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[Federal Register Volume 63, Number 104 (Monday, June 1, 1998)]
[Rules and Regulations]
[Pages 29535-29544]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-14385]

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NUCLEAR REGULATORY COMMISSION

10 CFR Parts 30, 40, 50, 70, and 72

RIN 3150-AF64

Self-Guarantee of Decommissioning Funding by Nonprofit and Non-
Bond-Issuing Licensees

AGENCY: Nuclear Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Nuclear Regulatory Commission is amending its regulations 
to allow additional materials licensees and non-electric utility 
reactor licensees who meet certain financial criteria to self-guarantee 
funding for decommissioning. Certain commercial corporate licensees who 
issue bonds are presently allowed to self-guarantee funding if they 
meet stringent financial criteria. This rule allows nonprofit 
licensees, such as colleges, universities, and hospitals, as well as 
some commercial licensees who do not issue bonds, to self-guarantee 
funding provided they meet similarly stringent financial criteria. 
Allowing additional qualified licensees to use self-guarantee reduces 
licensee costs while providing adequate assurance that funds for 
decommissioning will be available when needed.

EFFECTIVE DATE: July 1, 1998.

FOR FURTHER INFORMATION CONTACT: Dr. Clark Prichard, Office of Nuclear 
Materials Safety and Safeguards, U.S. Nuclear Regulatory Commission, 
Washington, DC 20555-0001, telephone (301)415-6203, e-mail [email protected].

SUPPLEMENTARY INFORMATION:
    Licensees subject to 10 CFR parts 30, 40, 70, and 72, whose 
operations involve the use of substantial amounts of nuclear materials, 
and those subject to 10 CFR Part 50 who are applicants for, or holders 
of, operating licenses for production or utilization facilities must 
provide financial assurance for decommissioning funding by selecting 
from a variety of mechanisms: surety bond or letter of credit, 
prepayment, insurance, an external sinking fund coupled with a surety 
or insurance,1 parent company guarantee for licensees that 
have a qualifying corporate parent, and, for certain financially strong 
corporations, self-guarantee. A statement of intent regarding obtaining 
funds to satisfy decommissioning obligations may be used by some 
licensees that are governmental entities (for example, public 
universities whose charter provides for a direct link to the State 
Government).
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    \1\ Pursuant to 10 CFR 50.75(e)(3), an electric utility can 
satisfy the decommissioning funding requirements with an external 
sinking fund, standing alone. This rulemaking does not apply to 
electric utilities and does not affect the NRC's Notice of Proposed 
Rulemaking that addresses decommissioning funding assurance issues 
associated with electric utility restructuring (see Financial 
Assurance Requirements for Decommissioning Nuclear Power Reactors--
62 FR 47588, September 10, 1997). As part of this proposed rule, the 
NRC is considering amending its definition of ``electric utility'' 
and clarifying the distinction between financial assurance 
mechanisms applicable to power reactor licensees and non-power 
reactor licensees.
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    To date, self-guarantee has not been available to nonprofit 
licensees such as hospitals and universities, or to for-profit 
licensees who do not issue bonds, because the financial test for self-
guarantee uses the rating of the bonds issued by the licensee as one 
measure of the licensee's financial resources and ability to fund 
decommissioning.
    The NRC is extending the use of self-guarantee, previously limited 
to bond-issuing industrial corporations, to additional categories of 
qualified licensees. By selecting appropriate financial criteria for 
self-guarantee, this extension can be made without jeopardizing the 
present high level of financial assurance that the decommissioning 
obligation requires. Allowing qualified nonprofit and non-bond-issuing 
licensees to self-guarantee will reduce the costs of complying with NRC 
financial assurance requirements for those who meet the specified 
criteria.

Background

    On December 29, 1993 (58 FR 68726), as corrected on January 12, 
1994 (59 FR 1618), the NRC published a notice of final rulemaking that 
allows financially strong corporations with A or better bond ratings 
the option of using self-guarantee as a mechanism for complying with 
the regulations on financial assurance for decommissioning. Self-
guarantee was added to the list of financial assurance mechanisms as a 
cost-saving option for licensees that are able to meet the stringent 
financial test.
    The NRC's decision to add self-guarantee to the list of approved 
financial assurance mechanisms for qualified licensees came in response 
to a petition for rulemaking filed by General Electric and Westinghouse 
(PRM-30-59, Notice of receipt published September 25, 1991 (56 FR 
48445)). The petition presented a case for allowing self-guarantee as a 
cost-saving option for corporate licensees that are able to pass a 
stringent financial test.
    Subsequent to the December 29, 1993, final rule, the Commission 
initiated a study to determine whether criteria could be developed and 
applied by NRC for nonprofit licensees and non-bond-issuing commercial 
licensees to use self-guarantee while maintaining the required level of 
confidence regarding the availability of decommissioning funds when 
needed. The study, ``Analysis of Potential Self-Guarantee Tests for 
Demonstrating Financial Assurance by Nonprofit Colleges and 
Universities and Hospitals and by Business Firms that Do Not Issue 
Bonds,'' NUREG/CR-6514 2 (June 1997), identified a variety 
of financial criteria that could be applied to additional categories of 
licensees regarding the use of self-guarantee. The financial criteria 
in this rule were selected by the NRC based on information in this 
report.
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    \2\ Single copies are available from the NRC contact. Copies are 
available at current rates from the U.S. Government Printing Office, 
P.O. Box 37082, Washington, DC 20402-9328 (telephone (202) 512-
2249); or from the National Technical Information Service by writing 
NTIS at 5285 Port Royal Road, Springfield, VA 22161. Copies are 
available for inspection or copying for a fee from the NRC Public 
Document Room at 2120 L Street NW., Washington, DC; the PDR's 
mailing address is Mail Stop LL-6, Washington, DC 20555-0001; 
telephone (202) 634-3273; fax (202) 634-3343.
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Public Comments on the Proposed Rule

    The NRC published a notice of proposed rulemaking on April 30, 
1997, (62 FR 23394). In response to this notice, 16 comments were 
received; 2 from States, 6 from colleges and universities, 3 from 
associations, 3 from

[[Page 29536]]

private corporations, 1 from a hospital, and 1 from the United States 
Enrichment Corporation. The commenters all supported the extension of 
self-guarantee to qualified nonprofit and non-bond-issuing commercial 
licensees. Although some commenters urged NRC to adopt the proposed 
rule as written, most favored some type of change to the financial 
criteria.

