ML14204A621

Reply to NRC Request for Additional Information Letter Dated April 24, 2014 (TAC L33304)

ML14204A621
Person / Time
Site:	Pennsylvania State University, 07000113
Issue date:	07/17/2014
From:	Doncsecz J Pennsylvania State Univ, University Park, PA
To:	Document Control Desk, Office of Nuclear Material Safety and Safeguards
References
TAC L33304
Download: ML14204A621 (10)

Text

(814) 865-1355 (814) 863-0701 PENNSTATE Joseph J. Donesecz The Pennsylvania State University Associate Vice President for Finance and Corporate Controller 408 Old Main University Park., PA 16802-1505 July 17, 2014 Director, Office of Nuclear Material Safety and Safeguards U.S. Nuclear Regulatory Commission Document Control Desk 11555 Rockville Pike Rockville, Maryland 20852 - 2738 Subj: Reply to NRC Request for Additional Information letter dated April 24, 2014 (TAC L33304)

Re: License numbers: R-2 (Docket 50-005) and SNM-95 (Docket 70-113)

Dear Sir or Madam,

This letter and the attachments are Penn State University's reply to the NRC letter of April 24, 2014 requesting additional information with regard to the annual certification of financial assurance.

Attachment A is a re-issue of the self-guarantee agreement with Paragraph 17 re-instated.

Per teleconference between the NRC and Penn State on May 5 and 15, 2014, Paragraph 21 of the model self-guarantee agreement will not be included.

Attachment B contains a draft agreed-upon procedures letter for your review and comments.

Concerning the evaluation of off-balance sheet transactions, as discussed in our teleconference, AICPA Professional Standards prohibit any form of report or assurance on matters relating to solvency. As such, the attached draft does not include any evaluation of off-balance sheet transactions.

Please contact Jody Murawski (814-867-2477, QUM8@psu.edu) or Jeffrey Leavey (814-863-3939, JAL62@psu.edu) if you have any questions.

Sincerely,

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Joseph J. Doncsecz Associate Vice President for Finance and Corporate Controller Aca 0

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Attachment A - Re-issue of Penn State University's self-guarantee agreement Attachment B - Independent auditor letter (draft) cc: J. Murawski J. Leavey

ATTACHMENT A - Re-Issued Penn State University Self-Guarantee Agreement The Pennsylvania State University Financial Assurance for Cost of Decommissioning Activities Self-Guarantee Agreement with the Nuclear Regulatory Commission July 17, 2014 (Source: NUREG-1757, Vol. 3, Rev 1, Appendix A, Section A.9.12)

Guarantee made by The Pennsylvania State University, a nonprofit university, organized under the laws of the Coimnonwealth of Pennsylvania, herein referred to as "guarantor," to the U. S.

Nuclear Regulatory Commission, on behalf of the university as licensee.

The following licenses are covered under this guarantee:

License numbers: R-2 Breazeale Nuclear Reactor Docket 050-0005 SNM-95 Penn State University Docket 070-0113 Recitals

1. The guarantor has full authority and capacity to enter into this self-guarantee by the bylaws of the Trustees of the Pennsylvania State University.

2. This self-guarantee is being issued to comply with regulations issued by NRC, an agency of the U. S. Government, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974. NRC has promulgated regulations in Title 10, Chapter I of the Code of FederalRegulations, Parts 30, 50, and 70, which require that a holder of, or an applicant for, a materials license issued pursuant to 10 CFR Parts 30, 50, and 70 provide assurance that funds will be available when needed for required decommissioning activities.

3. The self-guarantee is issued to provide financial assurance for decommissioning activities for the licenses and facilities shown. The decommissioning costs for these activities are as follows:

Certified Amounts or License H License Description Current Cost Estimates (Docket #) and Method 2013 R-2 Research Reactor 2001 estimate of $7,141,464 (050-0005) plus 5% per year increase. $12,825,044 SNM-95 Special Nuclear Material for research and (070-0113) teaching. December 2013 estimate of $285,421 decommissioning costs.

