Text

Standard Review Plan for the Review of Financial Assurance Mechanisms for Decommissioning Under 10 CFR Parts 30, 40, 70 and 72
	ML20246E753
Person / Time
Issue date:	08/31/1989
From:	; NRC OFFICE OF NUCLEAR MATERIAL SAFETY & SAFEGUARDS (NMSS)
To:	;
References
	NUREG-1337, NUREG-1337-R01, NUREG-1337-R1, NUDOCS 8908290283
	Download: ML20246E753 (43)
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. AVAILABILITY' NOTICE f

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Availability of Reference Materials Cited in NRC Publications-d Most. documents cited in' NRC publications will be. available from one of the followinD :

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q 1h The'NRC Public Document Room, 2120 L Street, NW, Lower Level, Washington, DC :

20555

2. LThe Superintendent of Documents, U.S." Govemment Printing Office, P.O. Box 37082.

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Washington, DC ' 20013-7082 '

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3. - The. National Technical Information Service, Springfield,.VA' 22161 l

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' Although the listin0 that follows repres'ents the majority of documents cited in NRC publica; '

tions, it is not intended to be exhaustive.

q Referenced documents available for inspection and copyinD for a fee from the NRC Publics

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Document Room include NRC correspondence and internal N.RC memoranda; NRC Office of

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' inspection and Enforcement bulletins,' circulars, information notices, inspection and investi -

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gation notices; Licensee Event Reportst vendor reports and correspondence; Commission; j

papers; and applicant and licensee. documents and correspondence.

1 et The following documents in the NUREG series are availab's for purchase from the GPO Sales '.

l Program: formal NRC staff and contractor reports, NRC-sponsored conference proceed-lj ings, and NRC booklots and brochures. Also available are Regulatory Guides, NRC regula '

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. tions in the Code of Federal Regulations, and Nuclear Regulator / Commission issuances, Documents available from the National Technical Information Service include NUREG series.

reports and technical reports prepared by other federal aDencies and reports prepared by.

the Atomic Energy Commission, forerunner agency to the Nuclear Regulatory Commission.

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Documents available from public and special technical libraries include all open literature ~

4 items,'. such as books, journal and periodical articles, and transactions. Federal Register.

notices, federal and state legislation, and congressional reports can usually be obtained from these libraries.

Documents such as theses, dissertations, foreign reports and translations, and non-NRC -

conference proc 9edings are available for purchase from the organization sponsoring the -

publication cited.

. Single copies of NRC draft reports are available free, to the extent of supply, upon written request to the Office of information Resources Management Distribution Section, U.S.

Nuclear Reg 11atory Commission, Washington, DC 20555.

Copies of industry codes and standards used in a substantive manner in the NRC regulatory process are maintained at the NRC Library, 7920 Norfolk Avenue, Bethesda, Maryland, and are available there for reference use by the public. Codes and standards are usually copy-righted and may be purchased from the originating organization or, if they are American National Standards, im the American National Standards institute,1430 Broadway, New York. NY 10018.

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NUREG-1337 Rev.1 Standard Review Plan for the Review of Financial Assurance

.Mecaanisms for Decommissioning Under 10 CFR Parts 30,40,70, and 72 Manuscript Completed: July 1989 Date Published:. August 1989 Division of Low-Level Waste Management and Decommissioning Office of Nuclear Material Safety and Safeguards U.S. Nuclear Regulatory Commission Washington, DC 20555

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i ABSTRACT l

l Standard Review Plan (SRP) for the Review of Financial Assurance Mechanisms for Decommissioning under 10 CFR Parts 30, 40, 70 and 72, is prepared for the guidance of Nuclear Regulatory Commission staff i

reviewers in performing reviews of applications from material licensees affected by the decommissioning regulations established June 27, 1988 l

(53FR24018). The principal purpose of the SRP is to assure the quality and uniformity of staff reviews and to present a base from which to I

evaluate the financial assurance aspects of the applications.

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-The SRP identifies who performs the review, the matters that are reviewed, the basis for the review, how the review is performed, and the conclusions that are sought.

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TABLE OF CONTENTS Page ABSTRACT..............................

iii ACKNOWLEDGEMENTS.......................... vii 1

RESPONSIBILITY FOR REVIEW...................

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AREAS OF REVIEW........................

1 3

REVIEW PROCEDURES.......................

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ACCEPTANCE CRITERIA......................

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EVALUATION FINDINGS......................

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IMPLEMENTATION 12 12 7

REFERENCES..........................

Appendix I:

Check 12sts of Cr. ceria for Review of Financial Instruments.....................

Al Appendix II:

Conversion Table for Determining Amount of Financial Assurance Required as a function of Radionuclides Activity Levels...................

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ACKNOWLEDGEMENTS l

'l Special acknowledgement is made to ICF, Incorporated, especially to l

Craig Dean, Margaret Boryczka and Richard Smith for their major i

contribution in the preparation of the interim finhncial assurance l

guidance.

l Appreciation is also extended to the many individuals throughout NRC who contributed their expertise to the guidance. Among those persons who made contributions as authors, policy reviewers, legal experts or peer reviewers for this document were:

Louis Bykoski, Project Manager l

Division of Low-Level Waste Management and Decommissioning Timothy C. Johcron, Section Leader i

Division of Low-Level Waste Management and Decommissioning J

Dan E. Martin, Senior Project Manager Division of Low-Level Waste Management and Decommissioning Dennis M. Sollenberger, Health Physicist

-i Division of Low-Level Waste Management and Decommissioning Francis P. Cardile, Project Manager j

Division of Low. Level Waste Management and Decommissioning j

Robert S. Wood, Program Management, Policy Development and Analysis Nuclear Reactor Regulation Carl Feldman, Office of Nuclear Regulatory Research Kevin Ramsey, Division of Industrial and Medical Nuclear Safety l

Stuart A. Treby, Office of the General Counsel

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Jane R. Mapes, Office of the General Counsel l

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STANDARD REVIEW PLAN FOR THE REVIEW OF FINANCIAL ASSURANCES MECHANISMS REQUIRED FOR DECOMMISSIONING UNDER 10 CTR PARTS 30, 40, 70, AND 72 1.

