issuance of an order by tb Commission. the the guarantee.1d test are as contained credit, or line of credit. A parent in appendix D to part 30. For nonprofit company guarantee of funds for ouNo t cu reIcos est entitles, such as colleges. universities, decommissioning costs based on a es fo decommissioning.

and nonprofit hospitals, a guarantee of financial test may be used if the E. If, at any time, the licensee's most recent funds by the applicant or licensee may guarantee and test are as contained in bond issuance ceases to be rated in any be used if the guarantee and test are as appendix A to part 30. A parent category of "A" or above by either Standard contained in appendix E to part 30. A company guarantee may not be used in and Poors or Moodys, the licensee shall guarantee by the applicant or licensee combination with other financial provide notice in writing of such fact to the may not be used in combination with methods to satisfy the requirements of Commission within 20 days after publication any other financial methods used to this section. For commercial of the change by the rating service.

satisfy the requirements of this section corporations that issue bonds, a

[

29544 Federal Register /Vol. 63, No.104 / Monday, June 1.1998 / Rules and Regulations guarantee of funds by the applicant or financial test may be used if the (42 U.S.C.10154). Section 72.96(d) also licensee for decommissioning costs guarantee and test are as contained in issued under sec.145(g). Pub. L.100-203, based on a financial test may be used if appendix A to part 30. A parent 101 Stat.1330-235 (42 U.S.C.10165(g)).

the guarantee and test are as contained company guarantee may not be used in Subpart J also issued under secs. 2(2). 2(15),

in appendix C to part 30. For combination with other financial 2(19). Il7(a).141(h). Pub. L.97-425,96 Stat.

commercial companies that do not issue methods to satisfy the requirements of 2202. 22012204. 2222,2244 (42 U.S.C.

bonds, a guarantee of funds by the this section. For commercial 10101,10137(a).10161(h)). Subparts K and L applicant or licensee for corporations that issue bonds, a are also issued under sec.133,98 Stat. 2230 decommissioning costs may be used if guarantee of funds by the applicant or (42 U.S C.10153) and sec. 218(a). 96 Stat.

the guarantee and test are as contained licensee for decommissioning costs 2252 (42 U.S.C.10198).

In appendix D to part 30. For nonprofit based on a financial test may be used if entities, such as colleges, universities, the guarantee and test are as contained

12. In D2.30, the introductory text of and nonprofit hospitals, a guarantee of in appendix C to part 30. For Paragraph (c)(2) is revised to read as funds by the applicant or licensee may commercial companies that do not issue f0ll *S be used if the guarantee and test are as bnnds, a guarantee of funds by the

$ 72.30 Financial assurance and contained in appendix E to part 30. A appiicant or licensee for recordkeeping for decommissioning.

guarantee by the applicant or licensee decommissioning costs may be used U may not be used in combination with the guarantee and test are as contained any other financial methods used to in appendix D to part 30. For nonprofit (c) * *

• satisfy the requirements of this section entities, such as colleges, universities, (2) A surety method. Insurance, or or in any situation where the applicant and nonprofit hospitals, a guarantee of other guarantee method. These methods or licensee has a ;carent company funds by the applicant or licensee may holding majority control of the voting be used if the guarantee and test are as guarantee that decommissioning costs stock of the company.

contained in appendix E to part 30. A will be paid. A surety method may be guarantee by the applicant or licensee in the form of a surety bond, letter of may not be used in combination with credit, or line of credit. A parent PART 70--DOMESTIC LICENSING OF any other financial methods used to C mPany guarantee of funds for SPECIAL NUCLEAR MATERIAL satisfy the requirements of this section decommissioning costs based on a or in any situation where the applicant financial test may be used if the

9. The authority citation for Part 70 or licensee has a parent company guarantee and test are as contained in continues to read as follows:

holding majority control of the voting appendix A to part 30. A parent Authority: Secs. 51,53.161,182,183.68 stock of the company. Any surety company guarantee may not be used in Stat. 929, 930, 948, 953, 954, as amended.

method or ins 2rance used to provide c mbination with other financial i

sec. 234,83 Stat. 444, as amended (42 U.S.C.

financial assur nce for methods to satisfy the requirements of

(

2071. 2073. 2201, 2232, 2233, 2282); secs.

decommissioning must contain the this section. For commercial 201, as amended. 2b2,204,206. 88 Stat.

following conditions:

corporations that issue bonds, a 1242. as amended. 1244.1245,1246 (42 guarantee of funds by the applicant or U.S C. 58^1. 5842,5845,5846).

licensee for decommissioning costs Sections 70.l(c) and 70.20a(b) also issued PART 72-LICENSING based on a financial test may be used if 2232 224 (42 U.S 10 5. 016.'Sec to REQUIREMENTS FOR THE the guarantee and test are as contained 70 7 also issued under Pub. L.95-601, sec.

INDEPENDENT STORAGE OF SPENT in appendix C to part 30. For

10. 92 Stat. 2951 (42 U.S.C. 5851). Section NUCLEAR FUEL AND HIGH-LEVEL commercial corporations that do not 70.21(g) also issued under sec.122,68 Stat.

RADIOACTIVE WASTE issue bonds a guarantee of funds by the 939 (42 U.S.C. 2152). Section 70.31 also applicant or licensee for issued under sec. 57d. Pub. L.93-377. 88

11. The authority citation for Part 72 Stat. 475 (42 U.S.C. 2077). Sections 70.36 and continues to read as follows:

decommissioning costs may be used if the guarantee and test are as contained 70.44 also issued under sec.184. 68 Stat. 954 Authority: Secs 51,53,57.62.63.65.69.

in appencilx D to part 30. A guarantee as amended (42 U.S.C. 2234). Section 70 61 81.161.182.183,184.186.187,189. 68 Stat.

by the APP cant or licensee may not be li also tssued under secs. 186,187,68 Stat. 955 929.930.932.933,934,935,948.953,954 (42 U.S C. 2236,2237). Section 70.62 also 955. as amended, sec. 234,83 Stat. 444 as used in combination with any other issued under sec.108,68 Stat. 939, as amended (42 U.S.C. 2071,2073. 2077,2092, financial methods used to satisfy the j

amended (42 U.S.C. 2138).

2093,2095.2099 2111,2201,2232,2233.

requirements of this section or in any 1

2234, 2236. 2237. 4238, 2282); sec. 274. Pub.

situation where the applicant or

10. In 5 70.25, the introductory text of 1

L.86-373. 73 Stat. 688, as amended (42 licensee has a parent company holding paragraph (f)(2) is revised to read as U S C, 2021). sec. 201, as amended. 202,206 follows:

majority control of the voting stock of

(

88 Stat.1242. as amended. 1244,1246 (42 f2

' the company. Any surety method or

$ 70.25 Financial assurance and

t. 2 42 55 e.I2 insurance used to provide financial r:cordkeeping for decommissioning.

Pub L.91-190. 83 Stat. 853 (42 U.S C. 4332); assurance for decommissioning must Secs.131.132,133.135.137,141 Pub L.

contain the following conditions:

(f) * *

• 97-425. 96 Stat. 2229. 2230. 2232,2241, sec.

(2) A surety method. Insurance, or 148. Pub L.100-203,101 Stat.1330 235 (42 Dated at Rociwille. Maryland. this 22nd other guarantee method. These methods C 10151,10152,10153.10155.10157, 3

day of May,1998.

guarantee that decommissioning costs Section 72 44(g) also issued under secs.

For the Nuclear Regulatory Commission.

will be paid. A surety method may be 142(b) and 148(c). (d' Pub. L. 100-203.101 John C. Iloyle, in the form of a surety bond, letter of Stat.1330-232.137. -236 (42 U.S C.

credit, or line of credit. A parent 10162(b).10168(c), (d)). Section 72.46 also

""M*"*

company guarantee of funds for issued under sec.189. 68 Stat. 955 (42 8tS C.

[FR Doc,98-14385 Filed 5-29 98. 8 45 ami decommissioning costs based on a 2239). sec.134. Pub L.97-425. 96 Stat. 2230 BILUNG CODE 7590-01-P m

A F4 f PP A LIST OF COMMENTERS (62 FR 23394)

1. Stan Huber Consultants

2. Princeton University

3. Council on Radionuclides and Radiopharmaceuticals

[

l

4. State of Illinois

5. Fansteel

6. Amersham

7. Nuclear Reactor Laboratory, M.I.T.

8. University of Delaware

9. American Coucil on Education 10.M.I.T.

11 Nuclear Energy insitute

12. United States Enrichment Corporation

13. Fred Hutchinson Cancer Center

14. Harvard University

15. State of New York

16. Reed College

@ A. HUBER CONSULTANTS, INC. o 200 N. CEDAR ROAD o NEW LENoX. IL 60451 (800) 383-0468 (815) 485-6161 : FAX (815) 485-4C

(

77 FAY 19 P 4 :06 May 14,1997 0FFC C. ~.: '. 7;J '

00CM. ' J..

r-..-

Secretary Attn: Docketing and Service Branch 3-((PA Q 8;/# #

I U.S. Nuclear Regulatory Commission Washington, DC 20555-0001

((,2 FR 2 33 W) j RE:

Proposed NRC Financial Assurance Rule for Non-Utility Decommissioning REF: Federal Register, Vol. 62 No. 83

Dear Secretary:

The proposed rule for non-utility decommissioning indicates that industrial corporations would need to meet not only a series of financial ratio tests but also have a " net worth of greater than ten million dollars or at least ten (10) times the estimated decommissioning costs, whicheveris creater.

The words "whicheveris greater"is discriminatory against well funded smaller firms that could easily self-guarantee smaller decommissioning projects, but could not meet the requirement of a net worth of at least 10 million dollars. A smaller firm that meets the financial criteria tests and has a net worth at least ten times greater than the estimated decommissioning costs should enjoy the same privileges as the larger firms with likely larger decommissioning costs for their facilities.

Unless the words "whicheveris greater"are eliminated from the proposed rule, only larger firms with net worth's of greater than 10 million dollars will benefit.

Many hundreds of millions more collars could be saved each year by allowing all j

licensees to meet equal financial assurance criteria.

j I

Thank you for your consideration.

j Sincerely, Stan A. Huber Consultants, Inc.

i Y&b5W Stan A. Huber President I

1 I

i j

t

'e ap l 47-ofp7@Ay- /g, J

Princeton I'ni\\ crsits Office of the Vice President for Finance and Administration

'p 318 Nanau Hall, Pnnceton. New ferses 08544 5264 l

'97 JUN 16 P3 :31 l

June 12,1997 0FFICE Di,d' n.E P.Y 00CKE Ma s ' t-i EM '

l Secretary U.S. Nuclear Regulatory Commission DOO.F Nd :8ER nu Washington, D.C. 20555-0001 PRCPCSED RULE Til 30,40,60.70)1.2 Attn: Docketina and Service Branch

( (,2 F/2 2 33N) l Re: Federal Register / Vol. 62, No. 83 / Wednesday, April 30,1997 / Proposed l

Rules, page 23394, Nuclear Regulatory Commission 10 CFR Parts 30,40, 50,70, and 72 Self-Guarantee of Decommissioning Funding by Non-Profit and Non Bond issuing Licensees Princeton University commends the NRC's proposed rule 10 CFR parts l

30,40,50,70, and 72 as referenced above permitting financially strong non-profit licensees the option to self-guarantee as a mechanism to ensure that adequate financial resources are available to fund and carry-out required decommissioning l

activities. On behalf of the University, I am writing this letter in my capacity as Assistant Vice President for Finance and Administration at Princeton University l

with responsibility for the Office of Environmental Health and Safety.

i We heartily agree with your finding that private universities which can meet the proposed stringent financial test can achieve significant cost savings without any loss of confidence for the NRC that funds for decommissioning will be available when needed. To illustrate the cost-savings at an institutionallevel, Princeton University (rated AAA by S&P and Aaa by Moody's) spends roughly $12,000 each year to m 'ntain its letter-of-credit, which is, at the current time, the least expensive financial assurance option for Princeton University.

We therefore urge that the NRC adopt the proposed rule as written so that non-l profit licensees who meet the NRC's stringent financial criteria have available to l

them the same financial assurance options presently available to corporate licensees Sincerely, 11

-fCh.Y Y' Laurel Harvey Assistant Vice President for Finance and Administration 1706170ess'P70612 t p' PDR PR j

30 62FR23394 PDR q)

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.-h ocrb J

0 R

00CKETED coq 9%ikCRadionuclides and Radiophannaceuncals, Inc.

3911 Campolmdo Crive Morsga, CA 945561551 y/ JL -9 N1 *.47 Sions3.is50 Fax: 510R831850 July 2,1997 RY OFFICE OF SECREI.) ICE Henry H. Kramer. Ph.D FACNP 00CKETiHG & SEFJ.

am o,a-BRANCE l

Secretary DOCKET NUMBER g 3YOI0fH74-U.S. Nuclear Regulatory Commission Washington, DC 20555-0001 (befRass%)

\\

Attention:

Docketing and Service Branch

Reference:

Federal Register, Vol. 62, No. 83, April 30,1997.

Proposed Rule: Self Guarantee of Decommissioning Funding by Non-Profit and Non-Bond Issuing Licensees These comments are submitted on behalf of the Council on Radionuclides and Radiopharmaceuticals (CORAR). CORAR members include the major manufacturers and distributors of radiopharmaceuticals, radioactive sources and research radionuclides used in the U.S. for therapeutic and diagnostic medical applications and for industrial, environmental and biomedical research and quality control. CORAR members and their customers are U.S. Nuclear Regulatory Commission (NRC) or Agreement State licensees and therefore interested in this proposed rule.

CORAR supports the NRC's proposal to allow additional licensees to self-guarantee funding for decommissioning. CORAR welcomes the approach taken by the NRC and recommends extending this effort by reconsidering the values used in current and proposed financial tests to ensure that the program is cost effective. CORAR has enclosed detailed comments on this proposal and made additional recommendations to satisfy the intent of the regulations.

We appmciate the opportunity to comment on this proposed rule and would be glad to pmvide clarification or additional information.

Sincerely yo

/

Leonard R. Smith, CHP l

Chairperson, CORAR Committee on l

Regulatory and Legislative Issues l

l

~~ _

~

?>

wn

CORAR COMMENTS ON PROPOSED RULE: SELF GUARANTEE OF DECOMMISSIONING FUNDING BY NON-PROFIT AND NON-BOND ISSUING i

LICENSEES.

' 1.

Page 23395, column 1, paragraph 1:

l

" Allowing qualified non-profit and non-bond-issuing licensees to use self-guarantee i

would reduce the costs of complying with NRC financial assurance requirements while providing adequate confidence to the NRC that funds for decommissioning will be available when needed".

l a.

CORAR agrees that extending the use of self-guarantees would reduce the costs l

of complying with NRC financial assurance requirements.

b.

Many licensees have insufficient financial strength to meet the current stringent regulatory conditions and tests to qualify for self guarantee. 'Ihey are therefore forced to seek altemative financial assurance arrangements, letters of credit being l

a common solution. However, because of their financial status, these licensees i

are required to pay very high fees for the necessary banking services.

Furthermore the establishment of, a letter of credit often reduces a licensee's available credit which can weaken the licensee's fmancial and operational flexibility. Current NRC requirements for demonstrating financial assurance can i

therefore indirectly weaken the financial viability of smaller licensees and can be expected to statistically cause some licensees to fail and precipitate the very condition that the NRC seeks to protect against.

c.

The NRC should be aware that fees to maintain fmancial assurance arrangements are often paid out of the Radiation Protection budget. Consequently the payment l

of high fees can adversely affect the radiation protection program. It is not

)

unusual for financial assurance fees to consume from 10 to 20% of the radiation protection budget.

d.

Clearly any viable financial assurance mechanism that is less costly than current practice should be preferable to the licensee, regulator and the public.

CORAR agrees that licensees should be required to provide adequate confidence e.

to the NRC that funds for decommissioning will be available when @l itis clear too that the costs for maintaining this assurance should be minimized to preserve the financial, operational and radiation protection capability of the licensee.

1

i -

f.

There are three areas where the costs for demonstrating financial assurance could be reduced if NRC were to change its current licensing practice. These are:

i.

Many licensees use commercial contractors to estimate the cost of decommissioning the licensed facility. Contractors commonly over I

estimate the cost to provide for generous profit margins and ultra conservative contingencies in the event that they are contracted to decommission the facility. NRC should encourage best estimates of decommissioning costs and prefer estimates based on historic plant experience in decommissioning and renovation rather than commercial estimates.

ii.

Many licensees use a letter pf credit and standby trust agreement to assure 1

l-l decomminnioning. NRC Regions and Agreement state staff have limited l

financial and legal expertise and rely heavily on comparing licensee I

financial assurance ammgements with models presented in Regulatory Guide 3.66. However the NRC model standby trust agreement in Reg.

Guide 3.66 provides for funds to be released to the licensee for l

decommissioning purposes. This action can defeat the intent of the l

regulations because, if the licensee has filed for bankruptcy, they legally l

become a separate entity from the licensee that initially filed financial assurance arrangements and under the constraints of bankruptcy L

proceedings those funds could be used for purposes other than decommissioning.

CORAR recommends that NRC replaces this model with one that provides for the segulator to manage the da===iesioning funds in the event of bankruptcy. The benefit of this recommendation is that it will assure the intent of the regulation, it will provide a model that regulatory staff can use to gh licensee submissions and the arrangements carry less risk to the bank providing the services and consequently less cost to the licensee.

l

\\

iii.

NRC has had considerable experience in reviewing financial assurance l

submissions. CORAR recommends that the NRC should consider l

reevaluating the quantities used in both the proposed and current financial l

tests in 10CFR30. CORAR maintains that such a review should indicate l

that financial tests for self guarantee and parent guarantee could be relaxed i

by a factor of two and still provide adequate assurance. This would have i

the benefit of making a self guarantee accessible to more licensees and j

i reduce any unproductive financial burden on them.

I 2

I

2.

Page 233%, column 2, paragraph 4:

"The multiple of 30 has been chosen because this would mean that any level of decommissioning costs could be covered by the annual return on an endorsement invested at 3 percent".

aJ The selected multiple of 30 is excessively conservative. It should not be difficult to obtain secure investments yielding 6%. CORAR recommends that an appropriate multiple would be 15 based on investment yield.

b.

The above statement implies that decommissioning costs are paid from investment yields over a one year period. However, it is more realistic to assume that any decommissioning activities where financial assurance arrangements are involved will require considerable coordination with regulators and financial services involving two or three years to complete. This consideration also implies that the appropriate multiple should be 15 rather than 30.

c.

CORAR tecommends that the above two considerations can be combined and the multiplication factor reduced from 30 to 10 with ample conservativism 3.

Page 233%, column 3, paragraph 6:

C.... hospital operating revenues to be at least 100 times decommissioning costs".

l The selected multiple of 100 is excessively conservative. It appears to reflect an i

expectation that the decommissioning will take a short time whereas a realistic time frame should be two years or more. CORAR recommends that the NRC considers a multiple of 30 or less to be more appropriate.

4.

Page 233%, column 3, paragraph 7:

i "The proposed criterion is..., total liabilities divided by Net Worth less than 1.5, and i

' Net Worth greater than $10 million or at least 10 times decommissioning costs,...."

)

CORAR observes that Net Worth is defined as Assets minus Liabilities ar.d that l

Liabilities include decommissioning cost estimates. It therefore eyras that the liabilities are double counted in the above criteria. We recommend that decommissioning I

l costs be explicitly excluded from Liabilities in these criteria. The modified formula will I

continue to provide adequate financial assurance.

i 3

i

.____.m__________._U

J i

5.

Page 23397, column 2, paragraph 2:

I "The NRC invites comments on the general issue of the compatibility status ofits

{

financial assurance regulations".

I k

CORAR asserts that financial assurance regulations should be assigned level I strict compatibility status. We recommend this because financial assurar ce arrangements can have a significant effect on the financial and operational viability of a licensee.

