________________

POLICY ISSUE

(Information)

February 17, 2017 SECY-17-0025

FOR: The Commissioners 

FROM: Marc L. Dapas, Director

Office of Nuclear Material Safety

 and Safeguards

SUBJECT: UPDATE ON SOURCE SECURITY AND ACCOUNTABILITY 

ACTIVITIES

PURPOSE:

The purpose of this paper is to provide the Commission with an update on source security and 

accountability activities pertaining to the recommendations from the two working groups formed

in response to the findings and recommendations made by the Government Accountability 

Office (GAO) in materials licensing audit GAO-16-330, entitled “NRC Has Enhanced the 

Controls of Dangerous Radioactive Materials, but Vulnerabilities Remain.” This paper also 

informs the Commission of the initiation of Category 3 source security and accountability 

initiatives to address the tasks in the Staff Requirements Memorandum (SRM) for COMJMB-16-

0001, “Proposed Staff Re-Evaluation of Category 3 Source Accountability,” (Agencywide 

Documents Access and Management System (ADAMS) Accession No. ML16292A812), and 

potential strategies for addressing rulemaking activities affecting materials licensees. This 

paper does not address any new commitments or resource implications.

CONTACT: Ernesto Quiñones, NMSS/MSTR

 (301) 415-0271
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SUMMARY:

After analyzing the findings and recommendations in GAO-16-330, the Enhancements to PreLicensing Guidance Working Group (PLWG) and the License Verification and Transfer of 

Category 3 Sources Working Group (LVWG) made a number of recommendations to enhance

the materials licensing program. These recommendations were reviewed by a Steering 

Committee that was co-chaired by U.S. Nuclear Regulatory Commission (NRC) and Agreement 

State representatives and included proposals to pursue rulemaking, guidance development, and 

program changes such as training enhancements.

The NRC staff is preparing an action plan to implement PLWG recommendations that do not 

require rulemaking and that were endorsed by the Steering Committee, such as the 

development of additional guidance and training. Recommendations involving rulemaking will 

be addressed in an integrated manner with other planned rulemaking activities affecting 

materials licensees. Analyses and recommendations developed by the LVWG will be 

considered by a new working group that was formed to address the recent Commission 

direction in SRM-COMJMB-16-0001 for the staff to re-evaluate Category 3 source protection 

and accountability. This working group ─ the Category 3 Source Security and Accountability 

Working Group ─ will present the results of their working group activities to the Steering 

Committee for consideration. The NRC staff will provide the resultant recommendations to the 

Commission in August 2017 in a notation vote paper. 

In order to maximize efficiency and minimize the cumulative effects of regulatory changes on

materials licensees, the staff will provide an integrated rulemaking plan to the Commission for 

its consideration subsequent to receipt of Commission direction on the August 2017 notation

vote paper. The rulemaking plan will include the PLWG recommendation that requires

rulemaking (Title 10 of the Code of Federal Regulations (10 CFR) Parts 30, 40, and 70);

planned rulemaking activities pertaining to 10 CFR Part 37; and any rulemaking 

recommendations that result from ongoing working group activities performed in response to 

SRM-COMJMB-16-0001.

BACKGROUND:

In 2014, the GAO initiated an audit of the materials licensing program to determine whether the 

licensing vulnerabilities identified in its 2007 investigation (GAO-07-1038T, entitled “Nuclear 

Security: Actions Taken by NRC to Strengthen Its Licensing Process for Sealed Radioactive 

Sources Are Not Effective”) had been addressed by the NRC and the Agreement States. In 

2015, as part of the audit, the GAO conducted an investigation that again attempted to obtain 

radioactive materials licenses, this time from one NRC regional office and two separate

