POLICY ISSUE 

INFORMATION 

February 2, 2009 SECY-09-0019

FOR: The Commissioners 

FROM: R. W. Borchardt 

Executive Director for Operations 

SUBJECT: TRANSFER OF THE LICENSES FOR THE PERMANENTLY 

SHUTDOWN ZION NUCLEAR POWER STATION, UNITS 1 

AND 2, FROM EXELON GENERATION COMPANY, LLC TO 

ZIONSOLUTIONS 

PURPOSE: 

To provide the results of the staff’s review of the proposed license transfers for the permanently 

shutdown Zion Nuclear Power Station, Units 1 and 2 (Zion or ZNPS) from Exelon Generation 

Company, LLC (Exelon or the Applicant) to ZionSolutions (ZS) for the purpose of 

decommissioning the site. This paper does not address any new commitments or resource 

implications. 

SUMMARY: 

Exelon, the Zion licensee, submitted a request to transfer the licensed ownership, management 

authorities, and decommissioning trust fund of the facility to ZS, a subsidiary of 

EnergySolutions, LLC (ES). ZS was formed for the purpose of decommissioning the Zion site. 

The title to the site real estate and the spent nuclear fuel will remain with Exelon. ZS will 

construct an Independent Spent Fuel Storage Installation (ISFSI) and transfer the spent fuel to 

the ISFSI as part of the decommissioning. Following the decommissioning, currently scheduled 

for 10 years, the license for the spent fuel will be transferred back to Exelon. This would be the 

first time a permanently shutdown power reactor license would be transferred for the purpose of 

CONTACT: John Hickman, FSME/DWMEP 

 (301) 415-3017 

SECY NOTE: THIS SECY PAPER TO BE RELEASED TO THE PUBLIC 5 WORKING DAYS 

AFTER DISPATCH OF THE ORDER AND AMENDMENTS.
The Commissioners 2 

decommissioning. The staff has reviewed the proposal, focusing on the financial and technical 

qualifications of ZS to possess, maintain, and decommission the Zion facility, and determined 

that ZS is qualified to hold the license. Therefore, the staff intends to issue an Order, 

conforming amendments, and modified Price-Anderson indemnity agreements to approve the 

transfer. 

BACKGROUND: 

In February 1998, pursuant to 10 CFR 50.82(a)(1)(i), the Zion licensee certified to the U.S. 

Nuclear Regulatory Commission (NRC) that as of February 13, 1998, operations ceased at the 

Zion Units, and subsequently certified pursuant to 10 CFR 50.82(a)(1)(ii) that all fuel had been 

removed from the units' reactor vessels, and committed to maintain the units permanently 

defueled. Pursuant to 10 CFR 50.82(a)(2), operations at ZNPS are no longer authorized under 

the 10 CFR 50 licenses. On February 14, 2000, the licensee submitted a Post-Shutdown 

Decommissioning Activities Report (PSDAR) for the Zion Units, pursuant to 10 CFR 

50.82(a)(4)(i). The units remain defueled and in a safe storage condition, as described in the 

PSDAR. 

On January 25, 2008, Exelon, the Zion licensee, submitted a request to the NRC to transfer the 

operating license, including ownership and management authority, and the decommissioning 

trust fund of the facility to ZS, a subsidiary of ES. The title to the site real estate and the spent 

nuclear fuel would remain with Exelon. ZS plans to construct an ISFSI and transfer the spent 

fuel to the ISFSI as part of the decommissioning. Following decommissioning, currently 

scheduled for 10 years, the license for the ISFSI and possession of the spent fuel would be 

transferred back to Exelon. 

According to the application, the purpose of the proposed direct transfer of the licenses from 

Exelon to ZS is to permit accelerated radiological decontamination and subsequent completion 

of the decommissioning of the ZNPS as well as the environmental remediation of the Zion site. 

The Applicant states that the proposed transfer of the licenses is desirable because ZS would 

take advantage of the capability of its parent company, ES to accelerate the decommissioning 

of the Zion site and eliminate the risk associated with the cost and burial capacity for low level 

waste in the future. 

ZS is a direct wholly owned subsidiary of ES and was expressly created to take ownership of 

Zion. ES has entered into an agreement with Exelon under which ZS will assume ownership of 

the facility and undertake decommissioning activities, which will be conducted by ES and its 

affiliated companies. As stated in the application, ZS, as the licensee for the Zion site, will be 

responsible for, and have ultimate control and final authority over, all licensed activities, 

including decommissioning. ES states that it specializes in providing nuclear services, such as 

high level waste management, spent fuel handling and transportation, as well as performing 

complex decontamination and decommissioning projects. 

