Nuclear Regulatory Commission: Challenges Facing NRC in Effectively Carrying Out Its Mission
Published: 2005-05-26T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Nuclear Regulatory Commission (NRC) has the regulatory responsibility to, among other things, ensure that the nation's 103 commercial nuclear power plants are operated in a safe and secure manner. While the nuclear power industry's overall safety record has been good, safety issues periodically arise that threaten the credibility of NRC's regulation and oversight of the industry. Recent events make the importance of NRC's regulatory and oversight responsibilities readily apparent. The terrorist attacks on September 11, 2001, focused attention on the security of facilities such as commercial nuclear power plants, while safety concerns were heightened by shutdown of the Davis-Besse nuclear power plant in Ohio in 2002, and the discovery of missing or unaccounted for spent nuclear fuel at three nuclear power plants. GAO has issued a total of 15 recent reports and testimonies on a wide range of NRC activities. This testimony (1) summarizes GAO's findings and associated recommendations for improving NRC mission-related activities and (2) presents several cross-cutting challenges NRC faces in being an effective and credible regulator of the nuclear power industry.
section_title: What GAO Found
paragraphs: GAO has documented many positive steps taken by NRC to advance the security and safety of the nation's nuclear power plants. It has also identified various actions that NRC needs to take to better carry out its mission. First, with respect to its security mission, GAO found that NRC needs to improve security measures for sealed sources of radioactive materials---radioactive material encapsulated in stainless steel or other metal used in medicine, industry, and research--which could be used to make a "dirty bomb." GAO also found that, although NRC was taking numerous actions to require nuclear power plants to enhance security, NRC needed to strengthen its oversight of security at the plants. Second, with respect to its public health and safety, and environmental missions, GAO found that NRC needs to conduct more effective analyses of plant owners' funding for decommissioning to ensure that the significant volume of radioactive waste remaining after the permanent closure of a plant are properly disposed. Further, NRC needs to more aggressively and comprehensively resolve issues that led to the shutdown of the Davis-Besse nuclear power plant by improving its oversight of plant safety conditions. Finally, NRC needs to do more to ensure that power plants are effectively controlling spent nuclear fuel, including developing and implementing appropriate inspection procedures. GAO has identified several cross-cutting challenges affecting NRC's ability to effectively and credibly regulate the nuclear power industry. Recently, NRC has taken two overarching approaches to its regulatory and oversight responsibilities. These approaches are to (1) develop and implement a risk-informed regulatory strategy that targets the most important safety-related activities and (2) strike a balance between verifying plants' compliance with requirements through inspections and affording licensees the opportunity to demonstrate that they are operating their plants safety. NRC must overcome significant obstacles to fully implement its risk-informed regulatory strategy across agency operations, especially with regards to developing the ability to identify emerging technical issues and adjust regulatory requirements before safety problems develop. NRC also faces inherent challenges in achieving the appropriate balance between more direct oversight and industry self-compliance. Incidents such as the 2002 shutdown of the Davis-Besse plant and the unaccounted for spent nuclear fuel at several plants raise questions about whether NRC has the risk information that it needs and whether it is appropriately balancing agency involvement and licensee self-monitoring. Finally, GAO believes that NRC will face challenges managing its resources while meeting increasing regulatory and oversight demands. NRC's resources have already been stretched by the extensive effort to enhance security at plants in the wake of the September 11, 2001, terrorist attacks. Pressure on NRC's resources will continue as the nation's fleet of plants age and the industry's interest in expansion grows, both in licensing and constructing new plants, and re-licensing and increasing the power output of existing ones.

section_title: Letter
paragraphs: I am pleased to be here today to participate in the Subcommittee’s  oversight hearing on the Nuclear Regulatory Commission (NRC). NRC has  the regulatory responsibility to ensure that the nation’s 103 operating  commercial nuclear power plants are operated in a safe and secure  manner. These plants provide about 20 percent of the country’s electricity,  but safety of their operations is paramount, given the potentially  devastating effects of a nuclear accident. While the nuclear power  industry’s overall safety record has been good, safety issues periodically  arise that raise questions about NRC’s regulation and oversight of the  industry and challenge its credibility for guaranteeing the safety of the  nation’s aging fleet of nuclear power plants. NRC plays an important role  in protecting public health and the environment through its regulation of  the nuclear power industry and other civilian use of nuclear material, and  we commend the Subcommittee for holding this hearing.
NRC was formed in 1975, to regulate the various commercial and  institutional uses of nuclear energy, including nuclear power plants. NRC’s  mission is to regulate the nation’s civilian use of nuclear material to ensure  adequate protection of public health and safety, to promote the common  defense and security, and to protect the environment. NRC’s activities  include, among other things, licensing nuclear reactors (including license  transfers and operating experience evaluation), reviewing plant safety  procedures, imposing enforcement sanctions for violations of NRC  requirements, and participating in homeland security efforts (including  threat assessment, emergency response, mitigating strategies, security  inspections, and force-on-force exercises). NRC also has regulatory  oversight for the decommissioning of nuclear reactors, including  accumulating sufficient funds to carry out decommissioning, and for the  interim storage of spent nuclear fuel — the used fuel periodically removed  from reactors in nuclear power plants.
