# Decommissioning Planning > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2011-14267 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** June 17, 2011 - **Citation:** 76 FR 35512 ## Text NUCLEAR REGULATORY COMMISSION 10 CFR Parts 20, 30, 40, 50, 70, and 72 [NRC-2008-0030] RIN 3150-AI55 Decommissioning Planning AGENCY: Nuclear Regulatory Commission. ACTION: Final rule. SUMMARY: The U.S. Nuclear Regulatory Commission (NRC or the Commission) is amending its regulations to improve decommissioning planning and thereby reduce the likelihood that any current operating facility will become a legacy site. The amended regulations require licensees to conduct their operations to minimize the introduction of residual radioactivity into the site, which includes the site's subsurface soil and groundwater. Licensees also may be required to perform site surveys to determine whether residual radioactivity is present in subsurface areas and to keep records of these surveys with records important for decommissioning. The amended regulations require licensees to report additional details in their decommissioning cost estimate (DCE), eliminate the escrow account and line of credit as approved financial assurance mechanisms, and modify other financial assurance requirements. The amended regulations require decommissioning power reactor licensees to report additional information on the costs of decommissioning and spent fuel management. DATES: The final rule is effective on December 17, 2012. Compliance with the reporting provisions in Title 10 of the Code of Federal Regulations (10 CFR) 50.82(a)(8)(v) and (vii) is required by March 31, 2013. ADDRESSES: You can access publicly available documents related to this document using the following methods: • NRC's Public Document Room (PDR): The public may examine and have copied, for a fee, publicly available documents at the NRC's PDR, O1-F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852. • NRC's Agencywide Documents Access and Management System (ADAMS): Publicly available documents created or received at the NRC are available online in the NRC Library at http://www.nrc.gov/reading-rm/adams.html . From this page, the public can gain entry into ADAMS, which provides text and image files of the NRC's public documents. If you do not have access to ADAMS or if there are problems in accessing the documents located in ADAMS, contact the NRC's PDR reference staff at 1-800-397-4209, 301-415-4737, or by e-mail to pdr.resource@nrc.gov . • Federal Rulemaking Web Site: Public comments and supporting materials related to this final rule can be found at http://www.regulations.gov by searching on Docket ID NRC-2008-0030. Address questions about NRC dockets to Carol Gallagher, telephone: 301-492-3668; e-mail: Carol.Gallagher@nrc.gov . FOR FURTHER INFORMATION CONTACT: Robert D. MacDougall, Office of Federal and State Materials and Environmental Management Programs, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, telephone: 301-415-5175; e-mail: Robert.MacDougall@nrc.gov, or Kevin O'Sullivan, Office of Federal and State Materials and Environmental Management Programs, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, telephone: 301-415-8112; e-mail: Kevin.OSullivan@nrc.gov . SUPPLEMENTARY INFORMATION: I. Background II. Discussion A. What action is the NRC taking? B. Whom does this action affect? C. What steps did NRC take to prepare for this rulemaking? D. What alternatives did NRC consider? E. What is a legacy site? F. What are financial assurances? G. Why might some materials licensees not have funds to decommission their facility? H. Why is 10 CFR 50.82 being amended? I. What changes are being made to 10 CFR 20.1406? J. Which surveys are required under amended 10 CFR 20.1501(a)? K. What information must the licensee collect under amended 10 CFR 20.1501? L. How will licensees report required information to the NRC? M. What financial assurance information must licensees report to the NRC? N. What changes are being made to financial assurance regulations? O. Will some licensees who currently do not have financial assurance need to get financial assurance? P. What changes are being made with respect to materials facilities' decommissioning funding plan (DFP) and DCE? Q. What changes are being made with respect to license transfer regulations for materials licensees? R. What changes are being made with respect to permanently shutdown reactor decommissioning fund status and spent fuel management plan reporting? S. When do these actions become effective? T. Has NRC prepared a cost-benefit analysis of the final rule? U. Has NRC evaluated the additional paperwork burden to licensees? III. Summary and analysis of public comments on the proposed rule IV. Discussion of Final Amendments by Section V. Criminal Penalties VI. Agreement State Compatibility VII. Voluntary Consensus Standards VIII. Environmental Assessment and Finding of No Significant Environmental Impact: Availability IX. Paperwork Reduction Act Statement X. Regulatory Analysis XI. Regulatory Flexibility Certification XII. Backfit Analysis XIII. Congressional Review Act I. Background The NRC issued comprehensive and risk informed decommissioning regulations in 1997 as Subpart E of 10 CFR part 20 (62 FR 39058; July 21, 1997). This set of requirements is known as the License Termination Rule (LTR). The LTR is based on calculated doses, and it established specific radiological criteria for remediation of lands and structures to complete site decommissioning and successfully terminate the license. The LTR provides an overall approach for license termination for two different site conditions: unrestricted use and restricted conditions for use after license termination. The LTR applies to the decommissioning of facilities licensed under the regulations in 10 CFR parts 30, 40, 50, 60, 61, 63, 70, and 72. In the 1997 LTR final rule, in response to a public comment that the requirements of then-proposed regulations in 10 CFR 20.1406 should apply to all licensees rather than only to applicants for new licenses, the Commission stated: Applicants and existing licensees, including those making license renewals, are already required by 10 CFR part 20 to have radiation protection programs aimed towards reducing exposure and minimizing waste. In particular, § 20.1101(a) requires development and implementation of a radiation protection plan commensurate with the scope and extent of licensed activities and sufficient to ensure compliance with the provisions of 10 CFR part 20. Section 20.1101(b) requires licensees to use, to the extent practicable, procedures and engineered controls to achieve public doses that are [as low as reasonably achievable] ALARA. In addition, lessons learned and documented in reports such as NUREG-1444 [ML080860275 and ML080860308] have focused attention on the need to minimize and control waste generation during operations as part of development of the required radiation protection plans. Furthermore, the financial assurance requirements issued in the January 27, 1988 (53 FR 24018), rule on planning for decommissioning require licensees to provide adequate funding for decommissioning. These funding requirements create great incentive to minimize contamination and the amount of funds set aside and expended on cleanup. (62 FR 39082; July 21, 1997). Current 10 CFR 20.1101(a) requires each licensee to implement a radiation protection program to ensure compliance with the regulations in 10 CFR part 20. Current § 20.1101(b) requires each licensee to use, to the extent practical, procedures and engineering controls based upon sound radiation protection principles to achieve occupational doses and doses to members of the public that are ALARA. To achieve doses that are ALARA, licensees are already required to apply operating procedures and controls to evaluate potential radiological hazards and methods to minimize and control waste generation during facility operations. In a Staff Requirements Memorandum (SRM) for SECY-01-0194, dated June 18, 2002 (NRC ADAMS Accession Number ML021690563), the Commission directed the staff to conduct an analysis of LTR issues. The staff conducted the analysis and presented results and recommendations to the Commission in SECY-03-0069 (ML030800158), dated May 2, 2003, and known as the LTR Analysis. One of the recommendations was a set of “measures to prevent future legacy sites.” A legacy site is a facility that is in decommissioning status with complex issues and an owner who cannot complete the decommissioning work for technical or financial reasons (as discussed further in Section II.E of this document). The set of measures to prevent future legacy sites had two distinct parts: (1) The need for timely reporting during facility operations of subsurface contamination that has a potential to complicate future decommissioning efforts; and (2) The need for more detailed reporting of licensee financial assurance mechanisms to fund site decommissioning activities and protection of the committed funds in cases of financial distress. The need for timely reporting of subsurface contamination during facility operations was explained in Attachment 8 to SECY-03-0069 (ML030870186). Attachment 8, under the heading “chronic releases,” recommended revising the regulations in 10 CFR 20.1406 to extend its minimization of contamination requirements to cover licensees in addition to license applicants. Recommendations for more detailed decommissioning financial assurance requirements are set forth in Attachment 7 to SECY-03-0069 (ML030870180). In the SRM for SECY-03-0069 (ML033210595), the Commission approved the staff's recommendations and authorized development of a technical basis to support a proposed rule. As pertinent to the then-proposed regulations in 10 CFR 20.1406 and 10 CFR 20.1501 revisions, the Commission's SRM states as follows: The Commission has approved the staff's recommendation related to changes in licensee operations as described in attachment 8. However, in addition to incorporating risk-informed approaches, the staff should ensure that they are performance-based. The staff will have to be very careful when crafting the guidance documents so that it is clear to the licensees and to the staff how much characterization information is enough. The staff should only ask for limited information. Licensees should not be required to submit the equivalent of a full scale MARSSIM [Multi-Agency Radiation Survey and Site Investigation Manual (ML082470583)] survey every year. During 2003 and 2004, the NRC staff evaluated the decommissioning program and assessed the effectiveness of other improvements to protect public health and safety beyond those identified in the LTR Analysis. To integrate and track regulatory improvements resulting from the LTR Analysis and the further evaluation of the decommissioning program, the NRC adopted an Integrated Decommissioning Improvement Plan (IDIP) for activities during FY 2004 through 2007 (ML050890051). Among other actions, the IDIP called for publication of the Decommissioning Planning proposed rule and written guidance describing changes in the regulations to prevent future legacy sites. In 2005 and 2006, the operators of several nuclear power plants reported that inadvertent and unmonitored radioactive liquid releases, primarily tritium contained in water, had occurred. In some instances, the release of radioactive liquid was not recognized by the licensee until years after the release had apparently started. The NRC Executive Director for Operations chartered a Task Force to conduct a lessons-learned review of these incidents. The Task Force final report (ML062650312) dated September 1, 2006, concluded that the levels of tritium and other radionuclides measured thus far do not present a health hazard to the public and presented a list of findings and recommendations that the Task Force believed would improve plant operations and public confidence in nuclear plant operations. The findings and recommendations in the Task Force report identified the need to clarify existing licensee requirements to demonstrate that they have achieved public and occupational exposures that are ALARA during the life cycle of the facility, which includes the decommissioning phase. In April 2005, the NRC conducted a 2-day public workshop to solicit public comments on the technical basis for the proposed rule, covering changes in licensee operations and financial assurance. A 1-day public roundtable meeting was held in January 2007 to solicit public comments on specific topics in the technical basis for the proposed rule. SECY-07-0177 (ML072390153), dated October 3, 2007, requested Commission approval to publish a proposed rule consistent with the recommendations approved in SRM-SECY-03-0069 and the public comments from the workshop and roundtable meeting noted previously. The Commission approved staff's request in SRM-SECY-07-0177 (ML073440549), dated December 10, 2007, and accordingly, the proposed rule was published for comment in the Federal Register on January 22, 2008 (73 FR 3812). II. Discussion A. What action is the NRC taking? The NRC is amending its regulations to improve decommissioning planning and thereby reduce the likelihood that facilities under its jurisdiction will become legacy sites. To help achieve this goal, one set of complementary amendments revises 10 CFR 20.1406 to make it applicable to licensees with operating facilities as well as to license applicants and revises 10 CFR 20.1501(a) by replacing its undefined term “radioactive material” with “residual radioactivity,” a term already defined in 10 CFR part 20. This defined term includes subsurface contamination within its scope. Both new 10 CFR 20.1406(c) and amended 10 CFR 20.1501(a) are worded to include subsurface contamination within their scope by using the term “residual radioactivity.” These changes serve to reinforce the intended linkage between these provisions, and are consistent with NRC policy that licensees conduct operations to minimize the generation of waste to facilitate later facility decommissioning. A second set of amendments improves decommissioning planning by requiring more detailed reporting of DCEs and tighter control of financial instruments used to provide decommissioning financial assurance. The new 10 CFR 20.1406(c) states as follows: (c) Licensees shall, to the extent practical, conduct operations to minimize the introduction of residual radioactivity into the site, including the subsurface, in accordance with the existing radiation protection requirements in Subpart B of this part and radiological criteria for license termination in Subpart E of this part. The amended 10 CFR 20.1501(a) and (b) state as follows: (a) Each licensee shall make or cause to be made, surveys of areas, including the subsurface, that— (1) May be necessary for the licensee to comply with the regulations in this part; and (2) Are reasonable under the circumstances to evaluate— (i) The magnitude and extent of radiation levels; and (ii) Concentrations or quantities of residual radioactivity; and (iii) The potential radiological hazards of the radiation levels and residual radioactivity detected. (b) Notwithstanding § 20.2103(a) of this part, records from surveys describing the location and amount of subsurface residual radioactivity identified at the site must be kept with records important for decommissioning, and such records must be retained in accordance with §§ 30.35(g), 40.36(f), 50.75(g), 70.25(g), or 72.30(d), as applicable. As indicated, use of the term “residual radioactivity” is a key component of the amendments, and this term is discussed below. It is also discussed in the response to comment G.19 in section III of this document. 