Consequently Agreement States with more stringent regulatory requirements can cause competitive disadvantages to licensees 6.

Other Considerations a.

While CORAR appreciates the need for financial assurance for licensees with significant historic radionuclides inventories it is not clear whether the regulatory measures are effective. CORAR therefore recommends that the NRC should publish an evaluation that clearly shows that the benefit to society in ensuring decommissioning and reduction in public dose is justified by the cost of maintaining financial assurance arrangements, regulatory costs in reviewing financial assurance arrangements and costs of adverse effects of financial j.

assurance arrangements on licensee radiation protection resources and financial i-and operational viability, b.

'Ihe NRC should consider promoting a national insurance program for all non-utility licensees with the objective of reducing the cost of demonstrating financial assurance.

l l

l I

l 4

4 STATE OF " i.l.NO!-

DEPARTMENT OF NLCLEAR MF$yC l

EO 1035 OUTER PAIG. DRI\\ i~

SPRINGFIELD,ILLINOlF O4 37 JUL 22 A10:05 i

217-7 8 *4900 Ti onu-n crue lim E gar 0FFICE OF MMETARY I

Gw. mm

, 1.--782-e ' U (TDD -

DOCKEmG i 2PViCE BuNC4 I

July 18,1997 DOCKET N(NBER Secretary of the Commission PROPOSED RULE N So Yo sa 70 n; U.S. Nuclear Regulatory Commission y

Washington, D.C. 20555 Attention: Docketing and Service Branch Re:

Proposed Rule, "Self-Guarantee of Decommissioning Funding by Non-Profit and Non-Bond Issuing Licensees."

Gentlemen.

The Illinois Department of Nuclear Safety (Department) hereby submits its comments on the referenced proposed rule. The proposed rule represents changes to surety rules that would allow non-profit licensees and commercial licensees who do not issue bonds, the option to use self-guarantee as a surety funding mechanism. Specific comments on the proposed rule are detailed below.

1.

Under II. Analyses of Financial Criteria, A. Criteria for Colleges and Universities, there is a statement that non-profit entities or for-profit firms that do not issue bonds may opt to obtain a bond rating from one of the major ratings agencies.

However, the proposed language in Section 30.35 does not clearly indicate this option.

2.

Under II. Analyses of Financial Criteria, B. Criteria for Hospitals, ' liquidity"is incorrectly defined twice as turrent assets and depreciation fund, divided by current liabilities." (emphasis added) The same mistake is made in II.B.(2)(c) of the proposed Appendix E to Part 30. The underscored language should be deleted. Inclusion of

'tlepreciation fund"in the liquidity test makes no sense from an accounting perspective.

l The study upon which the proposed rule is baed, NUREGICR-6514, correctly defines the liquidity test on page 32 as " Liquidity ' meamed by the current ratio (current assets divided by current liabilities)."

,g, w-m o n x<

i.

.~

Secretary of the Commission Page 2 July 17,1997 3.

Provisions in 10 CFR 30.35(f)(2), 40.36(e)(2), 50.75(e)(2)(iii), 70.25(f)(2) and 72.30(c)(2), provide that neither a parent company guarantee nor a guarantee by an' applicant may be used in combination with other financial methods to satisfy financial assurance requirements. What are the reasons for these restrictions? It would seem that the licensing agency would, for instance, have stronger financial assurance for decommissioning if there were a 50% prepayment and a 50% guarantee than if there if just a 100% guarantee.

4.

Under Finding of No Significant EnvironmentalImpact, the notice states that, "Ihe proposed action is intended to offer non-profit and non bond-issuing nuclear materials licensees and aan-nower ranetar licensees gmater flexibility by allowing an additional mechanism that meet the financial criteria for use of self guarantee."

(emphasis added) The underscored language inaccurately reflects the scope of the proposed rule to reactor licensees. The factor which determines whether a Part 50 reactor licensee can use the new mechanism is whether the licensee is an electric utility, not whether the reactor is a power reactor. See section 50.75(e)(2). In other words, a l

non<lectric utility licensed to operate a power. reactor under Part 50 could use the new guarantee mechanism. This issue is correctly addressed in the first sentence of the Summary at the beginning of the notice, which refers to ' hon-electric utility reactor i

licensees."

i Overall, we believe that the NRC has increased the flexibility of this rule by developing additional surety options for licensees. If you have any questions mgarding these comments, please contact either me or Kathy Allen at (217) 785-9947.

Sincerely, f

kG.QstL Steven C. Collins, Chief Division of Radioactive Materials SCC:kaa Jim Lynch, State Agreements Officer, RIII cc:

I Michael J. Mocniah v.c. m...:,

0,,ca c:.. D. O C K E T E D a = se: er, USNRC hdb' VT JUL 24 P1 :43 ver one tama# orace coram en;caga ilkno s 6006: pno e i8a,66N900 fan iB47 68M30?

July 23, 1997 0FFICE OF SECFETARY DOCKEidG & CERVICE Secretary BRANCH U.S. Nuclear Regulatory Comm. ion iss Washington, DC 20555-0001 DOCKET NIMBER DD PROPOSED RULE rit_30,40,so,70s @

Attention: Docketing and Service Branch

{gpgg 33399) g Re:

NRC Proposed Rule on Self-Guarantee of Decommissioning Funding by Non-ProSt and Non-Bond Issuing Licensees 62 Fed Reg. 23394 (Aoril 30.1997) 1

Dear Secretary:

I am writing on behalf of Fansteel Inc. in support of the NRC's proposed rule and to offer comments for NRC's consideration in the Final Rule. Fansteel supports the concept that non-proSt and non-bond issuing licensees should be allowed to self-guarantee the availability of l

decommissioning funds. We believe, however, that the proposed financial test for non-bond issuing industrial corporations is unduly restrictive and that the final mle should adopt a less restrictive test similar to that currently used for parent company guarantees.

In the proposed rule, industrial corporations would have to meet the following criteria:

Cash Flow + Total Liabilities > 0.15; Total Liabilities + Net Worth < l.5; and Net Worth > $10 MM or 10 times the decommissioning costs, whichever is greater.

l PI-93933.01 1 _ q 7 " 7 WN L pp. %/tO gp 6

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t

m Fansteel These are the same criteria evaluated as Option 4 for non-bond issuing business firms in NUREG/CR-6514 " Analysis of Potential Self-Guarantee Tests for Demonstrating Financial Assurance by Non-Profit Colleges, Universities and Hospitals and by Business Firms That Do Not Issue Bonds." That analysis concluded that only six percent (2 of 36) licensees considered in the study would be able to pass such a rigorous financial test.

NUREG/CR-6514 also analyzed a less restrictive financial test, identified as

]

Option 2, which presented only a moderate assurance risk. The criteria for this test are:

Cash Flow + Total Liability > 0.1 or Total Liability + Net Worth < l.5.

This is the same test being considered by EPA for both parent company guarantees and self-guarantees for hazardous and nonhazardous waste management facilities under RCRA. The analyses for this option concluded that 69% (25 of 36) licensees would be able to quahfy for the self-guarantee under this option.

For comparison, NRC currently accepts a parent company guarantee where the parent company utidies two of the following three ratios:

Total Liability + Net Worth < 2.0; l

1 Cash Flow + Total Liabdity > 0.1; and Current Assets + Current iMiities > 1.5.

The parent cc...yaay must also have net working capital and tangible net worth each at least six times the decommissioning cost estimate; a tangible net worth of at least $10 MM; and at least l

90% ofits assets, or assets worth six times the decommissioning cost estimate, located in the l

United States. This is the same test currently ured by EPA for parent guarantees for closure and j

post-closure costs at RCRA facilities.

l

-_ L

Fandeel The proposed self-guarantee standard appears to be inconsistent with the existing i

parent guarantee standard used by the NRC, and it appears to favor corporate form over finmcial substance. For example, a licensee which is not a subsidiary of another company could pass the parent-guarantee test but not the self-guarantee test. This licensee would have to use other means to financially assure its decommissioning cost estimate-all ofwhich entail significant msts.

Another licensee with the same decommissioning cost estimate, but which has a parent company, could use a parent company guarantee as long as the parent satis 6es the less restrictive finandM 1

i test for parent companies. Thus, it is possible that a financially weaker parent company can guarantee a given amount, whereas a stronger company which has no parent cannot guarantee the same amount, and will incur significant additional costs to satisfy its financial assurance 1

?

obligations. The potential for such an outcome should not be countenanced by the NRC.

Fansteel believes that NRC should adopt for the self-guarantee test to be employed i

by non-bond issuing business finns either the current parent guarantee criteria or the NUREG/CR-6514 Option 2 criteria. Either test would not unfairly disenminate against companies which do not have parent companies (or which did not establish subsidiaries for their licensed activities) and which are otherwise financially sound. Additionally, more licensees would be able to employ these methods, thereby saving the costs that would be incurred when other financial assurance mechanisms are employed.

Fansteel also suggests that the final mie include definitions for the various emmting terms used in the rule. For example, the proposed rule uses the term " cash flow" but does not define it, whereas the current parent guarantee rule (10 CFR 30, Appendix B) uses the term "the sum of net income plus depreciation, depletion and amortization," but does not mention cash flow. NUREG/CR-6514 defines cash flow as" net income plus depreciation, depletion and Fandeel i

amortization." Without the NUREG, one might conclude that the use of different terms in similar 1

l l

rules suggests that different meanings are intended. This confusion can be avoided by defining the l

l terms in the rule, rather than relying on documents merely referenced in the rulemaking notice to l

provide clarity.

1 We hope these comments are helpful as the NRC moves to finalize this rule.

Very tmly yours, FANSTEEL INC.

.mp. km/

Michael J. Mocruak Vice President and General Counsel 1

i l

l l

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{ _ _ _ _ _ _ _ _ _ _ - _ - _ _ _ _ _ _. _ _ _ _ _ _ _ _ _ _ - -

DOCKETED USNRC W Jul. 25 A10:31 July 22,1997 0FFICE OF SECPETAaY Amershun Holdings, Inc.

DOCKETitiG & 3ERv!CE 2636 s. cieubrook Drive BP ACi Arlington Heights, IL 60005 tel (847) 593-6300 Sam EE MEQ U.S. Nuclear Regulatory Commission PROPOSED RULE m M W m Wm Washington, D.C. 20555-0001 (gpgpygg PAmersham g

the nuns smou crour, Attention:

Docketing and Service Branch h'ederal register, Vol. 62, No. 83, April 30,1997. Proposed Rule: Self Guarantee of Re:

Decommissioning Funding by Non-Profit and Non-Bond Issuing Licensees These comments are submitted by Amersham Holdings, Inc., a manufacturer and distributor of radiopharmaceuticals, life science research radiochemical and scaled sources used in medicine and in quality and safety assurance. Amersham currently maintains financial surety arrangements with the Illinois Department of Nuclear Safety in accordance with its Agreement State licensing regulations.

General Comments Amersham supports this NRC Proposed Rule as it provides licensees the opportunity to self-guarantee the costs of decommissioning. We recognize and appreciate the need for NRC to ensure that reasonable and responsible arrangements are established for licensee accountability of decommissioning costs. At the same time, the current methods available for demonstration of financial surety by licensees often result in estimates of decommissioning costs that include conservative assumptions and, therefore, unrealistically high. The financial burden ofletters of credit, surety bonds, and other approved mechanisms of financial surety may actually lead licensees to bankruptcy which may make some of the financial provisions available for decommissioning.

While the option of self-guarantee is viewed as a more reasonable and cost effective means of holding licensees accountable for long term decommissioning liability, Amersham provides the following specific comments regarding the mechanisms of financial surety which include the suggestion of some modifications to the financial tests used to qualify certain non-bond issuing industrial corporations for self-guarantee. These modifications could make the self-guarantee option available to a wider range oflicensees while still assuring the funding of decommissioning.

4 Specific Comments 1.

Estimated costs of decommissioning should not rely upon worst case conservative assumptions such as the prime rates charged by contractors or theoretical waste disposal

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2 costs. The estimated costs of decommiss.oning and waste disposal should be based upon licensee and industry experience.

2.

The estimate of decommissioning liability should include the costs of activities associated with site assessment, post decommissioning surveys,. decontamination, dismantling and packaging and disposal of waste, and should not include the estimated cost of disposal of finished goods in inventory and other materials in process and facilities that have value.

- Licensees should not be required to assume disposal costs for the total amount of material they are authonzed to p-= in their decommissioning estimates.

3.

Licensees, particularly those with relatively short-lived radionuclides, should be given the option of estimating the cost of site access control over the period of time necessary to significantly decay the radioactivity to reduce actual cleanup and disposal costs. The fact that decommissioning occurs over a time span should be allowed to be considered rather than the requirement to estimate the cost of decommissioning at the time the facility ceases operation.

The proposed regulations should be assigned a compatibility status of Level I to ensure j

4.

consistent requirements for financial surety arrangements and to avoid competitive disadvantages.

The proposed criteria for non-bond issuing industrial corporations should be modified to 5.

. enable more licensees to qualify while still providing adequate financial surety to cover the cost of decommissioning:

The second proposed criterion is total liabilities divided by net worth must be less 5.1 than 1.5. Since net worth is defined as assets minus liabilities, liabilities are factored into this fonnula in both total liabilities and net worth. This formula should b changed to total assets divided by the quantity of balance sheet listeilities plus de w.; aissioning liability'must be greater than 1.5. This formula makes more sense and'more realistically reflects a licensee's ability to shut dowr. and have the l

necessary assets to pay off remaining liabilities and decommissioning costs with a considerable margin remaining.

The third criterion is net worth greater than $10 million or at least 10 ' times 5.2.

decommissioning costs, whichever is greater. Again, since the definition of net worth is assets minus liabilities, it appears that the application of decommissioning costs in this relationship is rMuM=it. In addition, finished goods and oGer valuable assets should not be included in decommissioning costs. If these are considered as t

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3 both decommissioning liabilities and assets in the & termination of net worth, then the licensee is unfairly penalized using this criterion. This penalty is further

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exacerbated iflicensees are required to determine the cost of decommissioning based on total license possession rather than a realistic projection of actual decommissioning and disposalliabilities on site.

Amersham appreciates the opportunity to comment on this very important proposed rule and is willing to answer any questions or provide additional information as required.

Sincerely, h-Mark A. Doruff, CHP Director, Environmental and Safety Regulatory Affairs

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NUCLEAR REACTOR LABORATOk fRC i

AN INTERDEPARTMENTAL CENTER OF l

MASSACHUSETTS INSTITUTE OF TECHNOLOGY l

7 3 3 m1:00 Activation Analysis JOHN A. BERNARO 138 Albany Street. Cambndge. MA 02*39-42%

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DOCKET NLA48 erg PROP 06ED ALX.E rR.M VO,50,70MS-N lear Regulatory Commission

(/,2F# a3394) 7 Washington,DC 20555 Auention: Rulemakmgs and Adjudications Staff

Subject:

Proposed Rule on Self-Guarantee for Decommissioning Funding Gentlemen:

The Massachusetts Institute of Technology supports the proposed mle that would allow colleges and universities with either a certain bond rating or a certain unrestricted endowment to utilize self-guarantee as a means of financial assurance for decommissioning.

Sincerely, (WL ohn A. Bernard, Ph.D Director MIT Nuclear Reactor Laboratory JAB /CRM cc:

USNRC - Senior Project Manager, NRR/ONDD USNRC - Region I-Project Scientist, Effluents Radiation Protection Section (ERPS)

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97 JUL 29 P3 :28 f.n 302'838 2020 Julv 25 1997 0FFICE 0.< SECRTTArh DOCKE Th'.G 1 :;. cri Bh d -

U M.ET Nugggg Secretary John C. Hoyle U. S. Nuclear Regulatory Commission PROPOSED Ruts %30,e,go/ oj73 7

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Attention: Docketing and Service Branch

( b4 I4 2337V]

8 Washington, DC 20555-0001 Proposed nile regarding self-guarantee of decommissioning funding by Non-Profit RE:

Licensees

Dear Secretary Hoyle:

The University of Delaware strongly endorses the proposed rule allowing universities and other non-profit organizations to self-guarantee the funds for decommissioning costs. Not only are most universities very stable institutions, but they are perhaps the least likely licensee type to terminate licensed activities and require decommissioning. One change in the proposed rule is recommended.

As proposed, Appendit E to Part 30 section II.C.(2) requires that licensees annually " repeat passage of the test" to ensure that they continue te pass all self-guarantee criteria. However, the only financial test under criteria II.A.(20) is the maintenance of at least a $50 million dollar endowment. University endowments are, by nature, stable and secure. Universities meeting the endowment criteria should not need to perform annual financial test.Section II.C.(3) provides suffi ient assurance that the NRC will be notified if a university no longer meets the endowment criteria.

The University reewnmends that section II.C.12; cf Appendix E to Part 30 be modified to read:

(2) After the initial financial test, licensees qualifying for self guarantee under criteria B.(2) must repeat passage of the test within 90 days after the close of each succeeding fiscal year.

The University of Delaware appreciates the opportunity to comment on this important issue.

Sincerely.

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J Melvyn D. Schiavelli Provost s,

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I 97 JUL 29 P 3 :29 July 28,1997 0FC UI WT! U.-

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• e The Honorable John C. Hoyle 1

Secretary j

U.S. Nuclear Regulatory Commission DOCKET NUWBER 11555 Rockville Pike g

PROPOSED RULE FH 30 %60,704 7; Rockville, MD 20852 MS Ol6G15 (ls2 F# 433W[

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Attn: Docketing and Service Branch Re:

Proposed Ru Concerning Self-Guarantee of Decommissioning Funding By Non-Profit and Non-Bond Issuing Licensees 62 Fed. Reg. 23394 (April 30,1997)

Dear Sir:

On April 30,1997, the Nuclear Regulatory Commission (NRC) published a proposed rule which would expand the categories of NRC licensees who may self-guarantee their decommissioning funding obligations. On behalf of the higher education associations listed below, we wish to submit the following comments on the proposed rule.

On January 11,1993, the NRC published a proposed rule amending its decommissioning funding regulations to allow licensees that meet specified financial tes.s, issue bonds that are rated "A" or better, and have equity securities registered under the Securities Exchange Act of 1934 to self-guarantee their decommissioning funding obligations. Absent meeting these tests / these licensees w uld be obligated to provide decommissioning funding assure. by means of letters of credit, surety bonds on other types of third party fmancial assurance at a cost estimated by the NRC of 1.5 percent of the amount of financial assurance required.

Several commentors filed comments on the proposed rule, urging that the self-guarantee mechanism be made available to educational institutions and other non-profit entities. While the NRC did not adopt these comments when it issued the final rule, in the Supplementary Information accompanying the final rule, the NRC announced that it would undertake a I

study of potential self-guarantees for non-proiit licensees other than universities and would review the applicability of self-guarantees to universities after a fee recovery rulemaking. 58 Fed. Reg. 68726,68728 (1993).

One Dupont Circle. NW. Suite 838. Washington. DC 20036-1193 Phone (202) 939-9355 FAX (202) 833-4762 Interner: Shelcfon.5teinboch@ ACE NCHE.EDU l _17cq_aood fro.3pp, gn t()

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Page 2 The promised study, issued this year, identified alternative financial tests that might serve as the basis for self-guarantee by non-profit universities and hospitals and for-profit firms that do not issue bonds. NUREG/CR-6514,

" Analysis of Potential Self-Guarantee Tests For Demonstrating Financial i

. Assurance By Nonprofit Colleges and Universities and Hospitals and By l

Business Firms That Do Not Issue Bonds" (June 1997).

Based on this study, the NRC has now proposed that non-profit

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colleges and universities may demonstrate decommissioning financial assurance by self-guarantee if they meet the following tests:

2 1

1.

for those issuing bonds, a current rating of "A" or bett.z; and i

2.

for those not issuing bonds, an unrestricted endowment l

with assets in the United States of at least $50 million, or j

at least 30 times total current decommissioning cost estimate (or the current amount required if certification is used), whichever is greater.

