29244 Federal Register / Vol. 66, No. 104 / Wednesday, May 30, 2001 / Proposed Rules

to change the NRC’s current practice of

considering on a case-by-case basis

whether the acts of an individual should

be imputed to the licensee.

6. One commenter stated that any

attempt to apply such a regulation based

on past conduct of a licensee, such as

acts prior to promulgation of the

regulation, would violate the

prohibition against retroactive

rulemaking. NRC does not agree that

approval of the petition would represent

retroactive rulemaking. Specifically, as

already discussed, NRC already has

authority to consider character and

integrity of applicants and licensees

when making licensing decisions. As

such, evaluations of character and

integrity are not limited to acts that

occur after promulgation of a rule or

requirement that provides greater detail

with respect to the matter of character

and integrity. However, as part of using

discretion and judgement in

determining appropriate actions, NRC

may consider the age of the actions in

question.

Reasons for Denial

NRC is denying the petition for the

following reasons:

1. The petitioner has not identified a

statutory requirement for promulgating

the regulation requested in the petition.

In addition, the petitioner did not

identify a need for such regulation nor

a gap in the current regulatory process.

Specifically, NRC already has authority

under the AEA to deny or revoke a

license, or ban an individual from

licensed activities, if adequate

protection of public health and safety is

not provided. NRC currently considers

the integrity and character of

individuals in determining adequate

protection. Section 182a of the AEA

states, in part, that license applications

shall specifically state the information

that NRC determines is necessary to

evaluate the character of the applicant.

The information must enable NRC to

find that the licensed activities will

provide adequate protection of health

and safety. Further, after filing the

original application and before

expiration of a license, NRC may require

additional information in order to

determine whether the license should

be modified or revoked. In considering

the integrity and character of an

applicant or licensee, NRC would

consider engaging in bribery or

extortion or acts that undermine the

integrity of the regulatory process.

Therefore, if NRC determines that it

does not have reasonable assurance of

adequate protection of health and safety

based upon, in part, the character of an

applicant or licensee, NRC may deny or

revoke a license. Promulgation of

specific rule language is, therefore, not

necessary.

2. NRC does not agree with the

petitioner that the regulations should

specify the actions that NRC would take

against an applicant or licensee that has

engaged in bribery of, or extortion by,

any Federal, State or other regulator or

has acted in any manner that flagrantly

undermines the integrity of the

regulatory process of NRC or that of an

Agreement State. Specifically, NRC

believes that all enforcement actions,

including those involving situations

identified by the petitioner, should be

reviewed on a case-by-case basis and

dispositioned according to the merits of

the specific case using appropriate

discretion and judgment. In addition,

the current Enforcement Policy,

NUREG–1600, states that in deciding

whether to issue an enforcement action

to an unlicensed person as well as to the

licensee based on the willful acts of an

individual, NRC recognizes that

judgments will have to be made on a

case-by-case basis. The policy includes

factors that will be considered in

making such decisions. NRC does not

believe that the petitioner has provided

sufficient information nor justification

for NRC to consider changing its

practice of deciding enforcement actions

based on case-by-case consideration of

these factors.

For these reasons, NRC does not

believe that the rulemaking requested by

the Petitioner should be promulgated

and; therefore, NRC denies the petition.

Dated at Rockville, Maryland, this 14th day

of May, 2001.

For the Nuclear Regulatory Commission.

William D. Travers,

Executive Director for Operations.

[FR Doc. 01–13493 Filed 5–29–01; 8:45 am]

BILLING CODE 7590–01–P

NUCLEAR REGULATORY

COMMISSION

10 CFR Part 50

RIN 3150–AG52

Decommissioning Trust Provisions

AGENCY: Nuclear Regulatory

Commission.

ACTION: Proposed rule.

SUMMARY: The Nuclear Regulatory

Commission (NRC) is proposing to

amend its regulations relating to

decommissioning trust provisions for

nuclear power plants. The NRC

proposes to require that

decommissioning trust agreements be in

a form acceptable to the NRC in order

to increase assurance that an adequate

amount of decommissioning funds will

be available for their intended purpose.

Until recently, direct NRC oversight of

the terms and conditions of the

decommissioning trusts was not

necessary because rate regulators

typically exercised such authority. With

deregulation, this oversight may cease

and the NRC may need to take a more

active oversight role.

DATES: Submit comments on the

proposed rule and accompanying

regulatory guide August 13, 2001.

Comments received after this date will

be considered if it is practical to do so,

but the Commission is able to ensure

consideration only for comments

received on or before this date.

ADDRESSES: Mail comments to:

Secretary, U.S. Nuclear Regulatory

Commission, Washington, DC 20555–

0001. ATTN. : Rulemakings and

Adjudications Staff.

Deliver comments to: 11555 Rockville

Pike, Rockville, Maryland, between 7:30

a.m. and 4:15 p.m. on Federal workdays.

You may also provide comments via

the NRC’s interactive rulemaking

website at http://ruleforum.llnl.gov.

This site provides the capability to

upload comments as files (any format),

if your web browser supports that

function. For information about the

interactive rulemaking website, contact

Ms. Carol Gallagher, (301) 415–5905 (email: CAG@nrc.gov).

Certain documents related to this

rulemaking, including comments

received, the draft regulatory analysis

and the draft Regulatory Guide, DG–

1106, ‘‘Proposed Revision 1 of

Regulatory Guide 1.159, Assuring the

Availability of Funds for

Decommissioning Nuclear Reactors,’’

may be examined, and/or copied for a

fee, at the NRC’s Public Document

Room, One White Flint North, 11555

Rockville Pike (first floor), Rockville,

Maryland. These same documents also

may be viewed and downloaded

electronically via the interactive

rulemaking website established by NRC

for this rulemaking.

