ML13015A395

Response to Request for Additional Information Application for Approval of Indirect Transfer of Control of License of Aerotest Radiography and Research Reactor Pursuant to 10 CFR 50.80

ML13015A395
Person / Time
Site:	Aerotest
Issue date:	01/10/2013
From:	Silberg J Pillsbury, Winthrop, Shaw, Pittman, LLP, Aerotest
To:	Document Control Desk, Office of Nuclear Reactor Regulation
References
TAC ME8811
Download: ML13015A395 (21)

Text

pllsburq Pillsbury Winthrop Shaw Pittman LLP 2300 N Street, NW I Washington, DC 20037-1122 1 tel 202.663.8000 I fax 202.663.8007 Jay E. Silberg tel 202.663.8063 jay.silberg@pillsburylaw.com NOTE: Attachments to this document contain confidential information submitted under 10 CFR 2.390. This -information is Business Confidential to Aerotest and Nuclear Labyrinth and is identified with brackets as such [] or in the case of attachments in their entirety.

January 10, 2013 ATTENTION: Document Control Desk U.S. Nuclear Regulatory Commission White Flint North 11555 Rockville Pike Rockville, MD 20852-2738 AEROTEST RADIOGRAPHY AND RESEARCH REACTOR DOCKET NO. 50-228/LICENSE NO. R-98.

RESPONSE TO REQUEST FOR ADDITIONAL INFORMATION RE:

APPLICATION FOR APPROVAL OF INDIRECT TRANSFER OF CONTROL OF LICENSE OF AEROTEST RADIOGRAPHY AND RESEARCH REACTOR PURSUANT TO 10 CFR 50.80 (TAC NO. ME8811)

Ladies and Gentlemen:

Enclosed please find the response of Aerotest Operations, Inc. ("Aerotest")

and Nuclear Labyrinth LLC ("Nuclear Labyrinth") to the U.S. Nuclear Regulatory Commission's Request for Additional Information Re: Application for Approval of Indirect Transfer of Control of License of Aerotest Radiography and Research Reactor Pursuant to 10 CFR 50.80 (TAC No. ME881 1), December 10, 2012 including supporting affidavits on behalf of both Aerotest and Nuclear Labyrinth. Also enclosed are a request to withhold confidential information from public disclosure and a copy of the response redacting the confidential information. Because of his travel commitments, the signed affidavits of Dr. Slaughter will be transmitted separately, within the next several days.

www.pillsburylaw.com 403691180v0 PC o0es s Ars 57c f ,:-f04

January 10, 2013 Page 2 Should you have any questions or require additional information regarding this submission, please contact Jay Silberg, counsel to Aerotest at 202-663-8063 or jay.silberg@pillsburylaw.com.

Sincerely yours, Jay ilerg "

Counsel for Aerotest Operations, Inc.

Enclosures

1. Response to Request to Request for Additional Information - proprietary copy

2. Response to Request to Request for Additional Information - non-proprietary copy

3. Request to Withhold From Public Disclosure cc: U.S. NRC Office of Nuclear Reactor Regulation/NRLPO U.S. NRC Region IV, Regional Administrator NRC, NRR (Traiforos)

NRC, OGC (Uttal)

NRC, OGC (Safford) www.pillsburylaw.com 403691180v0

an~uary. 10, 2013.

Page'.21 ST ATE OF MICHIGAN f:W.

T 1WIT'

.COUNTY OF OAKLAND 1I,Michael ,S.' A.,, rn , stat6 thatl anita*i'teSec'ret'a-,rY of Aeote§t Oerati onsnc and thzat Famn.

duly.authorizedto. execute -andý file this rresponseon. behalf:of Aerotesi Operations, Inc. To theý

. mylknowledge and bel ieg the State-ent' -containedd in this documce it withhespect td besso Aerotest' ratioh~-4nc~ are-.tuand.cor*rect.*

Subscribed aitndzSw6Tr'* beforeie,'ma- Notary Pub]lc- in. and1or.i*ie :State: of Michigan and County of Oa~khind, th/',is:* 3_O*d~ayofý ýJangay2Ol3.

