ML23221A241
| ML23221A241 | |
| Person / Time | |
|---|---|
| Site: | Pennsylvania State University |
| Issue date: | 08/15/2023 |
| From: | Xiaosong Yin NRC/NRR/DANU/UNPL |
| To: | Wilmot A Pennsylvania State Univ, University Park, PA |
| Yin X | |
| References | |
| EPID L-2022-NFO-0016 | |
| Download: ML23221A241 (1) | |
Text
August 15, 2023 Aaron Wilmot, MS, CHP, PE Manager, Radiation Protection Office
& Radiation Safety Officer Environmental Health and Safety 227 Academic Projects Building University Park, PA 16802
SUBJECT:
EVALUATION IN SUPPORT OF THE PENNSYLVANIA STATE UNIVERSITY BREAZEALE NUCLEAR REACTOR, 2022 FINANCIAL TEST FOR A SELF-GUARANTEE FOR DECOMMISSIONING FUNDING (L-2022-NFO-0016)
Dear Aaron Wilmot:
By letter dated December 22, 2022 (Agencywide Document Access and Management System (ADAMS) Accession No. ML23040A063), Pennsylvania State University (PSU) submitted a self-guarantee letter to the U.S. Nuclear Regulatory Commission (NRC) demonstrating financial assurance for decommissioning, in accordance with Title 10 of the Code of Federal Regulations (10 CFR) 50.75, Reporting and recordkeeping for decommissioning planning, paragraph (e)(1)(iii)(C), and Appendix E to 10 CFR Part 30, Criteria Relating to Use of Financial Tests and Self Guarantee for Providing Reasonable Assurance of Funds for Decommissioning by Nonprofit Colleges, Universities, and Hospitals.
The NRC staff concludes that PSU self-guarantee agreement meets the financial test criteria for a non-profit college that issues bonds. PSU conforms to the guidance in NUREG-1757, Volume 3, Revision 1 Consolidated Decommissioning Guidance - Financial Assurance, Recordkeeping, and Timeliness, and meets the applicable requirements of 0 CFR Part 30 and 10 CFR Section 70.25, Financial assurance and recordkeeping for decommissioning.
In accordance with 10 CFR Section 2.390, Public inspections, exemptions, requests for withholding, a copy of this letter and the enclosure will be available electronically for public inspection in the NRC Public Document Room (PDR) or from ADAMS. The PDR is open by appointment only. You may submit your request to the PDR via email at PDR.Resource@nrc.gov or call 1-800-397-4209 between 8:00 a.m. and 4:00 p.m. (EST),
Monday through Friday, except Federal holidays. The ADAMS database is accessible from the NRC website at http://www.nrc.gov/reading-rm/adams.html (the Public Electronic Reading Room).
A. Wilmot A copy of the NRC staffs evaluation is enclosed. If you have any questions, please contact me at (301) 415-1404, or by email at Xiaosong.Yin@nrc.gov.
Sincerely, Signed by Yin, Xiaosong on 08/15/23 Xiaosong Yin, Project Manager Non-Power Production and Utilization Facility Licensing Branch Division of Advanced Reactors and Non-Power Production and Utilization Facilities Office of Nuclear Reactor Regulation Docket No.50-005 License No. R-2
Enclosure:
As stated cc: GovDelivery Subscribers
ML23221A241 NRR-043 OFFICE NRR/DANU/PM NRR/DANU/LA NRR/DANU/BC NRR/DANU/PM NAME XYin NParker JBorromeo XYin DATE 8/9/2023 8/10/2023 8/15/2023 8/15/2023 EVALUATION BY THE OFFICE OF NUCLEAR REACTOR REGULATION ANNUAL FINANCIAL TEST FOR A SELF-GUARANTEE FOR DECOMMISSIONING FUNDING RENEWED FACILITY OPERATING LICENSE NO. R-2 PENNSYLVANIA STATE UNIVERSITY PENN STATE BREAZEALE REACTOR DOCKET NO.50-005 BACKGROUND By letter dated December 22, 2022 (Agencywide Document Access and Management System Accession No. ML23040A063), Pennsylvania State University (PSU) submitted an annual certification of its self-guarantee (SG) for decommissioning financial assurance for the Breazeale Nuclear Reactor. PSU has two licenses issued by the U.S. Nuclear Regulatory Commission (NRC), SNM-95 (Docket No.70-113) and License No. R-2 Breazeale Nuclear Reactor (Docket No. 0500005). The subject review pertains to License No. R-2.