RESPONSIBILITY FOR REVIEW 1.1 Primarv - Appropriate Licensing Entity 1.2 Suonortinr. - Cffice of General Counsel (OGC) 2.

AREAS 07 REVIEW The staff will evaluate the financial instruments required by 10 CFR Parts 30, 40, 70, and 72 and the accompanying documentation submitted by the applicant and license holders to ensure that sufficient funds will be availabla to carry out decommissioning activities including:

j planning and preparation of the facility and site for

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decommissioning; decontamination and dismantlement of radioactive facility; packaging, shipment and burial of radioactive wastes; and

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a final radiation survey.

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All applicants for, or holders of licenses under 10 CFR Parts 30, 40, 70, and 72 may use one or more of several kinds of mechanisms to comply with the financial assurence requirements for decommissioning.

The financial responsibility arrangements specifically allowed include:

surety bonds; cash deposits;

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certificates of deposit; deposits of government securities; irrevocable letters or lines of credit; escrow accounts; a

trust funds; a

special government funds or accounts; standby trust; insurance;

parent company guarantee;

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external sinking fund; a

statement of intent (governmental entities); and e

combinations of the above instruments except in.the

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case of the parent guarantee which cannot be combined with other mechanisms.

In addition, self-insurance or any arrangement that essentially constitutes self-insurar-te will not satisfy the surety requirements, since this provides no additional assurance other than that which already exists through license requirements.

Recommended language for the different types of instruments is provided in the Standard Format and Content Guide for Financial Assurance Requirements for Decommissioning Under 10 CFR Parts 30, 40, 70, and 72.

If applicants do not adopt the recommended language, financial instruments should be reviewed using the checklists in t! - Appendix.

Part 72 licensees that are electric utility licensees may use any of the funding methods allowed under Part 72.

In addition, they may also use the methods allowed by 10 CFR $50.75(e)(1) and (3).

In particular, this allows the use of an external sinking fund without having to couple it with a surety method.

3.

REVIEW PROCEDURES The staff will review the conditions under which applicants are required to submit certification and those requiring a decommissioning funding plan to ensure that the appropriate mechanisms are used (see guidelines in the Standard Format and Content Guide).

The staff will also evaluate the applicant's proposed financial assurance mechanism that will be used to ensure that sufficient funds will be available to carry out decommissioning activities.

3.1 Acceptance Review The staff will review the financial instrument and accompanying documentation submitted by the applicant by comparing them with the checklists in the Appendix.

In addition, the wording of the instruments must be compared to the language suggested in the Standard Format and Content Guide to ensure that the appropriate information has been submitted.

The staff will review every financial instrument to ensure that it contains language requiring that the financial institution issuing the financial instrument notify the applicant and the NRC of its intent to cancel.

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3.2 Financial Evaluation The staff will review a financial instrument submitted by the applicant by using the general and specific procedures provided in the following sections:

3.2.1 General Evaluation Procedures Applicable to All Financial Instruments The staff will use the checklists in the Appendix to ensure that the instrument contains all the necessary components.

If there are questions about the wording of financial instruments or about documentation, the reviewer will consult the appropriate NRC office.

The staff will ensure that copies of all necessary documents have been submitted using the checklists provided in the Appendix.

The staff will check signatures and verify that the applicant has e.saured that the parties signing the various documents are authorized to represent the firm in the transaction.

If the applicant is a partnership, the signatory must indicate that she/he is signing for the partnership, that is, by using words such as "for the partnership" or "for the company." If the applicant is an individual, the signatory may be the applicant.

If the applicant is not an individual and power of attorney is needed for a signature, a copy of the power of attorney should be attached to the financial assurance mechanism.

The staff will determine whether the financial assurance mechanism is complete, and will be in effect at the proper time, and if the value is consistent with certification amounts specified in 10 CFR $5 30.35, 40.36 and 70.25, or is consistent with cost estimates provided in a decommissioning funding plan.

(Note that Part 72 licensees must submit a cost estimate.)

3.2.2 Financial Instrument Evaluation Procedures Escrow Accounts The staff will ensure that an executed copy of the escrow agreement is provided by the licensee and that the amount of the fund is at least equal to the cost of decommissioning (as specified in 10 CFR $$ 30.35, 40.36 or 70.25 or as specified in the applicant's cost estimate).

The staff will review the checklist in the Appendix to verify that the applicant has satisfied the conditions necessary for ensuring financial responsibility for decommissioning using this mechanism.

Cash Deposits. Certificates of Deposit. and Government Securities The staff will ensure that the applicant has submitted a trust agreement or documentation pertaining to the applicant's activities licensed pursuant to 10 CFR Part 30, 40, 70, or 72.

The staff will verify that the applicant has deposited assets such as cash, certificates of deposit, or 3

government securities with a third party such as a trust fund.

The staff will ensure that amount of the cash deposit, certificate of deposit, or government security is at least equal to the cost of decommissioning (as specified in 10 CFR $$ 30.35, 40.36 or 70.25 or as specified in the applicant's cost estimate).

The staff will review 5e checklist of criteric in the Appendix to verify that the applicant has atisfied the condition necessary for ensuring financial responsibility for dt. commissioning using one of these mechanisms.