,/. 7k WITNESSI mTy: Hand an'd iNo tairi~aJiSeaLi:`

"Notary'Public My :Commission Expire i's: /4/

Aerotest Radiography and Research Reactor Docket No. 50-228 Enclosure 2 Non-Proprietary Copy January 10, 2013

1. a) Provide any additional source(s) of funds that have not been previously disclosed to the NRC to cover the projected operating costs for the first five years of operation of the facility.

In additionto the funds transferredat closing, Nuclear Labyrinth expects to cover the firstfive years of costs with fees from services. Exhibit 1 provides customer communicationsfrom several ofAerotest's previous customers indicatingtheir intent to use Aerotest's services once the facility is operationaland able to provide service. Also included are communicationsfrom prospective customers seeking servicesfrom Aerotest.

1. b) Provide a draft financial support agreement between Nuclear Labyrinth and Aerotest sufficient to cover operations and maintenance costs for a period of 6 months. In addition, provide evidence of Nuclear Labyrinth's ability to provide the amount stated in the financial support agreement.

Exhibit 2 provides a draft support agreement between Nuclear Labyrinth andAerotest. As provided in response to previous RAIs, Autoliv will transferfunds sufficient to cover twelve months' worth of operatingand maintenance costs. The support agreement ensures that these funds are used only to fund operations and maintenance costsfor the Aerotest facility.

2. a) Update and provide Attachments 6 and 7 to include information required pursuant to 10 CFR 50.33(f)(2) (i.e., the annual operating cost for each of the first five years).

Exhibit 3 provides updatedAttachments 6 and 7. Attachment 6 provides the detailed information supportingthe operatingexpense projectionfor the first year of operation after closing the transaction. As provided in our prior submittals, at closing of the transaction,seller will transferfunds sufficient to fund twelve months of operatingexpenses during the restartof the facility and its resumption of commercial operations.Attachment 6 is the basisfor the amount offunds that seller will provide. Attachment 7 contains the projected income statement for Aerotestfor each of thefirstfive years after closing the transaction,inclusive of the first year provided in Attachment 6.

The firstyear of operatingexpenses for A erotest Operations,provided in Attachment 6 and Attachment 7, are based on the actual costs for 2011 as provided in Exhibit 4 Aerotest Historical Financials. Since it is conservatively assumed that there is no revenuefor the first year, the projected income statement,provided in Attachment 7, reflects only the initial contributionfrom Autoliv available to cover expenses.

Revenues are expected to begin in the secondyearfollowing the transaction. Revenues are projectedfrom participationin four areas. (1) Neutron Interrogationby Radiography; (2)

Nuclear Science and EngineeringResearch; (3) Training; and (4) Neutron Science/Engineering 403805242v1

Research (without the use of ARRR). These revenues willfund reactor operating,training, research, and service activities that will be rendered at the facility. The costs include many of those categoriesprovided in Attachment 6 and others directly relatedto the specific activity.

Revenues are calculateddifferentlyfor each activity. [

Fuel replacement,NRC, andfuel storage (after closure) costs while integratedin the service charge are tracked separatelyfrom the other expendituresfor convenience. Historicaldata shows that the needed contributionsfor fuel replacement have been approximatelyfive percent of the unadjusted cost of tasks that use the ARRR. Similarly, the NRCfees have historically been approximately 10-15% of that same unadjusted cost. (This does not include NRC fees associated with relicensing orforeign divesture activities).

