COMMISSION BRIEFING SLIDES/EXHIBITS

PERIODIC BRIEFING ON NEW REATOR ISSUES

OCTOBER 22, 2008
United States Nuclear Regulatory Commission

Protecting People and the Environment

PERIODIC BRIEFING ON

NEW REACTOR ISSUES

Bill Borchardt

Executive Director for Operations

October 22, 2008
Agenda

* Summary of Recent New Reactor

Activities

* New Reactor Construction

Inspection Program

2
Overview of New Reactor

Accomplishments and

Status

Michael R. Johnson, Director

Office of New Reactors

3
Accomplishments

• Acceptance reviews

* Final Environmental Impact

Statement for Vogtle Early Site

Permit

* Next Generation Nuclear Plant

Licensing Strategy Document

4
Accomplishments (continued)

* Memorandum of Understanding

with the Army Corps of Engineers

* Final Rule on consideration of

aircraft impacts

* Committed and obligated over

$75 million worth of contracts

5
Status of Reviews

e 3 Design Certifications and I

amendment under review

* 1 Early Site Permit /Limited Work

Authorization application under

review

* 17 Combined License

applications under review

6
New Reactor

Construction Inspection

Program

Glenn M. Tracy, Director

Division of Construction Inspection and Operational Programs

7
Overview

* Substantial progress in program

development since last year

* Industry is moving towards

construction

* The Construction Inspection

Program will be ready to support

the oversight of new plant

construction

8
Stakeholder Engagement

* All program development

activities proceeding with open

and collaborative stakeholder

communications

* Continuing and expanding

interface with international

colleagues to share experience

and improve programs

9
Inspection Readiness

Robert Lukes, Team Leader

Inspection Program Team

Construction Inspection and

Allegations Branch

10
Inspection Procedures

* Inspection procedures will be in

place to meet the challenge

* We are moving from developing to

refining in many areas

11
New Reactor Inspection

Program IT Infrastructure

* Established an Information

Technology Working Group

" Inspection scheduling

* Inspection reporting methodology

12
Inspection Program

* Construction site inspections will

be led by Region II

* NRC estimates 35,000 inspection

hours

* Based on inspection of ITAAC and

non-ITAAC

13
ITAAC Implementation

Richard Laura, Team Leader

Construction Oversight Team

Construction Inspection and

Allegations Branch

14
Overview

* ITAAC Quality

* ITAAC Inspection

" ITAAC Closure

" NRC Closure Verification

* Commission Finding

* Construction Experience (ConE)

15
ITAAC Quality

* Issued a generic communication

on ITAAC lessons learned

* Reviewing DCDs and COLs to

verify ITAAC are clearly written

and maximize inspection

effectiveness

16
ITAAC Inspection

" Developed generic NRC

inspection schedules for ITAAC

" Developed list of ITAAC requiring

NRO engineering support

" Targeted ITAAC lists made

publicly available

17
ITAAC Closure

• ITAAC Closure Notifications

* ITAAC Closure Guidance on

sufficient information and format

18
NRC Closure Verification

Process

* Developed a flow process for

review of the incoming closure

letters

* Includes review of the inspection

record, technical and OGC

reviews, and issuing a Federal

Register notice

19
Commission Finding

* Maintenance of closed ITAAC

until the Commission finding

* The acceptance criteria for all

ITAAC must be met

20
Construction Experience

(ConE)

* NRO is systematically reviewing

international ConE

* International exchange of

construction inspectors

21
Assessment & Enforcement

Robert Pascarelli, Team Leader

Assessment, Enforcement, &

Allegations Team

Construction Inspection and

Allegations Branch

22
Program Development

* Lessons learned

* Programmatic relationships

* Types of findings

23
Construction Assessment

• Construction Response Table

" Findings and Construction Safety Focus Issues are Inputs

24
Tra.ditional Enforcement

Process

* NRC Enforcement Policy applies

to NRC regulated construction

activities

* Notices of Violation issued for

inspection findings

25
Region II Center for

Construction Inspection

Luis Reyes

Regional Administrator

Region II

26
Center for Construction

Inspection

" Staffing

" Resident Offices

" Planning and scheduling

" Resource planning uncertainties

27
Summary

• Significant program development

accomplishments

" Effective coordination with

international colleagues and

industry

* Broad participation and insightful

contributions from stakeholders

28
Next Steps

* Areas of focus:

- Engineering design verification

inspections

- Role of safety culture in

inspection program

- ITAAC inspection at module

vendors

- Transition to ROP

29
Acronyms

* COL - Combined License

* DCD - Design Control Document

* IT- Information Technology

* ITAAC- Inspections, Tests, Analyses,

and Acceptance Criteria

" NRO - Office of New Reactors

* OGC - Office of General Counsel

" ROP - Reactor Oversight Process

30
Background Slides

1. New Reactor Licensing

Applications (2 slides)

2. NRC Construction Oversight

3. Implementation Under 10 CFR

52.99 and 10 CFR 52.103(g)

4. Construction Findings

Flowchart

31
L New Reactor Licensing Applications

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i

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32
New Reactor Licensing Applications

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3
NRC CONSTRUCTION OVERSIGHT HAS MULTIPLE COMPONENTS

Early

component

procurement

Construction

start

per LWA

Oversight will aissure plants are constructed as dsge

Combined

Ucense

Issuance

Fuel

load

Pre-Combined Ucense Construction under Combined License Start-Up

r, I

i .. . . .. ITAAC ia = n - IMC 2503I

Non - ITAAC Inspections - IMC 2504

Assessment - IMC 2505 | . . . . . . . .. . . . . . . . . I

w"Oll Oversight of Vendor Activities - IMC 2507 I p I I

ESP - EryStePri

ITAAC - npctos Tests,Anls,

LWA -Lmie WorkAuhrzto

IHC 2504

-QA for construction &

operations

-Problem Identification,

reporting, & corrective action

-Work planning/control over

work & contractors

-Translation of certified design

into design details

-Design change process

-Pre-operational & startup

testing

-Operational programs &

operational readiness

-Guides inspection

planning

IMC 2507

- Verification of QA program

implementation, compliance,

reporting and corrective

action

activites

34
Flowchart and Description of Implementation Under 10 CFR 52.99 and 10 CFR 52.103(g)

F- 'A

-~ I I I
Construction Findings Flowchart

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Y..

Y..

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I YNo

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L~LJ

Y..

No

No V..

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T Ye

ttoo r..-op

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NRC 14.Wt
REMARKS

Joseph Hunt

General President

International Association of Bridge, Structural

Ornamental and Reinforcing Ironworkers

Industry Readiness for New Nuclear Reactor Construction

Nuclear Regulatory Commission

Rockville, Maryland

October 22, 2008

Thank you, Chairman Klein and members of the Commission for

inviting here for this most important discussion.

I come before you today, not justas the General President of the

Ironworkers Union, but as a representative of the Building and

Construction Trades Department, AFL-CIO.

The Building Trades Department is an alliance of 13 national and

international unions which collectively represent 2.5 million skilled

craft workers in the United States and Canada.

And in addition to the 13 unions officially affiliated with the Building

Trades Department, we maintain corresponding relationships with the

International Union of Operating Engineers and the United

Brotherhood of Carpenters.

Suffice it to say, the men and women comprise America's Building

Trades Unions are the safest, most highly trained and productive

workforce known to mankind.

And that is a point worth noting as we come together here today to

discuss whether or not the US. construction industry is ready to meet

the challenges association with the construction of a new generation

of nuclear power reactors.

I
From our perspective... I can give you a confident answer in the

affirmative.

For we recognize that in the upcoming environment whereby

Construction Operating Licenses will be issues, it will be part of the

Nuclear Regulatory Commission's statutory responsibility to ensure

and regulate a safe and healthy environment surrounding both the

construction and the operation of these facilities.

We fully recognize that public confidence and credibility is critical in

this regard...

Andwe are fully prepared to meet this challenge in a myriad of ways.

First, we operate the finest, and most comprehensive, training

programs for skilled craftspeople at over one thousand facilities

across this nation.

Collectively, our unions spend over $750 million on this training.

And rest assured, safety and health is a primary component in this

training infrastructure.

In fact, quality andsafety are paramount in our culture.

[PAUSE]

But, in order to successfully meet the challenges associated with the

construction of an entirely new generation of nuclear power facilities

in this country, we have to deal with the realities associated with

current and future workforce projections.

Put simply, the current supply of skilled crafts people is insufficient to

meet projected demands.

At the core of this problem are a few root causes:

The first is Demographics.

Our current skilled workforce is aging and nearing retirement age.

2
Another root cause is Economics.

The North American construction industry has failed miserably to

maintain levels of compensation that are necessary to attract the

"best and the brightest."

Lastly, we continue to witness a high proportion of the so-called "open shop" sector lagging behind the organized sector of our

industry when it comes to making the necessary investments in

sustained skilled workforce development and training.

In contrarian fashion, many open-shop contractors are pursuing a

misguided strategy predicated upon building a cheap, low-wage, and

exploitable workforce comprised of significant numbers of untrained,

and in many cases undocumented, workers.

