ML23153A042

PR-030, 040, 050, 070, 072 - 58FR03515 - Self-Guarantee as an Additional Financial Assurance Mechanism

ML23153A042
Person / Time
Issue date:	01/11/1993
From:	Chilk S NRC/SECY
To:
References
PR-030, PR-040, PR-050, PR-070, PR-072, 58FR03515
Download: ML23153A042 (1)

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{{#Wiki_filter:DOCUMENT DATE: TITLE: CASE

REFERENCE:

KEYWORD: ADAMS Template: SECY-067 01/11/1993 PR-030,040,050,070,072 - 58FR03515 - SELF-GUARANTEE AS AN ADDITIONAL FINANCIAL ASSURANCE MECHANISM PR-030,040,050,070,072 58FR03515 RULEMAKING COMMENTS Document Sensitivity: Non-sensitive - SUNSI Review Complete

STATUS OP RULEMAKING PROPOSED RULBI PR-030,040,050,070,072 OPEN ITEM (Y/N) N RULE NAME: SELF-GUARANTEE AS AN ADDITIONAL FINANCIAL ASSURANCE MECHANISM PROPOSED RULE FED REG CITE: 58FR03515 PROPOSED RULE PUBLICATION DATE: 01/11/93 ORIGINAL DATE FOR COMMENTS: 03/29/93 NUMBER OF COMMENTS: EXTENSION DATE: I I 15 FINAL RULE FED. REG. CITE: 58FR68726 FINAL RULE PUBLICATION DATE: 12/29/94 NOTES ON THE FINAL RULE GRANTED PRM-30-59 (GENERAL ELECTRIC COMPANY PETITIO ST~& NJ SEE 56 FR 48445). SEE ALSO CORRECTION NOTICE PUBLISHED AT 59 OF'RULE FR 1618. FILE LOCATED ON Pl. TO FIND THE STAFP CONTACT OR VIEW THE RULEMAKING HISTORY PRESS PAGE DOWN KEY HISTORY OF THE RULE PART AFFECTED: PR-030,040,050,070,072 RULE TITLE: SELF-GUARANTEE AS AN ADDITIONAL FINANCIAL ASSURANCE MECHANISM ROPOSED RULE PROPOSED RULE DATE PROPOSED RULE SECY PAPER: 92-385 SRM DATE: 12/02/92 SIGNED BY SECRETARY: 01/05/93 FINAL RULE FINAL RULE DATE FINAL RULE SECY PAPER: 93-284 SRM DATE: 12/13/93 SIGNED BY SECRETARY: 12/22/93 STAFF CONTACTS ON THE RULE CONTACTl: CLARK PRICHARD CONTACT2: MAIL STOP: NLS-129 PHONE: 492-3734 MAIL STOP: PHONE:

DOCKET NO. PR-030,040,050,070,072 (58FR03515) DATE DOCKETED 01/06/93 01/26/93 03/22/93 03/24/93 03/26/93 03/29/93 03/29/93 03/29/93 03/29/93 03/30/93 03/30/93 03/31/93 04/01/93 04/09/93 In the Matter of SELF-GUARANTEE AS AN ADDITIONAL FINANCIAL ASSURANCE MECHANISM DATE OF TITLE OR DOCUMENT DESCRIPTION OF DOCUMENT 01/05/93 FEDERAL REGISTER NOTICE - PROPOSED RULE 01/19/93 COMMENT OF SC JOHNSON & SON, INC. (JOHNSON WAX) (GENE I. MATSUMOTO) (

1) 03/14/93 COMMENT OF MARVIN I. LEWIS (

2) 03/22/93 COMMENT OF ILLINOIS DEPARTMENT OF NUCLEAR SAFETY (THOMAS W. ORTCIGER, DIRECTOR) (

3) 03/23/93 COMMENT OF THE PROCTOR & GAMBLE COMPANY (DR. DONALD T. HOOKER) (

4) 03/24/93 COMMENT OF CARNEGIE MELLON UNIVERSITY (PETER COLLOPY) (

5) 03/24/93 COMMENT OF ALLIED SIGNAL, INC.

(STANLEY R. STEVINSON) (

6) 03/26/93 COMMENT OF SHIELDALLOY METALLURGICAL CORPORATION (RICHARD D. WAY, SR. V.P.) (

7) 03/29/93 COMMENT OF GENERAL ELECTRIC COMPANY (JAY R. KRAEMER, ESQUIRE) (

8) 03/25/93 COMMENT OF NUCLEAR REACTOR LABORATORY (DR. JOHN A. BERNARD) (

9) 03/29/93 COMMENT OF ELI LILLY AND COMPANY (JOSEPH H. MARXER) (

10) 03/29/93 COMMENT OF WESTINGHOUSE ELECTRIC CORPORATION 03/28/93 03/30/93 (BARTON Z. COWAN) (

11)

COMMENT OF UNIVERSITY OF NOTRE DAME (ROBERT M. ZERR) (

12)

COMMENT OF CAROLINA POWER & LIGHT COMPANY (DAVID C. MCCARTHY) (

13)

DOCKET NO. PR-030,040,050,070,072 (58FR03515) DATE DOCKETED 04/14/93 12/10/93 12/23/93 01/22/94 02/07/94 DATE OF TITLE OR DOCUMENT DESCRIPTION OF DOCUMENT 04/13/93 COMMENT OF NUCLEAR METALS, INC. (ALDEN R. GILMAN, V.P.) (

14) 12/06/93 COMMENT OF WHITEHEAD INSTITUTE FOR BIOMEDICAL RES (JOHN PRATT, ASSOCIATE DIRECTOR) (

15) 12/22/93 FINAL RULE FEDERAL REGISTER NOTICE PUBLISHED ON 12/29/93 AT 58 FR 68726.

01/06/94 FINAL RULE CORRECTION NOTICE PUBLISHED ON 1/12/94 AT 59 FR 1618. 02/02/94 SUPPLEMENT TO COMMENT NUMBER 15, PROVIDED BY JOHN PRATT, ASSOCIATE DIRECTOR, WHITEHEAD INSTITUTE

~~' WHITEHEAD Dr. Gerald R. Fink Director John Pratt Associate Director 617 / 258-5104 Secretary DOCKET NUMBER PR J~ d O c I) 7 u t1-PROPOSED RULE 1 0>-, '7/ / {_ C tY/= v? J c-'j r ) '.,\\X:;. ~i] 7 1° .J V 'j:.,Nr<C INSTITUTE

• 94 rm -7 P' :so Februa:ry 2, 1994 U.S. Nuclear Regulatory Commission Washington, DC 20555

Dear Sir:

This letter offers comment on the proposed revision to 10 CFR Part 30 regarding self-guarantee for financial assurance for costs of decommissioning licensed facilities that supplements comments previously forwarded on December 6, 1993 (copy attached). I have heard that the NRC is currently reconsidering the regulations as they pertain to a non-profit providing a self-guarantee and that the allowance of such a self-guarantee might be conditional upon the institution having a satisfactory bond rating as determined by such organizations as Moody's or Standard & Poor. It is recommended that having a bond rating not be a necessary condition. There are many non-profit institutions with considerable unrestricted invested capital that have no bond rating because they have never had a need to access the bond market. Rather, the NRC should look to an amount of unrestricted invested capital of a defined amount in excess of the amount of the guarantee as evidenced by the annual submission of audited financial statements. Gaining a rating from Moody's or Standard & Poor usually costs upwards from $15,000. An Institution with a strong balance sheet ought to be able to provide a self-guarantee without having to get a bond rating just for the sake of a self-guarantee. The NRC might consider a high threshold for unrestricted capital (such as ten times the amount of the assurance) without a bond rating and a lower level with a bond rating. Whitehead Institute for Biomedical Research / Nine Cambridge Ccntcr,Cambridgc, MA 02142-1479 617 / 258-5000 FAX 617 / 258-6294 Acknowleaged oy card....... ~AY, 1 a JM,

~G WHITEHEAD INSTITU T E Dr. Gerald R. Fink Director John Pratt Associate Director 617 / 258-5104 Secretary U.S. Nuclear Regulatory Commission Washington, DC 20555

Dear Sir:

December 6, 1993 This letter offers comment on the proposed revision to 10 CFR Part 30 regarding self-guarantee for financial assurance for costs of decommissioning licensed facilities. Under current regulations, self-guarantees may only be made by parent organizations. Under the proposed revision, companies with assets in excess of $1 billion could also provide self-guarantees. There are also other requirements that indicate the revision is aimed at companies and does not recognize the fact that many licensees are non-profit research institutions or universities with endowments of considerable size when compared to the amount needed for decommissioning. The Whitehead Institute is a non-profit independent research institute. Under the NRC rules, it must provide a financial assurance for $150,000. The Institute has invested unrestricted capital acting as endowment of $149 million. Under the rules, it cannot offer a self-guarantee. It is taking six months of effort plus ongoing annual fees to secure a standby letter of credit to satisfy the current financial assurance requirements. The fact that NRC regulations do not allow an organization with $149 million of unrestricted invested assets to guarantee the availability of $150,000 seems unreasonable. It is suggested that holders of licenses under 10 CFR Part 30 be allowed to offer self-guarantees if they have unrestricted liquid assets in an amount several times (such as 10 times) the decommissioning costs. s,::r~ ~ Pratt Whitehead Institute forBlomcdicalRcscarch / Nine CambridgcCcntcr,Cambridgc,MA 02142-1479 617 / 258-5000 FAX617 1 258-6294

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• ,i, r,t itto Feder:.! Reglstet NUCLEAR REGULATORY COMMISSION 10 CFR Parts 30, 40, 50, 70, 72 RIN 3150-AE16

'94 JAN 22 P 2 :J6 Self-Guarantee as an Additional

r N..

Financial Assurance Mechanism; Correction AGENCY: Nucl ear Regulatory Commission. ACTION: Final rule: correction.

SUMMARY

This document corrects a final rule that appeared in the Federal Register on December 29, 1993 (58 FR 68726), that amended NRC regulations for decommissioning licensed facilities to a l low certain non-electric utility licensees to use self-guarantee as a means of financial assurance. This action is necessary to correct the designation of an appendix in the final rule. EFFECTIVE DATE: January 28, 1994. FOR FURTHER INFORMATION CONTACT: Clark Prichard, Office of Nuclear Regulatory Research, U.S. Nuclear Regulatory Commission, Washington DC 20555, telephone (301) 492-3734. SUPPLEMENTARY INFORMATION:

1.

On page 68730, in the first column, in the last line of §30.8(b) the reference to "appendix A and B" should be changed to (J ~. evv I IJ-~ / 1~1 a- ~'"i F Jt l 6/<Y

2 read "appendix A and C".

2.

On page 68730, in the first column, in the 20th line of §30.35(f)(2), the reference to "appendix B" should be changed to read "appendix C".

3.

On page 68730, in amendatory instruction number 4, the reference to "appendix B" should be c hanged to read "appendix C".

4.

On page 68730, in the first line of the second column, "Appendix B" should be changed to read "Appendix C".

5.

On page 68731, in the first column, in the 20th line of §40.36(e)(2), the reference to "appendix B" should be changed to read "appendix C".

6.

On page 68731, in §50.75(e)(2)(iii), in the third column, in the sixth line, the reference to "appendix B" should be changed to read "appendix C".

7.

On page 68731, in §70.25(f) (2), in the last line of the third column, the reference to "appendix B" should be changed to read "appendix C".

8.

On page 68732, in §72.30(c) (2), in the second column, in the 12th line, the reference to "appendix B" should be changed to read "appendix C". -11... Dated at Bethesda, Maryland, thi s {p --day of January 1994. For the Nuclear Regulatory Commission. David L. Meyer, Chief Rules Review and Directives Branch, Division of Freedom of Information and Publications Services, Office of Administration.

DOCKET NUMBER, PROPOSED RULE 7P-.i.. t ft)/ 7 0 rl--11-- (StY Ff. 3s1sJ .. <) Nt*,C [7590-01-P] NUCLEAR REGULATORY COMMISSION

• 93 Off 23 /W :26 10 CFR Parts 30, 40, 50, 70, 72 RIN 3150-AE16 Self-Gu?tee as an Additional Financial Assurance Mechanism AGENCY : Nuclear Regulatory Carrmission.

ACTION: Fi nal rule.

SUMMARY

The Nuclear Regulatory Commission is amending i ts regulations for decommissioning licensed facilities to all ow certain nan-electric utility licensees to use self-guarantee as a means of financial assurance. The rule reduces the cost burden of financi al assurance whil e providing NRC with sufficient assurance that decarrmissioning costs will be funded. This rule grants a petition far rulemaking (PRM-30-59) from General Electric Company and Westinghouse Electric Corporation and completes action on the petition. EFFECTIVE DATE: (Insert Date - 30 days after date of publ ication in the Federal Register) FOR FURTHER INFORMATION CONTACT: Clark Prichard, Office of Nuclear Regulatory Research, U.S. Nucrear Regulatory Commission, Washington, DC 20555, telephone (301 ) 492-3734. 1

SUPPLEMENTARY INFORMATION:

Background

On January 11, 1993 (58 F,R 3515), the NRC published a notice of proposed rulemaking that would allow self-guarantee as an additional mechanism for complying with the regulations on financial assurance for deco111T1issioning. This action was in response to a petition for rulemaking (PRM-30-59) from the General Electric Company (GE) and the Westinghouse Electric Corporation (Westinghouse). The notice of receipt of the petition was published on September 25, 1991 (56 FR 48445}. The petitioners requested that the NRC amend its deco111Dissioning regulations contained in 10 CFR Parts 30, 40, so. 70, and 72 to provide a means for self-guarantee of decommissioning funding costs by certain NRC licensees who meet stringent financial standards and related reporting and oversight requirements. The petitione s propose tha ~ electric utility reactor licensees under 10 CFR Part 50 not be affected by the proposals in the petition. Under the original decommissioning regulations (53 FR 24018; June 27, 1988), licensees were permitted to provide financial assurance for decormnissioning funding through prepayment, insurance, surety bond, letter of credit, or parent company guarantee. Electric utilities were also allowed to establish an external sinking fund. The proposed rule sought public col'IITlents 2

on amendments to Parts 30*, 40, 50, 70, and 72 to allow self-guarantee as an additional method of complying with the decommissioning requirements in those parts. The objective of this rule is to reduce the licensee 1s cost burden without causing adverse effects on public health and safety. The regulatory analysis developed for this rule estimates that the annual industry cost savings would be approximately $730,000 if all licensees meeting the criteria use the self-guarantee. This estimate is based on rather conservative assumptions (i.e., $750,000 total decommissioning cost per license)i the actual cost savings may be considerably greater. The cost savings would result from the elimination of the cost of third party financial assurance for licensees qualifying to use the self-guarantee. Annual fees for letters of credit, surety bonds, and other forms of third party financial assurance typically are approximately 1:5 percent of the amount of financial assurance provide~. A. Proposed Criteria The proposed criteria for corporate self-guarantee included these financial criteria: (1) Tangible net worth of at least $1 billion; (2) Tangible net worth at least 10 times the current decommissioning cost estimate (or the current amount required if certification is used} for all decommissioning activities for which the c9mpany is responsible as self-guaranteeing licensee and as parent-guarantor; (3) Assets located in the United States amounting to at least 3

90 percent of total assets or at least 10 times the current decomm1ss1on1ng cost estimate (or the current amount required 1f certification 1s used); for all decommission1ng activ1ties for which the company is responsible as self-guaranteeing licensee and as parent-guarantor; (4) A current bond rating of AAA, AA, or A as issued by Standard and Poors (S&P), or Aaa, Aa, or A as issued by Moodys. Procedural requirements proposed were: (1) The company must have at least one class of equity securities registered under the Securities Exchange Act of 1934; (2) The company shall provide the Coirmission with copies of all reports filed with the Securities and Exchange Comission under Section 13 of the Securities Exchange Act of 1934; (3) The company's independent certified public accountant must compare the data used by the company in the financial test with the company's independently audited yearend financial statements; (4) The company must repeat passage of the test within 90 days after the close of each succeeding fiscal year; and (5) The company must notify NRC within 90 days of any matters that may come to the attention of the auditor that may cause the auditor to believe that the data specif;ed in the f;nancial test should be adjusted and that the company no longer passes the test. The self-guarantee would be available only for an applicant or licensee having no parent company holding majority control of its voting stock. 4

B. Alternative Criteria Because a majority of cormnenters on the notice of receipt of the petition questioned the need for the financial criteria to be so stringent. the Corrmission offered an alternative set of criteria to that of the petition as contained in the proposed rule. The alternative was the same financial criteria presented in the proposed rule, without the $1 billion net worth requirement. A company's tangible net worth is an important factor in determining its bond rating. The rating itself, combined with the other criteria, may be a sufficient indicator of financial stability. Because all firms qualifying would need an A or better bond rating, this alternative may not be riskier in terms of financial assurance than the proposed rule. The regulatory analysis examined the effects on availability of the self-guarantee to licensees of deleting the $1 billion tangible net worth requirement from the financial criteria in the proposed rule, all other criteria remaining constant. The conclusion was that this alternative, if adopted, would allow an additional 7 firms to use the proposed self-guarantee. (Approximately 20 firms would qualify with the $1 billion criterion included.) The additional availability would save industry an estimated $130,000 annually and, since all firms would need an A or better bond rating, would maintain a high level of assurance. An A or better bond rating indicates that a company has substantial net worth. A company which merits an A or better bond rating has passed a stringent review by the independent ratings agencies of )ts ability to meet its financial obligations. A report by Moody's gives the default rate assoc1ated with companies whose bonds are rated A or above in 1 of the 3 years prior to 5

default as only 0.13 percent annually. 1 In add1t1on. all companies. irrespective of their overall s1ze, must demonstrate that they possess tang1ble net worth of at least 10 times the current decommission1ng cost estimate (or the current amount required if certification is used) for all decommissioning activities for which the company is responsible as self-guaranteeing license and as parent granter. The alternate criteria, as well as the criteria in the proposed rule, do not apply to electric utilities. Electric utilities would be excluded from using self-guarantee under either set of criteria. Public comments were requested on this alternative financial criteria--the criteria 1n the proposed rule without the $1 billion tangible net worth requirement. Minor Wording Changes The proposed rule deleted the phrase "should the licensee defaultu from Secs. 30.35(f}(2), 40.36(e)(2), 50.75(e)(l)(iii), 70.25{f)(2), and § 72.30(c){2) to accommodate self-guarantee. Summary of Public Cotm1ents The Coamission received fourteen comment letters in response to the publication of the notice of.proposed rulemaking. All but one of the letters supported a revision of the Commission's regulations to allow self-guarantee. The following is a summary of significant public comments and the Comm1ss1on's 1Corporate Bond Defaults and Default Rates, Moody's Special Report, January, 1991, p. 32. 6

response. A more deta1led analysis of public comments has been prepared. This analysis 1s available for 1nspection 1n the NRC Public Document Room. 2120 L Street, NW. (Lower level), Washington, DC. Opposition to Self-Guarantee One coltlllenter opposed the proposed self-guarantee mechan1sm on the grounds that current capabilities of electronically transferring funds make self-guarantee meaningless even if a finn has initially demonstrated that it has the required assets. The commenter argued that recent failures of pensions and health benefits assured by self-guarantee indicate that self-guarantees cannot be trusted.

Response

NRC does not agree that a well-designed self-guarantee mechanism cannot be trusted to provide financial assurance. Self-guarantees have been used in a number of applications without incurring the problems pointed out by the commenter. The Environmental Protection Agency currently allows self-guarantee as a means of financial assurance for cleanup of hazardous waste treatment, storage, and disposal facilities. Because the qualification to use self-guarantee is based in large part on a specified bond rating, the NRC believes that it is tying the self-guarantee to an accurate measure of the financial strength of the self-guarantor. By requiring annual recertification, and submission of SEC reports, the NRC believes that potential problem situations will be identified and addressed in a timely manner. 7

Use of Self-Guarantee by Electric Power Utility Licensees One commenter indicated that electric utilities licensed under Part 50. which are prohibited from using the proposed self-guarantee, should be allowed to use that option. The commenter, pointing to the Regulatory Analysis, argued that NRC' s stated reasons do not create a strong technica.l basis for not a 11 owing nuc1 ear powe1

• licensees to use self-guarantee.

Response The objective of the rule is to reduce the licensee's cost burden without causing adverse effects on public health and safety. The Commission already allows electric utilities to accumulate deco11111issioning funds in an external sinking fund. Unlike other licensees who are subject to financial assurance for decommissioning, electric utilities do not have to provide the full amount of required financial assurance "up front" but can instead build up their sinking funds over time. Thus, electric utilities already are permitted a cost-reducing financial assurance mechanism. Requirement that 90 Percent of Total Assets be in the U.S. One conmenter suggested dropping what is described as the requirement that self-guarantors demonstrate that 90 percent of their total assets are located in the United States, because otherwise some large, multinational companies will be excluded from using the self-guarantee simply because a majority of their assets may be outside the U.S. Response The proposed self-guarantee financial test included a provision requiring the self-guarantor ~o show that it had assets located in the United States amounting of at least 90 percent of total assets or at least IO times the total current decommissioning cost estimate (or the current amount required if certification is used) for all decommissioning activities 8

for which the company 1s respons1ble as a self-guaranteeing licensee and as parent-guarantor. A l1censee using self-guarantee does not have to show that 90 percent of its assets are in the United States. The licensee could show that it has assets in the U.S. amounting to at least 10 times decomn11ssion1ng costs. A large, multinational corporation should readily be able to demonstrate that it has assets in the United States amounting to at least IO times the decommissioning responsibilities. e Net Worth Criterion Several comnenters favored the self guarantee concept but argued for less stringent financial criteria. Response The Coamission has considered various alternative financial criteria. It has decided to drop the Sl billion tangible net worth criterion. However, tangible net worth will be an ilDJ:lortant factor in the requirements for self-guarantee for several reasons: (1) The financial criteria in the final rule contain the requirement that to qualify to use self-guarantee, a licensee must have tangible net worth at least 10 times decorrmissioning costs, and (2} A company must have at least an A bond rating. The A or better bond rating indicates that a company has substantial net worth. Net worth is an important factor in comprisir.g a bond rating. Bond ratings are reviewed often, and changed in response to changes in the issuer's financial condition. A bond rating of A or better assures that the financial strength of a licensee offering a self-guarantee has been independently reviewed and affirmed. It provides an excellent guide to the ability of a company to meet its obligations. According to Moodys, default 9

rates associated with companies whose bonds are rated A or above 1n l of the 3 years prior to default are 0.13 percent annually." The criteria for parent guarantee were given consideration as financial criteria for self-guarantee in the final rule. Under current NRC decommissioning regulations, the parent company of a licensee that meets the financial criteria in 10 CFR Part 30, Appendix A may guarantee that funds will be available to decommission the facility of its subsidiary licensee. The financial criteria for the NRC parent guarantee include a lower bond rating (BBB or Baa) requirement and a lower net worth times decommissioning cost requirement (6, rather than 10 times decommissioning costs) than the criter1a in this rule. The Conmission has decided against using the criteria for parent guarantee in the rule. This is the first instance in which self-guarantee is being allowed under the Connission's decommissioning regulations. The Conmission prefers that the more conservative criteria be used. At some future time, when the Commission has gained some experience with self-guarantee, it may consider an appropriate revision of the financial criteria. Use of Self-Guarantee by Non-Profit Entities Several commenters suggested that NRC should amend the proposed rule to allow universities and other non-profit entities to use self-guarantee. They argued that many non-profit entities have been in existence and been financially stable for long periods of time. These commenters proposed 2Corporate Bond Defaults and Default Rates, Moody's Special Report, January 1991, p.32. 10

several alternative criteria. including s1ze of endowments, that they said could be used to assess the financial strength of non-profit entities. Response. NRC plans to begin shortly a study of extending the availability of cost-saving financial assurance alternatives to non-profit entities other than universities. A similar study for universities will be deferred until afte 4 planned rulemaking on fee recovery. However, including these non-profit entities in the self-guarantee program established by this rulemaking presents certain problems. The analysis which was prepared to evaluate the financial criteria in the proposed rule did not include non-profit entities. In order to extend the use of self-guarantees to non-profit entities, new criteria would have to be developed to assess the financial strength of the non-profit licensees. Development of financial criteria to assess the qualifications of a non-profit entity to provide a self-guarantee is likely to require detailed consideration of the different financial

• accounting methods used by medical institutions. The financial accounting and reporting of non-profit entities are unique and substantially different from the accounting and reporting of for-profit entities.