1. Residual Radioactivity As set forth in 10 CFR 20.1003: Residual radioactivity means radioactivity in structures, materials, soils, groundwater, and other media at a site resulting from activities under the licensee's control. This includes radioactivity from all licensed and unlicensed sources used by the licensee, but excludes background radiation. It also includes radioactive materials remaining at the site as a result of routine or accidental releases of radioactive material at the site and previous burials at the site, even if those burials were made in accordance with the provisions of 10 CFR part 20. Certain operational events ( e.g., slow, long-term leaks), particularly those that cause subsurface soil and ground-water contamination, can significantly increase the cost of decommissioning. To adequately assure that a decommissioning fund will cover the costs of decommissioning, the owner of a facility must have a reasonably accurate estimate of the extent to which residual radioactivity is present at the facility, particularly in the subsurface soil and groundwater. As reflected previously, the new 10 CFR 20.1406(c) requires that licensees conduct their operations in a manner that will minimize the introduction of residual radioactivity into the site. Section 20.1501(a) has been revised by replacing its undefined term “radioactive material” with “residual radioactivity.” For some, the phrase “residual radioactivity” may have a connotation implying radioactive material that is “left over” after operations. This is not the meaning. As reflected in the previously stated definition, the term “residual radioactivity” includes everything that the term “radioactive material” implies in this section of the current regulations plus other radioactive material resulting from activities under the licensee's control, such as contamination in the subsurface. The use of the term “residual radioactivity” in § 20.1501(a) also is intended to provide a link with new § 20.1406(c). The amended § 20.1501(a) retains previous survey requirements, with the addition that such requirements include consideration of waste in the form of residual radioactivity. Together, the amended § 20.1501(a) and the new § 20.1406(c) specify that compliance with 10 CFR part 20 requirements is a necessary part of effectively planning for decommissioning. The §§ 20.1406(c) and 20.1501(a) provisions are discussed further in Sections II.I and J of this document. These activities, undertaken during facility operations, will provide a technical basis for licensees and NRC to understand the effects of significant residual radioactivity on decommissioning costs, and will help to determine whether existing financial assurance provided for site-specific decommissioning is adequate. By using the term “residual radioactivity,” the new § 20.1406(c) and amended § 20.1501(a) cover any licensed and unlicensed radioactive material that have been introduced to the site by licensee activities. New paragraph 10 CFR 20.1501(b) requires licensees to keep records of surveys of subsurface residual radioactivity identified at the site with the records important for decommissioning. To remove any ambiguity about the applicability of record retention requirements, this paragraph also clarifies that such records must be retained in accordance with §§ 30.35(g), 40.36(f), 50.75(g), 70.25(g), or 72.30(d), as applicable. These provisions specify certain types of information important to decommissioning and require licensees to keep records with this information in an identified location until the site is released for unrestricted use, or in the case of reactors, until the license is terminated. These decommissioning-related record retention requirements supersede those of § 20.2103(a), which generically requires that records of the results of such radiological dose assessment activities as surveys, air sampling, bioassays, and calibrations be retained for 3 years after the record is made. During operations, residual radioactivity that would be significant for decommissioning planning would be a quantity of radioactive material that would later require remediation during decommissioning to meet the unrestricted use criteria of 10 CFR 20.1402. As stated in the proposed rule, significant residual radioactivity in subsurface media, such as soil, is a component of waste, because it must be removed and disposed of to meet unrestricted use criteria in 10 CFR 20.1402 (73 FR 3815; January 22, 2008). During decommissioning, the licensee must evaluate dose from all residual radioactivity surveyed at its site using the radiological criteria in Subpart E to 10 CFR part 20. For contamination migrating offsite from previous leaks and spills into the subsurface, a licensee must comply with the applicable license conditions for its facility. Such offsite contamination, released as an effluent in quantities below annual regulatory limits, has been a factor in the decommissioning of a few NRC and Agreement State sites. However, the scope of this rulemaking does not include offsite contamination discovered during decommissioning. The NRC's technical basis for the effect that significant residual radioactivity in the subsurface has on decommissioning costs is based on a 2005 NRC staff study, “General Guidance for Inspections and Enforcement to Prevent Future Legacy Sites and Indicators of Higher Risk of Subsurface Contamination” (ML052630421). The purpose of this study was to evaluate experience at sites that have undergone, or were undergoing, decommissioning to identify the types of events that have caused subsurface contamination. Associating these events with knowledge of currently operating sites provided a means for NRC staff to evaluate the potential for future subsurface contamination at currently operating facilities. This risk-informed approach concluded that the sites with a higher likelihood of becoming legacy sites shared the following characteristics: relatively large volumes of low specific activity radioactively contaminated liquids, large volumes of long-lived radionuclides, large throughput, liquid processes, or processes that involve large quantities of solid radioactive material stored outdoors. The study identified a number of events that could increase decommissioning costs by increasing the possibility of soil or ground-water contamination and concluded that these events should cause the licensee to reevaluate its DCE. Additional discussion on this topic is in Sections II.G and II.H of this document. The changes to 10 CFR 20.1406 and 20.1501 are consistent with existing NRC policy for operating facilities. Under 10 CFR 20.1101(b), licensees must use procedures and engineering controls to achieve occupational doses and doses to members of the public that are ALARA, during operations and during decommissioning. To accomplish this, licensees must be able to demonstrate their knowledge of residual radioactivity in the subsurface, including soil and ground-water contamination, particularly if the subsurface contamination is a significant amount that would require remediation during decommissioning to meet the unrestricted use criteria of 10 CFR 20.1402. This is an extension of the requirements promulgated in the 1997 LTR that were applicable only to license applicants. This action is needed, because significant subsurface residual radioactivity at current operating facilities may be a potential radiological hazard. Such a hazard, if left undetected, could potentially result in a failure to fully fund decommissioning while the facility is still operating. The revised requirements implement existing NRC policy by helping licensees to continue achieving doses that are ALARA and within dose limits, and helping them to more effectively plan for decommissioning. 2. Financial Assurance This final rule (amending §§ 30.35, 40.36, 70.25, and 72.30, and Criterion 9 of Appendix A to Part 40) codifies certain aspects of existing regulatory guidance to improve the quality of the DFP and applies NRC experience to increase the likelihood that adequate funds will be available when needed to complete the decommissioning process. This final rule allows materials licensees to base their financial assurance for decommissioning on a “certification amount” only if the licensee's site surveys do not indicate the presence of residual radioactivity in amounts that would prevent the site from meeting the unrestricted use criteria in § 20.1402. This final rule addresses the potential vulnerability of the parent company guarantee and the self-guarantee as the financial mechanism for providing decommissioning funding assurance, in cases where the guarantor falls into financial distress. This final rule requires all reactor and materials licensees who use these guarantee mechanisms to establish a standby trust fund to receive the guaranteed financial assurance amount should that amount become immediately due and payable. For licensees with reactors in a decommissioning status, this final rule institutes additional reporting requirements for decommissioning fund status, spent fuel management costs, and estimated decommissioning costs. These new reporting requirements, in part, modify the existing Post Shutdown Decommissioning Activities Report (PSDAR) requirements set forth in 10 CFR 50.82(a)(4)(i). Additional reporting requirements specify that each power reactor licensee undergoing decommissioning must submit an annual financial assurance status report, as set forth in new paragraphs 10 CFR 50.82(a)(8)(v) through (a)(8)(vii). Under this final rule, all licensees decommissioning their facilities pursuant to 10 CFR 20.1403 restricted release criteria are required to use a trust fund to meet the financial assurance requirements. A trust fund is the only financial assurance mechanism allowed for the long-term maintenance and surveillance of restricted release sites, unless a government organization either provides a guarantee of funds or assumes custody and ownership of the site. This topic is discussed further in Section II.N of this final rule. B. Whom does this action affect? By the effective date of this final rule, the NRC believes that the changes to 10 CFR part 20 will affect a small number of licensees, and that the changes to financial assurance regulations will affect several hundred NRC licensees. Based on the regulatory analysis for the final rule, NRC believes a small number of materials licensees (a total of about five NRC and Agreement State licensees) will need to perform additional site surveys due to the presence of significant residual radioactivity. The licensees who will need to perform additional surveys were modeled in the regulatory analysis as rare metal ( i.e., rare earth) extraction facilities with uranium as a soil contaminant. Although the number of licensees affected by rule changes to 10 CFR part 20 is small, the cost to States or the Federal Government to enforce and then fully decommission a single legacy site is much higher than the cost to prevent the occurrence of a legacy site through amended regulations. Uranium recovery licensees and applicants will not be subject to the new 10 CFR 20.1406(c) requirements, just as they are not subject to the existing 10 CFR 20.1406 requirements. As stated in existing 10 CFR 20.1401(a), uranium and thorium recovery facilities, and uranium solution extraction facilities, are not subject to the regulations in 10 CFR part 20, Subpart E. Such facilities are and will continue to be subject to the regulations in the other 10 CFR part 20 subparts, and the revised survey and monitoring requirements in 10 CFR 20.1501(a) and new 10 CFR 20.1501(b) will thus be applicable to them. Uranium recovery licensees are additionally subject to existing monitoring requirements pertaining to soil and groundwater contamination in Appendix A to 10 CFR part 40. The above issues are discussed further in the response to Comment G.14 in Section III of this document. For NRC licensees who have subsurface soil contamination but no groundwater contamination, a minimal, routine monitoring plan may remain in effect through license termination. The routine monitoring plan will be described in DG-4014. Application of a minimal, routine monitoring plan at sites with no groundwater contamination is meant to improve licensee decommissioning planning and the basis used for DCEs. The large majority of NRC and Agreement State licensees are not expected to have residual radioactivity in soil or groundwater, because they possess small amounts of short-lived byproduct material or byproduct material that is encased in a capsule designed to prevent leakage or escape of the byproduct material ( i.e., a sealed source). This set of licensees is expected to include the non-fuel-cycle nuclear facilities, which either have no significant residual radioactive contamination to be cleaned up, or, if there is contamination, it is localized or will be quickly reduced to low levels by radioactive decay. Licensees who do not have residual radioactivity in soil or groundwater, and who do not have an obligation to set aside funds for decommissioning financial assurance, are not affected by this final rule. Approximately 300 NRC materials licensees and over 1,000 Agreement State licensees have an obligation to set aside funds for decommissioning financial assurance. Of the NRC licensees, approximately 50 percent use a certified amount, specified in regulations, with the remaining 50 percent using a site-specific DFP or License Termination Plan (LTP) to meet the decommissioning financial assurance requirements. If there is significant residual radioactivity at the site, the final rule changes in §§ 30.35, 40.36, 70.25, and 72.30 require a licensee to switch out of its certified funding amount and replace the certified amount with a DFP. At this time, the NRC staff is not aware of any licensees using certified amounts for decommissioning that need to switch to a DFP because of significant residual radioactivity. Licensees using a site-specific DFP or License Termination