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[Federal Register: July 27, 2010 (Volume 75, Number 143)]
[Notices]               
[Page 43945-43955]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27jy10-61]                         

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DEPARTMENT OF ENERGY

 
Convention on Supplementary Compensation for Nuclear Damage 
Contingent Cost Allocation

AGENCY: Department of Energy.

ACTION: Notice of inquiry and request for comment.

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SUMMARY: The Department of Energy (``Department'' or ``DOE'') is 
seeking comment and information from the public to assist in its 
development of regulations pertaining to section 934 of the Energy 
Independence and Security Act of 2007 (``Act''). Section 934 addresses 
how the United States will meet its obligations under the Convention on 
Supplementary Compensation for Nuclear Damage (``Convention'' or 
``CSC'') and, in particular, its obligation to contribute to an 
international supplementary fund in the event of certain nuclear 
incidents. Section 934 authorizes the Secretary of Energy 
(``Secretary'') to issue regulations establishing a retrospective risk 
pooling program by which nuclear suppliers will reimburse the United 
States government for its contribution to the international 
supplementary fund. The Department's regulations to implement the 
retrospective risk pooling program are the subject of this notice.

DATES: Interested persons must submit written comments by September 27, 
2010.

ADDRESSES: Comments may be submitted electronically by e-mailing them 
to: Section934Rulemaking@Hq.Doe.Gov. We note that e-mail submissions 
will avoid delay associated with security screening of U.S. Postal 
Service mail.
    Also, written comments should be addressed to Sophia Angelini, 
Attorney-Advisor, Office of the General Counsel for Civilian Nuclear 
Programs, GC-52, U.S. Department of Energy, 1000 Independence Avenue, 
SW., Washington, DC 20585. The Department requires, in hard copy, a 
signed original and three copies of all comments. Copies of the written 
comments received and any other docket material may be reviewed on the 
Web site specifically established for this proceeding. The Internet Web 
site is: http://gc.doe.gov/civilian_nuclear_programs.htm.

FOR FURTHER INFORMATION CONTACT: Sophia Angelini, Attorney-Advisor, 
Office of the General Counsel for Civilian Nuclear Programs, GC-52, 
U.S. Department of Energy, 1000 Independence Avenue, SW., Washington, 
DC 20585; Telephone (202) 586-0319.

SUPPLEMENTARY INFORMATION:

I. Background

    On September 12, 1997, the Convention on Supplementary Compensation 
for Nuclear Damage was adopted by a diplomatic conference convened by 
the International Atomic Energy Agency (``IAEA'').\1\ The CSC provides 
the basis for a global nuclear liability regime. Such a regime is an 
essential element of the infrastructure necessary to support the 
expanded use of nuclear power around the world to meet the challenges 
of climate change, energy security, and economic growth. The CSC 
provides consistent rules for dealing with legal liability resulting 
from a nuclear incident and ensures prompt availability of meaningful 
compensation for the nuclear damage resulting from any such incident. A 
major feature of the CSC is the creation of an ``international 
supplementary fund,'' which provides an additional tier of compensation 
not otherwise available under a State's national law and to which each 
Party to the Convention (``Contracting Party'') contributes in the 
event of certain nuclear incidents.
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    \1\ The full text of the Convention on Supplementary 
Compensation for Nuclear Damage is available at http://www.iaea.org/Publication/Documents/Infircs/1998/infcirc567.shtml. A detailed 
interpretation of the CSC and its provisions is contained in ``The 
1997 Vienna Convention on Civil Liability for Nuclear Damage and the 
1997 Convention on Supplementary Compensation for Nuclear Damage--
Explanatory Texts,'' International Atomic Energy Agency (IAEA) 
(``Explanatory Texts''). International Law Series No. 3 (2007). The 
Explanatory Texts is available at http://www-pub.iaea.org/MTCD/publications/PDF/Pub1279_web.pdf .
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    In the event of a nuclear incident, the CSC provides a two-tiered 
compensation system based on: (1) A Contracting Party's national law; 
and (2) the international supplementary fund. The first tier is 
provided by funds available under the laws of the State where the 
nuclear installation involved is located, or under whose authority the 
installation is operated (``Installation State''). The first tier 
amount is set at a minimum of 300 million Special Drawing Rights 
(``SDRs'').\2\ In the event that the first tier is inadequate to 
compensate all nuclear damage, a second tier would be provided via the 
international supplementary fund to which all Contracting Parties would 
contribute, including the Installation

[[Page 43946]]

State that provided the first tier. This obligation arises when, and to 
the extent that, second tier funds are actually required, with no 
obligation to contribute if claims can be satisfied from the first 
tier. The second tier amount is not preset, but instead is calculated 
based on a formula that takes into account the installed capacity of 
all Contracting Parties and their United Nations (``UN'') rate of 
assessment at the time of the incident. If countries with most of the 
current installed capacity join the Convention, the second tier will 
amount to approximately 300 million SDRs, which, in conjunction with 
the first tier, would guarantee a total of approximately 600 million 
SDRs for compensation.
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    \2\ SDR is the unit of account defined by the International 
Monetary Fund (``IMF'') and used by the IMF for its own operations 
and transactions. As of May 2010, 1 SDR equaled about $1.50 dollars; 
therefore, 300 million SDRs would equal roughly $450 million 
dollars.
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    In 2007, Congress passed the Energy Independence and Security Act 
of 2007 (Pub. L. 110-140), which includes section 934 (``Convention on 
Supplementary Compensation for Nuclear Damage Contingent Cost 
Allocation'') (42 U.S.C. 17373). Section 934 implements the Convention 
in the United States. Congress found that the Convention benefits 
United States nuclear suppliers by replacing their potentially open-
ended liability with a predictable liability regime, and, in effect, 
insurance for nuclear damage arising from incidents not covered by the 
Price-Anderson Act (``PAA'').\3\ The Department and the Nuclear 
Regulatory Commission (``NRC'') are authorized to issue implementing 
regulations, as necessary and appropriate. 934(l). The combined 
operation of the CSC, PAA, and section 934 assures funding for victims 
in a wider variety of nuclear incidents, while reducing potential 
liability of United States nuclear suppliers and without increasing 
potential costs to United States nuclear reactor operators. 934(a)(1).
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    \3\ The Price-Anderson Act (``Price-Anderson'' or ``PAA''), 
section 170 of the Atomic Energy Act of 1954, as amended (``AEA''), 
42 U.S.C. 2210, is the national law governing compensation for 
victims of nuclear incidents occurring within the United States. The 
PAA provides that owners of commercial reactors must assume all 
liability for nuclear damages awarded to the public; each licensed 
reactor must carry primary financial protection in the amount of the 
maximum liability insurance available, currently $375 million U.S. 
dollars, and damages exceeding that amount would be assessed equally 
against all commercial reactors (currently 104 reactors) covered by 
the PAA under a retrospective premium requirement pooling program. 
The PAA also provides indemnification for public liability in the 
event of a nuclear incident resulting from activities conducted for 
or on behalf of DOE, including a nuclear incident outside the United 
States involving U.S.-owned nuclear material.
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    Section 934 sets forth the means by which the United States will 
contribute to the second tier of compensation required under the 
Convention, that is, the international supplementary fund. (The first 
tier of compensation would be funded pursuant to the governing United 
States law for nuclear incidents, the PAA.) Funds available under the 
PAA would be used to pay the United States contribution to the 
international supplementary fund for nuclear incidents that are covered 
by the PAA. 934(c) and (d). For nuclear incidents that are not covered 
by the PAA, section 934 establishes a new risk pooling program for 
nuclear suppliers to pay the United States contribution to the 
international supplementary fund. The risk pooling program involves a 
premium to be assessed retrospectively (i.e., a deferred payment) based 
on a risk-informed formula taking into account specified risk factors 
in conjunction with exclusionary criteria. 934(e). This notice of 
inquiry (``NOI'') is focused only on regulations to be promulgated by 
the Department to implement the new retrospective risk pooling program 
for nuclear suppliers. A section by section explanation of section 934 
is provided in the Appendix to this notice.