The financial reporting practices of public and private hosp1tals generally follow standards for these institutions established by the American Institute of Certified Public Accountants. Development of financial criteria for a self-guarantee for hospitals also would involve analysis of the various accounting funds utilized and establishment of adequate criteria. NRC's review of decommissioning financial assurance submissions identified third-party financial mechanisms, such as surety bonds and letters of credit, as well as escrows and trusts, as the financial mechanisms used most often by private non-profit entities. In a few instances, private non-11

profit entities have sought to use parent company guarantees. Publicly owned non-profit entities, particularly public un1versities, have sought to use statements of intent (a financial assurance mechanism available only to government licensees}. To the extent that non-profit entities have been able to make use of guarantees or stattments of intent, cost saving financial assurance alternatives already exist for those licensees. The Corrmission anticipates that in the future it will carry out a study of potential self-guarantee criteria for non-profit licensees other than universities. Because of the time required for such a study however, it cannot include non-profit entities in the self-guarantee program established by this rulemaking. The NRC will review the situation relative to universities after its planned rulemaking on fee recovery. Requiring Additional Written Co11111itment by Self-Guarantors One conmenter reco11111ended adding a requirement that self-guarantors execute a binding corrmitment to make the necessary funds available for deconmissioning. Under this recorrmendation, in addition to submitting proof of the required financial strength, the self-guarantor would also have to submit a written agreement that, upon issuance of an order by the Commission to undertake decomissioning, the licensee will set up a trust fund in favor of the Connission, or obtain other surety accessible to the Commission. Response The addition of a written commitment is a useful suggestion. A provision is being included in the self-guarantee requirements calling for the licensee to provide the Commission with a written guarantee (a written commitment by a corporate officer) stating that the licensee will fund and carry out the required decommissioning activities, or, upon issuance of an 12

order by the Commission, it will set up and fund a standby trust *.. nth sufficient funds to carry out the required decomn11ssion1ng activities based on the current cast estimates. Changes From the Proposed Rule There are only three changes from the proposed rule. First, the specific $1 billion tangible net worth criterion has been deleted from the financial criteria required for a non-electric utility licensee ta use self-guarantee. The financial criteria included in the final rule are: (1) Tangible net worth at least 10 times the total current decommissioning cost estimate (or the current amount required if certification is used) for all decomissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor. (2) Assets located in the United States amounting to at least 90 percent of total assets or at least 10 times the total current deco11111issioning cost estimate (or the current amount required if certification is used) for all decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor. (3) A current rating for its most recent bond issuance of AAA, AA, or A as issued by Standard and Poors (S&P), or Aaa, Aa, or A as issued by Moodys. As used by the ratings agencies, an A rating marks a discrete point on the ratings scale, different from A-. An A-or lower rating would not be acceptable. The second change is the addition of the requirement for the licensee to provide the Commission with a written guarantee. 13

The third change 1s that additional language has been added to Appendix B to clarify procedural requirements for notification of the Comm1ss1on and provision of alternate financial assurance if a licensee no longer meets the requirements for self-guarantee. Agreement State Compatibility Section 72.30 is assigned Division 4 compatibility, since regulation of independent storage of spent nuclear fuel and high-level radioactive waste are functions reserved to the NRC pursuant to the Atomic Energy Act. Sections 30.35, 40.36, and 70.25 are currently considered Division 2 compatibility. The addition of the self-guarantee mechanism for providing the required financial guarantee does not change the division of compatibility. Division 2 compatibility allows the Agreement States flexibility to be more stringent. The agreement States must provide mechanisms in their regulations, but due to the specific State financial regulations, certain mechanisms may not be acceptable in their States. Limiting the mechanisms to a subset of those provided for in the NRC regulations is within the flexibility provided in Division 2 compatibility. Environmenta1 Impact: Categorical Exclusion 14

The NRC has determined that this regulation is the type of action described as a categorical exclusion in 10 CFR 51.22(c)(lO)(i). Therefore. neither an environmental impact statement nor an environmental assessment has been prepared for this regulation. Paperwork Reduction Act Statement This rule amends information collection requirements that are subject to the Paperwork Reduction Act of 1980 (44 U.S.C. 3501, et seq.). These requirements have been approved by the Office of Management and Budget. approval numbers: 3150-0017, -0020, and -0009. The public reporting burden for this collection of information is estimated to average 19 hours per response, including the time for reviewing I instructions, searching existing data sources, gathering and maintaining the

• data needed, and completing and reviewing the collection of infonnation.

Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burder, to the Information and Records Management Branch {MNBB-7714), U.S. Nuclear Regulatory Commission, Washington, DC 2055'5, and to the Desk Officer, Office of Information and Regulatory Affairs, NEOB-3019, (3150-0017, -0020, and -0009), Office of Management and Budget, Washington, DC 20503. Regulatory Analysis The Cormiission has prepared a regulatory analysis on this regulation. The analysis examines the costs and benefits of the alternatives considered by 15

the Commission. The analys1s is available for inspection in the f:RC Public 0ocument Room. 2120 L Street, NW. (lower level), Washington, DC. Single copies of the analysis may be obtained from Clark W. Prichard, Office of Nuclear Regulatory Research, U.S. Nuclear Regulatory Co11111ission, Washington, DC; 20555 telephone (301) 492-3734. Regulatory Flexibility Certification In accordance with the Regulatory Flexibility Act, 5 U.S.C. 605(b), the Comnnssion certifies that this rule will not have a significant economic impact upon a substantial number of small entities. The licensees affected by this rule do not fall within the scope of the definition of "small entities" set forth in the Regulatory Flexibility Act or the size standards of the NRC applicable to a small business (56 FR 56671; November 6, 1991). Backfit Analysis The NRC has detennined that the backfit rule, 10 CFR 50.109, does not apply to this rule and, therefore, that a backfit analysis is not required for this rule, because these amendments do not involve any provisions which would impose backfits as defined in 10 CFR 50.109(a)(l). list of ~ubjects 10 CFR Part 30 16

Byproduct material, Crim1na1 penalty, Government contracts, Intergovernmental relations. Isotopes, Nuclear material, Radiation protection. Reporting and recordkeeping requirements. 10 CFR Part 40 Criminal penalty, Government contracts, Hazardous materials transportation, Nuclear materials, Reporting and recordkeeping requirements, Source material, Uranium. 10 CFR Part 50 Antitrust, Classified information, Criminal penalty, Fire protection, Intergovernmental relations, Nuclear power plants and reactors, Radiation protection, Reactor siting criteria, Reporting and recordkeeping requirements. 10 CFR Part 70 Criminal penalty, Hazardous materials transportation, Material control and accounting, Nuclear materials, Packaging and containers, Penalty, Radiation protection, Reporting and recordkeeping requirements, Scientific equipment, Security measures, Special nuclear material. 10 CFR Part 72 Manpower training programs, Nuclear materials, Occupational safety and health, Reporting and recordkeeping reqµirements, Security measures, Spent fuel. For the reasons set out in the preamble and under the authority of the Atomic Energy Act of 1954, as amended, the Energy Reorganization Act of 1974, 17

as amended, and 5 U.S.C. 552 and 553, the NRC 1s adopting the following amendments to 10 CFR Parts 30, 40, 50, 70. and 72. PART 30 - RULES OF GENERAL APPLICABILITY TO DOMESTIC LICENSING OF BYPRODUCT MATERIAL

1. The authority citation for Part 30 continues to read as follows:

AUTHORITY: Secs. 81, 82, 161, 182, 183, 186, 68 Stat. 935, 948,

953, 954, 955, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 2111, 2112, 2201, 2232, 2233, 2236, 2282); secs. 201, as amended, 202, 206, 88 Stat.

1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846). Section 30.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 2951 (42 U.S.C. 5851). Section 30.34(b) also issued under sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234). Section 30.61 also issued under sec. 187, 68 Stat. 955 (42 U.S.C. 2237).

2.

In§ 30.8 paragraph {b) is revised to read as follows: § 30.8 Information collection requirements: 0MB approval. {b) The approved information collection requirements contained in this part appear in §§ 30.9, 30.11, 30.15, 30.19, 30.20, 30.32, 30.34, 30.35, 30.36, 30.37, 30.38, 30.50, 30.51, 30.55, 30.56, and Appendix A and 8.

3.

In § 30.35, the introductory text of paragraph (f)(2) 1s revised to read as follows: § 30.35 Financial assurance and recordkeeping for decommission1ng. 18

~ (f) (1) (2) A surety method, insurance, or other guarantee method. These methods guarantee that deconvnissioning costs will be paid. A surety method may be in the form of a surety bond, letter of credit, or line of credit. A parent company guarantee of funds for decommissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix A of this part. A parent company guarantee may not be used in combination with other financial methods to satisfy the requirements of this section. A guarantee of funds by the applicant or licensee for deconrnissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix B of this part. A guarantee by the applicant or licensee may not be used in combination with any other financial J .methods to satisfy the requirements of this section or in any situation where the applicant or licensee has a parent company holding majority control of the voting stock of the company. Any surety method or insurance used to provide financial assurance for deco11111issioning must conta1n the following conditions:

4. A new Appendix Bis added to Part 30 to read as follows:

Appendix B to Part 30 - Criteria Relating ta Use of financial Tests and Self Guarantees for Providing Reasonable Ass~rance of Funds for Decommissioning. I. Introduction 19

An applicant or licensee may provide reasonable assurance of the ava1lab1lity of funds for decommissioning based on furn1sh1ng its own guarantee that funds will be ava1lable for decommissioning costs and on a demonstration that the company passes the financial test of Sect1on II of this appendix. The terms of the self-guarantee are in Section III of this appendix. This appendix establishes criteria for passing the financial test for the self guarantee and establishes the terms for a self-guarantee. II. Financial Test A. To pass the financial test, a company must meet all of the follow1ng criteria: (1) Tangible net worth at least 10 times the total current decommissioning cost estimate {or the current amount required if certification is used) for all decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor. (2) Assets located in the United States amounting to at.least 90 percent of total assets or at least 10 times the total current decommissioning cost estimate (or the current amount required if certification is used) for all decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor. (3) A current rating for its most recent bond issuance of AAA, AA, or A as issued by Standard and Poors (S&P), or Aaa, Aa, or A as issued by Moodys. B. To pass the financial test, a company must meet all of the following additional requirements: (1) The company must have at least one class of equity securities registered under the Securities Exchange Act of 1934. 20

(2) The company's independent certified public accountant must have compared the data used by the company in the financial test which 1s derived from the independently audited, yearend financ1al statements for the latest fiscal year, with the amounts in such financial statement. In connection with that procedure, the licensee shall inform NRC within 90 day~ of any matters coming to the attentiJn of the auditor that cause the auditor to believe that the data specified in the financial test should be adjusted and that the company no longer passes the test. (3} After the initial financial test, the company must repeat passage of the test within 90 days after the close of each succeeding fiscal year. C. If the licensee no longer meets the requirements of Section II.A. of this appendix, the licensee must send inmediate notice to the Comission of its intent to establish alternate financial assurance as specified in the Coaraission's regulations within 120 days of such notice. III. Company Self-Guarantee The terms of a self-guarantee which an applicant or licensee furnishes must provide that: A. The guarantee will remain in force unless the licensee sends notice of cancellation by certified mail to the Comission. Cancellation may not occur, however, during the 120 days beginning on the date of receipt of the notice of cancellation by the Commission, as evidenced by the return receipt. B. The licensee shall provide alt~rnative financial assurance as specified in the Commission's regulations within 90 days follow1ng receipt by the Commission of a notice of cancellation of the guarantee. 21

C. The guarantee and financ1a1 test provisions must remain 1n effect until the Commission has terminated the license or until another financial assurance method acceptable to the Co11111ission has been put in effect by the licensee. D. The licensee will promptly-forward to the Commission and the licensee's independent auditor all reports covering the latest fiscal year filed by the licensee with the Securities and Exchange Corrmission pursuant to the requirements of Section 13 of the Securities and Exchange Act of 1934. E. If, at any time, the licensee's most recent bond issuance ceases to be rated in any category of "A" or above by either Standard and Poors or Moodys, the licensee will provide notice in writing of such fact to the Commission within 20 days after publication of the change by the rating service. If the licensee's most recent bond issuance ceases to be rated in any category of A or above by both Standard and Poors and Moodys, the licensee no longer meets the requirements of Section II.A. of this appendix. F. The applicant or licensee must provide to the Commission a written guarantee (a written conmitment by a corporate officer) which states that the licensee will fund and carry out the required decommissioning activities or, upon issuance of an order by the Commission, the licensee will set up and fund a trust in the amount of the current cost estimates for decommissioning. PART 40 - DOMESTIC LICENSING OF SOURCE MATERIAL

5.

The authority citation for Part 40 continues to read as follows: AUTHORITY: Secs. 62, 63, 64, 65, a1, 161, 182, 183, 186, 68 22

Stat. 932. 933. 935, 948, 953, 954, 955, as amended, secs. lle(2). 33, 84, Pub. -* 95-604. 92 Stat. 3033, as amended. 3039. sec. 234. 83 Stat. 444, as amended (42 U.S.C. 2014(e}(2), 2092, 2093, 2094, 2095, 2111, 2113. 2114, 2201, 2232. 2233, 2236, 2282); sec. 274, Pub. L. 86-373, 73 Stat. 688 (42 U.S.C. 2021); secs. 201, as amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 {42 U.S.C. 5841, 5842, 5846); sec. 275, 92 Stat. 3021, as amended by Pub. L. 97-415, 96 Stat. 2067 (42 U.S.C. 2022). Section 40.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 2951 (42 U.S.C. 5851). Section 40.3l(g) also issued under sec. 122, 68 Stat. 939 (42 U.S.C. 2152). Section 40.46 also issued under sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234). Section 40.71 also issued under sec. 1B7, 68 Stat. 955 (42 u.s.c. 2237).

6.

In§ 40.8 paragraph (b) is revised to read as follows: § 40.8 Information collection requirements: 0MB approval. (b) The approved information collection requirements contained in this part appear in§§ 40.25, 40.26, 40.31, 40.35, 40.36, 40.42, 40.43, 40.44, 40.60, 40.61, 40.64, 40.65, and Appendix A.

7.

In§ 40.36 the introductory text of paragraph (e)(2) is revised to read as follows: § 40.36 Financial assurance and recordkeeping for decommissioning. (e) 23

(2) A surety method. insurance, or other guarantee method. These methods guarantee that decommissioning costs will be paid. A surety method may be in the form of a surety bond, letter of credit, or line of credit. A parent company guarantee of funds for decommissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix A of 10 CFR Part 30. A parent company guarantee may 1ot be used in combination with other financial methods to satisfy the requirements of this section. A guarantee of funds by the applicant or licensee for decommissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix B of 10 CFR Part 30. A guarantee by the applicant or licensee may not be used in combination with any other financial methods to satisfy the requirements of this section or in any situation where the applicant or licensee has a parent company holding majority control of the voting stock of the company. Any surety method or insurance used to provide financial assurance for decommissioning must contain the following conditions: PART 50 - DOMESTIC LICENSING OF PRODUCTION AND UTILIZATION FACILITIES

8. The authority citation for Part 50 continues to read as follows:

AUTHORITY: Secs. 102, 103, 104, 105, 161, 182, 183, 186, 189, 68 Stat. 936, 937, 938, 948, 953, 954, 955, 956, as amended, set. 234, 83 Stat. 1244, as amended (42 U.S.C. 2132, 2133, 2134,. 2135, 2201, 2232, 2233, 2236, 2239, 2282); secs. 201, as amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 (42 u.s.c. 5841, 5842, 5846). 24

Section 50.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 2951 (42 U.S.C. 5851). Section 50.10 also issued under secs. 101, 185. 68 Stat. 936, 955, as amended (42 U.S.C. 2131, 2235); sec. 102, Pub. L. 91-190, 83 Stat. 853 (42 U.S.C. 4332). Sections 50.13, 50.54(dd), and 50.103 also issued under sec. 108, 68 Stat. 939; as amended (42 U.S.C. 2138). Sections 50.23, 50.35, 50.55, and 50.56 also issued under sec. 185, 68 Stat. 955 (42 U.S.C. 2235). Sections 50.33a, 50.55a and Appendix Q also issued under sec. 102, Pub. L. 91-190, 83 Stat. 853 (42 U.S.C. 4332). Sections 50.34 and 50.54 also issued under sec. 204, 88 Stat. 1245 (42 U.S.C. 5844). Sections 50.58, 50.91, and 50.92 also issued under Pub. L. 97-415, 96 Stat. 2073 (42 U.S.C. 2239). Section 50.78 also issued under sec. 122, 68 Stat. 939 (42 U.S.C. 2152). Sections 50.80 - 50.81 also issued under sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234). Appendix Falso issued under sec. 187, 68 Stat. 955 (42 U.S.C-2237).

9.

In§ 50.8 paragraph (b) is revised to read as follows: § 50.8 Infonnation collection requirements: 0MB approval. (b) The approved infonnat1on collection requirements contained in this part appear in§ § 50.30, 50.33, 50.33a, 50.34, 50.34a, 50.35, 50.36, 50.36a, 50.48, 50.49, 50.54, 50.55, 50.55a, 50.59, 50.60, 50.61, 50.63, 50.64, 50.65, 50.71, 50.72, 50.75, 50.80, 50.82, 50.90, 50.91, and Appendices A, B, E, G, H, I, J, K, M, N, 0, Q, and R.

10. In§ 50.75 the introductory text of paragraph (e)(l)(iii) and paragraph (e)(2)(iii) are revised to read as follows:

25

§ 50.75 Reporting and recordkeep1ng for decomm1ss1on1ng planning. (e) (1) {iii) A surety method, insurance, or other guarantee method. These methods guarantee that deconnissioning costs will be paid. A surety method may be in the form of a surety bond, letter of credit, or line of credit. Any surety method or insurance used to provide financial assurance for decotT111issioning must contain the following conditions: (2) {111) A surety method, insurance, or other guarantee method. A parent company guarantee of funds for deco11111issioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix A of 10 CFR Part 30. A parent company guarantee may not be used in combination with other financial methods to satisfy the requirements of this section. A guarantee of funds by the applicant or licensee for deco11111issioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix B of 10 CFR Part 30. A guarantee by the applicant or the licensee may not be used in combination with any other financial methods to satisfy the requirements of this section or in any ~ituation where the applicant or licensee has a parent company holding majority control of the voting stock of the company. 26

PART 70 - DOMESTIC LICENSING OF SPECIAL NUCLEAR MATERIAL

11. The authority citation for Part 70 continues to read as follows:

AUTHORITY: Secs. 51, 53, 161, 182, 183, 68 Stat. 929, 930, 948, 953, 954, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 2071, 2073, 2201, 2232, 2233, 2282); secs. 201, as amended, 202, 204, 206, 88 Stat. 1242, as amended, 1244, 1245, 1246 (42 U.S.C. 5841, 5842, 5845, 5846). Sections 70.l(c) and 70.ZOa(b) also issued under secs. 135, 141, Pub. L. 97-425, 96 Stat. 2232, 2241 (42 U.S.C. 10155, 10161). Section 70.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 2951 (42 U.S.C. 5851). Section 70.2l(g) also issued under sec. 122, 68 Stat. 939 (42 U.S.C. 2152). Section 70.31 also issued under sec. 57d, Pub. L. 93-377, 88 Stat. 475 (42 U.S.C. 2077). Sections 70.36 and 70.44 also issued under sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234). Section 70.61 also issued under secs. 186, 187, 58 Stat. 955 (42 U.S.C. 2236, 2237). Section 70.62 also issued under sec. 108, 68 Stat. 939, as amended (42 U.S.C. 2138).

12. In§ 70.25, the introductory text of paragraph (f)(2) is revised to read as follows:

§ 70.25 Financial assurance and recordkeeping for decommissioning. (f) 27

(2) A surety method, insurance, or other guarantee method. These methods guarantee that decommiss1on1ng costs w1ll be paid. A surety method may be in the form of a surety bond, letter of credit, or line of credit. A parent company guarantee of funds for deco11111issioning costs based on a financial test may be used if the guarantee and test are as contained.in Appendix A of 10 CFR Part 30. A parent company guarantee may not be used in combination with other financial methods to satisfy the requirements of this section. A guarantee of funds by the applicant or licensee for decommissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix B of 10 CFR Part 30. A guarantee by the applicant or the licensee may not be used in combination with any other financial methods to satisfy the requirements of this section or in any situation where the applicant or licensee has a parent company holding majority control of the voting stock of the company. Any surety method or insurance used to provide financial assurance for dec011111issioning must contain the f o 11 owing cond-i ti ans: PART 72 - LICENSING REQUIREMENTS FOR THE INDEPENDENT STORAGE OF SPENT NUCLEAR FUEL ANO HIGH-LEVEL RADIOACTIVE WASTE

13. The authority citation for Part 72 continues to read as follows:

AUTHORITY: Secs. 51, 53, 57, 62, 63, 65, 69, 81, 161. 182, 183, 184, 186, 187, 189, 68 Stat. 929, 930, 932, ~33, 934, 935, 948, 953, 954, 955, as amended, sec. 234, 83 Stat. 444, as amended {42 U.S.C. 2071, 2073, 2077, 2092, 2093, 2095, 2099, 2111, 2201, 2232, 2233, 2234, 2236, 2237, 2238, 2282); sec. 274, Pub. L. 86-373, 73 Stat. 688, as amended (42 U.S.C. 2021); sec. 201, as 28

amended. 202, 206, 88 Stat. 1242. as amended, 1244, 1246 (42 U.S.C. 5841. 5842, 5846); Pub. L. 95-601, sec. 10, 92 Stat. 2951 (42 U.S.C. 5851); sec. 102, Pub. L. 91-190, 83 Stat. 853 (42 U.S.C. 4332); Secs. 131, 132, 133, 135, 137, 141, Pub. L. 97-425, 96 Stat. 2229, 2230, 2232, 2241, sec. 148, Pub. L. 100-203, 101 Stat. 1330-235 (42 U.S.C. 10151, 10152, 10153, 10155, 10157, 10161, 10168). Section 72.44(g) also issued under secs. 142(b) and 148(c), (d), Pub. L. 100-203, 101 Stat. 1330-232, 1330-236 (42 U.S.C. 10162(b), 10168(c}, (d)). Section 72.46 also issued under sec. 189, 68 Stat. 955 (42 U.S.C. 2239); sec. 134, Pub. L. 97-425, 96 Stat. 2230 (42 U.S.C. 10154). Section 72.96(d) also issued under sec. 145(g), Pub. L. 100-203, 101 Stat. 1330-235 (42 U.S.C. 10165(g)). Subpart J also issued under secs. 2(2), 2(15), 2(19), 117(a), 14l(h}, Pub. L. 97-425, *95 Stat. 2202, 2203, 2204, 2222, 2244 (42 U.S.C. 10101, 10137(a), 1016l(h)}. Subparts Kand Lare also issued under sec. 133, 98 Stat. 2230 (42 U.S.C. 10153) and sec. 218(a), 96 Stat. 2252 (42 U.S.C * .