The importance of NRC’s regulatory and oversight responsibilities is made  readily apparent by recent events. The terrorist attacks on September 11,  2001, and the subsequent discovery of nuclear power plants on a list of  possible terrorist targets have focused attention on the security of the  nation’s commercial nuclear power plants. Safety concerns were  heightened by the discovery of a pineapple-sized cavity in the carbon steel  reactor vessel head, and subsequent 2-year shutdown, of the Davis-Besse  nuclear power plant in Ohio in 2002. Additional safety concerns were  raised by the discovery of missing or unaccounted for spent nuclear fuel at  three nuclear power plants. Further, the decommissioning of some of the  nations’ aging nuclear power plants raises the issue of whether NRC is  ensuring that plant owners are accumulating sufficient funds for  decommissioning plants in a way that best protects public health, safety,  and the environment.
Over the past 2 years, we have issued a total of 15 reports and testimonies  on a wide range of NRC activities. (These reports are listed in Appendix I).  While our work has primarily focused on identifying ways that NRC can  strengthen its regulation and oversight of the nuclear power industry, we  have documented a number of productive steps NRC has taken to improve  its mission-related activities. One example is the substantial effort that  NRC has made in working with the industry to enhance security at nuclear  power plants since the September 11, 2001, terrorist attacks. Another  example is NRC’s considerable effort to analyze what went wrong at the  Davis-Besse plant in 2002, and to incorporate the lessons learned into its  processes. Today, my testimony will briefly summarize our recently  completed NRC work. Specifically, this testimony (1) summarizes GAO’s  findings and associated recommendations for improving NRC mission- related activities and (2) provides some observations on cross-cutting  challenges that NRC faces in being an effective and credible regulator of  the nuclear power industry.
This testimony is based on seven of our recently issued reports. The other  eight reports either address issues for which NRC is not the primary  federal agency – such as radioactive waste disposal and nuclear  nonproliferation — or concern internal NRC administrative matters —  such as fee recovery and information technology management. We did not  perform additional audit work in preparing this testimony. The work for  our previously issued reports was conducted in accordance with generally  accepted government auditing standards.
subsections: section_title: Regulatory and Oversight Functions Vital to NRC’s Mission Need to be Improved
paragraphs: Our recent analyses of NRC programs identified several areas where NRC  needs to take action to better fulfill its mission and made associated  recommendations for improvement. With respect to NRC’s security  mission, we found that the security of sealed radioactive sources and the  physical security at nuclear power plants need to be strengthened. With  respect to its public health and safety, and environmental missions, we  found several shortcomings that need to be addressed. NRC’s analyses of  plant owners’ contributions could be improved to better ensure that  adequate funds are accumulating for the decommissioning of nuclear  power plants. By contrast, we found that NRC is ensuring that  requirements for liability insurance for nuclear power plants owned by  limited liability companies are being met. Further, to ensure the safety of  nuclear power plants NRC must more aggressively and comprehensively  resolve oversight issues related to the shutdown of the Davis-Besse plant.  Finally, NRC’s methods of ensuring that power plants are effectively  controlling spent nuclear fuel need to be improved.
subsections: section_title: Operations Related to NRC’s Security Mission Could Be Improved
paragraphs: In August 2003, we reported on federal and state actions needed to  improve security of sealed radioactive sources. Sealed radioactive  sources, radioactive material encapsulated in stainless steel or other  metal, are used worldwide in medicine, industry, and research. These  sealed sources could be a threat to national security because terrorists  could use them to make “dirty bombs.” We were asked among other things  to determine the number of sealed sources in the United States. We found  that the number of sealed sources in use today in the United States is  unknown primarily because no state or federal agency tracks individual  sealed sources. Instead, NRC and the agreement states track numbers of  specific licensees. NRC and the Department of Energy (DOE) have begun  to examine options for developing a national tracking system, but to date,  this effort has had limited involvement by the agreement states. NRC had  difficulty locating owners of certain generally licensed devices it began  tracking in April 2001, and has hired a private investigation firm to help  locate them. Twenty-five of the 31 agreement states that responded to our  survey indicated that they track some or all general licensees or generally  licensed devices, and 17 were able to provide data on the number of  generally licensed devices in their jurisdictions, totaling approximately  17,000 devices. GAO recommended that NRC (1) collaborate with states to  determine the availability of the highest risk sealed sources, (2) determine  if owners of certain devices should apply for licenses, (3) modify NRC’s  licensing process so sealed sources cannot be purchased until NRC  verifies their intended use, (4) ensure that NRC’s evaluation of federal and  state programs assesses the security of sealed sources, and (5) determine  how states can participate in implementing additional security measures.  NRC disagreed with some of our findings.