Agreement States, using a fictitious company. The 2015 investigation went beyond the 

investigation in 2007 in its sophistication and planning, such that the GAO rented 

storefront/warehouse space to demonstrate its legitimacy during pre-licensing visits. The GAO 

was successful in one of three attempts, acquiring a license for a Category 3 well-logging 

source. Subsequently, GAO was able to place an order for one Category 3 source, then alter 

the license and place an order for a second Category 3 source. The investigation demonstrated 

that the GAO could have acquired an aggregated Category 2 quantity of material, although at 

no point in the investigation were radioactive materials actually shipped to the fictitious 

company. 
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Once notified of the investigation results by the GAO in October 2015, the NRC took a number 

of immediate actions, including: 1) working with the impacted Agreement State to ensure that 

the license obtained by GAO was immediately terminated and relevant manufacturers and 

distributors were notified; 2) issuing a notice to the Agreement States on the importance of 

following pre-licensing guidance, conducting site visits during the licensing process, and

suspending use of the “good-faith” presumption during the licensing process; 3) asking the 

Agreement State that issued the license to GAO to perform a self-assessment and root cause 

analysis of the State’s action in association with the GAO application and pre-licensing visit; and 

4) requesting NRC regions and Agreement States to perform self-assessments of their 

implementation of the pre-licensing guidance and provide their results to the NRC. As a longer 

term activity, the NRC also formed two NRC-Agreement State working groups to evaluate the

results of the GAO audit and investigation. Specifically, one working group considered 

enhancements to the pre-licensing guidance (the PLWG) while the second working group 

evaluated the need for enhancements to existing requirements or guidance for license 

verification and source tracking beyond Category 1 and Category 2 thresholds of radioactive 

material (the LVWG). 

In addition, the Commission directed the staff to take specific actions to evaluate whether it is 

necessary to revise NRC regulations or processes governing source protection and 

accountability. Specifically, on October 18, 2016, the Commission issued SRM-COMJMB-16-

0001 directing the staff to re-evaluate Category 3 source accountability given the agency’s 

operating experience with higher-risk sources and in response to the findings by GAO. As a 

result of the SRM, the Category 3 Source Security and Accountability Working Group was 

formed to complete the tasks identified in the SRM and to produce a notation vote paper that 

will be submitted to the Commission in August 2017. 

Additional activities related to source management and protection have recently been 

completed by the NRC. Specifically, in December 2016, the Commission provided a report to 

Congress documenting the NRC staff’s evaluation of the effectiveness of the requirements in 10 

CFR Part 37, “Physical Protection of Category 1 and Category 2 Quantities of Radioactive 

Material” (ADAMS Accession No. ML16348A230). The report detailed the results of the NRC’s 

comprehensive program review of 10 CFR Part 37, which concluded that the requirements in 10 

CFR Part 37 are effective in protecting Category 1 and 2 quantities of radioactive material. 

However, the report did identify specific areas in which revisions to the rule, development or 

revision of implementing guidance, and enhanced communication efforts with licensees would 

be beneficial in improving the clarity of the regulations and licensees’ implementation of source 

security measures. As such, the NRC staff will undertake a number of activities to address the 

enhancements identified as a result of the program review. These actions include preparation 

of a rulemaking plan, consistent with Commission direction in the SRM for SECY-15-0129, 

“Commission Involvement in Early Stages of Rulemaking,” dated February 3, 2016 (ADAMS 

Accession No. ML15267A716), to seek Commission approval to proceed with proposed rule 

changes identified as a result of the program review. 

On June 12, 2014, the Nuclear Energy Institute (NEI) submitted a petition for rulemaking (PRM), 

PRM-37-1 (ADAMS Accession No. ML14199A570), seeking to amend 10 CFR Part 37 to: 1) 

allow for all byproduct material kept within any area for which 10 CFR Part 73 requires access 

control to be exempted from 10 CFR Part 37 requirements regardless of whether the byproduct 

material activities are specifically included in a 10 CFR Part 73 security plan; 2) remove 
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ambiguity as to what type of wastes are exempted from 10 CFR Part 37 requirements; and 3) 

add an exemption to address large components and storage of radioactive material in robust 

structures due to the low risk of theft or diversion of these materials. In June 2015, the NRC 

staff closed the docket for PRM-37-1 (80 FR 33450) and determined that the issues raised in 

the PRM would be considered in rulemaking. Review of the associated rulemaking plan was 

deferred in February 2016 due to the then-ongoing Part 37 program review. The NRC staff 

anticipates including the request to enter the rulemaking process to evaluate and address 

issues raised by PRM-37-1 in the same rulemaking plan that will be prepared to address the 

rulemaking recommendations identified as a result of the Part 37 program review. The exact 

wording of revisions to 10 CFR Part 37, if any, will be determined during the rulemaking 

process.