• 10!98)...

15. In§ 72.30 the introductory text of paragraph (c){2) is revised to read as follows:

§ 72.30 Decommissioning Planning including financing and recordkeeping. (c) (2) A surety method, insurance, or other guarantee method. These methods guarantee that decommissioning ~osts.will be paid. A surety method may be in the form of a surety bond, letter of credit, or line of credit. A parent company guarantee of funds for decommissioning costs based on a financial test may be used if the guarantee and test are as contained in 29

Appendix A of 10 CFR Part 30. A parent company guarantee may not be used in combination with other financial methods to satisfy the requirements of this section. A guarantee of funds by the applicant or licensee for deconunissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix B of 10 CFR Part 30. A guarantee by the applicant or the licensee may not be used in combination with any other financial methods to satisfy the requirements of this section or in any situation where the applicant or licensee has a parent company holding majority control of the voting stock of the company. Any surety method or insurance used to provide financial assurance for deconmissioning must contain the following conditions: Dated at Rockville, Maryland, thi~~day of December I 1993. Regulatory Commission. 30

~' WHITEHEAD Dr. Gerald R. Fink Director John Pratt Associate Director 61 7/ 258-5104 Secretary INSTITUTE U.S. Nuclear Regulatory-Commission Washington, DC 20555

Dear Sir:

December 6, 1993

• ' r:. ~
• I

'j :,l'-;t*J.,

• 93 OEC i O P 2 :4 7 Jl,Ki.

This letter offers comment on the proposed revision to 10 CFR Part 30 regarding self-guarantee for financial assurance for costs of decommissioning licensed facilities. Under current regulations, self-guarantees may only be made by parent organizations. Under the proposed revision, companies with assets in excess of $1 billion could also provide self-guarantees. There are also other requirements that indicate the revision is aimed at companies and does not recognize the fact that many licensees are non-profit research institutions or universities with endowments of considerable size when compared to the amount needed for decommissioning. The Whitehead Institute is a non-profit independent research institute. Under the NRC rules, it must provide a fmancial assurance for $150,000. The Institute has invested unrestricted capital acting as endowment of $149 million. Under the rules, it cannot offer a self-guarantee. It is taking six months of effort plus ongoing annual fees to secure a standby letter of credit to satisfy the current financial assurance requirements. 1be fact that NRC regulations do not allow an organization with $149 million of unrestricted invested assets to guarantee the availability of $150,000 seems unreasonable. It is suggested that holders of licenses under 10 CFR Part 30 be allowed to offer self-guarantees if they have unrestricted liquid assets in an amount several times (such as 10 times) the decommissioning costs. s,7~ ~Pratt Whitehead Institute for Biomedical Research / Nine Cambridge Center, Cambridge, MA 02142-1479 617 / 258-5000 FAX 617 / 258-6294

U.S. tJCLE'*R R::G~iLA.TC,lY cm.!MISSION DOC*':1 * ', Z. ~::_;;'J'C*: SECT10N OF:-,G_ F I hi: SE(;EETAr!Y ~p:es, Addi e,o~ Special c. OF 1H:: CO.l:.;1SS ON '£ /6_1~ --- I h;f:YJf) iZ_ L ..fu<..J-.<,,

DOCKET NUMBER O PROPOSED RULE Pl ~ oJ! 7 o ;--i1- {_ 5 ~ FP.* 3S 1 SJ NUCLEAR METALS, INC. Secretary U. s. Nuclear Regulatory Commission Washington, D.C. Attention: Docketing and Service Branch

• 93 nPR 14 P3 :23 I

Re: Proposed Rule for Self-Guarantee as an Additional Financial Assurance Mechanism, RIN3150-AE16, 58 Fed. Reg. 3515 {January 11, 1993)

Dear Secretary:

Contained herein are the comments of Nuclear Metals, Inc. ("NMI") to the above-referenced proposed rule. NMI is a holder of two Nuclear Regulatory Commission (the "Commission" or "NRC") licenses. SMB-179 and SUB-1452. Pursuant to 10 CFR S40.36(3)(2), NMI presently provides financial assurance for decommissioning costs by means of a trust funded with an irrevocable letter of credit issued by State Street Bank & Trust Company. The rule, as proposed, is contrary to the policy of the United States, as stated in the Atomic Energy Act (42 USC 2011, et seq.), stifles entrepreneurial energy and places United States enterprises at a material disadvantage in competing in global markets. The Atomic Energy Act states: "It is therefore declared to be the policy of the United States that - **** (b) the development, use, and control of atomic energy shall be directed so as to promote worl d peace, include the general welfare, increase the standard of living, and strengthen free competition in private enterprise." (§2011). Congress has stated that the purpose of the law is to effectuate those policies by, inter alia, "a program of conducting, assisting and fostering research and development in order to encourage maximum scient ific and industrial policy (§2013(a)). More specifically, NMI comments as follows with respect to the proposed regulations:

SUMMARY

POINTS.

1.

Continuing operations should not be treated in the same way as facilities with a limited deterininable useful life. Where decommissioning is in the indefinite future, self-guarantee by financially healthy companies is the appropriate method of providing assurance. United States enterprises should not bear substantial and unnecessary financial burdens not carried by their foreign competitors. IAY 111993 Acknowledged by card......... 2229 Main Street, Concord, Massachusetts 017 42 (508) 369-5410

\\tS. t*!UCl.r'.!,q Fi'.;GlJLATORY COMMISSJm, DC(,:,'f.:*:'lfJO & SERVICE SECTION cr:;*iCE OF THI: SECRETARY OF THE COMMISSION

f.

Secretary

u. s. Nuclear Regulatory Commission April 13, 1993 Page 2

2.

Smaller companies, such as NMI, are put at competitive disadvantage by a proposed regulation which specifically provides regulatory relief to large companies only.

3.

The financial strength required for a self-guarantee should be proportionate to the size and complexity of the facility, not one size fits all.

4.

There is no justification for requiring a different much higher measure of financial strength for a self-guarantee as opposed to a parent company guarantee. Companies such as NMI should not have an incentive to restructure into a parent holding company and subsidiary licensee in order to bring themselves within the parent company structure and avoid the more onerous requirements for a self-guarantee.

s.

Bond ratings by Moodys and Standard Poors are applicable only to companies with public debt issues, and even in those cases can be misleading. Financial ratios derived from audited financial statements are a better measure of financial strength.

6.

Other funding sources should be taken into account. COMMENTARY

1. Continuing Operations vs. Determinable Life Facilities -

Global Competitiveness. Industrial companies whose operations are expected to continue indefinitely should be treated differently than licensees whose facilities have a determinable useful life and for whom decommissioning is a near term certainty. Business to be responsible must conduct itself as a business that is functioning, not as a business that is going out of business. An industrial facility, such as NMI, contemplates continuing in existence as a licensee into the indefinite future. Its plant is continually being modernized by the disposition of outdated equipment and the installation of newer replacements. An industrial plant, such as NMI, is not a single aging asset inexorably moving towards the end of a useful life and an inevitable requirement of decommissioning, but a continually evolving continually renewed production facility. Where there is no reason to contemplate decommissioning as a near term requirement, a financially strong company, such as NMI, should be allowed to provide its own guarantee of funding availability, and not be burdened with excess financial assurance costs. NRC licensees compete in a world market against aggressive foreign competitors, many of whom are government owned or financed. NMI and other NRC licensees willingly bear the cost of maintaining the world's best safety record in the handling of such materials, but

Secretary

u. S. Nuclear Regulatory Commission April 13, 1993 Page 3 should not have their global competitiveness undercut by a substantial new financial burden. To require an ongoing industrial enterprise, which has no contemplation of decommissioning in the foreseeable future, nevertheless to provide current funding for those distant financial burdens is to impose a regulatory financial burden which few companies could bear and remain competitive.

Start-up operations would be affected even more seriously. It is almost unimaginable to fund a start-up business, and, at the same time, begin to fund its eventual termination.

2.

Small Company Disadvantage. The proposed rule penalizes small companies, whose entrepreneurial energy generates most new jobs in the United States economy. This point was underscored in a speech by President Clinton to the nation's mayors. It is up to start-up and entrepreneurial companies to create a cutting edge of change in the economy. The Commission should not adopt a rule which penalizes small companies by providing relief from a financially burdensome requirement only to very large companies. The proposed rule also raises concerns as to the Regulatory Flexibility Certification. NMI bel ieves that the Commission has prematurely certified that the "proposed rule will not have a significant impact on the substantial number of small entities 11 pursuant to 5 u.s.c. §605(b). In fact, since the proposed rule can benefit "only entities with a tangible net worth of $1 billion, 11 it is clear that the proposed rule creates a competitive disadvantage for all smaller licensees. Both Congress and Federal Courts have recognized that the Regulatory Flexibility Act ( "RFA 11 ), 5 U.s.c. SS601-621 mandates that agencies formulate rules so as to make compliance less burdensome for small entities. See, ~-, Mid-Tex Electric Cooperative, Inc. v. Federal Energy Regul atory Commission, 773 F. 2d 327, 342 (D.C. Cir. 1985); Small Refiner Lead Phase-Down Task Force

v. Environmental Protection Agency, 705 F. 2d 506, 637 (D.C. Cir.

1983); Puhl. L. No. 96-354, S2, 94 Stat. 1164 (September 19, 1980);

s. Ref. No. 878, 96th Cong., 2d Sess. 3, reprinted in 1980 U.S.

Cong. & Ad. News 2788, 2790. Proposed regulations cannot result in placing disproportionately burdensome demands, including legal, accounting, and consulting costs upon small business. (Mid-Tex Electric Cooperative, Inc., 773 F.2d at 341). It is precisely the anti-competitive affect of the proposed rule that the RFA is intended to prevent. As stated by the court in Mid-Tex Electric Cooperative, Inc.: Congress viewed those costs as relatively more burdensome to small businesses that their larger counterparts and believed that this disproportion could have anti-competitive effects. (I.e. 773 F.2d at 342).

Secretary

u. s. Nuclear Regulatory Commission April 13, 1993 Page 4 The Commission should not adopt a proposed rule that results in unfair competitive advantage for larger licensees.

The regulation will continue to require all licensees, regardless of size, to provide a decommissioning financial assurance mechanism. Specifically, a self-guarantee directed only towards larger licensees will permit them to lower their overhead and thereby gain a competitive advantage over small licensees. Clearly, the Commission does not intend such a result. 3

• Financial Strength.

With respect to a requirement of net worth of at least $1 billion, it is not at all clear why the proposed rule contains this requirement. The Commission staff's "Regulatory Analysis of Decommissioning Financial Assurance Self-Guarantee Option for Materials Licensees," dated November 3, 1992, did not seem to find any basis to distinguish between financially strong licensees based upon a $1 billion net worth. An arbitrarily high net worth requirement discriminates against smaller companies, who tend to have smaller and less complex facilities. The financial strength required for a self-guarantee should be proportionate to the size and complexity of the decommissioning project.

4.

Parent Guarantee v. Self-Guarantee. A guarantee by a parent corporation and a self-guarantee by a single integrated enterprise serve essentially the same purpose in essentially the same way, and should not have radically different threshold requirements. By requiring a $1 billion net worth for self-guarantee and a $10 million net worth for a parent company guarantee, the Commission creates an incentive for restructuring of corporations into holding companies with subsidiary licensees. In fact, this counterproductive incentive in the existing regulations (which do not permit self-guarantee at all) is, in part, what precipitated the petition for rulemaking in the first place.

5.

Measuring Financial Strength. Somewhat more complicated, but no less problematic, is the requirement of a bond rating. Bond ratings are not an appropriate measure of financial strength. NMI is a financially strong company which has issued publicly traded equity but not publicly traded debt. NMI's financial strength is reflected in its ability to borrow from State Street Bank & Trust Company on an unsecured basis at the prime rate, thereby obviating any need to incur the additional costs of issuing publicly traded debt. The requirement of a bond rating unintentionally discriminates against licensees based upon mere capital structure. It creates a perverse incentive for a company to leverage itself with publicly traded debt as opposed to raising capital through equity and favorable commercial lines of credit. Further, bond ratings can be misleading. A bond ratings agency rates bonds, not companies.

Secretary

u. s. Nuclear Regulatory Commission April 8, 1993 Page 5 When an issuer backs its bonds with a credit or structural enhancement, Moodys or Standard & Poors may give a rating to the bonds higher than would be justified by the issuer's actual overall strength. The existence of rated bonds may reduce the availability of a licensee's assets for decommi ssioning.

Thus, there is not necessarily a relationship between high bond rating and adequate strength for guarantee purposes. Rather, NMI believes that the best indicator is the audited year end financial statement. In corporations such as NMI, the balance sheets re reflect numerous indicia of financial strength, such as debt to net worth ratio, debt to equity ratio, and current ratio. The Commission can use these and other standard financial ratios to determine the ability of a corporation to self-guarantee its decommissioning liability. Thus, the financial statements will provide a better basis for analyzing each licensee's ability to self-guarantee in relation to the amount of its decommissioning costs. Again, this particular requirement needlessly discriminates against smaller licensees, who are simply not of the size to issue publicly traded and rated bonds.

6.

Other Funding Sources Should be Taken into Account. The financial assurance requirements should take into account the availability of other funding sources. For example, licensees who work under contract for the government may have the right to pass on to the government a portion of prospective decommissioning costs. Companies in the private sector may have a contractual right of indemnification from their customers for a portion of such costs. Some licensees may have insurance to cover some or all of the costs. To the extent that these claims exist against financially strong entities, the financial assurance standard should be measured only against the remaining net decommissioning cost to be borne by the licensee. CONCLUSION. For the foregoing reasons, the Commission should adopt the proposed rule without the $1 billion net worth and bond rating requirements

• The rule should be based on a review of the soundness of licensees audited financial statements as the principal indicator of financial strength.

Continuing operations of financially sound entities should not require expensive third party funding assurance. Small licensees and start-up operations should not be disadvantaged or discouraged, since they are the engines of job growth in the economy. Even for larger companies, increases in the cost of doing business generally are recognized as harmful to the nation, and to the economy.

Secretary

u. s. Nuclear Regulatory Commission April 13, 1993 Page 6 Further, the degree of financial strength required should be reasonably related to the anticipated decommissioning liability.

Other sources of funds and indemnification available to the licensee should be taken into account. TAW/4096 Thank you for your consideration of these views. Very truly yours, NUCLEAR METALS, INC. By : ~ ............... ~ Alden R. l man, Vice Presi dent, Health/Safety

DOCKET NUMBER -"'i PROPOSED RULE PR 3 a- -o s oJ 1 /} ;-.., 71.., CN.L DOCKE TED ( 5e--FF-3SI G) USNr{C Carolina Power & Light Company MAR 3 o 1993

• 93 flPR -9 A10 :0 1 United States Nuclear Regulatory Commission ATTENTION:

Document Control Desk Washington, DC 20555 r r*1c* '._,;y-H. B. ROBINSON STEAM ELECTRIC PLANT, UNIT NO. 2 DOCKET NO. 50-261/LICENSE NO. DPR-23 SHEARON HARRIS NUCLEAR POWER PLANT DOCKET NO. 50-400/LICENSE NO. NPF-63 BRUNSWICK STEAM ELECTRIC PLANT, UNIT NOS. 1 AND 2 SERIAL: NLS-93-090 -:r-* 1* DOCKET NOS. 50-325 AND 50-324/LICENSE NOS. DPR-71 AND DPR-62 FEDERAL REGISTER, PAGE 3515, JANUARY 11, 1993, "SELF-GUARANTEE AS AN ADDITIONAL FINANCIAL ASSURANCE MECHANISM" Gentlemen:

REFERENCE:

Federal Register, Page 4099, January 13, 1993, "'I*imeliness in Decommissioning of Materials Facilities" Carolina Power & Light Company (CP&L) is pleased to submit this response to the petition for rulemaking information provided in the Federal Register, page 3515, January 11, 1993, titled, "Self-Guarantee as an Additional Financial Assurance Mechanism," and to the draft Regulatory Analysis for the proposed rule. Though we understand that electric utility reactor licensees under 10 CFR Part 50 will not be affected by the proposals in the petition, we take exception to the petition, as discussed in the attachment. In addition, we are concerned that the proposed rule changes could indirectly influence our future financial resources in certain cases. Licensees who wish to adopt current rules should be allowed that decision. The decision by the NRC to not allow certain licensees to adopt rules that are available to other licensees was not based upon strong technical information. The Regulatory Analysis provides such reasons for exempting utilities to participate as: higher decommissioning costs, alter balance of costs, and different financial characteristics. These reasons do not indicate a technical basis for the exemption, especially when the utilities analyzed were able to comply with self-assurance requirements in the $200 million category. The NRC should provide a much stronger rationale for exempting utilities the option of self-assurance or allow them to determine if they elect the self-assurance option. Acknowfedged b ca~ MAY 11 19~ y d................................,. 411 Fayetteville Street

• P. 0. Box 1551
• Raleigh, N. C. 27602 (1969GLU)

i.- i-iU;:'.:.t:.*, i '.CGULA:JRY COW.J!SS!Oi'f o;.~. *:,;f *: :;.;s ::. ~rnv:c!: fiEcT,~N li:-: *.~f: Of 1~i:: :.iC:CPETAii'/ Cr, ~E <,m.it~:1.;s*oN

Document Control Desk NLS 090 / Page 2 Further comments are included in the attachment. If more information is needed, please contact Mr. Fred Emerson at (919) 546-7573. J:Jrtrul David c. McCarthy Manager Nuclear Licensing Section JHH/jbw Attachment cc: Mr. s. D. Ebneter Mr. L. w. Garner Mr. N. B. Le Mr. P. D. Milano Ms. B. L. Mozafari Mr. R. L. Prevatte Mr. J. E. Tedrow (1969GLU)

GENERAL COMMENT

S ATTACHMENT TO SERIAL: HLS-93-090 Page 1 of 5 Though the petition does not directly affect 10 CFR Part SO licensees, such licensees could be impacted by the inability of other licensees to decommission their facilities. Regulations must assure that facilities are properly decommissioned by the company operating the facility, and that the burden of decommissioning costs does not fall on other members of the nuclear industry or other independent parties. It is possible that such a burden could result when a facility is taken over by another company (foreign or domestic), or a company determines to discontinue operations for financial reasons. SPECIFIC PETITION COMMENTS

1.

"The petitioners proposed that electric utility reactor licensees under 10 CFR Part 50 not be affected by the proposals in the petition." The NRC's response was that utilities already are permitted a cost-reducing financial assurance mechanism through external sinking funds. Carolina Power & Light Company takes exception to this proposal. Electric utility reactor licensees should be allowed to select the same decommissioning options as those afforded other companies within the nuclear industry. Utilities should be allowed to determine the most effective and efficient process to assure that decommissioning funds are available. Electric utility companies that can comply with the requirements in the Code of Federal Regulations and select a decommissioning option should be allowed to adopt that option. In addition, utilities would share in saving the minimum $600,000, third-party cost, annually (as specified in the Regulatory Analysis) if they were allowed to self-guarantee. Consideration should be given to allowing similar-sized business entities in the same industry the same choice.

2.

"The self-guarantee would be available only for an applicant or licensee having no parent company holding majority control of its voting stock." Carolina Power & Light Company agrees with this requirement and that it should be included in the regulation. This requirement will help to guarantee the independence needed to make operating and other business decisions that are influenced by the unique requirements of the nuclear industry. (1969GLU)

ATTACHMENT TO SERIAL : NLS-93-090 Page 2 of 5

3.

"Self-guarantee should not be allowed because of the potential for takeover and breakup of large companies." The NRC believes the requirements for annual recertification, combined with timely bond rating, will maintain the level of financial assurance of the self-guarantee. Federal Register, page 4100, January 13, 1993, "Timeliness in Decommissioning of Materials Facilities," background section states: "If decommissioning is delayed for long periods following cessation of operations, there is a risk that safety practices at the inactive facility or the inactive portion of the operating facility may become lax as key personnel relocate and management interests wane. In addition, bankruptcy, corporate takeover, or other unforeseen changes in the company's financial status may complicate and perhaps further delay decommissioning." Carolina Power & Light Company believes that regulations should take this scenario into consideration. The NRC has little recourse, after the fact, if a licensee shuts down, goes out of business, and does not volunteer to perform proper decommissioning activities. Companies are required to provide an annual submittal of financial stability; however, there is no stated process the NRC must complete to assure that these submittals are reviewed and, as necessary, acted upon. The self-guarantee is a promise by the company to provide the funds needed to complete decommissioning; the proposed rule allows that no monies will be required to be put aside. This promise to carry out the necessary financial activities when needed, in effect, is the guarantee for decommissioning that the NRC is relying upon for a clean site.

4.

"The Commission is especially interested in public comment on this alternative financial criteria--the criteria in this proposed rule without the $1 billion tangible net worth requirement." Carolina Power & Light Company believes that, if the other criteria are maintained (tangible net worth at least 10 times the total current decommissioning cost estimate; assets located in the United States amounting to at least 90 percent of total assets or 10 times the total decommissioning costs; and a current rating for its most recent bond issue of AAA, AA, or A), the $1 billion tangible net worth requirement should not be necessary. (1969GLU)

ATTACHMENT TO SERIAL : NLS-93-090 Page 3 of 5 SPECIFIC REGULATORY ANALYSIS COMMENTS

1.