Trust Funds (Includint Standby Trusts)

The staff will ensure that the applicant has provided information so that it can verify that the bank, savings and loan association, or other financial institution has the authority to act as trustee, and that the trust operations are regulated and examined by a Federal or State agency.

Where standby trusts are used, the staff will verify that the trustee is qualified to act as trustee.

It will also verify that the standby trust agreement is an originally signed duplicate and that a certificate of acknowledgement accompanies the bond or letter of credit.

The staff will ensure that amount of the trust fund is at least equal to the cost of decommissioning (as specified in 10 CFR SS 30.35, 40.36 or 70.25 or as specified in the applicant's cost estimate).

The staff will review the checklists in the Appendix to verify that the applicant has satisfied the conditions necessary for ensuring financial responsibility for decommissioning using these mechanisms.

Surety Bonds The staff will ensure that a standby trust fund agreement accompanies the bond, and that it complies with the suggested wording and documentation in the Standard Format and Content Guide.

l The staff will ensure that the applicant has submitted information showing that the surety is listed as an acceptable surety in the most recent edition of Circular 570 of the U.S. Department of the Treasury and that the surety company is licensed in the State where the bond will be executed.

The staff will verify that the applicant reviewed the broker or agent's power of attorney to ensure that the broker or agent is authorized by the surety to issue bonds in the necessary amount.

The staff will ensure that documentation provided by the applicant shows that the applicant will be responsible for notifying NRC if the surety company intends to cancel or if it goes bankrupt.

The staff will ensure that the penal sum of the bond is an amount at least equal to the cost of decommissioning (as specified in 10 CFR $$ 30.35, 4

40.36 or 70.25 or as specifie1 in the applicant's cost estimate).

The staff will review the checklist of criteria in the Appendix to verify that the licensee has satisfied the conditions necessary for ensuring financial responsibility for decommissioning.

Letters of Credit The staff will ensure that the applicant has submitted information so that it can verify that the bank, savings and loan association, mutual savings bank, or credit union issuing the letter of credit has authority to issue letters of credit, and that the letter-of-credit operations are regulated and examined by a Federal or State agency.

The staff will ensure that the amount of the guarantee is at least equal to the cost of decommissioning (as specified in 10 CFR 99 30.35, 40.36 or 70.25 or as specified in the applicant's cost estimate).

The staff will ensure that a letter of credit addressed to the NRC is submitted stating that the letter of credit is subject to the most recent edition of the Uniform Customs and Practice for Documentary Credits, published by the International Chamber of Commerce, or the Uniform Commercial Gode.

The staff will ensure that a standby trust fund agreement accompanies the letter of credit and that it complies with the suggested wording contained in the Standard Format and Content Guide (NUREG 1336).

The staff will review the draft " sight draft" under the checklist of criteria for review of letters of credit in Appendix I of this guidance, to ensure that the terms of the letter of credit and the terms of the sight draft are consistent.2 The staff will review the checklist of criteria in the Appendix to verify that the applicant has satisfied the conditions necessary for ensuring financial responsibility for decommissioning.

Parent Company Guarantee The staff will verify that the applicant / licensee presents evidence that it is a bona fide going concern and that it possesses positive tangible net worth.2 l

A " sight draft" is an order to the bank to pay on the letter of 2

credit.

It is an authorization to draw on the letter of credit upon receipt (upon " sight") of the draft.

A " going concern" is a firm that is expected to continue operating at 2

least long enough for current expectations and plans to be carried out and for the reasonably foreseeable future period after that.

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The staff will verify that the applicant has provided a letter from the corporate parent's chief financial officer, which specifies that the corporation guarantees to provide specified dollar amounts to fund decommissioning activities in the event of the licensee's default. The staff will also verify that the letter includes a financial statement and that it has adequate resources to cover the costs of decommissioning using alternative I or II of the financial test in the Standard Format and Content Guide.

The staff will verify that the applicant has submitted a copy of an independent certified public accountant's opinion of the parent company's I

year-end financial statements and footnotes for the latest complete fiscal year.

The staff will verify that the applicant has submitted a special report on the corporate guarantor from an independent certified public accountant.

The report should confirm that the financial data in the letter from the chief financial officer can be derived from the independently audited year-end financial statements and footnotes for the latest complete fiscal year. The report also should state that no matters came to the attention of the accountant that caused her/him to believe that the information in the chief financial officer's letter should be adjusted.

If there is any doubt about the qualifications of the cercified public accountant, the staff will verify the accountant's credentials by contacting the State Board of Accountancy in the accountant's State.

The staff will ensure that the applicant has provided information that enables it to verify that the corporate parent has control of the applicant's voting stock and also satisfies the financial test.

If there is any reason to question the validity of the financial data (e.g., if the corporate parent barely satisfies the financial test criteria), the staff will ask the firm to supply audited financial statements, or it should obtain Form 10-K from the SEC, and recalculate the financial ratios.

The staff will ask the corporate parent to provide the NRC with documentation of any changes in its financial condition, which would warrant filing Form 8-K with the SEC.

If necessary, the staff will use Moody's or Standard and Poor's bond rating guides to verify that the bonds are rated as claimed.

If an accountant's opinion is unqualified, and the corporate guarantor meets all other requirements, the staff will approve the parent company guarantee.

If an accountent's opinion is either adverse or a disclaimer of opinion, the staff will not allow the use of a parent company guarantee.

If an accountant's opinion is a qualified opinion, (either an "except for" or a " subject to"), excluding opinions rendered on the basis of a " going concern issue, the staff will do the following:

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(1)

It will ask the corporate parent to submit a copy of its latest financial statements. Alternatively, it could obtain a copy of the latest Form 10-K from the SEC.