Plan to meet decommissioning financial assurance requirements will have additional reporting requirements based on final rule changes in §§ 30.35, 40.36, 50.82, 70.25, and 72.30. The materials licensees under 10 CFR parts 30, 40, 70, and 72 will need to provide more details to support their DCEs, such as the assumed cost of an independent contractor to perform all decommissioning activities. Final rule changes to 10 CFR 50.82(a) affect the 12 power reactor licensees undergoing decommissioning. Such licensees will need to provide more details regarding their DCEs and will need to provide cost estimates for managing irradiated fuel. More specifically, licensees who have submitted a certification of permanent cessation of operations under 10 CFR 50.82(a) are subject to annual financial assurance reporting requirements similar to those imposed on operating reactors under existing 10 CFR 50.75(f). The annual reports must identify yearly decommissioning expenditures, the remaining balance of decommissioning funds, and a cost estimate to complete decommissioning. Similar to the one-time reports required by 10 CFR 50.54(bb), the annual reports required under 10 CFR 50.82(a)(8) must identify the amount of funds accumulated to manage irradiated fuel and the projected cost of managing the irradiated fuel until title and possession is transferred to the Secretary of Energy. Approximately 20 NRC licensees use an escrow account as a prepayment financial mechanism and will be affected by final rule changes in §§ 30.35, 40.36, 70.25, and 72.30 (which eliminate the escrow account as a prepayment financial assurance method). No NRC licensees are using a line of credit (which is being eliminated as an acceptable financial assurance instrument) to provide financial assurance. Approximately 45 NRC licensees use a parent company guarantee or self-guarantee as a financial assurance mechanism. These licensees will be affected by final rule changes in 10 CFR part 30, Appendices A, C, D, and E, which require establishment of a standby trust fund before the guarantee becomes effective, and which contain other new requirements. The standby trust fund is to be set up for receipt of funds in the case of financial distress by the guarantor. In the regulatory analysis and Paperwork Reduction Act burden estimate, NRC assumed that a total of 25 of these 45 licensees will need to establish a trust fund to comply with the amended regulations, while the other 20 already have an established trust fund. The regulatory analysis for this final rule, referenced in Section X of this document, has detailed cost-benefit estimates regarding the licensees who will be affected by the amended regulations. C. What steps did NRC take to prepare for this rulemaking? The NRC took several initiatives to enhance stakeholder involvement and to improve efficiency during the rulemaking process. On May 28, 2004, the NRC staff issued Regulatory Information Summary (RIS) 2004-08, “Results of the License Termination Rule Analysis” (ML041460385). This RIS was the first follow-up action taken in response to the SRM for SECY-03-0069. The purpose of the RIS was to inform licensees and stakeholders of NRC's analysis of the issues associated with implementing the LTR, the Commission's direction to resolve these issues, the schedule for future actions, and opportunities for stakeholder comment. The RIS noted that stakeholder involvement would be an important part of developing the planned rulemaking and guidance. In April 2005, the NRC conducted a 2-day decommissioning workshop examining a number of LTR topics, including potential changes in facility operating requirements and changes to financial assurance to prevent legacy sites. Stakeholders addressed the issues and potential resolutions that could be accomplished through rulemaking. Since then, NRC has maintained a Web page ( http://www.nrc.gov/about-nrc/regulatory/decommissioning.html ) with information including draft guidance documents, Commission papers, and a variety of decommissioning program documents. The NRC presented papers on the technical basis scope of the rulemaking at American Nuclear Society conferences in 2004, 2005, and 2006, and other stakeholder forums. In June 2006, the NRC formed a proposed rule Working Group of NRC staff and one Agreement State representative from the Organization of Agreement States (OAS). The NRC has held discussions with State and Federal agencies on their experience with trust funds for long-term financial assurance, including a discussion with the U.S. Environmental Protection Agency (EPA) on October 6, 2006. In January 2007, the NRC held a public roundtable meeting that was attended by about 40 stakeholders. The meeting was held to solicit input from stakeholders and interested members of the public regarding the issues of licensee control and identification of subsurface residual radioactivity and changes that were being considered in decommissioning financial assurance requirements. The Summary Notes and transcript of this public meeting are posted on: http://www.nrc.gov/about-nrc/regulatory/decommissioning/public-involve.html . D. What alternatives did NRC consider? The proposed rule Working Group considered three different alternatives for the rule. Each was evaluated in the environmental assessment (see Section VIII of this document) and the regulatory analysis (see Section X of this document). Alternative 2, comprised of the amendments in this final rule, was assessed to be superior compared to the other alternatives. E. What is a legacy site? A legacy site is a facility that is decommissioning and has an owner who cannot complete the decommissioning work for technical or financial reasons. These sites have been materials facilities, not reactor facilities. The purpose of this final rule is to improve decommissioning planning and thereby reduce the likelihood that a site will become a legacy site, thus avoiding unnecessary expense and promoting more timely return of licensed sites to other productive uses. NRC terminates several hundred materials licenses each year. Most of these are routine actions, and the sites require little, if any, remediation to meet NRC's unrestricted use criteria. There are other sites where more complex decommissioning actions are needed. These complex decommissioning sites are described, along with the objectives of NRC decommissioning activities, in the “Status of Decommissioning Program 2006 Annual Report” available at: http://www.nrc.gov/about-nrc/regulatory/decommissioning/program-docs.html . This report identifies and describes the status of 32 complex materials sites undergoing decommissioning. Of the total 32 complex sites, the NRC considered 8 of these to be legacy sites as of December 31, 2006. At the end of 2010, there were 6 legacy sites among the complex materials sites undergoing decommissioning. F. What are financial assurances? Financial assurances are financial arrangements provided by a licensee, whereby funds for decommissioning will be available when needed. Each NRC licensee has a regulatory obligation to properly decommission its facility. However, only licensees whose decommissioning cost is likely to exceed a threshold amount must provide financial assurance. All nuclear power reactors and about 7 percent of NRC materials licensees must provide decommissioning financial assurance. This financial assurance may be funds set aside by the licensee or a guarantee that funds will be available when needed. The guarantee may be provided by a qualified third party or upon passage of a financial test by the licensee. The third party may be the parent company of the licensee, which is the case for about 10 percent of the NRC materials licensees that are obligated to have decommissioning financial assurance. Nuclear power reactors have financial assurance obligations that are different from materials licensees. The minimum amount of financial assurance for reactors is defined in 10 CFR 50.75, and this rulemaking does not change this required minimum amount. Acceptable financial assurance mechanisms for power reactors are defined in § 50.75(e)(1). An external sinking fund is used to provide financial assurance for about 90 percent of the reactors. The remaining 10 percent of reactors have assurance through prepaid funds and/or guarantees. As of December 31, 2006, there were about 300 NRC materials licensees that had a regulatory obligation to provide approved financial assurance mechanisms. An acceptable financial assurance mechanism for unrestricted use decommissioning is any of the following four types of financial instruments: • A prepayment of the applicable decommissioning costs; • A guarantee to pay the decommissioning costs issued by a qualified third party or the licensee; • A statement of intent from a Federal, State or local government licensee; or • An external sinking fund. The prepayment method is full payment in advance of decommissioning using an account segregated from licensee assets and outside the licensee's administrative control. About 11 percent of current financial assurance mechanisms for materials licensees are prepayment methods, with most of these being escrow accounts. Currently accepted prepayment mechanisms include escrow accounts (8 percent), trust funds (2 percent), certificates of deposit (1 percent), government funds (0 percent), and deposits of government securities (0 percent). This final rule eliminates all prepayment mechanisms except the trust fund, for reasons discussed under Section II.N.2 of this document. The guarantee method can be used by licensees that demonstrate adequate financial strength through their annual completion of financial tests contained in Appendices A, C, D, and E of 10 CFR part 30. About 51 percent of current financial assurance mechanisms for materials licensees are guarantee methods. Currently accepted guarantee mechanisms include letters of credit (28 percent), parent company guarantees (8 percent), licensee self-guarantees (7 percent), surety bonds (8 percent), lines of credit (0 percent), and insurance policies (0 percent). This final rule eliminates the line of credit as an acceptable mechanism, for reasons discussed under Section II.N.10 of this document. The statement of intent is a commitment from a Federal, State or local government licensee that it will request and obtain decommissioning funds from its funding body, when necessary for decommissioning an NRC licensed site. It is available for use only by governmental entities. Approximately 38 percent of the NRC materials licensees who are required to provide financial assurance use the statement of intent as a means to provide financial assurance. The external sinking fund is an approved financial assurance method that allows an NRC licensee to gradually prepay the DCE, but no NRC materials licensees who have an obligation to provide decommissioning financial assurance use this option. Before this rulemaking, materials licensees choosing this option would have to cover amounts that were not prepaid by a surety mechanism or insurance. The same requirements apply to power reactor licensees, except that the amounts that are not prepaid can be covered by a guarantee method as well as by surety or insurance. This rulemaking provides materials licensees opting to use the external sinking fund with the same degree of flexibility that power reactor licensees have had since 1998 (in a final rulemaking for power reactor financial assurance, the NRC allowed use of a parent company guarantee or self-guarantee with an external sinking fund (63 FR 50465; September 22, 1998)). This final rule makes conforming changes in the financial assurance requirements for materials licensees (10 CFR 30.35, 40.36, 70.25, and 72.30) to provide greater consistency with the 10 CFR part 50 regulations. This discussion of financial assurance to decommission a site pertains only to unrestricted use under 10 CFR 20.1402. If a licensee can demonstrate its ability to meet the provisions of 10 CFR 20.1403 for restricted use, financial assurance for long-term surveillance and control may be provided by a trust fund or by a government entity assuming ownership and custody of the site. G. Why might some materials licensees not have funds to decommission their facility? In SECY-03-0069, the NRC evaluated licensee decommissioning experience and identified the following five reasons why some licensees may not have enough funds to complete their decommissioning activities. 1. Licensees at complex sites may underestimate decommissioning costs, if the assumption that the site will qualify for a restricted release proves incorrect. The cost for a restricted release is usually significantly lower than unrestricted release given the high offsite disposal costs of licensed material when compared to the cost of onsite controls. If it turns out that the licensee cannot meet the 10 CFR 20.1403 criteria for restricted conditions, the licensee may then not be able to meet its decommissioning financial obligations. To address this problem, this final rule amends 10 CFR 30.35, 40.36, 70.25, and 72.30 to require licensees to obtain NRC approval of their DFP based on a DCE for unrestricted release, unless the ability to meet the restricted release criteria can be adequately shown. 2. Certain operational events, particularly those that cause soil or ground-water contamination, can increase decommissioning costs if not addressed during the life of the facility. If the licensee does not identify these events, assess the problem in a timely manner, and update its DCE based on new conditions, the licensee may find it difficult to later meet its decommissioning obligations. To address this problem, this final rule amends 10 CFR 20.1406 as discussed previously in Section II.A of this document. Licensees also are required, in amendments to 10 CFR 30.35, 40.36, 70.25, and 72.30, to factor in residual radioactivity information in arriving at DCEs. 3. Certain financial assurance methods may not be effective in bankruptcy situations, given that funds held in them may be accessible to creditors. For example, title to property held in escrow remains with the licensee, making the property potentially vulnerable to claims by creditors. Another example is the parent and self-guarantees. The guarantees promise performance rather than payment. In the past, two companies used corporate reorganization to isolate the decommissioning obligations with the subsidiary company, but with insufficient funds to perform the work. In one case, the parent company reorganized without NRC approval and transferred to the subsidiary few assets and low levels of operating profits, so that the subsidiary was able to fund only a small portion of its decommissioning costs. In the second case, the parent company purchased the licensee before the financial assurance regulations went into in effect. The licensee was permanently shut down after the purchase and was unable to provide full financial assurance. To address this problem, this final rule amends 10 CFR 30.35, 40.36, 70.25, 72.30, and 10 CFR part 30, Appendices A, C, D, and E by eliminating the use of an escrow account as a financial assurance option, and requiring a guarantor, as a condition of using the parent company guarantee and self-guarantee financial assurance options, to establish a standby trust fund and to submit to a Commission order, if the guarantor is in financial distress, to immediately pay the guaranteed funds into the standby trust. 