ML23216A142
| ML23216A142 | |
| Person / Time | |
|---|---|
| Site: | South Texas, 07201041  |
| Issue date: | 08/04/2023 |
| From: | Ferraro D, Matthews J, Zorn J Constellation Energy Generation |
| To: | NRC/OCM |
| SECY RAS | |
| References | |
| RAS 56738, 72-1041-LT, 50-498-LT, 50-499-LT | |
| Download: ML23216A142 (0) | |
Text
UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION Before the Commission
)
In the Matter of ) Docket Nos. 50-498-LT
) 50-499-LT SOUTH TEXAS PROJECT, UNITS 1 AND 2 ) 72-1041-LT
)
(Indirect Transfers of Licenses) ) August 4, 2023
)
CONSTELLATIONS RESPONSE IN OPPOSITION TO MOTION TO DISMISS LICENSE TRANSFER APPLICATION AND MOTION TO STAY I. INTRODUCTION The Commission should swiftly deny the Motions1 filed by the City of San Antonio, Texas acting by and through the City Public Service Board of San Antonio (CPS Energy), a Texas municipally-owned utility, and the City of Austin, Texas, d/b/a Austin Energy (Austin)
(collectively, Petitioners). The Motions lack legal merit, distort precedent, and mischaracterize the key agreementsin other words, Petitioners come nowhere close to justifying the drastic relief they seek.
Petitioners core argumentthat STP Nuclear Operating Company (STPNOC) somehow did not have authority to submit an application on behalf of Constellationis fundamentally flawed. STPNOC, as the licensed operator and pursuant to its governancenot the STP Owners Committeehas sole authority to submit the LTA in furtherance of an owner licensees compliance with Section 184 of the Atomic Energy Act of 1954, as amended (the 1
Motion to Dismiss License Transfer Application, Immediately Stay NRC Proceedings, and Petition to Intervene City of San Antonio, Texas Acting By and Through The City Public Service Board of San Antonio and the City of Austin, Texas (July 31, 2023) (Motions). The Petitioners pleading also includes a Petition to Intervene and Request for Hearing (Petition). Constellation intends to respond to the Petition within twenty-five days as provided for in 10 CFR § 2.309(i)(1).
Act), 10 CFR § 50.80, and 10 CFR § 72.50. And thats precisely what it did pursuant to its sole authority. Contrary to Petitioners assertion, and as explained in greater detail below, the STP Owners Committee has no role in this process.
Petitioners also assert that the NRC should suspend its review because of a purported right of first refusal (ROFR) that is the subject of ongoing litigation in Texas state court. This claim, too, is meritless. Indeed, applicable NRC regulation and precedent make clear just the opposite:
that parallel litigation should not disrupt the NRC staffs expedited review of an LTA. 10 CFR
§ 2.1316(a) directs that: During the pendency of any hearing under this subpart, consistent with the NRC staffs findings in its Safety Evaluation Report (SER), the staff is expected to promptly issue approval or denial of license transfer requests. This provision reflects a key principle of the streamlined hearing process adopted for license transfer reviews in Subpart M, which was intended to prevent potential legal disputes by other parties or parallel proceedings in other jurisdictions from sidetracking the NRC staffs review of an LTA. Thus, even where an NRC hearing has been granted, the staff is expected to complete its review apace.
Finally, the Petitioners request that the Commission invoke 10 CFR § 50.80(b)(2) is equally misplaced. In support, Petitioners advance a never-before-applied interpretation of
§ 50.80(b)(2), claiming that it requires written consent of all co-owners.2 But it does not, as evidenced by the sections plain language and common practice. This provision is meant to apply to the licensee for the license that is being transferred. And seeking written consent from NRG South Texasan applicant seeking NRCs approvalfor the license transfer makes no sense.
NRG South Texas has already complied with 10 CFR § 50.80(b)(2), as its consent is inherent in 2
Petitioners Motions at 17.
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its affirmative request that NRC approve the license transfer, as reflected in the LTA submitted on its behalf by STPNOC.
