NRC’s Office of Nuclear Reactor Regulation provides overall direction for the oversight process and the Office of Enforcement is responsible for ensuring that appropriate enforcement actions are taken when performance issues are identified. NRC’s regional offices are responsible for implementing the ROP, along with the inspectors who work directly at each of the nuclear power facilities. NRC relies on on-site resident inspectors to assess conditions and the licensees’ quality assurance programs, such as those required for maintenance and problem identification and resolution. With its current resources, NRC can inspect only a relatively small sample of the numerous activities going on during complex operations. NRC noted that nuclear power facilities’ improved operating experience over more than 25 years allows it to focus its inspections more on safety significant activities. One key ROP goal is to make safety performance assessments more objective, predictable, and understandable. The unexpected discovery, in March 2002, of extensive corrosion and a pineapple-size hole in the reactor vessel head—a vital barrier preventing a radioactive release—at the Davis- Besse nuclear power facility in Ohio led NRC to re-examine its safety oversight and other regulatory processes to determine how such corrosion could be missed. Based on the lessons learned from that event, NRC made several changes to the ROP. NRC continues to annually assess the ROP by obtaining feedback from the industry and other stakeholders such as public interest groups, and incorporates this feedback and other information into specific performance metrics to assess its effectiveness. In anticipation of licensing new reactors, NRC has accelerated its efforts to build up its new reactor workforce. NRC’s workforce has grown from about 3,100 employees in 2004 to about 3,500 employees as of August 2007, and NRC projects that its total workforce size needs will grow to about 4,000 employees by 2010. NRC estimates that the first few COL applications will require about 100,000 hours of staff review and identified around 2,500 associated review activities related to each application’s detailed safety, environmental, operational, security, and financial information, which may total several thousand pages. NRC anticipates that for each application, the review process will take 42 months—including 30 months for its staff review, followed by approximately 12 months for a public hearing. In addition to the COL, NRC has established (1) the design certification, which standardizes the design of a given reactor for all power companies using it, with modifications limited to site-specific needs, and (2) an early site permit, which allows a potential applicant to resolve many preliminary siting issues before filing a COL application. Electric power companies plan to use five different reactor designs in their COL applications. In implementing its ROP, NRC oversees the safe operation of nuclear power facilities through physical inspections of the various complex plant equipment and operations, reviews of reactor operator records, and quantitative measures or indicators of each reactor’s performance. (See table 1 for a more expansive treatment of these tools.) These tools are risk-informed in that they focus on the aspects of operations considered most important to safety. NRC bases its oversight process on the principle and requirement that licensees have programs in place to routinely identify and address performance issues without NRC’s direct involvement. Thus, an important aspect of NRC’s inspection process is ensuring the effectiveness of licensee programs designed to identify and correct problems. On the basis of the number and risk significance of inspection findings and performance indicators, NRC places each reactor unit into one of five performance categories on its action matrix, which corresponds to graded, or increasing, levels of oversight. NRC assesses overall facility performance and communicates the results to licensees and the public on a semiannual basis. From 2001 through 2005, the ROP identified performance deficiencies through more than 4,000 inspection findings at nuclear power facilities. Ninety-seven percent of these findings were designated green—very low risk to safe facility operations, but important to correct. Two percent (86) were white findings that were considered to be of low to moderate risk significance. Twelve findings were of the highest levels of risk significance—7 yellow and 5 red. More recently, from January 2006 through June 2007, NRC identified an additional 1,174 green findings, 27 white findings, 1 yellow finding, and no red findings. NRC also reviews performance indicators data—used to monitor different aspects of operational safety—that facility operators report to categorize the level of reactor unit performance for each indicator. From 2001 through June 2007, NRC reported that less than 1 percent of over 39,000 indicator reports exceeded acceptable performance thresholds and nearly half of all reactor units have never had a performance indicator fall outside of the acceptable level. Through June 2007, 3 of the 16 performance indicators have always been reported to be within acceptable performance levels—measuring the amount of time that the residual heat removal safety system is unavailable, monitoring the integrity of a radiation barrier, and monitoring radiological releases. Since 2001, three reactor units have reported a yellow indicator for one performance indicator. No red indicators have ever been reported. For varying periods from 2001 through 2005, on the combined basis of inspection findings and performance indicators, NRC has subjected more than 75 percent of the reactor units to oversight beyond the baseline inspections. While most reactors received the lowest level of increased oversight through a supplemental inspection, five reactors were subjected to NRC’s highest level of oversight. Reactor units in this category were