4. The funds set aside by licensees to carry out decommissioning may decline in value over time. To address this problem, this final rule amends 10 CFR 30.35(h), 40.36(f), 70.25(h), and 72.30(g) to require that a licensee monitor the status of its decommissioning funds and, if necessary, add funds if the balance falls below the estimated cost of decommissioning. 5. The initial funding of a trust fund to cover the recurring costs of long-term surveillance and control for license termination under restricted release criteria may be inadequate if it assumes a high rate of return for the trust fund. To address this problem, this final rule amends 10 CFR 20.1403 to require that licensees assume only a 1 percent real rate of return in establishing the initial funding amount. H. Why Is 10 CFR 50.82 being amended? Several power reactor licensees have successfully decommissioned their reactor sites consistent with 10 CFR part 20 requirements. In some cases, reactor decommissioning costs have exceeded the initial DCE. For example, the Connecticut Yankee Nuclear Plant experienced higher decommissioning costs than planned, due in part to a larger volume of contaminated soil than was identified in the initial site characterization. In the past, the NRC has not required licensees to submit details of decommissioning costs on the grounds that the typical reactor licensee was part of a public utility with access to substantial assets and revenues and that the minimum required amount for decommissioning financial assurance was adequate. A licensee's status as a regulated public utility provided access to cost of service rate recovery to help provide additional funds. A public utility had access to sales revenues to fund its obligations, even if rate recovery was limited. Deregulation of the electric industry now permits a reactor licensee to operate as a merchant plant not subject to rate regulation or rate recovery of costs of service. When it ceases operation, it may have no sales revenues. The licensee may be organized as a separate company or a subsidiary of a holding company to isolate the risks and rewards of selling electricity on the open market. Without access to rate relief, with no sales revenues, and with the licensee's owner protected by limited liability, shortfalls in decommissioning funding may jeopardize timely completion of decommissioning. This final rule provides NRC regulatory authority to perform oversight to assure that the licensee anticipates potential shortfalls and takes steps to control costs to stay within its budget or obtain additional funds. I. What changes are being made to 10 CFR 20.1406? New 10 CFR 20.1406(c) states as follows: (c) Licensees shall, to the extent practical, conduct operations to minimize the introduction of residual radioactivity into the site, including the subsurface, in accordance with the existing radiation protection requirements in Subpart B of this part and radiological criteria for license termination in Subpart E of this part. The term “to the extent practical” is intended to limit the scope of this provision to actions that are already manifested in practice or action. The same phrase is used in existing 10 CFR 20.1101(b), which requires that licensees keep occupational and public radiological doses to ALARA levels. This final rule requires licensees to conduct their operations to minimize the introduction of residual radioactivity into the site, including the subsurface, to achieve effective decommissioning planning. For operating facilities, significant residual radioactivity is a quantity that would later require remediation during decommissioning to meet the unrestricted use criteria of 10 CFR 20.1402. The current 10 CFR 20.1101 requirements are related to those in new 10 CFR 20.1406(c). Section 20.1101(a) requires each licensee to implement a radiation protection program to ensure compliance with the regulations in 10 CFR part 20. The current 10 CFR 20.1101(b) requires each licensee to use, to the extent practical, procedures and engineering controls based upon sound radiation protection principles to achieve occupational doses and doses to members of the public that are ALARA. To achieve doses that are ALARA during facility operations and decommissioning, the § 20.1101(b) operating procedures and controls must apply to potential radiological hazards and to methods used by the licensee to minimize and control waste generation. In furtherance of these existing requirements, new 10 CFR 20.1406(c) includes the term “residual radioactivity,” as discussed previously in Section II.A of this document. This new section applies to current licensee operations, in contrast to the § 20.1406(a) and (b) requirements which are imposed on license applicants. Residual radioactivity excludes background radiation. The licensees of large nuclear facilities will have performed an assessment of background radioactivity at their site as part of an Environmental Impact Statement required during the license application process. As a matter of standard operating practice, licensees will document the background level of radioactivity when a survey is performed at the site. Residual radioactivity, as defined in 10 CFR 20.1003, is not “residual radioactive material” as defined in 10 CFR 40.4, which is used only with respect to materials at sites subject to remediation under Title I of the Uranium Mill Tailings Radiation Control Act of 1978, as amended. The final rule's use of the term “subsurface” designates the area below the surface by at least 15 centimeters, as defined in NUREG-1575, “Multi-Agency Radiation Survey and Site Investigation Manual” (ML070110228). Under this final rule, licensees must conduct their operations to minimize residual radioactivity that enters the subsurface at the site. If there are pathways that would allow the contamination to migrate, the licensee may need to monitor the groundwater onsite for contamination based on site specific conditions. Based on past NRC experience, significant concentrations or quantities of undetected and unmonitored contamination, caused primarily by subsurface migration of groundwater, have been a major contributor to a site's becoming a legacy site and a potential radiological hazard. Several hundred NRC materials licensees possess radioactive material and have liquid processes that could cause subsurface contamination. These licensees generally are compliant with regulations that limit effluent release to the environment over a specified time. Some of these licensees may not have documented onsite residual radioactivity, such as spills, leaks and onsite burials that may be costly to remediate during decommissioning and should be considered in arriving at an accurate DCE. There have been instances of previously unidentified soil and ground-water contamination at uranium recovery and rare earth metal recovery sites undergoing decommissioning in several states, notably Colorado and Pennsylvania. Two contributing factors to the accumulation of unidentified subsurface contamination are: (1) Reluctance among some licensees to spend funds during operations to perform surveys and document spills and leaks that may affect site characterization; and (2) reluctance to implement procedures for waste minimization. The vast majority of NRC materials licensees do not have processes that would cause subsurface contamination. NRC's expectation is that these licensees, including those that release and monitor effluents of short-lived radionuclides to municipal sewer systems, will not be impacted by new 10 CFR 20.1406(c). The accumulation of radionuclides at municipal waste treatment facilities was the subject of an Interagency Steering Committee on Radiation Standards (ISCORS) study (NUREG-1775, November 2003, ML033140171), which concluded that, in general, these facilities do not have significant concentrations of long-lived radionuclides. Other classes of licensees that are, in general, not expected to introduce significant residual radioactivity into the subsurface include broad scope academic, broad scope medical, and small research and test reactors. The DG-4014 proposes an acceptable method for these licensees to evaluate the subsurface residual radioactivity. Power reactor licensees have exhibited a high level of ALARA discipline with respect to effluent release and known spills and leaks. Current NRC regulations in §§ 20.1301, 20.1302, and 50.36a ensure that power reactor licensees maintain adequate monitoring and surveys of radioactive effluent discharges, with annual reporting requirements outlined in § 50.36a(2) that are made available to the public on the NRC Web site. Several nuclear power plants have reported abnormal releases of liquid tritium, which resulted in ground-water contamination. On May 5, 2006, the NRC staff issued a revised baseline inspection module (Procedure 71122.01, ML053490179) used to inspect leaks and spills at power reactor sites. To further address this issue, the Nuclear Energy Institute (NEI) developed voluntary guidance for licensees in the Industry Ground Water Protection Initiative (GPI) (ML072600295). The voluntary GPI, implemented by all licensed power reactors as of September 2008, is a site-specific groundwater protection program to manage situations involving inadvertent releases of licensed material to groundwater and to provide informal communication to appropriate State/Local officials, with follow-up notification to the NRC as appropriate. J. What surveys are required under amended 10 CFR 20.1501(a)? Before this final rule, § 20.1501(a) required licensees to perform surveys necessary to comply with Part 20 requirements, including surveys reasonable under the circumstances to evaluate potential radiological hazards. This final rule requires radiological surveys, reasonable under the circumstances (such as scoping surveys), sufficient to understand the extent of significant residual radioactivity, including the subsurface. This final rule does not add any new requirements regarding extensive site characterization. Slow and long-lasting leaks of radioactive material into the onsite subsurface may eventually produce radiological hazards and pose a risk for creation of a legacy site if contaminant characteristics are not identified when the facility is operating. The staff views radiological hazards as including those resulting from subsurface contaminating events, when these events produce significant residual radioactivity that would later require remediation during decommissioning to meet the unrestricted use criteria of 10 CFR 20.1402. An effective approach to understand the extent of subsurface residual radioactivity is through the use of radiological surveys. Appropriate surveys are essential for determining the adequacy of financial assurance for materials licensees, and need to be done periodically on a limited basis during operations when the DFP and financial assurance can be adjusted while the licensee is still generating revenue. This is far superior to the current practice at some facilities of delaying even limited survey work at the site until after the facility has been shut down. Facilities that process large quantities of licensed material, especially in fluid form, have the potential for causing significant environmental contamination. Leaks from these facilities can lead to large amounts of radioactive contamination entering the subsurface environment over an extended time. The estimated doses from this contamination are below the limits in 10 CFR part 20 that would initiate immediate regulatory action. Another factor the staff considered in preparing this final rule is the high cost to dispose of radioactive materials offsite. These costs are a concern, even when the material contains relatively low concentrations of radioactivity. A continued trend of high disposal costs could increase the number of environmental contamination incidents at operating facilities, resulting in higher decommissioning costs. A third factor that may contribute to future legacy sites is the delayed identification of contamination on the site. Over a long time, contamination that migrates in subsurface soil or groundwater does not cause immediate exposure to either workers or the public that approaches the limits specified in 10 CFR part 20. It is only after operations have ceased when the possible results of unlimited access to the site, and associated exposure pathways ( i.e., ingestion and inhalation) are being evaluated, that the volume of contamination becomes apparent. As discussed previously in Section II.A of this document, amended 10 CFR 20.1501(a) requires licensees to perform contamination surveys to comply with current 10 CFR part 20 requirements and the new § 20.1406(c), if there is a history of leaks or spills to the subsurface at the site. The magnitude and extent of radiation levels are typically defined in units of radioactivity measurement, such as in micro-rem per hour (µrem/hr). The concentrations or quantities of residual radioactivity are typically defined in units of radioactivity associated with a specific radionuclide, for example picocuries per liter of tritium (pCi/L of H-3). The amended § 20.1501(a) retains previous survey requirements and specifies that such requirements include consideration of subsurface residual radioactivity. Survey requirements may include ground-water monitoring if reasonable under the site specific conditions. Soil sampling also may be warranted based on site-specific conditions—for example, if there is no ground-water monitoring at the site or if known subsurface contamination has not migrated to the groundwater. The DG-4014 proposes a variety of acceptable methods to evaluate subsurface characteristics. The NRC recognizes that ground-water monitoring may be a surrogate for subsurface monitoring at some sites, that soil sampling may be appropriate at other sites, and that there are sites with no subsurface residual radioactivity where the existing monitoring method is appropriate. Also, the NRC recognizes that an area within the footprint of a building, during licensed operations, may not be a suitable area for subsurface residual radioactivity surveys if the process of sampling would have an adverse impact on facility operations. The decision to perform