The signatory organizations strongly support the NRC's amendment of its regulations to allow non-profit colleges and universities to self-guarantee their decommissioning funding obligations. The financial stability and longevity of such institutions is at least equal to commercial and industrial entities for which self-guarantees are allowed under NRC regulations.

We do, however, believe that in two respects the criteria in the proposed rule are unnecessarily restrictive and could be modified without any significant reduction % financial assurance. The first issue concerns the soility to reir upon bond ratings. As prop sed, for those insti*/tions that issue bonds, only a bond issuance that is " uninsured" may be relied upon.

The justification for this limitation is that " insured bond ratings are in fact l

the rating of the insurance company," rather than the college or university itself. 62 Fed. Reg. at 23396. However, as the NRC's own study acknowledges, bond insurers " evaluate the financial condition of the issuers to insure and

. avoid issuing policies to universities that are not creditworthy.

l Consequently, the presence of bond insurance (and the triple-A rating that j

accompanies it) indicates that the issuer is in sound financial condition."

NUREG/CR-6514, @ 2.5.2 at p.18. Thus, the existence of bond insurance provides further assurance that the institution is financially secure, and should support the acceptability of the self-guarantee, rather than l

' disqualifying the bond issuance from consideration.

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July 28,1997 Page 3 The second comment focuses on the test adopted for non-bond-issuing colleges and universities. As proposed, a college or university must have

]

unrestricted endowment of at least $50 million or at least 30 times the l

decommissioning cost estimate,'whichever is greater. No explanation is l

provided as to why an endowment that is at least 30 times projected decommissioning costs is not an adequate standard. Nor, given the size of projected decommissioning costs for college and university licensees, is there any reason why an unrestricted endowment of at least $50 million is not by itself an adequate standard. Rather than requiring' compliance with the greater of the two tests, compliance with either of the tests would appear more than adequate to provide financial assurance. This would be especially true for materials licensees, whose projected decommissioning costs are likely to be significantly less than those for facility licensees.

Since the proposed rule requires that the college or university assess its compliance with the financial criteria on an annual basis (see proposed App.

E to 10 CFR Part 30, @ II. C), the NRC will have continued assurance that the financial well-being of the institution remains sound (or else alternate financial assurance mechanisms are required). The suggested revisions to the financial criteria discussed above will therefore maintain the same high

' degree of assurance as the proposed rule, while avoiding unnecessarily

. restrictive and wasteful requirements. At a time when all organizations are i

seeking to use their resources in the most efficient possible manner, reducing unnecessary costs without significantly affecting decommissioning assurance ought to be the Commission's goal. The two suggested mMifications to the proposed rule would be consistent with this goal.

We appreciate the opportunity _to submit these comments, Sin erely, Sheldon Elliot Steinbach i

On behalf of the following associations-American Council on Education Association of American Medical Colleges Council on Governmental Relations National Association of State Universities and Land-Grant Colleges

USNRC

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Of5ce ofSponsored Programs Telephone (617) 253-3856 Maanachusetts Institute of Techmalogy i [

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ppow aut.edu Cambridge, MA 02139-4307 0FFICE OF SECRETARY 00CKETING & SERVICE July 29,1997 BRANCH DOCKET NUMBER PROPOSED RULE N 30. 40.50 7047

(&QFA 33594) '

U.S. Nuclear Regulatory Com=Immion Washington, DC 20555 4 001 Attention:

Docketing and Service Branch

Subject:

Self-Guarantee of Decommissioning Funding To Whom It May Concern:

l First, accept my apology for the late response to NRC's proposed amendment that appeared in the 4/30/97 Federal Register. We at MIT heartily agree with the pmposed amendment. We have found the cost associated with adhering to NRC's current financial assurance requirements to be quite signi5 cant. Allowing qualified non-profits, such as MIT, to use self-guarantee would significantly reduce these costs.

Sincerely yo t

@C Paul C.Powell Assistant Director i

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amn.+a July 29,1997 DOCKET NlAiBER PROPOSED RULE N30. 40,5o,70# ya Mr. John C. Hoyle e

( N A EA 333W)

Secretary b

U.S. Nuclear Regulatory Commi sion Washington, DC 20555-Or 91 ATTENTION: Docketing and Service Branch

SUBJECT:

Comments on Proposed Rules for Self Guarantee of Decommissioning Funding by Non Bond Issuing Licensees (62 FR 23394)

By a Federal Register Notice published April 30,1997, the Nuclear Regulatory Commission (NRC) requested comment on a proposed rule change that would extend current authority for licensees to "self guarantee" decommissioning funding. Under this approach, certain financially strong licensees are not required to provide financial assurance for the decommmsioning of their facilities through one of the mechanisms allowed by rule (e.g., surety bond, letter of credit, pre payment). Licensees using self-guarantees are permitted to rely upon corporate funds to caver decommissioning costs.

The current criteria allowing licensees to use '"-;ua-

• .es are based on corporate bond ratings. This option is therefore not available to non profit organizations and corporate entities that do not issue bonds. The proposed rule would add qualifying criteria to permit certain of thesa licensees also to use self guarantees.

The Nuclear Energy Institute 1 (NEI) supports the extension of the self guarantee principle to additional licensees. NEI recognizes NRC's responsibility to provide for reasonable assurance that funds will be available to decommmsion licensed facilities.

This assurance should be provided with the muumum burden necessary on licensees.

Allowing additional licensees to utilize self-guarantees is a laudable step in that direction. However, we believe that NRC should reconsider the conservative nature of some assumptions reqmred to be made in estimating decomnussioning costs. More

• NEl is the organization responsible for establishing unified nuclear industry policy on matters affecting the nuclear energy industry, including the regulatory aspects of generic operational and technical issues.

NEI's 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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Mr' John C. Hoyle July 29,1997 Page 2 realistic assumptions would have the effect of estimating costs more realistically and reducing the projected funds for which assurance must be sought. Specific comments on such assumptions and other issues are presented in the enclosure to this letter.

NEI commends the NRC for this initiative, and appreciates the opportunity to provide comments. If there are any questions regarding our comments, please contact me.

Sincerely, hl' Felix M. Killar

Director, Material Licensees & Nuclear Insurance Enclosure c-Marvin Fertel

i Spei& Comments on NRC Prooosal to Extend Self Guarantee

1. Estimated decomminaioning costs should be based on best available information.

Use of conservative assumptions such as the prime rates charged by contractors or unreasonably high estimates of waste disposal costs should not be required. Other considerations that would result in more realistic cost estimates (such as delays to l

allow short lived radioactivity to decay as discussed below) should be allowed. In general, decomminaioning cost estimates should be based on actual experience, rather than conservative worst-case assumptions.

~

f. r stunates of decomminaioning costs should not be required to assume disposal of the maximum amount of material permitted by the license. Typically, the licensee seldom comes close to having the marimum amount of material permitted by the license. It is more raamanable to assume that the licensee would have minimal Wanard material on site when going into decomminaioning. Additionally, licensees are engaged in commercial activities to produce products. It is reasonaute to assume

' that some portion of the licensed marimum quantity will be in the form of finished product that will have value and will not be disposed of. In fact, assi ming otherwise would be an unreasonable assumption.

3. Decommiaziomng coste can be reduced significantly by allowing a period for short-i lived isotopes to decay before decommissioning and dismantlement begins. Such delay, to reduce ultimate cost, is the likely scenario in cases where licensed activities occupy only a small portion of the licensee's facility. Licensees should be permitted I

to consider choosing to implement those procedures rather than be required to base their cost estimates on assuming immediate decomminaianing.

4. The requirements for licensees pursuing self-guarantees should reflect the realities of the licensee community. In particular, the proposed requirement (Appendices D and E) that licensees conduct accounting per U.S. generally accepted accounting principles (GAAP) does not r=ca-ni= the increasingly multi-national nature of materials licensees. Foreign ownership of major material licensees is currently a reality (e.g., Siemens, ABB, Framatome) and can be expected to increase in the future. The selection of a : counting practices to be used is a significant corporate decision afected by many factors. It is ur,aeonable to require that corporate practices of major multi-national firms be changed for a licensee to be allowed to provide self-guarantee of decommissioning fim<iing. The rule should allow that adequate assurance that funds will be available can be provided using other raca-ai==ian plants is in excess of $100,000 per ye a r.

Allowing certificates to demonstrate arwnph=nrw with the proposed fiant criteria required to asif-guarantee would reduce e-f:=e costs while providing adequate confidanna to the NRC that ihnds for M +

-- - :--g will be armilable when needed. h is proposed that the NRC modify th e

language of the prapa=< 3 rule to chmfy that it also applies to certificates.

The term " cash Sow" is undefined in Appendix D. USEC understands the term to mean the

" sum of not income phas depreciation, MW, and amortization." It is proposed that the NRC maMy thelanguage of the rvycM rule to define the term " cash flow."

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Dc-a- ' -g and Savice Branch August 1,1997 GDP 97 0137,Page 2 Thankyouforthewyy Gjtoprovideourinputto theCommission's evaluationprocess We would be plassed to discus these=== nam with you. Please contact Ms. Lisemarie Jarriel ar (3 31) l

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sincerely, s.n./I^

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Steven A ToeBe Nuclear Pana1*ary Assurance and Policy Manager O

FRED HUTCNNSON DOCKETED CANCBt USHRC RESEARCH CENTIR 97 ALG -5 A10 :50 0FFICE OF SECRETARY July 29,1997 00CKE nHG 4 IERV!CE BRANCH i

Secretary U.S. Nuclear Regulatory Comrmssion DOCKET NtWOEN Washington, D.C. 20555-001 PROPOSED g y a,ggo y

Attn: Rulemakings and Adjudications Staff

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, Re: Federal Regis+::r/Vol.62, No. 83 / Wednaaday, April 30,1997 / Proposed Rules, Page 23394, Nuclear Regulatory Commission 10 CFR Parts 30,40,50,70 and 72 Self-Guarantee of Decommissioning Funding by Non-Profit and Non-Bond Issuing Licensees On behalf of Fred Hutchinson Cancer Research Center, as a Health Physicist, I strongly feel that the NRC's proposed rule is highly beneficial to Institutes like us. It not only allows us to act accordingly and also organize ahead of time with our financial situation in much more efficient way. Non-profit orgamzations like Fred Hutchinson Ca.cer Research Center, can achieve a significant cost savings without any loss of confidence for the NRC and Agreement State that funds for decommissioning will be available when needed.

i We therefore urge that the NRC adopts the proposed rule as written so that non-profit licensees who meet the NRC's stringent financial criteria have available to them the same financial assurance options presently available to corporate licensees.

Respectfully, c6wL G7 O

l Rao M.Goriparthi Radiation Safety Officer / Health Physicist Environmental Health & Safety Department Fred Hutchinson Cancer Research Center i

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HARVARD UNIVERSITY RADIATION SAFETY COMMITTEE 00CKEiED USHRC

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0FFICE OF SEC

. m 02138 chair August 1,1997 00CKETmG&.

Josam P. Rmc, Pn.D., CHP gq;g gg :(617) 495-2060 Radiation Protection OfHcer Fax: (617) 495-0593 l

Secretary C

ET NUMBER U. S. Nuclear Regulatory Commission PROPOSED RULE _Eh S4 vo, go, yo# 7a, Washington, D. C. 20555-001

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Attn: Docketing and Service Branch h

Subject:

Proposed rule on Self-Guarantee of Decommissioning Funding by Non-Profit and Non-Bond issuing Licensees Federal Register / Vol 62. No. 83/ Wednesday, April 30,1997/ Proposed Rules, page 23394 Harvard University supports the proposed rule Decommissioning Funding for 10 CFR 30,40,50, 70, and 72 as referenced above to permit financially strong non-profit licensees the option of self-guarantee of the financial resources to fund and complete decommissioning of licensed activities.

We agree with your finding that private universities, which can meet the stringent financial criteria, would reduce the costs ofcomplying with financial assurance requirements while providing adequate confidence that the decommissioning funds were available. This rule would allow these institutions the self-guarantee option that is now only available to bond-issuing industrial corporations.

We urge that the NRC adopt the proposed rule as written so that not for profit licensees who meet the proposed criteria have available to them the same financial assumnce options currently available to corporate licensees.

Sincerely, Bertha K. Madras, Ph.D.

Chair cc:

E. Barkley J. Griffm R.McGaw J. Ring

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Dennis P. Whalen Commesioner hecutive Deputy Commissioner 00Cyy7[4.";E' q [t 'Y FFir::.~ :. v 01CE

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,5 July 29,1997 Secretary U.S. Nuclear Regulatory Commission Washington, DC20555-0001 Attn: Docketing and Service Branch RE: Comments on Proposed Rule - Self-Guarantee of Decommissioning Funding The New York State Department of Health submits the following comments on the above proposed rulemaking.

1. The proposed rule does not make clear which financial criteria apply when a university also includes a hospital.

2.

The proposed mie does not make clear what it means for the non-profit to " issue bonds." In New York State, tax-exempt bonds issued for colleges and universities are placed through the Dormitory Authority of the State of New York. The Dormitory Authority, a public agency, takes no financial risk in the transaction, and the bonds are rated based on the financial strength of the college or university for whom they are issued. The bonds are not, strictly speakmg, issued to the market directly by the institutions themselves; they are the bonds of the Authority.

3. What is meant by " uninsured, uncollateralized and unencumbered bonds"? Would a bond for which no property is mortgaged but a priority claim h: given to bondholders on certain receivables (e.g., room and board payments) be conside.wi "collateralized" or

" encumbered"?

4. Do any criteria apply when a non-profit has issued bonds, but none are " uninsured, uncollateralized and unencumbered"? Such institutions could not meet the first test, and the second test appears to be restricted to " applicants and licensees that do not issues bonds," regardless of what sorts of bonds those might be.

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5. What is meant by unrestricted " endowment'7 Most institutions have what are referred 2 University Place, Rm. 375, Albany, N. Y.12203 Tele:518MS8-6485 FAX: 518MS8-6434

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i to generally as " endowments" that consists substantially of funds functioning in that capacity, even though the donors contributed them in such a way that the funds would not c

necessarily be regarded, strictly speaking, as " endowment" in the narrower legal sense of that term. Many institutions of great financial strength may not meet the criteria if a strict legal definition is applied.

6. The rationale for requiring hospitals to meet all four financial tests is unclear. It would appear that implementation of test d, " operating revenues / decommissioning costs" would provide reasonable assurance of ability to provide decommissioning funding.

The Department supports the concept of self-guarantee for medical and academic institutions as there is little evidence these institutions pose a risk ofleaving a contamination problem. However the proposed rule prescribes strict financial tests that are unclear and appear to be over restrictive and possibly not true indicators of financial strength. Consideration should be given to including the detailed financial tests in a guidance document much like the current financial assuredness rule. Further Agreement States should have additional flexibility determine the requirements for financial assurance especially in the case of hospials. For example, the Department has considerable regulatory control over the operation of hospitals including the issuance of operating certificates, approving certificates of need and overseeing closures.

We appreciate the opportunity to comment. Please contact me if you have any questions or need additionalinformation.

i Sincerely

's b Stephen M. Gavitt, Chief 1

Radioactive Materials Section Bureau of Environmental Radiation Protection 2 Uninrsity Place, Rm. 375, Albany, N. Y.12203 Tele:518M58-6485 FAX: 518M58-6434

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REED COLLEGE

' Portland,ggo2 USNRC 4

• EDWIN O. MJARIANE DOCKET NUMBER 77 SEP 22 P3 :38 PROPOSED RUl.E PII3o.yo.soao e OFFICE 08 SECP.-:-iRY

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[o ADJUD;CAliONS STAFF September 17,1997 Secretary U.S. Nuclear Regulatory Commission" 11555 Rockville Pike, MS Ol6G15 Rockville, Maryland 20852 Attn.:

Docketing and Service Branch i

Subj.:

Comments on Proposed Rules for Self-Guarantee of Decommissioning Funding by Non-Profit Issuing Licensees (62 FR 23394)

Dear Sir:

On April 30,1997, the Nuclear Regulatory Commission (NRC) published a proposed rule which would expand the categories of NRC licensees who may self-guarantee their decommissioning funding obligations.

Reed College strongly supports the Proposed Rule. It would allow Reed College to meet the proposed stringent financial test and achieve significant cost savings without any loss of confidence for the NRC that funds for decommissioning will be available when needed.

We appreciate the opportunity to submit these comments.

. Sincerely, 0

Edwin O. MEF ane l

Vice President / Treasurer

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Dear Mr. Xiohlovich:

Regu1 story Enforosamnt Fairness Ask ("the Act")Under the C 55 s01-sos (5 U.S.C.

are " major)r,uless for purposes of the Act.your offica estarminos whether f fint Drief descriptions of final statements that the Nucl Enclosed you will Regulatory Commission may issue in the next 30 to so days ear These are new motians which have not yet been submitted fo review.

We believe that these antians are not " major rules"your r

unear the Act.

concurrence on this letter, and fax the letter to me atIf you egr 201-415-5144.

Dut15are. gov.,

You may also respond by return e-mail to to emil me at (201) 415-7103.If you have any questions about these action ree sincerely, l0 - 4}U n-e.

David L. Meyer Chief Rules and Direc,tives Branch Divisinn of againistrativt Services Offics of Againistration

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ATTACHMENT 6 Draft Comment Analysis

f DETAILED COMMENT

SUMMARY

AND RESPONSE l

1.

Standbv Trust Aareements Comment: "Many licensees use a letter of credit and standby trust agreement to assure decommissioning... [T]he NRC model standby trust agreement in Reg. Guide 3.66 provides for funds to be released to the licensee for decommissioning purposes. This action can defeat the intent of the regulations because, if the licensee has filed for bankruptcy, they legally become a separate entity from the licensee that initially filed financial assurance arrangements and under the constraints of bankruptcy proceedings those funds could be used for purposes other than decommissioning. CORAR recommends that NPC replaces this model l

with one that provides for the regulator to manage the decommissioning f Jnds in the event of bankruptcy. The benefit of this recommendation is that it will assure the intent of the regulation, it will provide a model that regulatory staff can use to process licensee submissions and tne arrangements carry less risk to the bank providing the service and co'sequently less cost to the licensee."

CORAR (Council on Radionuclides and Radiopharmaceuticals, Inc.)

Response: NRC does not agree that the current model in Regulatory Guide 3.66 for the standby trust requires funds to be released to the licensee in all circumstances nor does it believe that funds placed in the standby trust can or should become available in bankruptcy to be used for other purposes. In fact, the standby trust language provided in Reg Guide 3.66 was developed, in part, to address issues arising in the bankruptcy of the licensee.

l Under the terms of Section 5 of the trust,"In the event of the Grantor's default at inability to direct decommissioning activities. the Trustee shall make payments from the fund as the NRC shall direct, in writing, to provide for the payment of the costs of required activities covered by this Agreement."(emphasis added) The NRC interprets this language to provide that if the licensee is solvent and capable of conducting the decommissioning, NRC can direct the trustee to make payments from the trust to compensate the licensee for funds that it has expended for decommissioning activities, upon presentation of suitable documentation of such expenditures. However, if the licensee is insolvent and its business affairs are under the supervision of a bankruptcy court and/or a trustee in bankruptcy, NRC probably would take the l

position that the licensee is " unable to direct decommissioning activities." In that case, NRC can provide instructions to the trustee of the standby trust to make payments from the trust to a third party, such as a contractor, who is performing the decommissioning activities. Under the appropriate circumstances, such as a reorganization under the Bankruptcy Code, in which the licensee serves as a " debtor in possession" and continues to direct its business activities, and if suitable agreements can be made between the trustee in bankruptcy or the bankruptcy court and the NRC, the NRC might conclude that the licensee continues to be able to direct decommissioning activities. In that case, NRC might instruct the tr itee of the standby trust to make payments to the licensee, but those payments would be mace only after the licensee has provided proof that decommissioning activities have been carried out. In no case, however, should funds in the standby trust become part of the bankruptcy estate, or be used for a l

purpose other than decommissioning. Therefore, NRC disagrees with this comment, since in the NRC's opinion the standby trust currently provides for suitable protection against the

-9 s u N.> u t Y ci c?Dpp. Y b bl9 u

j

_2_

bankruptcy of the licensee. NRC also notes that if funds in a financial assurance mechanism, such as a letter of credit, were to go directly to NRC instead of into the standby trust, the NRC would be obligated by law to place such funds immediately into the control of the Treasury, with the potential effect of delaying decommissioning.