As you can imagine, the results of this strategy are predictable.

Unreliable, low-quality work fraught with safety and productivity

issues.

Much of our industry's short-term vision competes with its long-term

needs.

Now, due to the current economic troubles that our nation is currently

experiencing, the demand for skilled craft labor may actually fall... as

the needed capital for certain heavy and industrial projects becomes

scarce.

However, should the economy rebounds in a significant fashion over

the next 18-24 months, we could easily return to a "perfect storm"

scenario of high demand and low supply in the skilled construction

labor market.

For the nuclear industry, that will be especially troubling.

13 of the 19 "First Movers" - those plants that will most likely move

into construction phase first - are located in the Southeast or South

central states.

3
Those are precisely the regions where labor shortages are expected

to be the most challenging.

So, indulge me for a moment while I do a little math.

Each new reactor facility will require roughly 4,000 skilled crafts

people at peak construction.

Let's be conservative and say that only half of the 19 "First Movers" -

9 or 10 of them - actually break ground.

Then, conservatively, the peak craft demand would be in the

neighborhood of 36,000 to 40,000 workers.

If the craft ramp-up begins in 2010 - with Calvert Cliffs being the first

- the projected overall peak would be sometime between 2012 and

2015.

And we need always to keep in mind that most of these planned

facilities are to be located in remote, small-town and rural areas...

Where craft labor supply is smallest...

And where the challenge of providing the necessary skilled craft

manpower will be the greatest.

So, what are America's Building Trades Unions prepared to do to

meet these challenges?

First, you should know that we have performed a "critical needs

analysis" focusing upon the construction of a 2 1St century nuclear

power generation facility.

And we are engaged in on-going discussions with nuclear industry

leaders... including utilities and contractors.

As a result of these discussions, the Building and Construction

Trades Department is now developing the framework for a groundbreaking "Nuclear Power Construction Labor Agreement."

4
This framework is an unparalleled, no-nonsense approach that

recognizes and makes a commitment to the national importance of

nuclear power.

It is designed to address the many unique challenges of nuclear

power construction...

And it is based upon a regional framework, rather than a single-site

approach.

Perhaps most importantly, it is structured to maximize efficiencies

and contain costs.

Specifically, the framework of this agreement will be designed to:

" Address shortages in one craft with available workers from

another craft

" Allow 100% portability for outage work for the same owner, so

that workers can be used in a manner the owner deems to be

most effective. And if the same owner starts another project in

the same region, the agreement would permit the contractor to

transfer up to 20% of the workforce to "jump start" the new

project.

" Mandate the use of apprentices and other sub-journeymen

workers to contain unit costs and to encourage efficient crew

composition.

" Establish on-site... or near-site... multi-craft training facilities in

order to ensure a steady supply of qualified workers; to provide

specialized training for journeymen and apprentices; and to

provide a location for vendors to train and certify workers on the

installation of specialized equipment.

" Provide a commitment to train nuclear plant operations and

management personnel for a utility by integrating them into the

construction phase and rotating them throughout the various

5
craft disciplines. This would provide a more well-rounded

employee who understands in greater detail the workings of the

entire facility.

* Mandate OSHA-10 safety certification for every employee as a

condition of employment.

Finally, each project will be staffed with individual craft stewards who

will be trained and certified in their uniont's "Code of Excellence" or

"Accountability" program, and will be given complete authority to

demand compliance with these programs.

Overall, we believe this agreement is a revolutionary concept that is

already being met with rave reviews from industry leaders.

[PAUSE]

A lot has changed in the 30 years since our nation last built a nuclear

power facility.

I truly hope, after my presence here today, that the Commission

realizes that America's Building Trades Unions have changed as well.

What hasn't changed is our desire to be full partners in this crucial

American endeavor.

Again, I would like to thank the Commission for giving me this

opportunity to present these views.

I would welcome any questions you may have.

6
Preparing for New Reactor

Construction

October 22, 2008

Brian P. Reilly

Principal VP, Manager of Nuclear Operations

Bechtel Power Corporation
Preparing for New Reactor Construction

'] MOU for labor agreement -

Calvert Cliffs Unit #3

'> Front-end planning

> Aligned expectations

[ Comprehensive overview with

labor

> Plant Overview

Engineering/Construction

process review

> Facility walkdown of Flamanville

Plant

THE LABOR. NAIAMGEMENT ALLIANCE TO BUILD

C ALVETCLFS UNIT 3

On August 8o 200S ,the President of the Urt States signed the Energy Policy

Act of 200 S. e viis 5eg~ siat ,o launche d an energy strategy for the 21 century to

Iiprove our environment strengthen our economy and our our country more

secure. 

taC

America needs energy. Nuclear power Is proven, cafe and dean technology To

support the U.$. energy strategy the President .sued 

the following manchte

when he signed the Energy Policy Act of 2OOS..