II. Discussion of Section 934 and Request for Public Comment

A. Overview

    The Department is issuing this NOI to provide an opportunity for 
public input as the Department develops a rule to implement a 
retrospective risk pooling program for nuclear suppliers to fund the 
United States contribution to the international supplementary fund 
required by the Convention.
    This NOI discusses the major topics related to the implementation 
of section 934 by the Department, including: (1) Operation of the PAA 
system; (2) pertinent definitions in section 934(b); (3) the 
retrospective risk pooling program and deferred payment in subsection 
934(e)(2); (4) the risk-informed assessment formula in subsection 
934(e)(2)(C)(i) and factors for consideration in subsection 
934(e)(2)(C)(ii); (5) reporting requirements in subsection 934(f); and 
(6) payments to and by the United States in subsection 934(h).

B. Operation of the Price-Anderson System

    Section 934 is clear in its findings and purpose that the existing 
legal and operational framework of the PAA is not affected by the 
compensation system established by the Convention. Subsection 934(a) 
specifies that contributions under the Convention cannot ``(i) upset 
settled expectations based on the liability regime established under 
the Price-Anderson Act; or (ii) shift to Federal taxpayers liability 
risks for nuclear incidents at foreign installations.'' 934(a)(1)(H)(i) 
and (ii). With respect to a nuclear incident covered by the PAA 
(``Price-Anderson incident''), ``funds already available under the 
[PAA] should be used'' for contributions due under the Convention. 
934(a)(1)(I). With respect to a nuclear incident outside the United 
States not covered by the PAA, ``a retrospective premium should be 
prorated among nuclear suppliers'' with contingent costs allocated 
equitably, on the basis of risk. 934(a)(1)(J) and 934(a)(2)(B). In sum, 
the United States contribution under the Convention will be funded 
either from existing PAA funds or the new retrospective risk pooling 
program for nuclear suppliers. In no case would a nuclear reactor 
operator that contributes to the PAA pooling program be required also 
to contribute to the new retrospective pooling program. Because section 
934 is clear on this point, and imposes no requirements on nuclear 
reactor operators covered by the PAA, the statute preserves the 
existing compensation system under the PAA. Accordingly, it is not 
necessary for either the Department or the NRC to issue implementing 
regulations to effectuate how and when PAA funds will be used to cover 
a contribution under the Convention.
    The Department believes that, on this point, the operation of the 
PAA under the Convention is clear and self-executing; however, the 
Department invites comments if there is any question in this regard.

C. Definitions

    Subsection 934(b) provides definitions for certain terms used in 
the Act. In its regulation, the Department intends to include the terms 
defined in the statute, as well as other key terms necessary to 
implement the statute. The Department views some of the terms defined 
in subsection 934(b) as being clear and to not require additional 
clarification. Those terms include: ``Commission'' at subsection 
934(b)(1); ``Convention'' at subsection 934(b)(3); and ``Secretary'' at 
subsection 934(b)(9). Other terms in section 934, although defined, are 
less clear in their application or interpretation such that 
clarification may be necessary. For example, while the term ``nuclear 
supplier'' is defined at subsection 934(b)(7),\4\ that term is 
potentially very

[[Page 43947]]

broad in scope, complex, and subject to interpretation. As to this 
definition and others below, the Department requests comments on how 
implementation of section 934 would be facilitated by further 
clarification and consideration in the regulation. If a commenter 
believes that clarifications should be provided in the Secretary's 
regulation as to the terms below, or any other terms, the commenter is 
requested to explain why and, if possible, provide suggested language.
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    \4\ The term ``nuclear supplier'' means a covered person (or a 
successor in interest of a covered person) that--
    (A) Supplies facilities, equipment, fuel, services, or 
technology pertaining to the design, construction, operation, or 
decommissioning of a covered installation; or
    (B) Transports nuclear materials that could result in a covered 
incident.
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    The term ``contingent cost,'' defined at subsection 934(b)(2),\5\ 
means the cost to the United States in the event of a covered incident, 
which is equal to the amount the United States is obligated to make 
available under paragraph 1(b) of Article III of the Convention (i.e., 
the international supplementary fund) pursuant to Article VII. As the 
definition implies, the cost to the United States in the event of a 
covered incident (a nuclear incident within the scope of the 
Convention) is contingent, and thus only paid under specified 
circumstances. Those circumstances and the amount of the payment are 
governed by the Convention, primarily Articles IV, VI and VII.
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    \5\ The term ``contingent cost'' means the cost to the United 
States in the event of a covered incident the amount of which is 
equal to the amount of funds the United States is obligated to make 
available under paragraph 1(b) of Article III of the Convention.
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    The formula for calculating the amount of the international 
supplementary fund is contained in Article IV, and is based upon: (1) 
Nuclear generating capacity (thermal power shown at the date of the 
nuclear incident in a list of nuclear installations established under 
Article VIII); and (2) UN assessment rate. Article IV.1(c) establishes 
a cap on contributions by any Contracting Party, other than the 
Installation State, per nuclear incident equal to the Contracting 
Party's UN rate of assessment plus 8 percentage points of the fund as a 
whole. For the United States, the contribution is capped initially at 
28% (UN rate of assessment of 20%, plus 8%) or less than one-third of 
the international supplementary fund. As more generating States become 
Contracting Parties, the cap will increase, while the United States 
contribution percentage will decrease.
    The Department believes that the definition of ``contingent cost'' 
is exact both as to when the cost is triggered and as to the required 
methodology for calculation of such costs. Therefore, the current 
approach is to define this term consistent with the Act and the 
Convention. Nonetheless, the Department invites comments as to related 
clarifications that should be incorporated in its regulation.
    The term ``covered incident,'' defined at subsection 934(b)(4), 
means a nuclear incident ``the occurrence of which results in a request 
for funds pursuant to Article VII.'' Funds may be requested under 
Article VII when a nuclear incident results in nuclear damage that 
exceeds the first-tier contribution amount. Generally, a covered 
incident is a nuclear incident occurring in the territory of a 
Contracting Party or during transportation to or from a Contracting 
Party.
    Because section 934 defines neither ``nuclear incident'' nor 
``nuclear damage,'' terms which are essential to an understanding of 
what constitutes a covered incident, DOE believes that it is necessary 
to look to the Convention and existing law to determine the proper 
interpretation and meaning of a covered incident under the Act. The 
Convention defines both nuclear incident and nuclear damage; the AEA 
defines nuclear incident.
    The Convention, Article I.(i), defines ``nuclear incident'' as 
``any occurrence or series of occurrences having the same origin which 
causes nuclear damage or, but only with respect to preventive measures, 
creates a grave and imminent threat of causing such damage.'' This 
definition of nuclear incident includes incidents of actual nuclear 
damage, and, in the absence of an actual release of radiation, damages 
incident to preventive measures taken only in response to a grave and 
imminent threat of a release of radiation that could cause other types 
of nuclear damage. Under the AEA, subsection 11q. (42 U.S.C. 2014q.), a 
``nuclear incident'' is defined as, in pertinent part, ``any 
occurrence, including an extraordinary nuclear occurrence, within the 
United States causing, within or outside the United States, bodily 
injury, sickness, disease, or death, or loss of or damage to property, 
or loss of use of property, arising out of or resulting from the 
radioactive, toxic, explosive, or other hazardous properties of source, 
special nuclear, or byproduct material.'' Like the Convention, the PAA 
definition of nuclear incident centers on the occurrence of injury or 
damage to persons or property directly caused by the incident. Unlike 
the Convention, the definition of nuclear incident in the PAA does not 
expressly include damage incident to preventive measures. However, the 
PAA provides for indemnification in the case of ``public liability,'' 
where public liability is defined as, in pertinent part, ``any legal 
liability arising out of or resulting from a nuclear incident or 
precautionary evacuation * * * '' (AEA subsection 11w. (42 U.S.C. 
2014w.)), and ``precautionary evacuation'' is defined as, in pertinent 
part, a government ordered ``evacuation of the public within a specific 
area near a nuclear facility, or the transportation route in the case 
of an accident involving transportation of source material, special 
nuclear material, byproduct material, high-level radioactive waste, 
spent nuclear fuel, or transuranic waste * * * if the evacuation is--
(1) the result of any event that is not classified as a nuclear 
incident but poses imminent danger of bodily injury or property damage 
* * *.'' AEA subsection 11gg. (42 U.S.C. 2014gg.). The definitions of 
``preventive measures'' under the Convention and ``precautionary 
evacuation'' under the PAA are similar in scope and effect. Thus, when 
the AEA definitions of nuclear incident, public liability, and 
precautionary evacuation are read together the net effect is that a 
nuclear incident under the Convention is comparable to a nuclear 
incident under the PAA. Notwithstanding this comparability, in 
accordance with Article 2.2 of the Annex to the Convention (``Annex''), 
which permits the United States to use its existing domestic framework 
for dealing with liability for nuclear damage, the United States 
expects to use the PAA definition of a nuclear incident in connection 
with Price-Anderson incidents and the CSC definition of nuclear 
incident in connection with incidents that are not Price-Anderson 
incidents when implementing the Act.
    The Department requests comments on whether and how it may need to 
further clarify those terms in its regulation.
    In a similar vein, although the term ``nuclear damage'' is defined 
in the Convention, the Annex provides a mechanism for the United States 
to apply a definition of nuclear damage consistent with both the 
Convention and the PAA. For incidents outside the United States not 
covered by the PAA, the United States expects to apply the definition 
of nuclear damage under the Convention, Article I.(f). For incidents 
inside the United States covered by the PAA, the United States expects 
to apply the definition of nuclear damage in Annex Article 2.2(a).
    The Department requests comments on whether or how it may need to 
further clarify those terms in its regulation.