(2)

It should thoroughly understand the accountants' opinion in the context of the financial statements so that it can determine the likelihood of the circumstances specified in the accountants' opinion, the accuracy of the financial assessment, and the ability of the firm to meet the costs being guaranteed.

(3)

If it cannot make a decision because the information in the opinion or the financial statements is insufficient, it will require that the corporate ryarantor submit additional information.

(4)

If the matter is still unresolved, it will request assistance from its legal counsel.

The staff will ensure that the amount of the parent company guarantee is at least equal to the cost of decommissioning (as specified in 10 CFR $$

30.35, 40.36 or 70.25 or as specified in the applicant's cost estimate).

The staff will review the checklist of criteria in the Appendfx to verify that the applicant has satisfied the conditions necessary for ensuring financial responsibility for decommissioning using this mechanism.

Special Government Fund The staff will ensure that the applicant provides written verification of its agreement with the State regulatory agency (acting as a trustee) indicating that the funds will be used only for decommissioning.

The staff will ensure that documentation of the special account is provided by the licensee and that the amount of the fund is at least equal to the cost of decommissioning (as specified in 10 CFR SS 30.35, 40.36 or 70.25 or as specified in the applicant's cost estimate).

The staff will review the checklists in the Appendix to verify that the applicant han satisfied the conditions necessary for ensuring financial responsibility for decommissioning using this mechanism.

Insurance The staf f will ensure that documentation of the insurance policy is l

provided by the licensee and that the amount of the fund is at least equal to the cost of decommissioning (as specified in 10 CFR 55 30.35, 40.36 or 70.25 or as specified in the applicant's cost estimate).

The staff will review the checklists in the Appendix to verify that the applicant has satisfied the conditions necessary for ensuring financial responsibility for deconnissioning using this mechanism.

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External Sinkinr Fund The staff will ensure that documentation is provided by the applicant which indicates that a fund in the form of cash deposits in an escrow account, trust agreement, certificate of deposit, or government securities has been established.

The staff will ensure that documentation of a surety method (e.g.

letter of credit, surety bond, or insurance) is supplied when this mechanism is used.

The staff will ensure that documentation of the insurance policy is provided by the licensee and that the amount of the fund is at least equal to the cost of decommissioning (as specified in 10 CFR SS 30.35, 40.36 or 70.25 or as specified in the appliccat's cost estimate).

The staff will review the checklists in the Appendix to verify that the applicant has satisfied the conditions necessary for ensuring financial responsibility for decommissioning using this mechanism.

Statement of Intent The staff will ensure that the applicant is a Federal, State, or local government entity and that the officials signing the statement of intent have the authority to make such a commitment.

The staff will ensure that the amount of funos committed in the statement of intent is at least equal to the cost of decommissioning (as specified in 10 CFR $5 30.35, 40.36 or 70.25 or as specified in the applicant's cost estimate).

The staff will review the checklists in the Appendix to verify that the applicant has satisfied the conditions necessary for ensuring financial responsibility for decommissioning using this mechanism.

3.3 Recuests for Additional Information On the basis of its review, the staff may request that the applicant provide additional information or modify the submittal to meet the acceptance criteria in Section 4 of this SRP.

4.

ACCEPTANCE CRITERIA 4.1 Rerulatory Requirements The regulations applicable to the areas of review of this SRP are 10 CFR Parts 30, 40, 70, and 72.

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4.2 Reculatory Guidance There are no regulatory guides that apply to the review of an applicant's financial assurance mechanisms.

4.3 Reculatory Evaluation Criterf,a The staff will determine if the financial assurance information is acceptable by ensuring that it complies with the checklists provided in this document.

An Allowable Financial Instrument is acceptable if it meets the following conditions:

(1)

The financial instrument must state whether the principal is a corporation, partnership, or individual and must be in a form to allow the staff to determine if it has been properly signed and notarized and will be effective at the proper time.

(2)

With regard to signatures on a financial instrument; (a)

The instrument must ensure that the parties signing the various documents are authorired to act as representatives for the firm involved in the transactions.

Persons signing on behalf of the corporate principal must designate their legal capacity and should hold the position of president or vice president of the corporation.

If persons other than the president or vice-president are signing, a resolution or other certified evidence of authority must be attached to the instrument that states that the signatories have the authority to sign on behalf of the principal.

If needed for a signature, a copy of the power of attorney should be attached to the financial assurance instrument and the corporate seal should be affixed.

(b)

If the principal is a partnership, the firm's name must appear in the caption of the financial instrument.

(c)

If the principal is joint ownership, but is not a partnership, the firm's name must appear in the caption and all evners must sign the financial statement.

(d)

If applicable, a signature of the attorney-in-fact (representative granted power of attorney) acting on behalf of the issuing organization must appear on the financial instrument. The financial instrument must be accompanied by a properly executed authorization of the power of attorney for the l

person signing the instrument.

I (e)

If applicable, the financial instrument must contain the signature of the resident agent of the organization issuing the instrument. The agency must be qualified to do business in the State where the facility will be located.

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(f)

Each party must sign his/her own name.

(3)

The financial instrument nust be issued by an organization that has the legal authority to execute such an arrangement (e.g for a surety company check Circular 570; for other mechanisms, consult the checklists in the Appendix).

(4)

All financial instruments, including the original, any additions, and any replacements, must describe and pertain to the activities licensed o'

pursuant to 10 CFR Part 30, 40, 70, or 72.

(5)

The financial assurance must be open ended and cannot be cancelled 4

without at least 90 days advance notice to the NRC.

(6)

The instrument must allow for automatic collection by the NRC before its expiration if the applicant cannot provide an acceptable 3

alternative financial assurance mechanism 30 days after receipt of notification of cancellation. The instrument must not require proof of forfeiture.