The projected income statement assumes a three percent cost escalationper yearfor Tasks ]

and 3. For research Tasks 2 and 4, the plan assumes that in the secondyear of operation 25 percent of the researchcapacity is used and that the full research capacity is used by the fifth year. Thus, the plan assumes a 25 percent growth in revenue in the area of research, Tasks 2 and 4, until the completion of the 5h -yearwhere the growth rate will be lowered to three percent (the historicalinflation rate). This allows the researchactivities to grow at a controlledand reasonablepace consistent with researchacquisitionprocesses and size of the organization. The plan is conservativefor the stated amounts of sustainableresearch to ensurefunding targets and statedfinancial obligationscan be reasonably met.

2. b) Provide financial attachments, with favorable auditor opinion, to support estimated operating costs listed in Attachments (6) and (7).

Exhibit 4 provides the historicfinancial resultsfor the operations ofAerotest Operations,Inc.

("Aerotest") that have been provided to Nuclear Labyrinth, LLC (and,previously, with the exception of the years 2010 and 2011, to X-Ray Industries,Inc. and the NRCfor the purposes of the Applicationfor Indirect Transfer of Facility OperatingLicense dated January19, 2010).

Financialinformationfor Aerotest is and has been collected by Autoliv ASP, Inc. (the ultimate parent company in the US. ofAerotest) accordingto its standardaccountingproceduresfor reportingthe financial results of operatingunits or subsidiary companies. On a monthly basis, items of revenue and cost are reportedfor the previous month by each operatingunit or subsidiarycompany accordingto practicesand definitions applicable to Autoliv's internal financial reporting. The resulting income statement is consolidated into financial reportsfor Autoliv ASP, Inc. Likewise, balance sheet items are reportedmonthly accordingto Autoliv's standardaccountingprocedures. An annualaudit is performed at the Autoliv ASP, Inc. level by Autoliv 'spublicaccountants (Ernst& Young LLP). Typically, operatingunit/subsidiary financialresults are reviewed by the Autoliv finance departmentand Autoliv management with the operatingunit/subsidiarymanagement.

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The attachedhistoricfinancialresultsfor Aerotest Operations,Inc. were preparedby the Autoliv finance department by compiling the annual resultsfor the years indicated

3. a) Identify the method to be used by Nuclear Labyrinth to adjust levels of funds assured for decommissioning.

Nuclear Labyrinth will obtain a letter of credit to adjustfunding levels for decommissioning.

3. b) Provide evidence that Nuclear Labyrinth will establish the method stated in a).

Exhibit 5 contains correspondencefrom CentennialBank indicatingits commitment to provide Nuclear Labyrinth with a Letter of Credit.

4. a) Provide itemized estimated annual fuel storage costs, including but not limited to health physicists, security, overhead cost, insurance, etc, until 2055 and information to demonstrate Nuclear Labyrinth's financial ability to provide funding for fuel storage.

Alternatively, if the fuel storage responsibility will be transferred to a different entity, provide information to demonstrate the viability of this option.

The annual costs associatedwith thatfuel storage are:

$30,000 (20 FTE) 0.20full time equivalent (FTE),performing requiredsurveillances, reportingrequirements,and health physics activities doing the course of the year

$15,000 Maintenance and supply allowance to ensure the proper operationof the equipment,

$5,000 Annual training in systems, fuel handling,and healthphysics activities,

$50,000 NRC fees

$100,000 Annual Total Funds will be collected annually over the 20 year license period andplaced in trust until neededfor fuel management activities. Exhibit 6 provides the year 2 balance sheet demonstratingthe fuel storagefee that will be collectedfor each task. Even in the unlikely event that the fuel is not shipped until 2055 after the reactor closure in 2035 (assuminga 20 year license extension beginning in 2015), funds for the remaining20 years to cover storage costs will be available.