subsurface residual radioactivity sampling in a particular area should be balanced against the potential to jeopardize the safe operation of the facility. The purpose of amended 10 CFR 20.1501(a) and new 10 CFR 20.1406(c) is to specify that compliance with 10 CFR part 20 survey and recordkeeping requirements is necessary to demonstrate compliance with existing regulations and to plan effectively for decommissioning, including effects from subsurface contamination. Final rule amendments to 10 CFR 30.35(e)(2), 40.36(d)(2), 70.25(e)(2), and 72.30(c) require licensees who have a DFP or a LTP to factor in the results of surveys, performed under § 20.1501(a), in estimating decommissioning costs. This requirement applies only to materials licensees who are required to have a DFP and assures that these licensees properly consider the extent of subsurface residual radioactivity in their DCEs, thus improving decommissioning planning and helping to reduce the likelihood of future legacy sites. For the materials licensees with a certified amount as decommissioning financial assurance, the NRC assumes their current monitoring methods are adequate. If these licensees detect onsite contamination that would later require remediation during decommissioning to meet the unrestricted use criteria of 10 CFR 20.1402, then the licensees are required to submit for approval by the NRC a DFP with a DCE. Some materials licensees are not required to have financial assurance for decommissioning based on a license possession limit that is below the financial assurance threshold values in Appendix B of 10 CFR part 30. For these licensees, the NRC's expectation is that the monitoring performed under amended § 20.1501(a) would be of a simple form, as will be discussed in DG-4014. Simple form monitoring is a method that confirms the absence of leaks or spills to the subsurface. The risk is low that any of these sites would cause contamination to create a potential radiological hazard or a future legacy site. On the effective date of this final rule, NRC's expectation is that no additional surveys will be required of power reactor licensees and fuel cycle facilities. For power reactors, NRC staff concludes that the monitoring and survey processes and related reports prepared at power reactor sites will likely contain sufficient information to satisfy new § 20.1406(c) and amended § 20.1501 requirements. The NRC is not requiring licensees to submit reports, but the information must be kept onsite in records that are available for review. It is not expected that power reactor licensees will need to immediately install additional monitoring equipment or modify existing operating procedures to satisfy the amended § 20.1501(a) requirements. It may be necessary, however, for such licensees to take these actions if, for example, significant residual radioactivity is identified at a power reactor site at a level higher than had been previously identified. In any such situations, the need for additional monitoring will be determined on a case-by-case basis. Fuel cycle facilities, such as uranium fuel fabrication plants, the gaseous diffusion enrichment plants, and the dry process natural uranium conversion/de-conversion facility, also perform surveys to detect radioactive releases to the groundwater. NRC staff concludes that the monitoring and survey processes and related reports prepared at these facilities would likely contain sufficient information to satisfy § 20.1406(c) and § 20.1501 requirements. A high level of ALARA discipline for onsite spills and leaks is expected of the centrifuge enrichment plants and mixed oxide fabrication plant based on the information in their license applications (these facilities have not begun operations). K. What information must the licensee collect under amended 10 CFR 20.1501? For facilities having significant subsurface contamination, NRC is requiring licensee documentation of contaminating events and survey results, including groundwater monitoring surveys, and the retention of survey records until license termination, to facilitate later decommissioning of the facility. Licensees must be able to demonstrate compliance with the regulations in 10 CFR part 20 through surveys that evaluate the magnitude and extent of site radiation levels, including significant concentrations or quantities of residual radioactivity in the subsurface. Such surveys would evaluate any potential radiation hazards of the radiation levels and residual radioactivity detected. The sampling results should include the date, time, location, contaminants of interest and contamination levels, and the concentrations at which action is required to comply with regulations. The contaminants of interest are those used within the facility with half-lives long enough that they would require remediation during decommissioning to meet the unrestricted use criteria under 10 CFR 20.1402. Contaminants may include both chemicals and radionuclides in the groundwater from sources upstream of the NRC-licensed site because of the potential for interaction with releases from other sites. When groundwater is being monitored, the surveys conducted by the licensee should include hydro-geologic evaluations that lead to a determination of effective sampling and analysis, including accurate placement and installation of the wells, and well locations to determine the nominal groundwater flow direction and preferential flow paths for each “aquifer” underlying the site. Licensees may need to perform surveys to demonstrate compliance with the new 10 CFR 20.1406(c). Under the requirements of §§ 30.35(g), 40.36(f), 50.75(g), 70.25(g), and 72.30(d), licensees must designate the records from 10 CFR 20.1501(b) surveys of subsurface residual radioactivity at the site as records important for decommissioning. Significant residual radioactivity that must be documented in these records would include onsite subsurface residual radioactivity that would later require remediation during decommissioning to meet the unrestricted use criteria of 10 CFR 20.1402 (73 FR 3815; January 22, 2008). These records can be as simple as a description of the contaminating event, to include date, time, location, and the estimated quantities and activity levels of radioactive materials that were spilled or leaked. The documentation may describe the activation of a moisture alarm system used to indicate the presence of liquid in an area that is supposed to be dry. Contamination survey results must be included in these records if the surveys are considered important for decommissioning planning. L. How will licensees report required information to the NRC? There are no reporting requirements for licensees under amendments to 10 CFR 20.1406(c) and 20.1501. Instead, the NRC requires licensees to collect information and to have that information available for review. The information must be retained by licensees in records important for decommissioning under §§ 30.35(g), 40.36(f), 50.75(g), 70.25(g), and 72.30(d). Under amendments to financial assurance regulations, under § 30.35(e), § 40.36(d), 10 Part 40 Appendix A Criterion 9(b), § 70.25(e), and § 72.30, reporting requirements would increase for materials licensees who must prepare a detailed cost estimate for decommissioning. Reporting requirements also increase based on amended § 50.82(a) for power reactor licensees who prepare a post-shutdown decommissioning activities report (PSDAR) or an annual financial assurance status report. Under amendments to 10 CFR part 30, Appendix A, licensees who use the parent company guarantee as financial assurance for decommissioning will have increased reporting requirements. Increased reporting requirements will include reporting of off-balance sheet transactions and verification of bond ratings and annual documentation of continuing eligibility to use the parent company guarantee. Licensees who use the self-guarantee as financial assurance for decommissioning under 10 CFR part 30, Appendices C, D, and E, will have similarly increased reporting requirements. Licensees will continue to submit information to the NRC by certified mail or through approved Electronic Information Exchange (EIE) methods. M. What financial assurance information must licensees report to the NRC? Materials licensees with a license possession limit that is below the financial assurance threshold in 10 CFR part 30, Appendix B, are not required to have financial assurance for decommissioning. Licensees under 10 CFR parts 30, 40, and 70 with a license possession limit above the financial assurance threshold in 10 CFR part 30, Appendix B, but below the threshold requiring a DFP, have an option of providing financial assurance based on an amount specified by regulation or based on a DFP with a site-specific cost estimate. Materials licensees with a licensed possession limit above the financial assurance threshold, and all 10 CFR part 72 licenses, must submit at intervals not exceeding 3 years a DFP which includes the following: A site-specific cost estimate, a description of the methods used to assure the funds, and a description of the means of adjusting the cost estimate. The required contents of the DFP are changing as a result of this final rule, as discussed in Section II.P of this document. Except for 10 CFR part 72 licensees, materials licensees must also provide a signed original of the financial instrument obtained to satisfy the financial assurance requirement. For materials licensees, Chapter 4 in NUREG-1757, Volume 3, revision 1, “Consolidated NMSS Decommissioning Guidance,” provides details on information necessary to satisfy their financial assurance requirements. This document is available on the NRC Web site at: http://www.nrc.gov/reading-rm/doc-collections/nuregs/staff/sr1757/. This document is being updated to include new requirements resulting from this final rule. Power reactor licensees are already required by existing 10 CFR 50.75(f)(1) to report on the status of their decommissioning funds at 2-year intervals. A power reactor licensee that is within 5 years of the end of its projected life, or will close within 5 years (before the end of its licensed life), or has already closed, must submit the report of funds status on an annual basis. These requirements are not being changed. Applicants for power reactor and non-power reactor licenses and reactor license holders must submit a decommissioning report as required by existing 10 CFR 50.33(k), and this provision is not being changed. The 10 CFR 50.33(k) report is submitted once and contains the following: Information indicating how reasonable assurance will be provided that funds will be available to decommission the facility, the method used to provide funds for decommissioning, and the means for adjusting periodically the amount to be provided. The reporting requirements for reactors being decommissioned are changing as a result of amendments to 10 CFR 50.82, as discussed in Section II.R in this document. For nuclear power reactor licensees, Chapter 2 in Regulatory Guide 1.159, “Assuring the Availability of Funds for Decommissioning Nuclear Reactors,” provides details on the information necessary to satisfy these licensees' financial assurance requirements (ML032790365). This regulatory guide is being revised. The draft guide (DG-1229) is available at ML103400008. N. What changes are being made to financial assurance regulations? Most of the final rule amendments are changes to financial assurance regulations for materials licensees. A few changes apply to decommissioning financial assurance for power reactor licensees. The changes to financial assurance regulations are discussed in this section, under the following headings: N.1 Require a trust fund for decommissioning under restricted release. N.2 Require a trust fund for the prepayment option. N.3 Require an upfront standby trust fund for the parent guarantee and self-guarantee options. N.4 Require parent company to inform NRC of financial distress and submit to an Order. N.5 Require guarantor payment immediately due to standby trust. N.6 Allow intangible assets, with an investment grade bond, to meet some financial tests. N.7 Increase the minimum tangible net worth for the guarantees' financial tests. N.8 Clarify guarantors' bond ratings and annual demonstration submittals. N.9 Invalidate the use of certification for financial assurance if there is contamination. N.10 Other changes to financial assurance regulations. Many of the financial assurance amendments had been in NRC guidance and are being codified in this final rule. The amendments strengthen and clarify the financial assurance requirements. The NRC seeks to improve decommissioning planning and reduce the number of funding shortfalls caused in the past by—(1) overly optimistic decommissioning assumptions; (2) lack of adequate updating of cost estimates during operation; and (3) licensees' falling into financial distress with financial assurance funds unavailable for decommissioning. The changes increase licensee reporting requirements. The added reporting burden is estimated as part of the Paperwork Reduction Act Statement in Section IX of this document. The costs and benefits of this final rule are evaluated in the regulatory analysis in Section X of this document. N.1 Require a Trust Fund for Decommissioning Under Restricted Release The NRC is amending the regulations related to decommissioning financial assurance applied to planned restricted release sites. This final rule requires, under § 20.1403(c), that the funds for financial assurance of long-term care and maintenance of a restricted release site must be placed into a trust segregated from the licensee's assets and outside the licensee's administrative control. This amendment eliminates, as prepayment options, the escrow account, sureties and insurance, and the parent company and self-guarantee methods at restricted release sites. To date, no licensee has chosen to use these financial assurance mechanisms at a restricted release site. These mechanisms were eliminated, because they possess characteristics that make their use inadvisable for the types of long-term care and maintenance situations involved in restricted release sites. The final rule continues to permit government entities to use a statement of intent or to assume custody and ownership of a site. Escrow accounts are not well suited to the protection of funds over a long term. The purpose normally served by an escrow is to collect or hold funds for an expense to be paid in the relatively near future ( e.g., property tax escrows). The EPA concluded that a trust was more protective of funds because, under trust law, the title to property in a trust is transferred to the trustee (46 FR 2802, 2827; January 12, 1981). In an escrow account, title to the property remains with the grantor. Thus, escrow property is more likely to be subject to a creditor's