1. Financial Criteria for Colleges and Universities

    The financial test criteria proposed for colleges and universities 
were an A or better bond rating or, for those not having a bond rating, 
unrestricted endowment of at least $50 million or 30 times projected 
decommissioning costs, whichever was greater. There were no comments 
regarding the A or better bond rating, but several commenters objected 
to the non-bond criteria as too conservative.
    Comment: A commenter stated that the selected multiple of 30 times 
decommissioning costs is excessively conservative. NRC's basis for the 
30 multiple is that an amount of money 30 times decommissioning costs 
invested at 3 percent would yield an annual amount sufficient to fund 
those costs. The commenter said that it should not be difficult to 
obtain secure investments yielding 6 percent; thus an appropriate 
multiple would be 15 based on investment yield.
    Response: NRC's objective in selecting financial criteria was to 
provide a level of financial assurance risk similar to the financial 
assurance risk in the existing self-guarantee. However, for colleges 
and universities that do not issue bonds, lack of appropriate data on 
default risk made a financial assurance risk analysis impossible. For 
these licensees, NRC deliberately chose financial criteria which are 
conservative.
    NRC did state in the preamble to the proposed rule, at 62 FR 32296, 
that ``[the multiple of 30 has been chosen because this would mean that 
any level of decommissioning costs could be covered by the annual 
return on an endowment invested at 3 percent.'' However, it is 
important to note that NRC was not assuming (1) that institutions will 
in fact finance decommissioning out of endowments; (2) that endowments 
can be expected in all circumstances to grow at a rate of at least 3 
percent annually; or (3) that institutions can be expected to 
reallocate up to 3 percent of their spending from endowments in a one-
year period. Rather, the criterion was selected to serve as a measure 
of the overall financial strength of the institution, indicating that 
NRC can reasonably assume that such a college or university can be 
allowed to self-guarantee for the costs of decommissioning because it 
possesses sufficient financial strength to obtain the necessary funds 
when they are needed.
    Even assuming the premise of the commenter, NRC does not believe 
that reducing the multiple to 15, as the commenter suggests, is 
desirable. Although a real rate of return of 3 percent may appear low 
under the market conditions prevailing during certain periods, there is 
a substantial body of empirical evidence indicating that it is a 
reasonable assumption. If a licensee who has been relying on a self-
guarantee is required to fully fund a trust fund for decommissioning in 
the year before the beginning of decommissioning, and the licensee 
relies on earnings from endowment to create the trust, it is the annual 
earnings of the endowment for the year immediately prior to the 
decommissioning that must equal the required amount. NRC has reviewed 
the information provided in Ibbotson Associates, Stocks, Bonds, Bills, 
and Inflation 1995 Yearbook, 1995, which published a summary of market 
results for the 69-year period from 1926 to 1995 for five categories of 
investments: small company stocks, large company stocks, long-term 
government bonds, long-term corporate bonds, and intermediate-term 
government bonds.
    On a year-by-year basis, less risky investments, such as treasury 
bills, showed the most frequent positive returns, but their annual 
returns also were relatively low. Riskier investments showed a broad 
distribution of returns, from very good to very poor. Overall, however, 
with the exception of small and large company stocks, the average 
inflation-adjusted earnings (geometric mean) for these categories of 
investments were less than 3 percent. In a number of years, earnings 
for stocks also were less than 3 percent. Thus, real investment returns 
over a one-year period may not even match conservative earnings 
assumptions.
    The study of endowment sponsored by the National Council of College 
and University Business Officers (NACUBO) published in 1995 also 
emphasized a concern for this earnings variability in its analysis of 
college and university endowment investment. First, NACUBO's study 
noted that current high rates of return cannot be expected to continue 
indefinitely. ``At a time when many public and private institutions are 
searching for ways to bridge the gap between revenues and expenditures, 
it is tempting to extrapolate these extraordinary returns into the 
future and to budget endowment spending accordingly. However, in this 
context it is instructive to note that for a representative group of 
institutions, the average annual real return after spending for the 10-
year period ended June 30, 1994, is 4.1 percent, but for the 20 years 
ended June 30, 1994, it is 0.9 percent.'' (1994 NACUBO Endowment Study, 
National Council of College and University Business Officers, 1995, p. 
4)
    Therefore, the NACUBO study recommends strongly that institutions 
keep their spending from endowment below the rate proposed by the 
commenter. The report states that:

    Historical precedent indicates that a fund invested 
approximately 60 percent in domestic and foreign stocks, 30 percent 
in fixed income, and 10 percent in various other asset classes 
inevitably experiences recurring periods of absolute decline in 
market values over 3 years. Such a decline would trigger a reduction 
in spending for an institution sticking to a policy of spending a 
fixed percentage of a 3-year moving average of endowment market 
values * * * For fiscal year 1994, the average endowment spending 
rate reported by responding institutions is 6.0 percent. On average, 
the smallest endowments ($25 million and less) spent more (7.2 
percent) than the largest (4.5 percent), and public institutions 
spent more (6.6 percent) than private institutions (5.7 percent) * * 
* With the sole exception of the 4.5 percent spent by the largest 
universities, these spending rates are not compatible with most 
institutions' stated intention to preserve the purchasing power of 
their endowment. Over time, it is possible (difficult, but possible) 
for the exceptionally well-managed institution to spend 6.0 percent 
of a 3-year moving average of endowment market values, and still 
preserve purchasing power. However, it is courting disaster to spend 
at an annual rate of 6.0 percent toward the tail end of a long bull 
market. (1994 NACUBO Endowment Study, 1995, p. 5)

    Based on these considerations, the NRC continues to believe that a 
relatively conservative criterion, such as the 30 times requirement, is 
a reasonable criterion for the decommissioning self-guarantee test for 
colleges and universities. The NRC does not accept the commenter's 
recommendation to adopt a substantially less stringent criterion.
    Comment: A commenter objected to the requirement that unrestricted 
endowment be at least $50 million or at least 30 times the 
decommissioning cost estimate, whichever is greater. The requirement 
should be compliance with either the $50 million figure or the 30 times 
decommissioning cost estimate, but not whichever is greater.
    Response: As previously stated, NRC chose conservative financial 
criteria for

[[Page 29537]]

non-bond-issuing colleges and universities, aimed at assuring the 
financial viability of a licensee qualified to self-guarantee. This is 
the only requirement that would apply to non-bond-issuing colleges and 
universities, whereas non-bond-issuing hospitals or commercial 
licensees would be subject to multiple financial ratios as financial 
tests. It is designed to capture two measures of financial viability: 
(1) overall financial strength and (2) financial strength relative to 
size of decommissioning obligation. The overall financial strength of 
an institution is heavily dependent on the size of its unrestricted 
endowment. Specific ability to fund decommissioning expenses is 
measured by the ratio of unrestricted endowment to decommissioning 
costs. A financial test based only on ratio to decommissioning cost 
might allow an institution without adequate financial strength to pass 
if its decommissioning costs were low. A test based only on the size of 
the unrestricted endowment might be inadequate for those institutions 
with the highest decommissioning costs. Both threshold requirements are 
needed to provide assurance that an institution can meet 
decommissioning obligations when necessary.
    Comment: A commenter stated that NRC's rationale for a multiple of 
30 implies that decommissioning costs are paid from investment yields 
over a 1-year period. However, it is more realistic to assume that any 
decommissioning activities where financial assurance arrangements are 
involved will require considerable coordination with regulators and 
financial services involving 2 or 3 years to complete. This 
consideration also implies that the appropriate multiple should be 15 
rather than 30.
    Response: NRC recognizes that decommissioning may occur over a 
period longer than one year. The multiple of 30 was chosen without 
regard to how many years it would take to decommission a facility. The 
commenter is attempting to make this linkage the key factor in arriving 
at an appropriate multiple. However, following this line of reasoning, 
stretching out the time length of decommissioning would imply ever 
decreasing multiples.
    NRC's objective is to ensure that decommissioning will take place 
on a timely basis. The financial assurance regulations are intended to 
assure that inadequate funding does not prevent timely decommissioning. 
Timely decommissioning may require that all decommissioning funding be 
available up front even though decommissioning activities are not 
completed within a single year. For this reason NRC's criteria for 
determining whether a licensee should be allowed to self-guarantee the 
costs of decommissioning must consider the possibility that the 
licensee will be required to fully fund decommissioning in the year 
immediately prior to the beginning of decommissioning activities. The 
licensee would fund a standby trust if either (1) the licensee no 
longer qualifies to use the self-guarantee to provide financial 
assurance for decommissioning, even if it was not yet required to 
conduct decommissioning, or (2) a licensee using a self-guarantee is 
required to carry out decommissioning. NRC currently does not allow 
licensees to consider the impact of earnings during the ``payout'' 
period (the period during which funds are being expended from the 
financial assurance standby trust to pay for decommissioning) in 
calculating the amount of funds that must be set aside for 
decommissioning. Therefore, the NRC disagrees with the commenter's 
suggestion that the expected duration of decommissioning activities 
should apply to the determination of the appropriate multiple.
    Comment: A commenter recommends that [based on the combination of 
investment yield of 6 percent and investment yields over 2 to 3 years 
rather than 1 year] the multiplication factor [be] reduced from 30 to 
10 with ample conservatism.''
    Response: For the reasons stated in responses to the preceding 
comments, NRC does not accept this recommendation.

