Atlantic City Electric Company, Austin Energy, Central Maine Power Company, Delmarva Power & Light Company, South Mississippi Electric Power Association, and Washington Electric Cooperative, Inc.; Receipt of Petition for Rulemaking

NUCLEAR REGULATORY COMMISSION

10 CFR Part 50

[Docket No. PRM-50-64]

Atlantic City Electric Company, Austin Energy, Central Maine

Power Company, Delmarva Power & Light Company, South Mississippi

Electric Power Association, and Washington Electric Cooperative, Inc.;

Receipt of Petition for Rulemaking

AGENCY: Nuclear Regulatory Commission.

ACTION: Petition for rulemaking; notice of receipt.

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SUMMARY: The Nuclear Regulatory Commission (NRC) has received and

requests public comment on a petition for rulemaking filed by the

Atlantic City Electric Company, Austin Energy, Central Maine Power

Company, Delmarva Power & Light Company, South Mississippi Electric

Power Association, and Washington Electric Cooperative, Inc.

(petitioners). The petition has been docketed by the Commission and has

been assigned Docket No. PRM-50-64. The petitioners are all non-

operating joint owners of nuclear plants who have concerns about

potential safety impacts that could result from economic deregulation

and restructuring of the electric utility industry. The petitioners are

requesting that the enforcement provisions of NRC regulations be

amended to clarify NRC policy regarding the potential liability of

joint owners if other joint owners become financially incapable of

bearing their share of the burden for safe operation or decommissioning

of a nuclear power plant.

DATES: Submit comments by March 22, 1999. Comments received after this

date will be considered if it is practical to do so, but assurance of

consideration cannot be given except as to comments received on or

before this date.

of

joint owners if other joint owners become financially incapable of

bearing their share of the burden for safe operation or decommissioning

of a nuclear power plant.

DATES: Submit comments by March 22, 1999. Comments received after this

date will be considered if it is practical to do so, but assurance of

consideration cannot be given except as to comments received on or

before this date.

ADDRESSES: Submit comments to: Secretary, U.S. Nuclear Regulatory

Commission, Washington, DC 20555. Attention: Rulemaking and

Adjudications staff.

Deliver comments to 11555 Rockville Pike, Rockville, Maryland,

between 7:30 a.m. and 4:15 p.m. on Federal workdays.

For a copy of the petition, write: David L. Meyer, Chief, Rules and

Directives Branch, Division of Administrative Services, Office of

Administration, U.S. Nuclear Regulatory Commission, Washington, DC

20555-0001.

You may also provide comments via the NRC's interactive rulemaking

website through the NRC home page (http://www.nrc.gov). This site

provides the availability to upload comments as files (any format), if

your web browser supports that function. For information about the

interactive rulemaking website, contact Ms. Carol Gallagher, (301) 415-

5905 (e-mail: [email protected]).

FOR FURTHER INFORMATION CONTACT: David L. Meyer, Office of

Administration, U.S. Nuclear Regulatory Commission, Washington, DC

20555. Telephone: 301-415-7163 or Toll Free: 1-800-368-5642 or E-mail:

[email protected].

SUPPLEMENTARY INFORMATION:

Background

nction. For information about the

interactive rulemaking website, contact Ms. Carol Gallagher, (301) 415-

5905 (e-mail: [email protected]).

FOR FURTHER INFORMATION CONTACT: David L. Meyer, Office of

Administration, U.S. Nuclear Regulatory Commission, Washington, DC

20555. Telephone: 301-415-7163 or Toll Free: 1-800-368-5642 or E-mail:

[email protected].

SUPPLEMENTARY INFORMATION:

Background

The Nuclear Regulatory Commission received a petition for

rulemaking submitted by the petitioners. The petitioners are all non-

operating joint owners of nuclear power plants who are concerned about

their potential liability in the event that other co-owners or the

licensee(s) licensed to possess and operate those nuclear power plants

were to default on, or become financially incapable of bearing, their

share of the costs of operating in accordance with NRC requirements.