The analysis introduction background section states: "The U.S. Nuclear Regulatory Commission (NRC) has accepted a petition to amend the current regulations establishing general requirements for decommissioning licensee facilities to allow certain NRC non-electric utility reactor licensees to self-guarantee decommissioning funding costs **** " The executive summary of the analysis states: "The petition argues, specifically, that self-guarantees provided by NRC materials licensees under 10 CFR Parts 30, 40, 70, and 72 who can pass the financial test proposed in the Petition Carolina Power & Light Company takes exception to electric utility companies being excluded. Electric utility reactor licensees should be allowed to select the same decommissioning options as those afforded other companies within the nuclear industry. Utilities should be allowed to determine the most effective and efficient process to assure that decommissioning funds are available. Electric utility companies that can comply with the requirements in the Code of Federal Regulations and select a decommissioning option should be allowed to adopt that option.

2.

The introduction, Section 3: Analysis of Options, subsection 3.1: Methodology, Assurance Risk states: "In the case of self-guarantees, the granter is not required to set aside funds or obtain a third-party guarantee if it can demonstrate by means of a financial test that its financial resources are sufficient to pay the assured costs whenever those costs come due. Thus, for self-guarantees, the assurance risk equals the possibility that the licensee will be unable to meet the required obligations. In other words, the assurance provided by a self-guarantee is exposed to the risk that a decline in the financial condition of the self-guarantor will not be identified in time so that a prepayment or third-party financial assurance mechanism can be obtained to replace the self-guarantee." Carolina Power & Light Company reviewed the analysis for this scenario and noted that, with the conditions to qualify for self-guarantee being met, there was little possibility of financial default. The results of this section of the analysis further strengthen justification for allowing electric utilities to consider the option of self-guarantee. (1969GLU)

ATTACHMENT TO SERIAL: NLS-93-090 Page 4 of 5

3.

Section 5: "Implications for Other NRC Regulatory Programs" states: "Currently self-guarantees are not allowed in NRC's financial assurance programs for low-level radioactive waste disposal facilities, uranium recovery facilities or for power reactors. While much of the analysis behind the proposed self-guarantee rulemaking may be generally applicable to these other programs, l icensees in these programs may also be significantly different from materials licensees in at least three ways: (l) decommissioning costs may be higher *** (2) the number of licensees is likely to be smaller and could alter the balance between public and private costs (3) different financia l characteristics *** Because the present analysis, for the reasons stated above, may not fully apply to NRC's other financial assurance programs, NRC is not proposing a self-guarantee option for these programs at the present time." In reviewing the analysis, CP&L noted that although utilities were exempt from being allowed to use the self-assurance options, 50 utilities were selected to be analyzed as stated below: The Estimated Availability of Proposed Self-Guarantee section states: "Data on almost 250 licensees under 10 CFR Parts 30, 40, 70, and 72 were included in the database, along with data on almost 50 licensees under 10 CFR Part 50." Section 4.1: Development of Financial Database includes: at Step 4: Add firm names and financial data for NRC licensees under 10 CFR Part SO. Step 4 criteria included the sample of firms so that "data for these firms can be analyzed separately in the database to allow comparisons with licensees under Parts 30, 40 70, and 72. This process added 46 firms to the database. at Step 8: Enter data on decommissioning costs. Step 8 included a decommissioning cost of twenty million dollars was included because it is the highest cost estimate in any submission reviewed to date. The last two possibilities $50,000,000 and $200,000,000, were used to account for 10 CFR Part 50 licensees, who may face higher obligations than licensees under Parts 30, 40,70, and 72." It was further noted by CP&L that, in reviewing the exhibits or tables using varying criteria for comparisons, if a licensee has both a Part 50 license and a Part 30, 40, 70, and 72 license, the licensee is listed under the Part 30, 40, 70, and 72 category. This resulted in only 37 of the 50 selected utilities being analyzed as Part 50 licensees, with the other 13 utilities being combined with Part 30, 40, 70, and 72 analysis. (1969GLU)

IN

SUMMARY

ATTACHMENT TO SERIALS NLS-93-090 Page 5 of 5 The Regulatory Analysis exhibits or tables used in the varying decommissioning cost analyses indicated that a substantial number of utilities, that had been selected, could meet the specified criterion, even at the $200 million level. The analysis performed and results available indicate the electric utilities analyzed can meet several decommissioning options, especially the self-guarantee option. Therefore, the NRC should amend the petition to allow electric utilities the option of selecting self-guarantee of decommissioning funds. (1969GLU)

DOCKET NUMBER PRO ED RULE PR 3 o /~0Jso1 7 o tf F Je.3S ts) R ISK M ANAGEMENT AND S AFETY PH ONE 219/63 1 - 5037 J,i,'. 6 3 I -8 7 9 4 -93 APR -1 P 3 :15 Secretary U N IV E R S I TY OF N OT R E D A M E 122 CAMPUS SECURITY B UI'!,U I NG NOT R E D I .. 1,..,1'\\c

AME, NDIANA 465 56-56 7 t, March 28, 1993 U.S. Nuclear Regulatory Commission ATTN:

Docketing and Service Branch Washington, D.C. 20555

Dear Secretary,

In response to the proposed rule regarding Self-Guarantee as an Additional Financial Assurance Mechanism, the University of Notre Dame is very much in favor of this rul e with a few changes. As it reads now, no College or University could meet all the financial test criteria, which may have been the intent originally. The University of Notre Dame meets all financial requirements except for II, B. (1) which requires a company to have at l east one class of equity securities registered under the Securities Exchange Act of 1934. As you are aware very few if any Colleges and Universities could meet this requirement. Regarding item II. A. (1), tangible net worth of at least $1 billion., the University of Notre Dame just recently met this requirement. However, many colleges and schools, who have been in existence as long as or longer than Notre Dame, woul d not be able to satisfy the financial test. It is our hope that consideration be given for deleting the equity securities requirement for certain classes of licensees, such as Colleges and Universities, and lower the tangible net worth requirement to $500 million from $1 billion. Most Colleges and Universities have been in existence for 100 plus years and are more financially stable than many volatile for-profit companies. Also, many of us have already met EPA's financial assurance regulation for hazardous waste facilities and underground storage tanks which allows self-guarantee. MAY 1 11993 --- Acknowledged by card.................................. y

as. NUCLEAR nEGULATORY COMMISStOA OOCKETLNG & SERVICE SECTION Off-ICE OF THE SECRETARY OF THE COMMISSION Document Statistics Postrna*1, D~t 3 I~/°! J Cop * -: ;:.:.. * '.' _.. _ _ / AcY* _:::-, :.: * ~- : _L ____ _ Sp.:~;::: J:~:.:.i:.~i:n i:tO>;;.P.f2fi_~*-- pCt* hA.

Secretary March 28, 1993 Page 2 By allowing less stringent financial criteria, several Colleges and universities would be able to self-guarantee their financial assurance requirement and significantly reduce their costs in establishing and paying fees to maintain their decommissioning fund. Thank you for the opportunity to comment on this proposed rule. RMZ/mcn Sincerely, t/,J 'n/, r-- Robert M. Zerr Director Risk Management & Safety Radiation Safety Officer

LJI.Jvf\\C: I NUMtst:H PROPOSED RULE PR 3t>*~ Ljt?.., so..) 70 rf-72. (SrFR.3515_:> ECKERT SEAMANS CHERIN & MELLOTT BARTON Z. COW AN (412) 566-6029 Secretary U.S. Nuclear Regulatory Commission Washington, DC 20555 Attn: Docketing and Service Branch

Dear Sir:

ATI'ORNEYS AT LAW 42ND FLOOR 600 GRANT STREET PfITSBURGH, PA 15219 (4U) 566-6000 FACSIMILE (412) ~ TELEX 866172 March 29, 1993

• 93

~~. 31 p 4 *.1 0 The attached comments are submitted on behalf of Westinghouse Electric Corporation in response to the Commission's invitation to comment on the proposed rule on "Self-Guarantee as an Additional Financial Assurance Mechanism" (58 Fed.Reg. 3515, January 11, 1993). Westinghouse urges the Commission to expeditiously conclude this rulemaking. BZC/seh Attachment Very truly yours, MAY 1 J 1~Q3~* Acknowledged by card.................................. PITTSBURGH

• HARRISBURG
• ALLENTOWN
• PHILADELPHIA
• BOSTON BUFFALO
• FORT LAUDERDALE
• WEST PALM BEAOI
• WASHINGTON, D.C.

I.S. NlJCL f...,;, -iEGUt..ATORY COMMISSIOr. DOf.KE ftNG & SERVICE SECTION cr~-:ce OF THE SECRETARY OF THE COMMISSION Document Statistics Po:;t~~~!- ll!ite 3 /;_q /~3 Cc(, *',,, d / Ad;_..*>-'... : *:-*---~~-~J _J __ -= Spccal D.::tii: j!Nf) Jf;I- 05. PD (Z 1/J 7 ~ f'NC h4.aL

COMMENTS OF WESTINGHOUSE ELECTRIC CORPORATION REGARDING THE PROPOSED RULE ON SELF-GUARANTEE AS AN ADDITIONAL FINANCIAL ASSURANCE MECHANISM March 29, 1993 Westinghouse Electric Corporation ("Westinghouse") submits the following comments in response to the Commission's invitation included in the notice of proposed rulemaking on "Self-guarantee as an Additional Financial Assurance Mechanism" (58 Fed. Reg. 3515, January 11, 1993). Westinghouse respectfully urges the Commission to adopt the proposed rule, with the modifications suggested below, and thereby amend the decommissioning funding regulations in 10 C.F.R. parts 30, 40, 50, 70, and 72 so as to permit self-guarantee of decommissioning funding by financially strong licensees. In support of its decision to initiate the present rulemaking, the Commission acknowledged that use of a self-guarantee to assure the availability of funds for decommissioning would result in a significant cost savings to licensees. The Commission also recognized the anomaly of the current regulatory scheme which permits a large, financially strong company to provide financial assurance by a parent company guarantee, but does not allow the same entity to self-guarantee decommissioning funding. Finally, the commission noted that the EPA, for more than 10 years, has allowed the use of self-guarantees to assure adequate funds for decommissioning hazardous waste facilities, and has found the self-guarantee to be an effective financial assurance mechanism. 58 Fed. Reg. at 3517-18. As made clear both by the Commission's comments in the notice of proposed rulemaking and by the positive comments of others submitted in support of the concept of self-guarantee, it is eminently sensible to allow the use of a self-guarantee as a mechanism for financial assurance. With the application of appropriate criteria to insure that the self-guarantor is financially strong, a self-guarantee will provide a reasonable assurance of the availability of funds for decommissioning. Thus, the crux of the matter is the requisite stringency of the financial criteria for self-guarantee. Several commenters, while endorsing the concept of self-guarantee, persuasively argue that the proposed rule imposes unduly stringent financial criteria. The Commission has expressed special interest in evaluating, and receiving public comments on, alternative financial criteria that would permit more extensive use of the self-guarantee, yet maintain a high level of financial assurance (58 Fed. Reg. at 3517). As set forth in detail below, Westinghouse supports a change in the financial criteria for self-guarantee from the criteria suggested in the proposed rule. Westinghouse believes that a final rule incorporating the change discussed below will advance the dual goals of allowing for more extensive use of self-guarantee while maintaining an appropriate high level of financial assurance. Westinghouse began the instant rulemaking by a petition (PRM-30-59) filed jointly with the General Electric Company ("GE") in 1991. The rule proposed in the joint petition included a proposed test for the financial strength required of a licensee to permit a self-guarantee of decommissioning funding. The proposed financial test, in tum, included as one of its criteria a minimum bond rating of A as issued by Standard & Poor's or Moody's. That criteria was different from the criteria of a minimum bond rating of BBB contained in the Commission's parent company guarantee rule and in the EPA rule. After further consideration, Westinghouse believes that the minimum bond rating of A is unnecessarily stringent and unduly limits the utility of the self-guarantee both as a means to provide effective assurance of the availability of funds for decommissioning and as a way to avoid significant, and unnecessary, regulatory costs. Instead, Westinghouse now proposes that the Standard & Poor's bond rating of BBB (or Moody's equivalent rating, Baa) be adopted as the minimum acceptable bond rating to be made part of the financial test. 1 BBB is an investment-grade rating under the standards of both Standard & Poor's and Moody's. Many substantial, financially solid companies have BBB bond ratings. 2 Only if bond ratings fall below BBB (or for Moody's, Baa) does either rating service grade the bonds as speculative. Thus, a rating of BBB is a meaningful indicator that the company is investment worthy. The BBB rating not only has served the financial 1 In 1990, prior to submitting its petition for rulemaking with GE, Westinghouse applied for an exemption from the NRC's requirements for financial assurance of decommissioning funding on the basis of a proposed submission of a self-guarantee meeting the financial test for parent company guarantees under 10 CFR part 30, Appendix A. In its application for exemption, Westinghouse demonstrated that it met the test of financial strength set forth in section 11.A.2 of Appendix A (see Exh. 3 to application for exemption). Since a minimum bond rating of BBB is one of the standards of financial strength in the 11.A.2 test, Westinghouse's endorsement of BBB in these comments is consistent with its original position on the issue of self-guarantee as an acceptable mechanism for financial assurance. 2 Fortune 500 companies with BBB bond ratings, include, as of October 21, 1992, The Black & Decker Corporation, The B. F. Goodrich Company, W.R. Grace & Co., Levi Strauss & Co., Marriott Corporation, Maytag Corporation, RJR Nabisco Holdings Corp., Scott Paper Company, Teledyne Inc., Tenneco Inc., Textron Inc., Time Warner Inc., Union Carbide Corporation, and USX Corporation. Westinghouse was included in this category as of March 9, 1993. markets well as an indicator of a healthy, strong company, but also has been effectively incorporated into regulations of both the EPA and the NRC.3 For more than a decade, the EPA's rules regarding decommissioning funding for hazardous waste facilities have included a bond rating of BBB as acceptable to satisfy financial assurance requirements (47 Fed. Reg. 15032, April 7, 1982). Further, the BBB bond rating is already a part of the NRC's rules regarding financial assurance of decommissioning funding. Parts 30, 40, 50, and 70 of the regulations provide that a parent company's demonstration, consistent with the standards of 10 C.F.R. Part 30, Appendix A, of its capacity to bear the costs of decommissioning, coupled with the parent company's guarantee, is an acceptable method of providing the requisite financial assurance. Financial test 11.A.2 in Appendix A includes the criterion of a minimum bond rating of BBB. Even with the inclusion of the BBB bond rating into the proposed rule on self-guarantee, licensees seeking to utilize a self-guarantee as a mechanism for financial assurance nevertheless will have to meet a more rigorous test of financial strength than the standard applicable to parent company guarantees under current regulations. Financial test 11.A.2 in Appendix A, which was the model for the financial test included in the proposed rule on self-guarantee, requires, in addition to a minimum bond rating of BBB, tangible net worth of at least bot1:t $10 million and 6 times the current decommissioning cost estimate. In comparison, under the proposed rule now before the Commission, tangible net worth must be at least 10 times the current decommissioning cost estimate, and the absolute tangible net 3 Cabot Corporation, by its November 12, 1991 comment, advanced similar arguments for including the BBB bond rating in the financial test for self-guarantee. worth requirement is set at $1 billion, 100 times the minimum for parent company guarantees. 4 This comparison demonstrates plainly that the proposed self-guarantee rule, even as J?lOdified by adopting a BBB bond-rating standard, will actually enhance the regulations as a scheme to ensure that adequate funding is available for decommissioning. In an obvious and very real way, licensees who meet the rigorous financial standards for self-guarantee will be providing the Commission, and the public, with a greater level of financial assurance than is currently provided by parent company guarantees. For the foregoing reasons, Westinghouse urges the Commission to include a minimum bond rating of a BBB in the financial test for self-guarantors and to adopt the proposed rule so amended. 4 Both the Commission and other commenters have focused upon the $1 billion net worth requirement as being too stringent. For the reasons that have been well stated by other commenters, Westinghouse has no objection to lowering the tangible net worth requirement, so long as some absolute minimum tangible net worth figure is retained as a financial test criterion. There is admittedly some overlap between an investment-grade bond rating and an absolute net worth requirement. Yet the $1 billion minimum (or even an alternative minimum of 1/10 that amount) would not be entirely redundant of the bond-rating standard because bond ratings are not based solely on net worth calculations. Therefore, the net-worth and bond-rating requirements in the proposed rule provide cumulative levels of financial assurance. DOCKET NUMBER PR i' "'

• 0S~D RULE fJ '-I eJ

.,97£4, (sr r Y<- 35 15) FEDERAL EXPRESS Secretary Eli Lilly and Company Lilly Corporate Center Indianapolis, Indiana 46285 (317) 276-2000 March 29, 1993 U.S. Nuclear Regulatory Commission Washington, DC 20555 Attention: Docketing and Service Branch

• 93 t1A 30 p 4 : 11 Re: Proposed Ru.le Set Forth at 58 Fed. Reg. 3515 (Jan. 11, 1993) --

"Self-Guarantee as an Additional Financial Assurance Mechanism"

Dear Sir or Madam:

Eli Lilly and Company ("Lilly") is a research-based corporation that develops, manufactures, and markets pharmaceuticals and animal health products. Lilly uses various radioactive isotopes in the research, development, and manufacture of these pharmaceutical and animal health products and also generates various radioactive wastes from such activities. Lilly fully supports the Nuclear Regulatory Commission's proposed rule set forth at 58 Fed. Reg. 3515 (Jan. 11, 1993), "Self-Guarantee as an Additional Financial Assurance Mechanism." Lilly believes the proposed rule would reduce the burden of meeting current decommissioning funding mechanisms without any adverse effect on public health and safety. Please do not hesitate to contact me (317/276-3723) if you have any questions regarding the above. Sincerely, se i~ ttomey Acknowledged by card......,,...,..... H...... :::;;

8S. NUCLEAR REGULATORY COMMISS!Of\\ DOCKETING l SERVICE SECTION OFflCE OF THE SECRETARV OF THE COMMISSION Doo.Jment Statistics Postn:rl Date 3 h-Gf / e,J r.l:>s P.::-:*:"f'c:' I Ac-: I C_:,;;;21 :"'.'.*,.. c '.!..:.:.. ii 3 ~---- Spesirl D:~t;;bution f2:C: 0~ P0/2,; f./c,c '=4 DN

@11 0. K. HARLING Director DOCKET NUMBER PROPOSED RULE PR 3 Dl t t!!) s OJ 7 0 d [5 r F If. 3 SL S.] NUCLEAR REACTOR LABORATORY~ AN INTERDEPARTMENTAL CENTER OF. ~-~. : MASSACHUSETTS INSTITUTE OF TECHNOLOGY

• 93 MP,R 30 A10 :17 138 Albany Street, Cambridge, Mass. 02139-4296 J. A. BERNARD, JR.

Telefax No. (617) 253-7300 I., Director of Reactor Operations Telex No. 92-1473-MIT-CAM c:\\J ; Tel. No. (617) 253-4202 25 March 1993 U.S. Nuclear Regulatory Commission A TIN: Docketing and Service Branch Washington, DC 20555

Subject:

Proposed Rule on Self-Guarantee as an Additional Financial Assurance Mechanism; Federal Register Notice Vol. 58, No. 6, p. 3515 Gentlemen: The Massachusetts Institute of Technology supports the proposed rule to add self-guarantee as an additional financial assurance mechanism for the coverage of eventual decommissioning costs. However, as presently written the rule would only benefit large commercial entities that have a tangible net worth of $ 1 billion, a net worth ten times that of the decommissioning cost, assets located in the U.S. that amount to 90% of total assets, a specific bond rating, and one class of equity securities registered under the Securities Exchange Act of 1934. It is requested that these criteria be modified so that non-profit, educational institutions may also benefit from the rule change. To that end, the following criteria are proposed: (1) Tangible net worth at least 10 times the current decommissioning cost estimate. (2) A statement of intent signed by an authoriz.ed individual. The statement of intent together with an update of the decommissioning cost estimate and verification that assets exceed that estimate for decommissioning by at least a factor of ten would be submitted annually within 90 days after the close of each succeeding fiscal year. This requirement could, if desired, be made part of the facility reporting requirements that are already provided annually. In MIT's case, the immediate benefit of such a rule change would be to eliminate the need to pay several thousand dollars per year in fees for the servicing of an escrow account. These funds, which come out of the reactor's operating budget, would be better spent for instrumentation and/or other directly productive functions. MAY 1 11993 ~- Acknowledged by card................. '""""'""',_

HUCLl;.~it ~E3ULATORY COMMISSIO~ DOCKETING & SERVICE SECTION OF.flCE OF THE SECRETARY OF THE COMMISSION Dorurnent Statistics l!ostmark Date ;J 11Js 14[.J Copie~ R~.i:-.it*.;rf __ _./ ____ Add'l Copias P:i;, (,-~:;"':d --=:;. ___ Special Di.stribtltion /Zr~ f:JOl?y Pr I C b tew1 I

U.S. Nuclear Regulatory Commission Page2 Please contact the undersigned if additional information is needed. The opportunity to comment on this proposed rule is most appreciated. JAB/CRH cc: USNRC - Project Manager, NRR/PDNP USNRC - Region I - Chief, Sincerely, or~ q ~ fobn A. Bernard. Ph.,'O. Director of Reactor Operations MIT Research Reactor Effluents Radiation Protection Section (ERPS) FRSSB/DRSS USNRC - Director NRR/PDNP

BY HAND secretary DOCKET NUMBER PROPOSED RULE Pl 3 P I L/cJ I fiO.J 70 cJ-,2 l 5 i" F-R.3 s IS) FRIED. FRANK, HARRIS, S HRIVER & J ACOBSON A PARTNERSHIP INCLUDING PROFESSIONA L CORPORATIONS 1001 PENN SYLVANIA AVENUE, N.W.. SUITE 800 WASHINGTON, DC 20004

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WRITER'S DIRECT LINE (202) 639-7060 U.S. Nuclear Regulatory Commission 11555 Rockville Pike Rockville, MD 20852 Attn: Docketing and Service Branch Re: Notice of Proposed Rulemaking on Self-Guarantee as an Additional Financial Assurance Mechanism (RIN 3150-AE16). 58 Fed. Reg. 3515. et seq. (Jan. 11. 1993)

Dear Sir:

Enclosed you will find three (3) copies of comments that we are submitting to the Commission, on behalf of our client, the General Electric Company, with respect to the above-referenced rulemaking. (Please date stamp the fourth copy and return it to the messenger so t hat he can bring it back to us.) The GE comments strongly support the early promulgation of the proposed rule published by the Commission. Please contact the undersigned if you have any questions about the enclosed comments or require additional information. Thank you very much for your assistance. Sincerely yours, t?:::~ lfAY 111993 - Acknowledged by card................................ " 771 2k NEW YORK

• WASHINGTON
• LOS ANGELES
• LONDON

US. NUCLEAR REGULATORY COMMISSIOt-. DOCKETING & SERVICE SECTION OFflCE OF THE SECRETARY Of THE COMMISSION Document Statistics Postr::.3rl: Date Af~nd de.J 1v<.reb

COMMENTS OF THE GENERAL ELECTRIC COMPANY CONCERNING PROPOSED ROLE OF THE NUCI,EAR REGlJIATORY COMMISSION ON SELF-GUARANTEE AS AN ADDITIONAL FINANCIAL ASSURANCE MECHANISM

INTRODUCTION The General Electric Company

("GE") respectfully submits the following comments in support of the Commission's proposed rule on self-guarantee as an additional financial assurance mechanism, as published in the Federal Register at 58 F.R. 3515, et sag. (January 11, 1993). GE, along with Westinghouse Electric Corporation ("Westinghouse"), submitted a joint Petition for Rulemaking in mid-1991 requesting such a rule (PRM-30-57). GE continues to believe that a rule such as that now proposed by the Commission will eliminate from the NRC' s decommissioning funding regulations an anomoly which (i) places unnecessary cost burdens on financially secure licensees, and (ii) provides no corresponding benefit to the interest of the public in assuring that adequate funds will be available to decommission NRC-licensed facilities in a safe and timely manner. GE has no objection to the minor modification to the Petition's "Financial Test" in Part 30, Appendix B which the Commission has included in the proposed rule. That modification would make clear that the relative tangible net ( worth and United States assets standards in the Financial Test must be met in comparison to "all decommissioning activities for which the company is responsible as self-guaranteeing

2 - licensee and as parent-guarantor.