claim than property held in trust. In addition, the law of trusts places obligations on the trustee to act in the interest of the beneficiary. In contrast, an escrow agent is responsible only for what is specified in the escrow agreement. The EPA concluded that it would be extremely difficult to draft an escrow agreement that adequately specifies all the actions that an escrow agent would need to take in all situations to assure the instrument served its intended purpose. The surety methods and insurance are also not well suited to protect funds over the long term, because they depend on contracts made by the former licensee. There are no actual funds set aside for future costs; rather, the methods are promises made by the issuer to pay at a future time. These methods require renewal to remain effective. They depend on the former licensee continuing to exist to make renewal payments for the surety or insurance instruments. The instrument lapses if the payments are not made. Under the existing rule, the NRC may require the issuer to pay the face amount before the lapse occurs. However, issuers may resist making the payment, which could delay obtaining (and possibly reduce) the amount of funds for long-term care and maintenance. Whether the issuer resists paying or not, when the funds are paid for the face amount, the funds will be placed into a trust account. That is, the response to the non-renewal of a surety is to create a trust to hold funds. The long-term nature of the obligation increases the possibility that circumstances may arise that would require a demand for payment. In view of the potential difficulties and delays and recognizing that a trust fund is the preferred long-term instrument for holding funds, the surety and insurance methods of financial assurance for long-term maintenance and control have been eliminated. Likewise, the parent company and self-guarantee mechanisms are not well suited for providing financial assurance at restricted release sites, because these were designed to assure funding for the relatively limited time needed to complete most decommissioning projects under 10 CFR 20.1402. The former licensee or its parent must continue to exist to pay for long-term control and maintenance costs. If the former licensee or its parent ceases to exist, the self-guarantee or parent company guarantee has no source of funds to pay the costs. In addition, these guarantees presume the existence of a licensee subject to NRC authority. However, when the license is terminated, the NRC has no regulatory authority over the former licensee. Therefore, the self-guarantee and parent company guarantee have been eliminated as financial assurance options at restricted release sites. In contrast, the trust fund is best suited as a financial mechanism to assure the necessary long-term care and maintenance at restricted release sites. The trust fund can exist for long periods without need for renewal. It exists independently of the former licensee and can continue to serve the purposes of control and maintenance, even if the former licensee ceases to exist. The trustee has a fiduciary duty to serve the beneficiaries of the trust. The funds placed in the trust become property of the trust and generally cannot be reached by creditors of the former licensee. Trust funds have traditionally been used to provide for the long-term care and maintenance of parks and other public facilities, to care for cemeteries, and for similar purposes. This final rule requires the use of trust funds for the financial assurance for long-term care and maintenance at restricted release sites, unless a government entity provides long-term funding or assumes custody and ownership of the site. A further change to 10 CFR 20.1403(c)(1) requires that the initial amount of the trust fund established for long-term care and maintenance be based on a 1 percent annual real rate of return on investment. A similar provision is currently contained in 10 CFR part 40, Appendix A, Criterion 10, which provides that if a site-specific evaluation shows that a sum greater than the minimum amount specified in the rule is necessary for long-term surveillance following decontamination and decommissioning of a uranium mill site, the total amount to cover the cost of long-term surveillance must be that amount that would yield interest in an amount sufficient to cover the annual costs of site surveillance, assuming a 1 percent annual real rate of interest. The NRC concluded that a conservative estimate of the annual real rate of return is justified in the case of financial assurance for long-term care and maintenance under § 20.1403(c)(1). Although the NRC in 10 CFR 50.75(e)(1)(ii) allows a licensee of a nuclear power reactor that is using an external sinking fund to take credit for projected earnings on the external sinking funds (using up to a 2 percent annual real rate of return from the time of the future fund's collection through the decommissioning period), the reactor situation is distinguished by the continuing presence of the reactor licensee, who is obligated to provide additional funds if necessary. Long-term trust funds for surveillance and control are created when license termination relieves the licensee of any further obligation regarding the site. Therefore, no licensee is available to make up shortfalls in the fund, which reduces the likelihood that funds will be available when needed. A long period of low returns could deplete a trust fund so that later higher returns would be insufficient to return the fund to the value needed to permit earnings to cover the recurring long-term costs. Consequently, a conservative rate of return is necessary to assure that funds will be available when needed. From 1975-2005, the annual real rate of return was 1.58 for U.S. Treasury Bills and 4.87 for government bonds. Thus, a 1 percent real rate of return is conservative and appropriate for assuring funds under the amended § 20.1403(c)(1). The actual rate of return may exceed the 1 percent real rate. The trust agreement may contain provisions to return excess funds to the trust grantor if the fund balance significantly exceeds the amount needed to cover the recurring costs at the 1 percent rate. This final rule adds a new § 20.1404(a)(5) specifying one of the factors that the Commission must consider in determining whether to terminate a license under alternate criteria. The Commission must consider whether the licensee has provided sufficient financial assurance to enable an independent third party (including a government custodian of a site) to assume and carry out responsibilities for any necessary control and maintenance of the site. This new section also explicitly states that the financial assurance be in the form of a trust fund, as in § 20.1403(c). N.2 Require a Trust Fund for the Prepayment Option The final rule amends the list of prepayment financial methods that may be used to provide financial assurance for decommissioning to provide that prepayment shall only be in the form of a trust established for decommissioning costs (§§ 30.35(f)(1), 40.36(e)(1), 70.25(f)(1), and 72.30(c)(1)). The final rule eliminates the four other prepayment options that had been listed in those sections of the regulations ( i.e., the escrow account, government fund, certificate of deposit, and deposit of government securities). Three of these options (the government fund, certificate of deposit, and deposit of government securities) initially were authorized for use to provide alternatives to licensees that elected not to use a trust fund as their prepayment mechanism, even though the NRC recognized that in the event of the licensee's bankruptcy, they provided somewhat less assurance that the funds would remain available to pay for decommissioning. However, no NRC licensees have elected to use the government fund and deposit of government securities options, and only two have used a certificate of deposit. Because of their relative risk in bankruptcy and their non-use by licensees, the NRC has eliminated them as alternatives for providing financial assurance for decommissioning. The NRC recognizes that the elimination of the escrow account option will affect some materials licensees who currently use escrows. Approximately 25 escrows are currently in use as a prepayment option for decommissioning financial assurance. Because some materials licensees use more than one escrow, the number of materials licensees using escrows is slightly less than the number of escrows. The staff reviewed several studies of the situation of escrows in bankruptcy and concluded that the most accurate summary of the various assessments is as follows. The funds contained in escrows that are set up correctly before a licensee's entry into bankruptcy will likely be secure from transfer into the bankruptcy estate as assets of the debtor, and they will not be reachable by the bankruptcy trustee using doctrines of fraudulent conveyance or voidable preference. However, correctly setting up an escrow is difficult, as noted in Section II.N.1 of this document. The NRC is also concerned that a determination of the legal status of an escrow may be subject to considerable delay. In addition to the time necessary to carry out a legal standing analysis, a bankruptcy trustee could attempt to use the automatic stay provisions of the bankruptcy code to stop payment by an escrow agent under the escrow, if that payment is occurring following the commencement of the bankruptcy action. While this attempt may fail, it could postpone the NRC's access to the funds held in the escrow and thereby preclude the prompt commencement of decommissioning. Finally, the administrative costs of a trust fund are comparable to an escrow, so there is little economic benefit to using the escrow. Elimination of the use of escrow accounts by materials facilities was discussed at the public stakeholder meeting held January 10, 2007. No stakeholders objected to the elimination of the escrow as a financial assurance method. Two comments on this topic were received during the proposed rule public comment period. Both comments disagreed with the NRC's elimination of the use of escrow accounts for financial assurance. For reasons discussed previously, the NRC disagrees with these comments and has eliminated the escrow as an approved method for materials licensees to provide financial assurance. The escrow account may continue to be used by power reactor licensees, pursuant to 10 CFR 50.75. The technical basis for the Decommissioning Planning proposed rule did not include removal of the escrow account from 10 CFR 50.75, so this change was not made during this rulemaking. N.3 Require an Upfront Standby Trust Fund for the Parent Guarantee and Self-Guarantee Options The final rule amends Appendices A, C, D, and E to 10 CFR part 30 (amends Section III.D of Appendix A; amends Section III.F and adds a new Section III.G to Appendix C; amends Section III.D and adds a new Section III.E to Appendix D; and adds a new Section III.F to Appendix E). The amendments require a parent company providing a parent company guarantee and a licensee providing a self-guarantee to—(1) set up a standby trust before it may rely on the guarantee for financial assurance, and (2) specify criteria for selecting an acceptable trustee. Under current regulations, the guarantor was not required to establish a standby trust before providing a parent company or self-guarantee. Instead, a standby trust would be established and used to hold funds for decommissioning only if the NRC required the guarantor to provide such funding for decommissioning. Setting up a standby trust at the time that the guarantee is drawn upon could lead to a significant delay. Therefore, regulatory guidance recommended the creation of a standby trust at the commencement of the guarantee. A standby trust is necessary, because the NRC cannot accept decommissioning funds directly. Under the “miscellaneous receipts” statute (31 U.S.C. 3302(b)), the NRC must turn over all payments received to the U.S. Treasury. Therefore, a standby trust is necessary to receive funds if the NRC requires the guarantor to put the funds into a segregated account. Creating a standby trust before the guarantee is provided avoids potential delays in initiating decommissioning. In addition, the use of a trust protects the funds from creditors' claims, which may be necessary if the guarantor faces financial distress. Therefore, the final rule requires that the guarantor set up a standby trust. In addition, the final rule provides that the Commission has the right to change the trustee of the trust. That power is necessary to assure that the trustee will faithfully execute its duties. Finally, to assure that the trust agreement is adequate, the final rule specifies that an acceptable trust is one that meets the regulatory requirements of the Commission. N.4 Require Parent Company to Inform NRC of Financial Distress and Submit to an Order Because a parent company is not usually an NRC licensee subject to the NRC's authority, 10 CFR part 30, Appendix A, Section III.E (published as 10 CFR part 30, Appendix A, Section III.F in the proposed rule) is added to specify that the parent company guarantee option must include a contractual agreement by the parent company to submit to NRC payment orders. Before this final rule, the parent company had no requirement to inform the NRC of financial distress that may adversely affect its ability to meet its guarantee obligations. Because the NRC needs to know if the parent guarantor is in financial distress to take steps to protect the funds guaranteed for decommissioning, the final rule requires the parent guarantor to notify the NRC in case of its financial distress, and its plan to transfer the guaranteed amount to the standby trust. In these situations, payments from the parent company are immediately due and payable to the standby trust pursuant to an acceleration clause, discussed in Section II.N.5 of this document. A similar notification requirement is not necessary for a licensee guarantor because NRC regulations under 10 CFR 30.34(h), 40.41(f), 70.32(a)(9), and 72.44(a)(6) already require licensees to notify NRC of bankruptcy proceedings. N.5 Require Guarantor Payment Immediately Due to Standby Trust Before this final rule, the regulations did not address the possibility that the guarantor of the parent guarantee or self-guarantee may be in financial distress when it is required to provide alternate financial assurance. When decommissioning is not being conducted at the time of an insolvency proceeding, creditors could argue that the debtor owes performance of decommissioning in the future, not money at the present time. That argument could potentially support a finding that no payment is owed to the standby trust. In that event, a division of assets to satisfy creditors' claims may not adequately