DISCUSSION Regulatory Requirements Pursuant to Title 10 of the Code of Federal Regulations (10 CFR) Section 50.75, "Reporting and recordkeeping for decommissioning planning," nuclear facilities licensed under 10 CFR Part 50, Domestic Licensing of Production and Utilization Facilities, are required to establish adequate financial assurance for decommissioning, decontamination, and reclamation. Section 70.25, Financial assurance and recordkeeping for decommissioning, of 10 CFR requires nonprofit college and university licensees, that provide reasonable assurance of available funds for decommissioning costs through a SG, to annually provide an SG agreement and pass a financial test pursuant to Appendix E to 10 CFR Part 30, Criteria Relating to Use of Financial Tests and Self-Guarantees for Providing Reasonable Assurance of Funds for Decommissioning by Nonprofit Colleges, Universities, and Hospitals."
NRC Staff Review NRC Staff Review of Self-Guarantee and Supporting Documentation In its review, the NRC staff relied on the regulations set forth in Appendix E of 10 CFR Part 30 and 10 CFR 70.25, and 10 CFR 50.75, as well as the supporting NRC guidance contained in NUREG-1757, Consolidated Decommissioning Guidance - Financial Assurance, Recordkeeping, and Timeliness, Volume 3, Revision 1, Appendix A.9, Self-Guarantees.
This review was limited to the requirements in License No. R-2, Breazeale Nuclear Reactor.
Enclosure
The regulation, 10 CFR 70.25(f), requires, in part, that the financial instrument include the licensee's name, license number, and docket number; and the name, address, and other contact information of the issuer, and, if a trust is used, the trustee. Financial assurance for decommissioning must be provided by stated methods, including, for nonprofit entities, such as colleges, universities, and nonprofit hospitals, a guarantee of funds by the licensee may be used if the guarantee and test are as contained in Appendix E to 10 CFR Part 30.
In a letter dated December 13, 2022, PSU also submitted documentation (ML23012A060),
which covers both PSUs material and reactor licenses to demonstrate their continued eligibility to use the SG. The submittal consisted of the following:
An updated SG and associated financial test signed by the Associate Vice President for Finance An Independent Accountants Report and schedule of reconciling amounts contained in NRC annual certification letter with amounts in the licensees consolidated financial statements, and PSUs audited financial statements for the most recent fiscal year (FY), including auditors opinion on the financial statements.
The SG agreement states that the guarantee was made by the PSU, a nonprofit university, organized under the laws of the Commonwealth of Pennsylvania, to the NRC. PSU has full authority and capacity to enter into this SG by the bylaws of the Trustees of the PSU. The SG agreement is signed by Mrs. Virginia A. Teachy, Associate Vice President for Finance.
On the basis of its review, the NRC staff has determined that the licensee has an acceptable method of financial assurance to decommission, so as to protect health and minimize danger to life or property. Therefore, the NRC staff finds that the licensee meets the requirement of 10 CFR 70.25(f)(2), for License No. R-2.
In order for PSU to qualify for use of a SG, it must satisfy the criteria found in 10 CFR Part 30, Appendix E, Section II.A.1 or A.2. PSUs SG submission intends to demonstrate compliance with 10 CFR Part 30, Appendix E, Section II.A.1 (the Financial Test). The financial test, in pertinent part, requires that PSU have a current rating for its most recent bond issuance of AAA, AA, A as issued by Standard & Poors or Aaa, Aa, or A as issued by Moodys.