Indeed, the commission's modification to the Financial Test proposed in the Petition sets forth in a more precise and articulate manner the capabilities which GE expected all qualified self-guarantors to maintain.

GE takes no position with respect to the possible revision of the Financial Test criterion requiring that a self-guarantor have and maintain a tangible net worth of at least $1 billion. GE recognizes the merit of the arguments in the staff's Regulatory Analysis of Decommissioning Financial Assurance Self-Guarantee Options for Materials Licensees (November 3, 1992) (hereinafter, "Regulatory Analysis")

that, because tangible net worth is an important factor in the assignment of bond ratings, the $1 billion tangible net worth requirement may be largely redundant with the requirement of an "A"

bond rating. It is noteworthy in this regard that, according to the Regulatory Analysis, elimination of the $1 billion net worth requirement would increase the nwnber of licensees who might qualify as self-guarantors under the proposed rule from approximately 20 to approximately 27 (i.e., by only 7 licensees). GE believes, however, that since bond ratings also include many factors other than net worth, there is clearly a substantial zone of non-redundancy between the two factors. Therefore, and to avoid over-reliance on any single financial

3 -

factor, GE would suggest that the Commission retain in the Financial Test some absolute minimum tangible net worth requirement, and that such absolute minimum should not be less than $100 million (i.e., ten times higher than the comparable figure for a parent/guarantor).

Finally, GE urges the Commission to act as expeditiously as practicable to adopt and implement the proposed rule. As the cost comparisons in the Regulatory Analysis make clear, the total (i.e., public and private) cost burden on society of adhering to the current rule is substantial. The sooner the proposed rule can be adopted and implemented, the sooner society will begin to enjoy the savings from better, rather than bigger, regulation. GE first sought relief from the Decommissioning Rule's lack of a self-guarantee mechanism on March 16,

1990, when it filed a request for a

specific exemption. More than three years later,11 the NRC has made undeniable progress toward more cost-efficient regulation in this regard. However, GE is still required to maintain ( and pay for) a third party letter of credit to assure decommissioning funding for its NRC-licensed facilities. While GE appreciates the Commission's rationale for addressing this l/ And more than two years after GE was advised that the Commission was prepared to conduct, "on an expedited basis, 11 a rulemaking concerning a self-guarantee mechanism."

4 - issue through a rulemaking instead of by granting multiple exemptions, it hopes that this process can now be brought to a rapid conclusion, with any public comments quickly summarized and a final rule generally embodying the January 11, 1993 proposed rule brought swiftly before the Commission for approval and implementation. If a final rule cannot be put in place by March 1, 1994, GE respectfully requests that the Commission adopt its proposed rule on an "interim final" basis by that date. DISCUSSION The reasons which, in GE's view, support the adoption of the proposed rule published by the Commission on January 11, 1993, were set forth in GE's Petition for Rulemaking filed (jointly with Westinghouse) in June 1991. GE understands that the Petition is already part of the regulatory record in the instant rulemaking. Accordingly, GE will not restate here all the arguments and supporting evidence set forth in the Petition, but will merely summarize the principal reasons why it believes the revisions in the proposed rule should be adopted.

5 - A. The current Decommissioning Rule is Anomalous and Unfairly Burdensome on certain Licensees. Under the Decommissioning Rule promulgated by the Commission in mid-1988, licensees of unquestionable financial strength were left without a means to self-guarantee their own decommissioning funding costs. This aspect of the Decommissioning Rule weighed most heavily on materials licensees and non-utility reactor licensees, who (unlike nuclear utility licensees) were not permitted to accrue decommissioning funds over many years, but were required to assure adequate decommissioning funding in.:t.2.t.Q as of July 1990. GE believed, and still believes, that a self-guarantee by a financially secure licensee is at least the equivalent of certain unfunded financial assurance mechanisms accepted by the Commission under the 1988 Rule. Moreover, the Decommissioning Rule created certain anamalous results. For example, although GE was, under the 1988 Rule, permitted to, and did in fact, provide a parent guarantee for a subsidiary/licensee, it was nonetheless also required to seek external decommissioning funding assurance wherever GE itself (rather than a subsidiary) was the entity licensed by the NRC. GE and other similarly-situated large licensees have been, and continue to be, affected adversely and unreasonably by the Decommissioning Rule's lack of an internal method of

6 - decommissioning funding. As evidenced by the Regulatory Analysis in SECY-92-385, they are compelled thereby to bear unwarranted compliance costs far in excess of any resulting benefit to the protection of public health and safety. The cost of satisfying the current Decommissioning Rule through a line or letter of credit is significant to GE and other similarly situated non-subsidiary licensees -- especially when compared with the burden on competing licensees who are able to satisfy the Rule's funding assurance requirements through such essentially no-cost methods as the parent guarantee or the governmental statement of intent. Requiring such licensees to incur those costs, even though they are manifestly capable of satisfying the funding assurance objectives of the Decommissioning Rule through an annually re-certified self-guarantee the unnecessarily disparate treatment resulting from the current Decommissioning Rule -- is inconsistent with the public interest in cost-effective regulation. B. The Proposed Rule is consistent with the Commission's Objectives in Promulgating the 1988 Decommissioning Rule. The Petition noted (at p.11) that, in promulgating the Decommissioning Rule, the Commission's stated objective was to "provide reasonable assurance that, at the time of termination

7 - of operations, adequate funds are available so that decommissioning can be carried out in a safe and timely manner ** 2./ The Petition demonstrated that, when coupled with an appropriately stringent financial test and annual re-certification, a licensee's self-guarantee could clearly provide such reasonable assurance. It is now clear, even moreso than when the Petition was filed, that the proposed self-guarantee mechanism does not present more than a remote risk of decommissioning funding default. This is demonstrated by data contained in a draft report, entitled "Analysis of Assurance Provided by current and Proposed Financial Assurance Mechanisms" (April 1992) prepared for the Commission as NUREG/CR-5845 by its contractor, ICF Incorporated (herein the "ICF Draft Report"). The misprediction risk data set forth in the ICF Draft Report (which GE believes are, at the least, much too conservative and seriously overstate the relevant risk) lead to the conclusion that the annual risk of a default by the issuer of a bond rated "A" or better is 0. 13 %

• The NRC Staff's Regulatory Analysis supporting the proposed rule indicates that only some 20 licensees would qualify under the proposed rule to provide a self-guarantee.

Therefore, and even assuming that these Y 53 Fed. Reg. at 24033 (June 27, 1988).

8 - numbers are not overstated, one could expect only 2.6 defaults of such self-guarantees per century, or about one default every 38.5 years.di By anyone's calculation, a default which is predicted to occur less than once per generation is quite remote. Thus, the self-guarantee mechanism provides reasonable assurance of timely and adequate decommissioning funding.

c.

The Proposed Rule Is Highly Cost-Efficent. It is important to keep in mind that any consequences on the public health and safety of a default on a decommissioning funding obligation are -- unlike the consequences of a reactor accident or an off-site release of radioactive material neither immediate nor direct. No individual is contaminated or his/her heal th put at risk by the occurrence of a default itself. In public health and safety terms, a default means only that a source other than the licensee will have to be found to fund some or all of the decommissioning effort, li that decommissioning effort must be conducted during the 1/ If the $1 billion net worth requirement were eliminated, and (as the Regulatory Analysis predicts) 7 additional licensees would then qualify to provide a self-guarantee, the predicted default rate would would rise to 3.5 per century, or about one default every 28.5 years.

9 - continuance of the self-guarantor's financial incapacity.ii The Comprehensive Environmental

Response, Compensation and Liability Act (popularly known as "Superfund"),

the Price-Anderson Act, and even licensee funding of the NRC's budget, are all examples of legislative shifting of funding burdens -- in many cases to the private sector -- in order to address public health and safety needs. There is ample reason to believe that, if a self-guarantor's default threatened to cause heal th or safety consequences, an alternative source of public and/or private funding would be found in a timely manner. GE points this out, not to denigrate the importance* of decommissioning funding to public heal th and safety, but only to put it in its proper perspective. Decommissioning funding is, after all, a matter of money -- not adverse health effects on an individual member of the public. Thus, it is perfectly appropriate to engage in the sort of societal cost comparisons found in the ICF Draft Report, and relied on by the Commission in support of the proposed rule. And, as the ICF Draft Report and the Staff Regulatory Analysis demonstrate, the total (i.e., .ii Under Chapter 11 of the Bankruptcy

Code, such incapacity is ordinarily temporary, meaning that a licensee might reorganize and emerge fully able to bear its decommissioning funding responsibilities.

This is what happened, for example, with Texaco Inc., one of the most highly publicized bankruptcy cases in the 1980s.

10 - public filKl private) costs to the economy of failing to include in the Decommissioning Rule a self-guarantee mechanism for a small number of stringently qualified licensees far exceed the total costs if such a mechanism is provided. For example, for every $1,000 in additional "public costs"~ arising from permitting financially qualified licensees to utilize a self-guarantee, there are offsetting savings of more than $11,000 in "private costs," and of more than $10,000 in "total costs" to society. ~ Regulatory Analysis, Table 3.1. Over a period of years, then, the proposed rule would lead to millions of dollars in cost savings to licensees and to society as a whole. lg., Table 3.2. In her comments disapproving the recommended action in SECY-92-174, Commissioner de Planque made specific reference to the fact that "large annual private costs (could] be averted with a substantially smaller increase in annual public costs. *. " as a reason supporting the creation of a self-guarantee alternative. Since the ICF cost comparisons include the "public costs" of making up for defaults (i.e., meaning that there is no difference in the public heal th and S?tfety effects, because in each case timely decommissioning ~ As shown by the Price-Anderson and NRC license fee

examples, funds for public purposes may be obtained from private sector sources other than by general taxation.

11 - occurs), it is clear that the inclusion of a self-guarantee for a strictly defined class of licensees is highly cost-effective from a societal as well as a regulatory standpoint. D. The Parent Guarantee Does Not. In Fact. Provide Additional "Defense in Depth" compared to a oualified self-Guarantee. In SECY-92-174, the Staff opposed the creation of a self-guarantee mechanism in large part because it: runs counter to the regulatory philosophy regarding financial assurance which is the basis of the Commission's regulations and the way they are being implemented. The Commission's position has been that assurance requires a

second, separate and independent source of funds beyond the resources of the licensee to provide "defense in depth" that needed funds will be available.

Id., at 6. In formulating its recommendations in SECY-92-174, the Staff relied heavily on the ICF Draft Report. That document's decommissioning funding default risk comparisons, in turn, relied heavily on the "defense in depth" concept. There are many shortcomings in this aspect of the ICF Draft Report. (A summary statement of its principal shortcomings is attached to these comments as Exhibit A. ) However, one of the most serious (and one which the Commissioners clearly regarded as a grave flaw) is the set of assumptions ICF used concerning parent/subsidiary "independence" as a template for "defense in depth."

• For "defense in depth" to be a valid concept in the context of a parent's guarantee of its subsidiary's obligations, it is not enough that the two entities be legally and financially separate (i.e., in the sense that they could resist a top-down or bottom-up effort to pierce the corporate veil).

Rather, what is required is the type of mutual material non-dependence described at pp.48-49 of the ICF Draft Report.

Such independence is, far from being the norm, rather rare in today's world of large consolidated corporate groups. The frequency with which parent guarantees are requested, and given, in the commercial context is a telling testament to the typical fiscal interdependence within such corporate groups. As explained in Exhibit A, ICF

assumed, without any supporting

evidence, a

very high rate of subsidiary independence 97%. That this assumption defied credibility is demonstrated by the fact that the Commission unanimously rejected the recommendations in SECY-92-174. Indeed, three Commissioners specifically cast doubt on the assertion that the parent guarantee in Part 30, Appendix A was any more financially secure, merely because it involved two legally separate entities, than a self-guarantee from a qualified licensee would be. See comments of Commissioners curtiss, de Planque and Remick on SECY-92-174.

13 - In sum, the Commission rejected the concept of "defense in depth" as applied to the context of corporate guarantees, recognizing. that such concept can be valid only when each successive defensive device is subject to failure based solely on its inherent strengths. "Defense in depth" is an excellent concept for analyses of failure rates for valves or piping, which are virtually identical in form and material, and of which one is no more likely to fail than another. The concept quickly loses its validity, however, if one attempts to apply it in the context of corporate groups, where each entity is different from its affiliates, and top-down insulation of assets is more the exception than the rule. E. The stringent Financial

Test, certification and Notification Reguirements of the Proposed Rule Provide Adequate Assurance of Timely Decommissioning Funding.

For the reasons stated in the Petition and in the Staff's Regulatory Analysis, the proposed rule will result in an adequate level of assurance of timely decommissioning funding

and, indeed, in no reduction of the level of assurance of decommissioning funding compared to that achieved by the 1988 Rule.

The "early warning system" created by the Financial Test, annual recertification, and prompt notification to the NRC of changes in the licensee/guarantor's financial condition (all of which are contained in proposed Appendix B to Part 30) demonstrably provide an adequate means for the NRC to learn of

14 - changes in that condition and to take timely action to require alternative funding assurance. There is ample precedent for reliance on self-guarantees and periodic certifications, not only in the regulations of other agencies (~, e.g., 40 C.F.R. Parts 2 64 and 2 65), but also in the Commission's own rules concerning deferred premiums which might become due under the Price-Anderson Act's nuclear liability regime. 10 C.F.R. §140.21(e). The most compelling reason the proposed rule is justified and in the public interest lies in its stringent bond rating requirement. The relevant bond ratings are assigned by independent entities based on the rating services' calculations of relative investment qualities of the bonds and the future creditworthiness of their issuers. These bond ratings are relied upon broadly, throughout the economy, for a wide range of regulatory as well as commercial purposes. The excellent predictive capabilities of bond ratings are demonstrated by the very low default rates for bonds rated "A" or better, as set forth in the ICF Draft Report. It should be noted, moreover, that the default rates reported by ICF covered a period three years prior to the year of default, a much longer predictive period than necessary under the proposed rule, which includes an annual recertification requirement and a mandate for prompt notice to NRC if an issuer's bond loses its "A" rating.

15 - Substantial information about bond ratings and their predictive validity is presented in the GE/Westinghouse Petition. For purposes of these

Comments, GE would only reiterate its view that the "A"

bond rating requirement, coupled with the other criteria of the proposed rule's Financial Test, annual recertification requirement and prompt notice to NRC of downrating below the "A" level and of other significant events, constitute a sound basis for assurance that adequate decommissioning funding will be available when needed. CONCLUSION The modifications embodied in the Commission's proposed rule will remedy significant shortcomings in the current Decommissioning Rule. In sum, the proposed rule should be adopted in order to stop imposing costs on the NRC's most financially sound licensees, such as GE, which are not necessary to achieve the Commission's stated goal of reasonable assurance of the timely availability of adequate funds for decommissioning. GE commends the Commission for proposing to amend its 1988 Decommissioning Rule in this manner. GE takes no position on what the minimum absolute tangible net worth of a qualified self-guarantor should be under the proposed Part 30, Appendix B Financial Test, except to suggest that some minimum be retained and that it should be no less than $100 million.

16 - Finally, GE requests that this rulemaking be completed on an "expedited basis." Specifically, GE requests that the rulemaking not be delayed by the "minimum tangible net worth," issue and that, if necessary to avoid such delay, the proposed rule should be promulgated as published on January 11, 1993. Any reduction to or elimination of the tangible net worth criterion should then be made under a separate rulemaking. Three years have already passed since GE first formally requested that it be permitted to satisfy the Decommissioning Rule by means of a self-guarantee. Therefore, GE respectfully requests that, if this rulemaking cannot be completed by March 1, 1994, the proposed rule be promulgated on an "interim final" basis pending completion of the rulemaking. March 29, 1993 75931c

JOOITRIT A PRINCIPAL SHORTCOMINGS OF THE APRIL 1992 DRAFr REPORT BY ICF, INC. (HUREG/CR-5845) NRC Staff concerns expressed in SECY-92-174 over the changes proposed in the GE/Westinghouse joint Petition for Rulemaking (most of which changes have now been incorporated into the Commission's proposed rule) relied in large part upon an April 1992 draft report prepared by an NRC contractor, ICF Incorporated,

entitled, "Analysis of Assurance Provided by current and Proposed Financial Assurance Mechanisms,"

NUREG/CR-5845 (the "ICF Draft Report"). That document purports to suggest that the "assurance risk" of a qualified self-guarantee, as proposed in the GE/Westinghouse Petition, is higher than the risk of default under a Part 3 o, Appendix A parent guarantee or other decommissioning funding assurance mechanisms permitted under the Commission's current Decommissioning Rule.

However, the ICF Draft Report is so riddled with methodological and other shortcomings that one need not be an expert in risk analysis to recognize that its "estimated assurance risks" for large, financially secure licensees are clearly overstated.

The principal shortcomings of the ICF Draft Report as an analytical tool in comparing the proposed self-guarantee to

other, currently accepted decommissioning funding assurance mechanisms are described herein.

2 -

1.

The most important figure in the ICF Draft Report. the baseline failure rate for firms of greater than Sl billion in net worth <Le,. o. 14%) is inherently {and condeded by ICF to be) unreliable. The "baseline failure rate" is the expected rate at which the ICF Draft Report predicts firms in any given category of tangible net worth will become unable to meet their financial obligations in any particular year. The figure is obviously a critical one in any comparison of self-guarantees to other financial assurance mechanisms. Rather than using actual data on near-term failures of large

firms, ICF apparently attempted to extrapolate failure rates from "total liabilities at the time of failure [which] were used to estimate the net worth of the bankrupt firms two or three years prior to bankruptcy.nll ICF Draft

Report, at

24.

ICF itself recognized the inherent unreliability of the results of this methodology for large firms -- the very ones (indeed, .1/ Looking at net worth two or three years before bankruptcy ignores the requirements in the GE/Westinghouse Petition that the self-guarantor pass the Financial Test annually, promptly advise the NRC of a reduction of its bond rating below the "A" level, and promptly advise the NRC if its independent auditor concludes that the licensee no longer passes the Financial Test.

3 - the only ones) who might benefit from the petitioners' proposed rule change -- and declared in its Draft Report (at 25): Estimates of failure rates for firms with more than $100 million in net worth should be used with extreme caution, because there is an insufficient number of bankruptcies of this size to develop reliable statistics. Thus, the "confidence bounds" of the estimated assurance risk for large firms are immense. For example, for firms with net worths over $1 billion, while ICF's estimated assurance risk is O.14%, its confidence bounds are as low as 0.00% or as high as 0.48%. For firms in the $400 million-$1 billion range, the confidence bounds stretch all the way from 0.00% up to 1.19%. In other words, even ICF had very little confidence in its assurance risk estimates for large firms. And if that figure is unreliable, then all the comparisons in the ICF Draft Report which are based on that figure are of dubious validity. subsidiary-parent independence dictated a result unfavorable to the rule change proposed in the GE/Westinghouse Petition. ICF recognized

that, if a

licensee and its guaranteeing parent company were not

4 - independent of one another, the assurance risk of a parent guarantee was identical to the base failure rate of the parent company. See, ICF Draft Report, Table 3.12. ICF describes as "highly unlikely" the assumption that a parent company would always be drawn into the bankruptcy of its subsidiary (.Ig., at n.47), but fails to meaningfully address the impacts of the more likely scenario of the subsidiary/licensee being drawn into the bankruptcy of its parent guarantor.Y In so doing, ICF ignores its own definition of independence, which requires both that the parent's financial condition must not be "materially dependent on the financial condition of the subsidiary," and also vice versa. (_Ig., at 49.) ICF then proceeds, in total disregard of its own definitional guidelines, as well as its own cautions about attempting to quantify "non-independence" (Id., at 55), to assume that a ratio of 97 independent subsidiaries to 3 non-independent is "a much more likely scenario" than a 90:10 ratio. 2./ Indeed, while recognizing that parent companies might protect themselves against their subsidiaries' liabilities, ICF also noted that subsidiaries were "less able to isolate their assets" from a parent company's obligations since "the subsidiary itself is an asset." ICF's sole example of such isolation involved a "regulated financial institution." I.g., at n.61. ICF presents nQt ~ shred of evidence in support of its selection of a "weighted average" based on the 97:3 ratio. Quite the contrary, ICF states, at 55: Because the instances in which limited liability can be overcome are so intimately tied to particular factual situations, precise quantification of the likelihood that a parent corporation's limited liability will be ignored is not possible. Similarly, the likelihood that a subsidiary will be drawn into insolvency of its parent also cannot be quantified. If subsidiaries cannot be insulated from claims against their corporate

parents, then the conditional probability of such a

subsidiary failing to honor its obligations could be close to 100 percent when its corporate parent fails (because the subsidiary would be caught up in bankruptcy proceedings with its parent). The unsupported 97: 3 ratio of independent subsidiaries is critical to ICF's presentation of the "most likely case" in Table 3.14, which purports to show assurance risks for a parent guarantee as being nearly three times less than ICF' s calculated risk figures for a self-guarantee ( 0. 05% to 0.14% for firms with net worths over $1 billion). Practical experience and common sense, however, tell us that much more than 3% of corporate subsidiaries are IlQt mutually financially independent from their parents (i.e., that the financial condition of one.i.§. "materially dependent" on the financial condition of the other). If, for example, one assumes instead that the ratio of independent subsidiaries to non-independent

6 - is 60:40 (an assumption which practical experience suggests is still too conservative in a top-down bankruptcy context), then, using ICF's own "baseline failure rates," a self-guarantee by a firm with over $1 billion net worth has a lower assurance risk (0.14% to 0.15%) than a parent guarantee by a firm with assets up to $100 million. And if the ratio is 50:50 (which assumes that just half of all subsidiaries are not financially independent of their parents, and vice versa), the assurance risk for such a large self-guarantor becomes less than that for a parent guarantee from firms with up to $400 million in net assets. In sum, the ICF analysis depends on an assumption of parent/subsidiary independence for which ICF offers no support. If one alters the assumption, one obtains a markedly different result. Both Commissioner curtiss and Commissioner de Planque expressly criticized ICF's assumptions about parent/subsidiary independence ~n voting to disapprove a proposed denial of the GE/Westinghouse Petition. The foregoing discussion demonstrates the merits of rejecting the comparative conclusions in the ICF report if one finds, as they did, that ICF's assumptions in this regard (among others) were "unfounded" (Curtiss) or potentially "illusory" (de Planque).