Under the terms of the proposed sale, which are set forth in the Asset Sales Agreement (ASA), 

ES will accomplish the operational and physical decommissioning of the Zion facility. Title to 

the spent fuel and greater than Class C radioactive waste, which will be stored in an ISFSI to be 

constructed by ZS, will remain with Exelon, pursuant to general licenses provided for in 10 CFR 

31.9, 10 CFR 40.21 and 10 CFR 70.20. Exelon will also remain responsible for the ultimate 
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disposition of the spent fuel and waste as provided for under the terms of Exelon’s Standard 

Spent Fuel Disposal Contract with the U.S. Department of Energy. 

On July 22, 2008, ES announced that it has received a favorable Private Letter Ruling from the 

United States Internal Revenue Service (IRS) concerning tax treatment of decommissioning 

funds related to the company’s Zion Nuclear Power Station project. The IRS ruling concluded 

that the structure of the ES project will allow the ZS to assume control of decommissioning 

funds without having to recognize gains or losses at the time of transfer. 

DISCUSSION:

While this will be the first time that a license for a permanently shutdown power reactor would 

be transferred for the purpose of decommissioning, the staff did not consider this to be a policy 

issue because regulatory criteria are well established for the transfer of a Part 50 license. The 

applicants’ request for approval of the direct transfer of the Zion licenses was made pursuant to 

10 CFR 50.80. Section 50.80(a) of 10 CFR states: “No license for a production or utilization 

facility, or any right thereunder, shall be transferred, assigned, or in any manner disposed of, 

either voluntarily or involuntarily, directly or indirectly, through transfer of control of the license to 

any person, unless the Commission shall give its consent in writing.” 

In addition, the requirements of 10 CFR 50.80(b) and (c) apply. Section 50.80(b)(1)(i) states 

that an application for a license transfer shall include as much of the information described in 

10 CFR 50.33 and 10 CFR 50.34 “with respect to the identity and technical and financial 

qualifications of the proposed transferee as would be required by those sections if the 

application were for an initial license.” Section 50.80(c) states that “the Commission will 

approve an application for the transfer of a license, if the Commission determines: (1) that the 

proposed transferee is qualified to be the holder of the license; and (2) that the transfer of the 

license is otherwise consistent with applicable provisions of law, regulations, and orders issued 

by the Commission pursuant thereto.” 

Following the proposed direct transfer, ZS would not be authorized under the Part 50 licenses to 

operate or load fuel pursuant to the terms of 10 CFR 50.82(a)(2). Its licensed activities would 

be limited to possession of radioactive material in connection with maintaining the safe storage 

condition of the plant, maintaining the spent fuel pool, transferring the fuel to and maintaining 

the proposed ISFSI, as well as completing the decommissioning of Zion. The staff has 

evaluated the technical and financial qualifications of ZS to hold the license for the Zion facility 

based on the current licensed condition. 

To ensure adequate oversight of licensee performance during the decommissioning process, 

NRC Region III is prepared to conduct the inspection activity that will be needed to verify 

licensee activities are conducted safely and in accordance with regulatory requirements. 

Specific inspection areas would include quality assurance, corrective action, and oversight; 

spent fuel safety, handling and transfer to a new ISFSI; modifications to the facility to support 

the ISFSI project; radiation protection; radioactive waste management; security; maintenance 

and surveillance; and decommissioning related activities. 
The Commissioners - 4 - 

Technical Qualifications: 

The key technical qualifications for a permanently shutdown facility, such as the Zion facility, are 

related to maintaining the facility, including the spent fuel, in a safe and secure manner, 

constructing and transferring the spent fuel to a proposed ISFSI, removing and disposing of the 

large radioactive components, decontaminating and demolishing the remaining structures, and 

transporting radiologically contaminated and non-contaminated waste to an appropriate disposal 

facility. Expertise required for these activities include the areas of radiation protection, spent 

fuel handling and transportation, radioactive waste management, security, emergency planning, 

and radiological decommissioning. 

The staff reviewed the application to ensure that the proposed corporate management is 

involved with, informed of, and dedicated to, safely performing the above activities and that 

sufficient, qualified technical resources will be provided to support safe plant decommissioning 

and maintenance. The staff also considered whether the proposed corporate management was 

capable of evaluating proposed changes to the organization that may occur as a result of the 

license transfer. 

The initial operating organization at Zion was determined to be acceptable by the initial licensing 

review. Subsequent safety-related changes to the operating organization have been evaluated 

with an appropriate methodology. Therefore, the existing operating organization remains 

acceptable. The staff’s review focused on evaluating any changes to the operating organization 

proposed as a result of the transfer. 