Sub total $13,110,465 25% contingency fund $3,277,615 1Total Estimated Costs: $16,388,080

4. The guarantor meets or exceeds the following fimancial test criteria for a nonprofit university that issues bonds, and agrees to comply with all notification requirements as specified in 10 CFR 30 and 10 CFR 30 Appendix E.

Financial Test: The current rating for our most recent uninsured, uncollateralized, and unencumbered bond issuance is AA as issued by Standard & Poor's and Aa2 as issued by Moody's.

5. The guarantor does not have a parent company holding majority control of its voting stock.

6. Decommissioning activities as used below refer to the activities required by 10 CFR Part 30, 50, and 70 for decommissioning of the facilities identified above.

7. Pursuant to the guarantor's authority to enter into this guarantee, the guarantor guarantees to the NRC that the guarantor shall:

(a) Carry out the required decommissioning activities, as required by the licenses listed above.

8. The guarantor agrees to submit revised financial statements and financial test data annually within 180 days of the close of its fiscal year.

9. Not applicable.

10. The guarantor agrees that if, at the end of any fiscal year before termination of this self-guarantee, it fails to meet the self-guarantee financial test criteria, it shall send within 90 days of the end of the fiscal year, by certified mail, notice to the NRC that it intends to provide alternative financial assurance as specified in 10 CFR Part 30, 50, or 70. Within 120 days after the end of the fiscal year, the guarantor shall establish such financial assurance.

11. The guarantor also agrees to notify the NRC in writing in advance of any proposed change in or transfer of ownership of the licensed activity and to maintain this guarantee until the new licensee provides alternative financial assurance acceptable to the beneficiary.

12. The guarantor agrees that if it determines, at any time other than as described in Recital 10, that it no longer meets the self-guarantee financial test criteria or it is disallowed from continuing as a self-guarantor, it shall establish alternative financial assurance as specified in 10 CFR Parts 30, 50, or 70 within 30 days.

13. The guarantor, as well as its successors and assigns and agrees to remain bound jointly and severally under this guarantee notwithstanding any or all of the following:

amendment or modification of the license or NRC-approved decommissioning fundingplan for that facility, the extension or reduction of the time of performance of required activities, or any other modification or alteration of an obligation of the licensee pursuant to 10 CFR Parts 30, 50, or 70.

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14. The guarantor agrees that it shall be liable for all litigation costs incurred by the NRC in any successful effort to enforce the agreement against the guarantor. Such litigation costs shall not be deducted from or otherwise reduce the financial assurance provided by this guarantee.

15. The guarantor agrees to remain bound under this self-guarantee for as long as it, as licensee, must comply with the applicable financial assurance requirements of 10 CFR Part 30, 50, or 70, for the previously listed facilities, except that the guarantor may cancel this self-guarantee by sending notice by certified mail to the NRC, such cancellation to become effective not before an alternative financial assurance mechanism has been put in place by the guarantor.

16. The guarantor agrees that if it, as licensee, fails to provide alternative financial assurance as specified in 10 CFR Part 30, 50, or 70 and obtain written approval of such assurance from the NRC within 90 days after a notice of cancellation by the guarantor is received by the NRC from the guarantor, the guarantor shall make full payment under the self-guarantee.

17. The guarantor expressly waives notice of acceptance of this self-guarantee by the NRC. The guarantor also expressly waives notice of amendments or modifications of the decommissioning requirements.

18. If the guarantor files financial reports with the U.S. Securities and Exchange Commission, then it shall promptly submit them to its independent auditor and to NRC during each year in which this self guarantee is in effect.

19. The guarantor agrees that if the guarantor admits in writing its inability to pay its debts generally, or makes a general assignment for the benefit of creditors, or any proceeding is instituted by or against the guarantor seeking to adjudicate it as bankrupt or insolvent, or seeking dissolution, liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency, or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian, or other similar official for the guarantor or for any substantial part of its property, or the guarantor takes any action to authorize or effect any of the actions stated in this paragraph, then the Commission may:

(a) Declare that the financial assurance guaranteed by the guarantee agreement is immediately due and payable to the standby trust set up to protect the public health and safety and the environment, without diligence, presentment, demand, protect, or any other notice of any kind, all of which are expressly waived by guarantor; and (b) Exercise any and all of its other rights under applicable law.