"Start building new nuclear power plants by the end of this decadeo

Deartel Consmjucon Company ( BCC), the luii•dng & Consrct. Trades

i~eartent A~L-ID B~ nda i)) affiliaoted Internlrtiona) Unions of the IiCTi) ,",

strongly support UntSlar Nuclear Energy's commitment to Amer7cs national

energy strategy and the President s mandate.

In support of this comitment, 8CC and the BCTD will negotiate a Project Labor

Agree rpent (P tA) o vering Be chte l's scope of work on the Ca)vert Ciff's Uit 3La

Project by the end of 200)8.

Under the Proj~ Labor Agreement the OCtO and Its afililates witl commit to

Provide qualfied, skll-ed craft workers to the Caivert CIfTs Unit 3 Project 8CC

and all signatory contractors vill commit to p'ovide fair a ro ents

and working conditions for all craft workers employed under the Calvere Cliffs

UnIt 3 PIA.

Signed this 2 AL., day of Apra, 2008.

L tiding & C o ns r he l i

tepartheent, AFL-C io 

-Ct Bechtel Construct 

-

n Co oman npan y

2
Preparing for New Reactor Construction

Waste Treatment Plant

Scope of work: Lead contractor

for design, construction, and

commissioning of largest

radioactive waste treatment

plant in the world

- Employees: 4,300 peak

staffing - Major Challenge: Sourcing of

safety-related material and

equipment.
Preparing for New Reactor Construction

Browns Ferry Unit 1 Restart

Scope of work: Engineering

support for recovery & restart

- Bechtel employees: 700 peak

staffing ......

Watts Bar Unit 2 Completion

- Scope of work: Engineering,

Procurement & Construction

for plant completion

- Bechtel employees: 2300 peak

staffing
Current Bechtel Nuclear Activities

Constellation * Calvert Clifs

ESPICOL Support

UniStar

*Geawl igiee *CMc si..pefl Omenhw'"

Dominion

North Anna

COL

5
I. II

NUCLEAR CONSTRUCTION

ISSUES

October 22, 2008

Hal Thornberry

Vice President - Construction, Nuclear

Shaw Power Group

Sh!.
Shaw: Well-Positioned for Nuclear

Renaissance

" AP1000 Consortium - Shaw owns 20% of Westinghouse

- Shaw is EPC contractor for domestic

AP1 OOOTM projects and EPCM contractor

in China

* EPC Contracts

- Shaw/Westinghouse consortium has

the first EPC contracts awarded in 30

years to build new U.S. nuclear plants

A®
II I1

Shaw: Well-Positioned for Nuclear

Renaissance (cont.)

* Maintenance

- Shaw provides maintenance at 42

of 104 operating U.S. nuclear plants

" Pipe Fabrication

-Shaw supplies more than 50%

of fabricated pipe in the United States

-Shaw is largest U.S. supplier

of nuclear-grade fabricated pipe

Sha
Module Fabrication and Assembly

Facility

e 600,000 square-foot facility.located

in Lake Charles, Louisiana

* Joint venture with Westinghouse

" Will assemble structural, piping and

equipment modules for new nuclear

plants using API 000TM technology

" Facility will employ 1,400 workers

or more at full capacity

ShawA
APIOOO T M U.S. Projects/Prospects

WestinghouselShaw j

Consortium furnishes

API 00TM to domestic

utilities:.

" Conceptual design

" Integrated EPC team

* Detailed engineering

" Project management

" Construction management

" Site-specific engineering

" Startup and commissioning

TVA (NuStart)

Bellefonte site for 2 units

Progress Energy

Shearon Harris for 2 units

Duke Energy

W.S. Lee site SC for 2 units

South Carolina Electric & Gas

and Santee Cooper

V.C. Summer site for 2 units

Georgia Power

Vogtle site for 2 units

Progress Energy

Levy County site for 2 units

Florida Power & Light

Turkey Point for 2 units

I% LNWW

= EPC Contract signed = Interim Agreement

5
0 0 0 0 *

Supply Chain Challenges

" Limited safety-related certified

suppliers

* Competition for shop space

with other infrastructure projects

" Need to validate that shop QA

programs meet requirements

6
11 if

Supply Chain Challenges (cont.)