generally subjected to this higher oversight for long periods due to the more systemic nature of their performance problems. Currently, 1 unit is receiving the highest level of oversight by NRC, and 10 units at 6 facilities are receiving the second level of oversight. NRC inspectors at the facilities we reviewed indicated that when a reactor unit’s performance declines it is often the result of deficiencies or ineffectiveness in one or more of the three cross-cutting areas—problem identification and resolution, human performance, and a safety-conscious work environment. NRC inspectors cited examples of possible cross- cutting issues: (1) a facility does not have an effective corrective action program that appropriately identified and resolved problems early; (2) a facility employee has not followed correct maintenance procedures, and NRC made a finding associated with the human performance area; and (3) facility management is complacent by not paying attention to detail or adhering to procedures. Our examination of ROP data found that all reactor units that NRC subjected to its highest level of oversight had findings related to one or more of these substantive cross-cutting issues. In addition, recent NRC inspections have found more problems associated with these cross-cutting issues, in part because of new guidance for identifying and documenting them. Our 2006 report found that NRC has generally taken a proactive approach to continuously improving its oversight process, in response to recommendations that grew out of the Davis-Besse incident; independent reviews; and feedback that is usually obtained during NRC’s annual self- assessment of its oversight process from stakeholders, including its regional and on-site inspectors. Continued efforts will be needed to address other shortcomings or opportunities for improvement, however, particularly in improving its ability to identify and address early indications of declining safety performance at nuclear power facilities. For the most part, NRC considers these efforts to be refinements to its oversight process, rather than significant changes. Specific areas that NRC is addressing include the following: To better focus efforts on the areas most important to safety, NRC has formalized its process for periodically revising its inspection procedures. In particular, NRC completed substantive changes to its inspection and assessment program documents—including those currently guiding the highest level of NRC inspections—to more fully incorporate safety culture. To address concerns about the amount of time, level of effort, and knowledge and resources required to determine the risk significance of some inspection findings, NRC has modified its significance determination process, which, according to NRC’s 2006 self-assessment, has significantly improved timeliness. To address concerns that performance indicators did not facilitate the early identification of poor performance, NRC has modified several indicators to make them more risk-informed for identifying the risks associated with changes in the availability and reliability of important safety systems. In addition, NRC revised an indicator to more accurately reflect the frequency of events that upset reactor unit stability and challenge critical safety functions. NRC is considering options for revising indicators for emergency preparedness and reactor cooling systems. Both NRC’s 2006 self-assessment and internal staff survey cited the need to further improve the performance indicators and their associated guidance. Although NRC and others have long recognized the effects of a facility’s safety culture on performance, NRC did not undertake efforts to better incorporate safety culture into the ROP until 2005, when it formed a working group to lead the agency’s efforts. To date, the group has completed guidance for identifying, addressing, and evaluating cross- cutting issues specific to safety culture. Our 2006 report concluded that NRC’s efforts to incorporate safety culture into the ROP may be its most critical future change to the ROP and recommended that NRC aggressively monitor; evaluate; and, if needed, implement additional measures to increase the effectiveness of its initial safety culture changes. We also recommended that NRC consider developing specific indicators to measure important aspects of safety culture through its performance indicator program. While NRC has largely implemented initial safety culture enhancements to the ROP that primarily address cross-cutting issues, it does not plan to take any additional actions to further implement either recommendation before it completes its assessment of an 18-month implementation phase at the end of this year. This assessment will include lessons learned that NRC managers have compiled since July 2006, including insights from internal and external stakeholders about the effectiveness of ROP enhancements. In addition, we recommended that NRC, in line with its desire to make the ROP an open process, make available additional information on the safety culture at nuclear power facilities to the public and its other stakeholders to provide a more comprehensive picture of performance. NRC has implemented this recommendation by modifying its ROP Web site to fully explain the review process regarding cross-cutting issues and safety culture, and now provides data and correspondence on the reactor units or facilities that have substantive open cross-cutting issues. NRC has prepared its workforce for new reactor licensing reviews by increasing funding for new reactor activities, reorganizing several offices, creating and partly staffing the Office of New Reactors (NRO), and hiring a significant number of entry-level and midlevel professionals. As of August 2007, NRC had assigned about 350 staff to NRO, about 10 percent of the total NRC workforce; however, some critical positions are vacant, and the office plans to grow to about 500 employees in 2008. To assist its staff in reviewing the