2. Financial Criteria for Hospitals

    The financial test criteria proposed for hospitals was an A or 
better bond rating or, for hospitals not having a bond rating, a 
financial ratios test consisting of the following:
    (a) Liquidity--(current assets and depreciation fund, divided by 
current liabilities) greater than or equal to 2.55.
    (b) Net Revenue--(Total revenues less total expenditures divided by 
total revenues) greater than or equal to 0.04.
    (c) Leverage--(Long term debt divided by net fixed assets) less 
than or equal to 0.67.
    (d) Operating Revenues at least 100 times decommissioning costs.
    There were no comments regarding the bond rating criterion but 
there were several comments on the non-bond criteria.
    Comment: A commenter believed that the selected multiple of 100 
[hospital operating revenues at least 100 times decommissioning costs] 
was excessively conservative. It appears to reflect an expectation that 
the decommissioning will take a short time whereas a realistic time 
frame should be 2 years or more. NRC should consider a multiple of 30 
or less to be appropriate.
    Response: The requirement that hospital operating revenues be at 
least 100 times decommissioning costs is a criterion that NRC is 
proposing to use to determine whether a licensee has sufficient 
financial strength to self-guarantee. However, a potential consequence 
of self-guaranteeing could be the need to fully fund a trust fund in a 
short period of time if the licensee ceases to be capable of passing 
the self-guarantee test or if decommissioning must be carried out. As 
discussed above, the operating revenues multiple criterion does not 
reflect any expectation concerning the length of time during which 
decommissioning will occur. Therefore, NRC does not accept this 
recommendation.
    Comment: A commenter found the rationale that requires hospitals to 
meet all four financial ratios tests unclear. This commenter believed 
that using only the operating revenues/decommissioning costs ratio 
would appear to provide reasonable assurance of ability to provide 
decommissioning funding.
    Response: The financial ratios test for hospitals in the rule was 
carefully selected to provide a level of financial assurance risk 
similar to the financial assurance risk in the existing self-guarantee. 
The four ratios in combination represent the financial test that best 
achieves this goal. A financial test using just one of these ratios 
would not represent the same level of risk and would not provide an 
adequate level of financial assurance. Using only the ratio of 
operating revenues to decommissioning costs would completely ignore 
such determinants of financial strength as liquidity, indebtedness, and 
profitability. The financial test used for non-bond-issuing commercial 
licensees includes several ratios, not just one. The non-bond financial 
test for colleges and universities does use a single ratio, but it is 
the ratio of unrestricted endowment to decommissioning costs. 
Unrestricted endowment is a fund readily available to meet 
decommissioning expenses. Hospital operating revenues are different 
because these funds may not be readily available to meet 
decommissioning expenses due to other hospital costs.

[[Page 29538]]

3. Prohibition on Using a Guarantee in Combination With Another 
Financial Assurance Mechanism

    Comment: Some commenters noted that provisions in 10 CFR 
30.35(f)(2), 40.36(e)(2), 50.75(e)(2)(iii), 70.25(f)(2), and 
72.30(c)(2) provide that neither a parent company guarantee nor a 
guarantee by an applicant may be used in combination with other 
financial methods to satisfy financial assurance requirements. These 
commenters wanted to know the reasons for these restrictions.
    Response: This rule makes no change in the already existing 
prohibition against combining a parent or self-guarantee with another 
type of financial assurance mechanism. The issue of whether or not to 
allow such a combination is broader than the focus of this rule. The 
NRC has limited experience with parent and self-guarantee to date. It 
is expected that the NRC will periodically reevaluate its financial 
assurance program in the future and could reassess the need for the 
prohibition.

4. Insured Bond Ratings

    Comment: Some commenters objected to the proposed financial 
criteria which deal with bond ratings. As proposed, for institutions 
that issue bonds, only a bond issuance that is ``uninsured'' may be 
used; an ``insured'' bond rating would not be eligible. The 
justification for this limitation is not warranted because bond 
insurers evaluate the financial condition of the prospective issuers 
and avoid issuing policies to universities that are not creditworthy. 
Consequently, the presence of bond insurance indicates that the issuer 
is in sound financial condition.
    Response: Bond insurers evaluate the financial condition of the 
issuers of the bonds at the time the debt is insured. Bond rating 
agencies, such as Moodys and Standard and Poors, typically assign such 
bonds a triple-A rating because of the insured status of the bond.
    NRC's concerns with accepting insured bonds as a criterion of 
financial assurance arise from the possibility that, over time, the 
insured bond rating could mask adverse changes in the financial 
condition of the bond issuer after the debt has been insured. The rule 
includes a requirement that the licensee must ascertain whether it 
continues to pass the financial test for self-guarantee every year. 
Furthermore, if the licensee no longer meets the test criteria, it must 
notify NRC and establish alternative financial assurance. However, 
insured bonds would continue to hold their rating, despite declines in 
the financial condition of the issuer.
    The problem with an insured bond from the standpoint of financial 
assurance is that there is no criterion by which NRC can identify when 
a licensee/issuer no longer qualifies to self-guarantee. The bond can 
retain its high rating despite a decline in the financial strength of 
the issuer. Furthermore, the insurance coverage provided by the bond 
insurer, which is a guarantee of payment of principal and interest in 
accordance with the insured bond issue's payment schedule, will not 
provide any additional source of funding for decommissioning. NRC does 
not agree with the commenter's suggestion that it accept ratings on 
insured bonds as an acceptable criterion for self-guarantee.

5. Requirements for Financial Statements

    Comment: Some commenters objected to the proposed requirement in 
Appendices D and E to 10 CFR Part 30 that licensees must conduct 
accounting by U.S. generally accepted accounting principles (GAAP). 
This does not recognize the increasingly multi-national nature of 
materials licensees. Foreign ownership of major material licensees is 
currently a reality (e.g., Siemens, ABB, Framatome) and can be expected 
to increase in the future. The selection of accounting practices to be 
used is a significant corporate decision affected by many factors. It 
is unreasonable to require that corporate practices of major multi-
national firms be changed for a licensee to be allowed to provide self-
guarantee of decommissioning funding. The rule should allow licensees 
to certify adequate assurance that funds will be available by using 
other recognized and accepted accounting principles.
    Response: Financial statements prepared in accordance with foreign 
accounting principles rather than U.S. GAAP pose two problems from the 
standpoint of a financial test for self-guarantee. First, the financial 
test was developed based on an analysis of financial data for U.S. 
firms. Consequently, the financial test criteria may not be applicable 
or effective when used in conjunction with financial data that were 
prepared in accordance with foreign accounting practices. Second, 
allowing firms to rely on financial statements prepared according to 
accounting principles in use in their own country could place a heavy 
administrative burden on NRC. The examples cited by the commenter, for 
instance, might require NRC to know and apply German, Swiss, and French 
accounting principles to assess compliance with a financial test 
designed using U.S. GAAP. Finally, the present financial assurance 
regulations allow the use of a broad range of financial assurance 
mechanisms in part to ensure that licensees that are unable to use a 
particular mechanism have other alternatives available. NRC does not 
expect firms to change their accounting practices in order to make use 
of the financial test because a number of other options are available.

6. Financial Criteria for Non-Bond-Issuing Commercial Licensees

    The financial test proposed for non-bond issuing commercial 
licensees was:
    (a) Cash flow divided by total liabilities greater than 0.15.
    (b) Total liabilities divided by net worth less than 1.5.
    (c) Net worth greater than $10 million or at least 10 times 
decommissioning costs, whichever is greater.
    Comment: A commenter objected to the net worth criterion of net 
worth greater than $10 million or at least 10 times estimated 
decommissioning costs. This discriminates against well-funded smaller 
firms that could easily self-guarantee smaller decommissioning 
projects, but could not meet the $10 million net worth requirement.
    Response: The NRC's objective in setting financial criteria for 
non-bond-issuing commercial licensees was to make the financial 
assurance risk of these criteria equal to the financial assurance risk 
of the financial criteria for licensees that issue bonds (estimated to 
be approximately 0.13 percent per year). According to the analysis of 
potential financial criteria carried out as part of the proposed rule, 
the financial criteria in the proposed rule meet this 
objective.3 Firms with smaller net worth have a larger 
default risk than larger firms. Thus, the $10 million net worth 
requirement is an essential part of the overall financial test. The NRC 
has retained this requirement in the final rule.
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    \3\ ``Analysis of Potential Self-Guarantee Tests for 
Demonstrating Financial Assurance by Nonprofit Colleges, 
Universities, and Hospitals, and by Business Firms That Do Not Issue 
Bonds,'' NUREG/CR-6514, p. 4.7, June 1997.
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7. Decommissioning Cost Estimates

    Comment: Several commenters raised the issue of how decommissioning 
costs were estimated. The NRC should encourage best available 
information estimates of decommissioning costs, based on historic plant 
experience in decommissioning and renovation, rather than commercial 
estimates by contractors that tend to be too high.