The ZS organization will consist of existing Zion staff, augmented by an experienced 

management team and other technical resources as required. The personnel presently 

employed by Exelon will be integrated into the ZS organization, and the proposed transfer will 

have no impact on their ability to continue to safely maintain the facilities. An organization chart 

of the management structure was provided, along with resumes of corporate officers and station 

managers. The organization chart shows that the incumbent Plant Operations Manager will 

continue in that position under the proposed ZS organization and the resumes of the proposed 

management personnel demonstrate significant experience in the areas of radiation protection, 

spent fuel handling and transportation, radioactive waste management, security, emergency 

planning, and radiological decommissioning. Additionally, the applicant stated that, “. . . support 

for certain functions (e.g., training, emergency preparedness and quality assurance) may be 

obtained from ES' corporate organization or from Exelon (by contract) during the transition 

period.” 

Based on the continuity of plant staff and expertise of the proposed management, the staff 

concludes that the corporate level management and technical support organization and the 

onsite operating organization that will be responsible for the operation and maintenance of the 

ZNPS facilities after the transfer of licensed operating authority to ZS, meets NRC’s regulatory 

requirements and demonstrates that ZS will be technically qualified to hold the ZNPS licenses. 

Financial Qualifications: 

Pursuant to the license transfer application, the existing decommissioning trust funds currently 

held by Exelon (approximately $727 million) will be the primary source of funds for the purpose 
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of evaluating the financial qualifications of ZS. The NRC staff must find reasonable assurances 

that the site will be brought to NRC standards for decommissioning activities that result in 

complete radiological decontamination. 

In February 1999, TLG Services, Inc. (TLG) completed a ZNPS site-specific decommissioning 

cost estimate. The applicant used the TLG estimates to obtain site-specific commodity 

quantities, and ES applied its own weights and currently estimated unit cost factors, which take 

into consideration the specific demolition methods and schedule ES plans to use, to arrive at an 

updated estimated cost to decommission the ZNPS. This estimate includes provisions for 

storage of spent fuel and greater than Class C wastes on the ZNPS site until 2018, as well as 

complete site restoration costs, also referred to as “Green Field,” for all areas except for the 

proposed ISFSI. The application also stated that, pursuant to the terms of a Credit Support 

Agreement, ES will provide a $200 million Irrevocable Letter of Credit to ZS, which is payable to 

a backup non-qualified decommissioning trust, that will be established at closing, which will be 

drawn against a thrift institution to be named. The NRC staff will add the procurement of the 

$200 million Irrevocable Letter of Credit for ZS as a condition of the license transfer. 

In addition to the Credit Support Agreement, ES committed to provide an Irrevocable Easement 

for Disposal Capacity of 7.5 million cubic feet to ZS, which provides for rights for disposal 

capacity at the Clive, Utah facility sufficient to dispose of all of the Class A Low-Level Waste that 

will be shipped from the ZNPS. This Irrevocable Easement for Disposal may be exercised such 

that no additional financial expenses will be incurred by the project. The staff considers this 

easement a material factor in assessing the financial qualifications of the proposed transferee. 

The NRC staff will add the procurement of the Irrevocable Easement for Disposal Capacity of 

7.5 million cubic feet for ZS as a condition of the license transfer. 

As of November 30, 2008, the market value of the combined Zion trust funds was approximately 

$727 million, including funds for site restoration not required by NRC regulations. ZS estimates 

NRC radiological decontamination costs to be $644 million. NRC staff reviewed that estimate 

given the proposed method outlined by ZS to conduct radiological decontamination and found 

the estimated cost reasonable. Based on the staff review of the forecasted expenses estimated 

by ZS, the available decommissioning funds, including the $200 million letter of credit, the 

economic value for disposal rights, and an independent estimate of decommissioning funding, 

the staff determined that ZS is financially qualified to hold the licenses as proposed for Zion. 

The provisions of the Price-Anderson Act (Section 170 of the Atomic Energy Act) and the 

Commission’s regulations at 10 CFR Part 140 require that the current indemnity agreement 

reflect that ZS will be the licensee after the proposed direct transfer takes effect. ZS will be 

required to maintain the financial protection required by 10 CFR Part 140 and the property 

insurance required by 10 CFR 50.54(w). Prior to the proposed direct transfers, ZS will obtain 

not less than $50 million onsite insurance coverage and not less than $100 million offsite 

coverage in accordance with NRC approved exemptions to 10 CFR 50.54(w) and 10 CFR 

140.11 issued December 21, 1999. Participation in the secondary insurance pool is not 

required based on the permanently defueled status of the Zion Units. 