safety and environmental portions of the applications, NRC plans to contract out about $60 million in fiscal year 2008 through support agreements with several Department of Energy national laboratories and contracts with commercial companies. NRC also has rolled out several new training courses, but it is still developing content for in-depth training on reactor designs. NRC is using a project management approach to better schedule, manage, and coordinate COL application and design certification reviews. While NRC has made progress, several elements of NRC’s activities to prepare its workforce are still under way, as the following illustrates: NRC has developed plans for allocating resources for a design certification application and an early site permit it is currently reviewing, 20 COL applications, 2 additional design certification applications, and a design certification amendment application. However, NRC has not yet developed specific criteria to set priorities for reviewing these applications if it needs to decide which applications take precedence. Without criteria, NRC managers are likely to find it more difficult to decide how to allocate resources across several high-priority areas. Accordingly, we recommended that NRC fully develop and implement criteria for setting priorities to allocate resources across applications by January 2008, which NRC has agreed to do. NRC is developing computer-based project management and reviewer tools to assist staff in scheduling and reviewing multiple applications at the same time. For example, Safety Evaluation Report templates are designed to assist COL reviewers by providing standardized content that will enable them to leverage work completed during the design certification review process. However, the implementation of this and other tools has been delayed. We recommended that NRC provide the resources for implementing reviewer and management tools needed to ensure that the most important tools will be available as soon as is practicable, but no later than March 2008, which NRC has agreed to do. NRO established a cross-divisional resource management board early in 2007 for resolving resource allocation issues if major review milestones are at risk of not being met. However, it has not clearly defined the board’s role, if any, in setting priorities or directing resource allocation. Because NRO expects to review at least 20 COL applications and 6 design certification, early site permit, and limited work authorization applications associated with its new reactor program over the next 18 months, it may not be able to efficiently manage thousands of activities simultaneously that are associated with these reviews. NRC managers we spoke with recognize this problem and plan to address it. We recommended that NRC clarify the responsibilities of NRO’s Resource Management Board in facilitating the coordination and communication of resource allocation decisions, which NRC has agreed to do. NRC has significantly revised most of its primary regulatory framework and review process to prepare for licensing new reactors. Specifically, NRC has revised and augmented its rules, guidance, and oversight criteria for licensing and constructing new reactors primarily to provide for early resolution of issues, standardization, and predictability in the licensing process. In making these changes, NRC has regularly interacted with nuclear industry stakeholders to determine which parts of an application’s technical and operational content could be standardized and to clarify guidance on certain technical matters. In addition, NRC just completed modifications to its acceptance review process to include an evaluation of the application’s technical sufficiency as well as its completeness and made internal acceptance review guidance available last week. While NRC has made progress in these areas, it has not yet completed some ancillary rules and regulatory guidance, or actions to implement certain review process components. For example, because NRC only recently solicited public comments to further update its environmental guidance, applicants may have more difficulty developing specific COL content for unresolved issues. In addition, while NRC proposed a rule to update physical protection requirements in September 2006, officials told us that it will not be made final until 2008. Furthermore, NRC’s limited work authorization rule, while substantially complete, will not be available in final form before October 2007. Lastly, NRC is revising its policy for conducting hearings on both the contested and uncontested portions of applications. In addition, NRC is refining its processes to track its requests for additional information to each applicant. In some instances, applicants using the same reference reactor design may be asked the same question, and one applicant may have already provided a satisfactory answer. With a completed tracking process, the second reviewer could access the previously submitted information to avoid duplication. We recommended that NRC enhance the process for requesting additional information by (1) providing more specific guidance to staff on the development and resolution of requests for additional information within and across design centers and (2) explaining forthcoming workflow and electronic process revisions to COL applicants in a timely manner. NRC has agreed to do so. In conclusion, the safe operation of the nation’s nuclear power facilities has always been of fundamental importance and has received even more emphasis recently as the nation faces an expected resurgence in the licensing and construction of new nuclear reactors to help meet our growing electricity needs. Our assessment of the ROP has found that NRC has made considerable effort to continuously improve its oversight activities and to prompt industry to make constant management improvements. However, while the current oversight process appears logical and well-structured, NRC recognizes the need to make further