Documents created or received at the

NRC after November 1, 1999, are also

available electronically at the NRC’s

Public Electronic Reading Room on the

Internet at http://www.nrc.gov/NRC/

ADAMS/index.html. From this site, the

public can gain entry into the NRC’s

Agency wide Document Access and

Management System (ADAMS), which

provides text and image files of NRC’s

public documents. For more

information, contact the NRC Public

Document Room (PDR) Reference staff

Federal Register / Vol. 66, No. 104 / Wednesday, May 30, 2001 / Proposed Rules 29245

at 1–800–397–4209, (301) 415–4737, or

by email to pdr@nrc.gov.

FOR FURTHER INFORMATION CONTACT:

Brian J. Richter, Office of Nuclear

Reactor Regulation, Washington, DC

20555–0001, telephone (301) 415–1978,

e-mail bjr@nrc.gov.

SUPPLEMENTARY INFORMATION:

I. Background

Until recently, rate regulators have

generally exercised direct oversight of

the terms and conditions of

decommissioning trust agreements.

Extensive NRC involvement was not

necessary. Because this oversight may

cease with deregulation, the NRC

believes it needs to take a more active

oversight role. 10 CFR 50.75(e) allows

sinking fund payment or prepayment

into external decommissioning trusts as

two of several acceptable financial

assurance methods. These methods are

used by virtually all nuclear power

plant licensees. The NRC included

sample language for decommissioning

trust agreements in guidance issued in

August 1990 (Regulatory Guide 1.159,

‘‘Assuring the Availability of Funds for

Decommissioning Nuclear Reactors’’),

but the NRC’s regulations do not

explicitly require that specific terms and

conditions be included in the

decommissioning trust agreements or

that the decommissioning trust

agreements be in a form acceptable to

the NRC. This proposed rule attempts to

remedy this situation.

II. Rulemaking Initiation

In a staff requirements memorandum

(SRM) dated August 10, 1999, the

Commission directed the NRC staff to

initiate a rulemaking to require that

decommissioning trust agreements be in

a form acceptable to the NRC in order

to increase assurance that an adequate

amount of decommissioning funds will

be available for their intended purpose.

This SRM was in response to SECY–99–

170 (July 1, 1999), ‘‘Summary of

Decommissioning Fund Status Reports,’’

in which the NRC staff noted that it

intended to continue to review

decommissioning trust agreements in

license transfers on a case-by-case basis

and impose appropriate conditions in

the orders approving these transfers.

However, the NRC staff believes that

efficiency would be increased if the

NRC codified this practice generically in

the regulations. Also, based on

experience with approving the transfers

of the operating licenses of the Three

Mile Island Unit 1, Pilgrim, Clinton,

Oyster Creek, and other nuclear power

stations, the NRC staff believes this

rulemaking could expedite similar

transfers in the future by providing

increased regulatory predictability. The

proposed rule and accompanying

revisions to regulatory guidance, if

adopted, would provide uniform

decommissioning trust terms and

conditions for all power reactor

licensees. The NRC staff issued a

rulemaking plan for Decommissioning

Trust Provisions, SECY–00–0002, on

December 30, 1999. The plan called for

amending 10 CFR 50.75 and a revision

to Regulatory Guide 1.159, ‘‘Assuring

the Availability of Funds for

Decommissioning Nuclear Reactors.’’

The Commission approved the plan on

February 9, 2000, directing the NRC

staff to include specific trust fund terms

and conditions necessary to protect

funds fully in the rule itself and

suggested that sample language for trust

agreements consistent with the terms

and conditions within the rule be

provided in the associated regulatory

guide.

III. Proposed Action

The NRC is proposing to amend its

regulations on decommissioning trust

agreements. The proposed action would

state that the trust provisions must be

acceptable to the NRC and contain

general terms and conditions that the

NRC believes are required to ensure that

funds in the trusts will be available for

their intended purpose. To accomplish

this objective, the NRC is proposing to

modify paragraphs 10 CFR 50.75(e)(1)(i)

and (ii), and to add a new paragraph,10

CFR 50.75(h) to its regulations. The

changes in § 50.75(e) specify that the

trust should be an external trust fund in

the United States, established pursuant

to a written agreement and with an

entity that is a State or Federal

government agency or an entity whose

operations are regulated by a State or

Federal agency. Paragraph 50.75(h) will

reference the other paragraphs in § 50.75

where necessary and will discuss the

terms and conditions that the NRC

believes are necessary to ensure that

funds in the trusts will be available for

their intended purpose. As an

accompaniment to this rulemaking, the

NRC intends to update Regulatory

Guide 1.159 to include sample trust

fund language containing these terms

and conditions.

IV. Discussion

The NRC believes that certain

decommissioning trust language should

be standardized to increase assurance of

the protection of public health and

safety by requiring that the

decommissioning trusts: (1) Ensure that

special care is taken to safeguard the

trust corpus from investment risks, (2)

provide adequate information

concerning the trust to the NRC, and (3)

provide safeguards against improper

payments from the trust.

These issues are now of particular

interest to the NRC because deregulation

of the electric utility industry can

potentially lead to several changes in

the structure of ownership of nuclear

power reactors that could affect reactor

decommissioning trust funds. These

changes include the following:

• Relaxation or elimination of

regulatory oversight by State Public

Utility Commissions (PUCs) or the

Federal Energy Regulatory Commission

(FERC). With utility industry

deregulation, State PUCs and/or FERC

may no longer have jurisdiction of the

kind that they now exercise over

electricity rates. Under regulation,

utilities are reimbursed for their costs,

including nuclear decommissioning

trust fund costs, from approved rates

charged ratepayers. If, under

deregulation, PUCs and/or FERC no

longer approve rates they will also no

longer have a basis for establishing

stringent accounting and financial

controls. Without these controls, PUCs

may determine that they have no basis

for specifying terms and conditions for

nuclear reactor decommissioning trust

funds or for monitoring those trust

funds.

• Changes in ownership of nuclear

generating facilities. Under

deregulation, vertically integrated

public utilities that generate electricity,

own and manage the transmission

system, and sell power to the ultimate

consumers may gradually become less

prevalent. Instead, generating facilities

may be separated (i.e., ‘‘spun off’’)

within a holding company structure or

sold to power-producing companies that

sell electricity as a commodity to other

companies that service consumers.