Specifically, the petitioners are concerned that the NRC's ``Final

Policy Statement on the Restructuring and Economic Deregulation of the

Electric Utility Industry'' (Policy Statement) published on August 19,

1997 (62 FR 44071), has resulted in confusion among joint owners of

nuclear power plants regarding the potential liability of the owner of

a relatively small ownership share of a nuclear power plant. The

petitioners believe that a joint owner could incur the burden of all or

an excessive portion of a plant's costs if other joint owners or the

operators defaulted or became financially incapable of bearing their

share of the burden. The petitioners believe that the NRC might ignore

existing pro rata cost sharing arrangements. The petitioners also

believe that the NRC has published no information regarding what would

constitute a de minimis share and under what circumstances the NRC

might find the imposition of joint and several liability necessary to

protect the public health and safety

earing their

share of the burden. The petitioners believe that the NRC might ignore

existing pro rata cost sharing arrangements. The petitioners also

believe that the NRC has published no information regarding what would

constitute a de minimis share and under what circumstances the NRC

might find the imposition of joint and several liability necessary to

protect the public health and safety.

The petitioners have concluded that these factors have caused much

confusion and uncertainty about the potential liability of a joint

owner, and can adversely affect the ability to raise capital in an

uncertain market that is undergoing consolidation and restructuring.

The petitioners believe that the Policy Statement might stifle the

emerging market for the sale of nuclear power plants and associated

interests, and have concluded that the unsettled nature of potential

liability would adversely affect joint owners who wish to be acquired

by other utilities because decommissioning costs are unknown. The

petitioners request that the issue of potential liability among joint

owners be resolved by amending the regulations pertaining to

enforcement in 10 CFR Part 50.

The NRC has determined that the petition meets the threshold

sufficiency requirements for a petition for rulemaking under 10 CFR

2.802. The petition has been docketed as PRM-50-64. The NRC is

soliciting public comment on the petition for rulemaking.

Discussion of the Petition

al liability among joint

owners be resolved by amending the regulations pertaining to

enforcement in 10 CFR Part 50.

The NRC has determined that the petition meets the threshold

sufficiency requirements for a petition for rulemaking under 10 CFR

2.802. The petition has been docketed as PRM-50-64. The NRC is

soliciting public comment on the petition for rulemaking.

Discussion of the Petition

The petitioners note that the NRC Policy Statement issued on August

13, 1997 and published in the Federal Register on August 19, 1997 (62

Fed. Reg. 44071), ``Final Policy Statement on the Restructuring and

Economic Deregulation of the Electric Utility Industry'' (Policy

Statement) contemplated how NRC would respond to potential safety

impacts on power reactor licensees that could result from economic

deregulation and restructuring of the electric utility industry.

Although the NRC recognized that many licensed nuclear power plants are

jointly owned facilities, the petitioners are concerned that the NRC

stated that pro rata cost sharing arrangements might be ignored in

``highly unusual situations where adequate protection of public health

and safety would be compromised if such action were not taken, to

consider imposing joint and several liability on co-owners of more than

a de minimis share when one or more co-owners have defaulted.'' The

petitioners are also concerned that the NRC has published no

information regarding what would constitute a de minimis share and the

situation where the NRC might find the imposition of joint and several

liability necessary to protect the public health and safety. The

petitioners believe that the quoted portion of the Policy Statement

appears to create a possibility that the owner of a small share of a

nuclear power plant could be held responsible for all or an excessive

portion of a plant's costs if other co-owners or the operators became

financially incapable of meeting their pro rata obligations

ity necessary to protect the public health and safety. The

petitioners believe that the quoted portion of the Policy Statement

appears to create a possibility that the owner of a small share of a

nuclear power plant could be held responsible for all or an excessive

portion of a plant's costs if other co-owners or the operators became

financially incapable of meeting their pro rata obligations.