[[Page 43948]]

    Nuclear damage is defined in the Convention, Article I.(f), as loss 
of life or personal injury, loss of or damage to property and, to the 
extent determined by the law of a competent court, five categories of 
damages relating to impairment of the environment such as costs of 
measures of reinstatement, loss of income, costs of preventive 
measures, and other economic loss that must be treated as nuclear 
damage. The types of nuclear damage covered by the Convention are thus 
divided into two categories: Those which must be compensated (loss of 
life, personal injury, and property loss or damage) and those that are 
to be compensated ``to the extent determined by the law of the 
competent court.'' Article I.(f)(ii). This provides the competent court 
flexibility in determining under national law how to compensate 
economic loss that does not fall into the category of ``loss or damage 
to property.''
    Under Annex Article 2.2, the United States (the only country able 
to meet the conditions of Annex Article 2.2) may define nuclear damage 
as set forth in Article I.(f) of the Convention, or as set forth in 
Annex Article 2.2(a). Annex Article 2.2(a) defines nuclear damage as 
including, in addition to that identified in Article I.(f) of the 
Convention, ``any other loss or damage to the extent that the loss or 
damage arises out of or results from the radioactive properties, or a 
combination of radioactive properties with toxic, explosive or other 
hazardous properties of nuclear fuel or radioactive products or waste 
in, or of nuclear material coming from, originating in, or sent to, a 
nuclear installation; or other ionizing radiation emitted by any source 
of radiation inside a nuclear installation, provided that such 
application does not affect the undertaking by that Contracting Party 
pursuant to Article III of this Convention.'' The latter definition of 
nuclear damage (i.e., at Annex Article 2.2(a)) is consistent with the 
PAA approach of compensating victims for ``bodily injury, sickness, 
disease or death, or loss of or damage to property, or loss of use of 
property, arising out of or resulting from the radioactive, toxic, 
explosive, or other hazardous properties of source, special nuclear, or 
byproduct material.'' AEA subsection 11q. (42 U.S.C. 2014q.). 
Accordingly, the United States would use this broader definition for 
Price-Anderson incidents within the United States when implementing the 
Act.
    The Department requests comments on whether or how it may need to 
further clarify those terms in its regulation.
    The term ``covered installation,'' defined at subsection 934(b)(5), 
means a nuclear installation at which the occurrence of a nuclear 
incident could result in a request for funds under Article VII of the 
Convention and thus trigger the obligation to contribute to the 
international supplementary fund. The Department views this definition 
as clear, except that it is dependent upon an understanding of the term 
``nuclear installation.'' The term ``nuclear installation'' is not 
defined in section 934 or the AEA. The CSC generally uses the 
definition set forth in the Paris Convention on Third Party Liability 
in the Field of Nuclear Energy of 29 July 1960 (``Paris Convention''), 
the Vienna Convention on Civil Liability for Nuclear Damage of 21 May 
1963 (``Vienna Convention'') or Article 1(b) of the Annex, depending on 
which instrument is applicable to a particular nuclear incident. 
Article 2.2(b) of the Annex, however, permits the United States to 
apply the definition of ``nuclear installation'' set forth at Article 
2.3 of the Annex to the exclusion of the definition at Article 1.1(b) 
of the Annex. Thus, for covered incidents within the United States, 
``nuclear installation'' is defined at Annex Article 2.3 to mean: a) 
Any civil nuclear reactor other than one with which a means of sea or 
air transport is equipped for use as a source of power, whether for 
propulsion thereof or any other purpose; and b) any civil facility for 
processing, reprocessing or storing: (i) Irradiated nuclear fuel; or 
(ii) radioactive products or waste that: (1) Result from the 
reprocessing of irradiated nuclear fuel and contain significant amounts 
of fission products; or (2) contain elements that have an atomic number 
greater than 92 in concentrations greater than 10 nano-curies per gram; 
or (c) any other civil facility for processing, reprocessing, or 
storing nuclear material unless the Contracting Party determines the 
small extent of the risks involved with such an installation warrants 
the exclusion of such facility from the definition. In the context of 
the CSC, the United States interprets this definition of ``nuclear 
installation'' to cover reactors and facilities for which the primary 
purpose is processing, reprocessing, or storing spent fuel, high-level 
radioactive waste, or highly radioactive TRU waste. The United States 
further interprets this definition of ``nuclear installation'' as 
excluding all non-DOE nuclear facilities to which the NRC has decided 
not to extend Price-Anderson indemnification. For covered incidents 
within the United States, the Department's current approach would be to 
define the term ``covered installation'' consistent with the PAA and 
the definition of nuclear installation found in the Annex Article 2. 
For covered incidents outside the United States not covered by the PAA, 
the Department's current approach would be to use the definition of 
nuclear installation applicable under the CSC to determine a covered 
installation. The Department requests comments on whether or how it may 
need to further clarify those terms in its regulation.
    The term ``covered person,'' is defined at subsection 934(b)(6) as: 
(i) A United States person; and (ii) an individual or entity (including 
an agency or instrumentality of a foreign country) that--(I) is located 
in the United States; or (II) carries out an activity in the United 
States. The term does not include--(i) the United States; or (ii) any 
agency or instrumentality of the United States. The definition of 
``covered person'' incorporates another defined term, ``United States 
person,'' which is defined at subsection 934(b)(11) as: (1) Any 
individual who is a United States resident, national or citizen (other 
than an individual residing outside the United States and not employed 
by a United States person); and (2) any entity that is organized under 
the laws of the United States.
    Read together, these definitions provide a frame of reference for 
the type of individual or entity that would constitute a ``covered 
person'' under the Act and the DOE's regulation. The Department's 
current approach would be to interpret ``covered person,'' to be 
either: (1) Any individual who is a United States resident, national, 
or citizen (other than the non-resident who is not employed by a United 
States person); or (2) any entity organized under the laws of the 
United States; or (3) any individual or entity--including an agency or 
instrumentality of a foreign country--to the extent that it is either 
located in or carries out an activity in the United States. The 
Department currently expects to define a covered person in the broadest 
manner as including, for example, any individual or entity, whether of 
foreign origin or domestic, that carries out any activity in the United 
States that is determined to provide an appropriate basis for 
allocating the contingent costs. However, a covered person would not be 
the United States itself or any agency or instrumentality of the United 
States. The Department believes these definitions, although broad in 
scope, are clear and that there is a common understanding of how they 
are to be interpreted and applied. Nevertheless,