In sum, the Petitioners Motions lacks merit many times over and no basis exists to grant Petitioners the extraordinary relief they seek. Accordingly, Constellation requests that the Commission deny the Motions.
II. BACKGROUND A. STP Ownership, STPNOCs Agency Authority, and Petitioners Misreading of the Key Agreements STP and STPNOC are governed by two agreements adopted by the STP Participants in 1997, the Amended and Restated Participation Agreement (Participation Agreement) and the STP Operating Agreement (Operating Agreement).3 These agreements were developed in connection with the formation of STPNOC and a 1996 application to the NRC seeking to transfer the operating authority for STP from the then owner/operator Houston Lighting & Power Company to STPNOC.4 The Petitioners misleadingly assert that STPNOC is managed by the Owners Committee, and that there is some shared responsibility and authority for filing applications with the NRC. To this point, Petitioners cite Section 9.3.6 of the Participation Agreement, which states the Owners Committee shall:
Approve and join, where necessary, any application or amended application to the Nuclear Regulatory Commission or other regulatory authority as appropriate to provide for the reliable, safe and efficient operation of the South Texas Project by OPCO pursuant to the Operating Agreement.5 3
See Petitioners Exhibits A and B.
4 License Amendment Application (August 23, 1996) (seeking approval of transfer of operating authority)
(ADAMS Accession Nos. ML20117F720 & ML20117F228).
5 Participation Agreement at 18.
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Petitioners are wrong for several reasons.
First and foremost, the notion that the collection of plant owners must and can vote on every regulatory action performed by the licensed operator is antithetical to what has been a First Principle in NRC regulation for more than four decadesthere must be one, and only one, corporate entity responsible for operating a nuclear reactor and responsible to the NRC for compliance with applicable laws and regulations. Among other things, this principle evolved from recommendations of the Kemeny Commission in the aftermath of the accident at Three Mile Island. The Kemeny Commission recommended:
- 3. Integration of management responsibility at all levels must be achieved consistently throughout this industry. Although there may not be a single optimal management structure for nuclear power plant operation, there must be a single accountable organization with the requisite expertise to take responsibility for the integrated management of the design, construction, operation, and emergency response functions, and the organizational entities that carry them out.6 Consistent with this, the authority of STPNOC, as an entity governed by multiple co-owners, was the subject of careful review and scrutiny by the NRC staff in 1996-1997. This included many discussions with the NRC staff regarding STPNOCs authority, and it included review of the terms and conditions in the proposed Participation Agreement and Operating Agreement.7 For example, the NRC staff was concerned about what would happen if the co-owners could not agree on important nuclear safety or compliance matters. As a direct result of that concern, the Operating Agreement provides STPNOC with indisputable authority regarding matters of nuclear safety and compliance with applicable laws and regulations. Section 2.1 of the 6
Report of The Presidents Commission on the Accident at Three Mile Island, at 68-69 (Oct. 30, 1979)
(emphasis added).
7 Supplemental Information Regarding Proposed License Amendments (Jan. 28, 1997) (ADAMS Accession No. ML20147B459). Curiously, Petitioners have sought confidential treatment of the executed versions of these agreements, even though the material terms of the agreements are readily available on STPs NRC docket.
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Operating Agreement sets out the possibility of some direction from the Participants on limited matters, but then states unequivocally:
provided that Opco shall have sole authority, as the Operator of the South Texas Project pursuant to the Operating Licenses, to make all decisions to protect public health and safety as required by the Operating Licenses and applicable laws and regulations and as are necessary to comply with applicable laws and regulations.
(Emphasis added.)
Submitting an LTA to obtain NRC approval of a license transfer is just such an effort to comply with applicable laws and regulationsspecifically Section 184 of the Act and 10 CFR
§ 50.80. As such, STPNOC had sole authority to do so.
Petitioners attempt to interject commercial disputes between the co-owners into this licensing proceeding underscores precisely why STPNOC was empowered with sole authority to make such licensing submittals to the NRC. If matters clearly necessary for nuclear safety or compliance were left to a vote between the owners or subject to dispute in litigation, STPNOC would be left in the impossible position of having to choose between compliance with NRC requirements or arbitrarily being bound by disputes among the owners, notwithstanding the nuclear safety or compliance implications.
