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

pllsburqPillsbury Winthrop Shaw Pittman LLP2300 N Street, NW I Washington, DC 20037-1122 1 tel 202.663.8000 I fax 202.663.8007Jay E. Silbergtel 202.663.8063jay.silberg@pillsburylaw.comNOTE: Attachments to this document contain confidential information submittedunder 10 CFR 2.390. This -information is Business Confidential to Aerotest andNuclear Labyrinth and is identified with brackets as such [] or in the case ofattachments in their entirety.January 10, 2013ATTENTION: Document Control DeskU.S. Nuclear Regulatory CommissionWhite Flint North11555 Rockville PikeRockville, MD 20852-2738AEROTEST RADIOGRAPHY AND RESEARCH REACTORDOCKET NO. 50-228/LICENSE NO. R-98.RESPONSE TO REQUEST FOR ADDITIONAL INFORMATION RE:APPLICATION FOR APPROVAL OF INDIRECT TRANSFER OFCONTROL OF LICENSE OF AEROTEST RADIOGRAPHY ANDRESEARCH 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 RegulatoryCommission's Request for Additional Information Re: Application for Approval ofIndirect Transfer of Control of License of Aerotest Radiography and ResearchReactor Pursuant to 10 CFR 50.80 (TAC No. ME881 1), December 10, 2012 includingsupporting affidavits on behalf of both Aerotest and Nuclear Labyrinth. Alsoenclosed are a request to withhold confidential information from public disclosureand a copy of the response redacting the confidential information. Because of histravel commitments, the signed affidavits of Dr. Slaughter will be transmittedseparately, within the next several days.www.pillsburylaw.com 403691180v0PC o0es s Ars 57cf ,:-f04 January 10, 2013Page 2Should you have any questions or require additional information regardingthis submission, please contact Jay Silberg, counsel to Aerotest at 202-663-8063 orjay.silberg@pillsburylaw.com.Sincerely yours,Jay ilerg "Counsel for Aerotest Operations, Inc.Enclosures1. Response to Request to Request for Additional Information -proprietary copy2. Response to Request to Request for Additional Information -non-proprietarycopy3. Request to Withhold From Public Disclosurecc: U.S. NRC Office of Nuclear Reactor Regulation/NRLPOU.S. NRC Region IV, Regional AdministratorNRC, NRR (Traiforos)NRC, OGC (Uttal)NRC, OGC (Safford)www.pillsburylaw.com403691180v0 an~uary. 10, 2013.Page'.21ST ATE OF MICHIGAN.COUNTY OF OAKLANDf:W. T 1WIT'1I, Michael ,S.' A.,, rn , stat6 thatl of Aeote§t Oerati onsnc and thzat Famn.duly. authorizedto. execute -andý file this rresponseon. behalf :of Aerotesi Operations, Inc. To theý.besso mylknowledge and bel ieg the State-ent' -containedd in this documce it with hespect tdAerotest' ratioh~ -4nc~ Subscribed beforeie,'ma- Notary Pub]lc- in. :State: of Michigan and County ofOa~khind, ýJangay2Ol3.WITNESSI mTy: Hand an'd iNo tairi~aJiSeaLi:`,/. 7k"Notary' PublicMy :Commission Expire i's:/4/

Aerotest Radiography and Research ReactorDocket No. 50-228Enclosure 2Non-Proprietary CopyJanuary 10, 20131. a) Provide any additional source(s) of funds that have not been previously disclosed tothe NRC to cover the projected operating costs for the first five years of operation of thefacility.In addition to the funds transferred at closing, Nuclear Labyrinth expects to cover the first fiveyears of costs with fees from services. Exhibit 1 provides customer communications from severalofAerotest's previous customers indicating their intent to use Aerotest's services once thefacility is operational and able to provide service. Also included are communications fromprospective customers seeking services from Aerotest.1. b) Provide a draft financial support agreement between Nuclear Labyrinth and Aerotestsufficient to cover operations and maintenance costs for a period of 6 months. Inaddition, provide evidence of Nuclear Labyrinth's ability to provide the amount stated inthe financial support agreement.Exhibit 2 provides a draft support agreement between Nuclear Labyrinth and Aerotest. Asprovided in response to previous RAIs, Autoliv will transfer funds sufficient to cover twelvemonths' worth of operating and maintenance costs. The support agreement ensures that thesefunds are used only to fund operations and maintenance costs for the Aerotest facility.2. a) Update and provide Attachments 6 and 7 to include information required pursuant to10 CFR 50.33(f)(2) (i.e., the annual