Use of Decommissioning Trust Funds Before Decommissioning Plan Approval; Draft Policy Statement

NUCLEAR REGULATORY COMMISSION

Use of Decommissioning Trust Funds Before Decommissioning Plan

Approval; Draft Policy Statement

AGENCY: Nuclear Regulatory Commission.

ACTION: Draft policy statement.

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SUMMARY: This draft policy statement presents the criteria the U.S.

Nuclear Regulatory Commission (NRC) proposes to follow in addressing

requests from power reactor licensees that have permanently shut down

their power reactors to make withdrawals from external decommissioning

sinking funds to pay for the removal of components and other

decommissioning-related activities before the NRC approves these

licensees' decommissioning plans submitted pursuant to 10 CFR 50.82.

This draft policy statement also covers de minimis withdrawals from

external decommissioning sinking funds to pay for developing the 10 CFR

50.82 decommissioning plan and for other post-shutdown administrative

expenses.

DATE: Comment period expires April 19, 1994. Comments received after

this date will be considered if it is practical to do so, but the

Commission is able to ensure consideration only for comments received

on or before this date.

ADDRESSES: Mail written comments to: Secretary, U.S. Nuclear Regulatory

Commission, Washington, DC 20555, Attention: Docketing and Service

Branch.

Deliver comments to: 11555 Rockville Pike, Rockville, Maryland,

between 7:45 am and 4:15 pm on Federal workdays.

FOR FURTHER INFORMATION CONTACT:

Robert Wood, Office of Nuclear Reactor Regulation, U.S. Nuclear

Regulatory Commission, Washington, DC 20555, telephone: (301) 504-1255.

SUPPLEMENTARY INFORMATION:

Background

The NRC decommissioning regulations in 10 CFR 50.75 and 50.82 are

silent on whether approval of the decommissioning plan must precede

withdrawals from the decommissioning trust fund. Appendix B.3.1, p. B-

12 of Regulatory Guide 1.159, ``Assuring the Availability of Funds for

Decommissioning Nuclear Reactors,'' contains sample trust language that

indicates that the fund trustee should only release funds upon

certification ``that decommissioning is proceeding pursuant to an NRC-

approved plan.'' However, not all licensees have used this sample

language. When the NRC evaluated trust funds as part of the initial

certification required by 10 CFR 50.75(b) and submitted in July 1990,

it found trusts acceptable if, along with other provisions, they

contained language limiting trust fund withdrawals to legitimate

decommissioning purposes. Thus, many licensees have acceptable trusts

that nevertheless do not expressly limit the withdrawal of trust funds

before NRC approves a decommissioning plan.

Because of a request by Yankee Atomic Electric Company (YAEC)1

and in anticipation of future requests by other power reactor licensees

of permanently shutdown facilities, the Commission directed the NRC

staff to provide an analysis and recommendation to the Commission on

permitting licensees to use their decommissioning funds for

decommissioning activities prior to approval of the decommissioning

plans. The Commission approved the criteria developed by the staff to

evaluate early withdrawals from external decommissioning sinking funds

and directed the staff to publish the details of this policy in the

Federal Register for information and public comment.2 This

proposed policy and implementing criteria are provided below:

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\1\In a letter to the Commission dated November 25, 1992, YAEC

stated its intention to use its decommissioning trust funds to

remove reactor core internals, steam generators and the pressurizer

from Yankee-Rowe before the NRC approves YAEC's decommissioning

plan. (YAEC plans to submit its decommissioning plan for NRC review

in late 1993.) By letter dated April 16, 1993, the NRC did not

object to YAEC's proposed use of decommissioning trust funds before

NRC approval of the Yankee-Rowe decommissioning plan, using criteria

consistent with those discussed in this policy statement.

2This policy statement does not apply to licensees with

operating nuclear reactors. The staff is separately evaluating the

issue of whether and under what circumstances the NRC should allow

licensees of operating plants to withdraw decommissioning trust

funds.

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Statement of Policy

If a licensee of a permanently shutdown facility spends

decomissioning trust funds on legitimate decommissioning activities,

the timing of these expenditures, either before or after NRC approves a

licensee's decommissioning plan, should not adversely affect public

health and safety, provided adequate funds are maintained to restore

the facility to a safe storage configuration in case decommissioning

activities are interrupted unexpectedly. Consequently, the timing of

the NRC review of a licensee's decommissioning plan in relation to

withdrawals from trust funds is not as important as the purpose of

those withdrawals.

In its decommissioning plan reviews, the NRC evaluates proposed

licensee activities in the planned decommissioning process to determine

whether the proposed plan adequately ensures protection of public

health and safety. The NRC will also assess a licensee's overall

decommissioning fund balance in relation to total cost. The NRC review

of decommissioning costs is focused on seeing that they fall within a

normal range of costs and is not focused on examining the timing,

scope, and cost of specific component removal or other decommissioning

activities. Therefore, although the NRC believes that it should guard

against misuse or waste of decommissioning trust funds by licensees, it

is not clear that prior NRC review of the decommissioning plan would

identify such misuse or waste unless it resulted in costs far higher

than would normally be expected. The NRC would find it difficult to

identify the misuse of funds if a licensee's estimates were within a

reasonable range of the costs estimated for similar facilities.