Other provisions of the Operating Agreement emphasize STPNOCs sole authority to submit the LTA on behalf of NRG and Constellation. Section 9.3 of the Operating Agreement, for example, provides:
Assistance to Individual Participants. At the request of any Participant from time to time, Opco shall provide such Participant with data and assistance as may be requested by such Participant to enable such Participant to satisfactorily discharge, as a co-owner of the South Texas Project, such Participants responsibilities with regard to the South Texas Project, including such Participants responsibilities to its security holders, to regulatory authorities and others.
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The duties of STPNOC under this provision are clear: once NRG requested assistance, STPNOC had an obligation to assist in submitting the LTA. The Owners Committee has no role in STPNOCs providing assistance to a Participant in a regulatory proceeding.
The Petitioners contention that Section 9.3.6 of the Participation Agreement requires Owners Committee approval for NRC applications is flawed. Petitioners ignore that this Section requiring Participants to approve and join in NRC applicationsonly applies where necessary.
And, read in context, the Participation Agreement makes clear that such approval is only necessary when it might be necessary for the Participants to join in an application that provides for the reliable, safe and effective operation of the South Texas Project by OpCo.8 For example, the Participants joined in and provided information to support STPNOCs application to renew the STP operating licenses, which was submitted by STNOC on their behalf.9 More fundamentally, Petitioners argument ignores the overriding purpose of the Operating Agreement and the more specific provisions governing compliance with NRC regulations, which are intended to ensure that STPNOC would always be the sole entity responsible to the NRC for assuring compliance with applicable laws and regulations, especially in situations where its co-owners were in disagreement.
B. Proposed Transaction and Application Petitioners include a description of various communications among the Participants following the announcement of the proposed transaction and leading up to the submission of the 8
Petitioners argument suffers from an additional flaw. If the Owners Committee had any role, this would have required affirmative action by the Owners Committee. Pursuant to Section 9.4 of the Participation Agreement, actions by the Owners Committee require two or more Participants having in excess of sixty percent (60%)
interest, whereas Petitioners have only 56%. Therefore, even if the Owners Committee had a role in the submittal of the LTA (which it did not), the Petitioners composition of the Owners Committee had no authority to provide direction to STPNOC regarding the filing of the LTA.
9 https://www.nrc.gov/reactors/operating/licensing/renewal/applications/south-texas-proj/south-texas-project-lra.pdf. See Section 1.1.1 (page1.1-2) and Section 1.1.4 (pages 1.1-4 through 1.1-13).
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LTA. This includes several Exhibits with correspondence and Declarations recounting matters that are not properly before the NRC. The NRCs role in reviewing license transfer applications is not to mediate intramural disputes among co-owners or address matters that are to be litigated in the Matagorda County Court in Texas. For the reasons set forth above, STPNOC had full authority to submit the LTA, and the LTA is properly before the Commission and being reviewed by the NRC staff. No consent of a co-owner is required for the NRC to approve an indirect transfer of control of another co-owner holding a licensed ownership interest. The sole question before the NRC here is whether the applicant can establish that the co-owner being transferred will remain financially and otherwise qualified to hold its licenses after the proposed transfer of control.
III. OPPOSITION TO MOTION TO DISMISS Petitioners request that NRC dismiss the LTA, which has been properly submitted and accepted for review by the NRC staff. 10 But tellingly, Petitioners cite to no authority in support of such extraordinary relief, which is nowhere contemplated in NRCs regulations. Instead, Petitioners ground this request on the assertion that STPNOC did not have adequate authority to submit the LTA.11 However, as demonstrated above, this assertion is plainly incorrect. No Owners Committee approval was required, because STPNOC is given sole authority over actions relating to compliance with applicable laws and regulations. Moreover, NRG requested assistance as provided for in Section 9.3 of the Operating Agreement, and if some Owners Committee action could have directed STPNOC to refrain from submitting the LTA, two Participants with more than 60% of the ownership interests would have been required for it to take any such action.