As part of the SG submission, PSU included the identification of the financial test used and used the guidance in NUREG-1757, Volume 3, Revision 1, Appendix A, Checklist 9-B, to demonstrate passage of the financial test.
The SG submission states that the current bond rating of the most recent uninsured, uncollateralized, and unencumbered bond issuance is AA, as issued by Standard & Poors and a rating of Aa1, as issued by Moodys. The licensees statement was compared with Standard & Poor's Global Ratings and Moodys Ratings to PSU dated June 30, 2022, by PSUs independent auditor and found no exceptions (ML13114A070). Therefore, PSU meets the requirement of 10 CFR Part 30, Appendix E, Section II.A.1.
In addition, 10 CFR Part 30, Appendix E, Section II.C.(1) requires an independent certified public accountant of the licensee to compare the data used by the licensee in the financial test,
which is derived from the independently audited, year-end financial statements for the latest FY, with the amounts in such financial statement. The accountant must evaluate the licensee's off-balance sheet transactions and provide an opinion on whether those transactions could materially adversely affect the licensee's ability to pay for decommissioning costs. The accountant must verify that a bond rating, if used to demonstrate passage of the financial test, meets the requirements of Section II.
As part of the December 13, 2022, submittal, PSU included an independent auditors' report made to the Board of Trustees of the PSU, University Park, Pennsylvania. Consolidated financial statements of the PSU and its subsidiaries were audited. The financial statements comprise the financial position as of June 30, 2022, and the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the consolidated financial statements. The independent auditor stated an opinion that the consolidated financial statements present fairly, in all material respects, the financial position of the University as of June 30, 2022.
The auditor noted that PSU has changed its method of accounting for leases, effective July 1, 2020, due to the adoption of Accounting Standard Codification (ASC) Topic 842, Leases. Auditors opinion is not modified due to this matter. ASC Topic 842 defines a short-term lease as a lease with a term of twelve months or less that does not include a purchase option that is reasonably certain of being exercised ("short-term leases"). PSU has elected, for all asset classes, the short-term lease recognition exemption provided in the standard that eliminates the requirement to recognize on the statement of financial position any short-term leases. The lease expense for these short-term leases is recognized on a straight-line basis over the lease term within operating expenses in the consolidated statement of activities and is not considered material to the consolidated financial statements (ML21362A743).
The NRC staff determined that the licensee had its independent certified public accountant compare the data used by the licensee in the financial test, which is derived from the independently audited, year-end financial statements for the latest FY, with the amounts in such financial statement. The accountant evaluated off-balance sheet transactions and noted that the off-balance sheet exposures were less than PSUs total assets. The accountant verified the bond rating meets the requirements of 10 CFR Part 30, Section II. Therefore, the NRC staff finds that the licensee meets the requirement of 10 CFR Part 30, Appendix E, Section II (C)(1).
Furthermore, 10 CFR Part 30, Appendix E, Section II (C)(2) states that after the initial financial test, the licensee must repeat passage of the test and provide documentation of its continued eligibility to use the SG to the Commission within 90 days after the close of each succeeding FY.
The FY of PSU closes on June 30th. Under the 90-day requirement of Part 30, Appendix A, the annual certification documents are required to be submitted to the NRC by September 28th. At PSU, the Committee on audit and risk meets to review and accept financial statements on behalf of the Board of Trustees during October or November. The date on which the PSU Board of Trustees meets to give final approval of the financial statements varies from year to year, but such approval is generally given by November 30th.
By letter dated October 23, 2014 (ML13325A031), the NRC staff approved an exemption to 10 CFR Part 30, Appendix E, Section II (C)(2), allowing the licensee to submit documentation 180 days after the close of the FY.
Given that the FY 2022 ended on June 30, 2022, documentation to demonstrate continued eligibility to use the SG was due by December 31, 2022. PSU submitted documentation by letter dated December 13, 2022. The NRC staff determined that the licensee submitted on time the required documentation under 10 CFR Part 30, Appendix E, Section II(C) (2). PSU meets all the requirements of the financial test.