In a separate effort, in October 2016, the NRC staff submitted SECY-16-0115, “Rulemaking 

Plan on Financial Assurance for Disposition of Category 1 and 2 Byproduct Material Radioactive 

Sealed Sources” (ADAMS Accession No. ML16200A223), to request Commission approval to 

initiate a rulemaking to require financial assurance for the disposition of Category 1 and 2 

byproduct material radioactive sealed sources (RSSs). The rulemaking seeks to revise 10 CFR 

30.35, “Financial Assurance and Recordkeeping for Decommissioning,” to establish financial 

assurance requirements for the dispositioning of all byproduct material Category 1 and 2 RSSs

that are required to be tracked in NSTS. Staff is awaiting final Commission direction on this 

rulemaking plan.

DISCUSSION:

The PLWG and LVWG completed their chartered activities in October 2016, and the Steering 

Committee for the working groups met later that month to discuss and evaluate the proposed 

working group recommendations, while taking into consideration the recent Commission 

direction in SRM-COMJMB-16-0001. The Steering Committee endorsed the majority of the 

PLWG’s recommendations, while deciding to defer endorsement of the LVWG’s 

recommendations due to: 1) the existence of substantial overlap between the LVWG’s activities 

and tasks in SRM-COMJMB-16-0001; 2) the need to consider new cost/benefit, vulnerability, 

and threat analyses required by SRM-COMJMB-16-0001 to inform any decisions on the 

LVWG’s recommendations; and 3) the need to develop the project plan for responding to SRMCOMJMB-16-0001 in order to determine potential decision-making timeframes for 

recommendations related to Category 3 source security and accountability. 

A summary of the recommendations made by the PLWG and LVWG, and the results of the 

Steering Committee’s deliberation on these recommendations, are provided in the enclosure to 

this paper. The staff will implement recommendations from the PLWG through development of 

a rulemaking plan for Commission consideration as well as a separate action plan for those 

activities that do not require rulemaking. Activities not requiring rulemaking will be performed in 

accordance with budgeted resources and agency priorities. Recommendations from the LVWG 

will be considered as part of the Category 3 source security and accountability initiatives 

described below.
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Category 3 Source Security and Accountability Initiatives

Staff formed the Category 3 Source Security and Accountability working group to address SRMCOMJMB-16-0001 and has commenced work on those activities. The working group includes 

NRC and Agreement State participation and is responsible for evaluating whether it is 

necessary to revise NRC regulations or processes governing source security and accountability 

to continue to ensure adequate protection of public health and safety. The working group’s 

charter can be found in ADAMS (Accession No. ML17010A017). A total of nine tasks were 

identified in SRM-COMJMB-16-0001,

1 and the working group plans to address them through 

four targeted activities:

Activity 1: Expand on the analyses and recommendations developed by the LVWG. This 

activity addresses Tasks 1, 2, 3, 6, 7, and 8 from SRM-COMJMB-16-0001 and includes efforts 

to: 1) Evaluate and assess the pros and cons of different methods of requiring transferors of 

Category 3 sources to verify the validity of a transferee’s license prior to transfer; 2) Evaluate

and assess the pros and cons of including Category 3 sources in the NSTS; 3) Assess any 

additional options for addressing source accountability recommendations made by the GAO; 

4) Identify potential regulatory actions that would not require changes to NRC regulations to 

include changes to guidance, training, and other program improvements; 5) Identify any other 

factors arising from the staff’s currently ongoing assessment that the staff concludes would bear 

on the Commission’s deliberation on the proposed change; and 6) Assess the risks posed by 

the aggregation of Category 3 sources into Category 2 quantities. 