In September 2003, we reported that NRC’s oversight of security at  commercial nuclear power plants needed to be strengthened. The  September 11, 2001, terrorist attacks intensified the nation’s focus on  national preparedness and homeland security. Among possible terrorist  targets are the nation’s nuclear power plants which contain radioactive  fuel and waste. NRC oversees plant security through an inspection  program designed to verify the plants’ compliance with security  requirements. As part of that program, NRC conducted annual security  inspections of plants and force-on-force exercises to test plant security  against a simulated terrorist attack. GAO was asked to review (1) the  effectiveness of NRC’s security inspection program and (2) legal  challenges affecting power plant security. At the time of our review, NRC  was reevaluating its inspection program. We did not assess the adequacy  of security at the individual plants; rather, our focus was on NRC’s  oversight and regulation of plant security.
We found that NRC had taken numerous actions to respond to the  heightened risk of terrorist attack, including interacting with the  Department of Homeland Security and issuing orders designed to increase  security and improve defensive barriers at plants. However, three aspects  of NRC’s security inspection program reduced the agency’s effectiveness  in overseeing security at commercial nuclear power plants. First, NRC  inspectors often used a process that minimized the significance of security  problems found in annual inspections by classifying them as “non-cited  violations” if the problem had not been identified frequently in the past or  if the problem had no direct, immediate, adverse consequences at the time  it was identified. Non-cited violations do not require a written response  from the licensee and do not require NRC inspectors to verify that the  problem has been corrected. For example, guards at one plant failed to  physically search several individuals for metal objects after a walk-through  detector and a hand-held scanner detected metal objects in their clothing.  These individuals were then allowed unescorted access throughout the  plant’s protected area. By extensively using non-cited violations for  serious problems, NRC may overstate the level of security at a power plant  and reduce the likelihood that needed improvements are made. Second,  NRC did not have a routine, centralized process for collecting, analyzing,  and disseminating security inspections data to identify problems that may  be common to plants or to provide lessons learned in resolving security  problems. Such a mechanism may help plants improve their security.  Third, although NRC’s force-on-force exercises can demonstrate how well  a nuclear plant might defend against a real-life threat, several weaknesses  in how NRC conducted these exercises limited their usefulness.  Weaknesses included (1) using more personnel to defend the plant during  these exercises than during normal operations, (2) using attacking forces  that are not trained in terrorist tactics, and (3) using unrealistic weapons  (rubber guns) that do not simulate actual gunfire. Furthermore, at the  time, NRC has made only limited use of some available improvements that  would make force-on-force exercises more realistic and provide a more  useful learning experience.
Finally, we also found that even if NRC strengthens its inspection  program, commercial nuclear power plants face legal challenges in  ensuring plant security. First, federal law generally prohibits guards at  these plants from using automatic weapons, although terrorists are likely  to have them. As a result, guards at commercial nuclear power plants  could be at a disadvantage in firepower, if attacked. Second, state laws  regarding the permissible use of deadly force and the authority to arrest  and detain intruders vary, and guards were unsure about the extent of  their authorities and may hesitate or fail to act if the plant is attacked.  GAO made recommendations to promptly restore annual security  inspections and revise force-on-force exercises. NRC disagreed with many  of GAO’s findings, but did not comment on GAO’s recommendations.
In September 2004, we testified on our preliminary observations regarding  NRC’s efforts to improve security at nuclear power plants. The events of  September 11, 2001, and the subsequent discovery of commercial nuclear  power plants on a list of possible terrorist targets have focused  considerable attention on plants’ capabilities to defend against a terrorist  attack. NRC is responsible for regulating and overseeing security at  commercial nuclear power plants. We were asked to review (1) NRC’s  efforts since September 11, 2001, to improve security at nuclear power  plants, including actions NRC had taken to implement some of GAO’s  September 2003 recommendations to improve security oversight, and (2)  the extent to which NRC is in a position to assure itself and the public that  the plants are protected against terrorist attacks. The testimony reflected  the preliminary results of GAO’s review. We are currently performing a  more comprehensive review in which we are examining (1) NRC’s  development of its 2003 design basis threat (DBT), which establishes the  maximum terrorist threat that commercial nuclear power plants must  defend against, and (2) the security enhancements that plants have put in  place in response to the design basis threat and related NRC requirements.  We expect to issue a report on our findings later this year.