The proposedmission of the Aerotest's reactorwill support outstanding,cutting-edge and innovative researchand educationalmethods. The proposed education and researchactivities include but not necessarilylimited to.-

1. Perform materialdiagnostics - Neutron Radiographyand Tomography, Neutron Activation Analysis, and Ultra Sensitive Fission Track Analysis

2. Identify and quantify explosives and other contrabandby neutron interrogation techniques

3. Advance neutron detection, spectroscopy, imaging, and dosimetry

4. Model Neutronphenomena and diagnostic technologies, Radiation Exposure, and Dose 3

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5. Design small-modular uranium thorium reactors These activities will be ongoing even after the closure of the ARRR reactor. The facility will therefore continue to be staffed by trainedprofessionalsperforming the requiredmaintenance, surveillancesand security associatedwith safe storage of the fuel. These activities will be a small portion of the duties of the technical and administrativestaff until such time the fuel can be transportedand disposed by the DOE.

4. b) State whether the estimated cost of ] includes management costs for new fuel to be purchased. If not, update the estimate to include the management cost and the sources of funds to cover the new estimate.

The estimated cost of ] does not include management costs for new fuel to be purchased. As provided in response to question 5b, we do not expect to purchase new fuel.

As requested at the December 19, 2012 meeting with NRC staff Aerotest's agreement with the Departmentof Energyfor fuel disposal is attachedas Exhibit 7.

5. a) Provide a date on when the reactor is expected to return to a fully operational condition.

The reactor is expected to be fully operationalby September 1, 2013. This estimate is based on the expectation that no new fuel elements will be requiredas discussed in the response to question 5b.

5. b) Estimate the number of fuel elements that need to be replaced in the future and the associated costs.

Currently,based on a fully reflective core design, we do not expect to need new fuel elements.

However,fuel evaluations are ongoing and core calculationssupporting the new core design will not be completed until the end of March. Once these calculationsare complete, core re-load and startup testing will be requiredto confirm that no new fuel elements are required.

6. a) Provide an updated Funding Agreement to include all funds to be provided by Autoliv at the closing, as well as a revised closing date.

The updated FundingAgreement is provided in Exhibit 8.

6. b) Provide information on how the applicants will ensure that the financial support from Autoliv does not result in any foreign control over nuclear safety, security or reliability issues, Autoliv will transfer money to Nuclear Labyrinth and Aerotest at closing. There will be no ongoing relationshipbetween Autoliv andNuclear Labyrinth or Aerotestfollowing the transactionand therefore no possibility offoreign control.

7. Please provide a proposed license amendment and technical specifications, based on your current license, marked up to clearly show all insertions, deletions and revisions.

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Exhibit 9 includes a proposedmarkup of the current license. Proposedamendments to the technical specificationswere submitted in our July 19, 2012 supplement to the application. No additionalchanges areproposed, and therefore, no additionalmarkups are being submitted Exhibits:

1. Customer Communications

2. Draft Support Agreement

3. Updated Attachment 6 & 7

4. Aerotest Historical Financials

5. Evidence of Letter of Credit

6. Year 2 Balance Sheet

7. Department of Energy Fuel Disposal Contract as amended

8. Updated Funding Agreement

9. Proposed License Amendment Markup 5

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EXHIBIT (1)

PROPRIETARY - BUSINESS CONFIDENTIAL TRADE SECRET Confidential information submitted under 10 C.F.R. § 2.390 Withhold from public disclosure under 10 C.F.R. § 2.390 Customer Letters of Intent 403805242vl

EXHIBIT (2)

PROPRIETARY - BUSINESS CONFIDENTIAL TRADE SECRET Confidential information submitted under 10 C.F.R. § 2.390 Withhold from public disclosure under 10 C.F.R. § 2.390 Draft Financial Support Agreement 403805242vi

EXHIBIT (3)

PROPRIETARY - BUSINESS CONFIDENTIAL TRADE SECRET Confidential information submitted under 10 C.F.R. § 2.390 Withhold from public disclosure under 10 C.F.R. § 2.390 Updated Attachments 6 & 7 403805242vl

EXHIBIT (4)

PROPRIETARY - BUSINESS CONFIDENTIAL TRADE SECRET Confidential information submitted under 10 C.F.R. § 2.390 Withhold from public disclosure under 10 C.F.R. § 2.390 Aerotest Historical Financials 403805242v0