(7)

When the instrument is a bond, letter of credit, government security, or certificate of deposit, it must be accompanied by a standby trust to receive assets in the event the applicant defaults or is bankrupt.

(8)

The instrument must specify a bene;iciary satisfactory to the NRC.

If the instrument designates a State agency as the beneficiary, the applicant must submit written documentation to the NRC that will allow the NRC staff to verify that the State agrees to use any funds received to carry out the activities required for decommissioning.

(9)

With regard to the amount of coverage, the financial instrument must 4"

provide for the following:

(a) The instrument, or combination of instruments, must be sufficient at all times to cover all the costs of decommissioning.

(b) The instruments must provide coverage throughout the term of the license.

(e) Cast estimates for licensees submitting decommissioning funding plans must be adjusted for inflation at the time of license renewal or when chere are changes in amount / type of materials at the facility. Costs must be adjusted using current dollar estimates which are based on prices applicable to goods and services in the year that they are purchased.

(f)

If the current cost estimate exceeds the coverage because of inflationary increases or changes in plans, the applicant must arrange to increase coverage and submit evidence of the increase to s

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the NRC within 60 days after the cost estimates increase.

If cost estimates decrease, the applicant may apply to the NRC for approval of a decrease in coverage.

(10) An applicant should obtain alternative financial assurance coverage in the event of bankruptcy of the institution acting as trustce or issuing the financial instrument.

(11) The applicant must inform the NRC within 10 days after it or the organization i ssuing the financial instrument learns of the applicant's bankruptcy proceedings [10 CFR 30.34(h), 40.41(f), 70.32(a)(9), and 72.44(b)(6)].

(12)

If ownership or operating responsibility for the activities is transferred, the NRC will not allow the applicant tc terminate the original fintncial instrument until such time as the new applicant has obtained an acceptable assurance.

(13) The applicant is responsible for obtaining another financial assurance mechanism if the financial institution or corporate guarantor gives notice that it intends to cancel.

(14) The applicant may change the financial assurance mechanisms in use with prior written approval from the NRC.

The new mechanism, if approved, must become effective before or at the time the previous mechanism expires.

If a letter of credit, surety bond, certificate of deposit, or government security is used, the applicant must also establish a standby trust fund.

(15) The instrument must clearly state the terms and conditions under which the applicant may cancel the instrument and must provide for notification and approval by the appropriate State or Federal authority before canec11ation by the company.

(16) The instrument must be established so that the financial assurance can be released after the NRC has agreed that all license conditions for decommissioning have been met.

The NRC will send written notification to the applicant allowing termination of the financial assurance mechanism and a return of any funds held.

5.

EVAL'UATION FINDINGS 5.1 Introduction The staff's review must verify that the information provided is sufficient to satisfy the requirements in 10 CER Parts 30, 40, 70, or 72 and be able to conclude that this evaluation is complete. The staff will document its review as follows:

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P 5.2 Sample Evaluation Findinc

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v "The staff has reviewed the financial assurance documentation submitted by the applicant for [name of facility) facility according to the Standard Review Plan For The Review Of Financial Assurrage_3Pehanisms For Decommissioning Under 10 CFR Parts 30. 40. 70. yno [2 The staff has determined that the financial assurance mechani;ms submitted by the applicant are sufficient to ensure that adequate funds will be available to decommission the facility so that the site will ultimately be available for unrestricted use for any public or private purpose. The staff, therefore, concludes that the financial assurance mechanisms comply with 10 CFR Part [30, 40, 70, or 72]."

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IMPLEMENTATION This SRP provides guidance to the NRC in its technical review of applicants' financial assurance mechanisms for decommissioning.

In addition, it may be used as guidance by applicants and licensees regarding NRC's plans for performing such a technical review.

Except when the applicant proposes an acceptable alternative method for complying with the Commission's regulations, the staff will use the method described herein.

7.

REFERENCES Code of Federal Recu}ations, Title 10, " Energy," U.S. Covernment Printing Office, Washington, DC, revised annually.

International Chamber of Commerce, Uniform Customs and Practice for

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Documentary Credits, Paris, France, 1983.

V U.S. Department of the Treasury, Circular 570, " Companies Accepted on Federal Bonds," Washir.gton, DC, published annually in Erderal Renister.

Lawyer's Cooperative Publishing Co., Uniform Commercial Code, Rochester, NY, 1985.

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APPENDIX I: CHECKLISTS OF CRITERIA FOR REVIEW OF FINANCIAL INSTRUMENTS l

A-1

m, CHECKLIST FOR DECOMMISSIONING FINANCIAL ASSURANCF NAME OF LICENSEE OR APPLICANT MAILING ADDRESS s

A.

Licensee Part (check one of the followinn):

Part 30 Licensee or Applicant Part 70 Licensee or Applicant Part 40 Licensee or Applicant Part 72 Licensee or Applicant B.

Check appropriate item in each category (if applicable) 1.

Date of Financial Assurance Submission 2.

Public Entity Private Entity 3.

,_ Certification of Financial Assurance Decommissioning Funding Plan 4.

(a)

Prepayment Option (See Appendix B)

Trust Fund Escrow Account Certificate of Deposit Government Fund Deposit of Govurnment Securities (b)

_ Surety / Insurance /Other Guarantee (See Appendix C)

Surety band

_ Letter of Credit Line of Credit Parent Company Guarantee / Financial Test (c)

External Sinking Fund, Sinking Account and

^

Surety / Insurance (See Appendix D)

Trust Fund Escrow Account Certificate of Deposit Government Fund Deposit of Government Securities

~

Surety Lond Letter of Credit Line of Credit (d)

Statement of Intent (public entities only - See Appendix E)

May not be used in combination with any other instrument A-2

CHECKLIST FOR SUBMISSION OF PREPAYMENT A.