In the earlier work, we found that NRC responded quickly and decisively  to the September 11, 2001, terrorist attacks with multiple steps to enhance  security at commercial nuclear power plants. NRC immediately advised  plants to go to the highest level of security using the system in place at the  time, and issued advisories and orders for plants to make certain  enhancements, such as installing more physical barriers and augmenting  security forces, which could be quickly completed to shore up security.  According to NRC officials, their inspections found that plants complied  with these advisories and orders. Later, in April 2003, NRC issued a new  DBT and required the plants to develop and implement new security plans  to address the new threat by October 2004. NRC is also improving its  force-on-force exercises, as GAO recommended in its September 2003  report. While its efforts had enhanced security, NRC was not yet in a  position to provide an independent determination that each plant has  taken reasonable and appropriate steps to protect against the new DBT.  According to NRC officials, the facilities’ new security plans were on  schedule to be implemented by October 2004. However, NRC’s review of  the plans, which are not available to the general public for security  reasons, had primarily been a paper review and was not detailed enough  for NRC to determine if the plans would protect the facility against the  threat presented in the DBT. In addition, NRC officials generally were not  visiting the facilities to obtain site-specific information and assess the  plans in terms of each facility’s design. NRC is largely relying on the force- on-force exercises it conducts to test the plans, but these exercises will  not be conducted at all facilities for 3 years. We also found that NRC did  not plan to make some improvements in its inspection program that GAO  previously recommended. For example, NRC was not following up to  verify that all violations of security requirements had been corrected, nor  was the agency taking steps to make “lessons learned” from inspections  available to other NRC regional offices and nuclear power plants.
section_title: Operations Related to NRC’s Public Health and Safety and Environmental Missions Can Be Improved
paragraphs: In October 2003, we reported that NRC needs to more effectively analyze  whether nuclear power plant owners are adequately accumulating funds  for decommissioning plants. Following the closure of a nuclear power  plant, a significant radioactive waste hazard remains until the waste is  removed and the plant site is decommissioned. In 1988, NRC began  requiring owners to (1) certify that sufficient financial resources would be  available when needed to decommission their nuclear power plants and  (2) require them to make specific financial provisions for  decommissioning. In 1999, GAO reported that the combined value of the  owners’ decommissioning funds was insufficient to ensure enough funds  would be available for decommissioning. GAO was asked to update its  1999 report, and to evaluate NRC’s analysis of the owners’ funds and the  agency’s process for acting on reports that show insufficient funds.
We found that although the collective status of the owners’  decommissioning fund accounts has improved considerably since GAO’s  last report, some individual owners were not on track to accumulate  sufficient funds for decommissioning. Based on our analysis and using the  most likely economic assumptions, we concluded that the combined value  of nuclear power plant owners’ decommissioning fund accounts in 2000— about $26.9 billion—was about 47 percent greater than needed at that  point to ensure that sufficient funds would be available to cover the  approximately $33 billion in estimated decommissioning costs when the  plants are permanently closed. This value contrasts with GAO’s prior  finding that 1997 account balances were collectively 3 percent below what  was needed. However, overall industry results can be misleading. Because  funds are generally not transferable from funds that have more than  sufficient reserves to those with insufficient reserves, each individual  owner must ensure that enough funds are available for decommissioning  their particular plants. We found that 33 owners with ownership interests  in a total of 42 plants had accumulated fewer funds than needed through  2000, to be on track to pay for eventual decommissioning. In addition, 20  owners with ownership interests in a total of 31 plants recently  contributed less to their trust funds than we estimated they needed in  order to put them on track to meet their decommissioning obligations.
NRC’s analysis of the owners’ 2001 biennial reports was not effective in  identifying owners that might not be accumulating sufficient funds to  cover their eventual decommissioning costs. In reviewing the 2001 reports,  NRC reported that all owners appeared to be on track to have sufficient  funds for decommissioning. In reaching this conclusion, NRC relied on the  owners’ future plans for fully funding their decommissioning obligations.  However, based on the owners’ actual recent contributions, and using a  different method, GAO found that several owners could be at risk of not  meeting their financial obligations for decommissioning when these plants  stop operating. In addition, for plants with more than one owner, NRC did  not separately assess the status of each co-owner’s trust funds against  each co-owner’s contractual obligation to fund decommissioning. Instead,  NRC assessed whether the combined value of the trust funds for the plant  as a whole were reasonable. Such an assessment for determining whether  owners are accumulating sufficient funds can produce misleading results  because owners with more than sufficient funds can appear to balance out  owners with less than sufficient funds, even though funds are generally  not transferable among owners. Furthermore, we found that NRC had not  established criteria for taking action when it determines that an owner is  not accumulating sufficient decommissioning funds.
We recommended that NRC (1) develop an effective method for  determining whether owners are accumulating decommissioning funds at  sufficient rates and (2) establish criteria for taking action when it is  determined that an owner is not accumulating sufficient funds. NRC  disagreed with these recommendations, suggesting that its method is  effective and that it is better to deal with unacceptable levels of financial  assurance on a case-by-case basis. GAO continues to believe that  limitations in NRC’s method reduce its effectiveness and that, without  criteria, NRC might not be able to ensure owners are accumulating  decommissioning funds at sufficient rates.