Activity 2: Perform a vulnerability assessment which identifies changes in the threat 

environment between 2009 and today that argue in favor or against extending enhanced 

security measures for the protection of Category 3 quantities of radioactive materials and 

expansion of the NSTS to include Category 3 sources. This activity addresses Task 4 from 

SRM-COMJMB-16-0001.

Activity 3: Perform a regulatory impact analysis of the accrued benefit and costs of the changes 

requiring rulemaking to include the impacts to the NRC, Agreement States, non-Agreement 

States, and regulated entities. This Activity addresses Task 5 from SRM-COMJMB-16-0001.

Activity 4: Solicit feedback from Agreement State partners, non-Agreement States, regulated 

entities, public interest groups, industry groups such as those in the medical and industrial 

fields, and the reactor community on Activities 1 through 3. This Activity addresses Task 9 from 

SRM-COMJMB-16-0001 and includes efforts to: 1) Prepare and issue a Federal Register notice 

(FRN), which provides specific questions for stakeholders to consider; 2) Hold public 

meetings/webinars to facilitate feedback on the FRN; and 3) Give presentations to industry 

groups and professional organizations.

2

 1 SRM-COMJMB-16-0001 included a list of tasks numbered from 1-7. In subsequent paragraphs of the SRM, 

direction was given to conduct activities such as considering the risks of aggregation of Category 3 sources into 

Category 2 quantities and soliciting feedback from stakeholders. In order to ensure appropriate tracking of these 

activities, staff numbered them sequentially, with the assessment of aggregation being identified as Task 8 and the 

solicitation of stakeholder feedback being identified as Task 9.

2 On January 9, 2017, the FRN providing questions for stakeholders to consider regarding the re-evaluation of 

Category 3 source security and accountability (82 FR 2399) was issued with a 60-day comment period closing on 

March 10, 2017. A correction to the FRN was published on January 17, 2017 (82 FR 4938). A public meeting was 
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The products produced from each of the four activities performed by the working group will be 

used as input to the Commission notation vote paper required by SRM-COMJMB-16-0001.

Integration of Rulemaking Activities

The NRC staff intends to increase efficiency and address the cumulative effects of regulatory 

changes by integrating, to the extent practicable, rulemaking initiatives that are related to the 

same set of materials licensees. This will entail the consolidation of rulemaking activities 

pertaining to 10 CFR Parts 30, 37, 40, and 70 as well as any rulemaking recommendations that 

result from ongoing working group activities in response to SRM-COMJMB-16-0001, as 

described below. 

10 CFR Part 37. The NRC staff plans to address: 1) recommendations for rule changes 

resulting from the program review of 10 CFR Part 37, and 2) any potential rule changes 

being considered in response to PRM-37-1.

10 CFR Parts 30, 40, and 70. The PLWG recommended rulemaking to amend 10 CFR 

Parts 30, 40, and 70 to require safety and security equipment to be in place before

granting a license for an unknown entity. 

Other Rulemaking Activities. While rulemaking was recommended by the LVWG, 

Steering Committee endorsement of the rulemaking recommendations was deferred 

until after completion of the Category 3 Source Security and Accountability working 

group chartered activities to allow for consideration of the results of additional analysis 

activities required by SRM-COMJMB-16-0001. Consideration of the LVWG 

recommendations and the results of the Category 3 Source Security and Accountability 

working group chartered activities could result in recommendations for rulemaking in 

additional areas.

In order to consolidate the rulemaking activities described above, the NRC staff anticipates 

preparing an integrated rulemaking plan approximately 3 months following Commission 

direction on the August 2017 Commission vote paper required by SRM-COMJMB-16-0001. The 

integrated rulemaking plan will include recommendations to amend 10 CFR Parts 30, 37, 40, 

and 70, as well as other parts of 10 CFR as appropriate.