Check Appropriate Form of Prepayment Trust Fund Escrow Account Certificate (s) of Deposit Special Government Fund Deposit of Government Securities B.

Check Documents Submitted for Each Prepayment Mechanism

1. Trust Fund Trust Agreement

__ _ Acknowledgement

2. Escrow Account Escrow Agreement

3. Certificate (s) of Deposit Certificate (s) of Deposit Trust Agreement Acknowledgement EI Escrow Agreement *

4. Special Government Fund Written Verification and either Trust Agreement and Acknowledgement SI Escrc.w Agreement *

5. Deposit of Government Securities Verification of Approval of Securities and either Trust Agreement and Acknowled ement S

SI Escrow Agreecent*

with verification A-3

CHECKLIST FOR SUBMISSION OF SURETY / INSURANCE / PARENT GUARANTEE A.

Check Appropriate Form of Surety / Insurance / Guarantee Surety Bond Letter of Credit Line of Credit Parent Company Guarantee / Financial Test Insurance B.

Check Documents Submitted for Surety / Insurance / Guarantee

1. Surety Bond Surety Bond Standby Trust Agreement Acknowledgement

2. Letter of Credit Letter of Credit Standby Trust Agreement Acknowledgement

3. Line of Credit Verification Standby Trust Agreement Acknowledgement 1

1

4. Parent Company Guarantee Letter from the Chief Executive Officer of Applicant or Licensee Letter from Chief Financial Officer of Parent Company Financial Test: Alternative [I or II)

Auditor's Special Report and Attached Schedule Corporate Guarantee Standby Trust Agreement Acknowledgement

5. Insurance Certificate of insurance Standby Trust Agreement Acknowledgement A-4

i CHECKLIST FOR SUBMISSION OF EXi'ERNAL SINKING FUND A.

Check Mechanism In Which Sinking Account Will Be Held:*

Trust Fund Escrow Account Certificate (s) of Deposit Special Government Fund Deposit of Government Securities g

B.

Check Appropriate Surety Method:*, **

Surety Bond

'i?

Letter of Credit Line of Credit Insurance

See checklists for documents that should be submitted for mechanisms used in external sinking fund under the checklist for each respective mechanism.

- Part 72 electric utility licensees are exempt from B.

A5

STATEMENT OF INTENT A.

Type of Licensee (check one):

Federal Government Licensee State Government Licensee Local Government Licensee B. Check Documents Submitted for Statement of Intent Statement Guaranteeing Decocaissioning Description of Authority of Government Entity to Make Statement of Intent A-6

CHECKLIST OF CRITERIA FOR REVIEW OF ESCROW ARRANGEMENTS Copy of corporate by-laws or other evidence indicating that parties signing the financial instrument (for the applicant) are authorized to represent the organization in the transaction.

Evidence that the financial instrument is an originally signed duplicate (e.g., an executed copy of the instrument).

Introduction explaining the nature of the agreement between the parties and referring to the NRC license agreement concerning the regulatory obligations of the licensee or applicant.

Identification of the escrow agent:

l.

Name and address of escrow agent; 2.

Position of escrow agent; 3.

Duties and liabilities of escrow agent.

Recital of delivery of items placed in escrow to be disbursed in accordance with the directions, terms, and conditions that follow.

Terms and conditions upon which escrcwed items will be disbursed.

1.

Disbursement to licensee upon proper certification;

)

2.

Conditions that constitute default; 3.

Rights of parties upon default; 4.

Rights and duties of escrow agent upon default; 5.

Persons or names or positions to which funds may be released.

Recital of irrevocability of escrow ar'.angement.

=

Escrow agent's rights and duties.

Annual valuation requirement.

Method for amending or terminating escrow agreement upon mutual consent

=

of the parties and notice to escrow agent.

Compensation and expenses of escrow agent.

Amendment of the escrow agreement.

Interpretation of escrow agreement.

Termination of escrow.

Acceptance of appointment by escrow agent.

Signatures of parties and escrow agent.

A-7

_m-__

_____________m_

CHECKLIST OF CRITERIA FOR REVIEW OF CERTIFICATES OF DEPOSIT Copy of corporate by-laws or other evidence indicating that parties signing the financial-instrument (for the applicant) are authorized to represent the organization in the transaction.

Evidence that the financial instrument is an originally signed duplicate (e.g., an executed copy of the instrument).

Time or demand deposit.

Negotiable or non-negotiable instrument.

Terms and conditions include:

1.

Name and address of bank; 2.

Number of certificate; 3.

Date of creation; 4.

Name of depositor; 5.

Name or position of payee; 6.

Sum deposited; 7.

Rate of interest; 8.

Renewable or nonrenewable at maturity; 9.

Period of renewal; 10.

Power of bank not to renew; 11.

Limitations on withdrawal; 12.

Notice requirements.

Deposit insurance.

=

A-8

CHECKLIST OF CRITERIA FOR REVIEW OF GOVERNMENT SECURITIES Copy of corporate by-laws or other evidence indicating that parties a

signing the financial instrument (for the applicant) are authorized to represent the organization in the transaction.

Evidence that the financial instrument is an originally signed duplicate

.c.g.,

an executed copy of the instrument).

List of securities deposited:

Federal treasury bilis, notes, and bonds:

Government National Mortgage Association certificates (GNMAs);

+

Federal National Mortgage Association certificates (FNMAs); and a

Federal Home Loan Mortgage Corporation (FHLM) bonds.

a State or municipal bonds rated; j

BBB or higher as rated by Standard and Poor's Corporation; or BAA or higher as rated by Moody's Investors Service, Inc.