Currently, certain energy companies

that are non-utility suppliers of

electricity have announced their

intention to acquire nuclear power

plants. After these acquisitions, State

PUCs and/or FERC may no longer have

jurisdiction over the energy company

obtaining the reactors. NRC is required

to determine the suitability of

transferring reactor licenses from the

former licensee to a new licensee.

To date, as part of its review of

requests for license transfer in

connection with the sale of nuclear

power reactors, the NRC has examined

whether reasonable assurance of

decommissioning funding will continue

to be provided. As a result, the NRC is

proposing to both codify existing

practice and consider enhancements to

trust agreements to strengthen these

29246 Federal Register / Vol. 66, No. 104 / Wednesday, May 30, 2001 / Proposed Rules

1See Train, J. and Wolfe, T., Investing and

Managing Trusts under the New Prudent Investor

Rule, Harvard Business School Press, 1999.

agreements in the future environment of

deregulation. As a condition for NRC

approval, the NRC has required certain

clauses (some that parallel criteria in

Regulatory Guide 1.159 and others that

parallel FERC requirements) to be

included in decommissioning trust

funds. The NRC has essentially been

using these evaluative tests in its review

of decommissioning trusts in license

transfers involving an unregulated

license. In view of deregulation, the

NRC believes that these tests are also

appropriate for evaluating the trust

agreements of all NRC power reactor

licensees.

This section of the notice presents a

set of evaluative tests for assessing

whether particular terms and conditions

for decommissioning trust funds will

help meet NRC’s goals of providing

‘‘reasonable assurance that adequate

funds are available,’’ and that lack of

funds will not result in delays in

decommissioning creating public health

and safety problems.

The following tests do not address the

amount of funds in the

decommissioning trust, a topic that NRC

dealt with in its 1998 rule (63 FR

50465). However, the tests address how

to assess the certainty that assured

funds will be available. The tests were

obtained by reviewing existing

requirements of the NRC, the Internal

Revenue Service, FERC, and several

States that currently apply to

decommissioning trusts, as well as nonbinding recommendations created by

those agencies for those trusts.

Certainty can be evaluated under

several basic tests:

Test (1) Is the trust fund valid and

enforceable?

The trust instrument should be

required to include information that

helps to ensure and to demonstrate its

validity. A requirement that the

instrument be valid under State law,

while helpful, does not identify any

features of the trust that demonstrate its

validity. The trust must be in writing

and include the names and signatures of

the parties entering into the agreement;

their titles; the dates of signing (and the

effective date, if different); notarization

of the signatures; a description of the

basic agreement being entered into; and

an affirmative statement that the trustee

accepts the appointment.

An important measure of the

enforceability of the trust is whether the

trustee is clearly able to remain

financially solvent and capable of

providing the necessary services over

the period that the trust is in effect.

Factors that address the trustee’s

reliability include requirements that the

trustee be qualified or licensed, and

demonstrate that it has a particular level

of financial backing. The financial

condition of an institutional trustee may

be addressed in licensing of the trustee

through requirements for specified

levels of operating capital or reserves.

Test (2) Do the terms of the instrument

ensure that funds can be used only for

certain key activities—reactor

decommissioning and specified

administrative costs of the trust—rather

than a broad range of potentially

conflicting uses?

This test is to ensure that the trust

contains provisions that use of the

decommissioning trust funds is reserved

for decommissioning and routine and

minor administrative expenses.

Test (3) Is the trust protected against

events, such as amendment or

cancellation, that could lessen NRC’s

ability to direct the use of necessary

funds in a timely manner?

To address this particular problem,

the following features of the trust are

very important. The trust should

contain provisions describing

procedures for its amendment and

cancellation. NRC approval should be

required for both these actions when

amendment or cancellation could

materially affect timely access to

decommissioning funds. Because

disagreements over interpretation of the

trust could delay payment, the trust

should contain rules of interpretation

that specify how disagreements should

be resolved. Payment should occur

upon the happening of triggering events,

even if differences of opinion about the

trust have not been resolved.

Test (4) Do the terms of the trust ensure

that NRC will receive timely notice of all

important information concerning the

trust?

Trustees generally prepare annual

reports and accounting summaries

indicating the sums on hand,

investment results, taxes due, and

payments into the trust. These reports

can be supplied to NRC, upon request,

if NRC determines that it has a need for

the information. In general, however,

NRC determined in its rulemaking in

1998 that biennial reports of any

material changes in the trust, plus

information on the status of funds in the

trust, were sufficient to monitor the

trust funds. Thus, no changes to the

current frequency of reporting

requirements are being proposed.

Test (5) Do the terms of the trust place

appropriate limits on the investments

that the trustee may make?

This is typically accomplished by

specifying allowed or disallowed

investments and by defining a

‘‘prudent’’ investment. If the NRC relies

upon a ‘‘prudent investment’’ standard

adopted by investment specialists (e.g.,

the Third Restatement of Trusts) it will

need to track how that standard is being

interpreted in practice. In the past,

standards for the definition of prudent

investments have evolved over time. For

example, increasing use of diversified

investment portfolios led to changing

standards about whether each

investment in a portfolio, rather than

the portfolio as a whole, needed to be

prudent. Similarly, increasing use of

mutual funds led to relaxation of the

prohibition on delegation of investment

decisions by a trustee to a fund

manager. Because of these and other

evolving changes to the then-existing

‘‘prudent man’’ rule, the American Law

Institute adopted a new ‘‘prudent

investor’’ rule in the Restatement of the

Law Third, Trusts in 1992 (Third

Restatement). In addition, the National

Conference of Commissioners on

Uniform State Laws promulgated a

Uniform Prudent Investor Act in 1994,

and numerous States have since

adopted the entire Act or amended their

State laws to reflect it. However, the

rule cannot be said to be completely

uniform across the country, and

continued evolution can be expected.1

In view of the above tests, the NRC

believes that assurance can be enhanced

by specifying in 10 CFR 50.75 essential

terms and conditions of the

decommissioning trusts that address the

following topics:

—The trust must be an external trust

fund held in the United States,

established pursuant to a written

agreement and with an entity that is

any appropriate State or Federal

government agency or whose

operations are regulated by a State or

Federal agency.