[[Page 43949]]

the Department requests public comment on whether additional 
clarification may be necessary in its regulation.
    The term ``nuclear supplier,'' defined at subsection 934(b)(7), 
means a covered person (or its successor in interest) that (A) supplies 
facilities, equipment, fuel, services, or technology pertaining to the 
design, construction, operation, or decommissioning of a covered 
installation, or (B) transports nuclear materials that could result in 
a covered incident. The definition of ``nuclear supplier'' refers to a 
covered person or its successor that either: (1) Provides goods or 
services to a covered installation (where a nuclear incident could 
trigger an Article VII request for funds); or (2) engages in a shipment 
of nuclear materials that could result in a covered incident (which 
could trigger an Article VII request for funds). Under the Act, a 
nuclear supplier is the individual or entity responsible for a pro-rata 
share based on the risk-informed assessment formula at subsection 
934(e)(2)(C) of any contingent costs the United States may bear in the 
event of a covered incident outside the United States that is not 
covered by the PAA. While the statutory definition of ``nuclear 
supplier'' is broad in scope and may require further clarification in 
the regulation, the criteria related to the risk-informed assessment 
formula at subsection 934(e)(2)(C)(i) and factors for consideration in 
determining the formula at subsection 934(e)(2)(C)(ii) (whereby certain 
nuclear suppliers could be excluded) are directly relevant to 
determining which nuclear suppliers are contemplated within the Act. In 
this regard, the Department is considering whether it may be 
appropriate to include in its regulation additional criteria and 
requirements which, if met, would exclude certain nuclear suppliers 
from participation in the retrospective risk pooling program. The 
Department requests comment on whether the definition of ``nuclear 
supplier'' requires further clarification, or whether clarification can 
be appropriately addressed in regulations pertaining to the 
retrospective risk pooling program and formula at subsection 934(e).
    The term ``Price-Anderson incident,'' defined at subsection 
934(b)(8), means a covered incident for which section 170 of the AEA 
makes funds available to compensate for public liability, as defined in 
section 11w. of the AEA (42 U.S.C. 2014w.). This definition reflects 
the distinction between covered incidents within the scope of the PAA 
(where contingent costs would be covered by the PAA) and covered 
incidents outside the scope of the PAA (where contingent costs would be 
covered by United States nuclear suppliers). For covered incidents that 
are also PAA incidents (e.g., either a nuclear incident in the United 
States, or a nuclear incident outside the United States involving a DOE 
contractor and U.S.-owned nuclear material), the PAA would be used to 
fund the United States contribution to the international supplementary 
fund. For a covered incident that does not constitute a PAA incident, 
such as a nuclear incident occurring in the territory of a Contracting 
Party that does not involve U.S.-owned nuclear material, the United 
States contribution would be provided by the United States nuclear 
suppliers that must participate in the retrospective risk pooling 
program described at subsection 934(e).
    The Department requests comments on whether or how it may need to 
further clarify those terms in its regulation.
    The term ``United States,'' defined at subsection 934(b)(10), means 
the same geographic area as the definition of ``United States'' in 
section 11bb. of the AEA (42 U.S.C. 2014bb.). The AEA definition of 
United States provides that, when used in a geographical sense, the 
United States ``includes all territories and possessions of the United 
States, the Canal Zone and Puerto Rico.'' (Although the AEA definition 
includes ``the Canal Zone,'' DOE notes that, pursuant to the Panama 
Canal Treaty, the ``Canal Zone'' is no longer so included.) For 
purposes of the AEA definition and section 934, the geographic scope of 
the United States includes its territorial sea, but not its exclusive 
economic zone (``EEZ''),\6\ even though the CSC grants a member country 
jurisdiction over nuclear incidents in or above the EEZ of a 
Contracting Party under specified circumstances, as well as in or above 
other maritime areas beyond the territorial sea and EEZ of a 
Contracting Party under specified circumstances. The broader geographic 
scope of the Convention from that of the AEA (and thus PAA) recognizes 
the right of a Contracting Party, including the United States, to 
exercise its jurisdiction in the case of a covered incident that occurs 
during transport of nuclear material within its EEZ or in maritime 
areas beyond the territorial seas under the conditions specified in 
Article V of the Convention. The Department believes this definition is 
clear; however, the Department requests public comment on whether 
additional clarification may be necessary.
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    \6\ The EEZ of the United States is ``a zone contiguous to the 
territorial sea, including zones contiguous to the territorial sea 
of the United States, the Commonwealth of Puerto Rico, the 
Commonwealth of the Northern Mariana Islands (to the extent 
consistent with the Covenant and the United Nations Trusteeship 
Agreement), and United States overseas territories and possessions. 
The EEZ extends to a distance 200 nautical miles from the baseline 
from which the breadth of the territorial sea is measured.'' 
Presidential Proclamation 5030, March 10, 1983, 3 CFR 1983 Comp., p. 
22.
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    In sum, the Department requests comment as to whether 
implementation of section 934 would be facilitated by the Department 
further clarifying any of the foregoing terms or any other terms in its 
regulations.

D. Retrospective Risk Pooling Program

    Subsection 934(e) sets forth the requirements and risk-informed 
assessment formula to be used in establishing the retrospective risk 
pooling program that is central to United States participation in the 
Convention and supports its goal of ensuring prompt and equitable 
compensation in the event of a nuclear incident. PAA funding cannot be 
used for the United States contribution to the international 
supplementary fund in the event of a covered incident outside the 
United States that is not a Price-Anderson incident. 934(a)(1)(H)(i). 
Likewise, Federal taxpayers cannot be burdened with the liability risks 
associated with nuclear incidents at foreign installations. 
934(a)(1)(H)(ii). Accordingly, subsection 934(e) provides for a 
retrospective risk pooling program, with participation by nuclear 
suppliers, as the funding mechanism to cover contingent costs resulting 
from a covered incident outside the United States that is not a Price-
Anderson incident. This retrospective risk pooling program for nuclear 
suppliers (which provides nuclear suppliers with insurance for their 
potentially unlimited liability in the event of a nuclear incident) is 
similar in certain respects to the PAA retrospective pooling 
arrangement (which provides United States nuclear reactor operators 
with insurance for their potential liability in the event of a nuclear 
incident) wherein the premium is assessed retrospectively, i.e., after 
a nuclear incident, by allocating the aggregate legal liability (in 
excess of the required liability insurance constituting primary 
financial responsibility) that actually resulted from such incident 
among all operators without regard to fault or liability.
    Subsection 934(e)(2) provides the basic structure of the 
retrospective risk pooling program and criteria for determining the 
prorated deferred payment. The program is ``retrospective''

[[Page 43950]]