* Confirm suppliers have appropriate

attention to document detail

" Re-evaluate progress to prevent

fraudulent parts and components

7 Shawe
11 11 II II

Nuclear Construction Readiness

" Lessons learned from recent

nuclear projects including MOX,

LES, Browns Ferry 1, APIOOOs and

Olkiluoto 3

" Evaluation of INPO reports on

industry lessons learned from last

generation of nuclear construction

8 ShawQ
Nuclear Construction Readiness

(cont.)

* Realignment of construction

procedures with NRC programs,

including ITAAC inspections

* Flow mapping of construction

installation activities, turnover

and documentation processes

* Implementation of construction

readiness reviews in accordance

with CII guidelines

ShQw
New Construction Workforce

Development

* Dedicated team focused on

growing nuclear construction talent

• Establish initial resource profile by

construction discipline and skills

required

* Complete labor surveys to forecast

discipline-specific needs

4 nShaw IV
I 11 I1

New Construction Workforce

Development (cont.)

* Partner with outside organizations

to attract skilled resources

* Work with NCCER to develop

standardized craft training and

certification programs

11 Shaaw
How the Commission Can Help

" NRC should allocate resources

based on which applicants are

closest to actual construction

" Module fabrication facilities are

most similar to construction;

should come under NRC

construction inspection program

" NRC should continue to emphasize

support of vocational/technical

training programs

12 Shaw
Ii -,---~,----- -~

Table of Acronyms

* API OOOTM - Advanced pressurized

water reactor technology developed

by Westinghouse

• CII- Construction Industry Institute

* EPC - Engineering, procurement

and construction

* EPCM - Engineering, procurement

and construction management

* INPO - Institute of Nuclear Power

Operations ShQ13
0 0 0 0 @

Table of Acronyms (cont.)

" ITAAC - Inspections, tests,

analyses and acceptance criteria

* LES- Louisiana Enrichment

Services

* MOX - Mixed-oxide nuclear fuel

* NCCER - National Center for

Construction Education and

Research

" QA- Quality assurance

14 ShQaw
Construction Readiness Update

Flu

Copyright © 2007 Fluor Corporation 1
" EPC contractor for Toshiba on STP 3&4

" Duke Oconee Tornado Barrier Capital Project

" EPC contractor for USEC Uranium Enrichment Plant

+ Savannah River Site M&O Contract

-Other DOE clean-up activities

FLUOR, 2 CopyrighIt w 2UU0 1 luor Corporation]
Labor challenges well understood:

-Significant shortage of skilled craft labor currently, and

projected (over 30,000 construction workers needed)

P Area undergoing a significant construction boom

" Current plans for many owners were influenced by hurricane

Ike (and its predecessors)

" Houston area industrial construction market dominated by

.open shop craft

Main Craft Staffing Challenges:

• Where we will get craft

* How we will train them

e How we will retain them

FLUOR,

Copyright @ 2007 F-luor Corporation
* Present workforce solution plan for STP 3&4 is a combination

of open shop and union construction

* Reducing on-site craft needs through modularization

- Many of today's reactor designs employ significant

modularization

* Including the Toshiba ABWR's we will install for STP 3&4

- Fluor has been extensively using modularization for over 30

years and has done so on over 1,000 projects globally

Attracting, training, and retaining current and new craft

workers

- We must attract, train and employ new craft now

* OJT & continued development key for nuclear construction skills

F L U O R Copyright © 2007 Fluor Corporation

4
Fluor executes projects in open

shop and union environments.

FLUOR,

Copyright © 2007 Fluor Corporation 5
Training, Skills Assessment and Certification

- NCCER Curriculum utilized

- Craft Online Skills Assessments

- Craft Performance Verifications

- Field Supervisor Development

" Benefits of Fluor Craft Training Programs

- NCCER Curriculum utilized

- Variable delivery platform

- Individually paced

" Training Focus

- Welder pre-employment entry and upgrade training

* Tech schools partnerships

* Fluor centers (Houston, Job sites, Louisiana)

- Target training on developing Fluor advanced helper-level employees * Mid to top level helpers

* Not training just for NCCER certification

- Implement placement and retention

* 100% Hiring commitment

* Formally track and manage

FLUORC •) Copyright@© 2007 Fluor Corporation 6
Global experience -.

transferring knowledge,

skills and abilities

*Over 110,000 craft trained in

tbe,- ULS. atone 4

Australia

2,400

FLUOR,

Copyright © 2007 Fluor Corporation 7
* Key elements underway

or to be deployed:

- Early identification of the

problems and potential

solutions

- Developing public private

partnership

- Identifying the target

audience

- Establishing the paths and

methods to best reach the

target audience

- Identifying the most

effective incentives to

attract and retain your

target audience

FLUOR,

C.opynght, 2007 Fluor Corporation
Attracting potentially interested students - Hired local educator / training coordinator.