protect resources needed to fund decommissioning. To provide a money claim on the assets of the guarantor that would cover the cost of decommissioning at the time of a division of assets, the final rule authorizes the Commission to make the amount guaranteed immediately due and payable to the standby trust ( i.e., an acceleration clause). N.6 Allow Intangible Assets, With an Investment Grade Bond, To Meet Some Financial Tests The NRC regulations allow guarantees to be used as financial assurance for decommissioning by companies whose financial statements demonstrate a low risk of default for corporate obligations. A set of financial tests are prescribed in 10 CFR part 30, Appendices A, C, D, and E for companies who may qualify to use the guarantee methods. Licensees who desire to use the parent company guarantee or self-guarantee as a financial assurance option must pass the tests on an annual basis. Some of the financial tests in 10 CFR part 30, Appendices A, C, and E involve bond valuations. In the past, only tangible assets were considered within the calculations performed under the financial tests. In response to an inquiry during the public stakeholder meeting on January 10, 2007, the NRC staff considered whether allowing the use of intangible assets would materially increase the risk of a shortfall in decommissioning funds. The NRC concluded that if a licensee can meet a minimum tangible net worth requirement, then allowing that licensee to use intangible assets to meet a total net worth requirement beyond the minimum tangible net worth amount, in conjunction with certain bond valuations of the guarantor, would not materially decrease the ability of the licensee to provide assurance that it will have the requisite decommissioning funding. Although the use of a company's bond rating remains a joint criterion with the use of intangible assets in some of the financial tests, the NRC is making other changes so that licensees that pass the tests will have an increased likelihood of providing financial assurance. Recent data suggests that regulators should not rely on a bond rating by itself to provide financial assurance, as discussed in paragraph N.7 of this section. However, an investment grade bond rating coupled with a minimum amount of tangible net worth does provide an additional level of assurance. In a 1982 revised interim final rule, the EPA provided several reasons for accepting a minimum tangible net worth requirement, which are discussed in Paragraph N.7 of this section. Once these other components of the financial tests are met, licensees can use intangible assets for a total net worth requirement beyond the minimum tangible net worth requirement. Because bond rating agencies include intangible assets in their evaluation of the financial stability of a company's bonds, these companies are already given credit for their intangible assets in the bond rating component of the test. The minimum tangible net worth component prevents the NRC from relying too heavily on intangible assets. To further assure the efficacy of a company's current bond rating, amendments in the final rule specify that the bond must be uninsured, uncollateralized, and unencumbered to be used in the financial test. Moreover, the value of the nuclear facilities, both as tangible and intangible assets, is excluded from the calculation of net worth, because those assets would not be available to produce funds for decommissioning after the facility is shut down. The staff concluded that permitting the use of intangible assets after the minimum tangible net worth requirement is met, in conjunction with an investment grade bond rating, would not materially decrease the ability of the licensee to provide assurance that it will have adequate decommissioning funding. With the financial tests required by 10 CFR part 30, Appendices A, C, and E, the NRC has a greater level of assurance that these companies will not default on their decommissioning obligations. In addition, the guarantee methods require annual re-passage of the test. Because a company that satisfies the minimum tangible net worth criterion and has an investment grade bond rating is less likely to default in a one-year period, the annual re-passage requirement will normally provide adequate time for the guarantor to obtain alternative financial assurance. In rare cases in which a default may occur in a short time, the acceleration clause, discussed in paragraphs N.4 and N.5 of this section, will provide a method to obtain funds in situations of financial distress. Therefore, after the minimum tangible net worth requirement is met, this final rule will allow the use of intangible assets, in conjunction with an investment grade bond rating, to meet specified criteria in the financial tests for parent company and self-guarantees. N.7 Increase the Minimum Tangible Net Worth for the Guarantees' Financial Tests Before this final rule, the financial tests in Appendices A and D to 10 CFR part 30 each require the entity seeking to pass the relevant financial test to have a tangible net worth of at least $10 million. The financial test in the current Appendix C to 10 CFR part 30 requires the applicant or licensee to have a tangible net worth at least 10 times the current DCE or certification amount for decommissioning. The final rule amendments require a tangible net worth of at least $21 million in each of the financial tests in Appendices A, C, and D to 10 CFR part 30. The $10 million in tangible net worth requirement was first adopted by the EPA in 1981, and the financial test adopted by the NRC in 1988 used the same criterion. The NRC believes that the criterion should be adjusted to represent the value in current dollars of $10 million in 1981. For the proposed rule, the NRC calculated a new tangible net worth amount using the 2005 Implicit Price Deflator for Gross Domestic Product published by the U.S. Department of Commerce in its Survey of Current business, and the equivalent Implicit Price Deflator for 1981, to arrive at a value of $19 million to represent the $10 million value (1981 dollars) in 2005 dollars. The NRC agrees with a comment submitted on the proposed rule to escalate the 1981 dollars to 2007 dollars. This calculation, rounded up in units of one million dollars, equals $21 million. The final rule adds a requirement in Section II.A.(1) of Appendix C to 10 CFR part 30 for applicants or licensees to have a tangible net worth of at least $21 million. Before this final rule, that component of the financial test for self-guarantee specified only that the applicant or licensee must have a tangible net worth at least 10 times the current DCE or certification amount. The additional requirement has been added as recent events indicate that the existing requirement in Section II.A.(3) of Appendix C—that the applicant or licensee must have a current rating for its most recent bond issuance of AAA, AA, or A as issued by Standard & Poor's (S&P), or Aaa, Aa, or A as issued by Moody's —may not be adequate. The NRC has historically relied on the bond rating component to provide greater assurance that a company with a qualifying rating will be less likely to fall into bankruptcy within a one year time period; hence, the regulations require a licensee to repeat passage of the financial test on an annual basis. Recent trends suggest that a bond rating may not provide the additional assurance that the NRC is seeking. For example, companies that provide bond ratings may be reluctant to downgrade, because a downgrade can have such an adverse effect on a rated sovereign or corporate issuer that it can destabilize the issuer or the market for its securities ( e.g., AIG) (Katz, J., Salinas, E., & Stephanou, C., “Credit Rating Agencies: No Easy Regulatory Solution,” Crisis Response: Public Policy for the Private Sector, Note Number 8, 4-5 (October 2009), http://rru.worldbank.org/documents/CrisisResponse/Note8.pdf ). Credit ratings can also be slow indicators of an entities' financial health ( e.g., Enron, Worldcom, Parmalat, Lehman Brothers) (Katz; O'Brien, B., “Fitch Fells Berkshire's Credit Rating,” Barron's (March 13, 2009), http://blogs.barrons.com/stockstowatchtoday/2009/03/13/fitch-fells-berkshires-credit-rating/ ). Because recent events and trends cause the NRC to question the adequacy of the bond rating requirement to provide financial assurance, the NRC concludes that the bond rating requirement in appendix C to 10 CFR part 30 should be coupled with another requirement. The NRC determined that the tangible net worth requirement found in appendix A and appendix D to 10 CFR part 30 is an adequate accompaniment. The basis of this finding is rooted in a 1982 EPA revised interim final rule (47 FR 15032; April 7, 1982), which provided several reasons for choosing $10 million in tangible net worth in 1982 dollars as a financial test. The EPA recognized that the business failure rate for firms with $10 million (1982 dollars) or more in net worth was significantly lower than for firms overall. (47 FR 15035; April 7, 1982). Because firms with $10 million or more in net worth were more stable than companies with less net worth, these larger firms were less likely to abandon facilities or otherwise avoid closure or post-closure responsibilities. (47 FR 15035; April 7, 1982). EPA “furthermore believes that retaining the $10 million requirement will keep the burden of administering this new financial assurance mechanism at manageable levels; monitoring the use of the financial test by less stable firms can be expected to be more time-consuming and a greater administrative burden.” (47 15035; April 7, 1982). Because “[a]ssets of firms often include intangibles such as goodwill, patents, and trademarks which may be difficult to convert into cash to pay for closure or post-closure costs,” the EPA concluded that only tangible net worth could be used to meet its net worth requirements. (47 FR 15035; April 7, 1982). The data suggests that a high bond rating by itself does not necessarily signal financial strength. Also, the risk of a shortfall is expected to be lower for licensees that pass these qualifying tests than for licensees that do not. Therefore, the NRC has determined that licensees that can satisfy the $21 million tangible net worth minimum, together with the other financial tests, will have an increased likelihood of providing reasonable assurance that the necessary decommissioning funding will be available when it is needed. N.8 Clarify Guarantees' Bond Ratings and Annual Demonstration Submittals The final rule amendments specify that the current rating of the most recent bond issuance of AAA, AA, or A by Standard and Poor's could include adjustments of + or − ( i.e., AAA+, AA+, or A+ and AAA−, AA−, and A− would meet the criterion) and the current rating of Aaa, Aa, or A by Moody's could include adjustments of 1, 2, or 3. Standard and Poor's and Moody's have introduced the plus or minus and numerical adjustments to refine the precision of their ratings. As a result, licensees have been uncertain whether a rating that includes these adjustments, and in particular ratings that might be considered below the unadjusted ratings specified in the appendices ( e.g., A−) could be used. Based on the minimal difference in default rate associated with the qualifiers, the final rule states that all the bonds within a specified rating level meet the regulatory standard. In addition, the final rule amends Section II.A.(2)(i) of Appendix A to 10 CFR part 30 and Section II.A.(3) of Appendix C to 10 CFR part 30 to require the bond to be the most recent “uninsured, uncollateralized, and unencumbered” bond issuance. This amendment makes the bond criterion in Appendix A to 10 CFR part 30 and Appendix C to 10 CFR part 30 consistent with the bond criterion in Appendix E to 10 CFR part 30. As explained in NUREG/CR-6514, when a rated bond has insurance or pledged assets to provide additional security, the bond rating may not directly reflect the creditworthiness of the bond issuer. Therefore, the final rule adds the requirement that the bond rating used to pass the financial test must be uninsured, uncollateralized, and unencumbered. The final rule makes a conforming change in Section III.E. of Appendix E to 10 CFR part 30 to provide that if, at any time, the licensee's most recent bond issuance ceases to be rated in any category of “A−” and above by Standard and Poor's or in any category of “A3” and above by Moody's, the licensee no longer meets the requirements of the financial test. The final rule amendments to the bond rating criterion in Appendices A and C to 10 CFR part 30 are intended to clarify the intent of the rule, eliminate an unintended apparent inconsistency among the different financial tests that may be used, and to make administration of the financial assurance requirements more efficient by eliminating recurring questions. The final rule requires a certified public accountant to verify that a bond rating, if used to demonstrate passage of the financial test, meets the requirements. Some financial tests received by the NRC did not apply the requirement correctly. Requiring an audit of the bond rating will minimize the potential that an error is made in verification of the bond rating. Before this final rule, the regulations required the licensee to repeat passage of the financial test each year, but the regulations did not explicitly state that the licensee must annually submit documentation to the NRC to verify its passage of the test. However, the parent company and self-guarantee agreements illustrated in regulatory guidance include a provision that the licensee will annually submit to the NRC revised financial statements, financial test data, and an auditor's special report. Submittal of the documents permits the NRC to verify the licensee's continuing eligibility to use the parent company guarantee without incurring the expense of an onsite inspection. Therefore, the final rule codifies the regulatory guidance to require annual submittal of documentation that the guarantor passed the financial test. Before this final rule, the regulations were unclear about whether the parent company guarantee and financial test are to remain in effect until the license is terminated. The final rule clarifies that the NRC's written acceptance of an alternate financial assurance by the parent company or licensee allows the guarantee and financial test to lapse. N.9 Invalidate the Use of Certification for Financial Assurance if There Is Contamination This final rule amends regulations to add new requirements related to decommissioning financial assurance as applied to certifications. The changes affect §§ 30.35(c)(6), 40.36(c)(5), and 70.25(c)(5). Before this final rule, the regulations prescribed specific amounts of financial assurance for licensees that are authorized to possess relatively small amounts