—The trust agreement must provide that

trust investments are prohibited in

securities or other obligations of the

reactor owner or its affiliates,

successors, or assigns.

—The trust agreement must provide that

trust investments are prohibited in

any entity owning one or more

nuclear power plants, except for

investments tied to general market

indices or non-nuclear sector mutual

funds.

Federal Register / Vol. 66, No. 104 / Wednesday, May 30, 2001 / Proposed Rules 29247

—The trust agreement must provide that

the agreement cannot be amended in

any material respect without 30-days

prior written notification to the NRC,

and there is no objection from the

NRC within the notice period.

—The trust agreement must provide that

the trustee, investment advisor, or

anyone else directing investments

made by the trust should adhere to a

‘‘prudent investor’’ standard.

—The trust agreement must provide that

no disbursements or payments from

the trust may be made by the trustee,

other than for payment of ordinary

administrative expenses (examples of

ordinary administrative expenses are

set out in the Internal Revenue Code

Section 468A), until the trustee has

first given the NRC 30-days prior

written notice, and that no

disbursements or payments from the

trust may be made if the trustee

receives written notice of objection

from the NRC within the notice

period.

—The person directing the investment

of the funds is prohibited from

engaging the licensee or its affiliates

or subsidiaries as investment manager

for the funds or from accepting dayto-day management direction of the

funds’ investments or direction on

individual investments by the funds

from the licensee or its affiliates or

subsidiaries.

The NRC currently does not include

an extensive set of prescriptive

requirements in its regulations for the

terms and conditions of reactor

decommissioning trusts. Rather, the

NRC requires only that the funds be

segregated from the licensee’s assets and

outside the licensee’s administrative

control. A trust fund used to accomplish

these purposes must be acceptable to

the NRC. This overall approach gives

licensees great flexibility in how they

set up a decommissioning trust fund,

but it provides little guidance to them

concerning what trust provisions NRC

will find acceptable. NRC’s Standard

Review Plan NUREG–1577, Rev. 1

contains references to recent regulatory

amendments, as well as useful

explanations of certain key regulatory

terms, that are not found in the older

Regulatory Guide 1.159. However,

Regulatory Guide 1.159 contains a

model trust that provides an example of

the trust terms that NRC finds

acceptable. As a result, Regulatory

Guide 1.159 is being expanded and

updated. The NRC is seeking public

comment on the draft revised regulatory

guide. Comments may be submitted as

indicated under the ADDRESSES heading.

An alternative approach would be for

the NRC to specify the precise wording

of the trust provisions in its regulations.

The NRC does not believe it would be

either feasible or desirable to change its

overall approach by specifying

mandatory wording in regulations for

the entire decommissioning trust fund.

Based on the wide variety of trust

instruments that are currently in use for

decommissioning trust funds, it appears

that, at a minimum, several of these

trust fund templates would be needed

(e.g., a model master trust fund

agreement; a model for a qualified fund

under Internal Revenue Code Section

468A; and a model for a non-qualified

fund). Substantial time and considerable

costs, both to licensees and to the NRC,

would be necessary to fit the disparate

trust instruments currently in use into

any templates established by NRC. In

addition, the requirements in 10 CFR

50.75 would become more prescriptive.

With respect to the issuance of DG–

1106, ‘‘Proposed Revision 1 of

Regulatory Guide 1.159, Assuring the

Availability of Funds for

Decommissioning Nuclear Reactors,’’

the NRC:

—Incorporates material from NUREG–

1577, Rev. 1, ‘‘Standard Review Plan

on Power Reactor Licensee Financial

Qualification and Decommissioning

Financial Assurance’’ that provides

criteria for determining the meaning

of the terms ‘‘acceptable to NRC,’’

‘‘under the administrative control of

the licensee,’’ and other terms used in

the pertinent regulations that are

currently not defined in the regulatory

guide.

—Develops a list of trust provisions,

based on the model trust language

contained in Regulatory Guide 1.159

that identifies key provisions in the

model language that currently are not

described in the text of the regulatory

guide. The NRC has also provided

explanations of these provisions.

—Provides explanations or definitions

of other terms and conditions such as

‘‘subsidiaries,’’ ‘‘ affiliates,’’

‘‘successors,’’ ‘‘assigns,’’ and similar

terms. In addition, an explanation is

provided of the types of investments

tied to market indices or non-nuclear

mutual funds that will be acceptable.

—Provides explanation of what is likely

to constitute a ‘‘material’’ change or

amendment to the trust instrument.

—Provides explanations of certain

concepts that are currently

ambiguous. For example, the current

regulatory guide suggests that

licensees ‘‘should’’ ensure that trust

funds meet certain requirements, such

as effectiveness under pertinent State

trust law. This may be confusing to

licensees who believe that trusts must

be legally effective.

—Explains the intent and effect of cross

references to other sources of

authority, such as Internal Revenue

Service, FERC, and State

requirements. In some cases, the

current regulatory guide suggests that

trust funds that meet the requirements

of these other sources of authority

will be acceptable to NRC. The

revised guidance explains that

compliance with these other sources

of authority will be acceptable, within

the scope of the topic that they

address (e.g., investment criteria or

amount of annual payment into the

trust fund), but are not measures of

the overall acceptability of the trust

instrument to NRC. In some cases,

compliance with these requirements

will not be sufficient, by itself, to

constitute acceptability to the NRC.

—Provides a clear and consistent

description of the investment

guidelines pertinent to

decommissioning trust funds. Current

references in the regulatory guide to

State law, FERC requirements, and

other standards appear to create some

ambiguity concerning the precise

limits of the investment guidelines

and what they include.

—Revises the Sample Parent Guarantee

to eliminate NRC as a direct

beneficiary within the guarantee. This

modification reflects current NRC

practice.