7 -

3.

The "default rate for bond issues" in the ICF Draft Report is irrelevant in considering the proposed self-guarantee mechanism. Another number which ICF uses for comparative purposes in the Draft Report is its "misprediction rate" or default rate for bond issuers (Table 3.15 of the ICF Draft Report). This number represents "the average annual default rates of bond issuers rated A or better in one of the three years prior to the year of default." (Emphasis supplied.) Jg., at 57-58. However, the GE/Westinghouse Petition proposed that a self-guarantor must meet the financial test (both as to bond rating and net worth) every year and must notify the NRC within 20 days after its relevant bond rating falls below "A" from either of the two bond rating services.

Thus, a

default rate for bond issuers who may last have had an A rating as much as 3 years before default is clearly irrelevant to what is proposed in the Petition. As :the Petition demonstrates, the misprediction rates for "A"-rated bonds are lower over shorter terms, and it is these shorter terms which are most relevant for assessing the proposed Rule. By the time the three years of ICF's "misprediction rate" had elapsed, a self-guarantor whose bond rating had fallen from the "A" category would, under the proposed.Rule, long since have been required to provide an alternative financial assurance mechanism for decommissioning funding.

8 -

4.

The ICF Draft Report expressly excluded from its analysis certain risks of decommissioning funding default which are patently greater than the risk of default by a self-guarantor qualified under the standards in the GE/Westinghouse Petition. If the baseline annual failure rate for firms with a net worth in excess of $1 billion is, as the ICF Draft Report suggests, 0.14%, and there are only 20 present NRC licensees which would meet the Petition's financial criteria (~, 58 F.R. 3515, at 3517, middle column), this means that one could expect just 2.8 self-guarantor defaults every century, or self-guarantor defaults at the rate of one every 35.7 years. (Obviously, if one uses ICF's "A"-rated bond issuer default rate, 0.13%, which (as demonstrated above) is clearly higher than the relevant default rate under the Petition or the proposed rule, the period between such defaults would be longer still, approaching 40 years.) It is curious then that, while focusing on such rare events, occurring less than once per generation, ICF chose to exclude from its analysis such factors as: The possibility that the financial mechanism has been improperly executed. The possibility that the financial mechanism has been issued by an unauthorized provider.

9 - The possibility of collusion or fraud. ICF Draft Report, at 13-14. Such events not only happen in practical experience, they demonstrably occur with greater frequency than once per generation. Indeed, because there are so many NRC licensees who do not qualify for a self-guarantee under the Petition (or even if only an "A" bond rating is required), and such non-qualifiers tend to be firms with less in-house legal and accounting expertise ( and less independent audit accountability) than the NRC's largest licensees, one might reasonably conclude that such "excluded events" were considerably more likely to occur with respect to a licensee not qualified to be a self-guarantor. In a similar vein, ICF did not assess the assurance risk involved in accepting a "statement of intent" from governmental licensees. Since such "statements of intent" are not required to be based on either appropriating legislation or a "full faith and credit" undertaking by the relevant political jurisdiction, one may legitimately suggest that their associated assurance risk is substantially higher than that for a self-guarantor qualified under the standards in the GE/Westinghouse Petition.

10 - Without further "beating a dead horse to death, n it is clear beyond argument

that, even if ICF's default rate estimates were accurate ( instead of seriously overstated, as they are) they would still show such a modest default rate by qualified self-guarantors that the Commission would have "reasonable assurance" that there will be adequate decommissioning funding when called for.

Indeed, the level of that assurance, even using ICF's inflated risk figures, is clearly less than default risks which ICF determined did not merit inclusion in its analysis. 75791c

DOCKET NUMBER R PROPOSED RULE p ?;cJ/ -/ 0

• so.I 70 d-7 2 D

!) m;m __ s_H_I _E_L__A_L_L_O_Y_M_E_T._A_ 0 L_~i_u_' R_G_I C_A_L_C_O_R_P_O_R_A_T_I O_N_ WEST BOULEVARD PO BOX 768 NEWFIELD, NJ 08344 TELEPHONE (609) 692-4200 TWX (510) 687-8918 Secretary U.S. Nuclear Regulatory Commission Washington, D. C. 20555 Attention: Docketing and Service Branch Gentlemen: Re: Proposed Rule Regarding Self-Guarantee as an Additional Financial Assurance Mechanism, 58 Fed. Reg. 3515 (January 11, 1993) FAX (609) 692-4017 March 26, 1993 (j) Shieldalloy Metallurgical Corporation respectfully submits these comments on the proposed rule regarding self-quarantee as an additional financial assurance mechanism for funding the decommissioning of NRC-licensed facilities. We are pleased that the Commission is considering this issue. Shieldalloy believes that financial assurance methods should not impose unnecessary burdens on the regulated community; therefore, we strongly support the use of self-guarantee as a financial assurance mechanism and its availability to all licensees that satisfy certain financial standards, including those entities that may have a parent company. We further believe that the financial test that has been proposed is far more stringent than necessary. The financial criteria currently used for parent guarantees are more than sufficient to provide reasonable assurance of decommissioning funding; therefore, we propose that those criteria be adopted for self-guarantees in lieu of the proposed standards. The NRC's proposed rule would allow corporate self-guarantee as an additional method of demonstrating financial assurance for decommissioning. Currently, the acceptable methods are prepayment, surety, insurance, parent guarantee, and external sinking funds. The rule was proposed in response to a petition for rule making filed jointly by the General Electric Company and the Westinghouse Electric Company. 56 Fed. Reg. 48445 (1991). The proposed rule adopts the financial criteria suggested in the petition, including requirements that a company have a tangible net worth of at least $1 billion, that its tangible net worth be at least 10 times the current decommissioning cost estimate, that assets amounting to 90 percent of its total assets or at least 10 times its total current decommissioning cost estimate be located in the United States, and that the company's current bond rating be of AAA, AA, or A as issued by Standard and Poor's, or Aaa, Aa, or A as issued by Moodys. Acknowledged by r.n.rd... '!l!Y...l.,J,,~ BIRMINGHAM, AL* CHICAGO, IL* HOUSTON, TX

• LOS ANGELES, CA
• PITTSBURGH, PA EXECUTIVE OFFICES: WEST BOULEVARD* PO. BOX 768
• NEWFIELD, NJ 08344
• TEL: (609) 692-4200

~.S. NUCl.(1._li REGLJLATORY COMMISSIO~ OOCK::T:~JG & SERVICE SECTION Offi,~E OF THE SECRETARY OF THE COMMISSION Document Statistics

Secretary U.S. Nuclear Regulatory Commission Page Two March 26, 1993 Those standards are more stringent than the current financial criteria for parent guarantees. NRC estimates that only 20 materials licensees would be capable of satisfying the proposed requirements. NRC, "Regulatory Analysis of Decommissioning Financial Assurance Self-Guarantee Options for Materials Licensees" (Draft), at 3.2 (November 3, 1992). In the Supplementary Information accompanying the proposed rule, the NRC noted that "[a]llowing less stringent criteria would permit additional licensees to use self-guarantee and thus reduce the costs of complying with the Commission's regulations." 58 Fed. Reg. 3515, 3518 (1993). Shieldalloy believes that the proposed financial criteria is unnecessarily stringent and recommends that the financial test currently allowed for parent guarantees be used for self-guarantees. As set forth in Appendix A to 10 C.F.R. Part 30, the parent must have: tangible net worth of at least $10 million; tangible net worth and working capital at least 6 times the total current decommissioning cost estimates for all decommissioning activities for which it is responsible; U.S. assets amounting to at least 90 percent of its total assets or 6 times the total current decommissioning cost estimates; and, either bond ratings of at least BBB as issued by Standard and Poor's or Baa as issued by Moodys or specified financial ratios.!L Shieldalloy believes that the adoption of self-guarantee criteria that mirrors parent guarantee criteria is in the public interest, as it would reduce a licensee's cost burden without any adverse effects on public health or safety. NRC estimates that a total annual cost savings of $600,000 could be realized, at a minimum, if the proposed rule is adopted as is, since internal financial assurance is less costly than any of the various external assurance methods. 58 Fed. Reg. at 3517-18. If the parent guarantee standards are made applicable to self-guarantees, many more licensees would qualify for self-guarantee, resulting in a cost savings far greater than NRC's estimate. Shieldalloy's proposal would thus end the imposition of unnecessary costs upon licensees and would result in cost-effective regulation. Little difference exists between the risks inherent in parent guarantees, which the NRC has already found acceptable, and in self-guarantees. The requirement that a licensee satisfy the financial test on a yearly basis would suffice to reveal any changes in a self-guarantor's financial status that may cause the NRC concern. The NRC would be notified if a self-guarantor failed to meet the test and the self-guarantor would be required to establish alternate financial assurance. lL The specified financial ratios are (i) total liabilities to net worth less than 2.0; (ii) the sum of net income plus depreciation, depletion, and amortization to total liabilities greater than 0.1; and (iii) current assets to current liabilities greater than 1.5. A parent company must have two of the three ratios.

Secretary U.S. Nuclear Regulatory Commission Page Three March 26, 1993 The NRC should look to the U.S. Environmental Protection Agency (EPA) for proof of the effectiveness of the self-assurance mechanism. EPA authorizes self-guarantee as a financial assurance mechanism for the closure of hazardous waste facilities.~ The NRC recognizes that the objective of EPA and NRC financial assurance regulations is the same -- to ensure that adequate funds are available to safely decommission facilities. 58 Fed. Reg. at 3518. In fact, the NRC actually adopted EPA's parent guarantee criteria for its own parent guarantee standards. 53 Fed. Reg. 24018, 24036 (1988). Under EPA's regulations, however, a parent guarantee is merely a substitute for a self-guarantee.ll The parent guarantor must satisfy the same financial criteria applicable to self-guarantees.~ We believe that the NRC should fully adopt EPA's approach and allow self-guarantees based on the financial standards currently applicable to parent guarantees. Like EPA, the NRC should also allow all entities that meet the financial criteria to provide a self-guarantee, including those businesses that have a parent corporation. The NRC may rely upon EPA's decade of successful use of the self-guarantee mechanism as support for the approach that we are proposing. See 58 Fed. Reg. at 3518. In conclusion, Shieldalloy strongly advocates the adoption of self-guarantee as a method of financial assurance for decommissioning costs, using the same financial criteria now applicable to parent company guarantees. It creates an anomalous result to allow a company to provide an internally-funded parent company guarantee for a subsidiary, but to disallow it from offering a self-guarantee based on the same financial information. Shieldalloy's proposed method will provide reasonable assurance of decommissioning funding without imposing unnecessary burdens on the regulated community. Sincerely yours, f?,u;/,ad o.~ Richard D. Way Senior Vice President, Manufacturing Df\\-- Barry USS Vi dent Finance ltn 21 See 40 C.F.R. SS 264.143(t), 264.145(t), 265.143(e), and 265.145(e).

31.

See 40 C.F.R. SS 264.143(t) (10), 264.145(t) (11), 265.143(e) (10), and 265.145 (e) (11). Af_ Id.

~ Hied Signal

• DOCKET NUMBER Pl PROPOSED RULE JO, L/"' S 0..170 t1--72.

C 5B-E Y{ 3 5, s) *

• 93 MAR 29 P 4 :06 The Secretary of the Commission U.S. Nuclear Regulatory Commission 11555 Rockville Pike Rockville, MD 20852 Attn:

Docketing and Service Branch Re: RIN 3150-AE16

Dear Sirs:

,I March 24, 1993 Allied-Signal Inc. Law Department P.O. Box 2245 Morristown, NJ 07962-2245 (i) Allied-Signal Inc. ("AlliedSignal" ) operates a uranium hexafluoride conversion facility at Metropolis, Illinois, pursuant to a commission license. We file these comments in response to the Commission's proposed rule set forth in Volume 58, No. 6 of the Federal Register of January 11, 1993 (pp. 3515-3522). AlliedSignal strongly supports the concept of a self-guarantee of financial assurance by licensees who are able to demonstrate a given level of financial strength. We believe, however, that the financial stability test should be tied to the current estimate of decommissioning costs rather than to the size of the licensee. Many companies, some of which may be commis sion licensees potentially subject to the proposed financial stability tests, have a credit rating of "A" or above and a substantial tangible net worth although less than one billion dollars. Since the concept of a self-guarantee is acceptable to the Commission, not to make such option readily available to otherwise credit worthy entities not having a one billion dollar net worth seems unfair. We suggest that the Commission establish a net worth requirement of ten times the estimated decommissioning costs or, in the case of licensees with multiple facilities requiring decommissioning, five hundred million dollars to one billion dollars depending on the number of such facilities. Very truly yours, IYAY 111993 Acknowledged by card.......................... ::::; Stevinson General Counsel

NUCLEAH REGULATORY COMMISSI0'1. DOCKETING & SERVICE SECTION OFf ICE OF THE SECRET ARV OF THE COMMISSION Document Slattstics Po~marr. Date _,..c...;..l.,;;._2.....:.;1,;;.....<...f..:...'f:....J __

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• 93 HAR 29 P 3 :49 I

Attention: Docketing and Service Branch

Dear Director:

Environmental Health & Safety Carnegie Mellon University Physical Plant Building 5000 Forbes Avenue Pittsburgh, PA 15213-3890 412-268-3013/8182 Attached are Carnegie Mellon University's comments on the NRC proposed rule for "Self-Guarantee as an Additional Financial Assurance Mechanism." This proposed rule was first published in FR Vol. 58, No. 6 on Monday, January 11, 1993. (() Any questions regarding Carnegie Mellon University comments can be directed to Peter Collopy at the address listed above. ~ truly yours, if-tA._~ Peter Collopy, 00,&H Director, Environmental Health & Safety IAY 11 jOM Acknowledged by card........................ :~::::::

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Carnegie Mellon University Response to Nuclear Regulatory Commission Proposed Rule Regarding Self-Guarantee as an Additional Financial Assurance Mechanism March 22, 1993 Carnegie Mellon University has reviewed the proposed rule by the Nuclear Regulatory Commission (NRC) to allow certain non-electric utility licensees to use self-guarantee as a means of providing financial assurance as published in the January 11, 1993 Federal Register. The university believes that the NRC should include colleges and universities with sufficient discretionary resources to self-guarantee decommissioning in the class of license holders being considered for this proposed rule. By so including colleges and universities, the cost of complying with the regulations would be reduced and these resources could be used for improving the safety conditions within the radiological use areas. We have specific comments to the Financial Test criteria as follows: Part A Criteria (1 ). "Tangible net worth of at least $ 1 billion." (2) (3) We support the proposal to remove this requirement. "Tangible net worth of at least 1 O times the total current decommissionng cost estimate for all decommissioning activities... or the current amount required if certification is used". We support the concept of maintaining resources of1 O times the cost of decommissioning. We believe that other measures than tangible net worth should be permitted. A more reasonable measure for colleges and universities would be "market value of discretionary endowment at least 1 O times the total current decommissionng cost". "Assets located in the United States amounting to at least 90 percent of total assets or at least 10 times the total current decommissioning cost estimate... or the current amount required if certification is used". We support this requirement completely. (4). "A current rating for its most recent bond issuance of AAA, AA, or A as issued by Standard and Poors (S & P), or Aaa, Aa, or A as issued by Moodys." We support this requirement completely.

Part B Criteria (1 ). "The company must have at least one class of equity securities registered under the Securities Exchange Act (SEC) of 1934." We do not believe this is an important measure of financial viability and excludes many privately held corporations and non-profit organizations with adequate resources. If the goal of this requirement is to obtain interim financial information similar to that provided to the SEC, then the requirement should be so revised. (2). "The company's independent certified public accountant must have compared the data used by the company in the financial test ... passes the test". We support this requirement completely. (3). "After the initial financial test, the company must repeat... each succeeding fiscal year." We support this requirement completely.

The Procter &: Gamble Company lvorydale Technical Center 5299 Spring Grove Avenue, Cincinnati, Ohio 45217-1087

• 93 MAR 26 A11 :30 Secretary U.S. Nuclear Regulatory Commission Washington, DC 20555 Attention:

Docketing and Service Branch

Dear Sir or Madam:

This provides the comments of Procter & Gamble to the proposed amendment to NRG regulations which would allow certain non-electric utility licensees to use self-guarantee as a means of financial assurance of decommissioning costs. This proposal was published in the Federal Register on Monday, January 11, 1993 with comments requested by March 29, 1993. (i) Procter & Gamble endorses the proposed revisions. When a licensee is financially strong, it is an unnecessary expense and effort to be required to obtain an annual surety bond to cover some future license decommissioning costs. This is especially so when the use of licensed materials is for research and development efforts where decommissioning costs will be limited. We believe the NRG recognized this when an option in the 1988 regulations permitted a parent company to guarantee for a subsidiary. Yet as issued, the regulations precluded a financially strong parent company from guaranteeing for itself. We have no difficulty with the financial criteria as proposed; however, we see no sound reason the self-guarantee requirements should be any more stringent that the parent-guarantee requirements. We do wish to highlight one aspect. It is critical that the wording of II. (3) of the Self-Guarantee Appendix B include the option that the portion of assets in the United States need only be 10 times the estimated decommissioning costs. Otherwise, because of the wording of the first part of (3), a large multinational company such as Procter & Gamble with major and adequate assets in the United States could be excluded from self-guarantee simply because we might have a majority of assets outside IAY 111993 Acknov1fedged by card..... :.......... i:....... :.~?

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THE PROCTER & GAMBLE COMPANY Secretary U.S. Nuclear Regulatory Commission Page Two March 23, 1993 of the United States. As a suggestion, part (3) could be deleted and part (2) reworded to : (The added words are underlined. ) (2) Tangible net worth and assets located in the United States amounting to at least 10 times the total current decommissioning cost estimate for all decommissioning activities for which the company is responsible as a self-guaranteeing licensee and as parent-guarantor, or the current amount required if certification is used. We hope the Commission will promptly adopt self-guarantee as an option for financially strong licensees for assuring potential decommissioning costs. mjb Very truly yours, a ~-/~ Dr. Donald T. Hooker, Associate Director Professional Standards Department Phone : (513) 627 -5114

DOCKET NUMBER PR ,.Y.,OSED RULE_ 0 ( 56'"' FR. 3~JS)

• 93 MAP 24 P 3 :53 THOMAS W. 0RTCIGER DIRECTOR STATE OF ILLIN0IS DEPARTMENT OF NUCLEAR SAFETY 1035 OUTER PARK DRIVE SPRINGFIELD, IL 62704 (217) 785-9900 March 22, 1993 Secretary of the Commission U.S. Nuclear Regul atory Commission Wash ington, D. C. 20555 JIM EOOAR GoVERNOR RE:

Proposed Rule, "Self-Guarantee as an Additional Financial Assurance Mechanism," 58 Federal Register 3515 - 3522 (January 11, 1993)

Dear Sir:

The Ill inois Department of Nuclear Safety has reviewed the notice of proposed rule referenced above regarding self-guarantee as an additional financial assurance mechanism. In addition, we have reviewed the regulatory analysis document that was prepared in conjunction with the proposed rule. As the State agency responsible for regulating the use of radioactive materials with in Illinois, we are interested in the rulemaking. We are interested also because there are a few facilities in Illinois (e.g., a uranium conversion facility and a spent fuel storage facility} that are licensed by NRC and that may come within t he scope of the proposed rule. The Need for a Specifically Enforceable Commitment from the Self-Guarantor As stated in the proposed rulemaking, the objective of the NRC financial assurance regulations is "to ensure that adequate funds are available to safely decommission facilities. (p. 3518} When comparing the self-guarantee with the parent company guarantee, NRC states that "the parent company guarantee all owed in NRC regulations does not provide a greater degree of financial assurance than self-guarantee proposed here." We are not sure this is correct. The Department recognizes that the proposed regulation would require licensees providing the "self-guarantee" to meet criteria that are comparable to the criteria that parent companies providing guarantees must currently meet. What is missing from the proposed rule is the legally binding commitment from the self-guarantor licensee to make the funds available for decommissi oni ng when NRC determines that it is time to undertake such activities. It is not enough that licensees have assets, the financial assurance requirements should contain some mechanism to ensure that the licensees will make those assets available for1 decommi ssioning when the time comes. ~Y 111993 - Jtcknowledged by card..................................