[[Page 29539]]

Conservative assumptions, such as use of rates charged by contractors 
and high estimates of waste disposal costs, should not be used. A 
commenter also noted that assuming a period for short-lived isotopes to 
decay before decommissioning begins would be a realistic assumption. 
Also, a typical licensee will not have the maximum amount of material 
allowed by the license at the time of decommissioning.
    Response: This rulemaking makes no changes in the requirements for 
how licensees estimate decommissioning costs. Decommissioning cost 
estimates, or use of the certification amounts in 10 CFR Part 30, are 
already required by existing regulations on financial assurance. This 
rule simply adds an additional financial assurance mechanism to those 
already permitted in NRC regulations.

8. Agreement State Compatibility Status of Financial Assurance 
Regulations

    Comment: Some commenters believed that the proposed regulations 
should be assigned a compatibility status of Level 1 with Agreement 
States. This will ensure consistent requirements for financial surety 
arrangements and will preclude the unintended creation of competitive 
disadvantages between facilities in Agreement States and Non-Agreement 
States.
    Response: When the proposed rule was published in the Federal 
Register (see 62 FR 23394, April 30, 1997), it was designated as a 
Division 2 compatibility item in accordance with the compatibility 
policy in effect at that time. A Division 2 level of compatibility 
allowed an Agreement State to promulgate equivalent, or more stringent, 
financial assurance regulations than those of NRC.
    Under the new ``Policy Statement on Adequacy and Compatibility of 
Agreement State Programs,'' (see 62 FR 46517, September 3, 1997) 
Agreement States must adopt NRC regulations having particular health 
and safety significance and those necessary to maintain compatibility 
with the Commission's regulatory program.
    The NRC financial assurance regulations, in effect when the new 
policy was implemented, were designated as having health and safety 
significance. Specifically, sections (a), (b), and (d) of Parts 30.35, 
40.36 and 70.25, which require that licensees must consider the cost of 
decommissioning their facilities and that those costs must be provided 
for through a financial assurance mechanism, have particular health and 
safety significance and were designated as category H&S. Under the H&S 
category, Agreement States should adopt the essential objectives of 
these sections in order to maintain an adequate program. The remaining 
sections of the rule, including those which allow self-guarantee of 
certain commercial corporate licensees who issue bonds if they meet 
stringent financial criteria, were designated as compatibility Category 
D. Category D means the Agreement States do not need to adopt a 
compatible rule.
    The final rule change, which will extend the self-guarantee 
financial assurance option to other material and non-electric utility 
reactor licensees that meet certain financial criteria, is also 
designated as compatibility Category D. Under compatibility category D, 
Agreement States may choose to maintain a more stringent rule by not 
adopting the self-guarantee option.

9. Requirement for Annual Passage of Financial Test

    Comment: A commenter stated that Section II.C.(2) of Appendix E to 
Part 30 should be modified so a qualifying licensee would not have to 
repeat passage of the financial test for self-guarantee every year. 
University endowments are very stable. In addition, Section II.C.(3) 
provides sufficient assurance that NRC will be notified when a licensee 
no longer meets the criteria for self-guarantee.
    Response: Although it is true that university endowments are 
relatively stable and Section II.C.(3) provides for notification, the 
provision for qualifying licensees to annually pass the test is 
retained in the final rule. For a self-guarantee program to provide 
adequate assurance of decommissioning funding, the annual 
``requalification'' provision is necessary. NRC must have assurance of 
financial strength on a timely basis. A self-guarantee relies solely on 
the licensee's ability to fund decommissioning. There is no backup such 
as that provided by a third-party financial assurance mechanism. The 
requirement for repeating the financial test yearly is not unduly 
burdensome on a licensee and gives NRC information on the financial 
condition of the licensee on a timely basis. This requirement is not 
unique to colleges and universities or to this rule. It is found in the 
self-guarantee financial tests applicable to other types of licensees, 
both profit and nonprofit.

10. Use of Self-Guarantee by the United States Enrichment Corporation

    Comment: The United States Enrichment Corporation (USEC) proposed 
that the NRC modify the language of the rule to include certificates 
(regulated by NRC under 10 CFR Part 76). USEC stated that it would 
benefit from the opportunity to reduce the costs of complying with NRC 
financial assurance requirements, which USEC estimated would presently 
cost in excess of $100,000 per year for letters of credit and surety 
bonds.
    Response: Under 10 CFR 76.35(n), USEC (or the Corporation) is 
required to establish financial surety arrangements to ensure that 
sufficient funds will be available for the ultimate disposal of waste 
and depleted uranium, and decontamination and decommissioning 
activities that are the financial responsibility of the Corporation. 
The funding mechanisms currently listed in the regulation as 
potentially acceptable for use by the Corporation include prepayment, 
surety, insurance, and an external sinking fund, but do not include 
self-guarantee or statement of intent. The rule provides that the 
funding mechanism must ``ensure availability of funds for any 
activities that are required to be completed'' by the Corporation.
    USEC was created pursuant to the Energy Policy Act of 1992. It is a 
wholly owned government corporation, whose powers are vested in a five-
member Board of Directors appointed by the President of the United 
States and confirmed by the Senate. However, on July 25, 1997 a plan 
was approved by the President under which USEC will be sold either to 
another corporation or to the public through a stock offering. Under 
the USEC Privatization Act, Congress set certain restrictions on 
foreign involvement in USEC's privatization and required that a 
``reliable and economical domestic source of enrichment services'' 
exist following privatization.
    Although the NRC is not currently aware of any reason why it would 
be inappropriate to consider expanding the category of funding 
mechanisms available to the Corporation to demonstrate the availability 
of funds for the actions required under 10 CFR 76.35(n), NRC does not 
believe that it would be feasible to do so in the current rule. First, 
USEC was not included in any of the analyses performed to evaluate 
potential self-guarantee tests for demonstrating financial assurance. 
NRC believes that detailed analyses should be undertaken to ensure that 
all critical factors have been considered. Second, USEC's current and 
future situation with respect to the costs that it might incur is 
substantially different from those of the licensees included in the 
current rulemaking. In particular, the scope and type of activities 
that USEC must carry out under 10 CFR 76.35(n) are very different from 
those

[[Page 29540]]

conducted by hospitals and universities, and the non-bond issuing firms 
covered by the proposed rule.
    Third, the exact size of the obligations that USEC might be 
required to cover is uncertain and will not be determined until a later 
date, although it is known that many of the costs will remain the 
responsibility of the U.S. Department of Energy (DOE). Under 10 CFR 
76.35(n), DOE is responsible for those aspects of decontamination and 
decommissioning of the gaseous diffusion plants (GDPs) assigned to DOE 
under the Atomic Energy Act. DOE also is responsible for all 
environmental liabilities associated with the operation of the GDPs 
before July 1, 1993. According to USEC's Annual Report for 1996, 
``[e]xcept for certain accrued liabilities that will be specified in a 
memorandum of agreement entered into prior to privatization, all 
environmental liabilities of the Company through the date of 
privatization will remain obligations of the U.S. Government.'' (Notes 
to Financial Statements: 7. Environmental Matters). Furthermore, as of 
June 30, 1996, USEC had accrued liability of $303 million for 
transportation, conversion, and disposition of depleted uranium 
currently stored at the GDPs. The 1996 Annual Report states that ``USEC 
is evaluating various proposals for the disposition of depleted 
uranium, and depending on the outcome of such evaluations, the Company 
may be able to reduce future cost accruals * * *. Pursuant to the USEC 
Privatization Act, all costs and liabilities related to the disposition 
of depleted uranium generated prior to the privatization date are the 
responsibility of DOE.'' Fourth, until privatization has occurred, 
important information about USEC's future corporate structure and 
ownership will remain uncertain. As noted above, Congress has allowed 
USEC to be sold either to another corporation or to the public through 
a stock offering. Thus, the form in which privatization occurs could 
affect the NRC's analysis of financial assurance alternatives. Because 
of the need to evaluate all of these factors, NRC has determined not to 
include 10 CFR part 76 in the current rulemaking.

Changes From the Proposed Rule

    There are no changes from the proposed rule.