Section-by-Section Analysis

Section 50.75(e)

This subsection would be amended by

the addition of a sentence to both

paragraphs 50.75(e)(1)(i), which deals

with the prepayment method of

financial assurance, and 50.75(e)(1)(ii),

which deals with the external sinking

fund method of financial assurance. The

sentences would call for the trust to be

an external trust fund held in the United

States, established pursuant to a written

agreement with an entity that is a State

or Federal government agency or whose

operations are regulated by a State of

Federal agency. These amendments

would be used by the NRC staff in

evaluating the first test addressed in the

Discussion Section relating to trust

agreement validity and enforceability.

Section 50.75(h)

This is a new subsection which would

implement the following conditions.

The trust agreement must prohibit trust

investments in securities or other

obligations of the reactor owner or its

affiliates, successors, or assigns. The

trust agreement must prohibit

investments in any entity owning one or

more nuclear power plants. This is

29248 Federal Register / Vol. 66, No. 104 / Wednesday, May 30, 2001 / Proposed Rules

2Copies of NUREG–0586 are available for

inspection or copying for a fee from the NRC’s

Public Document Room, located at One White Flint

North, 11555 Rockville Pike (first floor), Rockville,

Maryland 20555–0001. Copies may be purchased at

current rates from the U.S. Government Printing

Office, P.O. Box 37082, Washington, DC 20402–

9328 (telephone (202) 512–1800); or from the

National Technical Information Service (NTIS) by

writing NTIS at 5285 Port Royal Road, Springfield,

VA 22161.

proposed to address the concerns raised

in Test 5 relating to the appropriate

limits on investments. The investment

may, however, be tied to general market

indices or non-nuclear sector mutual

funds. The trust agreement must

stipulate that the agreement cannot be

amended in any material respect

without 30-days prior written notice to

the NRC, and that no amendment to the

trust may be made if the trustee receives

written notice of objection from the NRC

within that notice period. This is being

proposed to address the lessening of

NRC’s ability to direct the use of

necessary funds in a timely manner as

discussed in Test 3. The trust agreement

must stipulate that the trustee,

investment advisor, or anyone else

directing investments made by the trust

should adhere to a ‘‘prudent investor’’

standard. The trust agreement must

provide that no disbursements or

payments from the trust (other than

payment of ordinary administrative

expenses) may be made by the trustee

until the trustee has first given the NRC

30-days prior written notice, and that no

disbursements or payments from the

trust may be made if the trustee receives

written notice of objection from the NRC

within that notice period. This would

ensure that the funds can be used only

for certain key activities as identified in

Test 2. The person directing the

investment of the funds may not use the

licensee or its affiliates or subsidiaries

as the investment manager for the funds

or accept day-to-day management

direction of the funds’ investments or

direction on individual investments by

the funds from the licensee or its

affiliates or subsidiaries.

V. Finding of No Significant

Environmental Impact: Environmental

Assessment

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, if

adopted, would not be a major Federal

action significantly affecting the quality

of the human environment and therefore

an environmental impact statement is

not required. The basis for this

determination reads as follows: This

action is being proposed to require that

decommissioning trust agreements be in

a form acceptable to the NRC in order

to increase assurance that an adequate

amount of decommissioning funds

would be available for their intended

purpose. Because of deregulation within

the electric power generation industry,

the NRC will need to take increased

responsibility to oversee

decommissioning trust funds as State

Public Utility Corporations may no

longer oversee these funds.

This revision to the NRC’s regulations

would provide licensees with a

codification of requirements and

guidance that will specify more fully the

provisions of the decommissioning trust

agreements. The proposed rule would

state that the trust provisions must be

acceptable to the NRC and would

contain general objectives and criteria

that the NRC believes are required to

ensure that funds in the trusts would be

available for their intended purpose.

These proposed changes would 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).2

Therefore, promulgation of this rule

would not introduce any impacts on the

environment not previously considered

by the NRC. The NRC is not aware of

any other documents related to the

environmental impact of this action.

The foregoing constitutes the

environmental assessment and finding

of no significant impact for this

proposed rule.

The determination of this

environmental assessment is that there

would be no significant offsite impact to

the public from this action. However,

the general public should note that the

NRC welcomes public participation.

The NRC has also committed to

complying with Executive Order (EO)

12898, ‘‘Federal Actions to Address

Environmental Justice in Minority

Populations and Low-Income

Populations,’’ dated February 11, 1994,

in all its actions. Therefore, the NRC has

also determined that there are no

disproportionate, high, and adverse

impacts on minority and low-income

populations. In the letter and spirit of

EO 12898, the NRC is requesting public

comment on any environmental justice

considerations or questions that the

public thinks may be related to this

proposed rule but somehow were not

addressed. The NRC uses the following

working definition of ‘‘environmental

justice:’’ the fair treatment and

meaningful involvement of all people,

regardless of race, ethnicity, culture,

income, or educational level with

respect to the development,

implementation, and enforcement of

environmental laws, regulations, and

policies. Comments on any aspect of the

environmental assessment, including

environmental justice, may be

submitted to the NRC as indicated

under the ADDRESSES heading.

The NRC has sent a copy of this

proposed rule to every State Liaison

Officer and requested their comments

on the environmental assessment.

VI. Paperwork Reduction Act

Statement

This proposed rule amends

information collection requirements that

are subject to the Paper Work Reduction

Act of 1995 (44 U.S.C. 3501 et seq.).

This rule has been submitted to the

Office of Management and Budget for

review and approval of the information

collection requirements.

The burden to the public for this

information collection is estimated to

average 80 hours per response,

including the time for reviewing

instructions, searching existing data

sources, gathering and maintaining data

needed, and completing and reviewing

the information collection. The U.S.

Nuclear Regulatory Commission is

seeking public comment on the

potential impact of the information

collections contained in the proposed

rule and on the following issues:

1. Is the proposed information

collection necessary for the proper

performance of the functions of the

NRC, including whether the information

will have practical utility?