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Secretary of the Commission Page 2 March 22, 1993 The Department looked at the recommended wording for parent company guarantees contained in Section 4.7.6. of Reg. Guide 3.66 to see how NRC addresses this issue with regard to that surety mechanism. That recommended wording does more than merely state that the parent company guarantor has met the financial tests. Recital 7 establishes a contractual arrangement between the licensee and the parent company and designates the regulator as the third party beneficiary of the that contract. Recital 7 provides in part: that if the licensee fails to perform the required decommissioning activities, as required by [the license], the guarantor shall {a) (b) carry out the required activities, or set up a trust fund in the favor of the [regulator] in the amount of the current cost estimates for these activities. The parent company's liability is not triggered just by i nability of the licensee to undertake decommissioning. The guarantor would also have to create the trust, or undertake decommissioning itself, if the licensee was able but not willing to do so. Thus, while primary responsibility for decommissioning rests with the licensee, if the licensee fails for any reason to fulfill its responsibilities, NRC has access to the surety. The Department recommends that NRC consider incorporating a similar provision in the self-guarantee requirements. Specifically, we suggest that if NRC is going to permit licensees to provide financial assurance through self-guarantee, then as part of the self-guarantee, NRC should require the licensees to enter an agreement providing that, upon issuance of an order by the Commission to undertake decommissioning, the licensee will setup a trust fund in favor of the Commission, or obtain other surety accessible to the Commission, in the amount of the current cost estimates for decommissioning activities. It is not clear to the Department that the self-guarantee" option, or even the "parent company guarantee" option, provides much in the way of financial assurance if a licensee initiates bankruptcy proceedings. How will the rule ensure that assets sufficient to accomplish decommissioning will be protected in bankruptcy proceedings? Additionally, if NRC decides to undertake decommissioning of a licensed site, how will NRC recover its costs? The self-guarantee and parent company guarantee options do not create a secured interest. The Alternative Criteria In the notice of proposed rulemaking, NRC invited comments on the advisability of widening the range of eligible licensees by deleting the $1 billion tangible net worth criterion, an option considered in the regulatory analysis. The Department does not endorse that option. Instead we recommend that, in addition to requiring "self-guarantors to provide an enforceable commitment as discussed above, NRC lower the tangible net worth

Secretary of the Commission Page 3 March 22, 1993 criteria to $10 million. This is the same standard applied by NRC to parent company guarantors. In addition, US EPA's financial tests require corporate guarantors to have $10 million tangible net worth in addition to the high bond rating. Reducing the tangible net worth requirement to $10 million would achieve the NRC's objective of allowing additional licensees to use the self-guarantee option but would still require the self-guarantors to have a stable financial base, thereby increasing the likelihood that decommissioning funds will be available. Compatibility If NRC adopts this rulemaking, we believe that NRC should not consider the self-guarantee provisions to be an item of compatibility that requires Agreement States to adopt similar requirements. The proposal being considered by NRC, is in some respects, significantly less stringent than current requirements imposed by some Agreement States. In addition, as noted above, the Department has some reservations that a "self-guarantee creates a sufficiently secured commitment on the part of licensees to constitute financial assurance. Each Agreement State should have the discretion to require its lic~nsees to provide whatever form of financial assurance the Agreement State deems necessary in order to adequately protect the state against finding it necessary to expend state resources in the event of site abandonment or failure of a licensee to decommission a licensed site. We appreciate the opportunity to comment on this rulemaking. If you have any questions regarding our comments, please feel free to direct them to Wayne Kerr at (217) 785-9918. TWO:las

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< -b ~ 7 -.J ./ I I ~~L-' ~ )li Cst-FY<.3 51 V J)~<(" Marvin I. Lewis 7801 Roosevelt Boulevard Suite 62 Phi 1 a *, PA 1 9152 (215)624-1574 Secretary of the Commission USNRC Washington, D. C. 20555

Dear Secretary:

• 93 MAR 22 Al 1 :QQ A

P lease accept this letter as my cc,mments on the prc,pc,sed ~ e ndments to Parts 30, 40, 50, 70, and 72 of the Commission's regulations governing decommissioning funding. The proposed regulations allow the licensee to be self-guaranteeing in limited circumstances. In this day and age of multi-national corporations being able to flee with their assets across borders and with electronic bank transfers being used to transmit trillions of dollars around the world without anyone knowing whose funds they are transferring, self-guarantees are worth less than the paper that they are written on. If you feel that this is a harsh assessment of self-guarantees, ask any r£~tiree whc, has lc,st his "cc,mpany gL1ar an teed" pension c,r hea 1th benefit. The US does not need anymore S&L rip offs. Please demonstrate that sanity still exists in Government by eliminating any self 9 arantees fc,r clean up. ~ 4(~ 3-14-93.

r,

.,~ I ~ohnson (!llifil (f) S.C. Johnson & Son, Inc. 1525 Howe Street Racine, WI 53403-5011 Phone: (414) 631-2000

• 93 JAN 26 P 4 :03 January 19, 1993 Attention: Docketing and Service Branch Secretary U.S. Nuclear Regulatory Commission Washington, D.C. 20555 RE:

RIN 3150-AElG - "Self Guarante e as an Additional Financial Assurance Mechanism" dated January 11. 1993 at 58 FR 3515-22. Gentlemen: S. C. Johns on and Son, Inc. (SC Johnson) has r e ad NRC' s proposal to amend i ts regulations for decommissioning licensed facilities to allow use of self-guarantee as a means of financial assurance. This proposal was published on January 11, 1993 at 58 FR 3515-22 under: RIN 3150-AElG - "Self Guarante e as an Additional Financial Assurance Mechanism". After reviewing the NRC's rationale for allowing certain electric utility licensees to use self-guarantees as a means of financial assurance for decommissioning, we agree that a wider range of NRC licensees should be qualified to use this mechanism to reduce the cost burden of financial assurance. For this reason, we endorse the Commissions proposal to extend this mechanism to non-electric utility licensees. SC Johnson wishes to thank the NRC for providing this opportunity to submit comments on this proposal. We hope our limited comment will assist the NRC in its approval of this industry petition. If you would like to discuss these comments further, please feel free to contact me at 414/ 631-3570. Sincerely yours, J,- I Jtd,,,,,4 Gene I. Matsumoto Consulting Engineer/RPO U.S. Safety and Environmental Affairs GIM/goa 4011G C G. A. Krieger

c. M. Richards T. T. Stocksdale MAY 111993

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• 93 JAN -6 A 9 : 1 3

[7590-01] ,*r~*wc,,i :;;r nAHY NUCLEAR REGULATORY cb~s~~:l)-i NICf 10 CFR Parts 30, 40, 50, 70, 72 RIN 3150-AE16 Self-Guarantee As An Additional Financial Assurance Mechanism AGENCY: Nuclear Regulatory Commission. ACTION: Proposed rule.

SUMMARY

The Nuclear Regulatory Commission is proposing to amend its regulations for decommissioning licensed facilities to allow certain non-electric utility licensees to use self-guarantee as a means of financial e assurance. The proposed rule would reduce the cost burden of financial assurance while providing NRC with sufficient assurance that decommissioning costs will be funded. This proposed rule responds to a petition for rulemaking (PRM-30-59) from General Electric Company and Westinghouse Electric Corporation. 3 /21113 DATE: Comment period expires ( insert date 75 days after publication). Comments received after this date will be considered if it is practical to do so, but the Commission is able to assure consideration only for comments received on or before this date. 1

ADDRESSES: Mail written comments to: Secretary, U.S. Nuclear Regulatory Commission, Washington, DC, 20555, Attention: Docketing and Service Branch. Deliver comments to: 11555 Rockville Pike, Rockville, Maryland, between 7:45 am and 4:15 pm Federal workdays. Copies of the regulatory analysis and co11111ents received may be examined at: The NRC Public Document Room, 2120 L Street, NW. (Lower Level), Washington, DC. ,e FOR FURTHER INFORMATION CONTACT: Clark Prichard, Office of Nuclear Regulatory Research, U.S. Nuclear Regulatory Commission, Washington, DC 20555, telephone (301) 492-3734. SUPPLEMENTARY INFORMATION:

Background

On September 25, 1991 (56 FR 48445), the NRC published a notice of receipt of a petition for rulemaking from the General Electric Company {GE) and the Westinghouse Electric Corporation {Westinghouse). The petitioners requested. that.the NRC amend its.decommissioning-regulations contained-in 10 CFR Parts 30, 40, 50, 70, and 72 to provide a means for self-guarantee of decommissioning funding costs by certain NRC licensees who meet stringent financial standards and related reporting and oversight requirements. The petitioners proposed that electric utility reactor licensees under 10 CFR Part 50 not be affected by the proposals in the petition. 2

On June 27, 1988 (53 FR 24018), the NRC published a final rule that established general requirements for deconvnissioning nuclear facilities. These requirements provide assurance that licensed facilities will be decorrmissioned in a safe and timely manner and that adequate funds will be available for deco1T111issioning. Under the present deconvnissioning regulations, licensees are permitted to provide financial assurance for decommissioning funding through prepayment, insurance, a surety bond, a letter of credit, a parent company guarantee, or for electric utilities, the establishment of an e external sinking fund. In 1990, GE and Westinghouse requested exemptions from the financial assurance requirements for decommissioning. The requested exemptions would have permitted GE and Westinghouse to demonstrate financial assurance for decorrmissioning by submitting a self-guarantee that otherwise met or exceeded the criteria for qualifying parent company guarantees under Appendix A to 10 CFR Part 30. The Commission denied the requests for exemption. Later in 1990, GE and Westinghouse each submitted a petition for reconsideration of their requests for exemption. These requests for reconsideration were also denied. However, in informing GE and Westinghouse of the denial, the -£orrmission indicated a willingness to consider a petition for rulemaking from GE and Westinghouse. -- The GE/Westinghouse petition was docketed on July 11, 1991 (PRM-30-59). The petition requested that Parts 30, 40, 50, 70, and 72 be amended to allow corporate self-guarantee as an additional method of complying with financial assurance for decommissioning requirements in those parts. The petition proposed criteria for corporate self-guarantee which would assure that only 3

very strong financial entities could qualify. The financial criteria which were proposed are: (1) Tangible net worth of at least $1 billion. (2) Tangible net worth at least 10 times the current decollll1issioning cost estimate, or the current amount required if certification is used. (3) Assets located in the United States amounting to at least 90 percent of total assets or at least 10 times the current decommissioning cost estimate, or the current amount required if certification is used. (4) A current bond rating of AAA, AA, or A as issued by Standard and Poors (S&P), or Aaa, Aa, or A as issued by Moodys. A number of procedural requirements were also proposed: (1) The company must have at least one class of equity securities registered under the Securities Exchange Act of 1934. (2) The company will provide the Commission with copies of all reports filed with the Securities and Exchange Commission under Section 13 of the Securities Exchange Act of 1934. (3) The company's independent certified public accountant must compare the data used by the company in the financial test with the company's independently audited yearend financial statements. ( 4 )--- The---company-must repeat-passage of-the-test w-ithi n--90 days-afteF----- the close of each succeeding fiscal year. (5) The company must notify NRC within 90 days of any matters coming to the attention of the auditor that cause the auditor to believe that the data specified in the financial test should be adjusted and that the company no longer passes the test. 4

The self-guarantee would be available only for an applicant or licensee having no parent company holding majority control of its voting stock. Basis for Petition The petitioners believed that they have been adversely and unreasonably affected by limitations in the current decommissioning regulations. Companies such as the petitioners are unable to guarantee decommissioning funding if they themselves are the licensee. However, relatively weaker financial institutions, such as banks, insurance companies, and savings and loans, are permitted to guarantee decommissioning funding for.licensees without providing any evidence of financial strength. Furthennore, licensees without the financial strength of the petitioners may provide qualifying parent company guarantees solely because these parent companies are legal entities distinct from the subsidiary licensees whose decommissioning funding they guarantee. The petitioners asserted that the lack of an internal decommissioning funding method imposes unwarranted compliance costs upon them. The current regulations compel the petitioners to either restructure their licensed-- acti-vities -into-less-financially-secure subsidiaries for-which--they-could then- - provide a parent company guarantee, or to purchase outside financial assurance. 5

I * . / Public Co111C1ents The Commission received five convnent letters in response to the publication of the notice of receipt of the petition. Most of the letters supported a revision of the Commission's regulations to allow self guarantee. Three large materials licensees supported self guarantee, although they favored less stringent financial criteria for self guarantee so that a wider range of licensees could qualify to use self guarantee. One large materials e licensee prefers that the tangible net worth requirement should be ten times the estimated deconvnissioning costs, or in the case of licensees with multiple facilities requiring decommissioning, $500 million to $1 billion depending on the number of such facilities. Another large materials lfcensee suggests that NRC use the same financial requirements now applicable to parent company guarantees. It does not see any need to make the tangible net worth criterion any higher than $50 million. The minimum bond rating requirement should be BBB or Baa, the lowest rating still considered investment grade. Also, in their opinion, the financial ratio tests in Appendix A to 10 CFR Part 30 should be retained as an alternative to the bond rating criterion.

Finally, this convnenter does not believe that the more restrictive tangible net

-worth/decommissioning cost ratio-proposed-in the-petition-is justified-.---:--_ Another large materials licensee asserts that there is no rational basis for establishing criteria for a company self-guarantee which differ significantly from existing criteria for the parent company guarantee. In either instance, the adequacy of the financial assurance requirement provided is based on the value of the assets securing the decommissioning obligation. According to this commenter, if the assets are held in two separate pools, each technically 6

owned by a different but related company, the level of financial security provided does not increase in any significant measure. In virtually all instances where the parent guarantee is utilized, the subsidiaries are wholly or substantially owned by the parent such that the financial and other elements of the two entities are substantially the same. As an alternative, this commenter recommends that the NRC adopt the petitioners' proposal, modified by reducing the minimum tangible net worth requirement to at most $100 million, and requiring a bond rating not lower than BBB or Baa. An electric utility licensee opposes the petition's exclusion of the electric utility reactor licensees under 10 CFR Part 50. Its position is that decommissioning regulations should apply to all licensees equally and that compliance alternatives contingent on licensee financial status and size should also be available to utilities. A commenter opposed self-guarantee, citing the potential for takeover and breakup of large corporations. This would mean that a company initially allowed to use a self guarantee by meeting the criteria, subsequently could be substantially weakened through restructuring. The ability of the restructured company to meet deconunissioning costs could be in doubt. ~Response-to-Comments-- Several commenters favored the self guarantee concept but argued for less stringent financial criteria. The Convnission is interested in alternative financial criteria which would permit more licensees to use the proposed self-guarantee, yet would maintain a high level of financial 7

assurance. The CoDJDission is asking for public corrments on a possible. alternative to the proposed financial criteria (see Alternative Criteria). Regarding the convnent concerning the exclusion of electric utilities from the scope of the proposed self-guarantee, the Commission allows electric. utilities to accumulate decorrmissioning funds in an extern~l sinking fund.

• Unlike other licensees subject to financial assurance requirements, electric utilities do not*have to provide financial assurance *up front." Thus, electric utilities already are permitted a cost-reducing financial assurance e

mechanism. In response to the comment that self-guarantee should not be allowed because of the potential for takeover and breakup of large companies, the Corrmission believes that the requirements for annual re-certification, combined with timely bond rating reviews, will be adequate to. maintain the level of financial assurance of the proposed self-guarantee. Basis for the Commission's Decision The Convnission has carefully reviewed the arguments in the petition, as well as the public comments. For the-reasons outlined below, it has-decided - - to -init~ate-thi-s -rulemak-ing, which,- if -promulgated*-as-final-, would-grant-the,-~- petiti on. Stringent Financial Criteria The financial criteria proposed for self-guarantee are exceptionally stringent. The Co1T111ission is confident that licensees able to meet the 8

financial criteria provide the necessary reasonable assurance that funding will be available to meet decomissioning costs. The regulatory analysis estimates that only approximately 20 present NRC licensees could meet the criteria. The criterion for tangible net worth, $1 billion, far exceeds that required for the NRC parent company guarantee ($10 million). In addition to the $1 billion tangible net worth requirement, the proposed rule would require that a licensee must have tangible net worth at least ten times the total e current decommissioning cost estimate for all decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor, or the current amount required if certification is used. To assure that assets are within reach of the Commission's authority, 90 percent of total asse'ts or at least ten times total decommissioning cost estimates for all decommissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor, or the current amount if , certification is used, would need to be in the United States. In addition to tangible net worth criteria, the financial criteria include a bond rating of A or above. This bond rating is above that required to classify debt securities as "investment grade." The principal debt*-r-ating services-,- Moodys-and Standard and-Poors, classify bonds with a rating of Baa-- and BBB respectively, as "investment grade" as opposed to bonds with a lesser rating which are classified as "speculative grade." Bond ratings are reviewed often, and changed in response to changes in the issuer's financial condition. A bond rating of A or better assures that the financial strength of a licensee offering a self-guarantee has been independently reviewed and affirmed. It provides an excellent guide to the ability of a company to meet its 9

obligations. According to Moodys, default rates associated with companies whose bonds are rated A or above in 1 of the 3 years prior to default are 0.13 percent annually. 1 There could be concern that a self-guaranteeing licensee's financial condition could deteriorate over time, jeopardizing deconunissioning funding. The proposed rule has the following safeguards against this possibility: (1) A licensee using self-guarantee would need to be re-certified each year as meeting the financial criteria, (2) Copies of all current financial reports ,e filed with the Securities and Exchange Commission would also need to be provided to the Commission, (3) The company would need to notify NRC within 90 days of any matters which could prevent the company from any longer passing the financial criteria, and (4) The company would need to notify NRC ~ithin 20 day~ if its bonds are no longer rated A or better. Cost Savings The objective of this proposed rule is to reduce the licensee's cost burden without adverse effects on public health and safety. The draft regulatory analysis dev.eloped for this proposed rule estimates that annual total cost-sav-4ngs-would be-approximately-$600, 000-for-al l i censees-us-ing--the:--- self-guarantee. This estimate is*based on rather conservative assumptions (i.e., $750,000 total decommissioning cost per license); the actual cost savings may be considerably greater. Both the petition for rulemaking and several public cpmment letters assert much greater cost savings. 1Corporate Bond Defaults and Default Rates, Moody's Special Report, January 1991, p. 32.

The cost savings would result from the elimination of the cost of third party financial assurance for licensees qualifying to use the proposed self-guarantee. Annual fees for letters of credit, surety bonds, and other fonns ~ of third party financial assurance typically are approximately 1.5 percent of the amount of financial assurance provided. Comparison wjth Parent Guarantee The NRC currently allows licensees to comply with its financial assurance regulations by means of a parent company guarantee. ihe parent company of a licensee, if it meets the financial criteria in 10 CFR Part 30, Appendix A, may guarantee that funds will be available to decommission the facility of its subsidiary licensee. The parent company guarantee allowed in NRC regulations does not provide a greater degree of financial assuraAce than self-guarantee for a company meeting the criteria_proposed here. Under current regulations, there is no explicit regulatory requirement that licensees using the parent company guarantee: (1) be wholly independent of the parent company who provides the guaraijtee and (2) demonstrate financial -~ualifications -in itself that are comparable to those required of a parent company guarantor under current regulations-or --those-proposed for self-- guarantee in the petition. A company which meets the financial criteria for the proposed rule could readily pass the financial test in 10 CFR Part 30, Appendix A, and would thus be eligible to provide a parent company guarantee for a subsidiary. It is anomalous for NRC regulations to pe~it a large, financially strong company to provide a parent company guarantee, but not allow that same company to provide 11

a self-guarantee. Moreover, a large, financially strong company could carry out a corporate restructuring to create a licensee subsidiary which could then be covered by a parent company guarantee. EPA Precedent The Environmental Protection Agency (EPA) allows self-guarantee as a mechanism for meeting its financial assurance regulations for hazardous waste facilities (40 CFR Parts 264 and 265). The objective of EPA and NRC financial assurance regulations is the same; to ensure that adequate funds are available to safely decommission facilities. EPA has about 10 years of experience with self-guarantee to date (the final rule was promulgated on April 7, 1982, 47 FR 15033), and self-guarantee has been an effective financial assurance mechanism. Alternative Criteria The Convnission notes that a majority of commenters on the petition questioned the need for the financhl criteria for self-guarantee to-be as stringent-as-*proposed*here~ Allowing less-strtngent criteria would*pennit--- additional licensees to use self guarantee and thus reduce the costs of complying with the Commission's regulations. The draft regulatory analysis indicates that one approach which could widen the range of eligible licensees would be to delete the $1 billion tangible net worth criterion. A company's tangible net worth is an important factor comprising its bond ra~ing, and the rating,itself, combined with the other criteria, may be a sufficient indicator 12

of financial stability. Since all firms qualifying would need an A or better bond rating, this alternative may not be riskier in terms of financial assurance than the proposed rule. The draft regulatory analysis examines the effects of deleting the $1 billion tangible net worth requirement from the financial criteria in the proposed rule, all other criteria remaining constant. The conclusion is that this alte'rnative, if adopted, would allow an additional 7 firms, holding 11 licenses, to use the proposed self-guarantee. 1 The Commission is especially interested in public co11111ents on this alternative financial criteria--the criteria in this proposed rule without the $1 billion tangible net worth requirement. Administrative Conforming Changes Sections 30.B(b), 40.B(b) and 50.B(b) are being revised to list all the regulatory provisions of these parts that contain information collections. Environmental Impact: Categorical Exclusion The NRC has determined that this proposed regulation is the type-of act i on--descri bed-as -a categor-i ca 1--excl usi on--i n CFR--51-.-22 ( c) ( 10) ( i) *. Therefore, neither an environmental impact statement nor an environmental assessment has been prepared for this proposed regulation. 13

Paperwork Reduction Act Statement This proposed rule amends information collection requirements that are subject to the Paperwork Reduction Act of 1980 (44 U.S.C. 3501, et seq'.). This rule has been submitted to the Office of Management and Budget for review and approval of the paperwork requirements. The public reporting burden for this collection of information is estimated to average 19 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to the Information and Records Management Branch (MNBB-7714), U.S. Nuclear Regulatory Commission, Washington, DC 20555, and to the Desk Officer, Office of Information and Regulatory Affairs, NEOB-3019, (3150-0017, -0020, -0011, -0009, -0132), Office of Management and Budget, Washington, DC 20503. Regulatory Analysis The Commission has prepared-a-draft-regulatory-analysis-on this -proposed--- regulation. The analysis examines the costs and benefits of the alternatives considered by the Commission. The draft analysis is available for inspection in the NRC Public Document Room, 2120 L Street, NW. (Lower Level}, Washington, DC. Single copies of the draft analysis may be obtained from Clark W. Prichard, Office of Nuclear Regulatory Research, U.S. Nuclear Regulatory Commission, Washington, DC, 20555 telephone (301} 492-3734. 14

The Commission requests public cotm1ent on the draft regulatory analysis. Comments on the draft analysis may be submitted to the NRC as indicated under the ADDRESSES heading. Regulatory Flexibility Certification In accordance with the Regulatory Flexibility Act, 5 U.S.C. 605{b), the Commission certifies that, if promulgated, this proposed rule will not have a significant economic impact upon a substantial number of small entities. The proposed rule would affect only entities with a tangible net worth of $1 billion. The licensees affected by,this proposed rule do not fall within the scope of the definition of "small entities" set forth in the Regulatory Flexibility Act or the size standards of the NRC applicable to a small business {56 FR 56671; November 6, 1991). Backfit Analysis The NRC has determined that the backfit rule, 10 CFR 50.109, does not -apply to this proposed rule and, therefore, that a backfit analysis is not required -for-this proposed rule, because--these -amendments do not i nvo l ve--any---- -- provisions which would impose backfits as defined in 10 CFR 50.109{a){l). 15

List of Subjects , 10 CFR Part 30 Byproduct *material, Civil penalty, Government contracts, Intergovernmental relations, Isotopes, Nuclear material, Radiation protection, Reporting and recordkeep1ng requirements. 10 CFR Part 40 Criminal penalty, Government contracts, Hazardous materials-transport, Nuclear materials, Reporting and recordkeeping requirements, Source material, Uranium. 10 CFR Part 50 Antitrust, Classified informati.on, Criminal penalty, Fire protection, Incorporation by reference, Intergovernmental relations, Nuclear power plants and reactors, Radiation protection, Reactor siting criteria, Reporting and recordkeeping requirements. 10 CFR Part 70 Crim*i na 1-penalty, Hazardous-materials-transportation, Materi a 1-contra 1---- - and accounting, Nuclear materials, Packaging and containers, Penalty, Radiation protection, Reporting and recordkeeping requirements, Scientific equipment, Security measures, Special nuclear material. 16

10 CFR Part 72 Manpower training programs, Nuclear materials, Occupational safety and health, Reporting and recordkeeping requirements, Securi~y measures, Spent fuel. For the reasons set out in the preamble and under the authority of the Atomic Energy Act of 1954, as amended, the Energy Reorganization Act of 1974, as amended, and 5 U.S.C. 553, the NRC is proposing to adopt the following amendmenti to 10 CFR Parts 30, 40, 50, 70, and 72. PART 30 - RULES OF GENERAL APPLICABILITY TO DOMESTIC LICENSING OF BYPRODUCT MATERIAL

1.

The authority citation for Part 30 continues to read as follows: AUTHORITY: Secs. 81, 82, 161, 182, '183, 186, 68 Stat. 935, 948,

953, 954, 955, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 2111, 2112, 2201, 2232, 2233, 2236, 2282); secs. 201, as amended, 202, 206, 88 Stat.