of radioactive material. Licensees authorized to possess radioactive materials in higher amounts must submit a DFP, which includes a site-specific cost estimate for decommissioning. The site-specific cost estimate is almost always higher than the prescribed certification amounts. This final rule requires licensees who qualify to use the certification amounts to submit a DFP in the event that survey results detect significant residual radioactivity within the site boundary, including the subsurface. A significant amount would be residual radioactivity that would, if left uncorrected, prevent the site from meeting the criteria for unrestricted use. Remediating subsurface contamination can be very expensive. However, licensees that qualify to use the certification amounts have no regulatory requirement to increase the amount of financial assurance to cover subsurface remediation costs. In the event subsurface contamination occurs at such a site, this final rule provides the regulatory basis to require these licensees to cover the full cost, not just the certification amount. N.10 Other Changes to Financial Assurance Regulations This final rule eliminates the line of credit option from 10 CFR 30.35(f), 40.36(e), 50.75(e)(1)(iii)(A), 70.25(f), and 72.30(e) from the list of surety, insurance, or other guarantee methods that may be used to provide financial assurance for decommissioning. Although the line of credit was initially authorized for use to provide an alternative to licensees that elected not to use a surety or letter of credit, the NRC recognized that it posed a greater risk than the other two surety methods, because it might be subject to underlying loan covenants that could make it more vulnerable to cancellation if the licensee experienced financial difficulties. However, since 1988, no NRC licensees have elected to use a line of credit to provide financial assurance for decommissioning. Because of its greater risk of cancellation and its non-use by licensees, the NRC has decided to eliminate the line of credit as an alternative for providing financial assurance for decommissioning. The final rule excludes, in the financial tests for the parent guarantee and self-guarantee, the net book value of the nuclear facility and site from the calculation of tangible net worth. Before this final rule, the regulations required that the calculation of tangible net worth must exclude the book value of the “nuclear units.” That requirement leads to confusion, because some interpreted it to apply to nuclear reactor units and not other kinds of nuclear facilities. However, other kinds of nuclear facilities should be excluded from the tangible net worth calculation, because they are unlikely to provide funds for decommissioning. The existing rule does not specify whether the nuclear site, as distinguished from the facility, may be included in the calculation of tangible net worth. The value of the site is likely to depend on the probability that the decommissioning will be completed, and is subject to some degree of uncertainty. Therefore, the calculation of tangible net worth has been changed to exclude the net book value of the nuclear facility and site. The final rule requires a certified public accountant to include an evaluation of off-balance sheet transactions, for the parent guarantee and self-guarantee. Generally accepted accounting principles (GAAP) permit certain kinds of transactions to be accounted for off the company's balance sheet. Many companies, as a means of managing risk and/or taking advantage of legitimate tax minimization opportunities, create off-balance-sheet transactions. It is important to understand the nature and the reason for each off-balance-sheet item and ensure that any such relationships are adequately disclosed. ( Off-Balance Sheet Arrangements and Other Disclosures, American Institute of Certified Public Accountants, http://www.aicpa.org/ForThePublic/AuditCommitteeEffectiveness/AuditCommitteeBrief/DownloadableDocuments/Off%20Balance%20Sheet%20Arrangements.pdf, last visited May 9, 2011). The volume and risk of the off-balance-sheet activities need to be considered (Risk Management Manual of Examination Policies, Federal Deposit Insurance Corporation, http://www.fdic.gov/regulations/safety/manual/section3-8.pdf, last visited December 20, 2010). Before this final rule, the regulations did not require the independent certified public accountant's special report to examine off-balance sheet transactions. However, these transactions have the potential to materially affect the guarantor's ability to fund decommissioning obligations. Therefore, the final rule requires the auditor to include an evaluation of off-balance sheet transactions. O. Will some licensees who currently do not have financial assurance need to get financial assurance? No. Licensees who are not required to provide financial assurance for decommissioning will not have to obtain financial assurance as a result of amendments in this final rule. The decommissioning planning and financial assurance amendments in this final rule only apply to licensees who are or will be subject to the decommissioning financial assurance requirements under 10 CFR 30.35, 40.36, 50.75, 70.25, and 72.30. All operating power reactor licensees are required to have financial assurance, consistent with 10 CFR 50.75(c), and all licensees with an independent spent fuel storage installation (ISFSI) regulated under 10 CFR part 72 must have financial assurance for decommissioning in accordance with 10 CFR 72.30(c). P. What changes are being made with respect to materials facilities' decommissioning funding plan (DFP) and DCE? This final rule requires certain licensees under 10 CFR part 72 to adjust their DCEs within 3 years of the previous DCE. This was done by final rule on October 3, 2003 (68 FR 57327) for licensees under 10 CFR parts 30, 40, and 70. This provision in the final rule makes the timing basis for DCE adjustments consistent among all materials facilities. Regarding DFPs, §§ 30.35(e), 40.36(d), 70.25(e), and 72.30(b) are amended to require additional information from licensees. The NRC's experience indicates that underestimation of decommissioning costs can occur when the licensee assumes it will qualify for a restricted site release by meeting all of the 10 CFR 20.1403 requirements. If it turns out that these requirements cannot be met, and that an unrestricted site release under 10 CFR 20.1402 will be required, the licensee may not have the ability to fund a potentially more expensive cleanup. For example, if instead of leaving large volumes of slightly contaminated soil onsite in a restricted release decommissioning, the licensee must ship this material offsite for disposal to support an unrestricted site release, then the decommissioning will typically be much more expensive due to high offsite disposal costs. Therefore, the final rule requires the licensee to estimate and cover the costs to decommission the facility to meet unrestricted use criteria. The option of meeting the 10 CFR 20.1403 restricted release requirements will be available, but the licensee would have to demonstrate that it can meet those criteria before a cost estimate based on that assumption would be acceptable. In addition, certain operational events can increase decommissioning costs above the original estimate. These events include spills, increases in onsite waste inventory, increases in waste disposal costs, facility modifications, changes in authorized possession limits, actual remediation costs that exceed the initial cost estimate, onsite disposal, and use of settling ponds. The final rule amends 10 CFR 30.35(e)(2), 40.36(d)(2), 70.25(e)(2), and 72.30(b) to require the 3-year update of the DFP to consider these events for the effect, if any, they may have on the estimated cost of decommissioning. Subsurface contamination can be very expensive to remediate. The new regulations require the licensee to estimate the volume of contaminated subsurface material that would require remediation, and provide financial assurance for the estimated cost of remediation. Early consideration and funding arrangements to cover increased costs will improve decommissioning planning and increase the likelihood that funds will be available when needed for site decommissioning. Existing regulatory guidance identifies recommended methods for arriving at DCEs. The NRC is codifying some of these recommended methods in this final rule. To assure that funds will be adequate to complete decommissioning in the event the licensee is unable to do so, cost estimates are required to include contractor overhead and profit. An adequate contingency factor is necessary to cover unanticipated costs that can arise after the decommissioning project begins. The key assumptions underlying the cost estimate would have to be identified to aid the staff in evaluating the adequacy of the estimate. Codification of these recommendations will improve the quality of DFP submittals, facilitate the staff's review of these submittals, and result in regulatory efficiencies. The NRC is aware of the records important for decommissioning reporting requirements that licensees have under §§ 30.36(g)(1), 40.36(f)(1), 50.75(g)(1), 70.25(g)(1), and 72.30(d)(1). The additional reporting requirements in this final rule are designed to foster a better understanding of the impact the spill or contaminating event has on the DCE. Q. What changes are being made with respect to license transfer regulations for materials licensees? This final rule makes a set of parallel changes to §§ 30.34(b)(2), 40.46(a)(2), and 70.36(a)(2). These changes codify NRC regulatory guidance to require the licensee to do the following: (1) Provide information on the proposed transferee's technical and financial qualifications, and (2) to provide decommissioning financial assurance as a condition for approval of the transfer if the licensee is required to have financial assurance. The information and financial assurance are necessary to evaluate the adequacy of the proposed transferee. Placing these provisions in the regulation, rather than keeping them in regulatory guidance, will improve regulatory efficiency by improving the quality of license transfer requests. It also will ensure that a prospective license transferee provides to the NRC the information necessary to determine that public health and safety are not compromised by the transfer and that the radiation safety aspects of the program are not degraded. R. What changes are being made with respect to permanently shutdown reactor decommissioning fund status and spent fuel management plan reporting? The final rule amends § 50.82(a)(4)(i) and adds three new provisions to § 50.82(a)(8) in Paragraphs (a)(8)(v) through (a)(8)(vii). The revised § 50.82(a)(4)(i) requires that the PSDAR include, if applicable, a cost estimate for managing irradiated fuel, pursuant to § 50.54(bb). Before this final rule, the PSDAR was required to include a description of the planned decommissioning activities, a schedule for their accomplishment, and an estimate of expected costs. The amendments to § 50.82(a)(8) require each power reactor licensee undergoing decommissioning to submit, in the form of an annual financial assurance status report, information (specified further in this section) regarding its decommissioning funds. Currently, under § 50.75(f)(1), the information reported to the NRC by power reactor licensees is focused on collection of funds before permanent shutdown and does not require information on the actual funds spent. To assess the adequacy of power reactor decommissioning funding after permanent shutdown, the NRC needs to know the actual costs being incurred at decommissioned facilities. To obtain this information, the annual report is now required to include, among other things, the amount spent on decommissioning over the previous calendar year, the remaining balance of any decommissioning funds, and an estimate of the costs to complete decommissioning. If the annual report reveals a projected funding shortfall, additional financial assurance to cover the cost to complete decommissioning must be provided. These changes will improve NRC oversight of decommissioning planning and increase the likelihood that funds for decommissioning will be available when needed. Under new § 50.82(a)(8)(vii), the annual financial assurance status report must also include the status of funds to manage irradiated fuel. Due to the cessation of operating revenues, spent fuel management and related funding are a concern after the reactor is permanently shut down. Therefore, the final rule requires the following: (1) That the amount of funds accumulated to cover the cost of managing the spent fuel be specified; (2) that an estimate of the projected costs of spent fuel management, until the Department of Energy takes title to the spent fuel, be provided; and (3) that a plan to obtain additional funds if the accumulated funds do not cover the projected cost be identified. These changes will increase the likelihood that funds for spent fuel management will be available when needed. S. When do these actions become effective? The effective date of the Decommissioning Planning final rule is eighteen months after publication of the final rule in the Federal Register. The NRC considers this an adequate time for licensees to implement the requirements in the final rule. The 18-month period will provide licensees sufficient time if there is a need on their part to review their current methods for radiological surveys and monitoring in relation to new 10 CFR 20.1406(c) and modified 10 CFR 20.1501(a) and (b). Also, the 18-month implementation period will accommodate the time needed to prepare and publish a final version of DG-4014. The DG-4014 contains changes made as a result of public comments received on the draft guidance released with the Decommissioning Planning proposed rule. The NRC considered revising Regulatory Guide 4.21, “Minimization of Contamination and Radioactive Waste Generation: Life-Cycle Planning,” dated June 2008, but considered this inappropriate because Regulatory Guide 4.21 applies only to certain licensees who submitted their initial license application after August 20, 1997. The DG-4014 applies to licensees who submitted their initial license application on or before August 20, 1997, and who were not required to consider in the early planning stages of the facility specific design features for contaminant management. Additionally, the 18-month implementation period will provide sufficient time to licensees who need to—(1) Switch out of their escrow account into a different financial assurance mechanism; (2) examine their continued use of a parent guarantee or self-guarantee as decommissioning financial assurance [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2011-14267. Public record. Not legal advice.