[Senate Hearing 105-918]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 105-918
 
                NUCLEAR REGULATORY COMMISSION OVERSIGHT

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
        CLEAN AIR, WETLANDS, PRIVATE PROPERTY AND NUCLEAR SAFETY

                                AND THE

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                       ONE HUNDRED FIFTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 30, 1998

                               __________

  Printed for the use of the Committee on Environment and Public Works

                               ----------

                      U.S. GOVERNMENT PRINTING OFFICE
52-635 CC                     WASHINGTON : 1999

_______________________________________________________________________
            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington DC 
                                 20402



               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                       ONE HUNDRED FIFTH CONGRESS
                 JOHN H. CHAFEE, Rhode Island, Chairman
JOHN W. WARNER, Virginia             MAX BAUCUS, Montana
ROBERT SMITH, New Hampshire          DANIEL PATRICK MOYNIHAN, New York
DIRK KEMPTHORNE, Idaho               FRANK R. LAUTENBERG, New Jersey
JAMES M. INHOFE, Oklahoma            HARRY REID, Nevada
CRAIG THOMAS, Wyoming                BOB GRAHAM, Florida
CHRISTOPHER S. BOND, Missouri        JOSEPH I. LIEBERMAN, Connecticut
TIM HUTCHINSON, Arkansas             BARBARA BOXER, California
WAYNE ALLARD, Colorado               RON WYDEN, Oregon
JEFF SESSIONS, Alabama
                     Jimmie Powell, Staff Director
               J. Thomas Sliter, Minority Staff Director
                                 ------                                

  Subcommittee on Clean Air, Wetlands, Private Property, and Nuclear 
                                 Safety

               JAMES M. INHOFE, North Carolina, Chairman

TIM HUTCHINSON, Arkansas             BOB GRAHAM, Florida
WAYNE ALLARD, Colorado               JOSEPH I. LIEBERMAN, Connecticut
JEFF SESSIONS, Alabama               BARBARA BOXER, California

                                  (ii)

  


                            C O N T E N T S

                              ----------                              

                             JULY 30, 1998

                                                                   Page

                           OPENING STATEMENTS

Allard, Hon. Wayne, U.S. Senator from the State of Colorado......     5
Chafee, Hon. John H., U.S. Senator from the State of Rhode Island     3
Hutchinson, Hon. Tim, U.S. Senator from the State of Arkansas....     7
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     1
Lieberman, Hon. Joseph I., U.S. Senator from the State of 
  Connecticut....................................................     3
Sessions, Hon. Jeff, U.S. Senator from the State of Alabama......     6

                               WITNESSES

Colvin, Joe F., president and CEO, Nuclear Energy Institute......    30
    Prepared statement...........................................   147
    Responses to additional questions from Senator Inhofe........   166
Diaz, Nils, Commissioner, Nuclear Regulatory Commission..........    11
    Prepared statement...........................................   144
    Responses to additional questions from Senator Inhofe......101, 110
Fetter, Steven M., managing director, Global Power Group, Fitch 
  IBCA, Inc......................................................    37
    Prepared statement...........................................   200
    Responses to additional questions from Senator Lieberman.....   201
Jackson, Shirley A., Chairman, Nuclear Regulatory Commission.....     9
    Prepared statement........................................... 50-85
    Responses to additional questions from Senator Inhofe........85-144
Jones, Gary, Associate Director, Energy, Resources and Science 
  Issues, Resources, Community and Economic Development Division, 
  General Accounting Office......................................    33
    Prepared statement...........................................   171
    Responses to additional questions from:
        Senator Inhofe...........................................   177
        Senator Lieberman........................................   176
Lochbaum, David, nuclear safety engineer, Union of Concerned 
  Scientists.....................................................    35
    Letters.....................................................181-199
    Prepared statement...........................................   179
    Report, NRC's Regulatory Structure and Processes.............   195
    Responses to additional questions from:
        Senator Inhofe...........................................   199
        Senator Lieberman........................................   197
McGaffigan, Edward, Commissioner, Nuclear Regulatory Commission..    11
    Responses to additional questions from Senator Inhofe........   111
Rhodes, James T., chairman and CEO, Institute of Nuclear Power 
  Operations.....................................................    31
    Prepared statement...........................................   168
    Responses to additional questions from Senator Lieberman.....   169