Further, the NRC does not supervise or review the actual expenditure of

funds during decommissioning and would not have an opportunity to

identify serious cost overruns that might jeopardize the adequacy of

funding available for remaining decommissioning activities.

However, there appears to be little motivation for utilities to

misuse these funds. Most NRC power reactor licensees are subject to

rate regulation by State public utility commissions (PUCs) or the

Federal Energy Regulatory Commission (FERC). Utilities are normally

allowed to earn a return on assets, including nuclear plants, once they

are determined to be ``used and useful'' and placed in the rate base.

Decommissioning costs, however, are normally treated by PUCs and FERC

as non-rate-base expenses. They are passed on to ratepayers as

expenses, but the utility and its stockholders do not earn a return on

these collections. Consequently, there is little financial incentive

for a licensee to ``pad'' or dissipate collected decommissioning funds

to increase the rate base, because the stockholders would not benefit.

Further, PUCs and FERC are unlikely to allow utilities under their

jurisdictions to squander funds obtained from ratepayers. Rate

regulators hold prudency reviews to determine whether utilities have

spent funds properly throughout all aspects of plant operation, from

initial planning to final decommissioning. The NRC expects that PUCs

and FERC will continue to exercise their oversight of utilities'

expenditures, including those being paid from decommissioning trust

funds, throughout the decommissioning process. A utility has an

incentive to spend decommissioning funds prudently if it knows that its

stockholders will be liable for decommissioning costs in excess of

those already collected from ratepayers.

Although NRC approval of the decommissioning plan does not ensure

prevention of misuse or waste of decomissioning funds, the NRC believes

that withdrawal of funds for decommissioning activities before a

decommissioning plan is developed and approved should require NRC

review. This is consistent with Commission guidance which provided that

the staff may permit licensees to use their decommissioning funds for

the decommissioning permitted above (as the term decommission is

defined in 10 CFR 50.2), notwithstanding the fact that their

decommissioning plans have not yet been approved by the NRC.

Criteria

The criteria and supporting rationale developed to evaluate

licensee proposals for early withdrawals from external decommissioning

sinking funds are as follows:

1. The withdrawals are for expenses for legitimate decommissioning

activities as defined in 10 CFR 50.2 that would necessarily occur under

most reasonable decommissioning scenarios. Section 10 CFR 50.2 defines

``decommission'' as meaning ``to remove (as a facility) safely from

service and reduce residual radioactivity to a level that permits

release of the property for unrestricted use and termination of

licensee.''

This criterion calls for a licensee to demonstrate that the early

withdrawal is for activities that would occur under reasonable

decommissioning scenarios and would prevent funds being used for

activities that do not reduce radioactivity at the site and ultimately

permit release of the property for unrestricted use. A licensee that

has already prepared its Sec. 50.82 decommissioning plan (which must be

submitted within 2 years after a permanent cessation of operations)

could reference the appropriate part of this plan. A licensee that has

not yet completed its Sec. 50.82 decommissioning plan would have to

provide other documentation to demonstrate that its proposed activities

were clearly decommissioning activities.

2. The expenditures would not reduce the value of the

decommissioning trust below an amount necessary to place and maintain

the licensee's reactor in a safe storage (SAFSTOR) condition if

unforeseen conditions or expenses arise. (For example, if the waste

shipments were rejected by the disposal site because of lack of storage

space or legal impediments, a licensee would have to show it had the

funds to return and store any affected components on site and to store

any radioactive components and materials that had remained on-site.)

Consistent with the purpose of the decommissioning funding

regulations, assurance of availability of funds to safely decommission

a facility, and the principle that a preapproval activity does not

foreclose the release of the site for possible unrestricted use, this

criterion calls for a licensee to show that it can maintain the status

quo at a facility and that the proposed activities will not preclude

the ultimate unrestricted use of the site. A licensee would have to

document the rationale for the minimum amount estimated to be needed to

return to a safe storage condition if decontamination or removal

activities are interrupted and the components and equipment involved

have to be stored safely at the site. Such on-site storage after

shipment could, in the worst case, require construction of a storage

facility. This criterion ensures that decommissioning activities that

occur before approval of the Sec. 50.82 decommissioning plan do not

reduce funds below a level that would ensure continued maintenance of

safety at a defueled, shutdown facility until the decommissioning plan

is reviewed and approved. A licensee could satisfy this criterion by

demonstrating that it has sufficient funds in either its

decommissioning fund or other available funds to maintain the status

quo at the facility, that is, maintain safety in the defueled, shutdown

condition. It should be noted that this criterion is also pertinent to

the normal, end-of-life decommissioning; licensees are to accommodate

the possibility of unforeseen occurrences by providing for

contingencies. (See Regulatory Guide 1.159 at 1.159-10, Item 1.4.4.3.