The petitioners contend that these factors create much uncertainty

as to the potential liability of a joint owner and could adversely

affect a joint owner's ability to raise capital in an industry

undergoing consolidation and restructuring. The petitioners believe

there is an emerging market for the sale of nuclear power plants and

interest in those plants that could be stifled. The petitioners also

believe that the unsettled potential liability issue could prevent co-

owning utilities from being acquired by other utilities because actual

or projected costs, such as decommissioning costs, are unknown.

The petitioners stated that a group of joint owners requested NRC

review of the Policy Statement and ultimately petitioned for judicial

review in the U.S. Court of Appeals for the D.C. Circuit, American

Public Power Association, et al. v. Nuclear Regulatory Commission, et

al. (Case No. 98-1219). Although the case was dismissed after an

agreement between the parties, the NRC stipulated that future legal

challenges on the potential liability issue of joint owners would not

be precluded by the dismissal.

The petitioners have proposed the following language they believe

will eliminate confusion and establish a stable regulatory process on

the potential liability issue, and request that it be included among

the enforcement provisions in 10 CFR part 50:

ties, the NRC stipulated that future legal

challenges on the potential liability issue of joint owners would not

be precluded by the dismissal.

The petitioners have proposed the following language they believe

will eliminate confusion and establish a stable regulatory process on

the potential liability issue, and request that it be included among

the enforcement provisions in 10 CFR part 50:

Whenever the Commission finds it necessary or desirable to

impose additional requirements by rule, order or amendment on a

person subject to this part to promote or protect the public health

and safety, the additional requirements will be directed first to

the person licensed to possess and operate the facility. If it

becomes necessary to impose additional requirements on persons who

only own the facility, and were never licensed to operate, then the

Commission will not impose greater than the agreed allocation of

responsibility among all the owners and operators reflected in

applicable joint ownership or similar agreements pertaining to the

plant.

Although the petitioners agree that all licensees must comply with

their licenses, they believe the prospect of joint and several

liability is directly contrary to joint ownership agreements in which

ownership commitments were made and substantial sums of capital were

raised based on a contractual pro rata allocation of liability for

plant costs. The petitioners also contend that accounting of assets and

liabilities for potential sales of ownership interests is made more

uncertain because of the unsettled potential joint liability issue.

In addition to the petition for rulemaking, the petitioners have

attached a document entitled, ``Memorandum of Law in Support of

Petition for Rulemaking.'' The petitioners state that the Atomic Energy

Act of 1954, as amended (AEA), does not authorize the NRC to impose any

liability (per se) and only allows the NRC to impose certain

substantive safety obligations on licensees

liability issue.

In addition to the petition for rulemaking, the petitioners have

attached a document entitled, ``Memorandum of Law in Support of

Petition for Rulemaking.'' The petitioners state that the Atomic Energy

Act of 1954, as amended (AEA), does not authorize the NRC to impose any

liability (per se) and only allows the NRC to impose certain

substantive safety obligations on licensees. The petitioners state that

the Price Anderson Act (AEA Sec. 170), contains an elaborate statutory

framework for public liability and associated actions, and provides for

various fees and NRC involvement in deferred premiums. However, the

petitioners contend that the NRC has no public safety authority to

impose liability or initiate or adjudicate claims of liability on

behalf of the public.

Under the Price Anderson Act, the petitioners note that legal

actions are brought by injured persons, rules for

decision in public liability cases are derived from State law, and that

the U.S. district courts have jurisdiction to adjudicate claims. The

petitioners note that although the AEA and congressional appropriations

acts permit the NRC to impose and collect fees, they believe the power

to create fee liability does not extend to other types of liability.

The petitioners believe that although the NRC has authority to impose

financial qualifications requirements and has used this authority to

require funds to be provided for decommissioning, no comparable funding

requirement for operation exists. The petitioners also note that

although the Environmental Protection Agency, under the Comprehensive

Environmental Response, Compensation, and Liability Act (CERCLA), has

authority to initiate safety improvements at taxpayers' expense and

then sue the licensee for reimbursement, nothing in the AEA allows the

NRC to decommission a plant and impose liability for reimbursement. The

petitioners state that the NRC policy on joint and several liability

could be understood to ``. .

