ML26062A259
| ML26062A259 | |
| Person / Time | |
|---|---|
| Site: | 05000614, 99902117 |
| Issue date: | 03/03/2026 |
| From: | Long Mott Energy |
| To: | Office of Nuclear Reactor Regulation |
| References | |
| 2026-PLM-NRC-005 | |
| Download: ML26062A259 (0) | |
Text
2.2.1.5.2 10 CFR 50.12(a)(2) Criteria The special circumstances described in 10 CFR 50.12(a)(2)(ii) and 10 CFR 50.12(a)(2)(vi) are present that support granting the requested exemption.
10 CFR 50.12(a)(2)(ii)Application of the regulation in the particular circumstances would not serve the underlying purpose of the rule or is not necessary to achieve the underlying purpose of the rule.
The special circumstance described in 10 CFR 50.12(a)(2)(ii) applies in that requiring the detailed financial qualification documentation required under 10 CFR 50 is not necessary to achieve the underlying purpose of the rule. The underlying purpose of the financial qualification requirements for construction in 10 CFR 50.33(f) and 10 CFR 50, Appendix C, is to protect public health and safety by preventing safety lapses during construction from underfunded projects. As explained below, application of these specific financial qualification requirements (from 10 CFR 50) is not necessary to achieve that purpose in the specific circumstances presented here.
First, LME is participating in the U.S. Department of Energys (DOE) Advanced Reactor Demonstration Program (ARDP). As described in Funding Opportunity Announcement-Advanced Reactor Demonstration Program, dated May 14, 2020 (FOA), the ARDP is structured as a public-private partnership in which the DOE and industry jointly share the financial burden associated with the development and deployment of advanced nuclear reactors. The ARDP provides a unique and robust financial framework that supports project continuity and mitigates the potential for underfunding during the construction phase.
Second, an intercompany agreement is in place ensuring that LMEs parent, TDCC, will provide financial support to LME for construction of LMGS. Because the ARDP operates on a reimbursement model, this provides a mechanism for LME to incur project costs prior to receiving federal reimbursement.
Third, TDCC is a global corporation with extensive experience in megaproject construction and financing. In fact, TDCC has reported annual capital spending of $2.5 billion/year on average over the recent years since 2021. TDCC finances this capital budget through a combination of debt and equity sources, including cash flow from operations, bonds and the issuance of new debt. These financing mechanisms have been applied in various portfolio approaches to execute on Dow's growth objectives through its megaprojects. TDCCs involvement and support provide further guardrails against potential underfunding during the construction phase.
Fourth, this CPA utilizes the licensing modernization project (LMP) methodology, which provides a structured approach to development of the licensing basis that enables a comprehensive understanding of the risk and safety-significance of facility structures, systems, and components (SSCs). This understanding enables the NRC to evaluate the risk and safety-significance of SSCs during construction, ensuring that resources are strategically allocated to maintain facility safety and support informed regulatory oversight of construction-related changes.
Finally, LME is proposing the use of alternative financial qualification requirements from 10 CFR 70. The 10 CFR 70 requirements provide a fully adequate alternative means to protect public health and safety by preventing safety lapses during construction from underfunded projects for merchant applicants, such as LME, that are not rate-regulated utilities. The adequacy of this alternative for merchant applicants is further discussed in a regulatory basis document [5] issued by the NRC following a notice and comment process.1 For example, Section 6.1 explains that many decades of experience have shown no direct correlation between initial financial qualifications review and later safe performance of licensed activities (noting that a 1979 SECY paper, a 2014 academic paper, and [t]he NRCs experience to date support this conclusion). As another example, Section 6.2 explains that the modern NRC oversight framework provides a means of preventing safety lapses during construction from underfunded projects (e.g.,
detailed technical licensing review, construction reactor oversight process, vendor inspection program, and quality assurance inspection program) that is more direct, robust, and reliable than predictive financial reviews. These observations remain valid and applicable here.2 Taken together, these case-specific circumstances ensure that a reasonable level of defense-in-depth is maintained to protect public health and safety by preventing safety lapses during construction from underfunded projects. Accordingly, application of the financial qualification requirements for construction in 10 CFR 50.33(f) and 10 CFR 50, Appendix C, in the particular circumstances here, is not necessary to achieve the underlying purpose of the rule.
This purpose is met for the reasons detailed in Subsection 2.2.1.4 and Item 2 of Subsection 2.2.1.5.1. LME's construction cost estimate and FCP provided in CPA Part I includes documentation demonstrating commitments of financing equal to more than 50 percent of the LMGS construction cost estimate. This satisfies the review standards in Reference [5] and as such represent a sufficient demonstration of financial capacity with no risk to public health and safety. Therefore, the special circumstances described in 10 CFR 50.12(a)(2)(ii) are present that support granting the requested exemption.
1 This document was developed to support a stand-alone rulemaking to revise the financial qualification requirements in 10 CFR 50 to match those in 10 CFR 70. The Commission encouraged the staff to use regulatory exemptions as a way to address existing and emergent cases, as appropriate and necessary, during the pendency of the rulemaking process and that anticipates the outcome of the proposed changes to the current financial qualification regulations. SRM-SECY-13-0124. The Commission later discontinued that stand-alone rulemaking and directed the NRC staff to relocate its consideration of financial qualifications into a broader rulemaking for advanced reactors in 10 CFR 53.
SRM-SECY-18-0026. In doing so, it did not disavow the regulatory basis document or discourage staff from issuing exemptions that reference it.