2.

Financial Criteria for Colleoes and Universities (a)

Comment: "The selected multiple of 30 is excessively conservative. It should not be difficult to obtain secure investments yielding 6%. CORAR recommends that an appropriate multiple would be 15 based on investment yield."

CORAR (Council on Radionuclides and Radiopharmaceuticals, Inc.)

j Response: NRC's objective in selecting financial criteria was to provide a level of financial assurance risk similar to the financial assurance risk in the existing self-guarantee.

However, for colleges and universities that do not issue bonds, lack of appropriate data on i

default risk made a financial assurance risk analysis impossible. For these licensees, NRC deliberately chose financial criteria which are conservative. NRC did state in the preamble to the proposed rule, at 62 FR 32296, that "[t]he multiple of 30 has been chosen because this would mean that any level of decommissioning costs could be covered by the annual return on an endowment invested at 3 percent." However, it is important to note that NRC was not assuming (1) that institutions will in fact finance decommissioning out of endowments; (2) that endowments can be expected in all circumstances to grow at a rate of at least 3 percent annually; or (3) that institutions can be expected to reallocate up to 3 percent of their spending from endowments in a one-year period. Rather, the criterion was selected to serve as a

. measure of the overall financial strength of the institution, indicating that NRC can reasonably assume that such a college or university can be allowed to self-guarantee for the costs of decommissioning because it possesses sufficient financial strength to obtain the necessary funds when they are needed.

Even assuming the premise of the commenter, NRC does not believe that reducing the multiple to 15, as the commenter suggests, is desirable.

First, colleges and universities can be expected to have budgeted expenditures from endowments in advance. Reallocating that spending to address decommissioning costs may be difficult. Other sources of funds, including borrowing, may be a more efficient resource to use than endowment to pay the costs of decommissioning. Endowments of the size required by the 30 times criterion should ensure that the necessary funds can be obtained.

Second, although a real rate of return of 3 percent may appear low under the

{

market conditions prevailing during certain periods, there is a substantial body of empirical evidence indicating that it is a reasonable assumption. If a licensee who has been relying on a self-guarantee is tequired to fully fund a trust fund for decommissioning in the year prior to the beginning of decommissioning, and the

_ i licensee relies on earnings from endowment to create the trust, it is the annual earnings of the endowment for the year immediately prior to the decommissioning that must equal the required amount. NRC has reviewed the information provided in Ibbotson Associates, Stocks, Bonds, Bi/Is, and inflation l

1995 Yearbook,1995, which published a summary of market results for the 69 year period from 1926 to 1995 for five categories of investments: small company stocks, large company stocks, long-term government bonds, long-term corporate bonds, and intermediate-term government bonds. On a year-by-year basis, less risky investments, such as treasury bills, showed the most frequent positive retums, but their annual returns also were relatively low. Riskier investments showed a broad distribution of returns, from very good to very poor. Overall, however, with the exception of small and large company stocks, the average inflation adjusted earnings (geometric mean) for these categories of investments were less than 3 percent. In a number of years, eamings for stocks also were less than 3 percent. Thus, realinvestment returns over a one-year period may not even match conservative earnings assumptions.

The study of endowment sponsored by the National Council of College and University Business Officers (NACUBO) published in 1995 also emphasized a concern for this earnings variability in its analysis of college and university endowment investment. First, NACUBO's study noted that current high rates of return cannot be expected to continue indefinitely. "At a time when many public and private institutions are searching for ways to bridge the gap between revenues and expenditures, it is tempting to extrapolate these extraordinary returns into the future and to budget endowment spending accordingly. In this context, however, it is instructive to note that for a representative group of institutions, the average annual real return after spending for the 10-year period ended June 30,1994, is 4.1%, but for the 20 years ended June 30,1994, it is 0.9%." (1994 NACUBO Endowment Study,1995, p. 4)

The NACUBO study therefore recommends strongly that institutions keep their spending from endowment below the rate proposed by the commenter. The report says:

Historical precedent indicates that a fund invested approximately 60% in domestic and foreign stocks,30% in fixed income, and 10% in various other asset classes inevitably experiences recurring periods of absolute decline in market values over three years. Such a decline would trigger a reduction in spending for an institution sticking to a policy of spending a fixed percentage of a three-year movir, average of endowment market values... For fiscal year 1994, the average endowment spending rate reported by responding institutions is 6.0%. On average, the smallest endowments ($25 million and less) spent more (7.2%) than the largest (4.5%), and public institutions spent more (6.6%)

than private institutions (5.7%).

. With the sole exception of the 4.5% spent by the largest universities, these spending rates are not compatible with most institutions' stated intention to preserve the purchasing power of their endowment. Over time, it is possible (difficult, but possible) for the exceptionally

_4 well-managed institution to spend 6.0% of a three-year moving average of endowment market values, and still preserve purchasing power. However, it is courting disaster to spend at an annual rate of 6.0% toward the tail end of a long bull market. (1994 NACUBO Endowment Study,1995, p. 5)

Although to date the bull market existing in 1994-1995 is continuing, there is also current evidence that market fluctuations can adversely impact spending plans of colleges and universities. (See, for example, " Market Swings Take Colleges and Endowments Along For the Ride," The New York Times, August 20,1997, A30).

Based on these considerations, the NRC continues to believe that a relatively conservative criterion, such as the 30 times requirement, is a reasonable criterion for the decommissioning self-guarantee test for colleges and universities, and does not accept the commenter's recommendation to adopt a substantially less stringent criterion.

l The 30 times criterion is not a requirement that prevents a significant number of additional licensees from qualifying for self-guarantee. It applies only to colleges and universities that do l

not qualify on the basis of an A or better bond rating. Of the 27 colleges and universities i

estimated to qualify, over 75% do so on the basis of their bond rating. For the remaining

)

licensees, the absolute unrestricted endowment level ($50 million) is the restricting factor. At i

most, only a few (1-3) additionallicensees might qualify if the 30 times criterion were relaxed.

I (b)

Comment: A commenter objected to the requirement in the non-bond rating financial test for colleges and universities that unrestricted endowment be at least $50 million or at least i

30 times the decommissioning cost estimate, whichever is greater. "No explanation is provided as to why an endowment that is at least 30 times projected decommissioning costs is not an adequate standard. Nor, given the size of projected decommissioning costs for college and l

university licensees, is there any reason why an unrestricted endowment of at least $50 million is not by itself an adequate standard. Rather than requiring compliance with the greater of the two tests, compliance with either of the tests would appear more than adequate to provide financial assurance."

Americsn Councilon Education Response: This requirement is aimed at assuring the financial viability of a licensee qualified to self-guarantee. This is the only requirement for non-bond issuing colleges and universities, unlike that for non-bond issuing hospitals or commercial licensees-which use multiple financial ratios as financial tests. It is designed to capture two measures of financial viability; overall financial strength, and financial strength relative to size of decommissioning obligation. The overall financial strength of an institution is heavily dependent on size of unrestricted endowment. Specific ability to fund decommissioning expenses is measured by the ratio of unrestricted endowment to decommissioning costs. A tmancial test based only on ratio to decommissioning cost might allow an institution without adequate financial strength to pass if its decommissioning costs were low. A test based only on size of unrestricted endowment might be inadequate for those institutions with the highest decommissioning costs.

Both threshold requirements are needed to provide assurance that an institution can meet decommissioning obligations when necessary.

l

l

- (c)

. Comment: NRC's nationale for a multiple of 30 " implies that decommissioning costs are paid from investment yields over a one year period, However, it is more realistic to assume that any decommissioning activities where financial assurance arrangements are involved will L

require considerable coordination with regulators and financial services involving two or three years to complete. This consideration also implies that the appropriate multiple should be 15 rather than 30."

I~

CORAR (Council on Radionuclides and Radiopharmaceuticals, Inc.)

Response: NRC recognizes that decommissioning may occur over a period longer than i.

one year. The multiple of 30 was chosen without regard to how many years it would take to i

. decommission a facility. The commenter is attempting to make this linkage the key factor in arriving at an appropriate multiple. However, following this line of reasoning, stretching out the time length of decommissioning would imply ever decreasing multiples.

NRC's objective is to ensure that decommissioning will take place on a timely basis.

The financial assurance regulations are intended to assure that inadequate funding does not prevent timely decommissioning. Timely decommissioning may require that all decommissioning funding be available up front even though decommissioning activities are not completed within a single year period. For this reason NRC's criteria for determining whether a licensee should be allowed to self-guarantee the costs of decommissioning must consider the -

possibility that the licensee will be required to fully fund decommissioning in the year immediately prior to the beginning of decommissioning activities. The licensee would fund a standby trust either (1) if the licensee no longer qualified to use the self-guarantee to provide.

financial assurance for decommissioning, even if it was not yet required to conduct decommissioning, or (2) if a licensee using a self-guarantee is required to carry out decommissioning. NRC currently does not allow licensees to consider the impact of earnings during the " payout" period (the period during which funds are being expended from the financial assurance standby f rust to pay for decommissioning) in calculating the amount of funds that must be set aside for decommissioning. Therefore, the commenter's suggestion conceming the expected duration of decommissioning activities is not relevant to the determination of the appropriate multiple.

Comment: "CORAR recommends that [ based on the combination of investment yield of 6% and investment yields over two to three years rather than one year) the multiplication factor

[be] reduced from 30 to 10 with ample conservatism."

CORAR (Council on Radionuclides and Radiopharmaceuticals, Inc.)

Response: For the reasons stated in responses to the preceding comments, NRC does

. not accept this recommendation.

. 3.-

Financial Criteria for Hosoitals (a)

Comment: "The selected multiple of 100 [ hospital operating revenues at least 100 l

l

____ times decommissioning costs]is excessively conservative. It appears to reflect an expectation that the decommissioning will take a short ti ne whereas a realistic time frame should be two years or more. CORAR recommends that the NRC considers a multiple of 30 or less to be L

_ appropriate."

. CORAR (Council on Radionuclides and Radiopharmaceuticals, Inc.)

' Response: As noted above, the requirement that hospital operating revenues be at

. least 100 times decommissioning costs is a criterion that NRC is proposing to use to determine if a licensee has sufficient financial strength to self-guarantee. A potential consequence of self-guaranteeing, however, could be the requirement to fully fund a trust fund in a short period of time, if the licensee ceases to be capable of passing the self-guarantee test or if q

l; decommissioning must be carried out. As discussed above, the operating revenues multiple criterion does not reflect any expectation conceming the length of time during which decommissioning will occur. Therefore, NRC does not accept this recommendation.

L The multiple of 100 times decommissioning costs is not a si nificant restricting factor in limiting l

0 the number of hospitals that could qualify for self-guarantee. The requirement applies only to i

hospitals that cannot qualify on the basis of an A or better bond rating. Of the estimated 12 qualifying hospitals, all but 1 would do so by having an A or better bond rating. Of the 26 non-profit hospitals in the NRC database analyzed in the Regulatory Analysis, all have operating revenues in excess of 100 times the average decommissioning cost estimates submitted by

' hospitals to NRC ($372,000). All but 2 have operating revenues in excess of 100 times the highest decommissioning certification amount ($750,000). This indicates that only a few (1-2) additional licensees might qualify if this requirement were dropped.

(b)

Comment: A commenter found the rationale for requiring hospitals to meet all four financial ratios tests unclear. This commenter believed that using only one ratio-operating revenues / decommissioning costs-would appear to provide reasonable assurance of ability to provide decommissioning funding.

' State of New York Deparfment of Health Response: The financial ratios test for hospitals in the rule was carefully selected to provide a level of financial assurance risk similar to the financial assurance risk in the existing self-guarantee. The four ratios in combination represent the best financial test identified which achieves this goal. A financial test using just one of these ratios would not represent the same level of risk, and would not provide an adequate level of financial assurance. Using only the ratio of operating revenues to decommissioning costs would completely ignore such determinants of financial strength as liquidity, indebtedness, and profitability. The financial test used for non-bond issuing commercial licensees includes several ratios, not just one. The non-bond financial test for colleges and universities does use a single ratio, but it is the ratio of unrestricted endowment to decommissioning costs. Unrestricted endowment is a fund readily l

available to meet decommissioning expenses.. Hospital operating revenues is different; these

_j funds may not be readily avaiiable to meet decommissioning expenses due to other hospital costs.' A detailed explanation of the four ratios can be found in NUREG/CR-6514, " Analysis of l

l l

l

_ _ _ _ _ - _ _ _ - _ _ Potential Self-Guarantee Tests for Demonstrating Financial Assurance by Non-Profit Colleges, Universities, and Hospitals and by Business Firms That Do Not issue Bonds".

4.

Formula for Establishing N 6 Worth j

Comment: "CORAR observes that Net Worth is defined as Assets minus Liabilities and J

that Liabilities include decommissioning cost estimates, it therefore appears that the liabilities are double counted in [the requirements that total liabilities divided by net worth be less than i

- 1.5, and net worth be greater than $10 million or at least 10 times decommissioning costs). We L

recommend that decommissioning costs be explicitly excluded from liabilities in these criteria.-

l The modified formula will continue to provide adequate financial assurance."

CORAR (Council on Radionuclides and Radiopharmaceuticals, Inc.)

)

l Response: NRC has no evidence that all licensees currently are including estimates of their_ future decommissioning costs in their financial statements as part of their recognized liabilities. In some cases, companies choose to describe future decommissioning costs as only a potential future liability, recognizing them in footnotes to their financial reports, but not including them in their balance sheets. Second, even when a licensee includes l

decommissioning costs in its liabilities in its financial statements, such inclusion does not lead to L

" double counting," as suggested. by the commenter, although it does make the total liabilities to net worth ratio more difficult to satisfy. However, the NRC has concluded that such stringency is reasonable, because a self-guarantee does not provide the same " defense in depth" as financial assurance provided by third-party mechanisms such as letters of credit. Finally, NRC l

notes that future national accounting standards are likely to require decommissioning costs to be included in financial statement liabilities.- The Financial Accounting Standards Board (FASB)

~ has circulated for comment, but not yet finalized, a financial accounting standard (No.158-B) l relating to obligations that are incurred for the closure or removal of long-lived assets. Under this standard, the liability for decommissioning (stated as the present value of the estimated l:

future cash outflows required to satisfy the obligation) would be recognized in the entity's financial statements, either on the face of the statement of financial position or in the notes to the financial statements. NRC is reluctant to adopt a regulatory definition that would be inconsistent with the FASB standard.

5.

Study to Evaluate Benefits of Financial Assurance Comment:- "While CORAR appreciates the need for financial assurance for licensees with significant historic radionuclides inventories it is not clear whether the regulatory measures are effective. CORAR therefore recommends that the NRC should publish an evaluation that 1

clearly shows that the benefit to society in ensuring decommissioning and reduction in public L dose is justified by the cost of maintaining financial assurance arrangements, regulatory costs in reviewing financial assurance arrangements and costs of adverse effects of financial assurance arrangements on licensee radiation protection resources and financial and

operational viability." -

l l

(

L l CORAR (Council on Radionuclides and Radiopharmaceuticals, Inc.)

Response: NRC agrees with the commenter that there is a need for financial assurance requirements for licensees..However, the Commission does not agree that detailed I.

study is needed to further demonstrate the effectiveness of the current financial assurance requirements.

In 1988 NRC stated the rationale for financial assurance in the preamble to the regulations promulgating financial assurance requirements for decommissioning: "[l] adequate or untimely consideration of decommissioning, specifically in the areas of planning and financial assurance, could result in significant adverse health, safety, and environmental impacts." (53 FR 24019, June 27.,1988) In the course of its development of the decommissioning requirements, including an Advanced Notice of Proposed Rulemaking in 1978 and a Notice of Proposed Rulemaking in 1985, the Commission received and considered public comments on the need for financial assurance for decommissioning. The Commission's conclusion, which

.was particularly directed at the need for financial assurance for reactor decommissioning, also j

applies to decommissioning of other licensed facilities:

In carrying out its licensing and related regulatory responsibilities... the NRC has determined that this regulation is needed because there is a significant radiation hazard '

associated with nondecommissioned nuclear facilities. The NRC has also determined that the public health and safety can best be protected by promulgating a rule requiring reasonable assurance that at the time of termination of operations adequate funds are available so that decommissioning can be carried out in a safe and timely manner and that lack of funds does not result in delays that may cause potential health and safety problems. (53 FR 24037, June 27,1988)

NRC's experience'since 1988 supports this conclusion. In several cases, termination of operations by licanna that had not set aside sufficient funds (e.g., because such termination

occurred prior to the promulgation of the decommissioning financial assurance requirements) has raised the issue whether safe and timely decommissioning will occur and has required extensive efforts by the NRC to ensure protection of public health and safety. In contrast, the NRC has not experienced any failures of the financial assurance requirements to date.

Therefore, it does not agree with the comment that a detailed review of the benefits of the

= requirements is required.

l Even if the broader point that net benefits to society should be evaluated has merit, the practicalities are that NRC would find it extremely difficult to allocate resources for such an

. effort. An analysis of this type need not necessarily be done by NRC; it could be undertaken by l;

an industry or public interest group.

l 6.

National Insurance Proaram for Non-Utility Licensees Comment: "The NRC should consider promoting a national insurance program for all non-utility licensees with the objective of reducing the cost of demonstrating financial assurance."

[

_ _ CORAR (Council on Radionuclides and Radiopharmaceuticals, Inc.)

Response: The NRC does not believe that it should promote a national insurance program for this purpose. Whatever the issues involved in such a program are, there is no reason that this should be an NRC responsibility. Similar programs have been established through industry l

associations. This rulemaking, which simply adds to the list of acceptable financial assurance mechanisms, has no direct link to the pros and cons of such an insurance program.

7.

Definition of Liauidity for Hosoitals Comment: "[Under the criteria for hospitals,] '" liquidity' is incorrectly defined twice as

' current assets and depreciation fund, divided by current liabilities.' (emphasis added) The same mistake is made in ll.B.(2)(c) of the proposed Appendix E to Part 30. The underscored language should be deleted. Inclusion of' depreciation fund'in the liquidity test makes no sense from an accounting perspective. The study upon which the proposed rule is based, NUREG/CR-6514, correctly defines the liquidity test on page 32 as ' Liquidity,' measured by the current ratio (current assets divided by current liabilities).'"

State ofIllinois, Department of Nuclear Safety Response: As the commenter notes, the ratio that NRC has selected as one criterion for self-guarantee is the so-called " current ratio." Generally, it is defined as current assets divided by current liabilities. In some cases, however, particularly involving hospitals, the ratio in the proposed rule that is quoted by the commenter is used. For example, HCIA Inc., which prepares the annual Profiles of U.S. Hospitals, which collects and evaluates information on the financial, operational, and clinical performance of about 6,500 hospitals in the U.S., defines liquidity for purposes of its report as follows:

Liquidity is measured by a hospital's current ratio, which is computed as the sum of the hospital's current assets and depreciation fund divided by its current liabilities. (HCIA,1996 Profiles of U.S. Hospitals,1995, p. 2)

The primary source relied upon by HCIA is the Medicare cost report, which is filed annually with the U.S. Department of Health and Human Services by every U.S. hospital that participates in the Medicare program. Hospitals must describe the method of depreciation that they use, note whether depreciation is funded, and provide the balance in the depreciation fund, if any, at the end of the reporting period. (See Form HCFA-2552, the Hospital and Health Care Cost Report Certification and Settlement Summary) Thus, hospitals should have the information necessary to respond to this criterion.