                          ADDITIONAL MATERIAL

Statements:
    Biden, Hon. Joseph, U.S. Senator from the State of Delaware..    49
    Dodd, Hon. Christopher, U.S. Senator from the State of 
      Connecticut................................................    50

                                 (iii)




                NUCLEAR REGULATORY COMMISSION OVERSIGHT

                              ----------                              


                        THURSDAY, JULY 30, 1998

                                       U.S. Senate,
              Committee on Environment and Public Works,  ,
 Subcommittee on Clean Air, Wetlands, Private Property and 
                                            Nuclear Safety,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9 a.m. in room 
406, Senate Dirksen Building, Hon. James Inhofe (chairman of 
the subcommittee) presiding.
    Present: Senators Inhofe, Allard, Sessions, Hutchinson, 
Lieberman, and Chafee [ex officio].

          OPENING STATEMENT OF HON. JAMES M. INHOFE, 
            U.S. SENATOR FROM THE STATE OF OKLAHOMA

    Senator Inhofe. The subcommittee will come to order.
    Today's subcommittee hearing will focus on the Nuclear 
Regulatory Commission. This is the first oversight hearing that 
we have held on the NRC in over 4 years. I know that we have 
many issues to cover. This is kind of a pivotal point in our 
history. We haven't been able to focus on the NRC as much as we 
should since I've been chairman of this committee, primarily 
because of the fact that we have had to concentrate on the 
ambient air and wetland problems. There hasn't been time to get 
into this, but I think this is a subject that has been 
neglected.
    In order to encourage growth in the industry, and this is 
coming about at a very important time that I think when we talk 
about the problems and we've been going through this thing of 
ozone and particulate matter and yet we have a way to produce 
energy that is clean and it is one now that I think we need to 
concentrate on. I recognize that it's going to take several 
years before we're able to really grow in this industry but our 
country does rely on nuclear energy for 20 percent of its 
electrical generation right now. If people are concerned about 
reducing air pollution, then they must admit that we need a 
viable nuclear industry and we must begin encouraging the 
development of new nuclear facilities.
    So I think that this is a very appropriate time to have 
this meeting. There some things, some criticisms that I have 
heard in terms of the performance of the NRC and yet right now, 
the NRC is about to take on its most challenging task in years, 
the relicensing of plants, and I'm doubtful that they are 
currently up to the task and decisions sometimes take too long 
and never seem to come to a conclusion.
    I'd like to cite two examples which I'll be asking for 
responses at the time we have questions that I believe we are 
somewhat out of control in the regulatory process. The first 
involves the transfer of a license for Plant Vogtle, the 
company which owns the facility and transferred ownership from 
one subsidiary to another. It didn't really change, it changed 
from one subsidiary to another. All the personnel remained 
unchanged and the only change is on paper. This process took 4-
1/2 years.
    The second involves the proposed uranium enrichment 
facility in Louisiana where a company 7 years and $30 million 
trying to license a plant before giving up. The facility would 
have used well-known technology that has been used in England 
for 20 years. This should have been routine.
    Both of these examples cause me great concern and to begin 
the licensing renewal process, if the NRC and the licensing 
boards take this long for these cases, then I'm convinced that 
unless some drastic changes are made, the relicensing process 
is doomed before we begin.
    We'll have a good hearing today. I'm pleased we have 
several members here and of course we have the Chairman of our 
parent committee, Senator Chafee. I will recognize Senator 
Chafee at this time.
    [The prepared statement of Senator Inhofe follows:]
 Prepared Statement of Hon. Jim Inhofe, U.S. Senator from the State of 
                                Oklahoma
    Today's subcommittee hearing will focus on the Nuclear Regulatory 
Commission. This is the first oversight hearing we have held on the NRC 
in over 4 years and I know that we have many issues to cover today.
    We are at a pivotal point in the history of the nuclear industry. 
We have a mature industry that over the years has provided safe and 
environmentally friendly energy, much to the dismay of its biggest 
critics. As we begin the twenty-first century, the industry is 
beginning the relicensing process for their permits. Just this year the 
first two nuclear plants have filed for a license renewal. Because of 
this, the NRC is also at a pivotal point in its history, and we must 
determine if it is capable of functioning in the next century or if it 
needs an overhaul of its structure and function.
    Over the last year and a half this subcommittee has spent the 
majority of its time in Clean Air oversight, debating ozone, 
particulate matter, and regional haze. Today we are examining a fuel 
source with basically zero emissions. Our country relies on nuclear 
energy for 20 percent of its electrical generation and if people are 
concerned about reducing air pollution then they must admit that we 
need a viable nuclear industry and we must begin encouraging the 
development of new nuclear facilities. I am a realist, I do not expect 
any new plants to begin construction in the next five years, but we 
must begin to reform our regulatory process in order to encourage new 
facilities in the next five to twenty years. If we do not begin today, 
then we will never achieve the pollution reductions many want without 
sacrificing our nation's economy.
    In order to encourage growth in the industry we must reform the 
NRC. We will hear a number of ``buzz'' words today on how the NRC is 
reforming: phrases such as ``risk-informed, performance-based 
standards'', ``stakeholder input'', and ``performance indicators''. The 
trouble is these terms have been tossed around for years and we have 
seen no real change at the NRC. I am interested in hearing from the 
Commissioners and other witnesses on how we can ensure that real change 
will take place.
    The NRC is about to undertake its biggest task in years, the 
relicensing of plants, and I am doubtful that they are currently up to 
the task. Decisions at the Commission take too long and sometimes never 
seem to come to a conclusion. I would like to cite two examples which I 
believe show an out-of-control regulatory process.
    1. The first involves the transfer of a license for Plant Vogtle. 
The company which owes the facility transferred ownership from one of 
its subsidiaries to another. All of the managers stayed the same and 
all of the personnel stayed the same. The only change was on paper. 
This process took 4 \1/2\ years.
    2. The second involves the proposed uranium enrichment facility in 
Louisiana. The company spent 7 years and $30 million trying to license 
the plant before giving up. The facility would have used well-known 
technology that has been used in England for 20 years. This should have 
been routine.
    Both of these examples cause me great concern as we begin the 
license renewal process. If the NRC and the licensing boards take this 
long for these cases then I am convinced that unless some drastic 
changes are made, the relicensing process is doomed before we begin.
    I hope today's hearing will begin to examine these issues and we 
can begin a process of this committee working closely with the 
Commission in the months ahead.

