ML23289A156

Reed College 2022 Financial Test for Self-Guarantee for Decommissioning Funding

ML23289A156
Person / Time
Site:	Reed College
Issue date:	10/25/2023
From:	Geoffrey Wertz NRC/NRR/DANU/UNPO
To:	Newhouse J Reed College
Wertz G
References
EPID L-2021-NFO-0014
Download: ML23289A156 (1)

Text

Mr. Jerry Newhouse, Director Reed College Reed Research Reactor 3203 Southeast Woodstock Boulevard Portland, OR 97202-8199

SUBJECT:

U.S. NUCLEAR REGULATORY COMMISSION STAFF REVIEW RE: REED COLLEGE 2022 FINANCIAL TEST FOR SELF-GUARANTEE FOR DECOMMISSIONING FUNDING (EPID NO. L-2023-NFO-0009)

Dear Mr. Newhouse:

Pursuant to 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, Reed College submitted a self-guarantee letter to the U.S. Nuclear Regulatory Commission (NRC) to demonstrate financial assurance for decommissioning dated May 16, 2023 (Agencywide Documents Access and Management System Accession No. ML23139A132), and its supplement dated June 14, 2023 (ML23165A231).

The NRC staff has completed its review and finds that the Reed College self-guarantee agreement meets the financial test criteria for a non-profit college that issues bonds, is sufficient for providing financial assurance, 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 10 CFR Part 30 and 10 CFR 50.75.

Enclosed is a summary of the NRC staffs financial review of the Reed College self-guarantee.

October 18, 2023

J. Newhouse If you have any questions regarding this matter, please contact me at 301-415-0893, or by email at Geoffrey.Wertz@nrc.gov.

Sincerely, Geoffrey Wertz, 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. 50-288 License No. R-112

Enclosure:

As stated cc: GovDelivery Subscribers Signed by Wertz, Geoffrey on 10/18/23

ML23289A156 NRR-106 OFFICE NRR/DANU/UNPL/PM NRR/DANU/UNPL/LA NRR/DANU/UNPL/BC NRR/DANU/UNPL/PM NAME GWertz NParker JBorromeo GWertz DATE 10/16/2023 10/17/23 10/18/2023 10/18/2023

Enclosure SAFETY EVALUATION BY THE OFFICE OF NUCLEAR MATERIAL SAFETY AND SAFEGUARDS ANNUAL FINANCIAL TEST FOR A SELF-GUARANTEE REED COLLEGE DOCKET NO. 50-288

1.0 INTRODUCTION

By letter dated May 16, 2023 (Agencywide Documents Access and Management System Accession No. ML23139A132), supplemented by letter dated June 14, 2023 (ML23165A231),

Reed College provided documentation in support of its self-guarantee for demonstrating decommissioning funding assurance, in accordance with NUREG-1757, Volume 3, Revision 1, Consolidated Decommissioning Guidance; Financial Assurance, Recordkeeping, and Timeliness, and Title 10 of the Code of Federal Regulations (10 CFR), Part 30, Appendix E, 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 purpose of this financial test is to demonstrate that Reed College can continue maintaining

$6,841,307 (in 2023 dollars) in coverage for decommissioning funding assurance for the research reactor and related facilities located at Reed College in Portland, Oregon.

2.0 ANALYSIS The requirements of 10 CFR 50.75, Reporting and recordkeeping for decommissioning planning, paragraph (e)(1)(iii)(C), state, in part, that [f]or non-profit entities, such as colleges, a guarantee of funds by the applicant or licensee may be used if the guarantee and test are as contained in Appendix E to 10 CFR part 30. As a non-profit college, Reed College qualifies to use the self-guarantee as reflected in Appendix E to 10 CFR Part 30. The NRC staff evaluated Reed Colleges submittal to determine whether its proposed guarantee and test criteria meet those as contained in Appendix E to 10 CFR Part 30. The NRC staff reviewed Reed Colleges submittal pursuant to the elements specified in Appendix E to 10 CFR Part 30, including the financial test requirements, self-guarantee requirements, and additional requirements, as contained in Section II, Financial Test, and Section III, Self-Guarantee, of Appendix E to 10 CFR Part 30, and guidance contained in NUREG-1757.