NRC recognizes that the detailed information presented in Medicare cost reports is not always presented in the same way in other financial reports prepared by hospitals. In particular, hospitals do not always provide information about their depreciation fund, if any, in their financial statements and balance sheets, and therefore hospitals' independently audited year-end financial statements may not contain information on the depreciation fund. The NRC believes, however, that even if a hospital uses a figure for " current assets" from its financial statement, and that figure does not include the hospital's depreciation fund, this should not pose a problem from the standpoint of qualifying to self-guarantee. The effect will be to make the test criterion somewhat more stringent. That stringency can be addressed by the licensee if it desires, by noting in its submission that it is adjusting the current assets from its financial statement by the addition of information on its depreciation fund from another source.

Therefore, NRC does not agree that it is necessary to revise the definition of liquidity.

8.

Prohibition on Usino a Guarantee in Combination with Another Financial Assurance Mechanism Comment: " Provisions in 10 CFR 30.35(f)(2), 40.36(e)(2), 50.75(e)(2)(iii), 70.25(f)(2)

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and 72.30(c)(2), provide that neither a parent company guarantee nor a guarantee by an applicant may be used in combination with other financial methods to satisfy financial assurance requirements. What are the reasons for these restrictions? It would seem that the licensing agency would, for instance, have stronger financial assurance for decommissioning if there were a 50% prepayment and a 50% guarantee than if there [is]just a 100% guarantee."

State of Illinois, Department of Nuclear Safety Response: This rulemaking makes no change in the already existing prohibition against combining a parent or self-guarantee with another type of financial assurance mechanism. The issue of whether or not to allow such a combination is broader than the focus of this rulemaking. The NRC has IN,ted experience with parent and self-guarantee to date. It is expected that NRC will periodically reevaluate its financial assurance program in the future, and could assess the need for the prohibition.

As of now, the NRC has identified at least two reasons why it continues to believe that combining a prepayment financial assurance mechanism with a guarantee or self-guarantee for the same license is undesirable. First, the prohibition agairist combining guarantees with other financial assurance instruments was intended to eliminate possible conflicts that could delay decommissioning. For example, under a guarantee the licensee or guarantor may have the option of performing the required decommissioning activities or funding a trust in the amount of the decommissioning cost estimate. Issues could arise concerning whether a prepayment mechanism or the guarantee can or should be drawn on first to complete a portion of the decommissioning. The licensee or guarantor might prefer using the guarantee, either as performance or payment, first, with the financial assurance drawn on for the balance of the decommissioning. NRC might prefer to draw on the prepayment or third party mechanism first.

In addition, issues could arise concerning whether the mechanism initially drawn upon had funded an adequate and appropriate share of the decommissioning work. Thus, for example, in the 50-50 example posited by the commenter, the guarantor could assert that less than 50 percent of the work had been accomplished under the prepayment, and that therefore the guarantor was not obligated to fully complete the decommissioning. Moreover, NRC believes that a licensee seeking to self-guarantee the costs of decommissioning should at a minimum have sufficient financial strength to cover decommissioning costs of at least one facility or license, rather than just a portion of the costs. The fact that a guarantor is unable to meet the entire obligation for decommissioning could indicate a financial weakness inat reduces assurance that funding will be available for decommissioning. NRC therefore is unwilling to l

i accept the commenter's suggestion.

9.

Nggd for Definitions of Accountina Terms Comment: "Fansteel... suggests that the final rule include definitions for the various accounting terms used in the rule. For example, the proposed rule uses the term ' cash flow' but does not define it, whereas the current parent guarantee rule (10 CFR 30, Appendix B) uses the term 'tne sum of net income plus depreciation, depletion and amortization,' but does not mention cash flow. NUREG/CR-6514 defines cash flow as ' net income plus depreciation, depletion and amortization.' Without the NUREG, one might conclude that the use of different terms in similar rules suggests that different meanings are intended. This confusion can be

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avoided by defining the terms in the rule, rather than relying on documents merely referenced in the rulemaking notice to provide clarity."

The US Enrichment Corporation wanted a definition of" cash flow" in Appendix D to be defined.

Fansteel, Incorporated, US Enrichment Corporation

)

Respcnse: NRC intends the definitions of accounting terms used in similar financial assurance rules to be consistent from rule to rule. The detailed criteria for the financial tests for use of the parent guarantee, self-guarantee, and the self-guarantee by non-profit and non-bond issuing licensees under the proposed rule all will be found in appendices to 10 CFR Part 30 (Appendix A, Appendix C, and Appendix D, respectively). Therefore, NRC will review the regulations and determine if definitions should be added. In many cases, however, the NRC places materialillustrating or explaining basic regulatory requirements in regulatory guidance.

NRC will also review the guidance on financial assurance for decommissioning, Regulatory Guide 3.66, Standard Format and Content of Financial Assurance Mechanisms Required for Decommissioning Under 10 CFR FARTS 30, 40, 70, and 72, June 1990, to ensure that all necessary definitions are included and that the definitions are consistent.

10.

Insured Bond Ratinos Comment: "[T]he criteria in the proposed rule are unnecessarily restrictive and could be modified without any significant reduction in financial assurance. The first issue concerns the ability to rely upon bond ratings. As proposed, for those institutions that issue bonds, only a bond issuance that is ' uninsured' may be relied upon. The justification for this limitation is that

' insured bond ratings are in fact the rating of the insurance company' rather than the college or university itself. 62 Fed. Reg. at 23396. However, as the NRC's own study acknowledges, bond insurers ' evaluate the financial condition of the issuers to insure and avoid issuing policies to universities that are not creditworthy. Consequently, the presence of bond insurance (and the triple-A rating that accompanies it) indicates that the issuer is in sound financial condition.'

NUREG/CR-6514, $2.5.2 at p.18. Thus, the existence of bond insurance provides further assurance that the institution is financially secure, and should support the acceptability of the self-guarantee, rather than disqualifying the bond issuance from consideration."

l

__. American Councilon Education Response: NRC agrees that bond insurers evaluate the financial condition of the issuers of the bonds at the time the debt is insured, and that bond rating agencies, such as Moody's and Standard and Poofs typically assign such bonds a triple-A rating. However, the rating agencies do not directly consider the creditworthiness of the bond issuer when assigning ratings on insured bonds; rather, the rating corresponds to the rating of the bond insurer.

NRC's concerns with accepting insured bonds as a criterion of financial assurance arise from the possibility that over time the insured bond rating could mask potential adverse changes in the financial condition of the bond issuer after the debt has been insured. The proposed rule includes a requirement that the licensee must review whether it continues to pass the financial test for self-guarantee every year. Furthermore, if the licensee no longer meets the test criteria, it must notify NRC and establish alternate financial assurance. However, insured bonds would continue to hold their rating, despite declines in the financial condition of the issuer.

The study quoted by the commenter addresses this issue immediately after the text quoted above:

Bond insurance companies evaluate the financial condition of the issuers they insure and avoid issuing policies to universities that are not creditworthy.

Consequently, the presence of bond insurance (and the triple-A rating that accompanies it) indicates that the issuer is in sound financial condition. In fact almost all insured university debt would receive an investment grade rating (i.e.,

Baa/BBB or higher) without insurance. [However, i]f an issuers financial condition deteriorates, the rating on its insured bonds remains constant... If.

. surveillance causes the insurer to believe that an issuer may be in jeopardy of defaulting on insured dabt payments, the insurer may advise the issuer of ways to improve its financial condition and avoid default.

The problem from the standpoint of financial assurance is that an insured bond does not provide a criterion by which NRC can identify when a licensee / issuer no longer qualifies to self-guarantee. The bond can retain its high rating despite a decline in the financial strength of the issuer. Furthermore, the insurance coverage provided by the bond insurer -- a guarantee of payment of principal and interest in accordance with the insured bond :ssue's payment schedule - will not provide any additional source of funding for decommissioning. NRC therefore does not agree with the commenter's suggestion that it accept ratings on insured bonds as an acceptable criterion for self-guarantee.

I 11.

Requirements for Financial Statements l

Comment: "The requirements for licensees pursuing self-guarantees should reflect the realities of the licensee community. In particular, the proposed requirement (Appendices D and E) that licensees conduct accounting per U.S. generally accepted accounting principles (GAAP) does not recognize the increasingly multi-national nature of materials licensees. Foreign

f i

i ownership of major material licensees is currently a reality (e.g., Siemans, ABB, Framatome) i l

and can be expected to increase in the future. The selection of accounting practices to be used is a significant corporate decision affected by many factors. it is unreasonable to require that corporate practices of major multi-national firms be changed for a licensee to be allowed to provide self-guarantee of decommissioning funding. The rule should allow that adequate assurance that funds will be available can be provided using other recognized and accepted accounting principles."

NuclearEnergy Institute Response: Financial statements prepared in accordance with foreign accounting principles rather than U.S. generally accepted accounting principles pose two problems, from the standpoint of a financial test for self-guarantee. First, the financial test was developed based on an analysis of financial data for U.S. firms. Consequently, the financial test criteria may not be applicable or effective when used in conjunction with financial data that were prepared in accordance with foreign accounting practices. Second, allowing firms to rely on financial statements prepared according to accounting principles in use in their own country could place a heavy administrative burden on NRC. The examples cited by the commenter, for instance, might require NRC to know and apply German, Swiss, and French accounting

{

principles to assess compliance with a financial test designed using U.S. GAAP. Finally, NRC l

has authorized the use of a broad range of financial assurance mechanisms in part to ensure I

that licensees that are unable to use a particular mechanism have other alternatives available.

NRC does not expect firms to change their accounting practices in order to make use of the financial test, because a number of other options are available.

i 12.

Which Financial Criteria Aoolv When a University Also includes a Hosoital Comment: "The proposed rule does not make clear which financial criteria apply when a university also includes a hospital."

i State of New York Department of Health j

l Response: The activity of the licensee determines the appropriate financial criteria. If a l

hospital is the licensee, even if the hospital is within a university, the financial criteria for hospitals would be applicable.

13.

What is the Bond issuina Entity Comment: "The proposed rule does not make clear what it means for the non-profit to

'ir, sue bonds.' in New York State, tax-exempt bonds issued for colleges and universities are placed through the Dormitory Authority of the State of New York. The Dormitory Authority, a public agency, takes no financial risk in the transaction, and the bonds are rated based on the financial strength of the college or university for whom they are issued. The bonds are not, strictly speaking, issued to the market directly by the institutions themselves; they are the bonds l

of the Authority."

State of New York Department of Health Response: The NRC would Icok closely at three attributes of a particular bond, to determine whether it could be used to satisfy the self-guarantee bond-rating criterion. First, the bond should be attributable to the college or university licensee that is attempting to use its rating. That is, even if the bond is issued to the market by a special state authority, such as the Dormitory Authority, the bond issuance should be clearly linked, on its face or in supporting documentation supplied to the NRC, with the college or university. Second, the bond issuance should be linked nDly with that college or university seeking to rely upon it for financial assurance. That is, it should not be linked to two or more institutions. Third, the bond's rating should be based QDly on the financial strength of the college or university for whom the bond is issued. That is, the bond's rating should not reflect any assessment of the financial strength of the issuing authority. It is important to note, however, that other factors also may be important, and that NRC will address each situation according to the facts of the licensee's particular submission.

13.

Definition of " Uninsured. Uncollateralized. and Unencumbered Bonds" Comment: 'What is meant by ' uninsured, uncollateralized and unencumbered bonds?"

Would a bond for which no property is mortgaged but a priority claim is given to bondholders on cedain receivables (e.g., room and board payments) be considered 'collateralized' or

' encumbered'?"

State of New York Department of Health Response: " Collateral"is defined as an asset pledged as security to ensure payment or performance of an obligation. A collateralized bond can be a bond backed by the cash flow from such obligations as a pool of loans, lease payments, or receivables. Such asset-backed securities generally are rated with reference to the quality of the pledged assets, in contrast to unsecured bonds, which are rated with reference to the overall financial condition and future prospects of the issuer. Although NRC will address each situation according to the facts of the licensee's padicular submission, bonds backed by the cash flow from certain specified receivables are unlikely to qualify as " uninsured, uncollateralized and unencumbered."

i 14.

Acolication of Criteria for issuers of Uninsured. Uncollateralized. and Unencumbered j

BQDdL

{

l Comment: "Do any criteria apply when a non-profit has issued bonds, but none are l

' uninsured, uncollateralized and unencumbered?' Such institutions could not meet the first test, and the second test appears to be restricted to ' applicants and licensees that do not issue bonds,' regardless of what sorts of bonds these might be."

State of New York Department of Health

)

Response: A licensee that has not issued any uninsured, uncollateralized, or

L unencumbered bonds clearly cannot use the bond-rating criterion to qualify to self-guarantee.

However, a licensee that has issued insured, collateralized, or otherwise encumbered bonds may in fact be able to demonstrate that it satisfies the alternative criteria. The NRC did not intend for the rule language quoted by the commenter to restrict the use of the alternative test for self-guarantee, if the licensee can satisfy the alternative criteria.

15.

Meanina of Unrestricted Endowment Comment 'What is meant by unrestricted ' endowment?' Most institutions have what are referred to generally as ' endowments' that consist substantially of funds functioning in that capacity, even though the donors contributed them in such a way that the funds would not necessarily be regarded, strictly speaking, as ' endowment'in the narrower legal sense of that term. Many institutions of great financial strength may not meet the criteria if a strict legal definition is applied."

State of New York Department of Health Response: As defined by NACUBO, endowment is " assets donated by individuals or l

organizations to provide permanent capital and an ongoing stream of current income for an i

institution." NRC considers unrestricted endowment to be endowment that is not limited by the terms of its donation to use for a specified purpose; that is not subject to any reversionary interest if not used for a specified purpose; and whose principal or interest are not required to be spent by a particular specified date. An analysis prepared for NRC of the impact of this criterion indicated that institutions of financial strength would not be precluded by the I

unrestricted endowment requirement from qualifying for self-guarantee.

l

)

15.

Financial Criteria for Non-Bond issuina Commercial Licensees Comment: A commenter objected to the net worth criteria-net worth greater than $10 million or at least 10 times estimated decommissioning costs.

This discriminates against well-funded smaller firms that could easily self-guarantee smaller decommissioning projects, but could not meet the $10 million net worth requirement.

Stan A. Huber Consultants Response: The NRC's objective in setting financial criteria for non-bond issuing i

commercial licensees was to make the financial assurance risk of these criteria equal to the financial assurance risk of the financial criteria for those licensees that issue bonds (estimated to be approximately 0.13 percent per year). According to the analysis of potential financial criteria carried out as part of the proposed rule, the financial criteria in the proposed rule meet this objective.' Firms with smaller net worth have a larger default risk than larger firms. Thus, 1 " Analysis of Potential Self-Guarantee Tests for Demonstrating Financial Assurance ny Non-Profit Colleges. Universities, and Hospitals, and by Business

_ _ _ _ _ _ _ - - ____ _ _ ____ ______ _____ _ _ __ _ the $10 million net worth requirement is an essential part of the overall financial test. Moreover, eliminating the $10 million requirement would not allow more than a few (1-2) additional licensees to qualify. The analysis in NUREG/CR-6514, (p. 4.6) estimates that all non-bond issuing firms in the NRC licensee database have a $10 million net worth.

16.

Decommissioning Cost Estimales Comment: Several commenters raised the issue of how decommissioning costs estimates were arrived at. The NRC should encourage best available information estimates of decommissioning costs, based on historic plant experience in decommissioning and renovation, rather than commercial estimates by contractors which tend to be too high. Conservative assumptions, such as use of rates charged by contractors and high estimates of waste disposal costs, snould not be used. A commenter also noted that assuming a period for short-lived isotopes to decay before decommissioning begins would be a realistic assumption. Also, a typical licensee will not have the maximum amount of material allowed by the license at the time of decommissioning.

CORAR, Amersham, Nuclear Energy Institute Response: This rulemaking makes no changes in r quirements for how licensees estimate decommissioning costs. Decommissioning cost estimates, or use of the certification amounts in 10 CFR Part 30, are already required by existing regulations on financial assurance.

l This rule simply adds an additional financial assurance mechanism to those already permitted j

in NRC regulations.

i i

17.

Acreement State Compatibility Status of Financial assurance Regulations I

Comment: The proposed regulations should be assigned a compatibility status of Level 1 with Agreement States. This will assure consistent requirements for financial surety arrangements, and will preclude the unintended creation of competitive disadvantages between facilities in Agreement States and Non-Agreement States.

CORAR, Amersham, NuclearEnergyInstitute Response: In accordance with current NRC policy, Agreement States may be required to adopt an equivalent rule based on health and safety considerations. The health and safety consideration related to this rule is that licensees, whether NRC or Agreement State, must consider the cost of decommissioning their facilities and that those costs be provided for through a financial surety mechanism. The original rule was classified as a Division 2 level of compatibility. This would allow an Agreement State to promulgate equivalent regulations that establish a fewer number of financial assurance mechanisms than allowed by NRC. The subsequent amendments to the financial assurance rule have continued to be a Division 2 level Firms That Do Not Issue Bonds. NUREG/CR-6514

p. 4.7.

- _ _ _ of compatibility, which permits an Agreement State to have more restrictive regulations.

Under the revised compatibility criteria established by the Commission, this rule would be classified a Category D level which means that the Agreement State would not need to adopt this amendment to the financial assurance regulations on the basis of the need to establish a program that is compatible with NRC's regulatory program. As with all Agreement State rules and other program elements, there should be no significant gaps, conflicts, or duplication in the orderly national pattern of collective regulation by NRC and the Agreement States. However, the Agreement State must have the requirement to provide financial assurance that is at least as stringent as NRC's rule based on health and safety, but is not required to adopt the specific mechanisms allowed by NRC.

The commenters presented an argument that the rule might have transboundary impacts and should be classified Category B under the revised compatibility criteria. The staff does not agree. The transboundary impacts need to be significant impacts for the rule to meet the Category B criterion. This rule does not have any significant impacts other than the local site decommissioning impacts.

18.

Acolicability of Rule in Findina of No Significant imoact Section Comment: A commenter noted that in the " Finding of No Significant Impact" section, the phrase "non-power reactor licensees" is used to describe the applicability of the proposed rule. This is incorrect; the correct phrase should be "non-electric utility" licensees.

State ofIllinois, Department of Nuclear Safety l

Response: The commenter is correct; this has been changed in the final rule.

19.

Requirement for Annual Passage of Financial Test Comment: A commenter stated that Section 11. C. (2) of Appendix E should be modified so that a qualifying licensee would not have to repeat passage of the financial test for self-guarantee every year. University endowments are very stable. In addition, section 11. C. (3) provides sufficient assurance that NRC will be notified when a licensee no longer meets the criteria for self-guarantee.

University of Delaware Response: While it is true that university endowments are relatively stable and Section

11. C. (3) provides for notification, the provision for qualifying licensees to repeat passage of the test is retained in the final rule. For a self-guarantee program to provide adequate assurance of decommissioning funding, the annual"requalification" provision is necessary. NRC must have l

l l

t_.__

- 18.-

L assurance of financial strength on a timely basis. A self-guarantee relies solely on the licensees ability to fund decommissioning; there is no backup such as provided by a third party l

financial assurance mechanism. The requirement for repeating the financial test yearly is not -

unduly burdensome on a licensee, and it gives NRC information on the financial con'.il tion of the Llicensee on a timely basis. This requirement is not unique to colleges and universitbs or to this L

rule; it is found in the self-guarantee financial tests applicable to other types oilicennees, both 1

I profit and non-profit.

20.

Use of Self-Guarantee by the United States Enrichment Corporation

. Comment The US Enrichment Corporation proposed that the NRC modify the language of the rule to include certificates (regulated under 10 CFR Part 76 by NRC). USEC stated that it would benefit from the opportunity to reduce the costs of complying with NRC financial assurance requirements, which USEC estimated would presently cost in excess of

. $100,000 per year for letters of credit and surety bonds.