10 Acceptance of Request for Indirect Transfer of Licenses and Conforming Amendments (July 7, 2023)
(ADAMS Accession No. ML23191A010).
11 Petitioners Motions at 6.
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Petitioners claim that in submitting the LTA, STPNOC somehow suggested it was acting in its normal role as agent for all the Participants (emphasis added). 12 This is erroneous. In the LTA, STPNOC plainly states that it is acting on behalf of NRG, its parents, and Constellation.
STPNOC does not purport to act on behalf of the Petitioners in this LTA. References in the LTA to STPNOC generally acting for all the Participants in matters regarding STP are merely included as background information describing STP and its operation.
Petitioners also suggest that the request in the LTA to terminate the existing $120 million support agreement represents some kind of change in its licensing basis.13 Even if the Commission were to agree with this argument, it would not result in dismissal of the LTA as suggested by Petitioners, because this issue could clearly be remedied through the NRC staffs review and approval process. In any event, the financial qualifications licensing basis for STP co-owners is founded on each co-owner being financially qualified to hold its licenses and meet its obligations to STPNOC, not any specific level of financial support from a parent company. Accordingly, if Constellation establishes that NRG South Texas will remain financially qualified following the proposed transfer, then the same licensing basis is maintained. The amount and adequacy of financial support provided by Constellation are to be determined in connection with NRCs findings in its Safety Evaluation, which should be based upon the circumstances presented with the new parent company.
Following the proposed transfer, it is appropriate to relieve NRG South Texas former parent companies from any ongoing financial obligations. The Support Agreements provide that 12 Petitioners Motions at 7.
13 Petitioners Motions at 6-7.
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they can be amended, and such amendments may appropriately include termination, but only with the written consent of the NRC.
Finally, the Participants have no rights or other purported interest in the NRG Support Agreements. These agreements each include a Section 6 that disclaims any such interest:
Rights of Participants and Creditors. The obligations of Parent pursuant to this Agreement are to LP only and do not run to and are not enforceable directly by STPNOC, any other Participant (as defined in the STP Participation Agreement) or any creditor of LP or other entity or person, nor shall this Agreement cause Parent to be responsible for payments of any obligation of LP to STPNOC, any Participant or any creditor or other entity or person or give rise to any recourse by STPNOC, any Participant, creditor or other entity or person to or against Parent or any of its assets or properties.14 In short, Petitioners request to dismiss the LTA should be denied.
IV. OPPOSITION TO MOTION TO STAY A. No Suspension of Review is Warranted Based Upon Petitioners Disputed ROFR Rights Petitioners introduce arguments regarding their purported ROFR rights under the Participation Agreement before the Commission, but these matters are properly to be adjudicated in Texas state court. The Commissions role is not to become embroiled in weighing the merits of disputed ROFR rights, but rather it should continue to adhere to the requirement in 10 CFR
§ 2.1316(a) that the NRC staff proceed with its review of the LTA and proceed to approve or deny the LTA based upon its findings in its Safety Evaluation, notwithstanding the pendency of other commercial disputes relating to the proposed transfer. In fact, nowhere in their Motion do Petitioners make any attempt to explain why 10 CFR § 2.1316(a) is inapplicable in this instance.
14 See Letter from J.W. Crenshaw to NRC, Notice Regarding NRG Energy, Inc. Corporate Restructuring Affecting NRG South Texas LP and Request for Consent to Support Agreement Modifications, Att. 3 (Apr. 13, 2006) 9
The Nine Mile Point precedent upon which Petitioners heavily rely does not help them.