In May 2004, we issued a report on NRC’s liability insurance requirements  for nuclear power plants owned by limited liability companies. An  accident at one the nation’s commercial nuclear power plants could result  in personal injury and property damage. To ensure that funds would be  available to settle liability claims in such cases, the Price-Anderson Act  requires licensees of these plants to have primary insurance—currently  $300 million per site. The act also requires secondary coverage in the form  of retrospective premiums to be contributed by all licensees of nuclear  power plants to cover claims that exceed primary insurance. If these  premiums are needed, each licensee’s payments are limited to $10 million  per year and $95.8 million in total for each of its plants. In recent years,  limited liability companies have increasingly become licensees of nuclear  power plants, raising concerns about whether these companies—which  shield their parent corporations’ assets—will have the financial resources  to pay their retrospective premiums. We were asked to determine (1) the  extent to which limited liability companies are the licensees for U.S.  commercial nuclear power plants, (2) NRC’s requirements and procedures  for ensuring that licensees of nuclear power plants comply with the Price- Anderson Act’s liability requirements, and (3) whether and how these  procedures differ for licensees that are limited liability companies.
We found that of the 103 operating nuclear power plants, 31 were owned  by 11 limited liability companies. Three energy corporations—Exelon,  Entergy, and the Constellation Energy Group—were the parent companies  for eight of these limited liability companies. These 8 subsidiaries were the  licensees or co-licensees for 27 of the 31 plants. We also found that NRC  requires all licensees for nuclear power plants to show proof that they  have the primary and secondary insurance coverage mandated by the  Price-Anderson Act. Licensees sign an agreement with NRC that requires  the licensee to keep the insurance in effect. American Nuclear Insurers  also has a contractual agreement with each of the licensees that obligates  the licensee to pay the retrospective premiums to American Nuclear  Insurers if these payments become necessary. A certified copy of this  agreement, which is called a bond for payment of retrospective premiums,  is provided to NRC as proof of secondary insurance. Finally, we found that  NRC does not treat limited liability companies differently than other  licensees with respect to the Price-Anderson Act’s insurance requirements.  Like other licensees, limited liability companies must show proof of both  primary and secondary insurance coverage. American Nuclear Insurers  also requires limited liability companies to provide a letter of guarantee  from their parent or other affiliated companies with sufficient assets to  pay the retrospective premiums. These letters state that the parent or  affiliated companies are responsible for paying the retrospective  premiums if the limited liability company does not. American Nuclear  Insurers informs NRC that it has received these letters.
In May 2004, we also issued a report documenting the need for NRC to  more aggressively and comprehensively resolve issues related to the  shutdown of the Davis-Besse nuclear power plant. The most serious  safety issue confronting the nation’s commercial nuclear power industry  since Three Mile Island in 1979, was identified at the Davis-Besse plant in  Ohio in March of 2002. After NRC allowed Davis-Besse to delay shutting  down to inspect its reactor vessel for cracked tubing, the plant found that  leakage from these tubes had caused extensive corrosion on the vessel  head—a vital barrier in preventing a radioactive release. GAO determined  (1) why NRC did not identify and prevent the corrosion, (2) whether the  process NRC used in deciding to delay the shutdown was credible, and (3)  whether NRC is taking sufficient action in the wake of the incident to  prevent similar problems from developing at other plants.
We found that NRC should have, but did not identify or prevent the  corrosion at Davis- Besse because agency oversight did not produce  accurate information on plant conditions. NRC inspectors were aware of  indications of leaking tubes and corrosion; however, the inspectors did not  recognize the importance of the indications and did not fully communicate  information about them to other NRC staff. NRC also considered  FirstEnergy—Davis-Besse’s owner—a good performer, which resulted in  fewer NRC inspections and questions about plant conditions. NRC was  aware of the potential for cracked tubes and corrosion at plants like Davis- Besse but did not view them as an immediate concern. Thus, despite being  aware of the development of potential problems, NRC did not modify its  inspection activities to identify such conditions. Additionally, NRC’s  process for deciding to allow Davis-Besse to delay its shutdown lacked  credibility. Because NRC had no guidance for making the specific decision  of whether a plant should shut down, it instead used guidance for deciding  whether a plant should be allowed to modify its operating license.  However, NRC did not always follow this guidance and generally did not  document how it applied the guidance. Furthermore, the risk estimate  NRC used to help decide whether the plant should shut down was also  flawed and underestimated the risk that Davis-Besse posed. Finally, even  though it underestimated the risk posed by Davis-Besse, the risk estimate  applied to the plant still exceeded levels generally accepted by the agency.  Nevertheless, Davis-Besse was allowed to delay the plant’s shutdown.