Section-by-Section Description of Changes

10 CFR Part 30

    Section 30.35 is amended to permit self-guarantee for financial 
assurance which can be used by qualified nonprofit licensees and non-
bond-issuing licensees.
    Appendix D is added to 10 CFR Part 30 to establish requirements for 
self-guarantee by non-bond-issuing commercial licensees. Appendix E is 
added to 10 CFR Part 30 to establish requirements for self-guarantee 
for nonprofit college, university, and hospital licensees.

10 CFR Part 40

    Section 40.36 is amended to permit self-guarantee for financial 
assurance which can be used by qualified nonprofit licensees and non-
bond-issuing licensees.

10 CFR Part 50

    Section 50.75 is amended to permit self-guarantee for financial 
assurance which can be used by qualified nonprofit licensees and non-
bond-issuing licensees.

10 CFR Part 70

    Section 70.25 is amended to permit self-guarantee for financial 
assurance which can be used by qualified nonprofit licensees and non-
bond issuing licensees.

10 CFR Part 72

    Section 72.30 is amended to permit self-guarantee for financial 
assurance which can be used by qualified non-bond issuing licensees.

Compatibility of Agreement State Regulations

    The current NRC regulation which allows self-guarantee of certain 
commercial corporate licensees who issue bonds if they meet stringent 
financial criteria is designated as compatibility Category D. This 
final rule change, which will extend the self-guarantee financial 
assurance option to other material and non-electric utility reactor 
licensees that meet certain financial criteria, is also designated as a 
compatibility Category D. Category D means the agreement States do not 
need to adopt a compatible rule. The Category D designation was 
determined in accordance with the new ``Policy Statement on Adequacy 
and Compatibility of Agreement State Programs,'' approved by the 
Commission on June 30, 1997. The final rule change does not involve a 
basic radiation protection standard, activities that have direct and 
significant effects in multiple jurisdictions, or essential objectives 
which an Agreement State should adopt to avoid conflicts, gaps, or 
duplications in the regulation of agreement material on a nationwide 
basis. Therefore, Category D has been assigned to these rule 
provisions.

Finding of No Significant Environmental Impact: Availability

    The amendments will allow qualified nonprofit and non-bond-issuing 
licensees the option of using self-guarantee as a mechanism for 
financial assurance for decommissioning. For-profit corporate licensees 
that issue bonds are already allowed to use self-guarantee if they meet 
the regulatory criteria. Other licensees currently may elect to use a 
variety of financial assurance mechanisms, such as surety bonds, 
letters of credit, and escrow accounts to comply with decommissioning 
regulations. This action is intended to offer nonprofit and non-bond-
issuing nuclear materials licensees and non-electric utility reactor 
licensees greater flexibility by allowing an additional mechanism for 
licensees that meet the financial criteria for use of self-guarantee.
    This revision to the NRC's regulations simply adds one more 
financial assurance mechanism to the mechanisms currently available. It 
does not affect the cost of decommissioning materials and non-power 
reactor facilities. Allowing self-guarantee for additional types of 
licensees does not lead to any increase in the effect on the 
environment of the decommissioning activities considered in the final 
rule published on June 27, 1988, (53 FR 24018), as analyzed in the 
Final Generic Environmental Impact Statement on Decommissioning of 
Nuclear Facilities (NUREG-0586, August 1988). 4 Promulgation 
of this rule does not introduce any impacts on the environment not 
previously considered by the NRC. Therefore, the Commission has 
determined, under the National Environmental Policy Act of 1969, as 
amended, and the Commission's regulations in subpart A of 10 CFR part 
51, that this rule would not be a major Federal action significantly 
affecting the quality of the human environment, and therefore an 
environmental impact statement is not required. No other agencies or 
persons were contacted in making this determination. The NRC staff is 
not aware of any other documents related to the environmental

[[Page 29541]]

impact of this action. The foregoing constitutes the environmental 
assessment and finding of no significant impact for this rule.
---------------------------------------------------------------------------

    \4\ Copies are available at current rates from the U.S. 
Government Printing Office, P.O. Box 37082, Washington, DC 20402-
9328 (telephone (202) 512-2249); or from the National Technical 
Information Service by writing NTIS at 5285 Port Royal Road, 
Springfield, VA 22161. Copies are available for inspection or 
copying for a fee from the NRC Public Document Room at 2120 L Street 
NW., Washington, DC; the PDR's mailing address is Mail Stop LL-6, 
Washington, DC 20555; telephone (202) 634-3273; fax (202) 634-3343.
---------------------------------------------------------------------------

Paperwork Reduction Act Statement

    This final rule amends information collection requirements that are 
subject to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et 
seq.). These requirements were approved by the Office of Management and 
Budget (OMB), approval number 3150-0017, -0020, -0011, -0009, and -
0132.
    The public reporting burden for this information collection is 
estimated to average 9 to 14 hours per response, including time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
information collection. Send comments on any aspect of this information 
collection, including suggestions for reducing the burden, to the 
Information and Records Management Branch (T-6 F33), U.S. Nuclear 
Regulatory Commission, Washington, DC 20555-0001, or by Internet 
electronic mail at [email protected]; and to the Desk Officer, Office of 
Information and Regulatory Affairs, NEOB-10202, (3150-0017), Office of 
Management and Budget, Washington, DC 20503.

Public Protection Notification

    If a document used to impose an information collection does not 
display a currently valid OMB control number, the NRC may not conduct 
or sponsor, and a person is not required to respond to, the information 
collection.

Regulatory Analysis

    The NRC has prepared a regulatory analysis on this regulation. The 
analysis examines the costs and benefits of the alternatives considered 
by the NRC. The analysis is available for inspection in the NRC Public 
Document Room, 2120 L Street NW (Lower Level), Washington, DC. Single 
copies of the analysis may be obtained from Clark Prichard, Office of 
Nuclear Materials Safety and Safeguards, U.S. Nuclear Regulatory 
Commission, Washington, DC 20555, telephone (301) 415-6203.

Small Business Regulatory Enforcement Fairness Act

    In accordance with the Small Business Regulatory Enforcement 
Fairness Act of 1996, the NRC has determined that this action is not a 
``major rule'' and has verified this determination with the Office of 
Information and Regulatory Affairs, Office of Management and Budget.

Regulatory Flexibility Certification

    In accordance with the Regulatory Flexibility Act of 1980 (5 U.S.C. 
605(b)), the Commission certifies that this rule will not have a 
significant economic impact on a substantial number of small entities. 
This rule would expand the number of options available to licensees to 
comply with the Commission's financial assurance requirements, thus 
enhancing the flexibility of these regulations. It is estimated that 
this rule would result in significant cost savings to qualifying 
licensees.

Backfit Analysis

    The NRC has determined that backfitting provisions (10 CFR 50.109 
and 72.62) in the parts of the Commission's regulations that are being 
amended by this rulemaking do not apply to this rule because the rule 
does not impose a backfit as defined in 10 CFR 50.109(a)(1) or 
72.62(a). The rule extends the self-guarantee alternative for 
demonstrating decommissioning financial assurance to qualified non-
profit and non-bond-issuing licensees. Extending the availability of 
this option does not impose a new burden on licensees of commercial 
power reactors or independent spent fuel storage installations 
(ISFSI's). Accordingly, the rulemaking does not constitute a backfit 
and a backfit analysis was not prepared for this final rule.

List of Subjects

10 CFR Part 30

    Byproduct material, Criminal penalties, Government contracts, 
Intergovernmental relations, Isotopes, Nuclear materials, Radiation 
protection, Reporting and recordkeeping requirements.

10 CFR Part 40

    Criminal penalties, Government contracts, Hazardous materials 
transportation, Nuclear materials, Reporting and recordkeeping 
requirements, Source material, Uranium.

10 CFR Part 50

    Antitrust, Classified information, Criminal penalties, Fire 
protection, Intergovernmental relations, Nuclear power plants and 
reactors, Radiation protection, Reactor siting criteria, Reporting and 
recordkeeping requirements.

10 CFR Part 70

    Criminal penalties, Hazardous materials transportation, Material 
control and accounting, Nuclear materials, Packaging and containers, 
Radiation protection, Reporting and recordkeeping requirements, 
Scientific equipment, Security measures, Special nuclear material.

