ML15023A055

Enclosure - Safety Evaluation Report of Psu Annual Certification Fy 2013

ML15023A055
Person / Time
Site:	Pennsylvania State University, 07000113
Issue date:	01/29/2015
From:	Office of Nuclear Material Safety and Safeguards
To:
Ryder C
Shared Package
ML15023A048	List: ML15023A053 ML15023A055
References
TAC L33304
Download: ML15023A055 (4)

Text

SAFETY EVALUATION REPORT ANNUAL CERTIFICATION OF FINANCIAL ASSURANCE FISCAL YEAR 2013 DOCKETS: 50-0005,70-113 LICENSES: R-2, SNM-95 LICENSEE: PENNSYLVANIA STATE UNIVERSITY (PSU)

SUBJECT:

2014 PSU SELF-GUARANTEE ANNUAL CERTIFICATION BACKGROUND In a letter dated December 20, 2013, Pennsylvania State University (PSU) submitted its annual certification of their self-guarantee for its Breazeale Nuclear Reactor (Docket 050-0005) and Special Nuclear Material (Docket 70-113) (Ref. 1). By letter dated March 4, 2014, the submittal was accepted for a technical review (Ref. 2). The staff of the U.S. Nuclear Regulatory Commission sent requests for additional information (RAIs) to the licensee by letter dated April 24, 2014 (Ref. 3), to which the licensee responded by letter dated July 17, 2014 (Ref. 4). On May 5, 2014, a conference call was held between the NRC and the licensee to discuss and clarify the RAIs. The NRC staff had conference calls on May 5 and 15, 2014 (Ref. 5),

September 23, 2014 (Ref. 6), November 3, 2014 (Ref. 7), and December 12, 16, and 18, 2014 (Ref. 8), regarding 10 CFR Part 30, Appendix E.II.C.(1) that became effective after the previous submittal of financial assurance, requiring an opinion by an independent accountant on the off-balance sheet transactions. The opinion from the independent accountant was submitted by letter dated January 12, 2015 (Ref. 9).

DISCUSSION Regulatory Requirements Nuclear facilities licensed under 10 CFR Parts 50 and 70 are required to establish adequate financial assurance for decommissioning, decontamination and reclamation pursuant to 10 CFR Section 50.25, Reporting and Recordkeeping for Decommissioning Planning and 10 CFR Section 70.25, "Financial Assurance and Recordkeeping for Decommissioning" respectively.

Sections 50.25 and 70.25 of 10 CFR require that non-profit College and University licensees, that utilize a self-guarantee to provide reasonable assurance of available funds for decommissioning costs through a self-guarantee, are required to annually provide a self-guarantee agreement and pass a financial test pursuant to Appendix E of 10 CFR Part 30, Criteria Relating to Use of Financial Tests and Self-Guarantees For Providing Reasonable Assurance of Funds For Decommissioning by Nonprofit Colleges, Universities, and Hospitals."

PSU is a holder of a reactor license and a special nuclear material license and uses a self-guarantee for meeting the financial assurance requirements.

Staff Evaluation The NRC staff determined compliance with applicable regulations using NRC guidance (Ref.

10). The December 20, 2013, submittal (Ref. 1) from PSU included the following:

• a self-guarantee;

• a letter from PSUs Associate Vice President for Finance and Corporate Controller and 1

financial test;

• PSUs Audited Financial Statements; and

• a Standby Trust Agreement The submittal lacked an opinion of the off-balance sheet transactions by an independent accountant. The NRC began discussions with the licensee about an opinion on the off-balance sheet transactions in May 2014 (Ref. 5).

By letter dated April 24, 2014, NRC staff provided RAIs to the licensee. NRC staff clarified the intent of the model language recommended NRC guidance (Ref. 10), and the request for the auditors evaluation of off-balance sheet transactions. With the response to the RAIs (Ref. 4),

the NRC and PSU staffs determined that the model language was reasonable and would be updated in a revised submittal.

An RAI asked for the accountants evaluation of the off-balance sheet transactions is required pursuant to 10 CFR Part 30, Appendix E.II.C(1). But the American Institute of Certified Public Accountants prohibits any form of report or assurance on solvency matters. After conference calls to determine what the licensee could provide to meet the intent of the regulatory requirement, the NRC informally provided PSU with examples from other licensees of opinions from their respective independent auditors of a calculation of the off-balance sheet transactions to determine a specific amount. This amount, along with the cost of decommissioning, and the bond rating, was used in the financial test to determine the licensees solvency, and hence, the ability to decommission. PSU subsequently provided NRC staff with similar language in a revised independent auditors report. The NRC staff reviewed the revised independent auditors report and found that it met the intent of 10 CFR Part 30, Appendix E.II.C(1).

In order for PSU to qualify for use of a self-guarantee, the criteria found in 10 CFR Part 30, Appendix E, Section II.A.1 or A.2, must be satisfied. By letter dated December 20, 2013, PSU demonstrated compliance with 10 CFR Part 30, Appendix E, Section II.A.1 (the Financial Test). The Financial Test, in pertinent part, requires that PSU have a current rating for its most recent bond issuance of AAA, AA, A as issued by Standard & Poors or Aaa, Aa, or A as issued by Moodys.

As part of the December 20, 2013, submittal, the letter from PSUs Associate Vice President for Finance and Corporate Controller identified the Financial Test used as part of Appendix A, Checklist 9-B, of the NRC guidance (Ref. 10) to demonstrate passage of the Financial Test.