Date when securities were transferred to trust or escrow account.

Current market value of securities deposited.

Certified or estimated cost of decommissioning.

Documentation of standby trust, including trust agreement and acknowledgement.

EE Documentation of escrow account established to hold government securities.

A-9

CHECKLIST OF CRITERIA FOR REVIEW OF TRUST AGREEMENTS a/

Copy of corporate by-laws or other evidence indicating that parties signing the financial instrument (for the applicant) are authorized to represent the organization in the transaction.

Evidence that the financial instrument is an originally signed duplicate I

(e.g., an executed copy of the instrument).

l l

Evidence that the financial institution has authority to act as a trustee.

Purpose of trust ("whereas" clauses).

1.

Description; Grantor or grantors (introductory paragraph).

1.

Names; 2.

Addresses.

Trustee or trustees.

1.

Names and addresses; 2.

Bank or corporate trustee (introductory paragraph).

Identification of facilities and cost estimates (Section 2).h/

Words of transfer, conveyance, and delivery in trust (Section 3).

a Payments cc:.stituting the trust fund (Section 4).

Duration of trust.

Description of trust property.

1.

Property described in attached schedule (Schedule B);

2.

Cash; 3.

Stock and other securities.

Additions to trust.

Distribution of trust principal (Section 5).

1.

Disbursement to licensee upon proper certification; 2.

Payment for activities at NRC's direction in writing; g/ Adapted from 17A Am Jur Legal Forms 2d (Rev) 9251.94.

h/ References are to recommended wording for trust agreements provided in Section 4 A-10

i CHECKLIST OF CRITERIA'FOR REVIEW OF TRUST AGREEMENTS (continued) 3, Refund to grantor at NRC's specification in writing after completion of decommissioning activities.

s Trust Management (Sections 6-8).

1.

Discretionary powers; 2.

Fiduciary duty; 3.

Commingling and investment; 4

Sale or exchange of trust property; 5.

Scope of investments; 6.

Express powers of trustee; 7.

Borrowing money and encumbering trust assets.

(Optional provisions) 8.

Insurance; 9.

Operation of business; 10.

Compromise of claims.

Taxes and expenses (Section 9).

Annual valuation (Section 10).

I Advice of Counsel (Section ll).

l

=

Authority, compensation, and tenure of trustees (Sections 12-14).

1.

Trustee compensation; 2,

Successor trustee; 3.

Instructions to trustee.

Amendment of agreement (Section 15).

Irrevocability and. termination (Section 16).

Immunity and indemnification (Section 17).

Law to govern construction and operation of trust (Section 18).

Interpretation and severability (Section 19).

Date (signature block).

Signatures (signature block).

Acknowledgements, seals or attestations, if necessary or desired (witness by notary public).

Acceptance of trust by trustee or trustees (acknowledgment).

A-11 i

l 3

)

CHECKLIST OF CRITERIA FOR REVIEW OF LETTERS OF CREDIT Copy of corporate by-laws or other evidence indicating that parties signing the financial instrument (for the applicant) are authorized to represent the organization in the transaction.

Evidence that the financial instrument is an originally signed duplicate (e.g., an executed copy of the instrument).

Evidence that the financial institution is regulated by federal or state agency (e.g., member of FDIC, Federal Reserve System, etc.).

The instrument must be entitled a letter of credit; The letter should be limited in amount; The letter of credit must contain a specified expiration date or be

=

written for definite term; The issuer's obligation to pay the beneficiary should arise only upon

=

presentation of a draft or other documents specified in the letter of credit; The bank must not be called upon to determine a question of fact or law

=

at issue between the licensee and the Commission or State regulatory agency; The licensee should have an unqualified obligation to reimburse the a

issuer for payments made under the letter of credit.

l l

1 A-12 i

l

CHECKLIST OF CRITERIA FOR REVIEW OF LETTERS OF CREDIT (continued)

DRAFT SAMPLE SIGHT DRAFT (To be used if necessary to draw upon letter of credit)

Date On sight pay to the order offInsert standby trust or other naveel (payee), fInsert sum in writinel Dollers ($

)and charge the sum paid to letter of credit Number

, issued to To:

[ Insert name and address of bank issuing letter of credit)

Signature, title, and address of person authorizing payment 1

A-13 41

_____________-____j

CHECKLIST OF CRITERIA FOR REVIEW OF PARENT COMPANY GUARANTEES Letter from Chief Executive Officer of Licensee indicating that licensee e

is a going concern with positive tangible net worth.

Copy of corporate by-laws or other evidence indicating that parties signing the financial instrument (for the applicant) are authorized to represent the organization in the transaction.

Evidence that the financial instrument is an originally signed duplicate (e.g., an executed copy of the instrument).

Evidence that the corporate parent has majority control of the applicant's voting stock.

Name and address of guarantor.

Name and address of the licensee.

Names and address of the regulatory agency.

Recitation of the guarantor's authority to provide the guarantee such as j

=

ownership of the licensee.

Identification of the facilities for which the guarantee provides financial assurance and amounts guaranteed for decommissioning activities.

Description of the primary obligation (decommissioning requirements).

Unequivocal statement of guarantee.

Recitation of the consideration for the guarantee, a.

b.

Liability of the guarantor.

a. Limitation of liability;

b. Condition (s) of liability;

c. Effect on liability of a change in the status of the licensee.

Statement that guarantor remains bound despite amendment or modification of license or decommissioning funding plan, reduction or extension of time of performance of required activities, or any other modification or alternation of an obligation of licensee.

Notice requirements.

Discharge of the guarantor.

Termination and revocation.

1.

Termination on occurrence of contingency; 2.

Voluntary revocation by guarantor; 3.