Petitioners rightly point out that the Commission suspended adjudicatory proceedings there based upon the fact the co-owners there had ROFR rights that were imminently being exercised.15 But they overlook the most important part: the NRC staff did not suspend their review of the underlying license transfer application, even though the Commission suspended its adjudicatory review temporarily. Indeed, in that case, Rochester Gas & Electric (RG&E), the party urging suspension of the NRC staff review, acknowledged that the NRC staff review was continuing. The Commissions Order was issued on December 22, 1999, but in RG&Es January 28, 2000 Motion to Strike, it conceded:
AmerGen also incorrectly asserts that RG&E implies that the NRC staff has suspended their review of the pending Application. (Reply at 10 n. 4.) RG&E never made such an assertion. Rather, RG&E simply recommended that, in light of RG&E's exercise of its ROFR, any further NRC Staff action on the pending application should be halted. (RG&E Response at 6 (emphasis added).)
Moreover, as late as April 6, 2000, AmerGen submitted supplemental information in support of the NRC staffs review.16 Thus, this precedent does not support Petitioners request that the NRC staff suspend the review of the LTA. In fact, it holds the opposite: the staffs review of the application should proceed apace.
It is not uncommon for litigants to try to persuade NRC to suspend its review based upon parallel proceedings. However, only in the rarest of circumstances has the NRC found that circumstances warrant this extraordinary measure. For example, in denying a request for 15 See Niagara Mohawk Power Corp., N.Y. State Elec. & Gas Corp., and AmerGen Energy Co., LLC (Nine Mile Point, Units 1 & 2), CLI-99-30, 50 NRC 333 (1999).
16 Letter from G.R. Rainey to NRC, Supplemental Information Submitted in Support of Application for Order and Conforming Administrative Amendment for License Transfer (Apr. 6, 2000) (ADAMS Accession No. ML003703003).
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suspension of a 2002 license transfer proceeding involving Diablo Canyon, the Commission opined:
Unlike Nine Mile Point, we do not here face imminent mootness, but merely the common situation of multiforum transfer reviews. The Commission repeatedly has refused to suspend license transfer proceedings merely because related proceedings at the NRC, in state court, or in state or other federal agencies are pending.17 The Commission appropriately added: Our general policy is to expedite our adjudicatory proceedings, particularly in the time-sensitive license transfer area.18 A temporary suspension through September 1, 2023 so Petitioners can decide whether to exercise their alleged ROFR is also inappropriate. This argument presumes that there is a ROFR to exercise in the first placea hotly-disputed question that will be resolved on the merits in the Texas state court litigation. Unless and until Petitioners prevail on the merits of that claim which, for the reasons set forth in NRCs Response, they will nota purported September 1st exercise moots nothing here.
In contrast, any suspension of the licensing review would highly prejudice NRG South Texass parent companies and Constellation, which have a commercial agreement and only require regulatory approval to close.
17 Pacific Gas and Electric Company (Diablo Canyon Nuclear Power Plant Units 1 and 2), CLI-02-16, 55 NRC 317, 334 (2002) citing Power Authority of the State of New York (James A. Fitzpatrick Nuclear Power Plant; Indian Point, Unit 3), CLI-00-22, 52 NRC 266, 288-90 (2000) (Indian Point 3) (denying motions for stay pending decisions by New York courts, Internal Revenue Service, FERC, and New York State Department of Environmental Conservation); Consolidated Edison Co. of New York (Indian Point, Units 1 and 2), CLI-01-8, 53 NRC 225, 228-30 (2001) (Indian Point 2) (denying request to suspend proceeding until completion of Indian Point 3 license transfer and decision on 10 CFR § 2.206 enforcement petition); Nine Mile Point, CLI-99-30, 50 NRC at 343-44 (granting short suspension pending decisions on rights of first refusal, but denying further suspension until conclusion of New York Public Service Commission proceeding).
18 Id., citing Final Rule: Streamlined Hearing Process for NRC Approval of License Transfers, 63 FR 66,721, 66,721-22 (Dec. 3, 1998); see also Statement of Policy on Conduct of Adjudicatory Proceedings, CLI-98-12, 48 NRC 18, 24 (1998).