2. Is the estimate of burden accurate?

3. Is there a way to enhance the

quality, utility, and clarity of the

information to be collected?

4. How can the burden of the

information collection be minimized,

including the use of automated

collection techniques?

Send comments on any aspect of this

proposed information collection,

including suggestions for reducing the

burden, to the Records Management

Branch (T–6 E6), U.S. Nuclear

Regulatory Commission, Washington,

DC 20555–0001, or by Internet

electronic mail at BJS1@NRC.GOV; and

to the Desk Officer, Office of

Information and Regulatory Affairs,

NEOB–1202, (3150–0011), Office of

Management and Budget, Washington,

DC 20503.

Comments to OMB on the information

collections or on the above issues

should be submitted by June 29, 2001.

Comments received after this date will

be considered if it is practical to do so,

Federal Register / Vol. 66, No. 104 / Wednesday, May 30, 2001 / Proposed Rules 29249

but assurance of consideration cannot

be given to comments received after this

date.

VII. Public Protection Notification

If a means 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.

VIII. Regulatory Analysis

The Commission has prepared a draft

regulatory analysis on this proposed

regulation. The analysis examines the

costs and benefits of the alternatives

considered by the Commission. The

draft analysis is available for inspection

in the NRC Public Document Room, One

White Flint North, 11555 Rockville Pike

(first floor), Rockville, Maryland. Single

copies of the analysis may be obtained

from Brian J. Richter, Office of Nuclear

Reactor Regulation, U.S. Nuclear

Regulatory Commission, Washington,

DC 20555–0001, telephone (301) 415–

1978, e-mail bjr@nrc.gov.

The Commission requests public

comment on the draft analysis.

Comments on the draft analysis may be

submitted to the NRC as indicated

under the ADDRESSES heading.

IX. Regulatory Flexibility Certification

In accordance with the Regulatory

Flexibility Act of 1980 (5 U.S.C. 605(b))

as amended by the Small Business

Regulatory Enforcement Fairness Act of

1996, Public Law 104–121 (March 29,

1996), the Commission certifies that this

rule will not, if promulgated, have a

significant economic impact on a

substantial number of small entities.

This proposed rule affects only the

licensing, operation, and

decommissioning of nuclear power

plants. The companies that own these

plants do not fall in the scope of the

definition of ‘‘small entities’’ set forth in

the NRC’s size standards (10 CFR 2.810).

X. Backfit Analysis

The Regulatory Analysis for the

proposed rule also constitutes the

documentation for the evaluation of

backfit requirements, and no separate

backfit analysis has been prepared. As

defined in 10 CFR 50.109, the backfit

rule applies to—

* * * modification of or addition to systems,

structures, components, or design of a

facility; or the design approval or

manufacturing license for a facility; or the

procedures or organization required to

design, construct or operate a facility; any of

which may result from a new or amended

provision in the Commission rules or the

imposition of a regulatory staff position

interpreting the Commission rules that is

either new or different from a previously

applicable staff position. * * *

The proposed amendments to NRC’s

requirements for decommissioning trust

provisions of nuclear power plants

would require that decommissioning

trust agreements be in a form acceptable

to the NRC in order to increase

assurance that an adequate amount of

decommissioning funds will be

available for their intended purpose.

Also, as nuclear power reactors have

been sold, NRC has stipulated, in

connection with license transfers, that

certain terms and conditions be added

to decommissioning trust funds. These

sales may involve transfers of nuclear

power reactors from regulated public

utilities to firms that are not regulated

as public utilities. Because rate

regulators may, as a consequence of

utility deregulation, cease to exercise

direct oversight over decommissioning

trusts, the Commission directed the

NRC staff to initiate a rulemaking to

require that decommissioning trust

agreements are in a form acceptable to

the NRC.

Although some of the changes to the

regulations are reporting requirements,

that are not covered by the backfit rule,

other elements in the changes are

considered backfits because they would

modify, supplement, or clarify the

regulations with respect to: (1) The fact

that the NRC will need to exercise

greater oversight of decommissioning

trust funds as State Public Utility

Commissions reduce their oversight as a

result of deregulation within the electric

power generation industry, and (2) the

NRC exercising more oversight of

decommissioning trusts in evaluating

license transfer applications. The NRC

has concluded on the basis of the

documented evaluation required by 10

CFR 50.109(4)(a)(4) and set forth in the

regulatory analysis, that the new or

modified requirements are necessary to

ensure that nuclear power reactor

licensees provide for adequate

protection of the public health and

safety in the face of a changing

competitive and regulatory environment

not envisioned when the reactor

decommissioning funding regulations

were promulgated and that the changes

to the regulations are in accord with the

common defense and security.

Therefore, the NRC has determined to

treat this action as an adequate

protection backfit under 10 CFR

50.109(a)(4)(ii). Consequently, a backfit

analysis is not required and the costbenefit standards of 10 CFR 50.109(a)(3)

do not apply. Further, these changes to

the regulations are required to satisfy 10

CFR 50.109(a)(5).

XI. National Technology and Transfer

and Advancement Act

The National Technology Transfer

and Advancement Act of 1995, Pub. L.

104–113, requires that Federal agencies

use technical standards developed or

adopted by voluntary consensus

standards bodies unless the use of such

a standard is inconsistent with

applicable law or otherwise impractical.

There are no consensus standards

regarding the reporting of status of

decommissioning trust funds because of

revised trust agreements of nuclear

power plant licensees nor relating to

license transfers that would apply to the

requirements imposed by this rule.

Thus, the provisions of this Act do not

apply to this rule.

List of Subjects in 10 CFR Part 50

Antitrust, Classified information,

Criminal penalties, Fire protection,

Intergovernmental relations, Nuclear

power plants and reactors, Radiation

protection, Reactor siting criteria, and

Reporting and recordkeeping

requirements.

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 proposing to adopt the following

amendments to 10 CFR part 50.