After this incident, NRC took several significant actions to help prevent  reactor vessel corrosion from recurring at nuclear power plants. For  example, NRC has required more extensive vessel examinations and  augmented inspector training. I would also like to note that, in April 2005,  NRC proposed a $5.45 million fine against the licensee of the Davis-Besse  plant. The principal violation was that the utility restarted and operated  the plant in May 2000, without fully characterizing and eliminating leakage  from the reactor vessel head. Additional violations included providing  incomplete and inaccurate information to NRC on the extent of cleaning  and inspecting the reactor vessel head in 2000.
While NRC has not yet completed all of its planned actions, we remain  concerned that NRC has no plans to address three systemic weaknesses  underscored by the incident at Davis-Besse. Specifically, NRC has  proposed no actions to help it better (1) identify early indications of  deteriorating safety conditions at plants, (2) decide whether to shut down  a plant, or (3) monitor actions taken in response to incidents at plants.  Both NRC and GAO had previously identified problems in NRC programs  that contributed to the Davis-Besse incident, yet these problems continued  to persist. Because the nation’s nuclear power plants are aging, GAO  recommended that NRC take more aggressive actions to mitigate the risk  of serious safety problems occurring at Davis-Besse and other nuclear  power plants.
In April 2005, we issued a report outlining the need for NRC to do more to  ensure that power plants are effectively controlling spent nuclear fuel.  Spent nuclear fuel—the used fuel periodically removed from reactors in  nuclear power plants—is too inefficient to power a nuclear reaction, but is  intensely radioactive and continues to generate heat for thousands of  years. Potential health and safety implications make the control of spent  nuclear fuel of great importance. The discovery, in 2004, that spent fuel  rods were missing at the Vermont Yankee plant in Vermont generated  public concern and questions about NRC’s regulation and oversight of this  material. GAO reviewed (1) plants’ performance in controlling and  accounting for their spent nuclear fuel, (2) the effectiveness of NRC’s  regulations and oversight of plants’ performance, and (3) NRC’s actions to  respond to plants’ problems controlling their spent fuel.
We found that nuclear power plants’ performance in controlling and  accounting for their spent fuel has been uneven. Most recently, three  plants—Vermont Yankee and Humboldt Bay (California) in 2004, and  Millstone (Connecticut) in 2000—have reported missing spent fuel.  Earlier, several other plants also had missing or unaccounted for spent  fuel rods or rod fragments. NRC regulations require plants to maintain  accurate records of their spent nuclear fuel and to conduct a physical  inventory of the material at least once a year. The regulations, however, do  not specify how physical inventories are to be conducted. As a result,  plants differ in the regulations’ implementation. For example, physical  inventories at plants varied from a comprehensive verification of the spent  fuel to an office review of the records and paperwork for consistency.  Additionally, NRC regulations do not specify how individual fuel rods or  segments are to be tracked. As a result, plants employ various methods for  storing and accounting for this material. Further, NRC stopped inspecting  plants’ material control and accounting programs in 1988. According to  NRC officials, there was no indication that inspections of these programs  were needed until the event at Millstone. At the time of our review, NRC  was collecting information on plants’ spent fuel programs to decide if it  needs to revise its regulations and/or oversight. It had its inspectors collect  basic information on all facilities’ programs. It also contracted with the  Department of Energy’s Oak Ridge National Laboratory in Tennessee to  review NRC’s material control and accounting programs for nuclear  material. NRC is planning to request information from plants and plans to  visit over a dozen plants for more detailed inspection. The results of these  efforts may not be completed until late 2005, over 5 years after the incident  at Millstone that initiated NRC’s efforts. However, we believed NRC has  already collected considerable information indicating problems or  weaknesses in plants’ material control and accounting programs for spent  fuel.
GAO recommended that NRC (1) establish specific requirements for the  way plants control and account for loose rods and fragments as well as  conduct their physical inventories, and (2) develop and implement  appropriate inspection procedures to verify plants’ compliance with the  requirements.
section_title: NRC Faces Several Broad Challenges in Effectively Regulating and Overseeing Nuclear Power Plants
paragraphs: Based on our recent work at NRC, we have identified several cross-cutting  challenges that NRC faces as it works to effectively regulate and oversee  the nuclear power industry. First, NRC must manage the implementation  of its risk-informed regulatory strategy across the agency’s operations.  Second, and relatedly, NRC must strive to achieve the appropriate balance  between more direct involvement in the operations of nuclear power  plants and self-reliance and self-reporting on the part of plant operators to  do the right things to ensure safety. Third, and finally, NRC must ensure  that the agency effectively manages resources to implement its risk- informed strategy and achieve the appropriate regulatory balance in the  current context of increasing regulatory and oversight demands as the  industry’s interest in expansion grows.