Comprehensive

Environmental Response, Compensation, and Liability Act (CERCLA), has

authority to initiate safety improvements at taxpayers' expense and

then sue the licensee for reimbursement, nothing in the AEA allows the

NRC to decommission a plant and impose liability for reimbursement. The

petitioners state that the NRC policy on joint and several liability

could be understood to ``. . . hold co-licensees jointly and severally

responsible for meeting specific substantive safety obligations under

the AEA. However, even as so understood, the Commission's statement is

directly contrary to the contractual basis on which joint ownership

arrangements for nuclear power plants have been structured. In most, if

not all, such arrangements, ownership commitments were made and

substantial sums of capital raised based on a contractual pro rata

allocation of responsibility for plant costs.'' (Emphasis in original).

The petitioners state that because the NRC has implicitly accepted

these arrangements, all interested parties would have their reasonable

expectations overturned by the imposition of joint and several

liability.

The petitioners assert that NRC has approved many agreements among

co-owners based on a contractual pro rata allocation of responsibility

for plant costs. The petitioners assert that a draconian imposition of

liability is not necessary because even nuclear power plant licensees

in bankruptcy have always been able to comply with NRC safety

requirements. The petitioners note that the situation at Three Mile

Island Unit 2 after the accident was adequately addressed by the

accident cleanup insurance requirements in 10 CFR 50.54(w). The

petitioners believe that the NRC has never faced a situation where a

nuclear power reactor licensee was financially unable to meet its

safety obligations and that even with the operating licensee in

bankruptcy, the NRC's safety authority is preserved. The petitioners

cite Midlantic National Bank v

was adequately addressed by the

accident cleanup insurance requirements in 10 CFR 50.54(w). The

petitioners believe that the NRC has never faced a situation where a

nuclear power reactor licensee was financially unable to meet its

safety obligations and that even with the operating licensee in

bankruptcy, the NRC's safety authority is preserved. The petitioners

cite Midlantic National Bank v. New Jersey Department of Environmental

Protection, 474 U.S. 494, 506-507 (1986); Ohio v. Kovacs, 469 U.S. 274

(1985); and Penn Terra, Ltd. v. Department of Environmental Resources,

733 F. 2d 267 (3rd Cir. 1984), as cases which found that a bankruptcy

court does not have the power to authorize an abandonment without

compliance with environmental laws and protection of the public's

health and safety.

The petitioners also believe the Policy Statement is inconsistent

with the final rule published on September 22, 1998 (63 FR 50465), and

associated proposed rule that was published on September 10, 1997 (62

FR 47588), ``Financial Assurance Requirements for Decommissioning

Nuclear Power Reactors,'' in which the NRC noted difficulties that

could stem from attempting to impose joint liability on co-owners and

co-licensees for decommissioning costs. These difficulties included

problems regarding potential disagreements on decommissioning methods,

the inhibition of flexibility, the weakening of competitive position,

and implementation that the petitioners believe exist regarding

potential joint owner liability. The petitioners reiterate that under

the AEA, it would be unreasonable and unlawful for the NRC to impose

``an onerous safety obligation on non-operating co-owners simply

because the person with the real safety obligation'the operator'is

facing financial difficulty'' especially when the NRC has the authority

to impose financial qualifications requirements on those who propose to

operate a reactor

that ``congressional enactments

and administrative rules will not be construed to have retroactive

effect unless their language requires this result.''

The petitioners believe that these cited decisions illustrate that

an NRC order imposing onerous safety requirements on a co-owner

licensee disregard pro rata sharing agreements, defeat legitimate

expectations, and upset settled transactions. The petitioners assert

that joint owners have relied upon pro rata arrangements for decades

with implicit NRC approval and that the industry restructuring and

emerging market for nuclear power plants require that these sharing

agreements continue. The petitioners believe that under Bowen, the NRC

cannot issue retroactive rules unless that authority is granted

explicitly by statute. The petitioners believe that the NRC does not

possess this authority because nothing in the AEA specifically gives

the NRC the power to issue retroactive rules.