Part 30 of 10 CFR, Appendix E,Section III.A through G, describes the terms that are required in a SG:
A. The guarantee will remain in force unless the licensee sends notice of cancellation by certified mail, and/or return receipt requested to the NRC. Cancellation may not occur unless an alternative financial assurance mechanism is in place; B. The license shall provide alternate financial assurance as specified in the NRCs regulations within 90 days following receipt by the NRC of a notice of cancellation of the guarantee; C. The guarantee and financial test provisions must remain in effect until the NRC has terminated the license or until another financial assurance method acceptable to the NRC has been put in effect by the licensee; D. The applicant or licensee must provide to the NRC a written guarantee which states that the licensee will fund and carry out the required decommissioning activities or, upon issuance of an order by the NRC, the licensee will set up and fund a trust in the amount of the current cost estimates for decommissioning; E. If, at any time, the licensees most recent bond issuance ceases to be rated in any category of A or above by either Standard & Poors or Moodys, the licensee shall provide notice in writing of such fact to the NRC within 20 days after publication of the change by the rating service; F. A standby trust must be established to protect public health and safety and the environment for decommissioning costs prior to an SG being submitted; and G. Guarantor agrees that if guarantor admits in writing its inability to pay its debts generally, or makes a general assignment for the benefit of its creditors, or any proceeding is instituted against by or against the guarantor seeking to adjudicate it as bankrupt or insolvent then the Commission may: (a) declare the financial assurance guaranteed by the guarantee agreement is immediately due and payable to the standby trust ; and (b) exercise any and all of its other rights under applicable law.
In its December 13, 2022, submittal, PSU provided adequate language in its terms of the SG consistent with model language in NUREG-1757, Volume 3, Revision 1, Appendix A.9, Checklist B.
In addition, PSU has previously submitted a Standby Trust Agreement (STA) that has been previously approved by the NRC (ML13114A070). The STA agreement Schedule B document reflects the current certified decommissioning costs for PSUs Part 50 and 70 of 10 CFR licenses.
The NRC staff finds the language of the SG complies with the terms and conditions needed in NUREG-1757, Volume 3, Revision 1, Appendix A.12, Standby Trust Fund. Because the SG is consistent with the recommended language contained in NUREG-1757, Volume 3, Revision 1, Appendix A.9, Checklist B, which the NRC staff has previously determined would comply with the NRCs regulatory requirements, the NRC staff therefore finds that the proposed SG meets the requirements of 10 CFR Part 30, Appendix E, Section III. A-G and meets the criteria of reasonableness.
In order for the licensee to demonstrate reasonable assurance of the availability of funds for decommissioning based on the furnishings of its own guarantee and on to demonstrate that the licensee passes the financial test of Appendix E to Part 30 of 10 CFR, the licensee is required under 10 CFR 70.25 to resubmit a decommissioning funding plan with adjustments as necessary to account for charges in costs and the extent of contamination for review and approval at an interval not to exceed 3 years. This updated decommissioning funding plan estimate evaluation will be subject to a separate safety evaluation.
For the purposes of R-2 license, PSU has submitted the decommissioning funding plan with adjustments that updates the information submitted with the prior approval plan and consider the effects described in 10 CFR 70.25(e)(2) and provided the financial instrument data under 10 CFR 70.25(f) for nonprofit organizations such as PSUs.
The NRC staff finds the information provided to justify the adequacy of its SG is sufficient to the requirements of the regulations and, therefore, the SG is acceptable.
CONCLUSION On the basis of the NRC staffs review of the submittal as it applies to License No. R-2, and discussed above, PSU has demonstrated that: (1) its financial condition meets the requirements of 10 CFR Part 30, Appendix E, and (2) the language of the SG agreement, auditors opinion on PSUs audited financial statements, and previously submitted and approved STA agreement are consistent with NRC guidance. Therefore, the NRC staff finds that PSUs SG and supporting documentation for the R-2 license acceptable.
Principal Contributor: E. Tabakov, NMSS