PART 50—DOMESTIC LICENSING OF

PRODUCTION AND UTILIZATION

FACILITIES

1. 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. 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

29250 Federal Register / Vol. 66, No. 104 / Wednesday, May 30, 2001 / Proposed Rules

issued under sec. 187, 68 Stat. 955 (42 U.S.C.

2237).

2. In § 50.75, the introductory text of

paragraph (e)(1), paragraph (e)(1)(i), and

the introductory text of paragraph

(e)(1)(ii) would be revised, and a new

paragraph (h) would be added to read as

follows:

§ 50.75 Reporting and recordkeeping for

decommissioning planning.

* * * * *

(e)(1) Financial assurance is to be

provided by the following methods.

(i) Prepayment. Prepayment is the

deposit made preceding the start of

operation into an account segregated

from licensee assets and outside the

administrative control of the licensee

and its subsidiaries or affiliates of cash

or liquid assets such that the amount of

funds would be sufficient to pay

decommissioning costs at the time

permanent termination of operations is

expected. Prepayment may be in the

form of a trust, escrow account,

Government fund, certificate of deposit,

deposit of Government securities or

other payment acceptable to the NRC.

Such trust, escrow account, Government

fund, certificate of deposit, deposit of

Government securities, or other

payment shall be established pursuant

to a written agreement and maintained

at all times in the United States with an

entity that is an appropriate State or

Federal government agency or an entity

whose operations relating to the

prepayment deposit are regulated and

examined by a Federal or State agency.

A licensee may take credit for projected

earnings on the prepaid

decommissioning trust funds using up

to a 2 percent annual real rate of return

from the time of future funds’ collection

through the projected decommissioning

period. This includes the periods of safe

storage, final dismantlement, and

license termination, if the licensee’s

rate-setting authority does not authorize

the use of another rate. However, actual

earnings on existing funds may be used

to calculate future funds needs.

(ii) External sinking fund. An external

sinking fund is a fund established and

maintained by setting funds aside

periodically in an account segregated

from licensee assets and outside the

administrative control of the licensee

and its subsidiaries or affiliates in

which the total amount of funds would

be sufficient to pay decommissioning

costs at the time permanent termination

of operations is expected. An external

sinking fund may be in the form of a

trust, escrow account, Government

fund, certificate of deposit, deposit of

Government securities, or other

payment acceptable to the NRC. Such

trust, escrow account, Government

fund, certificate of deposit, deposit of

Government securities, or other

payment shall be established pursuant

to a written agreement and maintained

at all times in the United States with an

entity that is an appropriate State or

Federal government agency or an entity

whose operations relating to the

external sinking fund are regulated and

examined by a Federal or State agency.

A licensee may take credit for projected

earnings on the external sinking funds

using up to a 2 percent annual real rate

of return from the time of future funds’

collection through the decommissioning

period. This includes the periods of safe

storage, final dismantlement, and

license termination, if the licensee’s

rate-setting authority does not authorize

the use of another rate. However, actual

earnings on existing funds may be used

to calculate future fund needs. A

licensee, whose rates for

decommissioning costs cover only a

portion of such costs, may make use of

this method only for that portion of

such costs that are collected in one of

the manners described in this

paragraph, (e)(1)(ii). This method may

be used as the exclusive mechanism

relied upon for providing financial

assurance for decommissioning in the

following circumstances:

* * * * *

(h)(1) Licensees using prepayment or

an external sinking fund to provide

financial assurance shall provide in the

terms of the trust, escrow account,

government fund, or other account used

to segregate and manage the funds

that—

(i) The trustee, manager, investment

advisor, or other person directing

investment of the funds:

(A) Is prohibited from investing the

funds in securities or other obligations

of the licensee or any other owner or

operator of the power reactor or their

affiliates, subsidiaries, successors or

assignees, or in securities of any other

entity owning one or more nuclear

power plants, except for investments

tied to market indices or non-nuclear

sector mutual funds;

(B) Is obligated to ensure that all

investments are rated at least

‘‘investment grade’’ or equivalent;

(C) Is obligated at all times to adhere

to a prudent investor standard in

investing the funds; and

(D) Is prohibited from engaging the

licensee or its affiliates or subsidiaries

as investment manager for the funds or

from accepting day-to-day management

direction of the funds’ investments or

direction on individual investments by

the funds from the licensee or its

affiliates or subsidiaries.

(ii) The trust, escrow account,

Government fund, or other account used

to segregate and manage the funds may

not be amended in any material respect

without written notification to the

Director, Office of Nuclear Reactor

Regulation, or the Director, Office of

Nuclear Material Safety and Safeguards,

as applicable, at least 30-days prior to

the proposed effective date of the

amendment. The licensee shall provide

the text of the proposed amendment and

a statement of the reason for the

proposed amendment. The trust, escrow

account, Government fund, or other

account may not be amended if the

person responsible for managing the

trust, escrow account, Government

fund, or other account receives written

notice of objection from the Director,

Office of Nuclear Reactor Regulation, or

the Director, Office of Nuclear Material

Safety and Safeguards, as applicable,

within the notice period; and

(iii) No disbursement or payment may

be made from the trust, escrow account,

Government fund, or other account used

to segregate and manage the funds, other

than for payment of ordinary

administrative expenses, until written

notice of the intention to make a

disbursement or payment has been

given the Director, Office of Nuclear

Reactor Regulation, or the Director,

Office of Nuclear Material Safety and

Safeguards, as applicable, at least 30-

days prior to the date of the intended

disbursement or payment. The

disbursement or payment from the trust,

escrow account, Government fund or

other account may be made following

the 30-day notice period if the person

responsible for managing the trust,

escrow account, Government fund, or

other account does not receive written

notice of objection from the Director,

Office of Nuclear Reactor Regulation, or

the Director, Office of Nuclear Material

Safety and Safeguards, as applicable,

within the notice period. Disbursements

or payments from the trust, escrow

account, Government fund, or other

account used to segregate and manage

the funds, are restricted to ordinary

administrative expenses,

decommissioning expenses, or transfer

to another financial assurance method

acceptable under paragraph (e) of this

section until final decommissioning has

been completed.