If final Commission approval has been received on SECY-16-0115, the staff plans to 

recommend incorporation of the rulemaking to amend 10 CFR Part 30 to establish financial 

assurance requirements for the disposition of Category 1 and 2 RSSs, into the integrated 

rulemaking initiative in the August 2017 Commission vote paper. If approved, this integration 

would occur at the regulatory basis phase, as the rulemaking plan for financial assurance was 

provided to the Commission in October 2016 in SECY-16-0115.

 held at NRC Headquarters on January 31, 2017. Two additional public meetings outside the Washington, DC, area 

(dates and locations yet to be confirmed) and two webinars (February 21, 2017, and March 2, 2017) will be held 

during the comment period. NRC representatives will also participate in meetings and workshops held by industry 

groups and professional organizations to provide presentations on the staff’s activities with respect to Category 3 

source security and accountability and to solicit feedback. Further details regarding these activities can be found at 

the following website: https://www.nrc.gov/security/byproduct/category-3-source-security-accountabilityreevaluation.html.
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CONCLUSION:

The staff is developing an action plan to implement the PLWG recommendations that do not 

require rulemaking and that were endorsed by the Steering Committee. The activities described 

in the action plan will be performed in accordance with budgeted resources and agency 

priorities. In addition, the staff provided copies of the PLWG and LVWG reports and the 

Steering Committee meeting summary to the Agreement States to ensure that they are fully 

informed of NRC actions in response to GAO-16-330 and SRM-COMJMB-16-0001. 

As noted above, the staff intends to provide an integrated rulemaking plan to the Commission 

that incorporates all the existing activities that are relevant to source security and accountability 

approximately 3 months following Commission direction on the August 2017 Commission vote 

paper required by SRM-COMJMB-16-0001. This integrated rulemaking plan will include the 

request to undertake rulemaking to address: 

1) Recommendations resulting from the program review of 10 CFR Part 37 and issues 

raised by PRM-37-1;

2) The recommendation for rulemaking to amend 10 CFR Parts 30, 40, and 70 made by 

the PLWG; and

3) Subject to appropriate Commission direction following the August 2017 Commission 

paper, any rulemaking recommendations proposed by the Category 3 Source Security 

and Accountability Working Group, including consideration of the LVWG deferred 

recommendations.

In addition, pending Commission direction on SECY-16-0115, the staff plans to recommend 

incorporation of the rulemaking activity to amend 10 CFR Part 30 to require financial assurance 

for the disposition of Category 1 and 2 RSSs, into the integrated rulemaking effort beginning at 

the regulatory basis phase of the rulemaking.
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COORDINATION:

The Office of the General Counsel has reviewed this paper and has no legal objections. The 

Office of the Chief Financial Officer has reviewed this paper for resource implications and has 

no objections.

/RA/

Marc L. Dapas, Director

Office of Nuclear Material Safety

 and Safeguards

Enclosure:

Conclusions Made by the Steering 

 Committee Regarding the Recommendations 

 Made By the Pre-Licensing Guidance and 

 License Verification and Transfer of 

 Category 3 Sources Working Groups
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COORDINATION:

The Office of the General Counsel has reviewed this paper and has no legal objections. The 

Office of the Chief Financial Officer has reviewed this paper for resource implications and has 

no objections.

/RA/

Marc L. Dapas, Director

Office of Nuclear Material Safety

 and Safeguards

Enclosure:

Conclusions Made by the Steering 

 Committee Regarding the Recommendations 

 Made By the Pre-Licensing Guidance and 

 License Verification and Transfer of 

 Category 3 Sources Working Groups

 ML16344A108 *via email

OFFICE NMSS/MSTR NMSS/MSTR NMSS/MSTR NMSS/MSTR OGC Tech Ed

NAME E. Quinones D. White S. Atack P. Henderson 

for D. Collins

JBielecki* W. Moore

DATE 12/01/16 12/08/16 12/09/16 12/21/16 01/10/16 01/24/16

OFFICE NMSS

NAME M. Dapas

DATE 2/17/17

OFFICIAL RECORD COPY