Response:' Under 10 CFR $76.35(n), the United States Enrichment Corporation (USEC 1

or the Corporation) is required to establish financial surety arrangements to ensure that sufficient funds will be available for the ultimate disposal of waste and depleted uranium and decontamination and decommissioning activities which are the financial responsibility of the l-Corporation.. The funding mechanisms currently listed in the regulation as potentially l

acceptable for use by the Corporation include prepayment, surety, insurance, and an external t

sinking fund, but do not include self-guarantee or statement of intent. The rule provides that the funding mechanism must " ensure availability of funds for any activities that are required to be i

completed..... " by the Corporation.

USEC was created pursuant to the Energy Policy Act of 1992. It is a wholly-owned L

government corporation, whose powers are vested in a five-member Board of Directors appointed by the President of the United States and confirmed by the Senate. On July 25, 1

I 1997, hcwever, a plan was approved by the President under which USEC will be sold either to another corporation or to the public through a stock offering. Under the USEC Privatization Act, Congress set certain restrictions on foreign involvement in USEC's privatization, and s equired

. that a " reliable and economical domestic source of enrichment services" exist following privatization.

' Although the NRC is not currently aware of any reason why it would be inappropriate to I

consider expanding the category of funding mechanisms available to the Corporation to l.

demonstrate the availability of funds for the actions required under 10 CFR 76.35(n), it does not believe that it would be feasible to do so in the current rulemaking. First, USEC was not included in any of the analysis performed to evaluate potential self-guarantee tests for demonstrating financial assurance. NRC believes that detailed analysis should be undertaken to ensure that all critical factors have been considered. Second, USEC's current and future L,

situation with respect to the costs that it might incur is substantially different from the licensees

. included in the current rulemaking. In particular, the scope and type of activities that USEC must carry out under 10 CFR 78.35(n) are very different from those conducted by hospitals and universities and the non-bond issuing firms covered by the proposed rule. Third, the exact size l

li-

. _ - - of the obligations that USEC might be required to cover is uncertain, and will not be determined until privatization has occurred, although it is known that many of the costs will be transferred to the U.S. Department of Energy (DOE). Under the Energy Policy Act and the USEC Privatization Act, DOE is responsible for the decontamination and decommissioning of the gaseous diffusion plants (GDPs). DOE also is responsible for all environmental liabilities associated with the operation of the GDPs prior to July 1,1993. According to USEC's Annual Report for 1996, "[e]xcept for certain accrued liabilities that will be specified in a memorandum of agreement entered into prior to privatization, all environmental liabilities of the Company thcough the date of privatization will remain obligations of the U.S. government."(Notes to Financial Statements: 7. Environmental Matters) Furthermore, as of June 30,1996, USEC had acenced liability of $303 million for transportation, conversion, and disposition of depleted uranium currently stored at the GDPs. The 1996 Annual Report states that "USEC is evaluatag various proposals for the disposition of depleted uranium, and depending on the outcome of such evaluations, the Company may be able to reduce future cost accruals..

Pursuant to the USEC Privatization Act, all costs and liabilities related to the disposition of depleted uranium generated prior to the privatization date are the responsibility of DOE."

Fourth, until privatization has occurred, important information about USEC's future corporate structure and ownership will remain uncertain. As noted above, Congress has allowed for USEC to be sold either to another corporation or to the public through a stock offering. Thus, the form in which privatization occurs could affect the NRC's analysis of financial assurance alternatives. Because of the need to evaluate all of these factors, NRC has determined not to include Part 76 in the current rulemaking.

21.

Obtainina a Bond Ratino Even if a Licensee Does Not issue Bond.s Comment: A commenter noted that while the " Supplementary information" section of the notice of proposed rulemaking said that a licensee that did not issue bonds could obtain an indicative bond rating, the proposed rule text did not state this.

State ofI!!inois, Department of Nuclear Safety Response: As the NRC stated in the Supplementary Information accompanying the proposed rule, the fact that a licensee has not issued bonds is not necessarily a sign of financial weakness. "[L]ack of any bond issuance could reflect financial resources great enough to preclude the need to issue debt." (62 FR 23396, April 30,1997) Therefore, as the commenter correctly notes, the preamble went on to say the following:

Even if an applicant or licensee were a non-prot.:ntity or a for-profit firm that does not issue bonds, it may obtain a bond rating from one of the major ratings agencies. This option would be allowed. Having obtained a bond rating, the licensee would be subject to the same requirements as the bond-issuing institutions. (Ibid.)

By " obtaining a bond rating" the NRC meant securing a so-called " indicative" bond rating from Moody's or Standard & Poor's. In banking and finance, an " indication"is a notation next to a price quote that it is for information only. Similarly, " indicative" bond ratings, which are

. available for a relatively Is@) fixed fee, are informative in nature, and are provided as an indication of what a rating would be if the firm were to issue debt. Moody's explains such L

' ratings as follows:

lssuers contemplating the issuance of debt at some future date are offered an indicative rating on a prospective issue. The rating is indicated on a confidential basis, subject to certain limitations in the event of debt issuance by the applicant in any of the capital markets. The indicative rating is subject to revision or withdrawal at any time, without notice, if any information (or lack of information) warrants such action, in the sole opinion of Moody's.

A licensee seeking to use such a rating would be required to submit the rating and name -

of the rating service, but it would not be able to provide NRC information on the dates of issuance and maturity of the bond, nor certify that the rating pertained to its "most recent" issuance. Instead, it would need to explain that the rating was an indicative rating.

NRC's approach to defining the criteria for the financial tests for use of the parent guarantee and self-guarantee is to place the basic requirements in appendices to 10 CFR Part 30 and to place material illustrating or explaining the basic regulatory requirements in regulatory guidance. Ir, formation concerning the use of indicative bond ratings to satisfy the bond rating criterion and details concerning the information that a licensee should submit to qualify for such.

~ use are more appropriately included in guidance material than in the regulation. NRC will' review the guidance on financial assurance for decommissioning, Regulatory Guide 3.66, Standard Format and Content of Financial Assurance Mechanisms Required for Decommissioning Under 10 CFR PARTS 30, 40, 70, and 72, June 1990, to ensure that the necessary explanation of the use of indicative bond ratings is included.

(

Health Physics argRqdialyn Safety Services sTAN A. HuBER CONSULTANTS, INC. : 200 N. CEDAR ROAD n NEW LENOX, IL 60451. (800) 383-0468 - (815) 485-6161 : FAX (815) 485-4C 97 m 19 pa:06 May 14,1997 Of ' ;2 C. ~.: '. 7;. c.

i 00CnE '1.

c.-.,,,,._

Secretary Attn: Docketing and Service Branch

'".[$%[.(./6 #

U.S. Nuclear Regulatory Commission Washington, DC 20555-0001

((o2 FR 2 33 N)

RE:

Proposed NRC Financial Assurance Rule for Non-Utility Decommissioning REF: Federal Register, Vol. 62 No. 83

Dear Secretary:

The proposed rule for non-utility decommissioning indicates that industrial corporations would need to meet not only a series of financial ratio tests but also have a " net worth of greater than ten million dol lars or at least ten (10) times the estimated decommissioning costs, whicheveris creater.

The words "whicheveris greater"is discriminatory against well funded smaller firms that could easily self-guarantee smaller decommissioning projects, but could not meet the requirement of a net woNh of at least 10 million dollars. A smaller firm that meets the financial criteria tests and has a net worth at least ten times greater than the estimated decommissioning costs should enjoy the same privileges as the larger firms with likely larger decommissioning costs for their facilities.

Unless the words "whichever is greater" are eliminated from the proposed rule, only larger firms with net worth's of greater than 10 million dollars will benefit.

Many hundreds of millions more collars could oe saved each year by allowing all licensees to meet equal financial assurance criteria.

Thank you r your consideration.

Sincerely, Stan A. Huber Consultants, Inc.

A M L Stan A. Huber l

President l

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5 omce orihe vice President for snance and Administration Ufp Princeton Unkersm 318 Nawau Hall. Pnnecton. New ferse3 08544 5264

'97 JUN 16 P3 :31 June 12,1997 0FFICE Of h!' nE iF'-

O O C K E T C.. W ' W.:

BM Secretary U.S. Nuclear Regulatory Commission 00C..U NUMBER nD I

Washington, D.C. 20555-0001 PRCPOSED RULEfit 30Mo40,703 7a.

Attn: Docketino and Service Branch

( (,Q F/2 2 3FN)

Re: Federal Register / Vol. 62, No. 83 / Wednesday, April 30,1997 / Proposed Rules, page 23394, Nuclear Regulatory Commission 10 CFR Parts 30,40, 50,70, and 72 Self-Guarantee of Decommissioning Funding by Non-Profit and Non-Bond issuing Licensees Princeton University commends the NRC's proposed rule 10 CFR parts 30,40,50,70, and 72 as referenced above permitting financially strong non-profit licensees the option to self-guarantee as a mechanism to ensure that adequate financial resources are available to fund and carry-out required decommissioning l

activities. On behalf of the University, I am writing this letter in my capacity as Assistant Vice President for Finance and Administration at Princeton University with responsibility for the Office of Environmental Health and Safety.

We heartily agree with your finding that private universities which can meet the proposed stringent financial test can achieve significant cost savings without any loss of confidence for the NRC that funds for decommissioning will be available when needed. To illustrate the cost-savings at an institutionallevel, Princeton University (rated AAA by S&P and Aaa by Moody's) spends roughly $12,000 each year to m'ntain its letter-of-credit, which is, at the current time, the least expensive financial assurance option for Princeton University.

We therefore urge that the NRC adopt the proposed rule as written so that non-profit licensees who meet the NRC's stringent financial criteria have available to them the same financial assurance options presently available to corporate licensees Sincerely, i

-fCmj }lM.L i.

~

Laurel Harvey

~

Assistant Vice President for Finance and Administration 7706170266-970612 )p.

- PDR PR 30 62FR23394 PDR (p3

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L__________.__.________________________._

3 0-DOCKETED Co%%E Radionuclides and Radiopharmaceuticals, Inc.

3911 Campolmdo Drive Moraga, CA 94556-1551 97 JUL -9 N1 ;47 Ston831850 Fau 510/2831850 July 2,1997 RY 0FFICE OF SECRET.) ICE iwry n. xr.... rs.o.. racsr 00CKETiHG & Sero tm-< o' e-BRANCH 8*"***'Y DO~ KET NUMBER C

h5 U.S. Nuclear Regulatory Commission PROPOSED RULE rn 3o.4o go gor 7a, Washington, DC 20555-0001 (6# FR.us94)

Attention:

Docketing and Service Branch

Reference:

Federal Register, Vol. 62, No. 83, April 30,1997.

Proposed Rule: Self Guarantee of Decommissioning Funding by Non-Profit and Non-Bond Issuing Licensees These comments are submitted on behalf of the Council on Radionuclides and Radiopharmaceuticals (CORAR). CORAR members include the major manufacturers and distributors of radiopharmaceuticals, radioactive sources and research mdionuclides used in the U.S. for therapeutic and diagnostic medical applications and for industrial, environmental and biomedical research and quality control. CORAR members and their customers are U.S. Nuclear Regulatory Commission (NRC) or Agreement State licensees and therefore interested in this proposed rule.

CORAR supports the NRC's proposal to allow additional licensees to self-guarantee funding for decommissioning. CORAR welcomes the approach taken by the NRC and recommends extending this effort by reconsidering the values used in current and proposed financial tests to ensure that the program is cost effective. CORAR has enclosed detailed comments on this proposal and made additional recommendations to satisfy the intent of the regulations.

We appreciate the opportunity to comment on this proposed rule and would be glad to provide clarii. cation or additional information.

Sincerely you,

/

4 Leonard R. Smith, CHP Chairperson, CORAR Committee on Regulatory and Legislative issues l

t 4

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g-u_--______________

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j

CORAR COMMENTS ON PROPOSED RULE: SELF GUAR ANTEE OF DECOMMISSIONING FUNDING BY NON-PROFIT AND NON-BOND ISSUING LICENSEES.

1.

Page 23395, column 1, paragraph 1:

" Allowing qualified non-profit and non-bond-issumg licensees to use self-guarantee would reduce the costs of complying with NRC financial assurance requirements while providing adequate confidence to the NRC that funds for decommissioning will be available when needed".

a.

CORAR agrees that extending the use of self-guarantees would reduce the costs of complying with NRC financial assurance requirements.

b.

Many licensees have insufficient financial strength to meet the current stringent regulatory conditions and tests to qualify for self guarantee. They are therefore forced to seek alternative financial assurance arrangements, letters of credit being a common solution. However, because of their financial status, these licensees are required to pay very high fees for the necessary banking services.

Furthermore the establishment of, a letter of credit often reduces a licensee's available credit which can weaken the licensee's fint.ncial and operational flexibility. Current NRC requirements for demonstrating financial assurance can therefore indirectly weaken the financial viability of smaller licensees and can be expected to statistically cause some licensees to fail and precipitate the very condition that the NRC seeks to protect against.

c.

The NRC should be aware that fees to maintain financial assurance arrangements are often paid out of the Radiation Protection budget. Consequently the payment of high fees can adversely affect the radiation protection program. It is not unusual for financial assurance fees to consume fiom 10 to 20% of the radiation protection budget.

d.

Clearly any viable financial assurance mechanism that is less costly than current practice should be preferable to the licensee, regulator and the public.

CORAR agrees that licensees should be required to provide adequate confidence e.

to the NRC that funds for decommissioning will be available when needed. It is clear too that the costs for maintaining this assurance should be minimized to preserve the financial, operational and radiation protection capability of the licensee.

1

)

l f.

There are three areas where the costs for demonstrating financial assurance could be reduced if NRC were to change its current licensing practice. These are:

1 i.

Many licensees use commercial contractors to estimate the cost of decommissioning the licensed facility. Contractors commonly over estimate the cost to provide for generous profit margins and ultra conservative contingencies in the event that they are contracted to decommission the facility. NRC should encourage best estimates of decommissioning costs and prefer estimates based on historic plant experience in decommissioning and renovation rather than commercial estimates.

J

)

ii.

Many licensees use a letter pf credit and standby trust agreement to asst' e decommissioning. NRC Regions and Agreement state staff have limit < J financial and legal expertise and rely heavily on comparing licensee financial assurance arrangements with models presented in Regulatory Guide 3.66. However the NRC model standby trust agreement in Reg.

Guide 3.66 provides for funds to be released to the licensee for decommissioning purposes. This action can defeat the intent of the regulations because, if the licensee has filed for bankruptcy, they legally I

become a separate entity from the licensee that initially filed financial j

assurance arrangements and under the constraints of bankruptcy i

proceedings those funds could be used for purposes other than decommissioning.

CORAR recommends that NRC replaces this model with one that provides for the regulator to manage the decommissioning funds in the event of bankruptcy. The benefit of this recommendation is that it will assure the intent of the regulation, it will provide a model that regulatory staff can use to process licensee submissions and the arrangements carry less risk to the bank providing the services and consequently less cost to the licensee.

iii.

NRC has had considerable experience in reviewing financial assurance submissions. CORAR recommends that the NRC should consider reevaluating the quantities used in both the proposed and current financial tests in 10CFR30. CORAR maintains that such a review should indicate that financial tests for self guarantee and parent guarantee could be relaxed by a factor of two and still provide adequate assurance. This would have the benefit of making a self guarantee accessible to more licensees and reduce any unproductive financial burden on them.

2

l

\\

l 2.

Page 23396, column 2, paragraph 4:

l "The multiple of 30 has been chosen because this would mean that any level of decommissioning costs could be covered by the annual return on an endorsement invested at 3 percent".

l af The selected multiple of 30 is exces ively conservative. It should not be difficult l

to obtain secure investments yielding 6%. CORAR recommends that an appropriate multiple would be 15 based on investment yield.

b.

The above statement implies that decommissioning costs are paid from investment yields over a one year period. However, it is more realistic to assume that any decommissioning activities where financial assurance arrangements are involved will require considerable coordination with regulators and financial services involving two or three years to complete. This consideration also implies that the appropriate multiple should be 15 rather than 30.

l c.

CORAR recommends that the above two considerations can be combined and the multiplication factor reduced from 30 to 10 with ample conservativism 3.

Page 23396, column 3, paragraph 6:

.... hospital operating revenues to be at least 100 times decommissioning costs".

The selected multiple of 100 is excessively conservative. It appears to reflect an expectation that the decommissioning will take a short time whereas a realistic time frame should be two years or more. CORAR recommends that the NRC considers a multiple of 30 or less to be more appropriate.

4.

Page 23396, column 3, paragraph 7:

"The proposed criterion is..., total liabilities divided by Net Worth less than 1.5, and Net Worth greater than $10 million or at least 10 times decommissioning costs,...."

CORAR observes that Net Worth is defined as Assets minus Liabilities and that Liabilities include decommissioning cost estimates. It therefore appears that the liabilities are double counted in the above criteria. We recommend that decommissioning l

costs be explicitly excluded from Liabilities in these criteria. The modified formula will continue to provide adequate financial assurance.

3 I

i; L

5.

Page 23397, column 2, paragraph 2:

"The NRC invites comments on the generalissue of the compatibility status ofits financial assurance regulations".

CORAR asserts that financial assurance regulations should be assigned level I strict compatibility status. We recommend this because financial assurance arrangements can have a significant effect on the financial and operational viability of a licensee.

Consequently Agreement States with more stringent regulatory requirements can cause competitive disadvantages to licensees.

6.

Other Considerations While CORAR appreciates the need for financial assurance for licensees with a.

significant historic radionuclides inventories it is not clear whether the regulatory measures are effective. CORAR therefore recommends that the NRC should publish an evaluation that clearly shows that the benefit to society in ensuring decommissioning and reduction in public dose is justified by the cost of maintaining financial assurance arrangements, regulatory costs in reviewing financial assurance anangements and costs of adverse effects of financial assurance arrangements on licensee radiation protection resources and financial and operational viability.

b.

The NRC should consider promoting a national insurance program for all non-utility licensees with the objective of reducing the cost of demonstrating financial assurance.

l l

4

4 STATE OF ? LINOF ETED i

DEPARTMLNT 01 NUCLEAR S AFl%fgpC 1035 OUTER PARK DRIVE SPRINGFIELD, ILLINOIS r2X 97 JUL 22 A10:05 l

hm linar Thome w enage:

217-7N900 Gm ernor 217-7S2-oD3 (TDD '

0FFICE Of@EMETARY j

DOCKEiM 3 SERVICE BRANC4 July 18,1997 DOCKET NLNBER Secretary of the Commission PROPOSED RULE N So,40. ra 10 m U.S. Nuclear Regulatory Commission

((,:2FR,2339y)

Washington, D.C. 20555 Attention: Docketing and Service Branch Re:

Proposed Rule, "Self-Guarantee of Decommissioning Funding by Non-Profit and Non-Bond Issuing Licensees."

Gentlemen:

The Illinois Department of Nuclear Safety (Department) hereby submits its comments on the referenced proposed rule. The proposed rule represents changes to surety rules that would allow non-profit licensees and commercial licensees who do not issue bonds, the option to use self-guarantee as a surety funding mechanism. Specific comments on the proposed rule are detailed below.

I.

Under II. Analyses of Financial Criteria, A. Criteria for Colleges and Universities, there is a statement that non-profit entities or for-profit firms that do not issue bonds may opt to obtain a bond rating from one of the major ratings agencies.

However, the proposed language in Section 30.35 does not clearly indicate this option.

2.

Under II. Analyses of Financial Criteria, B. Criteria for Hospitals, ' liquidity"is incorrectly defined twice as turrent assets and depreciation fund, divided by current liabilities." (emphasis added) The same mistake is made in II.B.(2)(c) of the proposed Appendix E to Part 30. The underscored language should be deleted. Inclusion of

'tlepreciation fund"in the liquidity test makes no sense from an accounting perspective.