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B. NRG South Texas Has Already Complied With 10 CFR § 50.80(b)(2)
The Petitioners note that the Commission has discretion pursuant to 10 CFR § 50.80(b)(2) to require a license transfer applicant to provide either the written consent of the existing licensee or a court order demonstrating Constellations entitlement to acquire NRG South Texas. The implication posed by Petitioners is that § 50.80(b)(2) requires the written consent of all existing licensees.19 But, that is not what the plain language of § 50.80(b)(2) states. Here, NRG South Texas, as the licensee for ownership interest being transferred, is an applicant affirmatively requesting NRCs consent to the proposed license transfer. Further affirmation of its consent would be superfluous.
Not only does the plain language of the regulation not require consent from co-owner licensees, but in practice, the undersigned has not identified a single instance where the NRC has required that all co-owners consent to a license transfer involving ownership interests held by another co-owner. Petitioners thus ask the Commission to establish and apply a new interpretation of the requirements of § 50.80(b)(2)one that is contrary to its plain language and common practicethat would require NRG South Texas and/or Constellation to obtain consent of the Petitioners before issuing its approval or denial of the pending LTA.20 Petitioners reliance on the Bellefonte and Nuclear Development, LLC precedent for their novel interpretation is misplaced.21 Bellefonte was owned and operated solely by Tennessee Valley Authority, which declined to join in the license transfer application or provide its consent to the transfer. There were no other licensees to consent to the transfer of the Bellefonte license 19 Petitioners Motions at 17.
20 Petitioners Motions at 17.
21 See NRC Staff Response to Nuclear Development Letter Dated Sept. 11, 2020 (Nov. 3, 2020) (ADAMS Accession No. ML20286A172).
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so it is impossible for this example to stand for the proposition that the Petitioners claim.
Moreover, here the licensee at issue has already consented by requesting NRCs approval. The Bellefonte facts simply do not apply.
In the end, the Petitioners substantive concerns with the NRC staff continuing their review of the LTA and request that the Commission make a dramatic exception to its regulations and normal processes are all based upon disputed ROFR rights. To the extent Petitioners want to pursue their ill-advised interpretation of their ROFR rights, the litigation in Matagorda County Court in Texas is the appropriate forum. The Commission need not become mired in assessing the disputed merits of Petitioners claims, because these issues are not properly before the Commission. In fact, the Commissions regulations in 10 CFR Part 2, Subpart M were carefully developed to avoid the interference of external commercial disputes or existence of parallel proceedings with the NRCs obligations to focus on the merits of the license transfer application itself.
Moreover, the Petitioners appeal to the Commission for an extraordinary departure from its normal processes in order to protect the Petitioners commercial rights is inappropriate and would set a troubling precedent for future license transfer applications. Any appropriate remedy should be decided by the Matagorda County Court in Texas.
IV. UNTIMELINESS AND FAILURE TO ENGAGE IN MEANINGFUL CONSULTATIONS REGARDING MOTIONS Constellation agrees whole heartedly with the objections posed by NRG in Sections IV.
and V. of NRCs Answer. Rather than restate the arguments here, Constellation joins in NRCs arguments in those sections of its Answer.
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V. CONCLUSION For the foregoing reasons, the NRC should deny the Motion to Dismiss and Motion for Stay.
Respectfully submitted, Signed Electronically by John E. Matthews Jason C. Zorn Donald P. Ferraro John E. Matthews Counsel for Constellation Energy Generation, LLC 14
UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION Before the Commission
)
In the Matter of ) Docket Nos. 50-498-LT
) 50-499-LT SOUTH TEXAS PROJECT, UNITS 1 & 2 ) 72-1041-LT
)
(Indirect Transfers of Licenses) ) August 4, 2023
)
CERTIFICATE OF SERVICE I hereby certify that copies of the foregoing CONSTELLATIONS RESPONSE IN OPPOSITION TO MOTION TO DISMISS LICENSE TRANSFER APPLICATION AND MOTION TO STAY has been served through the E-Filing system on the participants in the above-captioned proceeding this 4th day of August, 2023.
Signed Electronically By John E. Matthews John E. Matthews Managing Director JEMatthews Consulting LLC 1135 Registry Boulevard St. Augustine, FL 32092 202.255.5110 Email: jematthewsconsulting@outlook.com Counsel for Constellation Energy Generation, LLC