10 CFR Part 72

    Manpower training programs, Nuclear materials, Occupational safety 
and health, Reporting and recordkeeping requirements, Security 
measures, Spent fuel.

    For the reasons set out in the preamble and under the authority of 
the Atomic Energy Act of 1954, as amended, the Energy Reorganization 
Act of 1974, as amended, and 5 U.S.C. 553, the NRC is adopting the 
following amendments to 10 CFR Parts 30, 40, 50, 70, and 72.

PART 30--RULES OF GENERAL APPLICABILITY TO DOMESTIC LICENSING OF 
BYPRODUCT MATERIAL

    1. The authority citation for Part 30 continues to read as follows:

    Authority: Secs. 81, 82, 161, 182, 183, 186, 68 Stat. 935, 948, 
953, 954, 955, as amended, sec. 234, 83 Stat. 444, as amended (42 
U.S.C. 2111, 2112, 2201, 2232, 2233, 2236, 2282); secs. 201, as 
amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 
5841, 5842, 5846).

    Section 30.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 
2951 (42 U.S.C. 5851). Section 30.34(b) also issued under sec. 184, 68 
Stat. 954, as amended (42 U.S.C. 2234). Section 30.61 also issued under 
sec. 187, 68 Stat. 955 (42 U.S.C. 2237).
    2. In Sec. 30.8, paragraph (b) is revised to read as follows:

Sec. 30.8  Information collection requirements: OMB approval.

* * * * *
    (b) The approved information collection requirements contained in 
this part appear in Secs. 30.9, 30.11, 30.15, 30.19, 30.20, 30.32, 
30.34, 30.35, 30.36, 30.37, 30.38, 30.50, 30.51, 30.55, 30.56, and 
Appendices A, C, D, and E of this part.
* * * * *
    3. In Sec. 30.35, the introductory text of paragraph (f)(2) is 
revised to read as follows:

Sec. 30.35  Financial assurance and recordkeeping for decommissioning.

* * * * *
    (f) * * *
    (2) A surety method, insurance, or other guarantee method. These 
methods guarantee that decommissioning costs will be paid. A surety 
method may be in the form of a surety bond, letter of credit, or line 
of credit. A parent company guarantee of funds for decommissioning 
costs based on a

[[Page 29542]]

financial test may be used if the guarantee and test are as contained 
in appendix A to this part. A parent company guarantee may not be used 
in combination with other financial methods to satisfy the requirements 
of this section. For commercial corporations that issue bonds, a 
guarantee of funds by the applicant or licensee for decommissioning 
costs based on a financial test may be used if the guarantee and test 
are as contained in appendix C to this part. For commercial companies 
that do not issue bonds, a guarantee of funds by the applicant or 
licensee for decommissioning costs may be used if the guarantee and 
test are as contained in appendix D to this part. For nonprofit 
entities, such as colleges, universities, and nonprofit hospitals, a 
guarantee of funds by the applicant or licensee may be used if the 
guarantee and test are as contained in appendix E to this part. A 
guarantee by the applicant or licensee may not be used in combination 
with any other financial methods used to satisfy the requirements of 
this section or in any situation where the applicant or licensee has a 
parent company holding majority control of the voting stock of the 
company. Any surety method or insurance used to provide financial 
assurance for decommissioning must contain the following conditions:
* * * * *
    4. New Appendices D and E to Part 30 are added to read as follows:

Appendix D to Part 30--Criteria Relating To Use of Financial Tests 
and Self-Guarantee for Providing Reasonable Assurance of Funds for 
Decommissioning by Commercial Companies That Have no Outstanding 
Rated Bonds

I. Introduction

    An applicant or licensee may provide reasonable assurance of the 
availability of funds for decommissioning based on furnishing its 
own guarantee that funds will be available for decommissioning costs 
and on a demonstration that the company passes the financial test of 
Section II of this appendix. The terms of the self-guarantee are in 
Section III of this appendix. This appendix establishes criteria for 
passing the financial test for the self-guarantee and establishes 
the terms for a self-guarantee.

II. Financial Test

    A. To pass the financial test a company must meet the following 
criteria:
    (1) Tangible net worth greater than $10 million, or at least 10 
times the total current decommissioning cost estimate (or the 
current amount required if certification is used), whichever is 
greater, for all decommissioning activities for which the company is 
responsible as self-guaranteeing licensee and as parent-guarantor.
    (2) Assets located in the United States amounting to at least 90 
percent of total assets or at least 10 times the total current 
decommissioning cost estimate (or the current amount required if 
certification is used) for all decommissioning activities for which 
the company is responsible as self-guaranteeing licensee and as 
parent-guarantor.
    (3) A ratio of cash flow divided by total liabilities greater 
than 0.15 and a ratio of total liabilities divided by net worth less 
than 1.5.
    B. In addition, to pass the financial test, a company must meet 
all of the following requirements:
    (1) The company's independent certified public accountant must 
have compared the data used by the company in the financial test, 
which is required to be derived from the independently audited year 
end financial statement based on United States generally accepted 
accounting practices for the latest fiscal year, with the amounts in 
such financial statement. In connection with that procedure, the 
licensee shall inform NRC within 90 days of any matters that may 
cause the auditor to believe that the data specified in the 
financial test should be adjusted and that the company no longer 
passes the test.
    (2) After the initial financial test, the company must repeat 
passage of the test within 90 days after the close of each 
succeeding fiscal year.
    (3) If the licensee no longer meets the requirements of 
paragraph II.A of this appendix, the licensee must send notice to 
the NRC of intent to establish alternative financial assurance as 
specified in NRC regulations. The notice must be sent by certified 
mail, return receipt requested, within 90 days after the end of the 
fiscal year for which the year end financial data show that the 
licensee no longer meets the financial test requirements. The 
licensee must provide alternative financial assurance within 120 
days after the end of such fiscal year.

III. Company Self-Guarantee

    The terms of a self-guarantee which an applicant or licensee 
furnishes must provide that:
    A. The guarantee shall remain in force unless the licensee sends 
notice of cancellation by certified mail, return receipt requested, 
to the NRC. Cancellation may not occur until an alternative 
financial assurance mechanism is in place.
    B. The licensee shall provide alternative financial assurance as 
specified in the regulations within 90 days following receipt by the 
NRC of a notice of cancellation of the guarantee.
    C. The guarantee and financial test provisions must remain in 
effect until the Commission has terminated the license or until 
another financial assurance method acceptable to the Commission has 
been put in effect by the licensee.
    D. The applicant or licensee must provide to the Commission a 
written guarantee (a written commitment by a corporate officer) 
which states that the licensee will fund and carry out the required 
decommissioning activities or, upon issuance of an order by the 
Commission, the licensee will set up and fund a trust in the amount 
of the current cost estimates for decommissioning.

Appendix E to Part 30--Criteria Relating to Use of Financial Tests 
and Self-Guarantee For Providing Reasonable Assurance of Funds For 
Decommissioning by Nonprofit Colleges, Universities, and Hospitals

I. Introduction

    An applicant or licensee may provide reasonable assurance of the 
availability of funds for decommissioning based on furnishing its 
own guarantee that funds will be available for decommissioning costs 
and on a demonstration that the applicant or licensee passes the 
financial test of Section II of this appendix. The terms of the 
self-guarantee are in Section III of this appendix. This appendix 
establishes criteria for passing the financial test for the self-
guarantee and establishes the terms for a self-guarantee.