           OPENING STATEMENT OF HON. JOHN H. CHAFEE, 
          U.S. SENATOR FROM THE STATE OF RHODE ISLAND

    Senator Chafee. Thank you very much, Mr. Chairman.
    I want to thank you and the Ranking Member for holding this 
hearing today. I share your concern that we've been so 
preoccupied with a host of other things--whether the Endangered 
Species Act, the transportation legislation or Superfund--that 
we haven't spent the time on this matter which you so wisely 
have chosen today to embark upon.
    The Nuclear Regulatory Commission has an important mission 
and that is to ensure civilian uses of nuclear materials are 
handled in a manner consistent with the public's health and 
safety, environmental quality and national security. 
Increasingly, however, the question has been whether or not the 
NRC is carrying out its mission in a fair and thorough manner. 
Some, including industry, say the agency is overregulating. 
Others, including the GAO and other watchdog groups, say it is 
not doing enough. This kind of criticism is not atypical for a 
regulatory agency. I know Chairman Jackson is familiar with 
that. This is an agency that oversees a major component of the 
Nation's energy supply along with many other duties.
    I hope, Mr. Chairman, today we can begin to make further 
steps to improve the effectiveness of the NRC so as to allow 
efficient industry operations while at the same time insuring 
public safety and these need not be mutually exclusive.
    I regret that I can't stay for the whole hearing but I 
certainly am interested in this and want to commend you again 
for what you're doing. I'll be following it closely and 
appreciate what you've undertaken here.
    Senator Inhofe. Thank you, Mr. Chairman.
    Senator Lieberman?