The petitioners distinguish backfit rules from those that are

retroactive. The petitioners acknowledge that the vast majority of NRC

backfits apply to plant operation after the effective date of the

backfit and could never have been applied without the beginning of

plant operation. However, the petitioners state that the imposition of

new requirements on non-operating co-owners without regard for pro rata

cost sharing agreements is distinguishable from a backfit because

entities licensed to own or operate have no reasonable expectation that

the NRC will never impose additional safety requirements as a condition

of continued operation. The petitioners maintain that for non-operating

co-owners there is reasonable expectation that the NRC would continue

to honor pro rata cost-sharing contractual agreements even though NRC

has power to impose additional safety measures.

The petitioners acknowledge that any determination that an NRC rule

or order is impermissibly retroactive will be made by the courts

n

of continued operation. The petitioners maintain that for non-operating

co-owners there is reasonable expectation that the NRC would continue

to honor pro rata cost-sharing contractual agreements even though NRC

has power to impose additional safety measures.

The petitioners acknowledge that any determination that an NRC rule

or order is impermissibly retroactive will be made by the courts.

However, the petitioners have concluded that an NRC imposition of a new

operational safety requirement on a non-operating co-owner group that

holds all co-owners equally responsible and disregards pro rata cost-

sharing agreements would be unreasonable and unlawful.

Lastly, the petitioners acknowledge that the NRC has the authority

to prevent an unsafe plant from operating. They also agree that a plant

that cannot operate is a liability, not an asset. The petitioners cite

Public Service Company of New Hampshire (Seabrook Station, Units 1 and

2), CLI-88-10, 28 NRC 573 (1988), and state that it is in the interest

of all licensees, co-owners, and operators to agree on the funding of

necessary safety measures so the plant can operate. However, the

petitioners believe that the Policy Statement interferes with

licensees' rights to make their own decisions regarding allocation of

safety expenses. The petitioners have concluded that NRC interference

in allocation decisions among co-owners is not necessary for safety and

creates potentially great difficulties for co-owning utilities who wish

to consolidate, restructure, or sell assets.

The Petitioners' Conclusions

the Policy Statement interferes with

licensees' rights to make their own decisions regarding allocation of

safety expenses. The petitioners have concluded that NRC interference

in allocation decisions among co-owners is not necessary for safety and

creates potentially great difficulties for co-owning utilities who wish

to consolidate, restructure, or sell assets.

The Petitioners' Conclusions

The petitioners have concluded that the NRC Policy Statement

regarding electric utility deregulation and restructuring has caused

great confusion among non-operating co-owners about the issue of

potential joint liability if an operating licensee becomes financially

incapable of meeting license conditions. The petitioners have concluded

that the NRC might ignore existing pro rata contractual agreements

among joint licensees and that no information has been published

regarding what would constitute a de minimis share or under what

circumstances the NRC might find the imposition of joint liability

necessary to protect the public health and safety. The petitioners have

also concluded that the unsettled potential liability issue could mean

that a co-owner of a very small ownership share could become

financially incapable of fulfilling its contractual obligations.

Lastly, the petitioners have concluded that these factors might stifle

an emerging market for the sale of nuclear power plants and associated

interests because future operating and decommissioning costs are

unknown.

The petitioners request that the issue of potential liability among

joint owners be resolved as requested in their petition by amending the

regulations pertaining to enforcement in 10 CFR part 50.

Dated at Rockville, Maryland, this 29th day of December, 1998.

For the Nuclear Regulatory Commission.

John C. Hoyle,

Secretary of the Commission.

[FR Doc. 99-97 Filed 1-4-99; 8:45 am]

BILLING CODE 7590-01-P