subsections: section_title: NRC Must Manage the Implementation of Its Risk- Informed Regulatory Strategy
paragraphs: Nuclear power plants have many physical structures, systems, and  components, and licensees have numerous activities under way, 24-hours  a day, to ensure that plants operate safely. NRC relies on, among other  things, the agency’s on-site resident inspectors to assess plant conditions  and oversee quality assurance programs, such as maintenance and  operations, established by operators to ensure safety at the plants.  Monitoring, maintenance, and inspection programs are used to ensure  quality assurance and safe operations. To carry out these programs,  licensees typically prepare numerous reports describing conditions at  plants that need to be addressed to ensure continued safe operations.  Because of the significant number of activities and physical structures,  systems, and components, NRC adopted a risk-informed strategy to focus  inspections on those activities and pieces of equipment that are  considered to be the most significant for protecting public health and  safety. Under the risk-informed approach, some systems and activities that  NRC considers to have relatively less safety significance receive little  agency oversight. With its current resources, NRC can inspect only a  relatively small sample of the numerous activities going on during  complex plant operations. NRC has adopted a risk-informed approach  because it believes that it can focus its regulatory resources on those areas  of the plant that the agency considers the most important to safety. NRC  has stated the adoption of this approach was made possible by the fact  that safety performance at plants has improved as a result of more than 25  years of operating experience.
Nevertheless, we believe that NRC faces a significant challenge in  effectively implementing its risk-informed strategy, especially with regards  to improving the quality of its risk information and identifying emerging  technical issues and adjusting regulatory requirements before safety  problems develop. The 2002 shutdown of the Davis-Besse plant illustrates  this challenge, notably the shortcomings in NRC’s risk estimate and failure  to sufficiently address the boric acid corrosion and nozzle cracking issues.  We also note that NRC’s Inspector General considers the development and  implementation of a risk-informed regulatory oversight strategy to be one  of the most serious management challenges facing NRC.
section_title: NRC Must Balance Oversight and Industry Self-Compliance
paragraphs: Under the Atomic Energy Act of 1954, as amended, and the Energy  Reorganization Act of 1974, as amended, NRC and the operators of nuclear  power plants share the responsibility for ensuring that nuclear reactors  are operated safely. NRC is responsible for issuing regulations, licensing  and inspecting plants, and requiring action, as necessary, to protect public  health and safety. Plant operators have the primary responsibility for  safely operating their plants in accordance with their licenses. NRC has  the authority to take actions, up to and including shutting down a plant, if  licensing conditions are not being met and the plant poses an undue risk to  public health and safety.
NRC has sought to strike a balance between verifying plants’ compliance  with requirements through inspections and affording licensees the  opportunity to demonstrate that they are operating their plants safely.  While NRC oversees processes, such as the use of performance measures  and indicators, and requirements that licensees maintain their own quality  assurance programs, NRC, in effect, relies on licensees and trusts them to  a large extent to make sure their plants are operated safely. While this  approach has generally worked, we believe that NRC still has work to do  to effectively position itself so that it can identify problems with  diminishing performance at individual plants before they become serious.  For example, incidents such as the 2002 discovery of the extensive reactor  vessel head corrosion at the Davis-Besse plant and the unaccounted for  spent nuclear fuel at several plants across the country, raise questions  about whether NRC is appropriately balancing agency involvement and  self-monitoring by licensees. An important aspect of NRC’s ability to rely  on licensees to maintain their own quality assurance programs is a  mechanism to identify deteriorating performance at a plant before the  plant becomes a problem. At Davis-Besse, NRC inspectors viewed the  licensee as a good performer based on its past performance and did not  ask the questions that should have been asked about plant conditions.  Consequently, the inspectors did not make sure that the licensee  adequately investigated the indications of the problem and did not fully  communicate the indications to the regional office and NRC headquarters.
section_title: NRC Must Manage Agency Resources to Meet Increasing Regulatory and Oversight Demands
paragraphs: Finally, Mr. Chairman, I would also like to comment briefly on NRC’s  resources. While we have not assessed the adequacy of NRC’s resources,  we have noted instances, such the shutdown of the Davis-Besse plant,  where resource constraints affected the agency’s oversight or delayed  certain activities. NRC’s resources have been challenged by the need to  enhance security at nuclear power plants after the September 11, 2001,  terrorist attacks, and they will continue to be challenged as the nation’s  fleet of nuclear power plants age and the industry’s interest grows in both  licensing and constructing new plants, and re-licensing and increasing the  output of existing plants. Resource demands will also increase when the  Department of Energy submits for NRC review, an application to construct  and operate a national depository for high-level radioactive waste  currently planned for Yucca Mountain, Nevada. We believe that it is  important for NRC and the Congress to monitor agency resources as these  demands arise in order to ensure that NRC can meet all of its regulatory  and oversight responsibilities and fulfill its mission to ensure adequate  protection of public health, safety, and the environment.
section_title: Conclusion
paragraphs: In closing, we recognize and appreciate the complexities of NRC’s  regulatory and oversight efforts required to ensure the safe and secure  operation of the nation’s commercial nuclear power plants. As GAO’s  recent work has demonstrated, NRC does a lot right but it still has  important work to do. Whether NRC carries out its regulatory and  oversight responsibilities in an effective and credible manner will have a  significant impact on the future direction of our nation’s use of nuclear  power.