EXHIBIT (5)

PROPRIETARY - BUSINESS CONFIDENTIAL TRADE SECRET Confidential information submitted under 10 C.F.R. § 2.390 Withhold from public disclosure under 10 C.F.R. § 2.390 Evidence of Letter of Credit 403805242vi

EXHIBIT (6)

PROPRIETARY - BUSINESS CONFIDENTIAL TRADE SECRET Confidential information submitted under 10 C.F.R. § 2.390 Withhold from public disclosure under 10 C.F.R. § 2.390 Year 2 Balance Sheet 403805242vl

EXHIBIT (7)

PROPRIETARY - BUSINESS CONFIDENTIAL TRADE SECRET Confidential information submitted under 10 C.F.R. § 2.390 Withhold from public disclosure under 10 C.F.R. § 2.390 Department of Energy Fuel Disposal Contract 403805242vl

EXHIBIT (8)

PROPRIETARY - BUSINESS CONFIDENTIAL TRADE SECRET Confidential information submitted under 10 C.F.R. § 2.390 Withhold from public disclosure under 10 C.F.R. § 2.390 Updated Funding Agreement 403805242vl

EXHIBIT (9)

Proposed License Amendment Markup 403805242vl

UNITED STATES ... ,-.- -.

ATOMIC ENER-GY COMMISSION WASHINGTON. D.C. 20545 AEROTEST OPEPATIONS- *INC.

DOCKET NO. 50-228 AEROTEST RADIOGRAPHY AND RESEARCH REACTOR (ARRR)

AMENDMENT TO FACILITY OPERATING LICENSE Amendment No. 1 f License No. R-98 bjuc~ef

1. The

• ul--nrgy Commission (the Commission) has found that: t4 (Ae&e-Indgret _________

A. The application forAtransfer of license filed b:-91-A, !no fier Li.

Aeiotest Operations, Inc. (the licensee)> complies with the standards and. requirements of the Atomic Energy Act of 1954, as amended (the Act), and the Co~myission's rules and regulations set forth in 10 CFR Chapter I; B. Construction of the facility has been substantially completed in conformity with Construction Permit No. CPRR-86, and the application, as amended, the proVisions of the Act and the rules and regulations of the Commission; C. The facility will operate in conformity with the application, as amended., the provisions of the Act, and the rules and regulations.

of the Commission; D. There is reasonable assurance: (i) that the activities authorized.

by this operating license can be conducted without endangering the health and safety of the. public, and (ii) that such activities will be conducted in compliance with the rules and regulations of the Commission; E. Aerotest Operations, Inc. is technically and financially qualified to possess, use, and operate the facility in accordance with the rules and regulations of the Commission;

F. The issuance of this operating license will not be inimical :to the common defense and security or to the health and safety of

.the public, and :does not involve a significant hazards con-sideration; G. Tle receipt, possession, and use of byproduct and special nuclear material %asauthorize.d by this license will be in accordance. with the Commission's regulations in .1 CFR Parts 30 and 7.0, including Sections 30.33, 70.23, and 70.31; H. The licensee is qualified to be the holder of the license; and

i. The transfer of the license is otherwise consistent with applicable provisions of law, regulations, and orders issued by t.hL Commission pu.rsuant thereto.

2.. Facility Operatiing License No. R-98,

• issued to Aar-Jet Gene,&

orn9p-tion. is hereby ttrn,.-r*z* tcTherotest Operations, Inc. and the license is reissued in its. entirety to read as follows: ii',eeS.1 t4irec!ll'-

A. This license applies to the Aerotest Radiography and Research Reactor MC"l(

(ARRR)., previously called the Aerojet General Nuclear Industrial .fr*

Reactor (AGNIR)., a pool-type nuclear reactor owned by-s N Q, . LL,.

The facility is located at. the. Aerotest Operations site near San Ramon, California, and is described in the application dated.