20. The guarantor agrees to notify the NRC, in writing, immediately following the filing of a voluntary or involuntary petition for bankruptcy under any chapter of Title 11 (Bankruptcy) of the United States Code, or the occurrence of any other event listed 3

in paragraph 19 of this guarantee and by or against the guarantor; the licensee; an entity (as that term is defined in 11 U.S.C. 101(14)) controlling the licensee or listing the license or licensees as property of the estate; or an affiliate (as that term is defined in 11 U.S.C. 101(2)) of the licensee. This notification must include: a description of the event, including major creditors, the amounts involved, and the actions taken to assure thai the amount of funds guaranteed by the guarantee for decommissioning will be transferred to the standby trust as soon as possible; if a petition of bankruptcy was filed, the identity of the bankruptcy court in which the petition for bankruptcy was filed; and the date of filing of any petitions.

21. Not applicable.

22. The guarantor agrees that if, at any time before termination of this self-guarantee, its most recent bond issuance ceases to be rated in any category of "A-" and above by Standard and Poor's or in any category of "A3" and above by Moody's, the licensee will notify the Commission in writing within 20 days after publication of the change by the rating service.

I hereby certify that this self-guarantee is true and correct to the best of my knowledge.

Effective date: 7/17/2014 Pennsylvania State University:

Joseph J. Doncsecz Associate Vice President for Finance and Corporate Controller Signature of witness or notary:

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ATTACHMENT B - Independent Auditor Letter (draft)

INDEPENDENT ACCOUNTANT'S REPORT ON APPLYING AGREED-UPON PROCEDURES To the Board of Trustees of The Pennsylvania State University:

We have performed the procedures enumerated below, which were Agreed to by The Pennsylvania State University (the "University") and the U.S. Nuclear Regulatory Commission (the "NRC"), solely to assist these specified parties in evaluating the University's complianc6ewithlthe NRC s financial assurance regulations, Appendix E to 10 CFR Part 30, related to use~of financial tests and self-guarantee for providing reasonable assurance of funds for decommissioning the.-#theazeale Reactor"iFCility and special Nuclear Material for research and teaching, as of June 30, 20,14,.Tie University's maniAgenent is responsible for the University's compliance with those regulations. Thi':aereed-upon procedures engaýRement was conducted in accordance with attestation standards established by theimerican Institute of Certified,Public Accountants.

The sufficiency of the procedures is solely the responsibilft.yof those!: afrties specified-nt*bis report.

Consequently, we make no representatiotegarding the suffic*encyof the procedures described below either for the purpose for which this report has beenwrequested or for anyother purpose.

The procedures and associated findings areas follo .:.

(a) We noted that the Uni......... a f ord & Poor's and a rating of "Aa2" from (a

entd htteUnlv*ersiit,.had::a rating of":V*' krri**i:i~

Moody's, and agreeOls\Qch' ratmngs?:Ibthe lette "M ardm§ SW i l6tterfro d r's Rating Services to the University dated December 20', 13 and to letter fI W 's InvestoisService to the University dated November 6,2013, respectively; (b) We inquifdili6inVe~rsity s m'anýagement antd.noted th'e ratings above are current; We of anwerei7 op iti o i.niff o plto aaanv-6Vengaged n dcoduct

c. c,~ c t g ~ i:wan.oexalination, the objective of which would be the expression n icompliance Accordingly we o not express such an opinion. Had we performed additional procedures, other? matters might haveMcome to6our:.attention that would have been reported to you.

This report is intended ýsolely for the iormation and use of the specified parties listed above and is not intended to be and shouil'l"ot be user':by anyone other than these specified parties.