The general guidance of Regulatory Guide 1.159 concerning provisions

for ``contingencies,'' however, does not explicitly identify the nature

of such contingencies. The NRC's proposed criterion is more explicit.)

The NRC notes that 10 CFR 50.82(c)(1) requires that, ``funds needed

to complete decommissioning be placed into an account segregated from

licensee assets and outside the licensee's administrative control

during the storage or surveillance period, or a surety method or fund

statement of intent be maintained in accordance with the criteria of

Sec. 50.75(e).'' Because the definition of decommissioning in 10 CFR

50.2 implicitly includes the costs of placing and maintaining a reactor

in safe storage, a licensee should continue to provide assurance of

adequate funds for these expenses at all times during the SAFSTOR

period. Thus, licensees are required to maintain this assurance both

before and after the NRC approves a licensee's Sec. 50.82

decommissioning plan.

3. The withdrawals would not inhibit the ability of the licensee to

complete funding of any shortfalls in the decommissioning trust needed

to ensure availability of funds to ultimately release the site for

unrestricted use.

This criterion encompasses the principle that activities allowed

before approval of the decommissioning plan do not significantly

increase decommissioning costs. A licensee would be required to

document the effect of the withdrawals on the decommissioning funding

plan, addressing the current fund balance and collection schedule, and

demonstrate that the use of funds before NRC approval of a

decommissioning plan for the facility would not impair the licensee's

ability to fully fund the plan submitted to the NRC (or, if no plan has

been filed, the actions necessary to permit release of the site for

unrestricted use). A licensee would, for example, have to show that the

decommissioning actions potentially taken out of sequence of any

decommissioning plan submitted (or reasonable decommissioning

alternatives if no plan has been submitted) would not significantly

increase decommissioning costs or impair its ability to obtain the

funds necessary to complete decommissioning.

4. Before the NRC approves a decommissioning plan, licensees can be

allowed to undertake any decommissioning activity (as the term

``decommission'' is defined in 10 CFR 50.2) that does not: (a)

Foreclose the release of the site for possible unrestricted use, (b)

significantly increase decommissioning costs, (c) cause any significant

environmental impact not previously reviewed, or (d) violate the terms

of the licensee's existing license (e.g., OL, POL, or OL with

confirmatory shutdown order) or 10 CFR 50.59 as applied to the existing

license.

This criterion seeks to ensure that funds are only used for those

decommissioning activities that would be allowed to proceed before the

NRC approves a decommissioning plan. Items (a) and (b) have already

been addressed by this policy statement. For items (c) and (d), a

licensee and the NRC would evaluate the proposed activity to ensure

that the activity may proceed under the current license and that the

proposed activity will not result in any significant environmental

impact not previously reviewed.

As stated above, the NRC may permit licensees to use their

decommissioning funds for the decommissioning activities permitted

above (as the term ``decommission'' is defined in 10 CFR 50.2),

notwithstanding the fact that their decommissioning plans have not yet

been approved by the NRC. After review of the licensee's proposed

activities and fund withdrawal using the above criteria, the NRC would

permit the licensee to use decommissioning funds and to undertake the

proposed activities by tacitly consenting to the proposed withdrawals

by not interposing, within a specified time, an objection to the

licensee's proposal. The NRC would need 60 days to complete an

effective review of a licensee's proposal and justification of how the

above criteria will be met.

Ancillary Issue

In the past, licensees have asked the NRC informally whether they

would be able to withdraw funds from their trusts to pay for developing

the Sec. 50.82 decommissioning plan and for other post-shutdown

administrative expenses. The NRC believes that these withdrawals should

be allowed before the NRC approves the final decommissioning plan,

provided the licensee meets the following guidelines:

1. The sum of withdrawals for such purposes should be de minimis, that

is, less than $5 million.\3\

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\3\In talking informally with several licensees, the NRC

understands that most licensees expect to spend from $1 million to

$3 million for completing decommissioning plans and for immediate

post-shutdown administrative expenses. The amount of $5 million,

therefore, is based on a ``best-guess'' estimated, but is small

enough not to significantly deplete the decommissioning trust.

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2. The decommissioning trust balance would not fall below an amount

needed for safe storage.

3. The licensee provided for these costs in its site-specific

decommissioning cost estimate and increased its overall trust fund

balances accordingly.

Dated at Rockville, Maryland, this 12th day of January, 1994.

For the Nuclear Regulatory Commission.

James L. Blaha,

Acting Executive Director for Operations.

[FR Doc. 94-2391 Filed 2-2-94; 8:45 am]

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