1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846). Section 30.7 also issued under Pub. L. 95-601, sec. 10, 92 StaL-2951 ( 42-U. S-. C. -5851--). Section. 34 (-b )- a 1 so-1 ssued under-sec-. 184,- 68-Stat. 954,~*. -- as amended {42 U.S.C. 2234). S~ction 30.61 also issued under sec. 187, 68 Stat. 955 (42 U.S.C. 2237). For the purposes of sec. 223, 68 Stat. 958, as amended (42 U.S.C. 2273); §§ 30.3, 30.10, 30.34(b), (c), (f), (g) and (i}, 30.41 (a) and (c), and 30.53 are issued under sec. 161b, 68 Stat. 948, as amended (42 U.S.C. 220l(b)); § 30.10 is issued under sec. 16li, 68 Stat. 949, as amended (42 U.S.C. 17

220l{i)); and§§ 30.6, 30.9, 30.34{g), 30.36, 30.50, 30.51, 30.52, 30.55, and* 30.56{b) and {c) are issued under sec. 1610, 68 Stat. 950, as amended {42 u.s.c. 2201(0)).

2.

In § 30.8 paragraph (b) is revised to read as follows: § 30.8 Information collection requirements: 0MB approval {b) The approved information collection requirements contained in thts e part appear *in §§ 30.15, 30.19, 30.20, 30.32, 30.34, 30.35, 30.36, 30.37, 30.38, 30.50, 30.51, 30.55, 30.56, and Appendix A and B.

3.

In § 30.35, the introductory text of paragraph {f),{2) is revised to read as follows: § 30.35 Financial assurance and recordkeeping fo,r decommissioning. {f) {l) (2) A surety method, insurance, or other guarantee method. These methods guarantee that decommtssioning* costs will be paid. A surety method - -may be-in-the -form-of a surety~bond; letter of credit-, or-1 ine-of credit~ - A-- parent company guarantee of funds for decommissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix A of this part. A parent company guarantee may not be used in combination with other financial methods to satisfy the requirements of this section. A guarantee of funds by the applicant or licensee for deconvnissioning costs based on a financial test may be used if the guarantee 18

and test are as contained in Appendix B of this part. A guarantee by the applicant or licensee may not be used in combination with any other financial methods to satisfy the requirements of this section or in.any situation where the applicant or licensee has a parent.company holding majority control of the voting stock of the company. Any surety method or insurance used to provide financial assurance for deco1T111issioning must contain the following conditions:

4. A new Appendix Bis added to Part 30 to read as follows:

Appendix B to Part 30 - Criteria Relating to Use of Financial Tests and. Self Guarantees for Providing Reasonable Assurance of Funds for Decolll'llissioning. I. Introduction. An applicant or licensee may provide reasonable assurance of the availability of funds for deco1T111issioning based on furnishing its own guarantee that funds will be available for decommissioning costs and on a demonstration that the company passes the financial test of Section II of this* appendix. The terms of the self-guarantee are in Section III of this ---appendix. This appendix establishes criteria for passing the financial* test for the-self~ guarantee-and* est ab li shes --the-terms for-a-se l f-guarant'ee-. -----

11. Financial Test.

A. To pass the financial test, a company must meet all of the following criteria: (1) Tangible net worth of at least $1 billion. (2) Tangible net worth at least 10 times the total current decommissioning cost estimate for all decolllllissioning activities for which the 19

company is responsible as self-guaranteeing licensee and as parent-guarantor, or the current amount required if certification is used. (3) Assets located in the United States amounting to at least 90 percent of total assets or at least 10 times the total current decommissioning cost estimate for all deconvnissioning activities for which the company is responsible as self-guaranteeing licensee and as parent-guarantor, or the current amount required if certification is used. (4) A current rating for its most recent bond issuance of AAA, AA, or A as issued by Standard and Poors (S&P), or Aaa, Aa, or A as* issued by Moodys. B. To pass the financial test, a company must meet all of the following additional requirements: (1) The company must have at least one class of equity securities registered under the Securities Exchange Act of i934. (2) The company's independent certified public accountant must have compared the data used by the company in the financial test which is derived from the independently audited, yearend financial statements for the latest fiscal year, with the amounts in such financial statement. In connection with that procedure, the licensee shall inform NRC withi~ 90 days of any matters coming to the attention of the auditor that cause the auditor to bel-teve that-the data spee-1fied-1n the-financial test should -be adjusted and that--the----*--~ company no longer passes the test. (3) After the initial financial test, the company must repeat passage of the test within 90 days after the close of each succeeding fiscal year. III. Company Self-Guarantee. The terms of a self-guarantee which an applicant or licensee furnishes must provide that: 20

A. The guarantee will remain in force unless the licensee sends notice of cancellation by certified mail to the Commission. Cancellation may not occur, however, during the 120 days beginning on the date of receipt of the notice of cancellation by the Commission, as evidenced by the return receipt. B. The licensee will provide alternative financial assurance as specified in the Commission's regulations within 90 *days following receipt by the Commission of a notice of cancellation of the guarantee. C. The guarantee and financial test provisions must remain in effect until the Co11111ission has terminated the license or until another financial assurance method acceptable to the Commission has been put in effect by the licensee. D. The licensee will promptly forward to the Comission and the licensee's independent auditor all reports covering the latest fiscal year filed by the licensee with the Securities and Exchange Convnission pursuant to the requirements of Section 13 of the Securities and Exchange Act of 1934. E. If, at any time, the licensee's most recent bond issuance ceases to be rated in any category of "A" or above by either Standard and Poors or Moodys, the licensee will provide notice in writing of such fact to the Commission within 20 days after publication of the change by the rating-- service~- - PART 40 - DOMESTIC LICENSING OF SOURCE MATERIAL

5.

The authority citation for Part 40 continues to read as follows: AUTHORITY: Secs. 62, 63, 64, 65, 81, 161, 182, 183, 186, 68 21

Stat. 932, 933, 935, 948, 953, 954~ 955, as amended, secs. lle(2), 83, 84, Pub. L. 95-604, 92 Stat. 3033, as amended, 3039, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 2014(e)(2), 2092, 2093, 2094, 2095, 2111, 2113, 2114, 2201, 2232, 2233, 2236,,2282); sec. 274, Pub. L. 86-373, 73 Stat. 688 {42 U.S.C. 2021); secs. 201, as amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846); sec. 275, 92 Stat. 3021, as amended by Pub. L. 97-415, 96 Stat. 2067 (42 U.S.C. 2022). Section 40.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 2951 e (42 U.S.C. 5851). Section 40.3l(g) also issued under sec. 122, 68 Stat. 939 (42 U.S.C. 2152). Section 40.46 also issued under sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234). Section 40.71 also issued under sec. 187, 68 Stat. 955 (42 u.s.c. 2237}. For the purposes of sec. 223, 68 Stat. 958, as amended {42 U.S.C. 2273); §§ 40.3, 40.25(d){l)-(3), 40.35{a)-(d) and {f), 40.4l(b) and (c), 40.46, 40.5l{a} and (c), and 40.63 are issued under sec. 161b, 68 Stat. 948, as amended (42 U.S.C. 220l(b}); § 40.10 is issued under sec. l6li, 68 Stat. 949, as amended (42 U.S.C. 2201(1)); and §§ 40.5, 40.9, 40.25(c), (d){3), and (4), 40.26(c)(2), 40.35(e), 40.42, 40.60, 40.61, 40.62, 40.64, and 40.65 are issued under sec. 1610, 68 Stat. 950, as amended (42 U.S.C. 2201i~)).

6. In§ 40.8 paragraph (b) is revised to read as follows:

§ 40.8 Information collection requirements: 0MB approval. (b) The approved information collection requirements contained in this part appear in ef§ 40.25, 40.26, 40.31, 40.35, 40.36, 40.42, 40.43, 40.44, 40.60, 40.61, 40.64, 40.65, and Appendix A. 22

7.

In § 40. 36 the i ntrod.uctory text of paragraph ( e )( 2) is revised to

• read as follows:

§ 40.36 Financial assurance and recordkeeping for deconvnissioning. {e) (2) A surety method, insurance, or other guarantee method.* These methods guarantee that decorrrnissioning costs will be paid. A surety method may be in the form of a surety bond, letter of credit, or line of credit. A parent company guarantee of funds for decorrmissioning costs based oh a financial test may be used if the guarantee and test are as contained in Appendix A of 10 CFR Part 30. A parent company guarantee may not be used in combination with other financial methods to satisfy the requirements of this section. A guarantee of funds by the applicant or licensee for decommissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix B of 10 CFR Part 30. A guarantee by the applicant or licensee may not be used in combination with any other financial methods to sattsfy the requirements of this section or in any situation where .the *applicant-or-licensee has a parent company-11olding majority *contr~o(* -the*---- vot i ng stock of the company. Any surety method or insurance used to provide financial assurance for decolTlllissioning must contain the following conditions: 23

PART 50 - DOMESTIC LICENSING OF PRODUCTION AND UTILIZATION FACILITIES

8. The authority citation for Part 50 continues to read as follows:

AUTHORITY: Secs. 102, 103, 104, 105, 161, 182, 183, 186, 189, 68 Stat. 936, 937, 938, 948, 953, 954, 955, 956, as amended, sec. 234, 83 Stat. 1244, as amended (42 U.S.C. 2132, 2133, 2134, 2135, 2201, 2232, 2233, 2236, 2239, 2282); secs. 201, as amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 (42 u.s.c. 5841, 5842, 5846). Section 50.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 2951 (42 U.S.C. 5851). Section 50.10 also issued under secs. 101, 185, 68 Stat. 936, 955, as amended (42 U.S.C. 2131, 2235); sec. 102, Pub. L. 91-190, 83 Stat. 853 (42 U.S.C. 4332). Sections 50.13, 50.54{dd), and 50.103 also issued under sec. 108, 68 Stat. 939, as amended (42 U.S.C. 2138). Sections 50.23, 50.35, 50.55, and 50.56 also issued under sec. 185, 68 Stat. 955 (42 U.S.C. 2235). Sections 50.33a, 50.55a and Appendix Q also issued under sec. 102, Pub. L. 91-190, 83 Stat. 853 (42 U.S.C. 4332). Sections 50.34 and 50.54 also issued under sec. 204, 88 Stat. 1245 (42 U.S.C. 5844). Sections 50.58, 50.91, and 50.92 also issued under Pub. L. 97-415, 96 Stat. 2073 (42 U.S.C. 2239). Section 50.78 also issued under sec~ 122, 68 Stat. 939 (42-u.s.c. 2152). Sections 50-.80-- 50.81-also issued under-sec~-184,-68 -Stat. 954, as amended--- - (42 U.S.C. 2234). Appendix Falso issued under sec. 187, 68 Stat. 955 (42 u.s.c 2237). For the purposes of sec. 223, 68 Stat. 958, as amended (42 U.S.C. 2273); §§ 50.5, 50.46(a) and (b), and 50.54(c) are issued under sec. 161b, 68 Stat. 948, as amended (42 U.S.C. 220l(b)); §§ 50.5, 50.7(a), 50.lO(a)-(c), 50.34(a) and (e), 50.44(a)-(c), 50.46(a) and (b), 50.47(b), 50.48(a), (c), (d), and

• 24

(e), 50.49(a), 50.54(a), (1), (i)(l), (1)-(n), (p), (q), (t), (v), and (y), 50.55(f), 50.55a(a), (c)-{e), (g), and {h}, 50.59{c), 50.60{a), 50.62{b}, 50.64(b), 50.65, and 50.80(a) and (b) are issued under sec. 1611, 68 Stat. 949, as amended (42 U.S.C. 2201(1)); and§§ 50.9, 50.49(d), (h), and (j), 50.54(w), (z), (bb), (cc), and (dd), 50.55(e), 50.59(b), 50.6l(b), 50.6Z(b), 50.70(a), 50.71(a)-(c) and (e), 50.72(a), 50.73(a) and (b), 50.74, 50.78, and 50.90 are issued under sec. 1610, 68 Stat. 950, as amended (42 U.S.C. 2201(0)) *

9.

In§ 50.8 paragraph (b) is revis~d to read as follows: § 50.8 Information collection requirements: 0MB approval. (b) The approved information collection requirements contained in this part appear in § § 50.30, 50.33, 50.33a, 50.34, 50.34a, 50.35, 50.36, 50.36a, 50.48, 50.49, 50.54, 50.55, 50.55a, 50.59, 50.60, 50.61, 50.63, 50.64, 50.65, 50.71, 50.72, 50.75, 50.80, 50.82, 50.90, 50.91, and Appendices A, a, E, G, H, I, J, K, M, N, 0, Q, and R.

10. In§ 50.75 the introductory text of paragraph (e)(l)(iii) and--

) paragraph- (e)(2*)( iii} -are--revi sed--to read as-follows:- ~ § 50.75 Reporting and recordkeeptng for decommissioning planning. {e) {l) 25

)'. r (iii) A surety method, insurance, or other guarantee method. These methods guarantee that decommissioning costs will be paid. A surety method may be in the form of a surety bond, letter of credit, or line of credit. Any surety method or insurance used to provide financial assurance for* decommissioning must contain the following conditions: (2) (iii) A surety method, insurance, or other guarantee method. A parent company guarantee of funds for decommissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix A of 10 CFR Part 30. A parent company guarantee may not be used tn combination with other financial methods to satisfy the requirements of this section. A guarantee of funds by the applicant or licensee for decorrunissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix B of 10 CFR Part 30. A guarantee by the applicant or the licensee may not be used in combination with any other financial methods to satisfy the requirements of this section or in any situation where the applicant or licensee has a parent company-holding majority control of the vot4ng stock of the company.* - PART 70 - DOMESTIC LICENSING OF' SPECIAL NUCLEAR MATERIAL

11. The authority citation for Part 70 continues to read as follows:

26

AUTHORITY: Secs. 51, 53, 161, 182, 183, 68 Stat. 929, 930, 948, 953, 954, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 2071, 2073, 2201, 2232, 2233, 2282); secs. 201, as amended, 202, 204, 206, 88 Stat. 1242, as amended, 1244, 1245, 1246 (42 U.S.C. 5841, 5842, 5845, 5846). Sections 70.l(c) and 70.20a(b) also issued under secs. 135, 141, Pub. L. 97-425, 96 Stat. 2232, 2241 (42 U.S.C. 10155, 10161). Section 70.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 2951 (42 U.S.C. 5851). Section 70.2l(g) also issued under sec. 122, 68 Stat. 939 (42 U.S.C. 2152). Section e 70.31 also issued under sec. 57d, Pub. L. 93-377, 88 Stat. 475 (42 U.S.C. 2077). Sections 70.36 and 70.44 also issued under sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234). Section 70.61 also issued under secs. 186, 187, 68 Stat. 955 (42 U.S.C. 2236, 2237). Section 70.62 also issued under sec. 108, 68 Stat. 939, as amended (42 U.S.C. 2138). For the purposes of sec. 223, 68 Stat. 958, as amended (42 U.S.C. 2273); §§ 70.3, 70.10, 70.19(c), 70.2l(c), 70.22(a), (b), (d)-(k), 70.24(a) and (b), 70.32(a)(3), (5), (6), (d), and (i), 70.36, 70.39(b) and (c), 70.4l{a), 70.42(a) and (c), 70.56, 70.57{b), (c), and (d), 70.58(a)-{g){3), and (h)-(j) are issued under sec. 161b, 68 Stat. 948, as amended (42 U.S.C. 220l(b)); -§§ 70.7, 70.10, 70.20a(a) and (d), 70.20b(c) and (e), 70.2l(c), 70.24(b), 70.32(a)(b), (c), (d), (e), and (g), 70.36, 70.Sl(c)-(g), 70.56, 70.57(b)- and (d), and 70.58 (a)-(g){3) and (h}-(j} are issued under sec. 1611, 68 Stat. 949, as amended (42 U.S.C. 220l(i)); and §§ 70.5, 70.9, 70.20b(d} and (e), 70.38, 70.50, 70.Sl(b) and (i), 70.52, 70.53, 70.54, 70.55, 70.58(g)(4), {k), and (1), 70.59 and 70.60(b) and (c) are issued under sec. 1610, 68 Stat. 950, as amended (42 U.S.C. 2201(0)). 27

12. In § 70.25, the introductory text of paragraph(f)(2) is revised to read as follows:

§ 70.25 Financial assurance and recordkeeping for decommissioning. (f) (2) A surety method, insurance, or other guarantee method. These methods guarantee that decommissioning costs will be paid. A surety method may be in the form of a surety bond, letter of credit, or line of credit. A parent company guarantee of funds for decommissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix A of 10 CFR Part 30. A parent company guarantee may not be used in combination with other financial methods to satisfy the requirements of this section. A guarantee of funds by the applicant or licensee for decommissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix B of 10 CFR Part 30. A guarantee by the applicant or the licensee may not be used in combination with any other financial methods to satisfy the requirements of this section or in any situation where the applicant or licensee has a parent company holding majority-control of the voting stock of the company. Any surety method or insurance used to provide financial-assurance-for deconvnissioning must--contain-

• the following conditions:

PART 72 - LICENSING REQUIREMENTS FOR THE INDEPENDENT STORAGE OF SPENT NUCLEAR FUEL AND HIGH-LEVEL RADIOACTIVE WASTE

13. The authority citation for Part 72 continues to read as follows:

28

AUTHORITY: Secs. 51, 53, 57, 62, 63, 65, 69, 81, 161, 182, 183, 184, 186, 187, 189, 68 Stat. 929, 930, 932, 933, 934, 935, 948, 953, 954, 955, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 2071, 2073, 2077, 2092, 2093, 2095, 2099, 2111, 2201, 2232, 2233, 2234, 2236, 2237, 2238, 2282); sec. 274, Pub. L. 86-373, 73 Stat. 688, as amended (42 U.S.C. 2021); sec. 201, as amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846); Pub. L. 95-601, sec. 10, 92 Stat. 2951 (42 U.S.C. 5851); sec. 102, Pub. L. 91-190, 83 Stat. 853 {42 U.S.C. 4332); Secs. 131, 132, 133, 135, e 137, 141, Pub. L. 97-425, 96 Stat. 2229, 2230, 2232, 2241, sec. 148, Pub. L. 100-203, 101 Stat. 1330-235 (42 U.S.C. 10151, 10152, 10153, 10155, 10157, 10161, 10168). Section 72.44{g) also issued under secs. 142{b) and 148{c), (d), Pub. L. 100-203, 101 Stat. 1330-232, 1330-236 (42 U.S.C. 10162(b), 10168(c), (d)). Section 72.46 also issued under sec. 189, 68 Stat. 955 (42 U.S.C. 2239); sec. 134, Pub. L. 97-425, 96 Stat. 2230 (42 U.S.C. 10154). Section 72.96(d) also issued under sec. 145(g), Pub. L. 100-203, 101 Stat. 1330-235 (42 U.S.C. 10165(9)). Subpart J also issued under secs. 2(2), 2(15), 2(19), 117(a), ~4l(h), Pub. L. 97-425, 96 Stat. 2202, 2203, 2204, 2222, 2244 (42 U.S.C. 10101, 10137 {a), 10161 (h)). - Subparts K and L are al so issued under sec~ 133, 98-Stat~-2230-(42-u.s.c.--10153) -and-sec.- 218(a)-, 96-Stat. 2252 {42 u~s.c. ---- 10198). For the purposes of sec. 223, 68 Stat. 958, as amended {42 U.S.C. 2273); §§ 72.6, 72.12, 72.22, 72.24, 72.26, 72.28(d), 72.30, 72.32, 72.44(a), (b)(l), (4), (5), (c), (d)(lL (2), (e), (f), 72.48(a), 72.50(a), 72.52(b), 72.72(b), (c), 72.74(a), (b), 72.76, 72.78, 72.104, 72.106, 72.120, 72.. 122, 72.124, 72.126, 72.128, 72.130, 72.140(b), (c), 72.148, 72.154, 72.156, 29

72.160, 72.166, 72.168, 72.170, 72.172, 72.176, 72.180, 72.184, 72.186 are issued under sec. 161b, 68 Stat. 948, as amended (42 U.S.C. 220l{b)); § § 72.lO(a), {e), 72.12, 72.22, 72.24, 72.26, 72.28, 72.30, 72.32, 72.44(a), {b)(l}, (4), (5), {c), (d)(l), (2), (e}, (f}, 72.48 (a), 72.SO{a}, 72.52(b), 72.90(a)-{d), (f), 72.92, 72.94, 72.98, 72.100, 72.102(c), (d), (f}, 72.104, 72.106, 72.120, 72.122, 72.124, 72.126, 72.128, 72.130, 72. 140 ( b), ( c}, 72.142, 72.144, 72.146, 72.148, 72.150, 72.152, 72.154, 72.156, 72.158, 72.160, 72.162, 72.164, 72.166, 72.168, 72.170, 72.172, 72.176, 72.180, 72.182, 72.184, 72.186, 72.190, 72.192, 72.194 are issued under sec. 1611, 68 Stat. 949, as amended (42 U.S.C. 2201(1}}; and §§ 72.lO(e), 72.11, 72.16, 72.22, 72.24, 72.26, 72.28, 72.30, 72.32, 72.44(b)(3), {c)(S), (d)(3), (e), (f), 72.48(b), {c), 72.SO(b), 72.54(a), {b), (c), 72.56, 72.70, 72.72, 72.74(a), (b), 72.76{a), 72.78(a), 72.80, 72.82, 72.92(b), 72.94(b), 72.140(b), (c), (d}, 72.144(a), 72.146, 72.148, 72.150, 72.152, 72.154(a), {b), 72.156, 72.160, 72.162, 72.168, 72.170, 72.172, 72.174, 72.176, 72.180, 72.184, 72.186, 72.192, 72.212(b}, 72.216, 72.218, 72.230, 72.234(e) and (g} are issued under sec. 1610, 68 Stat. 950, as amended (42 U.S.C. 2201(0)).

14. In § 72.30 the introductory text of paragraph (c){2) is-revised to read as follows:

§ 72.30 Decommissioning Planning including financing and recordkeeping. (c} (2) A surety method, insurance, or other guarantee method. These methods guarantee that decommissioning costs will be paid. A surety method may be in the form of a surety bond, letter of credit, or line of credit. A 30

parent company guarantee of funds for deco11111issioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix A of 10 CFR Part 30. A parent company guarantee may not be used in combination with other financial methods to satisfy the requirements of this section. A guarantee of funds by the applicant or licensee for deconmissioning costs based on a financial test may be used if the guarantee and test are as contained in Appendix B of 10 CFR Part 30. A guarantee by the applicant or the licensee may not be used.in combination with a~y other e financial methods to satisfy the requirements of this section or in any situation where the applicant or licensee has a parent company holding majority control of the voting stock of the company. Any surety method or insurance used to provide financial assurance for decommissioning must contain the following conditions: r'- Dated at Rockville, Maryland, thisL day of January , 1993. Nuclear Regulatory Commission. ommission. 31}}