The submittal states that the current bond rating of the most recent unsecured bond issuance is AA, as rated by Standard & Poors. Therefore, PSU meets the requirement of 10 CFR Part 30, Appendix E, Section II.A.1. Thus, PSU meets the requirements of the Financial Test.

10 CFR Part 30, Appendix E, Section III.A through F, describes the terms that are required in a self-guarantee:

A. The guarantee will remain in force unless the licensee sends notice of cancellation by certified mail, and/or return receipt requested to the NRC. Cancellation may not occur unless an alternative financial assurance mechanism is in place; B. The license shall provide alternate financial assurance as specified in the NRCs regulations within 90 days following receipt by the NRC of a notice of cancellation of the guarantee; 2

C. The guarantee and financial test provisions must remain in effect until the NRC has terminated the license or until another financial assurance method acceptable to the NRC has been put in effect by the licensee; D. The applicant or licensee must provide to the NRC a written guarantee which states that the licensee will fund and carry out the required decommissioning activities or, upon issuance of an order by the NRC, the licensee will set up and fund a trust in the amount of the current cost estimates for decommissioning; and E. If, at any time, the licensees most recent bond issuance ceases to be rated in any category of A or above by either Standard and Poors or Moodys, the licensee shall provide notice in writing of such fact to the NRC within 20 days after publication of the change by the rating service.

F. A standby trust to protect public health and safety and the environment must be established for decommissioning costs before the self-guarantee agreement is submitted.

The NRC staff finds the language of the self-guarantee conforms to Appendix A.9 of Reference

10. Because the self-guarantee is consistent with the recommended language contained Appendix A.9, Checklist B, of Reference 10, the NRC staff finds that the proposed self-guarantee meets the requirements of 10 CFR Part 30, Appendix E, Section III.A, B, C, D, E, and F.

Relying upon the self-guarantee dated December 20, 2013 and responses to the RAIs, the NRC staff finds that PSU meets the requirements of the Financial Test set forth in 10 CFR Part 30, Appendix E, Section II.A.1, the self-guarantee, Controller Letter, Audited Financial Statements, and Standby Trust Agreement are consistent with NRC guidance, and that the self-guarantee meets the requirements of 10 CFR Part 30, Appendix E, Section III.A through F.

CONCLUSION PSU has demonstrated that (1) its financial condition meets the requirements of 10 CFR Part 30, Appendix E and (2) the language of the self-guarantee, Controller Letter, Audited Financial Statements, and Standby Trust Agreement submitted by cover letter dated December 20, 2013, are consistent with NRC guidance. Therefore, the NRC staff concludes that PSU has demonstrated it continued eligibility to use the self-guarantee as financial assurance for decommission.

FINDING The NRC staff finds that PSU meets the requirements of 10 CFR 50.25.

The NRC staff finds that PSU meets the requirements of 10 CFR 70.25.

The NRC staff finds that PSU meets the requirements of 10 CFR Part 30, Appendix E.II.C(1).

The NRC staff finds that PSU meets the requirements of 10 CFR Part 30, Appendix E, Section III.A, B, C, D, E, and F.

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REFERENCES

1. Letter from J. Doncsecz, Pennsylvania State University, Audited Financial Statements -

Year Ending June 30, 2013, Self-Guarantee Agreement and Standby Trust Agreement, December 20, 2013. ADAMS accession number ML14013A265.

2. Letter from C. Ryder, U.S. Nuclear Regulatory Commission, Acceptance For Technical Review: Pennsylvania State University Annual Certification Of Financial Assurance (Technical Assignment Control No. L33304), March 4, 2014. ADAMS accession number ML14059A089.

3. Letter from C. Ryder, U.S. Nuclear Regulatory Commission, Request For Additional Information - Annual Certification Of Financial Assurance (Technical Assignment Control Number L33304), April 24, 2014. ADAMS accession number ML14013A265.

4. Letter from J. Doncsecz, Pennsylvania State University, Reply to NRC Request for Additional Information letter dated April 24, 2014 (TAC L33304), July 17, 2014. ADAMS accession number ML14204A621.

5. Note from C. Ryder, U.S. Nuclear Regulatory Commission, Summary of Conference Call on May 5, and May 15, 2014, Regarding the Annual Certification of Eligibility to Use the Self-Guarantee for Financial Assurance of Decommissioning, June 20, 2014.

ADAMS accession number ML14174A410.

6. Note from C. Ryder, U.S. Nuclear Regulatory Commission, Call on Sept 22, 2014, Regulatory Requirements and Guidance of the American Institute of Certified Public Accountants, November 4, 2014. ADAMS accession number ML14308A215.

7. Note from C. Ryder, U.S. Nuclear Regulatory Commission, Summary of Conference Call on November 3, 2014: Annual Certification to Demonstrate Continued Eligibility for Using the Self-Guarantee of Decommissioning Financial Assurance, November 25, 2014. ADAMS accession number ML14329A480.

8. Note from C. Ryder, U.S. Nuclear Regulatory Commission, Summary of Conference Calls: Annual Certification Of Financial Assurance 10 CFR Part 30, Appendix E, Section II.(c)(1), January 7, 2015. ADAMS accession number ML15007A441.

9. Letter from J. Doncsecz, Pennsylvania State University, Reply to NRC Request for Additional Information Letter Dated April 24, 2014 (TAC L33304), January 12, 2015.

ADAMS accession number ML15016A116.

10. U.S. NRC, Consolidated Decommissioning Guidance: Financial Assurance, Recordkeeping, and Timeliness, Final Report NUREG-1757, Vol. 3, Rev. 1, February 2012. ADAMS accession number ML12048A683.

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