The study upon which the proposed rule is based, NUREG/CR-6514, correctly defines the liquidity test on page 32 as " Liquidity,' measured by the current ratio (current assets divided by current liabilities)."

l

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Secretary of the Commission Page 2 July 17,1997 3.

Provisions in 10 CFR 30.35(f)(2), 40.36(e)(2), 50.75(e)(2)(iii), 70.25(f)(2) and 72.30(c)(2), provide that neither a parent company guarantee nor a guarantee by an 7

applicant may be used in combination with other financial methods to satisfy financial assurance requirements. What are the reasons for these restrictions? It would seem that the licensing agency would, for instance, have stronger financial assurance for decommissioning if there were a 50% prepayment and a 50% guarantee than if there if just a 100% guarantee.

I 4.

Under Finding of No Significant EnvironmentalImpact, the notice states that,

'The proposed action is intended to offer non-profit and non bond-issuing nuclear materials licensees and non-oower reactor licensees greater flexibility by allowing an additional mechanism that meet the financial criteria for use of self guarantee."

(emphasis added) The underscored language inaccurately reflects the scope of the j

proposed rule to reactor licensees. The factor which determines whether a Part 50 reactor licensee can use the new mechanism is whether the licensee is an electric utility, not whether the reactor is a power r. actor. See section 50.75(e)(2). In other words, a non-electric utility licensed to operate a power reactor under Part 50 could use the new J

guarantee mechanism. This issue is correctly addressed in the first sentence of the.

Summary at the beginning of the notice, which refers to ' hon-electric utility reactor licensees."

Overall, we believe that the NRC has increased the flexibility of this rule by developing additional surety options for licensees. If you have any questions regarding

- these comments, please contact either me er : Kathy Allen at (217) 785-9947, Sincerely, l

l L G.0s ala

\\

Steven C. Collins, Chief Division of Radioactive Materials i

SCC:kaa l

l Jim Lynch, State Agreements Officer, RIII cc:

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Michael J. Mocniak 0 nce presee-i cenra cce. 0CKETED

.cc swer, USNRC d

VI JUL 24 P1 :43 N'Def 099 lA"InWP Dlate MOfth Ch'C230 lihno 5 60061 pnore 447; 69-i faa (8471689-0307 July 23, 1997 0FFICE OF SECFETARY DOCKET:NG & CERVICE Secretary BRANCH U.S. Nuclear Regulatory Comnu.ssion Washington, DC 20555-0001 DOCKET NUMBER nn PROPOSED RULE rn 30,40,50,W 73 Attention: Docketing and Service Branch gpppgg94}

Re:

NRC Proposed Rule on Self-Guarantee of Decommissioning Funding by Non-Profit and Non-Bond Issuing Licensees 62 Fed. Rec. 23394 (Acril 30.1997)

Dear Secretary:

I am writing on behalf of Fansteel Inc. in support of the NRC's proposed rule and to offer comments for NRC's consideration in the Final Rule. Fansteel supports the concept that non-profit and non-bond issuing licensees should be allowed to self-guarantee the availability of decommissioning funds. We believe, however, that the proposed financial test for non-bond issuing industrial corporations is unduly restrictive and that the final rule should adopt a less j

restrictive test similar to that currently used for parent company guarantees.

In the proposed rule, industrial corporations would have to meet the following criteria:

Cash Flow + Total Liabilities > 0.15; Total Liabilities + Net Worth < l.5; and Net Worth > $10 MM or 10 times the decommissioning costs, whichever is greater.

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These are the same criteria evaluated as Option 4 for non-bond issuing business firms in l

i NUREG/CR-6514 " Analysis of Potential Self-Guarantee Tests for Demonstrating Financial Assurance by Non-Profit Colleges, Universities and Hospitals and by Business Firms That Do Not Issue Bonds." That analysis concluded that only six percent (2 of 36) licensees considered in the l

study would be able to pass such a rigorous fmancial test.

NUREG/CR-6514 also analyzed a less restrictive financial test, identified as l

l Option 2, which presented only a moderate assurance risk. The criteria for this test are:

1 i

Cash Flow + Total Liability > 0. I or Total Liability + Net Worth < l.5.

This is the same test being corsidered by EPA for both parent company guarantees and self-guarantees for hazardous and nonhazardous waste management facilities under RCRA. The analyses for this option concluded that 69% (25 of 36) licensees would be able to qualify for the self-guarantee under this option.

For comparison, NRC currently accepts a parent company guarantee where the parent company satisfies two of the following three ratios:

Total Liability + Net Worth < 2.0; Cash Flow + Total Liability > 0.1; and Current Assets + Current Liabilities > 1.5.

The parent company must also have net working capital and tangible net worth each at least six times the decommissioning cost estimate; a tangible net worth of at least $10 MM; and at least 90% ofits assets, or assets worth six times the decommissioning cost estimate, located in the United States. This is the same test currently used by EPA for parent guarantees for closure and post-closure costs at RCRA facilities.. _ _ _ _ _ _ _ _ _ _ _ _ _

Fansteel The proposed self-guarantee standard appears to be inconsistent with the existing parent guarantee standard used by the NRC, and it appears to favor corporate form over financial substance. For example, a licensee which is not a subsidiary of another company could pass the parent-guarantee test but not the self-guarantee test. This licensee would have to use other means l

to financially assure its decommissioning cost estimate-all of which entail significant costs.

' Another licensee with the same decommissioning cost estimate, but which has a parent company, f

could use a parent company guarantee as long as the parent satisfies the less restrictive financial test for parent companies. Thus,it is possible that a financially weaker parent company can i

guarantee a given amount, whereas a stronger company which has no parent cannot guarantee the same amount, and will incur significant additional costs to satisfy its financial assurance obligations. The potential for such an outcome should not be countenanced by the NRC.

Fansteel believes that NRC should adopt for the self-guarantee test to be employed by non-bond issuing business firms either the current parent guarantee criteria or the 1

l NUREG/CR-6514 Option 2 criteria. Either test would not unfairly discriminate against companies which do not have parent companies (or which did not establish subsidiaries for their licensed activities) and which are otherwise financially sound. Additiona!!y, more licensees would be able to employ these methods, thereby saving the costs that would be incurred when other financial assurance mechanisms are employed.

Fansteel also suggests that the final rule include definitions for the various accounting terms used in the rule. For example, the proposed rule uses the term " cash flow" but does not define it, whereas the current parent guarantee nile (10 CFR 30, Appendix B) uses the term "the sum of n-t income plus depreciation, depletion and amortization," but does not mention j

cash flow. NUREG/CR-6514 defines cash flow as" net income plus depreciation, depletion and l

8 4

amortization." Without the NUREG, one might conclude that the use of different terms in similar rules suggests that different meanings are intended. This confusion can be avoided by defining the terms in the rule, rather than relying on documents merely referenced in the miemaking notice to provide clarity.

We hope these wmments are helpful as the NRC moves to finalize this rule.

Very truly yours, FANSTEEL INC.

/M8

./

l Michael J. Mocruak Vice President and General Counsel I

_j

00CKETED USNRC W Jul. 25 A10 :31 J uly "~~' 1997 0FflCt OF StCPETA3Y

^"*"h '" " ' d i"5' ' '"'-

00CKEilHG & 3EnvicE 2636 s. cicarbrook orive BRANGl Arlinpon Heighu. IL 60005 Secretary DOCKET NUMBER DD U.S. Nuclear Regulatory Commission PROPOSED RULE m M @ 6Mo / 7A Washington, D.C. 20555-0001 (4p gg g33g}

FAmersham 6

'*""h"'*"""'""I' Attention:

Docketing and Service branch Re:

Federal register, Vol. 62, No. 83, April 30,1997. Proposed Rule: Self Guarantee of Decommissioning Funding by Non-Profit and Non-Bond issuing Licensees These comments are submitted by Amersham 11oldings, Inc., a manufacturer and distributor of radiopharmaceuticals, life science research radiochemical and sealed sources used in medicine and in quality and safety assurance. Amersham currently maintains financial surety arrangements with the Illinois Department of Nuclear Safety in accordance with its Agreement State licensing regulations.

General Comments Amersham supports this NRC Proposed Rule as it provides licensees the opportunity to self-guarantee the costs of decommissioning. We recognize and appreciate the need for NRC to ensure that reasonable and responsible arrangements are established for licensee accountability of decommissioning costs. At the same time, the current methods available for demonstration of financial surety by licensees often result in estimates of decommissioning costs that include conservative assumptions and, therefore, unrealistically high. The financial burden ofletters of credit, surety bonds, and other approved mechanisms of financial surety may actually lead licensees to bankruptcy which may make some of the financial provisions available for decommissioning.

While the optic of self-guarantee is viewed as a more reasonable and cost effective means of holding licenu., accountable for loreg term decommissioning liability, Amersham provides the following specific comments regarding the mechanisms of financial surety which include the suggestion of some modifications to the financial tests used to qualify certain non-bond issuing industrial corporations for self-guarantee. These modifications could make the self-guarantee option available to a wider range oflicensees while still assuring the funding of decommissioning.

Specific Comments 1.

Estimated costs of decommissioning should not rely upon worst case conservative assumptions such as the prime rates charged by contractors or theoretical waste disposal hno iW1OCM 3(P' oci]

l f

l

)

j 2

costs. The estimated costs of decommiss.oning and waste disposal should be based upon j

I licensee and industry experience.

l 2.

The estimate of decommissioning liability should include the costs of activities associated with site assessment, post decommissioning surveys, decontamination, dismantling and packaging and disposal of waste, and should not include the estimated cost of disposal of finished goods in inventory and other materials in process and facilities that have value.

Licensees should not be required to assume disposal costs for the total amount of material they are authorized to possess in their decommissioning estimates.

I i

3.

Licensees, particularly those with relatively short-lived radionuclides, should be given the option of estimating the cost of site access control over the period of time necessary to significantly decay the radioactivity to reduce actual cleanup and disposal costs. The fact that decommissioning occurs over a time span should be allowed to be considered rather than l

the requirement to estimate the cost of decommissioning at the time the facility ceases operation.

The proposed regulations should be assigned a compatibility status of Level 1 to ensure 4.

consistent requirements for financial surety arrangements and to avoid competitive disadvantages.

The proposed criteria for non-bond issuing industrial corporations should be modified to 5.

enable more licensees to qualify while still providing adequate financial surety to cover the cost of decommissioning:

5.1 The second proposed criterion is total liabilities divided by net worth must be less than 1.5. Since net wonh is defined as assets minus liabilities, liabilities are factored into this formula in both total liabilities and net worth. This formula should be changed to total assets divided by the quantity of balance sheet liabilities plus decommissioning liability must be greater than 1.5. This formula makes more sense and more realistically reflects a licensee's ability to shut down and have the l

necessary assets to pay off remaining liabilities and decommissioning costs with 3 t

l considerable margin remaining.

The third criterion is net worth greater than $10 million or at least 10 times 5.2 decommissioning costs, whichever is greater. Again, since the definition of net worth is assets minus liabilities, it appears that the application of decommissioning costs in this relationship is redundant. In addition, finished goods and other valuable assets should not be included in decommissioning costs. If these are considered as l

i l

c

3 both decommissioning liabilities and assets in the determination of net worth, then the licensee is unfairly penalized using this criterion. This penalty is further exacerbated iflicensees are required to determine the cost ofdecommissioning based on total license possession rather than a realistic projection of actual decommissioning and disposal liabilities on site.

Amersham appreciates the opportunity to comment on this very important proposed rule and is willing to answer any questions or provide additional information as required.

1 Sincerely, d.

Mark' A. Doruff, Clip Director, Environmental and Safety Regulatory Affairs i

i

)

L

NUCLEAR REACTOR LABORATO HC AN INTERDEPARTMENTAL CENTER OF MASSACHUSETTS INSTITUTE OF TECHNOLOGY

.g ?o All :00 JOHN A. BERNARD 138 Albany Street, Cambndge. MA 02139-42%

Activation Arafysis C '*"' C * **'S"v 0FFICE CF SEC ~mRY Telefan No (617) 253 7300 Derector 00CKETlHG & SERVICE Director of Reactor Operations Tel No (617) 253-4202 Reactor Eng neenn; Pnncipal Research Engineer BRANCH July 24,1997 DOCKET NtWBERg PROPOSED RULE ru M VMMBe 7%

Secretary U.S. Nuclear Regulatory Commission

((p2F#03394) 7 Washington,DC 20555 Attention: Rulemakings and Adjudications Staff

Subject:

Proposed Rule on Self-Guarantee for Deconunissioning Funding Gentlemen:

The Massachusetts Institute of Technology supports the proposed rule that would allow colleges and universities with either a cenain bond ratmg or a certain unrestricted endowment to utilize self-guarantee as a means of financial assurance for decommissioning.

Sincerely, (NL ohn A. Bernard, Ph.D Director MIT Nuclear Reactor Laboratory JAB /CRM cc:

USNRC - Senior Project Manager, NRR/ONDD USNRC - Region I - Project Scientist, Effluents Radiation Protection Section (ERPS)

FRSSB/DRSS J. D. Litster, MIT RRO1W,YQ lf

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IVERSITYor occ m ED l'

JT; USNPC AL omct or int Puovost m n n~n nan a

t nnerun or pelaware W JUL 29 P3 :28 70."uM*"*"""

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July 25,1997 O F FIC E S 'E R t.,o,,r. Y j

00CKEUNG ; :mr:

Biiu R" Secretary John C. Hoyle UCCET Ntgaggg U. S. Nuclear Regulatory Commission IMOPOSED RUG $30,@,go/ oj7A' 7

Attention: Docketing and Service Branch r

( 02 TR 233W 8

Washington, DC 20555-0001 RE:

Proposed rule regarding self-guarantee of decommissioning funding by Non-ProGt Licensees

Dear Secretary Hoyle:

The University of Delaware strongly endorses the proposed rule allowing universities and other non-profit organizations to self-guarantee the funds for decommissioning costs. Not only are most universities very stable institutions, but they are perhaps the least likely licensee type to terminate licensed activities and require decommissioning. One change in the proposed rule is recommended.

As proposed, Appendix E to Part 30 section II.C.(2)' requires that licensees annually " repeat passage of the test" to ensure that they continue te pass ali self-guarantee criteriv. However,

~

the only financial test under criteria II.A.(20) is the maintenance of at least a $50 million dollar endowment. University endowments are, by nature, stable and secure. Universities meeting the endowment criteria should not need to perform annual financial test.Section II.C.(3) provides suffi ient assurance that the NRC will be notiGed if a university no longer meets the endowment criteria.

The Univershy reevinmends that section ll.C.12; ef Appendix E to Part 30 be modified to read:

(2) After the initial financial test, licensees qualifying for self guarantee under criteria B.(2) must repeat passage of the test within 90 days after the close of each succeeding fiscal year.

The University of Delaware appreciates the opportunity to comment on this important issue.

\\

1 Sincerely, l

Melvyn D.'Schiavelli Provost

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j

AMERICAN COUNCll.ON EDUCATION 00CKET.ED O6ce of V,ce President and General Counsel 1

1 37 JUL 29 P 3 :29 l

July 28,1997 0 F ri; ? Is W ;.7 ' 3 00CM ; n -

l The Honorable John C. Hoyle 8"

• Secretary U.S. Nuclear Regulatory Commission E 08EN I

11555 Rockville Pike PROPOSED RULE PR 30ao.goao# 7:

Rockville, MD 20852 MS Ol6G15

( l.a 2 FR 4 33'N[ '

Attn: Docketing and Service Branch Re:

Proposed RuN Concerning Self-Guarantee of Decommissioning Funding By Non-Profit and Non-Bond Issuing Licensees 62 Fed. Reg. 23394 (April 30,1997)

Dear Sir:

On April 30,1997, the Nuclear Regulatory Commission (NRC) published a proposed rule which would expand the categories of NRC licensees who may self-guarantee their decommissioning funding obligations. On behalf of the higher education associations listed below, we wish to submit the following comments on the proposed rule.

On January 11,1993, the NRC published a proposed rule amending its decommissioning funding regulations to allow licensees that meet specified financial tes.s, issue bonds that are rated "A ' or better, and have equity securities registered under the Securities Exchange Act of 1934 to self-guarantee their decommissioning funding obligations. Absent meeting these tests / these licensees w uld be obligated to provide decommissioning funding by means of letters of credit, surety bonds on other types of third assurcr party financial assuran e at a cost estimated by the NRC of 1.5 percent of the amount of financial assurance required.

Several commentors filed comments on the proposed rule, urging that the self-guarantee mechanism be made available to educational institutions and other non-profit entities. While the NRC did not adopt these comments when it issued the final rule, in the Supplementary Information accompanying the final rule, the NRC announced that it would undertake a study of potential self-guarantees for non-proiit licensees other than universities and would review the applicability of self-guarantees to universities after a fee recovery rulemaking. 58 Fed. Reg. 68726, 68728 (1993).

l One Dupont Circle. NW. Suite 838. Washington DC 20036-1193 Phone (202 ) 939-9355 FAX (202) 833-4762 Internet: Sheldon Steinboch@ ACE NCHE EDU

__[kl__ N

9 July 28,1997 Page 2 The promised study, issued this year, identified alternative financial tests that might serve as the basis for self-guarantee by non-profit universities and hospitals and for-profit firms that do not issue bonds. NUREG/CR-6514,

" Analysis of Potential Self-Guarantee Tests For Demonstrating Financial l

Assurance By Nonprofit Colleges and Universities and Hospitals and By Business Firms That Do Not Issue Bonds" (June 1997).

Based on this study, the NRC has now proposed that non-profit colleges and universities may demonstrate decommissioning financial assurance by self-guarantee if they meet the following tests:

1.

for those issuing bonds, a current rating of "A" or betta; and 2.

for those not issuing bonds, an unrestricted endowment with assets in the United States of at least $50 million, or at least 30 times total current decommissioning cost estimate (or the current amount required if certification is used), whichever is greater.

The signatory organizations strongly support the NRC's amendment of its regulations to allow non-profit colleges and universities to self-guarantee their decommissioning funding obligations. The financial stability and longevity of st.ch institutions is at least equal to commercial and industrial entities for which self-guarantees are allowed under NRC regulations.

We do, however, believe that in two respects the criteria in the proposed rule are unnecessarily restrictive and could be modified without any significant reduction % financial assurance. The first issue concerns the ooility to re? upon bond ratings. As prop sed, for those insti+ ctions that issue bonds, only a bond issuance that is " uninsured" may be relied upon.

The justification for this limitation is that " insured bond ratings are in fact the rating of the insurance company," rather than the college or university itself. 62 Fed. Reg. at 23396. However, as the NRC's own study acknowledges, bond insurers " evaluate the financial condition of the issuers to insure and avoid issuing policies to universities that are not creditworthy.

Consequently, the presence of bond insurance (and the triple-A rating that accompanies it) indicates that the issuer is in sound financial condition."

i NUREG/CR-6514, @ 2.5.2 at p.18. Thus, the existence of bond insurance provides further assurance that the institution is financially secure, and should support the acceptability of the self-guarantee, rather than disqualifying the bond issuance from consideration.

l

1 I

l July 28,1997 l

Page 3 L

The second comment focuses on the test adopted for non-bond-issuing colleges and universities. As proposed, a college or university must have unrestricted endowment of at least $50 million or at least 30 times the l

decommissioning cost estimate, whichever is creater. No explanation is i

l provided as to why an endowment that is at least 30 times projected i

decommissioning costs is not an adequate standard. Nor, given the size of projected decommissioning costs for college and university _ licensees, is there l

any reason why an unrestricted endowment of at least $50 million is not by j.

itself an adequate standard. Rather than requiring compliance with the

[

greater of the two tests, compliance with either of the tests would appear L

more than adequate to provide financial assurance. This would be especially j

true.for materials licensees, whose projected decommissioning costs are likely j

to be significantly less than those for facility licensees.

l l

Since the proposed rule requires that the college or university assess its compliance with. the financial criteria on an annual basis (see proposed App.

