July 15, 2016 

 COMJMB-16-0001 

 PLEASE RESPOND BY: 

 July 29, 2016 

MEMORANDUM TO: Chairman Burns 

 Commissioner Svinicki 

FROM: Commissioner Baran /RA/ 

SUBJECT: PROPOSED STAFF RE-EVALUATION OF CATEGORY 3 

SOURCE ACCOUNTABILITY 

Background 

On June 10, 2009, the NRC staff recommended publication of a draft final rule to include 

International Atomic Energy Agency (IAEA) Category 3 radioactive sources in the National 

Source Tracking System (NSTS).1 The staff made four principle arguments for expanding the 

NSTS to include Category 3 sources: (1) the potential exists to aggregate Category 3 sources 

to a Category 2 level2; (2) the additional burden to track Category 3 sources is justified given the 

benefit in improved source accountability; (3) Category 3 sources are defined as dangerous by 

IAEA; and (4) the NSTS design can accommodate additional sources. After a 2-2 vote, the 

Commission was unable to reach a majority position on the draft final rule, which was not 

published. 

I think it is time to revisit the question of whether and how to track Category 3 sources. The 

case for doing so is even stronger today than it was seven years ago. 

In 2009, the NSTS was a recent innovation, and the staff was still struggling to address the 

technical difficulties posed by covering the Category 1 and 2 sources. In the June 10, 2009, 

policy paper, the NRC staff described the situation: 

Many of the States insist that the existing NSTS is not effective, and 24 comment letters 

stated that the NSTS should not be expanded until the NRC resolves existing NSTS 

problems. The States described existing NSTS software problems, such as automatic 

termination of session, inability to print inventories, delays in entering transactions 

submitted to the NRC contractor, an inoperable radionuclide delay function, among 

others. Many licensees have opted to send their transaction reports to the NRC by fax, 

and the NRC currently has a data entry backlog.3 

At that time, the NRC staff estimated that about 75% of Category 3 tracking submittals to the 

system would be sent by fax.4 This would have required a laborious and resource-intensive 

data entry effort to populate the system with the Category 3 information. 

 

1 SECY-09-0086 (June 10, 2009). 

2 The staff explained: “at the high end of Category 3, it would only take a few sources to 

aggregate to Category 2.” Id. at 3. 

3 SECY-09-0086 at 7. 

4 Draft final rule, “Expansion of the National Source Tracking System” at 21.
2 

Today, the NSTS is an established system that is functioning well. Early problems with 

authentication and system access by licensees and Agreement States have been resolved. 

The system is also far more efficient than it once was, with 99% of transactions processed 

electronically, either online or through computer-readable files. As the staff explained in 2009, 

“the NSTS was designed to accommodate Category 3 sources and licensee information, and 

this feature can be implemented at reasonable cost.”5 With much higher levels of online data 

entry today, the costs of including Category 3 sources should be even lower for NRC, 

Agreement States, and potentially licensees. 

The just-released Government Accountability Office (GAO) report examining the effectiveness 

of NRC’s radioactive source tracking regime provides another important reason to re-evaluate 

how the agency treats Category 3 sources. Although the report acknowledges that NRC and 

Agreement States have taken several steps “to help ensure that licenses are granted only to 

legitimate organizations and that licensees can only obtain such materials in quantities allowed 

by their licenses,” GAO’s covert testing identified a regulatory gap.6 The failure of one 

Agreement State to conduct a proper pre-licensing site visit can be addressed through improved 

training and guidance. But the ability of GAO investigators to alter the paper license issued by 

the Agreement State in order to improperly obtain the Category 3 source from more than one 

vendor reveals a weakness in the underlying regulatory requirements. GAO’s fictitious 

company was able to get two vendors to agree to provide a Category 3 source even though the 

license only entitled the fake company to one Category 3 source. GAO was successful because 

“NRC does not specifically require that the validity of Category 3 licenses be verified by the 

seller with NRC or the Agreement States—creating risks that licenses could be counterfeited or 

that licensees could obtain radioactive materials in quantities greater than what is allowed by 

their licenses.”7 As a result, GAO states that “NRC and Agreement States do not have 

assurance that their systems would prevent bad actors from altering licenses or fraudulently 

reporting the details of their licenses to transferors, accumulating dangerous materials by 

aggregation to Category 2 or larger quantities on the basis of those fraudulent licenses, and 

thereby endangering public health and safety.”8

 

Based on its findings, GAO makes two main recommendations: (1) NRC should include 

Category 3 sources in the NSTS and add Agreement State Category 3 licenses to the Webbased licensing system “as quickly as reasonably possible” and (2) NRC should require 

transferors of Category 3 sources to confirm the validity of a purchaser’s license with NRC or 

the appropriate Agreement State before making the transfer.9 

Proposed Staff Direction 

In light of GAO’s findings and the years of operating experience with the NSTS, I propose that 

the NRC staff take a fresh look at the question of whether and how to track Category 3 sources. 

This re-evaluation can build on the efforts of the working groups established in response to the 

GAO investigation. I propose that, within six months of the Staff Requirements Memorandum 

 

5 SECY-09-0086 at 4. 

6 Government Accountability Office, “Nuclear Security, NRC Has Enhanced the Controls of 

Dangerous Radioactive Materials, but Vulnerabilities Remain” (GAO-16-330) (July 2016) at 

highlights page.

7 Id. 8 Id. at 20.

9 Id. at highlights page, 26-27. 
3 

resulting from this paper, the staff should submit a notation vote paper to the Commission that 

includes the following: 

1) An evaluation of 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 the transfer; 

2) An evaluation of the pros and cons of including Category 3 sources in the NSTS; and 

3) Based on these evaluations, options for addressing the GAO recommendations. 

In conducting these evaluations, the staff should assess the risks posed by the aggregation of 

Category 3 sources into Category 2 quantities and consider the current views of our Agreement 

States partners. 

cc: EDO 

 SECY 

 OGC