II. Financial Test

    A. For colleges and universities, to pass the financial test a 
college or university must meet either the criteria in Paragraph 
II.A.(1) or the criteria in Paragraph II.A.(2) of this appendix.
    (1) For applicants or licensees that issue bonds, a current 
rating for its most recent uninsured, uncollateralized, and 
unencumbered bond issuance of AAA, AA, or A as issued by Standard 
and Poors (S&P) or Aaa, Aa, or A as issued by Moodys.
    (2) For applicants or licensees that do not issue bonds, 
unrestricted endowment consisting of assets located in the United 
States of at least $50 million, or at least 30 times the total 
current decommissioning cost estimate (or the current amount 
required if certification is used), whichever is greater, for all 
decommissioning activities for which the college or university is 
responsible as a self-guaranteeing licensee.
    B. For hospitals, to pass the financial test a hospital must 
meet either the criteria in Paragraph II.B.(1) or the criteria in 
Paragraph II.B.(2) of this appendix:
    (1) For applicants or licensees that issue bonds, a current 
rating for its most recent uninsured, uncollateralized, and 
unencumbered bond issuance of AAA, AA, or A as issued by Standard 
and Poors (S&P) or Aaa, Aa, or A as issued by Moodys.
    (2) For applicants or licensees that do not issue bonds, all the 
following tests must be met:
    (a) (Total Revenues less total expenditures) divided by total 
revenues must be equal to or greater than 0.04.
    (b) Long term debt divided by net fixed assets must be less than 
or equal to 0.67.
    (c) (Current assets and depreciation fund) divided by current 
liabilities must be greater than or equal to 2.55.
    (d) Operating revenues must be at least 100 times the total 
current decommissioning cost estimate (or the current amount 
required if certification is used) for all decommissioning 
activities for which the hospital is responsible as a self-
guaranteeing license.
    C. In addition, to pass the financial test, a licensee must meet 
all the following requirements:

[[Page 29543]]

    (1) The licensee's independent certified public accountant must 
have compared the data used by the licensee in the financial test, 
which is required to be derived from the independently audited year 
end financial statements, based on United States generally accepted 
accounting practices, for the latest fiscal year, with the amounts 
in such financial statement. In connection with that procedure, the 
licensee shall inform NRC within 90 days of any matters coming to 
the attention of the auditor that cause the auditor to believe that 
the data specified in the financial test should be adjusted and that 
the licensee no longer passes the test.
    (2) After the initial financial test, the licensee must repeat 
passage of the test within 90 days after the close of each 
succeeding fiscal year.
    (3) If the licensee no longer meets the requirements of Section 
I of this appendix, the licensee must send notice to the NRC of its 
intent to establish alternative financial assurance as specified in 
NRC regulations. The notice must be sent by certified mail, return 
receipt requested, within 90 days after the end of the fiscal year 
for which the year end financial data show that the licensee no 
longer meets the financial test requirements. The licensee must 
provide alternate financial assurance within 120 days after the end 
of such fiscal year.

III. Self-Guarantee

    The terms of a self-guarantee which an applicant or licensee 
furnishes must provide that--
    A. The guarantee shall remain in force unless the licensee sends 
notice of cancellation by certified mail, and/or return receipt 
requested, to the Commission. Cancellation may not occur unless an 
alternative financial assurance mechanism is in place.
    B. The licensee shall provide alternative financial assurance as 
specified in the Commission's regulations within 90 days following 
receipt by the Commission of a notice of cancellation of the 
guarantee.
    C. The guarantee and financial test provisions must remain in 
effect until the Commission has terminated the license or until 
another financial assurance method acceptable to the Commission has 
been put in effect by the licensee.
    D. The applicant or licensee must provide to the Commission a 
written guarantee (a written commitment by a corporate officer or 
officer of the institution) which states that the licensee will fund 
and carry out the required decommissioning activities or, upon 
issuance of an order by the Commission, the licensee will set up and 
fund a trust in the amount of the current cost estimates for 
decommissioning.
    E. If, at any time, the licensee's most recent bond issuance 
ceases to be rated in any category of ``A'' or above by either 
Standard and Poors or Moodys, the licensee shall provide notice in 
writing of such fact to the Commission within 20 days after 
publication of the change by the rating service.

PART 40--DOMESTIC LICENSING OF SOURCE MATERIAL

    5. The authority citation for Part 40 continues to read as follows:

    Authority: Secs. 62, 63, 64, 65, 81, 161, 182, 183, 186, 68 
Stat. 932, 933, 935, 948, 953, 954, 955, as amended, secs. 11e(2), 
83, 84, Pub. L. 95-604, 92 Stat. 3033, as amended, 3039, sec. 234, 
83 Stat. 444, as amended (42 U.S.C. 2014(e)(2), 2092, 2093, 2094, 
2095, 2111, 2113, 2114, 2201, 2232, 2233, 2236, 2282); sec. 274, 
Pub. L. 86-373, 73 Stat. 688 (42 U.S.C. 2021); secs. 201, as 
amended, 202, 206, 88 Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 
5841, 5842, 5846); sec. 275, 92 Stat. 3021, as amended by Pub. L. 
97-415, 96 Stat. 2067 (42 U.S.C. 2022).
    Section 40.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 
2951 (42 U.S.C. 5851). Section 40.31(g) also issued under sec. 122, 
68 Stat. 939 (42 U.S.C. 2152). Section 40.46 also issued under sec. 
184, 68 Stat. 954, as amended (42 U.S.C. 2234). Section 40.71 also 
issued under sec. 187, 68 Stat. 955 (42 U.S.C. 2237).

    6. In Sec. 40.36, the introductory text of paragraph (e)(2) is 
revised to read as follows:

Sec. 40.36  Financial assurance and recordkeeping for decommissioning.

* * * * *
    (e) * * *
    (2) A surety method, insurance, or other guarantee method. These 
methods guarantee that decommissioning costs will be paid. A surety 
method may be in the form of a surety bond, letter of credit, or line 
of credit. A parent company guarantee of funds for decommissioning 
costs based on a financial test may be used if the guarantee and test 
are as contained in appendix A to part 30. A parent company guarantee 
may not be used in combination with other financial methods to satisfy 
the requirements of this section. For commercial corporations that 
issue bonds, a guarantee of funds by the applicant or licensee for 
decommissioning costs based on a financial test may be used if the 
guarantee and test are as contained in appendix C to part 30. For 
commercial companies that do not issue bonds, a guarantee of funds by 
the applicant or licensee for decommissioning costs may be used if the 
guarantee and test are as contained in appendix D to part 30. For 
nonprofit entities, such as colleges, universities, and nonprofit 
hospitals, a guarantee of funds by the applicant or licensee may be 
used if the guarantee and test are as contained in appendix E to part 
30. A guarantee by the applicant or licensee may not be used in 
combination with any other financial methods used to satisfy the 
requirements of this section or in any situation where the applicant or 
licensee has a parent company holding majority control of the voting 
stock of the company. Any surety method or insurance used to provide 
financial assurance for decommissioning must contain the following 
conditions:
* * * * *

PART 50--DOMESTIC LICENSING OF PRODUCTION AND UTILIZATION 
FACILITIES

    7. The authority citation for Part 50 continues to read as follows:

    Authority: Secs. 102, 103, 104, 105, 161, 182, 183, 186, 189, 68 
Stat. 936, 937, 938, 948, 953, 954, 955, 956, as amended, sec. 234, 
83 Stat. 1244, as amended (42 U.S.C. 2132, 2133, 2134, 2135, 2201, 
2232, 2233, 2236, 2239, 2282); secs. 201, as amended, 202, 206, 88 
Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846).
    Section 50.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 
2951 (42 U.S.C. 5851). Section 50.10 also issued under secs. 101, 
185, 68 Stat. 936, 955, as amended (42 U.S.C. 2131, 2235); sec. 102, 
Pub. L. 91-190, 83 Stat. 853 (42 U.S.C. 4332). Sections 50.13, 
50.54(dd), and 50.103 also issued under sec. 108, 68 Stat. 939, as 
amended (42 U.S.C. 2138). Sections 50.23, 50.35, 50.55, and 50.56 
also issued under sec. 185, 68 Stat. 955 (42 U.S.C. 2235). Sections 
50.33a, 50.55a and Appendix Q also issued under sec. 102, Pub. L. 
91-190, 83 Stat. 853 (42 U.S.C. 4332). Sections 50.34 and 50.54 also 
issued under sec. 204, 88 Stat. 1245 (42 U.S.C. 5844). Sections 
50.58, 50.91, and 50.92 also issued under Pub. L. 97-415, 96 Stat. 
2073 (42 U.S.C. 2239). Section 50.78 also issued under sec. 122, 68 
Stat. 939 (42 U.S.C. 2152). Sections 50.80-50.81 also issued under 
sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234). Appendix F also 
issued under sec. 187, 68 Stat. 955 (42 U.S.C 2237).
    8. In Sec. 50.75, the introductory text of paragraph (e)(2)(iii) is 
revised to read as follows:

Sec. 50.75  Reporting and recordkeeping for decommissioning planning.