in the sense that a nuclear supplier's obligation to pay does not arise 
(i.e., it is deferred) unless and until a covered incident that is not 
a Price-Anderson incident occurs and the United States is called on to 
provide its contribution to the international supplementary fund (i.e., 
resulting in contingent costs). 934(e)(2)(A). This deferred payment 
will be allocated among the ``pool'' of nuclear suppliers on the basis 
of a risk-informed assessment formula. 943(e)(2)(B). The formula cannot 
be applied by the Secretary to any covered installation or 
transportation for which funds are available under the PAA. 
943(e)(2)(iii). The amounts of the deferred payments will basically 
reflect the risk from which each nuclear supplier is relieved, relative 
to other nuclear suppliers, by reason of the United States 
participation in the international nuclear liability compensation 
system.
    Subsection 934(e)(2)(C) requires that the Secretary determine by 
rulemaking the risk-informed assessment formula and specifies certain 
risk factors that the Secretary must take into account. These risk 
factors focus on the extent of the potential liability of each nuclear 
supplier resulting from its activities relative to other nuclear 
suppliers and are comparable to factors currently used by private 
insurers to allocate risk. While subsection 934(e)(2)(C) contains 
specific risk factors to be accounted for in arriving at the risk-
informed assessment formula, the Secretary has broad discretion to 
interpret and implement this provision. The Department believes that 
the public, and in particular the nuclear insurance industry, can 
provide valuable information to DOE regarding how each of the following 
six (6) risk factors enumerated in subsection 934(e)(2)(C)(i) should be 
taken into account (particularly in light of other factors, such as the 
exclusionary criteria in subsection 934(e)(2)(C)(ii) and the period on 
which risk is assessed in subsection 934(e)(2)(C)(ii)(II)):
    (I) The nature and intended purpose of the goods and services 
supplied by each nuclear supplier to each covered installation outside 
the United States;
    (II) The quantity of the goods and services supplied by each 
nuclear supplier to each covered installation outside the United 
States;
    (III) The hazards associated with the supplied goods and services 
if the goods and services fail to achieve the intended purposes;
    (IV) The hazards associated with the covered installation outside 
the United States to which the goods and services are supplied;
    (V) The legal, regulatory, and financial infrastructure associated 
with the covered installation outside the United States to which the 
goods and services are supplied; and
    (VI) The hazards associated with particular forms of 
transportation.
    Without the six risk factors at subsection 934(e)(2)(C)(i) above, 
the retrospective risk pooling program could conceivably require the 
participation of any nuclear supplier involved in activities such as 
supplying facilities, equipment, fuel, services, technology, or 
transport of nuclear materials related to any step within the nuclear 
fuel cycle--from activities such as mining, milling, enrichment, and 
fabrication through reprocessing--no matter its size or contribution 
relative to the nuclear installation. However, application of the risk 
formula provides a basis for the Department to assess a deferred 
premium according to the relative risk a nuclear supplier's goods or 
services contribute to a nuclear incident.
    Further, subsection 934(e)(2)(C)(ii) lists factors for 
consideration whereby the Secretary may exclude certain nuclear 
suppliers. The Department believes that its interpretation of the risk 
factors enumerated above will be influenced significantly by the 
following factors in subsection 934(e)(C)(ii) that the Secretary may 
consider:
    (ii) Factors for Consideration.--In determining the formula, the 
Secretary may--
    (I) exclude
    (aa) Goods and services with negligible risk;
    (bb) Classes of goods and services not intended specifically for 
use in a nuclear installation;
    (cc) A nuclear supplier with a de minimis share of the contingent 
cost; and
    (dd) A nuclear supplier no longer in existence for which there is 
no identifiable successor; and
    (II) Establish the period on which the risk assessment is based.
    The Department believes the intent of this provision is to exclude 
from participation in the risk pooling program those nuclear suppliers 
that provide goods or services that are the least likely to result in a 
nuclear incident for which requests under the Convention for 
contributions to the international supplementary fund would be invoked. 
Stated otherwise, the contingent costs should be allocated among those 
suppliers that provide goods or services most likely to result in 
significant potential liability in the event of a covered incident. 
Accordingly, only nuclear suppliers of goods and services that are 
likely to cause a covered incident with significant damage should be 
contributors to the risk pooling program. The exclusionary 
considerations are indicative of the type of nuclear supplier unlikely 
to contribute to the risk of such an incident, that is, a nuclear 
supplier that does not provide goods or services specifically for 
nuclear facilities; that does not engage in activities likely to result 
in significant potential nuclear liability, or that engages in such 
activities to a minor extent; or is no longer in existence and 
therefore cannot be expected to contribute to the pooling program.
    If the United States is called upon to contribute to the 
international supplementary fund, the risk-informed formula would be 
applied to calculate the amount that each ``nuclear supplier'' within 
the definition of the Act would be obligated to pay. The Department 
believes that, reading both subsections 934(e)(2)(C)(i) and (ii) 
together, the formula is expected to include nuclear suppliers based on 
the relative risk of their goods or services causing a covered incident 
resulting in a request for contributions under the international 
supplementary fund, and to exclude nuclear suppliers with little or no 
risk of being determined legally liable for a covered incident 
resulting in nuclear damage in excess of 300 million SDRs.
    Because of the importance of each risk factor and the exclusionary 
considerations in establishing the formula, the Department seeks public 
comment on all of these criteria and how they should be interpreted and 
applied. Each risk factor, and the corresponding exclusionary 
considerations, will be discussed below.
    1. The first risk factor to be used as a basis for the formula is 
the nature and intended purpose of the goods and services supplied by 
each nuclear supplier to each covered installation outside the United 
States. 934(e)(2)(C)(i)(I). The Department's current approach would be 
to interpret this risk factor, in light of the presence of other 
statutory criteria that could exclude nuclear suppliers providing goods 
and services with negligible risk and in classes not intended 
specifically for use in a nuclear installation (subsections 
934(e)(2)(C)(ii)(I)(aa) and (bb)), to mean that, as a general matter, 
only nuclear suppliers that provide goods or services specifically 
intended for use in structures, systems, and components (``SSCs'') that 
are important to safety at a nuclear installation should be included. 
This concept of SSCs important to safety is utilized in NRC

[[Page 43951]]

licensing of nuclear installations (e.g., nuclear reactors, fuel 
storage facilities) as a means to evaluate items based on their 
relative risk and importance to the safe operation of the nuclear 
installation. As such, this concept can provide a useful tool to 
identify those goods and services that have a greater potential for 
causing a nuclear incident that might result in significant nuclear 
damage. Focusing on SSCs important to safety would eliminate many 
nuclear suppliers of goods or services that do not contribute 
significantly to the risk of a nuclear incident, as well as suppliers 
of goods or services not intended specifically for use in a nuclear 
installation. For example, the Department believes that, under this 
interpretation, suppliers of such items as laboratory equipment, 
cleaning services, routine operational and technical reporting 
services, and computers not intended for control of the installation 
would be excluded from the formula. In contrast, the Department 
believes that suppliers such as designers and builders of nuclear 
islands (involving nuclear steam supply systems, reactors, etc.), and 
designers, manufacturers, and sellers of nuclear fuel assemblies or on-
line nuclear measurement devices would be included in the formula. The 
Department seeks public comment on this interpretation, and in 
particular as to whether it has too narrowly or broadly interpreted 
this risk factor.
    2. The second risk factor to be used as a basis for the formula is 
the quantity of the goods and services supplied by each nuclear 
supplier to each covered installation outside the United States. 
934(e)(2)(C)(i)(II). The Department's current approach would be to 
interpret this risk factor to mean that the formula should take into 
account the amount of goods and services provided by a nuclear supplier 
as an indicator of the extent to which a nuclear supplier contributes 
to overall risk. The Department seeks public comment on whether this 
factor should be assessed on the basis of the value of the goods or 
services supplied, the volume of the goods or services supplied, or 
some other criteria.
    3. The third risk factor to be used as a basis for the formula is 
the hazards associated with the supplied goods and services if they 
fail to achieve the intended purposes. 934(e)(2)(C)(i)(III). The 
Department's current approach would be to interpret this risk factor, 
in light of the presence of other statutory criteria that could exclude 
nuclear suppliers providing goods and services with negligible risk or 
in classes not intended specifically for use in a nuclear installation 
(subsections 934(e)(2)(C)(ii)(aa) and (bb)), in a manner analogous to 
the first risk factor. That is, only nuclear suppliers of safety-
related goods or services would be included in the formula. Among those 
goods and services, risk would then be determined based on the relative 
radiological hazard or harm that may be caused if a particular good or 
service failed to achieve its intended function. For example, the 
supplier of a reactor vessel would be weighted with greater risk than 
the supplier of the safety-related concrete forming the foundation of 
the reactor building. Both goods are safety-related, but the 
malfunction of the former presents a greater risk of radiological 
hazard than the latter. Further, the Department expects that the 
relative hazard of a good or service may be evaluated in terms of 
whether it is a likely contributor to a covered incident resulting in a 
request for contributions under the international supplementary fund 
(i.e., is it so hazardous as to likely cause a covered incident of a 
magnitude that first-tier compensation is inadequate). The Department 
seeks public comment on these issues and as to how it should further 
define the term ``hazard'' in light of various factors, such as whether 
hazard should be differentiated on the basis of harm to persons or 
property, or on the basis of its hazard standing alone or as part of a 
redundant system of protection.
    4. The fourth risk factor to be used as a basis for the formula is 
the hazards associated with the covered installation outside the United 
States to which the goods and services are supplied. 
934(e)(2)(C)(i)(IV). The Department's current approach would be to 
interpret this risk factor to mean that risk should be determined based 
on the hazard associated with the nuclear installation itself, because 
some nuclear installations bear more risk or hazard of a nuclear 
incident than others. These differences in risk stem from a variety of 
factors. For example, the risk of a nuclear incident causing 
significant nuclear damage may be greater at a nuclear reactor facility 
than at a spent fuel storage facility, or it may be greater for a 
facility located in a densely populated area as opposed to a facility 
in a remote area. Further, there may be distinctions within a class of 
nuclear installations that would make the risk posed by some classes 
more or less than others. For example, among nuclear reactors, research 
reactors having a thermal power rating of 20 Megawatts or less may have 
less hazard associated with them than power reactors having a thermal 
power rating of over 300 Megawatts. Also, nuclear facilities other than 
reactors may be distinguished based on common nuclear industry 
standards for hazard categorization and accident analysis techniques. 
Category 1 facilities pose the most hazardous risk as they have 
postulated accidents that could result in significant offsite 
consequences. Category 2 facilities have postulated accidents that 
could result in significant on-site consequences. Category 3 facilities 
have postulated accidents that could result in only localized 
consequences. Accordingly, the risk formula would include consideration 
of not only the type of good or service provided by the nuclear 
supplier, but also the type of nuclear installation that will utilize 
such good or service. DOE seeks public comment on this approach.
    5. The fifth risk factor to be used as a basis for the formula is 
the legal, regulatory, and financial infrastructure associated with the 
covered installation outside the United States to which the goods and 
services are supplied. 934(e)(2)(C)(i)(V). The Department's current 
approach would be to interpret this risk factor to refer to the 
relative risk of a nuclear incident arising from a nuclear installation 
based upon the legal, regulatory, or financial environment in which the 
installation operates. For example, a nuclear installation situated in 
a country with little regulatory oversight of public health and safety, 
or inadequate financial requirements for the nuclear operator, or 
without the availability of judicial recourse, may lead to a relative 
risk factor greater than the supply of goods or services to a nuclear 
installation in a country with rigorous regulatory oversight, robust 
financial requirements, and an efficient judicial system. Thus, for 
example, the presence of independent regulatory inspectors onsite at a 
nuclear installation of a more hazardous classification (such as a 
Category 1 facility) could constitute a favorable risk factor. The 
Department recognizes that this type of risk factor may be difficult to 
assess in a quantitative fashion, nevertheless, the statutory language 
must be given a good-faith reading, and the Department seeks public 
comment on how to interpret and implement this factor in its risk-based 
formula.
    6. The sixth risk factor to be used as a basis for the formula 
concerns the hazards associated with particular forms of 
transportation. 934(e)(2)(C)(i)(VI). The Department's current approach 
would be to interpret this risk factor to require consideration of how 
contingent costs should be allocated between suppliers of goods and 
services to