Effective date of termination or revocation.

Date and Signatures.

A-14

CHECKLISI 0F CRITERIA FOR REVIEW OF SURETY BOFDS Copy of corporate by-laws or other evidence indicating that parties

=

signing the financial instrument (for the applicant) are authorized to represent the organization in the transaction.

Evidence that the financial instrument is an originally signed duplicate (e

g.,

an executed copy of the instrument).

Copy of Circular 570 of the U.S. Department of the Treasury.

Copy of broker / agent's power of attorney authorizing the broker / agent to issue bonds.

Signed statement from applicant indicating that they will notify NRC if the surety company intends to cancel or go bankrupt.

Date of execution of bor d and effective date.

Name and address of licensee (principal).

Type of business organization; State of incorporation, if appropriate.

NRC license number, identification of licensed facility (ies),

=

decommissioning costs.

Identification of corporate or individual surety (ies).

1.

Name; 2.

State of incorporation; 3.

Qualificatu n in jurisdiction where facility covered by the surety bond is located.

Designation of obligee (NRC or State regulatory agency).

a Recitatina of consideration (fee paid for surety bond).

Liability of surety.

1.

Penal sum; 2.

1; mitation of liability; 3.

Condition (s) of liability; 4.

Statement of joint and several liability.

Statement of licensee's or applicant's regulatory obligations as reason for bond.

A-15

I CHECKLIST OF CRITERIA FOR REVIEW OF SURITY BONDS (continued)

Scope and duration of bond.

a I

Restricted to single obligation; 2.

Continuing:

3.

Provisions for renewal.

Termination.

1.

By surety; 2.

By principal;-

3.

Effective date of termination or revocation.

Adjustment of penal sum; Date.

=

Signatures,

- =

i Premium.

j a

1 l

l l

A-16

i,,rr

CHECKLIST OF CRITERIA FOR REVIEW OF SPECIAL GOVERNMENT FUNDS OR ACCOUNTS Copy of corporate by-laws or other evidence indicating that parties signing the financial instrument (for the applicant) are authorized to represent the organization in the transaction.

Evidence that the financial instrument is an originally signed duplicate (e.g., an executed copy of the instrument).

List of assets deposited with State agency, Date on which assets were transferred to Special Account.

Value of assets deposited.

Letter from State agency stating that use of funds will be restricted to covering the costs of decommissioning upon the licensee's default.

Documentation of trust fund established to hold assets, including trust agreement and acknowledgement; EI Documentation of established escrow account.

1 A-17

CHECKLIST OF CRITERIA FOR REVIEW OF STATEMENTS OF INTENT Copy of evidence indicating that parties signing the financial instrument (for the applicant) are authorized to represent the organization in the transaction.

Evidence that the statement of intent is an originally signed duplicate.

Identification of Federal, State, or local governmental entity.

Description of facilities for which Statement of Intent provides

=

financial assurance and corresponding decommissioning costs.

Statement that funds for decommissioning will be obtained when necessary.

Recitation of authority to sign the Statement of Intent.

Date.

=

Names and positions of signatories.

=

Signatures.

l A-18

APPENDIX II: CONVERSION TABLE FOR DETERMINING AMOUNT OF FINANCIAL ASSURANCE REQUIRED AS A FUNCTION OF RADIONUCLIDES ACTIVITY LEVELS A-19

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PORT N ER a L'%

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2. TITLE AND LVBTITLE NUREG-1337, Rev. 1 Standard Review Plan for the Review of Financial Assurance l

3.

DATE REPORT PUBLlSHED j

Michanisms for Decommissioning Under 10 CFR Parts 30, 40, 70 end 72 l

j l

August 1989

4. FIN oR GR ANT NUMBER l

6. AUTHOR {S)

6. TYPE OF REPORT.

l Technical

1. PE RloD cov E R ED tinctusere Deress

8. PE RFoRMlNG ORGAN 12 AT lQN ~ N AM E AND ADDR ESS tt! NRC, provedr Dtvision,09her or oregoon. U.K Nucker Requietory Commonsson, and moment address;it sentractor, prova j

name $ut meeting esemsL)

Division of Low-Level Waste Management and Decommissioning Office of Nuclear Material Safety and Safeguards US Nuclear Regulatory Commission W::hington, DC 20555

9. SPONSORING ORGAN l2 ATloN - N AME AND ADDRESS Ist NRc. tver "senw u.s enour"; to contractor. previor NRC Devnsion, Ottoes or neston un Nucker auguratory commtaron, end meHoria addresLO SAME AS AbOVE

10. SUPPLEME NT ARY NOTE S

11. ABSTRACT (200 were or mast Stendard Review Plan (SRP) for the Review of Financisl Assurance Mechanisms for Decommissioning Under 10 CFR Parts 30, 40, 70 and 72, is prepared for the guidance e

of Nuclear Regulatory Commission staff reviewers in performing reviews of applications L

from material licensees affected by the decommissioning regulations established June 27, 1988 (53 FR 24018). Tne principal purpose of the SRP is to assure the quality and uniformity of staff reviews and to present a base from which to evaluate the financial cecurance aspects of the applications.

NUREG-1337, Rev. 1, identifies who performe the review, the matters that are reviewed, the basis of the review, how the review is performed, and the conclusions that are cought.

i3 AvAaABiul ? 61 AILMLN1

12. KE Y droRDS/DE SCR:PiORS ttest worm orphieses ther wm essest mennen m toreuma the report,s Unlimited License application

u. secuan v o mai+.va

Financial assurance y,,,,, e,e, Decommissioning Unclassified Standard Review Plan n. a.,t>

Unclassified Ib. NUMBE R of PAGES 16 PRICE NAC FORM 33b 0491

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