The staff is aware that ES is considering delaying the finalization of the transfer of the Zion 

Nuclear Power Station assets until after the financial markets stabilize and the company 

reaffirms that there is sufficient value in the Zion decommissioning trust funds to ensure 
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adequate funds for the complete decommissioning of the plant and restoration to green field. 

Exelon officials have informed ES that they are supportive of this strategy. Pursuant to the 

asset sale agreement, ES and Exelon have until December 2009, to close the transaction. The 

staff recognizes that ES has significant financial interest in ensuring sufficient funds in the 

decommissioning trust as NRC approval of the transfer is dependent on contingency funding 

provided by ES which ES would not want to expend. Although the value of the trust fund, as of 

November 30, 2008, is sufficient for NRC required decontamination and decommissioning, due 

to the recent market decrease the fund is no longer sufficient for restoration to green field. 

However, green field (except for the ISFSI and switchyard) is the contractually expected 

condition when ZS has finished their work prior to transferring it back to Exelon. 

Although the staff believes that ES would not execute the transfer unless they considered the 

trust fund sufficiently funded to complete the decommissioning and restoration to green field 

without the use of the letter of credit contingency funding, that represents significantly more 

funding than necessary for the NRC required radiological decontamination. Given that the site 

specific cost estimate for NRC required decommissioning is $644 million and that there is 

currently $727 million in the decommissioning trust fund, the staff is satisfied with the current 

funding status. 

CONCLUSION: 

The staff’s review of the proposed transfer determined that ZS is technically and financially 

qualified to receive the license for Zion. Therefore, the Office of Federal and State Materials 

and Environmental Management Programs (FSME) staff intends to prepare the necessary 

Order, conforming amendments, and modified Price-Anderson indemnity agreements to 

approve the transfer for FSME Office Director signature. 

COORDINATION: 

The Office of the General Counsel reviewed this package and has no legal objection. 

The staff requests this paper be withheld until issuance of the order and amendments because 

it is pre-decisional. 

 /RA Martin Virgilio for/ 

 R. W. Borchardt 

 Executive Director 

 for Operations 
The Commissioners - 6 - 

adequate funds for the complete decommissioning of the plant and restoration to green field. 

Exelon officials have informed ES that they are supportive of this strategy. Pursuant to the 

asset sale agreement, ES and Exelon have until December 2009, to close the transaction. The 

staff recognizes that ES has significant financial interest in ensuring sufficient funds in the 

decommissioning trust as NRC approval of the transfer is dependent on contingency funding 

provided by ES which ES would not want to expend. Although the value of the trust fund, as of 

November 30, 2008, is sufficient for NRC required decontamination and decommissioning, due 

to the recent market decrease the fund is no longer sufficient for restoration to green field. 

However, green field (except for the ISFSI and switchyard) is the contractually expected 

condition when ZS has finished their work prior to transferring it back to Exelon. 

Although the staff believes that ES would not execute the transfer unless they considered the 

trust fund sufficiently funded to complete the decommissioning and restoration to green field 

without the use of the letter of credit contingency funding, that represents significantly more 

funding than necessary for the NRC required radiological decontamination. Given that the site 

specific cost estimate for NRC required decommissioning is $644 million and that there is 

currently $727 million in the decommissioning trust fund, the staff is satisfied with the current 

funding status. 

CONCLUSION: 

The staff’s review of the proposed transfer determined that ZS is technically and financially 

qualified to receive the license for Zion. Therefore, the Office of Federal and State Materials 

and Environmental Management Programs (FSME) staff intends to prepare the necessary 

Order, conforming amendments, and modified Price-Anderson indemnity agreements to 

approve the transfer for FSME Office Director signature. 

COORDINATION: 

The Office of the General Counsel reviewed this package and has no legal objection. 

The staff requests this paper be withheld until issuance of the order and amendments because 

it is pre-decisional. 

 /RA Martin Virgilio for/

 R. W. Borchardt 

 Executive Director 

 for Operations 

DISTRIBUTION: EDATS: FSME-2008-0059 

ADAMS ACCESSION NO.: ML082550224 

OFC FSME/DWMEP FSME/DWMEP FSME/DWMEP FSME/DWMEP OGC 

NAME JHickman:dm SMichnoski TSmith for Persinko KMcConnell JHull 

DATE 10/20/08 9/11/08 9/22/08 10/22/08 11/ 26/08 

OFC FSME/DWMEP FSME/DWMEP FSME:D EDO 

NAME LCamper PTressler for CPoland GPangburn for CMiller RWBorchardt 

(MVirgilio for) 

DATE 12/ 04 /08 12/10/08 12/22/08 02/02/09 

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