[[Page 43952]]

nuclear installations and suppliers of transportation services, as well 
as an assessment of the various forms of transportation and the 
relative risks of that transportation. The Department seeks public 
comment on the extent, if any, to which the assessment of 
transportation services should be different than the assessment of 
other goods and services, especially with respect to the application of 
the first risk factor on nature and intended purpose. The Department 
also seeks public comment on the means to differentiate the hazards 
between particular forms of transportation, and the nuclear suppliers 
involved in such transportation. For example, how should the Department 
assess the relative risks among the various forms of radiological 
transportation such as truck, ship or rail and the contribution of a 
nuclear supplier to that risk? Should the hazard be assessed solely on 
the safety record within each type of transportation, or other factors 
such as the risks associated with the transportation routes used for a 
particular form of transportation? For example, transportation by truck 
may entail greater potential exposure to population centers than 
transportation by ship.
    Further, should certain nuclear suppliers be excluded regardless of 
the form of transportation in which the good or services is utilized? 
For example, suppliers that provide navigational systems might be 
excluded from the formula, as the purpose of the navigational system is 
not specific to nuclear transport or any one form of transport, and 
would constitute a negligible risk for causing a nuclear incident. On 
the other hand, suppliers of transportation casks designed for nuclear 
material would be included and risk assessed based on the relative 
contribution of the cask to a nuclear incident while in transport. The 
Department seeks public comment on these questions or other means to 
differentiate the hazards associated with particular forms of 
transportation as well as identifying mitigating factors to 
appropriately rank risk in its formula.
    Subsection 934(e)(2)(ii)(I)(cc) states that the Secretary may 
exclude ``a nuclear supplier with a de minimis share of the contingent 
cost.'' As commonly used, the term ``de minimis'' means lacking 
significance or importance, or so minor in importance as to be 
disregarded.\7\ The Department's current approach would be to interpret 
this ``de minimis'' criteria to mean that nuclear suppliers likely to 
contribute only a small percentage of the overall contingent costs 
should be excluded from the formula because they (1) Do not contribute 
in any meaningful manner to the risks intended to be covered by the 
Convention, (2) are unlikely to be sued in the event of a nuclear 
incident, and (3) are even more unlikely to be determined legally 
liable for significant amounts of nuclear damages. The Department 
believes this provision is intended to keep the risk pooling program 
from becoming unmanageable because of the number of potential 
contributors and to focus operation of the program on the major 
beneficiaries of the Convention. The Department could incorporate these 
criteria into its regulations by excluding those suppliers that would 
contribute less than a specified percentage (e.g., .5%) of the 
contingent costs.
---------------------------------------------------------------------------

    \7\ Webster's Third New Dictionary (2002)
---------------------------------------------------------------------------

    This approach, however, would result in uncertainty as to which 
suppliers would be included in the program prior to the actual 
implementation of the formula. Accordingly, the Department is 
considering alternative approaches that would implement the ``de 
minimis'' criteria in a manner that provides upfront certainty as to 
which suppliers would be included in the program. For example, the 
Department might exclude suppliers on the basis of the dollar value of 
the goods or services (e.g., nuclear suppliers that provide less than 
$50,000 per year in goods or services may be excluded from the 
formula), the volume of goods or services (e.g., nuclear suppliers of 
less than 10 cooling pumps), or the percentage of annual business 
attributable to nuclear goods or services (e.g., nuclear suppliers for 
which the nuclear equipment or services provided per year are less than 
10% of such entities' overall annual sales). The Department seeks 
comments on these alternatives, as well as other fair and equitable 
approaches for excluding ``de minimis'' suppliers.
    Finally, subsection 934(e)(2)(C)(ii)(II) permits the Secretary to 
``establish the period on which the risk assessment is based.'' By so 
doing, the Department could exclude certain nuclear suppliers by virtue 
of the time period established. The Department interprets this 
provision to give the Department discretion to determine the time 
period to use in the risk-informed formula. That time period may be set 
based on several relevant factors, including when the majority of 
domestic nuclear suppliers provided supplies in the global market and 
how many of those suppliers continue in existence today, or based on 
what suppliers are currently in existence for which the goods or 
services they supplied are likely to contribute to a future nuclear 
incident. The Department invites comments on how and what an 
appropriate and equitable time period should be used in order to 
determine the risk-informed formula.

E. Reporting

    In addition to the information obtained through this NOI and the 
subsequent rulemaking process, subsection 934(f)(1) expressly 
authorizes the Secretary to collect information and data from nuclear 
suppliers ``necessary for developing and implementing the formula for 
calculating the deferred payment of a nuclear supplier under subsection 
(e)(2).'' The Department requests comment on whether it should include 
in its regulations provision for collection of such information and, if 
so, what form of information collection requirements should be imposed. 
For example, what type of information and data should be collected, at 
what level of specificity, and how often (e.g., one-time or periodic 
updates)?
    While the Department may require that certain information be 
provided by nuclear suppliers and other appropriate persons (including 
insurers) as necessary or appropriate to assist in formulating and 
implementing the risk formula, the Department is required to provide 
certain information to nuclear suppliers and insurers of nuclear 
suppliers. Thus, subsection 934(f)(2) directs that the Secretary make 
available to ``nuclear suppliers, and insurers of nuclear suppliers, 
information to support the voluntary establishment and maintenance of 
private insurance against any risk for which nuclear suppliers may be 
required to pay deferred payments under this section.'' Such 
information would facilitate the creation of a voluntary private 
insurance system to cover potential payments by nuclear suppliers under 
the retrospective risk pooling program. The Department anticipates its 
regulations will include a provision to address this requirement; 
however, the Department requests comment on what type of information 
would be necessary to assist the nuclear suppliers and insurers of 
nuclear suppliers in the establishment of private insurance for the 
deferred payment. The Department is especially interested in obtaining 
specific and detailed comments on the type of information necessary to 
develop and implement such a private insurance system from nuclear 
suppliers and insurers of nuclear suppliers as such commentary would be 
most relevant to an appropriate formulation and implementation of this 
requirement. In

[[Page 43953]]

this regard, the Department is especially interested in descriptions of 
prior and existing insurance systems that allocate risks among nuclear 
suppliers, as well as systems that allocate risks among participants in 
comparable situations.