(2) Licensees using a surety method,

insurance, or other guarantee method to

provide financial assurance shall

provide that the trust established for

decommissioning costs to which the

surety or insurance is payable contains

in its terms the requirements in

paragraphs (h)(1)(i), (ii) and (iii) of this

section.

Federal Register / Vol. 66, No. 104 / Wednesday, May 30, 2001 / Proposed Rules 29251

Dated at Rockville, Maryland, this 23rd day

of May, 2001.

For the Nuclear Regulatory Commission.

Annette L. Vietti-Cook,

Secretary of the Commission.

[FR Doc. 01–13489 Filed 5–29–01; 8:45 am]

BILLING CODE 7590–01–P

NUCLEAR REGULATORY

COMMISSION

10 CFR Parts 51, 61, 70, 72, 73, 74, 75,

76, and 150

RIN AG69

Material Control and Accounting

Amendments

AGENCY: Nuclear Regulatory

Commission.

ACTION: Proposed rule.

SUMMARY: The Nuclear Regulatory

Commission (NRC) is proposing to

amend its material control and

accounting (MC&A) regulations. The

reporting requirements for submitting

Material Balance Reports and Inventory

Composition Reports are being revised

to change both the frequency and timing

of the reports. The categorical exclusion

for approving safeguards plans is being

revised to specifically include approval

of amendments to safeguards plans. The

MC&A requirements for Category II

facilities are being revised to be more

risk informed. The proposed

amendments are intended to reduce

unnecessary burden on licensees and

the NRC without adversely affecting

public health and safety.

DATES: The comment period expires

August 13, 2001. Comments received

after this date will be considered if it is

practical to do so, but the NRC is able

to assure consideration only for

comments received on or before this

date.

ADDRESSES: Submit comments to:

Secretary, U.S. Nuclear Regulatory

Commission, Washington, DC 20555–

0001, Attn: Rulemakings and

Adjudications Staff.

Deliver comments to 11555 Rockville

Pike, Rockville, MD, between 7:30 a.m.

and 4:15 p.m. on Federal workdays.

You may also provide comments via

the NRC’s interactive rulemaking

website (http://ruleforum.llnl.gov). This

site provides the capability to upload

comments as files (any format) if your

web browser supports that function. For

information about the interactive

rulemaking website, contact Ms. Carol

Gallagher (301) 415–5905; e-mail

CAG@nrc.gov.

Certain documents related to this

rulemaking, including comments

received, may be examined at the NRC’s

Public Document Room (PDR), 11555

Rockville Pike, Room O–1F21,

Rockville, MD. These same documents

may also be viewed and downloaded

electronically via the rulemaking

website.

Documents created or received at the

NRC are also available electronically at

the NRC’s Public Electronic Reading

Room on the Internet at http://

www.nrc.gov/NRC/ADAMS/index.html.

From this site, the public can gain entry

into the NRC’s Agencywide Document

Access and Management System

(ADAMS), which provides text and

image files of NRC’s public documents.

For more information, contact the NRC’s

PDR Reference staff at 1–800–397–4209,

301–415–4737, or by email to

pdr@nrc.gov.

FOR FURTHER INFORMATION CONTACT:

Merri Horn, telephone (301) 415–8126,

e-mail mlh1@nrc.gov, Office of Nuclear

Material Safety and Safeguards, U.S.

Nuclear Regulatory Commission,

Washington, DC 20555–0001.

SUPPLEMENTARY INFORMATION:

Background

The Commission proposes to amend

an aspect of the MC&A requirements so

as to reduce unnecessary regulatory

burden and to provide additional

flexibility to a licensee required to

submit Material Balance Reports and

Inventory Composition Reports (also

called Physical Inventory Listing

report). The current regulations require

these reports to be compiled as of March

31 and September 30 of each year and

submitted within 30 days after the end

of the period covered by the report.

These twice yearly reports are typically

based on book values as opposed to

physical inventory results because the

dates do not always coincide with the

time frame for a facility’s physical

inventory. Physical inventories for

Category III facilities are conducted on

an annual basis, semiannually for

Category I facilities, and every 2 to 6

months for Category II facilities. The

term Material Status Reports refers to

both the Material Balance Reports and

the Inventory Composition Reports and

is used in Part 75.

A Category I licensee is one that is

licensed to possess and use formula

quantities of strategic special nuclear

material (SSNM) (e.g., 5 kilograms of

uranium enriched to 20 percent or more

in the uranium-235 isotope). SSNM

means uranium-235 (contained in

uranium enriched to 20 percent or more

in the uranium-235 isotope), uranium233, or plutonium. There are currently

two licensed Category I facilities. A

Category II licensee is one that is

licensed to possess and use greater than

one effective kilogram of special nuclear

material (SNM) of moderate strategic

significance (e.g., uranium enriched to

more than 10 percent but less than 20

percent in the uranium-235 isotope,

with limited quantities at higher

enrichments). Currently, there is only

one licensed Category II facility, General

Atomics, and it has a possession-only

license and is undergoing

decommissioning. General Atomics

would not be required to make changes

to meet the new requirements. There are

no operating Category II licensed

facilities. A Category III licensee is one

that is licensed to possess and use

quantities of SNM of low strategic

significance (e.g., uranium enriched to

less than 10 percent in the uranium-235

isotope, with limited quantities at

higher enrichments). See Table 1 for

more specific information on possession

limits for Category I, II, and III licensees.

TABLE 1.—CATEGORIZATION OF MATERIAL

Material Form Category I Category II Category III

Plutonium ........................... Unirradiated ....................... 2 kg or more ..................... Less than 2 kg but more

than 500 g.

500 g or less.

Uranium-235 ...................... Unirradiated:

Uranium enriched to 20

percent U–235 or more.

5 kg or more ..................... Less than 5 kg but more

than 1 kg.

1 Kg or less.

Uranium enriched to 10

percent U–235 but less

than 20 percent.

........................................... 10 kg or more ................... Less than 10 kg.