operating cost for each of the first five years).Exhibit 3 provides updated Attachments 6 and 7. Attachment 6 provides the detailedinformation supporting the operating expense projection for the first year of operation afterclosing the transaction. As provided in our prior submittals, at closing of the transaction, sellerwill transfer funds sufficient to fund twelve months of operating expenses during the restart ofthe facility and its resumption of commercial operations. Attachment 6 is the basis for theamount offunds that seller will provide. Attachment 7 contains the projected income statementfor Aerotest for each of thefirstfive years after closing the transaction, inclusive of the first yearprovided in Attachment 6.The first year of operating expenses for A erotest Operations, provided in Attachment 6 andAttachment 7, are based on the actual costs for 2011 as provided in Exhibit 4 Aerotest HistoricalFinancials. Since it is conservatively assumed that there is no revenue for the first year, theprojected income statement, provided in Attachment 7, reflects only the initial contribution fromAutoliv available to cover expenses.Revenues are expected to begin in the second year following the transaction. Revenues areprojected from participation in four areas. (1) Neutron Interrogation by Radiography; (2)Nuclear Science and Engineering Research; (3) Training; and (4) Neutron Science/Engineering403805242v1 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 ofthose categories provided in Attachment 6 and others directly related to the specific activity.Revenues are calculated differently for each activity. [Fuel replacement, NRC, and fuel storage (after closure) costs while integrated in the servicecharge are tracked separately from the other expenditures for convenience. Historical datashows that the needed contributions for fuel replacement have been approximately five percentof the unadjusted cost of tasks that use the ARRR. Similarly, the NRC fees have historically beenapproximately 10-15% of that same unadjusted cost. (This does not include NRC fees associatedwith relicensing or foreign divesture activities).The projected income statement assumes a three percent cost escalation per year for Tasks ]and 3. For research Tasks 2 and 4, the plan assumes that in the second year of operation 25percent of the research capacity is used and that the full research capacity is used by the fifthyear. Thus, the plan assumes a 25 percent growth in revenue in the area of research, Tasks 2and 4, until the completion of the 5h -year where the growth rate will be lowered to three percent(the historical inflation rate). This allows the research activities to grow at a controlled andreasonable pace consistent with research acquisition processes and size of the organization. Theplan is conservative for the stated amounts of sustainable research to ensure funding targets andstated financial obligations can be reasonably met.2. b) Provide financial attachments, with favorable auditor opinion, to support estimatedoperating costs listed in Attachments (6) and (7).Exhibit 4 provides the historic financial results for the operations ofAerotest Operations, Inc.("Aerotest") that have been provided to Nuclear Labyrinth, LLC (and, previously, with theexception of the years 2010 and 2011, to X-Ray Industries, Inc. and the NRC for the purposes ofthe Application for Indirect Transfer of Facility Operating License dated January 19, 2010).Financial information for Aerotest is and has been collected by Autoliv ASP, Inc. (the ultimateparent company in the US. ofAerotest) according to its standard accounting procedures forreporting the financial results of operating units or subsidiary companies. On a monthly basis,items of revenue and cost are reported for the previous month by each operating unit orsubsidiary company according to practices and definitions applicable to Autoliv's internalfinancial reporting. The resulting income statement is consolidated into financial reports forAutoliv ASP, Inc. Likewise, balance sheet items are reported monthly according to Autoliv'sstandard accounting procedures. An annual audit is performed at the Autoliv ASP, Inc. level byAutoliv 'spublic accountants (Ernst & Young LLP). Typically, operating unit/subsidiaryfinancial results are reviewed