- Canvassing each high school w/in 100 miles (each 6 months for 3

years)

- Supplement through regular job fairs/advertising

*Arranging training infrastructure and coursework - Develop a local training center

- Partner with local colleges to conduct training

- Fund through public/private partnership

*Assuring continued, local development

opportunities

- Work with others to ensure local jobs (OJT) to graduates - Fluor's Oak Grove & Port Arthur projects

- Bechtel's Sandow & Port Arthur projects

* STP outage and O&M work

- Offer advanced training through Fluor's craft development program

- Regularly communicate with all graduates throughout licensing period

F L U O R Copyright © 2007 Fluor Corporation

9
* There are various forums on the STP 3&4 Project for

exchanging lessons learned. An example of one in particular that has been extremely effective:

- The STP Construction Team Meeting:

* Led by Fluor (5 th one just completed)

* Participants from: - STPNOC - Toshiba/TANE

-IHI

- Kajima - Sargent & Lundy

An intense, collaborative process, focusing on: - Construction techniques - Construction sequencing - ITAAC - Quality - Constructability

- Logistics - Modularization - Etc.

FL U O R Copyright © 2007 Fluor Corporation

10
Preparing for New Reactor

Construction

October 22, 2008

Carol L. Berrigan

Sr. Director, Industry Infrastructure

Nuclear Energy Institute
Preparing the Workforce

" Trends & Status

" Industry Activities

" Nuclear Specific

" Energy Sector

" Progress to Date

2 -
Current Status

- 35 percent retirement eligible by 2012

* Growing demand for skilled workers

-] $750+ billion in energy infrastructure

by 2020

.1Industry supporting over 42 community

.college programs

[ 19 state-based workforce development

efforts underway E: rID'1-

3
Progress in Key Areas

" Significant increases in nuclear

engineering enrollments and graduation

" Development of work force development

programs at community colleges

,, Expansion of "grow your own" programs

4or
Power Enlalts

3orate Hortherasr

* Data as of August 11, 2008 5
Expanding the Supply Chain

* Key challenges

" Increasing domestic capacity

• Outreach to potential suppliers

" Expanding domestic supplier

access to foreign markets

* Including nuclear in clean energy

initiatives

6 .•
Manufacturing Outreach

Workshops

*Three events in 2008

* March 27, Columbia, SC.

e April 14, Cleveland, OH

* June 3, San Antonio, TX

e Nearly 900 participated from 440

companies

*Four more planned in 2009

*Other outreach
Expand domestic supplier

access to international markets

* Interagency Working Group &Civil

Nuclear Trade Advisory Committee

(CINTAC)

SConvention on Supplementary

Compensation (CSC) deposited

* U.S.-India 123 Agreement signed

Increasing engagement in foreign

markets

P
Increases in U.S. Nuclear

Certifications

270

260

250

240

230

220

210

NI i

Source: ASME Nuclear Subcommittee on Accreditation, October 2008
TESTIMONY

OF

HAL THORNBERRY

VICE PRESIDENT - CONSTRUCTION

NUCLEAR DIVISION OF THE POWER GROUP

THE SHAW GROUP INC.

BEFORE THE

U.S. NUCLEAR REGULATORY COMMISSION

WEDNESDAY, OCTOBER 22, 2008

1
Chairman Klein and distinguished members of the U.S. Nuclear Regulatory

Commission, thank you for holding this meeting today to focus on the industry's

readiness and capability to support construction of the next generation of nuclear

power plants in the United States.

My name is Hal Thornberry, and I am Vice President of Construction for the

Nuclear Division of The Shaw Group Inc.'s Power Group.

The Shaw GrOup Inc. is a leading global provider of technology, engineering,

procurement, construction, maintenance, fabrication, manufacturing, consulting,

remediation and facilities management services for government and private

sector clients in the energy, chemicals, environmental, infrastructure and

emergency response markets. We are a Fortune 500 company with expected

fiscal 2008 annual revenues in excess of $7 billion that is headquartered in Baton

Rouge, La., and employs approximately 27,000 people at its offices and

operations in North America, South America, Europe, the Middle East and the

Asia-Pacific region. Shaw is the Power sector industry leader according to

Engineering News-Record's list of Top 500 Design Firms.

As we enter the nuclear renaissance, Shaw is well-positioned to play a major role

in the engineering, procurement and construction of the next generation of

nuclear power plants, in the United States and abroad.