E to 10 CFR Part 30, @ II. C), the NRC will have continued assurance that the financial well-being of the institution remains sound (or else alternate financial assurance mechanisms are required). The suggested revisions to the l

financial criteria discussed above will therefore maintain the same high degree of assurance as the proposed rule, while avoiding unnecessarily.

)

restrictive and wasteful requirements. At a time when all organizations are seeking to use their resources in the most efficient possible manner, reducing unnecessary costs without significantly affecting decommissioning assurance ought to be the Commission's goal. The two suggested modifications to the l

proposed rule would be consistent with this goal.

l L

We appreciate the opportunity to submit these comments, l

l Si,ncerely f

f-

/

Sheldon Elliot Steinbach On behalf of the following associations:

American Council on Education Association of American Medical Colleges Council on Governmental Relations National Association of State Universities and Land-Grant Colleges t

MASSACHUSETI'S INSTITUTE OF TECHNOLOGY

~~

DOCKETED Office of Sponsored Programs USNRC Telephone (617) 253-3856 Massachusetts Institute of Technology QXg7g3f]3g i

77 Massachusetts Avenue, E19 750

/

ppowenwmit.edu Cambridge, MA 02139-4307 0FFICE OF SECRETARY 00CKETING & SERVICE July 29,1997 BRANCH DOCKET NUMBER PROPOSED RULE PR 3o. vo.yo 7o472 Secretary

( b 2 ## 83394)

U. S. Nuclear Regulatory Commission Washington, DC 20555-0001

{

1 Attention:

Docketing and Service Branch

Subject:

Self-Guarantee of Decommissioning Funding To Whom It May Concern:

First, accept my apology for the late response to NRC's proposed amendment that appeared in the 4/30/97 Federal Register. We at MIT heartily agree with the proposed amendment. We have found the cost assoc!ated with adhering to NRC's current financial assurance requirements to be quite significant. Allowing qualified non-profits, such as MIT, to use self-guarantee would significantly reduce these costs.

Sincerely yo

@C Paul C. Powell Assistant Director PCP/mm xc: Dr. Prichard N

_N E f ! ' _-__ __ _ ---------

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@ 0CKETED USNRC NUCLEAR ENERGY IN51lTVTE W Jul. 30 All :21 0FFICE OF SECRETARY DOCKETING & SERV!CE

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O$k M Diarcton Derect Line 202 739 8126 Intemet fmngne, org July 29,1997 DOCKET NlMBER PROPOSED RULE b 30 40,go,70 # *' a Mr. John C. Hoyle (I' A fA *2 3 94h, Secretsry b

U.S. Nuclear Regulatory Commi, ion Washington, DC 20555-Or 91 ATTENTION: Docketing and Service Branch

SUBJECT:

Comments on Proposed Rules for Self-Guarantee of Decommissioning Funding by Non-Bond Issuing Licensees (62 FR 23394) i i

By a Federal Register Notice published April 30,1997, the Nuclear Regulatory Commission (NRC) requested comment on a proposed rule change that would extend current authority for licensees to "self-guarantee" decommissioning funding. Under this approach, certain financially strong licensees are not required to provide financial i

I assurance for the decommissioning of their facilities through one of the mechanisms allowed by rule (e.g., surety bond, letter of credit, pre-payment). Licensees using self-l guarantees are permitted to rely upon corporate funds to cover decommissioning costs.

l The current criteria allowing licensees to use " gun

' es are based on corporate l

bond ratings. This option is therefore not available to non-profit organizations and corporate entities that do not issue bonds. The proposed rule would add qualifying criteria to permit certain of theso licensees also to use self-guarantees.

The Nuclear Energy Institute (NEI) supports the extension of the self guarantee principle to additionallicensees. NEI recognizns NRC's responsibility to provide for reasonable assurance that funds will be available to decommission licensed facilities.

This assurance should be provided with the minimum burden necessary on licensees.

Allowing additional licensees to utilize self-guarantees is a laudable step in that direction. However, we believe that NRC should reconsider the conservative nature of some assumptions required to be made in estimating decommissioning costs. More i NE!is the organization responsible for establishing unified nuclear industry policy on inatters affecting the nuclear energy industry, including the regulatory aspects of generic operational and technical issues.

NEI's 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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Mr. John C. Hoyle July 29,1997 Page 2 realistic assumptions would have the effect of estimating costs more realistically and reducing the projected funds for which assurance must be sought. Specific comments on such assumptions and other issues are presented in the enclosure to this letter.

NEI commends the NRC for this initiative, and appreciates the opportunity to proside comments. If there are any questions regarding our comments, please contact me.

Sincerely, h b'

]

Felix M. Killar

Director, Material Licensees & Nuclear Insurance Enclosure c:

Marvin Fertel

l Snecific Comments on NRC Pronosal to Extend Self-Guarantee

1. Estimated decommissioning costs should be based on best available information.

Use of conservative assumptions such as the prime rates charged by contractors or unreasonably high estimates of waste disposal costs should not be required. Other considerations that would result in more realistic cost estimates (such as delays to allow short lived radioactivity to decay as discussed below) should be allowed. In general, decommissioning cost estimates should be based on actual experience, rather than conservative worst-case assumptions.

f. Estimates of decommissioning costs should not be required to assume disposal of the maximum amount of material permitted by the license. Typically, the licensee seldom comes close to having the maximum amount of material permitted by the license. It is more reasonable to assume that the licensee would have minimal licensed material on site when going into decommissioning. Additionally, licensees are engaged in commercial activities to produce products. It is reasonauie to assume that some portion of the licensed maximum quantity will be in the form of finished i

product that will have value and will not be disposed of. In fact, assuming otherwise l

would be an unreasonable assumption.

]

3. Decommissioning costs can be reduced significantly by allowing a period for short-lived isotopes to decay before decommissioning and dismantlement begins. Such delay, to reduce ultimate cost, is the likely scenario in cases where licensed activities occupy only a small portion of the licensee's facility. Licensees should be permitted to consider choosing to implement those procedures rather than be required to base their cost estimates on assuming immediate decommissioning.

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4. The requirements for licensees pursuing self guarantees should reflect the realities of the licensee community. In particular, the proposed requirement (Appendices D and E) that licensees conduct accounting per U.S. generally accepted accounting principles (GAAP) does not recognize the increasingly multi-national nature of materials licensees. Foreign ownership of major material licensees is currently a reality (e.g., Siemens, ABB, Framatome) and can be expected to increase in the future. The selection of a : counting practices to be used is a significant corporate decision affected by many factors. It is ur 2eonable to require that corporate practices of major multi-national firms be changed for a licensee to be allowed to provide self guarantee of decommissioning funding. The rule should allow that adequate assurance that funds will be available can be provided using other recognized and accepted accounting practices.

5. The proposed regulations should be assigned a compatibility status of Level I with Agreement States. This will assure consistent requirements for financial surety arrangements, and will preclude the unintended creation of competitive disadvantages between facilities in Agreement States and Non Agreement States.

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United Statas 00CKETED 4

e.nw. ment w,,,mn USNPC-2 DemocracpCenter 6903 Rockledge Drive

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seineadaA2can W AUG -4 A8 :39 Tel: (301) 00 Fax:(301)544 3201 i

Unhed %tes 0FFICE OF SECRt UM IDuichment Corporation 00CKETIM:,, ybiO Bu.,

DOCKET NUMBER PROPOSED RULE k 30, #, Q70 + 71 August 1,1997 (6 OfAa33W)

I2 Secretary SERIAL: GDP 97-0137 US Nuclear Regulatory Commission Washington, D.C. 20555-0001 Attention: Docketmg and Service Branch Paducah Gaseous Diffusion Plant (PGDP)

Portsmouth Gaseous Diffusion Plant (PORTS)

AVLIS Uranium Enrichment Plant Docket Nos. 70-700170-7002,70-3089 USEC Comments on IGC's Proposed Rule "Self-Guarantee of Decommissioning Funding by Non-Profit and Non-Bond Issuing Licensees," (62 Fed. Reg. 23395)

Dear Sir:

On behalf of the United States Enrichment Corporation (USEC), I am pleased to provide the following comments on the NRC's Proposed Rule, "Self-Guarantee of Decommissioning Fundirg by Non-Profit and Non-Bond Issuing Licensees."

TLe proposed amendment would extend current authority for licensees to self-guarantee decommissioning funding. It is not clear that certificates. such as USEC, would also be extendfd this authority. USEC would also benefit from this opportumty to reduce the costs of complying with NRC E=*1 assurance requirements. It was recently estimated that the costs of obtaining Letters of Credit and Surety Bonds for our gaseous diffusion plants is in excess of $100,000 per year.

Allowing certficatees to demonstrate compliance with the proposed financial criteria required y self-guarantee would reduce compliance costs while providing adequate confidence to the NRC the funds for decommissioning will be available when needed. It is proposed that the h1C modify the l

language of the proposed rule to clarify that it also applies to certificates.

i The term " cash flow" is undefined in Appendix D. USEC understands the term to mean the

" sum of net income plus depreciation, depletion, and amornzation." It is proposed that the NRC modify the language of the proposed rule to define the term " cash flow."

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Officesin Paducah, Kentucky Portsmouth, ohio Washington,DC LeloV+5gi$ he g

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eo U.S. Nuclear Raad=*~y Conunission Dc-ie:' g and Service Branch August 1,1997 GDP 97-0137, Page 2 ThanicyouforthewMif to provide our input to the Comminzion's evaluation process. We would be pleased to chscuss these cammaec with you. Please contact Ms. T 4==*rie Jarriel at (3 n) 564-3247.

Sincerely, a

S. R I ~I

=

Steven A. Toelle Nuclear Regulatory Assurance and Policy Manager.

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FRED 1

CANCER HUTCHINSON DOCKETED RESEARCH USNRC CENTER 97 AUG -5 A10 :50 0FFICE OF SECRETARY July 29,1997 DOCKEilHG & KRVICE BdANCH Secretary U.S. Nuclear Regulatory Commission DOCKET NUMBER Washington, D.C. 20555-001 PROPOSED RULE N30,40po,7o+7a.

Attn: Rulemakings and Adjudications Staff (6#F/f.?ggSy)

Re: Federal Regis':r/Vol.62, No. 83 / Wednesday, April 30,1997 / Proposed Rules Page 23394, Nuclear Regulatory Commission 10 CFR Parts 30,40,50,70 and 72 Self-Guarantee of Decommissioning Funding by Non-Profit and Non-Bond issuing Licensees On behalf of Fred Hutchinson Cancer Research Center, as a Health Physicist, I strongly feel that the NRC's proposed rule is highly beneficial to Institutes like us. It not only allows us to act accordingly and also organize ahead of time with our financial situation in much more efficient way. Non-profit organizations like Fred Hutchinson Cancer Rercarch Center, can achieve a significant cost savings without any loss of confidence for the NRC and Agreement State that funds for decommissioning will be available when needed.

We therefore urge that the NRC adopts the proposed rule as written so that non-profit licensees who meet the NRC's stringent financial criteria have available to them the same financial assurance options presently available to corporate licensees.

i Respectfully,

] 67 %6 b Rao M. Goriparthi Radiation Safety Officer / Health Physicist Environmental Health & Safety Department Fred Hutchinson Cancer Research Center i

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1 1124 Columbia Street Seattle, Washington 98104-2092 206 667 5000 w w i, d

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HARVARD UNIVERSITY R20tmon SArrw CouwirrEE DOCKETED USHRC 97 AUG -8 All :28 4'"**

BERTHA K. Mannas, PH.D.

0FFICE OF SEC

, m 2138 Chair August 1,1997 00CKEilMG &.

JosEPn P. RING PH.D., CHP ggg, :(617) 495-2060 Radiation Protection OfEccr Fax: (617) 495-0593 Secretary COCKET NUMBER U. S. Nuclear Regulatory Commission PHOPOSED RULE 20 30,yo, so, yo # 72 Washington, D. C. 20555-001

{d'DMdB3H)

Attn: Docketing and Service Branch h

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Subject:

Proposed rule on Self-Guarantee of Decommissioning Funding by Non-Profit and Non-Bond issuing Licensees Federal Register / Vol 62, No. 83/ Wednesday, April 30,1997/ Proposed Rules, page 23394 Harvard University supports the proposed rule Decommissioning Funding for 10 CFR 30,40,50, 70, and 72 as referenced above to permit financially strong non-profit licensees the option of self-guarantee of the financial resources to fund and complete decommissioning of licensed activities.

We agree with your finding that private universities, which can meet the stringent financial criteria, would reduce the costs of complying with financial assurance requirements while providing adequate confidence that the decommissioning funds were available. This rule would allow these institutions the self-guarantee option that is now only available to bond-issuing industrial corporations.

We urge that the NRC adopt the proposed rule as written so that not for profit licensees who meet the proposed criteria have available to them the same finar.cial assurance options currently available to corporate licensees.

Sincerely, Bertha K. Madras, Ph.D.

l Chair cc:

E. Barkley J. Griffin R.McGaw J. Ring l

$ $ lH 0D b lf. O! V a

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O STATE OF NEW Yfg<

NL_J DEPARTMENT OF EbAhCTH i

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II Universrty Place Albany, New York 12203-3399 37 AUG -7 P 4 38 B:rbara A. DeBuono. M.D., M.P.H.

Dennis P, Whalen

^ Commissioner Executive Deputy Commissioner JOCG tvLMs?.R kCYEI J

P~iOPOSED RULs PR so.vo so 7o#72 si m -

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July 29,1997 j

Secretary U.S. Nuclear Regulatory Commission Washington, DC 20555-0001 Attn: Docketing and Service Branch I

- RE: Comments on Proposed Rule - Self-Guarantee of Decommissioning Funding l

The New York State Department ofIIealth submits the following comments on the above proposed rulemaking.

1. The proposed rule does not make clear which financial criteria apply when a university also includes a hospital.

2.

The proposed rule does not make clear what it means for the non-profit to " issue bonds." In New York State, tax-exempt bonds issued for colleges and universities are placed through the Dormitory Authority of the State of New York. The Dormitory Authority, a public agency, takes no financial risk in the transaction, and the bonds are rated based on the financial strength of the college or university for whom they are issued. The bonds are not, strictly speaking, issued to the market directly by the institutions themselves; they are the bonds of the Authority.

3. What is meant by " uninsured, uncollateralized and unencumbered bonds"? Would a i

bond for which no property is mortgaged but a priority claim is given to bondholders on certain receivables (e.g., room and board payments) be considered "collateralized" or q

" encumbered"?

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4. Do any criteria apply when a non-profit has issued bonds, but none are " uninsured, j

uncollateralized and unencumbered"? Such institutions could not meet the first test, and the second test appears to be restricted to " applicants and licensees that do not issues bonds," regardless of what sorts of bonds those might be.

5. What is meant by unrestricted " endowment"? Most institutions have what are referred 1

2 University Place, Rm. 375, Albany, N. Y.12203 Tele:518N58-6485 FAX: 518M58-6434

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to generally as " endowments" that consists substantially of funds functioning in that capacity, even though the donors contributed them in such a way that the funds would not necessarily be regarded, strictly speaking, as " endowment" in the narrower legal sense of that term. Many institutions of great financial strength may not meet the criteria if a strict legal definition is applied.

6. The rationale for requiring hospitals to meet all four financial tests is unclear. It would appear that implementation of test d, " operating revenues / decommissioning costs" would provide reasonable assurance of ability to provide decommissioning funding.

The Department supports the concept of self-guarantee for medical and academic institutions as there is little evidence these institutions pose a risk ofleaving a contamination problem.- However the proposed rule prescribes strict financial tests that are unclear and appear to be over restrictive and possibly not true indicators of financial strength. Consideration should be given to including the detailed financial tests in a guidance document much like the current i

financial assuredness rule. Further Agreement States should have additional flexibility determine the requirements for financial assurance especially in the case of hospitals. For example, the Department has considerable regulatory control over the operation of hospitals including the issuance of operating cenificates, approving certificates of need and overseeing closures.

We appreciate the opportunity to comment. Please contact me if you have any questions or need additional information.

Sincerely

's U Stephen M. Gavitt, Chief j

i Radioactive Materials Section Bureau of Environmental Radiation Protection i

1 2 University Place, Rm. 375, Albany, N.Y.12203 Tele:518/458-6485 FAX: 518MS8-6434 t

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C0LLEGE(

' Port /end,gggyv2 REED USNRC ED%1N O. h4 FARI.ANE

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DOCKET NIMBER W SEP 22 P3 :38 PROPOSED RULEN30,40,50,70 s7.2

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OFFICE OF SECPc;AHy RULEMMINus +o

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ADJUDiCAllONS STAFF September 17,1997 Secretary U.S. Nuclear Regulatory Commission" 11555 Rockville Pike, MS Ol6G15 1

Rockville, Maryland 20852 I

Attn.:

Docketing and Service Branch Subj.:

Comments on Proposed Rules for Self-Guarantee of Decommissioning Funding by Non Profit Issuing Licensees (62 FR 23394)

Dear Sir:

On April 30,1997, the Nuclear Regulatory Commission (NRC) published a proposed rule which would expand the categories of NRC licensees who may self-guarantee their decommissioning funding obligations.

Reed College strongly supports the Proposed Rule. It would allow Reed College to meet the proposed stringent financial test and achieve significant cost savings without any loss of confidence for the NRC that funds for decommissioning will be available when needed.

We appreciate the opportunity to submit these comments.

. Sincerely, Edwin O. M6F ane Vice President / Treasurer

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3203 Southeast Woodstock Boulevard Portland. Oregon 97202-8199 Telephone (503) 771-1112 WUUb5 lf. bl?

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Coanizant Individuals:

_ NMSS - Louis Bykoski NRR - Robert Wood OGC - Stephen Lewis 4.

Reauested Action: Review and concur in the rulemaking.- Due to EDO 2/20/98. To meet the EDO due date,6. meeting will be tentatively scheduled for the week of February 2. This meeting will be for the Offices to discuss and resolve any issues and concerns that are delaying concurrence. Please plan on having an official who can concur for your Office available for this meeting. If no issues are identified and all concurrences have been received, this meeting will be cancelled.

5.

Reauested Comolation Date: Twenty calendar days from the date of this memo j

6.

Background. The amendments would allow additional materials licensees and non-electric utility reactor licensees who meet certain financial criteria to self-guarantee funding for decommissioning. Certain industrial corporate licensees who issue bonds are presently allowed to self-guarantee funding if they meet stringent financial criteria.

The rule would allow non-profit licensees, such as colleges, universities, and hospitals,

, and also some industrial licensees who do not issue bonds to self-guarantee funding, provided they meet similarly stringent financial criteria.- Allowing additional qualified licensees to use self-guarantee would reduce the costs of complying with NRC financial assurance requirements while maintaining adequate confidence that funds for decommissioning will be available when needed.

Attachment:

. As stated l

l cc w/encis.:

H. T. Bell, IG W. Beecher, OPA J. Larkins, ACRS & ACNW

.Jp:/c #@ eA9fr

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. T. Martin, CRGR A,ss W. 9go m y H. Miller, Region 1/ ORA u, Wrr 4,. y 3oo/e l

L. Reyes, Region ll/ ORA A. Beach, Region ill/ ORA E. Mershcoff, Region IV/ ORA C. Paperiello, NMSS -

WKane, HMSS m.

- Central f/c IMOEl r/f Njensen Pholahan LRriani MLesar CGallagher - FYoung DMendiola HTthompson, DEDR g

DOCUMENT NAME:O;Wrdwpfroffi

• See previous concurrence hhlI OFC iMOB:IMNS IMOB;iMNS D:SFPO k

MAaIE CPricharc JPecone*

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DATE-12/30/97-12/30/97-

/ / 7 /98

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OFFICE RECORD COPY NMSS FILE CODE:

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