by the Autoliv finance department and Autoliv management withthe operating unit/subsidiary management.2403805242vi The attached historic financial results for Aerotest Operations, Inc. were prepared by theAutoliv finance department by compiling the annual results for the years indicated3. a) Identify the method to be used by Nuclear Labyrinth to adjust levels of funds assuredfor decommissioning.Nuclear Labyrinth will obtain a letter of credit to adjust funding levels for decommissioning.3. b) Provide evidence that Nuclear Labyrinth will establish the method stated in a).Exhibit 5 contains correspondence from Centennial Bank indicating its commitment to provideNuclear Labyrinth with a Letter of Credit.4. a) Provide itemized estimated annual fuel storage costs, including but not limited tohealth physicists, security, overhead cost, insurance, etc, until 2055 and information todemonstrate 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 associated with that fuel storage are:$30,000 (20 FTE) 0. 20full time equivalent (FTE), performing required surveillances,reporting requirements, and health physics activities doing the course ofthe year$15,000 Maintenance and supply allowance to ensure the proper operation of theequipment,$5,000 Annual training in systems, fuel handling, and health physics activities,$50,000 NRC fees$100,000 Annual TotalFunds will be collected annually over the 20 year license period and placed in trust untilneeded for fuel management activities. Exhibit 6 provides the year 2 balance sheetdemonstrating the fuel storage fee that will be collected for each task. Even in the unlikely eventthat the fuel is not shipped until 2055 after the reactor closure in 2035 (assuming a 20 yearlicense extension beginning in 2015), funds for the remaining 20 years to cover storage costs willbe available.The proposed mission of the Aerotest's reactor will support outstanding, cutting-edge andinnovative research and educational methods. The proposed education and research activitiesinclude but not necessarily limited to.-1. Perform material diagnostics -Neutron Radiography and Tomography, NeutronActivation Analysis, and Ultra Sensitive Fission Track Analysis2. Identify and quantify explosives and other contraband by neutron interrogationtechniques3. Advance neutron detection, spectroscopy, imaging, and dosimetry4. Model Neutron phenomena and diagnostic technologies, Radiation Exposure, and Dose3403805242vl

5. Design small-modular uranium thorium reactorsThese activities will be ongoing even after the closure of the ARRR reactor. The facility willtherefore continue to be staffed by trained professionals performing the required maintenance,surveillances and security associated with safe storage of the fuel. These activities will be asmall portion of the duties of the technical and administrative staff until such time the fuel can betransported and disposed by the DOE.4. b) State whether the estimated cost of ] includes management costs for newfuel to be purchased. If not, update the estimate to include the management cost and thesources of funds to cover the new estimate.The estimated cost of ] does not include management costs for new fuel to bepurchased. 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 theDepartment of Energy for fuel disposal is attached as Exhibit 7.5. a) Provide a date on when the reactor is expected to return to a fully operationalcondition.The reactor is expected to be fully operational by September 1, 2013. This estimate is basedon the expectation that no new fuel elements will be required as discussed in the response toquestion 5b.5. b) Estimate the number of fuel elements that need to be replaced in the future and theassociated 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 calculations supporting the new core designwill not be completed until the end of March. Once these calculations are complete, core re-loadand startup testing will be required to confirm that no new fuel elements are required.6. a) Provide an updated Funding Agreement to include all funds to be provided by Autolivat the closing, as well as a revised closing date.The updated Funding Agreement is provided in Exhibit 8.6. b) Provide information on how the applicants will ensure that the financial support fromAutoliv does not result