Shaw was founded in 1987 by Jim Bernhard - now our Chairman and CEO -

and two partners as a heavy-pipe fabricating company. In a little more than two

decades, Mr. Bernhard's vision transformed Shaw from a company with a

50,000-square-foot fabricating facility into one of the fast-rising corporations in

the Fortune 500.

Although Shaw is only a 21-year-old company, we bring more than a century of

experience to the marketplace thanks to several significant strategic acquisitions

- including the purchase of Stone & Webster in 2000 and the acquisition of a 20-

percent share of Westinghouse Electric Company in 2006.

Today, Shaw's Power Group is a member of the AP1000 Consortium, working

with our partner Westinghouse to provide engineering, procurement and

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construction management services for four AP1 0 00 TM units in China - two each

at Haiyang in Shandong province and at Sanmen in Zhejiang province. The first

of those units is scheduled to begin commercial operation in 2013.

Closer to home, the Shaw and Westinghouse consortium won the first

engineering, procurement and construction (EPC) contracts for new nuclear

plants that have been awarded in the United States in more than 30 years. In

April, Georgia Power signed EPC contracts for two new AP1000 TM units at the

existing Vogtle site near Augusta, Ga. In May, South Carolina Electric & Gas and

Santee Cooper awarded the consortium EPC contracts for two AP1000TM units at

the V.C. Summer nuclear plant site near Columbia, S.C

In addition, we are in negotiations with a number of other electric utilities in the

United States and around the world. As you know, the NRC has stated that it

expects as many as 23 combined Construction and Operating License

applications for 34 units to be submitted by U.S. electric utilities by 2010. Of

those, 14 units - at present - are expected to use the AP1000 M T design.

If electric utilities move forward with even a fraction of those proposed nuclear

plants, our industry and the NRC will face substantial challenges in the years

ahead.

One of those challenges involves the global supply chain. The International

Atomic Energy Agency recently said that as many as 50 countries are

considering new nuclear power plants. In a world that has seen relatively little

nuclear construction during the past two decades, such an ambitious build-up

would likely strain existing supply chains.

As the global supply chain expands to meet the expected ramp-up of nuclear

construction, our industry will face a number of hurdles, including:

A limited number of safety-related certified suppliers of nuclear parts and

components

Competition for fabrication and manufacturing shop space - not just

among nuclear power projects, but against myriad construction projects

around the world as countries like the United States repair aging

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infrastructure and emerging nations, such as those in the Middle East and

Asia, embark on landmark building projects

> Ensuring that existing and new suppliers have nuclear-grade quality

assurance programs and that they have processes in place to assure

appropriate attention to document detail

> Monitoring all aspects of the supply chain to prevent the fabrication,

distribution and use of fraudulent parts and components

At Shaw, we have taken a number of steps prepare for such supply chain issues.

For example, we recently announced a joint venture with Westinghouse to

construct a 600,000-square-foot module fabrication and assembly facility in Lake

Charles, La. This facility will primarily produce structural, piping and equipment

modules for new nuclear power plants using the Westinghouse AP1000TM

technology. The new module fabrication facility will use industry-leading

technologies, as well as Shaw's proprietary operations management systems.

In addition, Shaw's standing as the leading supplier of fabricated pipe in the,

United States and the largest supplier of nuclear-grade fabricated pipe should

insulate us from some of the competition for constrained supply chain resources.

Also significant is the fact that while many companies allowed their nuclear

certifications to lapse, Shaw's Fabrication & Manufacturing Group maintained its

ASME N stamp.

Similarly, we have a long history in the area of quality assurance, which dates

back to Stone & Webster's development of the first NRC-approved Nuclear

Quality Assurance Program. Today, as we continue down the QA path, we are

led by someone who should be familiar to the Commission and NRC staff: Geoff

Grant, who served as Deputy Regional Administrator for NRC Region III.

Another challenge facing the industry is construction readiness. While no new

nuclear power plants have been built in the United States since the 1980s, Shaw

has found other ways to stay active in the nuclear arena.

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First, our Maintenance Division is a leading supplier of outage and uprate

services, with maintenance contracts for 42 of the nation's 104 operating units.

Similarly, Shaw was the contractor for the restart of Browns Ferry 1, which

involved some of the most recent construction work performed by the U.S.

nuclear industry.

Shaw also has maintained its new-plant readiness by supporting such nuclear

projects as the LES enrichment facility in New Mexico and the MOX facility in

South Carolina. At the same time, we have studied the many reports issued by

the Institute of Nuclear Power Operations about the lessons learned during the

first generation of nuclear plant construction. Today, we are incorporating that

experience and those lessons learned as the provider of engineering,

procurement and construction management services at the Haiyang and Sanmen

AP1000 TM projects in China.