improvements in such areas as the timeliness of its significant determination process and the redefinition of some performance indicators. Regulating the often complex and intangible aspects of safety culture is clearly challenging. While NRC had taken some concrete actions to incorporate safety culture into the ROP and now has a structured process in place through its inspection program, we recommended that NRC continue to act to improve its safety culture efforts. NRC plans to evaluate the effectiveness of its current actions at the end of this year before considering any further implementation of our recommendations. We continue to believe that NRC needs to give this issue attention in further revising the ROP so that it can better identify and address early indications of declining safety performance at nuclear power facilities. NRC has made important strides in revising its regulatory framework and review process for licensing new nuclear reactors to improve timeliness and provide more predictability and consistency during reviews. Nevertheless, NRC’s workforce will face a daunting task in completing certain regulatory actions currently under way and implementing this new process as it faces a surge in applications over the next 18 months—the first of which has just been submitted. We identified four actions that NRC could take to better ensure its workforce is prepared to review new reactor applications and that its review processes more efficiently and effectively facilitate reviews, and NRC agreed to implement them. Mr. Chairman, this completes my prepared statement. I would be happy to respond to any questions you or the other Members of the Subcommittee may have at this time. For further information about this testimony, please contact Mark Gaffigan, at (202) 512-3841 or by e-mail at gaffiganm@gao.gov. Richard Cheston, Assistant Director; Sarah J. Lynch; Alyssa M. Hundrup; and David Stikkers made key contributions to this testimony. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

Summary: The Nuclear Regulatory Commission (NRC) is responsible for overseeing the nation's 104 commercial nuclear power reactors to ensure they are operated safely. Since 2000, NRC has used a formal Reactor Oversight Process (ROP) to oversee safety. NRC is also responsible for licensing the construction and operation of new reactors. Electric power companies have announced plans to submit 20 applications in the next 18 months. This testimony is based on GAO reports that reviewed (1) how NRC implements the ROP, (2) the results of the ROP over several years, (3) the status of NRC's efforts to improve the ROP, (4) NRC's efforts to prepare its workforce and manage its workload for new reactor licensing, and (5) NRC's efforts to develop its regulatory framework and review processes for new reactor activities. In conducting this work, GAO analyzed programwide information and interviewed cognizant NRC managers and industry representatives. In implementing its ROP, NRC uses various tools and takes a risk-informed and graded approach to ensure the safety of nuclear power facilities. The ROP primarily relies on physical inspections of equipment and operations and quantitative measures or indicators of performance at each facility to assess the status of safety and determine appropriate levels of oversight. Since 2001, NRC has made more than 4,000 inspection findings that reactor unit operators had not fully complied with safety procedures. Almost all of these findings were for actions NRC considered important to correct but of low significance to safe operations. As a result of NRC inspections, more than 75 percent of the nation's reactor units received some level of increased oversight while five units were subjected to NRC's highest level of oversight for long periods because their performance problems were more systemic. In 2006, GAO reported that NRC has generally taken a proactive approach to improving its ROP. However, concerted efforts will be needed to address shortcomings, particularly in identifying and addressing early indications of declining reactor safety performance. For example, NRC is implementing several enhancements to the ROP to better assess a facility's safety culture--organizational characteristics that ensure safety issues receive the attention their significance warrants. GAO made recommendations to further improve this effort, and NRC has taken initial steps to implement them. NRC has taken important steps to prepare its workforce for new licensing reviews, but several key activities are still underway and uncertainties remain about its management of the expected surge of applications. For example, NRC has increased funding, hired hundreds of new employees, and created and partly staffed a new office. However, NRC has not completed its development of some computer-based tools for enhancing the consistency and coordination of application reviews and has not fully developed criteria for setting priorities if the workload exceeds available resources. Also, while NRC's Office of New Reactors established a resource management board for coordinating certain office review activities, it has not clearly defined the extent of the board's responsibilities. NRC agreed with recommendations GAO made to further improve its workload management. NRC has revised most of its primary regulatory framework and review processes, including its rules, guidance, and oversight criteria to provide for early resolution of issues, standardization, and enhanced predictability. However, NRC has not yet completed some associated rules, guidance, and review process components, including revisions to its environmental guidance, its hearing process, and its process for requesting additional information from applicants. Without these components, expected efficiencies and predictability may be limited regarding the total time an applicant needs to obtain a license. NRC agreed with a recommendation GAO made to further improve its application review process.