Federal Register / Vol. 63, No. 104 / Monday, June 1, 1998 /Rules and Regulations 29535

1Pursuant 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.

2Single 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.

Committee’s recommendation, and

other information, it is found that

finalizing the interim final rule, without

change, as published in the Federal

Register (63 FR 11585; March 10, 1998)

will tend to effectuate the declared

policy of the Act.

List of Subjects in 7 CFR Part 989

Grapes, Marketing agreements,

Raisins, Reporting and recordkeeping

requirements.

PART 989—RAISINS PRODUCED

FROM GRAPES GROWN IN

CALIFORNIA

Accordingly, the interim final rule

amending 7 CFR part 989 which was

published at 63 FR 11585 on March 10,

1998, is adopted as a final rule without

change.

Dated: May 26, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable

Programs.

[FR Doc. 98–14422 Filed 5–29–98; 8:45 am]

BILLING CODE 3410–02–P

NUCLEAR REGULATORY

COMMISSION

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

RIN 3150–AF64

Self-Guarantee of Decommissioning

Funding by Nonprofit and Non-BondIssuing Licensees

AGENCY: Nuclear Regulatory

Commission.

ACTION: Final rule.

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 cwp@nrc.gov.

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).

To date, self-guarantee has not been

available to nonprofit licensees such as

hospitals and universities, or to forprofit licensees who do not issue bonds,

because the financial test for selfguarantee 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 selfguarantee, previously limited to bondissuing 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 nonbond-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 selfguarantee 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 selfguarantee 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 costsaving 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-bondissuing commercial licensees to use selfguarantee 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.

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
29536 Federal Register / Vol. 63, No. 104 / Monday, June 1, 1998 /Rules and Regulations

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 oneyear 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 selfguarantee 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 selfguarantee 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
Federal Register / Vol. 63, No. 104 / Monday, June 1, 1998 /Rules and Regulations 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 nonbond-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 selfguarantee 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 selfguarantee. 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 selfguarantee 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 selfguarantee. 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.
29538 Federal Register / Vol. 63, No. 104 / Monday, June 1, 1998 /Rules and Regulations

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.

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 selfguarantee 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 selfguarantee 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 multinational 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 selfguarantee. 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-BondIssuing Commercial Licensees

The financial test proposed for nonbond 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 selfguarantee smaller decommissioning

projects, but could not meet the $10

million net worth requirement.

Response: The NRC’s objective in

setting financial criteria for non-bondissuing 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.

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.
Federal Register / Vol. 63, No. 104 / Monday, June 1, 1998 /Rules and Regulations 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 shortlived 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 NonAgreement 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 selfguarantee 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 selfguarantee 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 selfguarantee 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
29540 Federal Register / Vol. 63, No. 104 / Monday, June 1, 1998 /Rules and Regulations

4Copies 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.

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-bondissuing licensees.

Appendix D is added to 10 CFR Part

30 to establish requirements for selfguarantee 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-bondissuing 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-bondissuing 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 nonbond 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 selfguarantee 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 selfguarantee as a mechanism for financial

assurance for decommissioning. Forprofit corporate licensees that issue

bonds are already allowed to use selfguarantee 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
Federal Register / Vol. 63, No. 104 / Monday, June 1, 1998 /Rules and Regulations 29541

impact of this action. The foregoing

constitutes the environmental

assessment and finding of no significant

impact for this rule.

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

BJS@NRC.GOV; 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 nonprofit 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 § 30.8, paragraph (b) is revised to

read as follows:

§ 30.8 Information collection

requirements: OMB approval.

* * * * *

(b) The approved information

collection requirements contained in

this part appear in §§ 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 § 30.35, the introductory text of

paragraph (f)(2) is revised to read as

follows:

§ 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
29542 Federal Register / Vol. 63, No. 104 / Monday, June 1, 1998 /Rules and Regulations

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 selfguaranteeing licensee and as parentguarantor.

(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 selfguarantee 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:
Federal Register / Vol. 63, No. 104 / Monday, June 1, 1998 /Rules and Regulations 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 § 40.36, the introductory text of

paragraph (e)(2) is revised to read as

follows:

§ 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 § 50.75, the introductory text of

paragraph (e)(2)(iii) is revised to read as

follows:

§ 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
29544 Federal Register / Vol. 63, No. 104 / Monday, June 1, 1998 /Rules and Regulations

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 § 70.25, the introductory text of

paragraph (f)(2) is revised to read as

follows:

§ 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 § 72.30, the introductory text of

paragraph (c)(2) is revised to read as

follows:

§ 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