in any foreign control over nuclear safety, security or reliabilityissues,Autoliv will transfer money to Nuclear Labyrinth and Aerotest at closing. There will be noongoing relationship between Autoliv and Nuclear Labyrinth or Aerotest following thetransaction and therefore no possibility offoreign control.7. Please provide a proposed license amendment and technical specifications, based on yourcurrent license, marked up to clearly show all insertions, deletions and revisions.4403805242vl Exhibit 9 includes a proposed markup of the current license. Proposed amendments to thetechnical specifications were submitted in our July 19, 2012 supplement to the application. Noadditional changes are proposed, and therefore, no additional markups are being submittedExhibits:1. Customer Communications2. Draft Support Agreement3. Updated Attachment 6 & 74. Aerotest Historical Financials5. Evidence of Letter of Credit6. Year 2 Balance Sheet7. Department of Energy Fuel Disposal Contract as amended8. Updated Funding Agreement9. Proposed License Amendment Markup5403805242vl EXHIBIT (1)PROPRIETARY -BUSINESS CONFIDENTIAL TRADE SECRETConfidential information submitted under 10 C.F.R. § 2.390Withhold from public disclosure under 10 C.F.R. § 2.390Customer Letters of Intent403805242vl EXHIBIT (2)PROPRIETARY -BUSINESS CONFIDENTIAL TRADE SECRETConfidential information submitted under 10 C.F.R. § 2.390Withhold from public disclosure under 10 C.F.R. § 2.390Draft Financial Support Agreement403805242vi EXHIBIT (3)PROPRIETARY -BUSINESS CONFIDENTIAL TRADE SECRETConfidential information submitted under 10 C.F.R. § 2.390Withhold from public disclosure under 10 C.F.R. § 2.390Updated Attachments 6 & 7403805242vl EXHIBIT (4)PROPRIETARY -BUSINESS CONFIDENTIAL TRADE SECRETConfidential information submitted under 10 C.F.R. § 2.390Withhold from public disclosure under 10 C.F.R. § 2.390Aerotest Historical Financials403805242v0 EXHIBIT (5)PROPRIETARY -BUSINESS CONFIDENTIAL TRADE SECRETConfidential information submitted under 10 C.F.R. § 2.390Withhold from public disclosure under 10 C.F.R. § 2.390Evidence of Letter of Credit403805242vi EXHIBIT (6)PROPRIETARY -BUSINESS CONFIDENTIAL TRADE SECRETConfidential information submitted under 10 C.F.R. § 2.390Withhold from public disclosure under 10 C.F.R. § 2.390Year 2 Balance Sheet403805242vl EXHIBIT (7)PROPRIETARY -BUSINESS CONFIDENTIAL TRADE SECRETConfidential information submitted under 10 C.F.R. § 2.390Withhold from public disclosure under 10 C.F.R. § 2.390Department of Energy Fuel Disposal Contract403805242vl EXHIBIT (8)PROPRIETARY -BUSINESS CONFIDENTIAL TRADE SECRETConfidential information submitted under 10 C.F.R. § 2.390Withhold from public disclosure under 10 C.F.R. § 2.390Updated Funding Agreement403805242vl EXHIBIT (9)Proposed License Amendment Markup403805242vl UNITED STATES ...,-.- -.ATOMIC ENER-GY COMMISSIONWASHINGTON. D.C. 20545AEROTEST OPEPATIONS- *INC.DOCKET NO. 50-228AEROTEST RADIOGRAPHY AND RESEARCH REACTOR (ARRR)AMENDMENT TO FACILITY OPERATING LICENSEAmendment No. 1bjuc~ef f License No. R-981. The ul--nrgy Commission (the Commission) has found that: t4 (A e&e-Indgret _________A. The application forAtransfer of license filed b:- 91-A, !no fier Li.Aeiotest Operations, Inc. (the licensee)> complies with thestandards and. requirements of the Atomic Energy Act of 1954, asamended (the Act), and the Co~myission's rules and regulationsset forth in 10 CFR Chapter I;B. Construction of the facility has been substantially completedin conformity with Construction Permit No. CPRR-86, and theapplication, as amended, the proVisions of the Act and the rulesand regulations of the Commission;C. The facility will operate in conformity with the application, asamended., 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 thehealth and safety of the. public, and (ii) that such activities willbe conducted in compliance with the rules and regulations of theCommission;E. Aerotest Operations, Inc. is technically and financially qualifiedto possess, use, and operate the facility in accordance with therules and regulations of the Commission; F. The issuance of this operating license will not be inimical :tothe 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 nuclearmaterial %as authorize.d by this license will be in accordance. withthe