F. Payments to and by the United States

    Subsection 934(h) sets forth the procedure for the Secretary and 
nuclear suppliers to follow in the event of a call for funds under the 
Convention so that the deferred payments are made to the Treasury of 
the United States and conveyed from the Treasury to the appropriate 
entity in fulfillment of the obligation of the United States to 
contribute to the international supplementary fund. Subsection 
934(h)(1) prescribes the method by which the Secretary will collect the 
deferred payment from nuclear suppliers in the event the United States 
is called upon under Article VII to contribute to the international 
supplementary fund for a covered incident that is not a Price-Anderson 
incident. The nuclear suppliers are only required to make a deferred 
payment when and if the United States is required to make a payment 
under the Convention upon the occurrence of a covered incident. When 
notified by the Secretary of the amount of the deferred payment that is 
due, each nuclear supplier must either deposit the required payment 
into the general fund of the Treasury within 60 days after receipt of 
notification (subsection 934(h)(1)(B)(i)), or elect to prorate payment 
in that amount in 5 equal annual payments (including interest on the 
unpaid balance at the prime rate prevailing at the time the first 
payment is due) (subsection 934(h)(1)(B)(ii)). In making the payment, 
each nuclear supplier must submit a payment certification voucher to 
the Secretary of the Treasury in accordance with 31 U.S.C. 3325. 
934(h)(1)(C).
    The Department believes the statutory scheme for making the 
deferred payment is clear and in effect self-executing. Therefore, it 
does not anticipate significant commentary on the meaning or 
interpretation of this statutory provision. The Department's 
implementing regulations will specify when and how a nuclear supplier 
will make the lump-sum deferred payment, as well as the method of 
calculating and depositing the prorated annual payments with interest. 
The Department requests comments on how its regulations may provide 
clear direction to nuclear suppliers on how, when, and where to make 
the required deferred payments.
    Subsection 934(h)(3) addresses the consequences of a nuclear 
supplier's failure to pay the deferred payment. In the event a nuclear 
supplier defaults on its obligation to make the required deferred 
payment, subsection 934(h)(3) authorizes the Secretary to take 
appropriate action to recover from the nuclear supplier ``(A) the 
amount of the payment due from the nuclear supplier; (B) any applicable 
interest on the payment; and (C) a penalty of not more than twice the 
amount of the deferred payment due from the nuclear supplier.'' The 
Department is authorized to take appropriate action to ensure each 
nuclear supplier makes the deferred payment and to impose a penalty for 
noncompliance; however, the means by which the Department exercises 
this authority is not prescribed in the Act. The Department's 
implementing regulations will clarify what actions it deems appropriate 
to take to ensure the payment is made, how it will calculate the 
interest due on the payment, and the method and criteria for 
determining the penalty amount. The Department solicits comment from 
the public on how this statutory provision should be implemented and, 
in particular, what criteria may be appropriate for calculating the 
penalty amount.

G. General Questions

    In addition to comment on the particular matters discussed in the 
preceding paragraphs, DOE solicits general comments on how best to 
implement section 934, including comments that are based on existing 
systems or prior experience in regard to insurance programs, regulatory 
controls, reporting requirements, or other mechanisms pertaining to the 
supply of goods and services for nuclear projects. For example, DOE 
would be interested in whether there are any existing systems that 
control or collect information on the export of goods and services for 
nuclear projects that could be useful in implementing section 934. 
Likewise, DOE would be interested in prior experience with how risk is 
allocated when there are multiple participants in a nuclear project.

III. Public Participation

A. Submission of Comments

    The Department requests written comments from interested persons on 
all aspects of implementing the Convention on Supplementary 
Compensation for Nuclear Damage. All information provided by commenters 
will be available for public inspection at the Department of Energy, 
Freedom of Information Reading Room, Room 1G-033, 1000 Independence 
Avenue, SW., Washington, DC 20585 between the hours of 9 a.m. and 4 
p.m. Monday through Friday, except for Federal holidays.
    The Department also intends to enter all written comments on a Web 
site specifically established for this proceeding. The Internet Web 
site is: http://gc.doe.gov/. To assist the Department in making public 
comments available on a Web site, interested persons are encouraged to 
submit an electronic version of their written comments in accordance 
with the instructions in the ADDRESSES section of this notice.

    Issued in Washington, DC, on July 21, 2010.
Scott Blake Harris,
General Counsel.

Appendix--Overview of Section 934

The Energy Independence and Security Act of 2007, Section 934

    The Energy Independence and Security Act of 2007 (Pub. L. 110-
140) was enacted in 2007. Section 934 of the Act (``Convention on 
Supplementary Compensation for Nuclear Damage Contingent Cost 
Allocation'') (42 U.S.C. 17373) implements the Convention in the 
United States. Congress found that the Convention establishes a 
global system to: provide a predictable legal framework necessary 
for nuclear energy projects; ensure prompt and equitable 
compensation in the event of a nuclear incident; provide benefits to 
United States nuclear suppliers from a predictable liability regime 
and, in effect, insurance for nuclear damage arising from incidents 
not covered by the Price-Anderson Act (PAA); and assure funding is 
available for victims of a wider variety of nuclear incidents, 
without increasing potential liability of United States nuclear 
suppliers or costs to United States nuclear operators or Federal 
taxpayers. 934(a)(1).
    Section 934 implements the Convention by enacting into law 
provisions that enable the United States to carry out its 
obligations as a Contracting Party. Specifically, section 934 
provides for the allocation of costs associated with the United 
States' participation in the Convention's compensation system and 
affirms the right to seek relief in United States courts for covered 
nuclear incidents. The purpose of section 934 is to ensure that the 
allocation of costs is fair and equitable and does not burden 
Federal taxpayers with liability risks for nuclear incidents at 
foreign installations or adversely impact obligations under the 
existing system of indemnification under the PAA for nuclear 
incidents in the United States.
    The Secretary and the Nuclear Regulatory Commission are both 
authorized to issue rules to implement section 934, as appropriate. 
934(l). The Department's implementing regulations will be focused on 
allocating contingent costs equitably, on the basis of risk, among 
nuclear suppliers for a covered incident outside the United States 
that is not a Price-Anderson incident. This

[[Page 43954]]