Regarding the adequacy of Reed College submittal and its proposed use of a self-guarantee, regulatory guidance contained in NUREG-1757, section 4.3.2.6, Self-Guarantees, states, in part, that a submittal used to satisfy the requirements of Appendix E to 10 CFR Part 30 will be acceptable, if such submittal includes the self-guarantee agreement, the Chief Financial Officers Certification, the Independent Auditors Report, and Financial Statements. In its submittal, the licensee provided: a letter from Reed Colleges Vice President and Treasurer containing the self-guarantee financial test; an independent auditors report confirming the Reed Colleges Vice President and Treasures letter and reconciling amounts with the licensees financial statements; and the licensees audited financial statements for the most recent fiscal year. The NRC staff notes that the self-guarantee agreement (originally signed duplicate) was not submitted with the application as recommended in NUREG-1757; however, the NRC staff confirmed that this agreement is in the NRCs possession and remains unchanged (ML092200010; page 281). The NRC staff also notes that subsection II(C)(1) of Appendix E to 10 CFR Part 30 requires the licensees independent certified public accountant to evaluate the licensees off-balance sheet transactions and render an opinion on whether those transactions could adversely affect the licensees ability to pay for decommissioning costs. The guidelines established by the American Institute of Certified Public Accountants prohibit an accountant from rendering such an opinion. In this regard, the independent auditor retained by Reed College, KPMG LLP (Portland, Oregon office) states, in part, In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Reed Institute [Reed College]. The NRC staff concluded that Reed Colleges submittal, and the information provided in that submittal, is acceptable in support of the licensees use of a self-guarantee for decommissioning funding.

3.0 TECHNICAL EVALUATION

Based on its review, the NRC staff finds that the licensee provided complete documentation, including a letter from Reed Colleges Vice President and Treasurer containing the self-guarantee financial test; an independent auditors report confirming the Vice President and Treasures letter and reconciling amounts with the licensees financial statements; and the licensees audited financial statements for the most recent fiscal year. In addition, the NRC staff finds that the licensee does not have a parent company holding a majority control of its voting stock and that the amount of the self-guarantee exceeds the required coverage level. In consideration of the exceptions noted above, the NRC staff finds that the self-guarantee agreement meets the financial test criteria for a non-profit university that issues bonds, is sufficient for providing financial assurance, conforms to the guidance in NUREG-1757, and meets the requirements of 10 CFR 50.75 and Appendix E of 10 CFR Part 30.

Regarding financial test requirements, Appendix E to 10 CFR Part 30 requires a bond issuing licensee to have a current [credit] rating for its most recent uninsured, uncollateralized, and unencumbered bond issuance of Aaa, Aa, or A (including adjustments of 1, 2, or 3) as issued by Moodys. As stated in the Reed College Self-Guarantee Agreement provided with its October 22, 2022, submittal, the Standard & Poors (S&P) Global bond rating for Reed Colleges most recent uninsured, uncollateralized, and unencumbered bond was rated AA-/Stable. The S&P Global bond rating of AA-/Stable, meets the test criteria of Aaa, Aa, or A as provided in Appendix E to 10 CFR Part 30.

The NRC staff is currently addressing, through rulemaking, changes to its surety requirements used by licensees. These changes are responsive to the 2010, Dodd-Frank Wall Street Reform and Consumer Protection Act legislation (Dodd-Frank), which, among other things, seeks to have agencies remove reference to or requirements for reliance on credit ratings, and impacts NRCs financial tests for colleges, universities, and hospitals who use self-guarantees for providing reasonable assurance of funds for decommissioning. As a result, the NRC staff would disallow reliance on use of credit ratings as a financial test for providing reasonable assurance of funds for decommissioning. In the case of a university or college currently relying on bond ratings to qualify for use of a self-guarantee, such as Reed College, licensees would instead rely on the financial test in Appendix E to 10 CFR Part 30, II.A.(2). This financial test requires that the applicant meet unrestricted endowment criteria consisting of assets located in the United States of at least $50 million, or at least 30 times the total current decommissioning cost estimate, whichever is greater.

As provided in the Reed College Self-Guarantee Agreement submittal, the licensees financial statements reflect total quasi-(unrestricted) endowment funds of $357,326,884 (June 30, 2022),

and a cost to decommission the reactor of $6,841,307 (2023 dollars). Accordingly, the licensees unrestricted endowment is greater than 30 times the total current decommissioning cost estimate and therefore, meets the endowment criteria in Appendix E to 10 CFR Part 30, II.A.(2).

Based on the NRC staffs analyses, the licensee meets the financial test for use of a self-guarantee using either credit ratings or unrestricted endowment criteria. In consideration of the above, the NRC staff finds that Reed College has fulfilled the requirements for a university seeking to provide decommissioning funding assurance using a self-guarantee.

4.0 CONCLUSION

The NRC staff has reviewed the decommissioning financial assurance mechanism for the research reactor at Reed College. Based on its review, the NRC staff finds that the licensee provided complete documentation, including a letter from Reed Colleges Vice President and Treasurer containing the self-guarantee financial test; an independent auditors report confirming the Vice President and Treasurers letter and reconciling amounts with the licensees financial statements; and the licensees audited financial statements for the most recent fiscal year. In addition, the NRC staff finds that the self-guarantee agreement meets the financial test criteria for a non-profit college that issues bonds, is sufficient for providing financial assurance

($6,841,307 in 2023 dollars) for decommissioning of the Reed College facility and conforms to NUREG-1757. Therefore, the NRC staff concludes that Reed College meets the requirements of 10 CFR Part 30, Appendix E and 10 CFR 50.75.

Principal Contributor: E. Tabakov, NMSS