September 14, 1964 (the application), and in supplements thereto, including the application for transfer. of. license dated. April. 24, '.*' I"D" 19740 a.4d'e4 MM 1,9O ZVIZ. WWCA, OowL IS hercin, the .

• wr B. Subject to the conditions and requirements incorporated Commission hereby licenses Aerotest Operations, Inc. : ta*

(i) Pursuant to Section 104c of the Act and 10 CFR Par.t 50, "Licensing of Production and Utilization Facilities":, to possess, use, and operate the. reactor at the designated location, in San Raamon, Califoi'nia, in accordance with the procedures and limitations set forth in this license; (2) Pursuant to the Act and 10 CFR Part 70, "Special Nuclear Material", to receive, possess,, and use up to 5.0 kilograms.

of contained uranium 235 in connection with operation of the reactor; and (3) Pursuant to the Act and 10 CFR Part 30, "Licensing of Byproduct Material", (I) to receive, possess, and use a

.2 curie americiumn-beryllium neutron startup source, and (2) to possess, but not to separate, such byproduct material as may be produced by operation of. the reactor.

U i C. T'his license shall be deemed to. contain and is subject to the conditions specified in the. following Commission: regulations In 10 CER Chapter I.: Part 20, Section 30.34 of Part 30, Sections 50.54 and 50.59 of Part 50, and Section 70.32 of Part 70; is subject to all applicable provisions of the Act and to the rules, regulations, and orders of the Cormmission now .or hereafter in.effect; and is subject to the additional conditions specified or incorporated below:

(1) Maximum Power Level The licensee is authorized to operate the facility at steady

.state power levels not. in excess of 250 kilowatts (thermal).

(2) Technical Specifications The Technical Soecifications contained in 'Appendix A, as revised through Amendment No. 4, are hereby incorporated in the license.

The licensee shall operate the facility in accordance with the i2* *t Technical Specifications.

(3) .Physical Security Plan

'The licensee shall maintain in effect and fully implemn-t all f provisions of the NRC-approved physical security plan, including

• \\ amendments and changes made pursuant to the authorityeof 10 CFR Section 50.54(p). The approved security plan consists of the document withheld from public disclosure pursuant to 10 CFR 2.790(d). entitled "Aerotest Operations, Inc. Security Plan" dated August 10,. 1976, submitted by letter dated October 4, 1976, as revised January 16, 1979.

D.. Reports In addition to reports otherwise required under this license and applicable regulations:

(1) The licensee shall report in writing to the Co.r*ission within 10-days of its observed occurrence any incident or condition relating to the operation of the facility which prevented or could have prevented a nuclear system from performing its safety funct.ion as described in the Technical Specifications or in the Hazards. Summary report.

(2) The licensee shall report to the Coumission in writing: within 30 days of its: ob'served occurrence, any substantial variance disclosed by operati:on of the facility from performance speci-fications contained in the Hazards Summary Report or the Technical Specifications.

(3) The licensee shall report to the Commission in writing rithin 30 days of its occurrence any significant change, in transient Or accident analysis, as deszribed in the EaaZrds S=-_t R*'.ort.

LI-I E. Records.v_

In addition to those otherwise required under this license and appli-cable regulations, the licensee shall keep the following:

(I) Reactor operating records, including porker levels.

(2) Tecords of in-pile irradiations.

(3) Records showing radioactivity released or discharged into the air or water beyond the effective control of the licensee as measured at~the point of such release or discharge.

(4) Records of emergency reactor scrwais, including reasons for emergency shutdownns.

F. This amended license is effective as of the date of issuance and shall expire at midnight April 16, 2005.

FOR THE ATO:.ac ENERGY COS!flSSj0"\

Karl R. Goller, Assistant Director for Operating Reactors Directorate of Licensing Attnchmcnt: q

.Change. No. .0 to the. Technical Speci f j ca t.i ons Date of Issuance: October 22, 1974