Finally, we note that NRC has generally been responsive to our report  findings. Although the agency does not always agree with our specific  recommendations, it has continued to work to improve in the areas we  have identified. It has implemented many of our recommendations and is  working on others. For example, with respect to nuclear power plant  security, NRC has restored its security inspection program and resumed  its force-on-force exercises with a much higher level of intensity. It is also  strengthening these exercises by conducting them at individual plants  every 3 years rather than every 8 years, and is using laser equipment to  reduce the exercises’ artificiality. Another example involves sealed  radioactive sources. NRC is working with agreement states to develop a  process for ensuring that high-risk radioactive sources cannot be obtained  before verification that the materials will be used as intended. NRC  anticipates that an NRC-agreement state working group will deliver a  recommended approach to NRC senior management later this year. In  addition, NRC continues to work on its broader challenges. For example,  the agency intends to develop additional regulatory guidance to expand  the application of risk-informed decision making, including addressing the  need to establish quality requirements for risk information and specific  instructions for documenting the decision making process and its  conclusions.
We will continue to track NRC’s progress in implementing our  recommendations. In addition, as members of this subcommittee are  aware, GAO has been asked to review the effectiveness of NRC’s activities  for overseeing nuclear power plants, that is, its reactor oversight process.  An important part of that work would be to review the agency’s risk-  informed regulatory strategy and its effectiveness in identifying  deteriorating plant performance as well as whether NRC is making  progress toward effectively balancing agency inspections and self- monitoring by licensees.
Mr. Chairman, this completes my prepared statement. I would be pleased  to respond to any questions that you or other Members of the  subcommittee may have.
section_title: GAO Contacts and Staff Acknowledgements
paragraphs: For further information about this testimony, please contact me at (202)  512-3841 (or at wellsj@gao.gov). John W. Delicath, Ilene Pollack, and  Raymond H. Smith, Jr. made key contributions to this testimony.
section_title: Related GAO Products
paragraphs: Nuclear Waste: Preliminary Observations on the Quality Assurance  Program at the Yucca Mountain Repository. GAO-03-826T. Washington,  D.C.: May 28, 2003.
Nuclear Regulatory Commission: Revision of Fee Schedules; Fee  Recovery for FY 2003. GAO-03-934R. Washington, D.C.: June 30, 2003.
Spent Nuclear Fuel: Options Exist to Further Enhance Security. GAO-03- 426. Washington, D.C.: July 15, 2003.
Nuclear Security: Federal and State Action Needed to Improve Security  of Sealed Radioactive Sources. GAO-03-804. Washington, D.C.: August 6,  2003.
Nuclear Regulatory Commission: Oversight of Security at Commercial  Nuclear Power Plants Needs to Be Strengthened. GAO-03-752.  Washington, D.C.: September 4, 2003.
Nuclear Regulation: NRC Needs More Effective Analysis to Ensure  Accumulation of Funds to Decommission Nuclear Power Plants. GAO-04- 32. Washington, D.C.: October 30, 2003.
Information Technology Management: Governmentwide Strategic  Planning, Performance Measurement, and Investment Management Can  Be Further Improved. GAO-04-49. Washington, D.C.: January 12, 2004.
Yucca Mountain: Persistent Quality Assurance Problems Could Delay  Repository Licensing and Operation. GAO-04-460. Washington, D.C.:  April 30, 2004.
Nuclear Regulation: NRC Needs to More Aggressively and  Comprehensively Resolve Issues Related to the Davis-Besse Nuclear  Power Plant’s Shutdown. GAO-04-415. Washington, D.C.: May 17, 2004.
Nuclear Regulation: NRC’s Liability Insurance Requirements for  Nuclear Power Plants Owned by Limited Liability Companies. GAO-04- 654. Washington, D.C.: May 28, 2004.
Low-Level Radioactive Waste: Disposal Availability Adequate in the  Short Term, but Oversight Needed to Identify Any Future Shortfalls.  GAO-04-604. Washington, D.C.: June 10, 2004.
Nuclear Nonproliferation: DOE Needs to Take Action to Further Reduce  the Use of Weapons-Usable Uranium in Civilian Research Reactors.  GAO-04-807. Washington, D.C.: July 30, 2004.
Nuclear Regulatory Commission: Preliminary Observations on Efforts  to Improve Security at Nuclear Power Plants. GAO-04-1064T. Washington,  D.C.: September 14, 2004.
Low-Level Radioactive Waste: Future Waste Volumes and Disposal  Options Are Uncertain. GAO-04-1097T. Washington, D.C.: September 30,  2004.
Nuclear Regulatory Commission: NRC Needs to Do More to Ensure that  Power Plants Are Effectively Controlling Spent Nuclear Fuel. GAO-05- 339. Washington, D.C.: April 8, 2005.
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