* * * * *
    (e) * * *
    (2) * * *
    (iii) A surety method, insurance, or other guarantee method. These 
methods guarantee that decommissioning costs will be paid. A surety 
method may be in the form of a surety bond, letter of credit, or line 
of credit. A parent company guarantee of funds for decommissioning 
costs based on a financial test may be used if the guarantee and test 
are as contained in appendix A to part 30. A parent company guarantee 
may not be used in combination with other financial methods to satisfy 
the requirements of this section. For commercial corporations that 
issue bonds, a

[[Page 29544]]

guarantee of funds by the applicant or licensee for decommissioning 
costs based on a financial test may be used if the guarantee and test 
are as contained in appendix C to part 30. For commercial companies 
that do not issue bonds, a guarantee of funds by the applicant or 
licensee for decommissioning costs may be used if the guarantee and 
test are as contained in appendix D to part 30. For nonprofit entities, 
such as colleges, universities, and nonprofit hospitals, a guarantee of 
funds by the applicant or licensee may be used if the guarantee and 
test are as contained in appendix E to part 30. A guarantee by the 
applicant or licensee may not be used in combination with any other 
financial methods used to satisfy the requirements of this section or 
in any situation where the applicant or licensee has a parent company 
holding majority control of the voting stock of the company.
* * * * *

PART 70--DOMESTIC LICENSING OF SPECIAL NUCLEAR MATERIAL

    9. The authority citation for Part 70 continues to read as follows:

    Authority: Secs. 51, 53, 161, 182, 183, 68 Stat. 929, 930, 948, 
953, 954, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 
2071, 2073, 2201, 2232, 2233, 2282); secs. 201, as amended, 202, 
204, 206, 88 Stat. 1242, as amended, 1244, 1245, 1246 (42 U.S.C. 
5841, 5842, 5845, 5846).

    Sections 70.1(c) and 70.20a(b) also issued under secs. 135, 141, 
Pub. L. 97-425, 96 Stat. 2232, 2241 (42 U.S.C. 10155, 10161). 
Section 70.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 
2951 (42 U.S.C. 5851). Section 70.21(g) also issued under sec. 122, 
68 Stat. 939 (42 U.S.C. 2152). Section 70.31 also issued under sec. 
57d, Pub. L. 93-377, 88 Stat. 475 (42 U.S.C. 2077). Sections 70.36 
and 70.44 also issued under sec. 184, 68 Stat. 954, as amended (42 
U.S.C. 2234). Section 70.61 also issued under secs. 186, 187, 68 
Stat. 955 (42 U.S.C. 2236, 2237). Section 70.62 also issued under 
sec. 108, 68 Stat. 939, as amended (42 U.S.C. 2138).

    10. In Sec. 70.25, the introductory text of paragraph (f)(2) is 
revised to read as follows:

Sec. 70.25  Financial assurance and recordkeeping for decommissioning.

* * * * *
    (f) * * *
    (2) A surety method, insurance, or other guarantee method. These 
methods guarantee that decommissioning costs will be paid. A surety 
method may be in the form of a surety bond, letter of credit, or line 
of credit. A parent company guarantee of funds for decommissioning 
costs based on a financial test may be used if the guarantee and test 
are as contained in appendix A to part 30. A parent company guarantee 
may not be used in combination with other financial methods to satisfy 
the requirements of this section. For commercial corporations that 
issue bonds, a guarantee of funds by the applicant or licensee for 
decommissioning costs based on a financial test may be used if the 
guarantee and test are as contained in appendix C to part 30. For 
commercial companies that do not issue bonds, a guarantee of funds by 
the applicant or licensee for decommissioning costs may be used if the 
guarantee and test are as contained in appendix D to part 30. For 
nonprofit entities, such as colleges, universities, and nonprofit 
hospitals, a guarantee of funds by the applicant or licensee may be 
used if the guarantee and test are as contained in appendix E to part 
30. A guarantee by the applicant or licensee may not be used in 
combination with any other financial methods used to satisfy the 
requirements of this section or in any situation where the applicant or 
licensee has a parent company holding majority control of the voting 
stock of the company. Any surety method or insurance used to provide 
financial assurance for decommissioning must contain the following 
conditions:
* * * * *

PART 72--LICENSING REQUIREMENTS FOR THE INDEPENDENT STORAGE OF 
SPENT NUCLEAR FUEL AND HIGH-LEVEL RADIOACTIVE WASTE

    11. The authority citation for Part 72 continues to read as 
follows:

    Authority: Secs. 51, 53, 57, 62, 63, 65, 69, 81, 161, 182, 183, 
184, 186, 187, 189, 68 Stat. 929, 930, 932, 933, 934, 935, 948, 953, 
954, 955, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 
2071, 2073, 2077, 2092, 2093, 2095, 2099, 2111, 2201, 2232, 2233, 
2234, 2236, 2237, 2238, 2282); sec. 274, Pub. L. 86-373, 73 Stat. 
688, as amended (42 U.S.C. 2021); sec. 201, as amended, 202, 206, 88 
Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846); 
Pub. L. 95-601, sec. 10, 92 Stat. 2951 (42 U.S.C. 5851); sec. 102, 
Pub. L. 91-190, 83 Stat. 853 (42 U.S.C. 4332); Secs. 131, 132, 133, 
135, 137, 141, Pub. L. 97-425, 96 Stat. 2229, 2230, 2232, 2241, sec. 
148, Pub. L. 100-203, 101 Stat. 1330-235 (42 U.S.C. 10151, 10152, 
10153, 10155, 10157, 10161, 10168).
    Section 72.44(g) also issued under secs. 142(b) and 148(c), (d), 
Pub. L. 100-203, 101 Stat. 1330-232, 1330-236 (42 U.S.C. 10162(b), 
10168(c), (d)). Section 72.46 also issued under sec. 189, 68 Stat. 
955 (42 U.S.C. 2239); sec. 134, Pub. L. 97-425, 96 Stat. 2230 (42 
U.S.C. 10154). Section 72.96(d) also issued under sec. 145(g), Pub. 
L. 100-203, 101 Stat. 1330-235 (42 U.S.C. 10165(g)). Subpart J also 
issued under secs. 2(2), 2(15), 2(19), 117(a), 141(h), Pub. L. 97-
425, 96 Stat. 2202, 2203, 2204, 2222, 2244 (42 U.S.C. 10101, 
10137(a), 10161(h)). Subparts K and L are also issued under sec. 
133, 98 Stat. 2230 (42 U.S.C. 10153) and sec. 218(a), 96 Stat. 2252 
(42 U.S.C. 10198).

    12. In Sec. 72.30, the introductory text of paragraph (c)(2) is 
revised to read as follows:

Sec. 72.30  Financial assurance and recordkeeping for decommissioning.

* * * * *
    (c) * * *
    (2) A surety method, insurance, or other guarantee method. These 
methods guarantee that decommissioning costs will be paid. A surety 
method may be in the form of a surety bond, letter of credit, or line 
of credit. A parent company guarantee of funds for decommissioning 
costs based on a financial test may be used if the guarantee and test 
are as contained in appendix A to part 30. A parent company guarantee 
may not be used in combination with other financial methods to satisfy 
the requirements of this section. For commercial corporations that 
issue bonds, a guarantee of funds by the applicant or licensee for 
decommissioning costs based on a financial test may be used if the 
guarantee and test are as contained in appendix C to part 30. For 
commercial corporations that do not issue bonds, a guarantee of funds 
by the applicant or licensee for decommissioning costs may be used if 
the guarantee and test are as contained in appendix D to part 30. A 
guarantee by the applicant or licensee may not be used in combination 
with any other financial methods used to satisfy the requirements of 
this section or in any situation where the applicant or licensee has a 
parent company holding majority control of the voting stock of the 
company. Any surety method or insurance used to provide financial 
assurance for decommissioning must contain the following conditions:
* * * * *
    Dated at Rockville, Maryland, this 22nd day of May, 1998.

    For the Nuclear Regulatory Commission.
John C. Hoyle,
Secretary of the Commission.
[FR Doc. 98-14385 Filed 5-29-98; 8:45 am]
BILLING CODE 7590-01-P
```