cost allocation system will be structured consistent with provisions 
of the Act that mandate the use of existing PAA funding for a Price-
Anderson incident.
    For an incident covered by the Convention (``covered incident'') 
that is also covered by the PAA (``Price-Anderson incident''), the 
Act would use existing PAA funding mechanisms to cover the United 
States contribution to the international supplementary fund. 934(b) 
and (c). For a covered incident outside the United States that is 
not a Price-Anderson incident, the Act would allocate contingent 
costs owed by the United States among United States nuclear 
suppliers on the basis of risk. 934(a)(2). In this regard, the Act 
establishes a retrospective risk pooling program involving a premium 
assessed retrospectively (i.e., a deferred payment) on nuclear 
suppliers based on a risk-informed formula taking into account 
specified risk factors in conjunction with exclusionary criteria. 
934(e).
    In developing the formula, the Secretary is authorized to 
collect information necessary for calculating the deferred payment. 
Each nuclear supplier and other-appropriate persons are required to 
make available information, reports, records, documents, and other 
data that the Secretary determines, by regulation, to be necessary 
or appropriate. 934(f)(1). In turn, the Secretary must make 
available to nuclear suppliers and their insurers information to 
support the voluntary establishment and maintenance of private 
insurance to cover any deferred payments nuclear suppliers may be 
subject to pay under the retrospective risk pooling program. 
934(f)(2).
    When the United States is called upon to contribute, the 
Secretary must notify the nuclear suppliers of the amount of their 
deferred payment. The nuclear suppliers may either: (1) Pay within 
60 days of notification to the general fund of the Treasury; or (2) 
elect to prorate payment in five equal annual payments (including 
interest). 934(h)(1). Amounts paid must be available, without 
further appropriation or fiscal year limitation, for contribution by 
the Secretary of the Treasury to the international supplementary 
fund. 934(h)(2)(A). Such contribution will be to the court of 
competent jurisdiction under Article XIII of the Convention. 
934(h)(2)(B). If a nuclear supplier fails to pay, the Secretary of 
Energy may take appropriate action to recover the amount due with 
any applicable interest and penalty. 934(h)(3).
    Section 934(i) addresses where and what type of actions may be 
brought in United States courts arising from participation in the 
Convention. All causes of action arising from a nuclear incident 
that is not a Price-Anderson incident and for which the United 
States has been granted jurisdiction under the Convention will be 
adjudicated on appeal or review in the United States Court of 
Appeals for the District of Columbia Circuit. 934(i)(1)(A). In 
addition to any existing cause of action, section 934(i)(2)(A) 
creates a Federal cause of action for an individual or entity 
against an operator to recover for nuclear damage suffered in 
connection with a nuclear incident covered by the Convention. This 
provision ensures that a cause of action will be available in all 
situations where United States courts have jurisdiction over a 
nuclear incident covered by the Convention, such as a nuclear 
incident during transportation beyond State boundaries in the 
territorial sea, or the exclusive economic zone (EEZ), or the high 
seas, for which Federal or State law may not currently provide a 
cause of action. This provision does not apply to causes of action 
arising from a nuclear incident covered by the Convention that is a 
Price-Anderson incident, as the PAA already provides for a cause of 
action and assignment of jurisdiction in such cases. While 
subsection 934(i) creates a cause of action for individuals or 
entities suffering nuclear damage against an operator of a covered 
installation under certain circumstances, subsection 934(j) makes 
clear that the Act does not provide to the operator of a covered 
installation a right of recourse against a nuclear supplier or any 
other person for any liability it may incur as a result of the 
nuclear incident. Also, participation in the Convention does not 
require disclosure of sensitive United States information. 934(k).
    The following provides additional information regarding the 
allocation of contingent costs under section 934 between the PAA and 
nuclear suppliers.
    Costs Allocated to PAA. One of the purposes of the statute, to 
ensure that contingent costs associated with a Price-Anderson 
incident are paid with PAA funds, is met primarily through the 
requirements of subsections 934(c) (``Use of Price-Anderson Funds'') 
and (d) (``Effect on Amount of Public Liability''). These provisions 
are self-implementing and establish how funding under the PAA is to 
be used to cover contingent costs resulting from a Price-Anderson 
incident. As defined in subsection 934(b)(8), a Price-Anderson 
incident is a covered incident within the scope of the PAA for which 
PAA funding would be available to compensate for ``public 
liability'' defined in section 11w. of the AEA (42 U.S.C. 2014w.). 
Under subsection 934(b)(2), contingent costs represent the funds 
that the United States is obligated to make available to the 
international supplementary fund.
    Subsection 934(c)(1) states the requirement that PAA funds be 
used to cover contingent costs resulting from any Price-Anderson 
incident. Subsection 934(c)(2) directs that any PAA funds used to 
pay contingent costs shall not reduce the public liability 
limitation set by the PAA. These funding requirements serve to 
maintain the status quo of the PAA liability regime such that 
payment of contingent costs neither increases the burden on reactor 
operators nor decreases the benefits of the PAA since any contingent 
costs resulting from the United States contribution would come from 
funding otherwise required under the PAA. Using PAA funds to pay the 
contingent costs will not decrease funds available under the PAA 
because the contribution by the United States to the international 
supplementary fund and the distribution from the international 
supplementary fund of a corresponding amount will offset each other 
and result in a wash for accounting purposes. As described in the 
following paragraph, the remaining distribution amount will be used 
to compensate damage in lieu of using PAA funds. Thus, the benefits 
of the PAA indemnification system will be increased slightly with no 
additional burden imposed on reactor operators.
    Subsection 934(d) addresses the situation involving a Price-
Anderson incident, where funds are made available to the United 
States under Article VII of the Convention and sets out the effect 
thereof on the amount of public liability allowable under the PAA. 
Subsection 934(d)(1) provides that, for an incident covered by the 
PAA, funds made available to the United States from the 
international supplementary fund will be used to pay persons 
indemnified under the PAA. In addition, subsection 934(d)(2) 
provides that the PAA limitation on public liability will be 
increased by the net amount of funds that the United States receives 
from the international supplementary fund (i.e., the increase is 
equal to the difference between the amount the United States 
receives from the international supplementary fund and the amount 
which it contributed to the international supplementary fund). Thus, 
the United States must use any funds made available to it under the 
Convention to satisfy any public liability resulting from a Price-
Anderson incident and will increase the amount payable under the PAA 
based upon the net increased amount of funding available pursuant to 
the Convention.\8\
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    \8\ The following illustrates the combined operation of the 
Convention, the PAA, and section 934 in the case of a Price-Anderson 
incident. For this example, assume: (1) The limitation on public 
liability under the PAA is $10 billion\8\; (2) there are 100 
reactors covered by the PAA system; (3) the operator of each reactor 
must contribute a maximum of $100 million to the PAA system if legal 
liability reaches $10 billion dollars; (4) 1 SDR equals $1.50 
dollars; (5) the United States contribution to the international 
supplementary fund is $100 million dollars; (6) the payment to the 
United States from the international supplementary fund is $300 
million; and (7) there is an a nuclear incident at a domestic 
reactor resulting in damage that exceeds $10 billion dollars. Within 
these parameters, the PAA would use funds from operators to 
indemnify legal liability resulting from the nuclear incident until 
legal liability reached $450 million dollars (Article III. 1(a)(i) 
first tier compensation minimum of 300 million SDRs multiplied by 
$1.50 dollars). At this point, the United States would use the next 
$100 million dollars from operators under the PAA to cover the 
United States contribution to the international supplementary fund. 
At the same time the United States would receive a payment of $300 
million dollars from the international supplementary fund. This 
payment from the international supplementary fund would be used to 
indemnify legal liability between $450 million dollars and $750 
million dollars. In addition, the limitations on the PAA public 
liability would be increased by the net $200 million dollars from 
Contracting Parties other than the United States ($300 million from 
the international supplementary fund minus the $100 million dollars 
provided by the United States to that fund). When legal liability 
reached $750 million dollars, operators would resume making funds 
available through the PAA system to cover legal liability and 
continue to do so until such liability reached the $10.2 billion 
dollar limit. In this scenario, the additional $200 million dollars 
from the international supplementary fund is available to indemnify 
legal liability resulting from a nuclear incident covered by the 
PAA, at no additional cost to reactor operators. (The numbers used 
in this example were selected to facilitate understanding of how the 
mechanism operates, and do not reflect the actual numbers that would 
result from application of the PAA.)

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[[Page 43955]]

    Costs Allocated to Nuclear Suppliers. Another purpose of the 
statute, to ensure that nuclear suppliers pay the contingent costs 
for a covered incident outside the United States that is not a 
Price-Anderson incident, is met primarily by subsections 934(e) 
(``Retrospective Risk Pooling Program'') and (f) (``Reporting''). 
These provisions: (1) Require participation in a retrospective risk 
pooling program to cover contingent costs for which nuclear 
suppliers would be responsible; and (2) authorize the Secretary to 
collect information necessary for developing and implementing the 
formula to calculate the deferred payments. For such an incident 
outside the United States, subsection 934(e) requires that nuclear 
suppliers that supply certain nuclear equipment and technology and 
transport of nuclear materials contribute to a pool of money used to 
reimburse the United States for its contribution to the 
international supplementary fund. In an arrangement known as 
retrospective pooling, the obligation to pay into the pool will be 
deferred until the United States' is called upon to contribute with 
respect to an actual nuclear incident that has occurred. Article 
VII.1; 934(e)(1).
    The following illustrates the combined operation of the 
Convention and section 934 in the case of a covered incident that is 
not a Price-Anderson incident. For a covered incident that takes 
place in the territory of another Contracting Party, the responsible 
operator (alone or in combination with available public funds) would 
provide the first tier of compensation pursuant to the national law 
of the Installation State. If nuclear damage exceeds the first tier, 
all Contracting Parties, including the Installation State, would 
contribute to the international supplementary fund according to the 
Article IV formula.
    As a Contracting Party, the United States would contribute an 
amount determined by application of the formula in Article IV. Under 
section 934, the amount of the contribution required of the United 
States would be funded through payments of United States nuclear 
suppliers under the retrospective risk pooling program. As 
previously noted, the formula depends upon the installed capacity of 
the Contracting Parties at the time of the incident and the UN 
assessment rate assigned to each State. The exact amount owed by the 
United States would depend upon the number and generating capacity 
of the States that participate in the Convention at the time of a 
nuclear incident. For additional information, the IAEA Web site for 
the Office of Legal Affairs contains a calculator that can be used 
to run scenarios and estimate the contribution amount from various 
States. (http://ola.iaea.org/CSCND/calculate.asp).

[FR Doc. 2010-18357 Filed 7-26-10; 8:45 am]
BILLING CODE 6450-01-P
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