2 In 2016, the Commission approved the issuance of a financial qualifications exemption in the South Texas Project COL proceeding [CLI-16-2]. In 2025, the NRC staff issued a final safety evaluation finding that a financial qualifications exemption should be granted in the Kemmerer Unit 1 CP proceeding
[ML25329A252]. Both involved applying the 10 CFR 70 standard in lieu of the 10 CFR 50 standard and both referenced these observations in finding that special circumstances were present.
10 CFR 50.12(a)(2)(vi)There is present any other material circumstance not considered when the regulation was adopted for which it would be in the public interest to grant an exemption.
The special circumstance described in 10 CFR 50.12(a)(2)(vi) applies because there is a material circumstance not considered when the regulation was adopted for which it would be in the public interest to grant an exemption. Specifically, the original rule, promulgated in 1968 by the Atomic Energy Commission (AEC), did not contemplate deregulation of the utility industry in the 1980s; did not consider how, as a practical matter, non-regulated or non-utility (i.e., merchant) applicants without rate recovery mechanisms could satisfy the stringent financial qualification requirements in 10 CFR 50; did not consider that merchant applicants may be unable to satisfy the requirements in 10 CFR 50; did not evaluate the negative implications of unnecessarily precluding merchant entities from free-market participation in the production of nuclear energy; and did not foresee that decades of subsequent operating experience would yield no evidence of a direct correlation between initial financial qualifications review and later safe operating performance. The AECs rule also did not contemplate the modern comprehensive oversight and review framework that would later come to exist at the NRC. These circumstances are more fully described in the regulatory basis document
[5]. Nor did the rule account for the possibility of, nor consider whether the financial qualification requirements in 10 CFR 50 were needed for, an applicant participating in the ARDP or one that developed its application using the LMP methodology.
Granting this exemption is in the public interest because the financial qualification requirements in 10 CFR 70 better reflect the indirect correlation between an applicants initial financial condition and safety. Furthermore, application of the 10 CFR 70 financial qualification standard, in lieu of the 10 CFR 50 standard, will remove unnecessary impediments to (1) the success of the ARDP, which is enabled by the American public, and (2) the production of nuclear energy by a merchant entity, facilitating free market competition, both of which are in the public interest. (See also Ref. # 30 cited in [5], a public interest comment letter that is consistent with this conclusion).
Equally important, granting the exemption is consistent with the public interest because it would not erode the public health and safety. As explained above, regarding the special circumstance in 10 CFR 50.12(a)(2)(ii), LMEs participation in the ARDP, TDCCs involvement in and support of the project, LMEs use of the LMP methodology, the NRCs financial qualifications review under 10 CFR 70, and the NRCs comprehensive oversight and review framework collectively ensure that construction will be carried out safely.
In sum, there exist multiple material circumstances not considered by the AEC in 1968, when the regulation was adopted, for which it would be in the public interest to grant the requested exemption here.
in Reference [15], the Commission directed the staff to initiate a rulemaking to amend the financial qualification requirements of 10 CFR 50 and to apply financial qualification standards similar to those in 10 CFR 70. The staff prepared a regulatory analysis [5] that concluded there is sufficient regulatory basis to proceed with the rulemaking. It was an earlier draft version of this regulatory basis document that was applied in support of a
similar exemption granted by the Commission as part of the South Texas Project (STP)
Units 3 and 4 combined licenses (COLs) [6].
The NRC's final safety evaluation report for the STP Units 3 and 4 COLs [6] referred to the then-ongoing financial qualification rulemaking in the context of the STP requested exemption and the presence of a material circumstance not considered when the regulation was adopted:
After closely examining this issue, the NRC has determined that the current detailed Part 50 financial qualification standards go well beyond the NRC's mandate of ensuring safety. Also, the nuclear industry asserts that the current Part 50 standards have created an unnecessary impediment to initial licensing for merchant applicants that cannot be resolved absent a change in Commission policy or regulation. The regulatory objective of the rulemaking is to remove an unnecessary impediment to licensing while ensuring the protection of the public health and safety. The NRC proposes accomplishing this by amending the standard of 10 CFR Part 50.33(f) from "reasonable assurance of obtaining the funds" for construction and operations to a standard of "appears to be financially qualified."
The above notwithstanding, in its staff requirements memorandum (SRM) on SECY 0026 [16], the Commission disapproved the proposed rule that would have amended these requirements and instead directed the staff to address financial qualifications during the development of 10 CFR 53. As directed, the staff has solicited stakeholder feedback as part of the ongoing 10 CFR 53 rulemaking effort [17] on similar questions to those considered in the previous rulemaking, including: (1) the potential challenge that the current 10 CFR 50 financial qualification regulations pose to non-utility applicants; and (2) the appropriateness of applying the 10 CFR 70 "appears to be financially qualified" standard to non-utility applicants. As had been the case in the earlier rulemaking, industry responses to these questions are largely supportive of the use of the 10 CFR 70 "appears to be financially qualified" standard instead of the financial qualification regulations in 10 CFR 50, with some comments suggesting the NRC's financial qualification requirements should be further reduced or eliminated.
In summary, although the original financial qualification rulemaking is no longer in pendency, the proposed amendment of the 10 CFR 50 financial qualification regulations, including the question of conformance to the 10 CFR 70 standards, remains in a pendent state as it is being addressed as part of the ongoing 10 CFR 53 rulemaking effort per Commission direction [16]. For this reason and with consideration for the 2015 precedent where the NRC granted an exemption for STP Units 3 and 4 substantially equivalent to that requested herein, LME contends that the material circumstance not considered when the regulation was adopted as described in 10 CFR 50.12(a)(2)(vi) is present and applicable to the requested exemption.