Commission's regulations in .1 CFR Parts 30 and 7.0, includingSections 30.33, 70.23, and 70.31;H. The licensee is qualified to be the holder of the license; andi. The transfer of the license is otherwise consistent with applicableprovisions of law, regulations, and orders issued by t.hL Commissionpu.rsuant thereto.2.. Facility Operatiing License No. R-98, issued to Aar-Jet Gene,&orn9p-tion. is hereby tcTherotest Operations, Inc. and thelicense 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 Reactor (AGNIR)., a pool-type nuclear reactor owned by-s N Q, .LL,.The facility is located at. the. Aerotest Operations site near SanRamon, 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 MM1,9O ZVIZ. WWCA, ISOowLB. Subject to the conditions and requirements incorporated hercin, the .Commission hereby licenses Aerotest Operations, Inc. : (i) Pursuant to Section 104c of the Act and 10 CFR Par.t 50,"Licensing of Production and Utilization Facilities":, topossess, use, and operate the. reactor at the designatedlocation, in San Raamon, Califoi'nia, in accordance with theprocedures and limitations set forth in this license;(2) Pursuant to the Act and 10 CFR Part 70, "Special NuclearMaterial", to receive, possess,, and use up to 5.0 kilograms.of contained uranium 235 in connection with operation of thereactor; and(3) Pursuant to the Act and 10 CFR Part 30, "Licensing ofByproduct 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 materialas may be produced by operation of. the reactor.

-3- U iC. T'his license shall be deemed to. contain and is subject to theconditions specified in the. following Commission: regulations In10 CER Chapter I.: Part 20, Section 30.34 of Part 30, Sections 50.54and 50.59 of Part 50, and Section 70.32 of Part 70; is subject toall applicable provisions of the Act and to the rules, regulations,and orders of the Cormmission now .or hereafter in.effect; and issubject to the additional conditions specified or incorporatedbelow:(1) Maximum Power LevelThe licensee is authorized to operate the facility at steady.state power levels not. in excess of 250 kilowatts (thermal).(2) Technical SpecificationsThe Technical Soecifications contained in 'Appendix A, as revisedthrough Amendment No. 4, are hereby incorporated in the license.The licensee shall operate the facility in accordance with theTechnical Specifications.(3) .Physical Security Plan'The licensee shall maintain in effect and fully implemn-t all fprovisions of the NRC-approved physical security plan, including\\ amendments and changes made pursuant to the authorityeof 10CFR Section 50.54(p). The approved security plan consistsof the document withheld from public disclosure pursuant to10 CFR 2.790(d). entitled "Aerotest Operations, Inc. SecurityPlan" dated August 10,. 1976, submitted by letter datedOctober 4, 1976, as revised January 16, 1979.D.. ReportsIn addition to reports otherwise required under this license andapplicable regulations:(1) The licensee shall report in writing to the within10-days of its observed occurrence any incident or conditionrelating to the operation of the facility which prevented orcould have prevented a nuclear system from performing itssafety funct.ion as described in the Technical Specificationsor in the Hazards. Summary report.(2) The licensee shall report to the Coumission in writing: within30 days of its: ob'served occurrence, any substantial variancedisclosed by operati:on of the facility from performance speci-fications contained in the Hazards Summary Report or theTechnical Specifications.(3) The licensee shall report to the Commission in writing rithin30 days of its occurrence any significant change, in transientOr accident analysis, as deszribed in the EaaZrds S=-_t LI-IE. 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 intothe air or water beyond the effective control of thelicensee as measured at~the point of such release ordischarge.(4) Records of emergency reactor scrwais, including reasonsfor emergency shutdownns.F. This amended license is effective as of the date of issuance andshall expire at midnight April 16, 2005.FOR THE ATO:.ac ENERGY COS!flSSj0"\Karl R. Goller, Assistant Directorfor Operating ReactorsDirectorate of LicensingAttnchmcnt: q.Change. No. .0 to the. TechnicalSpeci f j ca t.i onsDate of Issuance: October 22, 1974