The nuclear renaissance poses an additional challenge related to construction

readiness, and that is manpower. At Shaw, we forecast that we will need

upwards of 10,000 craft workers during the peak of nuclear plant construction in

the coming decade. When you add to that the amount of skilled labor required by

our competitors and other construction industries, it is clear that our nation faces

a significant manpower challenge.

At Shaw, as the nation's leading design firm in the power industry, we are

fortunate to have a large number of skilled craft workers who could roll off of

fossil-plant construction projects to take similar jobs as we begin to build the new

AP1000TM units at Vogtle, V.C. Summer and elsewhere. Moreover, we have

approximately 3,000 employees among our 27,000-person workforce who have

nuclear-related experience. We believe that those two factors place Shaw in an

enviable position as we move into the nuclear renaissance.

That said, like every one of our competitors, we will need to hire thousands of

new craft workers in the coming years to construct the next generation of nuclear

power plants.

At Shaw, we employ a "best-value contracting" approach when it comes to

construction labor. This philosophy enables us to utilize both union and nonunion labor to ensure that we have full access to the breadth of expertise

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available in the marketplace. This approach has been successful for Shaw's

Power Group and Shaw Constructors Inc., which have a history of employing

union contractors on its construction projects in the United States - and of

maintaining labor harmony on its worksites.

Yet, even with the ability to work with various labor partners, it is clear that the

flow of talent from the current craft-labor pipeline needs to be increased.

In response, Shaw has built a dedicated team that is focused on developing and

attracting the construction talent we will need for the nuclear renaissance. Our

team is examining current labor availability, projecting future supply and demand,

and developing networks to reach out to encourage key stakeholders to promote

careers in construction.

We are working closely with the National Center on Construction Education and

Research, local vocational and technical schools, high schools and colleges to

create awareness about the rewarding careers that will be available to people

interested in building the next generation of nuclear power plants. We are taking

this message to educators so schools will develop the necessary programs and

curricula to prepare students for careers in construction. And we are taking this

message to students and their parents so they understand that the nuclear

renaissance could conceivably offer high-paying construction, maintenance and

operating jobs from the time they leave school until they are ready to retire.

Finally, Shaw's workforce development team has created an unparalleled training

and certification program that provides our current hourly employees the

opportunity to learn new skills and advance their careers.

As Shaw prepares to construct the first new nuclear power plants in the United

States in more than 30 years, we believe that Shaw is as well-positioned as a

company can be as we enter the nuclear renaissance.

We have experience that dates back to the construction of the first commercial

nuclear plant at Shippingport; we are part of the AP1OOO TM consortium with

Westinghouse building advanced plants in China; we have a workforce that has

both nuclear and large-project construction experience; and we have

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unparalleled vertical integration that enables our company to provide nuclear

utilities with cradle-to-grave services.

That said, Shaw's ability to help lead the nuclear renaissance requires a

continued strong relationship with the NRC, and we are committed to open and

beneficial interaction with the Commissioners and the NRC staff.

Going forward, there are several areas we would like to see the Commission

address:

The NRC should allocate its resources based on which combined

Construction and Operating License applicants are closest to actual construction.

As of October 1, the NRC had received 16 COL applications. However, not all

applicants share the same level of commitment to actually move forward with

construction. We believe that utilities that have signed EPC contracts or awarded

letters of intent to negotiate EPC contracts should receive priority by the NRC

when it comes to evaluating COL applications and related resource issues.

The module construction facility being built by Shaw and Westinghouse

should come under the NRC's construction inspection program. We believe

module fabrication is more similar to construction than manufacturing, since

without modularization these components and subcomponents would be

constructed in the field at the job site.

The NRC should continue to emphasize vocational and technical training

programs. Given the current disparity between the supply of craft labor and the

expected demand, the NRC's recently announced $15 million grant program to

provide trade school scholarships and "support education in nuclear science,

technology, and engineering to develop a workforce capable of supporting the

design, construction and operation, and regulation of commercial nuclear

facilities, and the safe handling of nuclear materials" is invaluable and should be

maintained - or even expanded.

In closing, I would like to thank you Chairman Klein and your fellow

Commissioners f6r the opportunity to.speak here today.

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This is an exciting time for The Shaw Group and our industry, as we prepare for

the nuclear renaissance. On behalf of Shaw, we look forward to working with the

Commissioners and the NRC staff to ensure the safe design, construction and

operation of a new fleet of AP1000TM nuclear power plants.

Thank you again for inviting me to participate in this panel discussion about

nuclear construction issues, and I would be happy to answer any questions you

might have.

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