        OPENING STATEMENT OF HON. JOSEPH I. LIEBERMAN, 
           U.S. SENATOR FROM THE STATE OF CONNECTICUT

    Senator Lieberman. Thanks, Mr. Chairman.
    I join you and Senator Chafee in expressing interest in 
this oversight process. Thank you for convening it. It was my 
pleasure for a period of time earlier to serve as chairman of 
this subcommittee and I appreciate very much the focus of the 
subcommittee on the NRC because it's a critically important 
agency of our government.
    I can speak to you from personal experience from my own 
State of Connecticut which is recent experience about the NRC. 
We're just now emerging from what has been and certainly seemed 
like a long, 3-year nightmare with respect to our four nuclear 
power plants which were all down. We went from having among the 
best run nuclear plants in the industry to having all of them 
being placed on the NRC's watch list of the most problematic 
plants.
    During that time, I was supposed to do my own personal form 
of oversight of the NRC led by Dr. Jackson and I must say I've 
been impressed. The NRC undertook one of the most extensive 
safety reviews ever of one of the plants which is known as 
Millstone 3 and just this month the plant received approval to 
restart.
    The Chairwoman has also committed that there will be 
extensive, continuing oversight of the Millstone 3 operation 
and that review of Millstone 2 which is the next target of 
inquiry will be equally intensive before any decision to 
restart is made. Those two commitments mean a lot to the people 
of my State and to me.
    In addition to the extensive and intensive nature of the 
review of the nuclear power plants in Connecticut, I do want to 
put on the record here my appreciation that the NRC process was 
a very fresh and open one. Dr. Jackson came to the State, spoke 
to the residents who lived near the plant, the workers at the 
plant, listened to them and made clear in every instance that 
she had one overriding responsibility which was to ensure that 
only safe nuclear power plants would be allowed to restart in 
Connecticut.
    In that context, I have watched the NRC come under recent 
criticism both from some within the industry and some within 
the Senate for what is described as overregulation. Some 
critics apparently believe that the NRC seeks blind adherence 
with the regulations that don't have safety significance. And 
there are others in Connecticut and outside who think the 
Commission has been too soft on the industry. As Chairman 
Chafee said, that's the nature of the process here in 
Washington.
    Mr. Chairman, I am a supporter of nuclear energy and I say 
that here and add that I am a supporter because I think it is 
not only part of our current balanced American energy policy 
but should be, and ultimately I think will have to be a part of 
the future balanced American energy program for reasons for 
energy independence as well as environmental protection, 
including working to inhibit the onward movement of global 
warming.
    In order for there to be a place for nuclear power in 
America's energy future, it's critical that we have a 
regulatory operation that gives the public and those of us who 
serve the public reason to maintain confidence in the safety of 
nuclear power. That's why I think a strong and effective NRC is 
so important.
    I'm interested in the testimony today but certainly in my 
recent experience in Connecticut with the Commission, I don't 
see reason to conclude that the current NRC overregulates or 
inspects or enforces too much, or it has adopted an overly 
restrictive body of regulations. In fact, the fear in 
Connecticut, until the recent experience, has been just the 
opposite.
    I think with the new safety initiatives undertaken under 
Chairman Jackson, the NRC has moved toward regaining some of 
the public confidence that is so important. Those initiatives 
include limiting inappropriate use of enforcement discretion, 
requiring utilities to verify whether they are operating in 
accordance with their design basis, undertaking review of NRC 
oversight of changes made by utilities without prior NRC 
approval, improving the inspection process, paying increased 
attention to the use of quantitative performance indicators and 
reforming the senior management process. In fact, for better or 
worse for Connecticut, I think many of those processes were 
direct responses to what happened to nuclear power plants in 
Connecticut.
    I'd also mention something relevant, but somewhat 
parenthetic to that--I appreciated that the NRC recently voted 
in favor of requiring States consider the use of potassium 
iodide, which can protect the residents against cancer in the 
event of an accident, as part of their emergency planning. That 
ends a long fight which I was privileged to become involved 
with 4 years ago with our former colleague, Senator Alan 
Simpson who had long advocated that this would happen.
    While the NRC has taken some important steps forward, 
obviously there's a need to continue improving its approach to 
safety. A couple of years ago I requested a report from GAO and 
I'm glad Mr. Chairman the representative of GAO will testify. 
It was forwarded in May 1997 and the GAO then raised serious 
concerns about instances in the past in which the NRC had 
neither taken aggressive enforcement action nor held nuclear 
plant licensees accountable for correcting their problems on a 
timely basis.
    The GAO also criticized the NRC for problems in the 
inspection process such as not including timetables for the 
completion of corrective action for not evaluating the 
competency of the licensee's plant managers as part of the 
ongoing inspection process.
    The GAO also raised a concern that the NRC's regulations do 
not provide the public with specific definitions and conditions 
that define the safety of a plant and similar criticism has 
been raised by scientific groups.
    To her credit, I do think Chairwoman Jackson has responded 
to most of the GAO recommendations positively and in a timely 
manner. Therefore, I look forward to hearing from her and the 
other witnesses today as we begin this effort to fulfill our 
oversight responsibility toward this important agency and 
hopefully to build public confidence not only in the operation 
of the plants that are providing power around the country today 
but to increase the confidence to a point where we might even 
contemplate building more nuclear power plants in America 
tomorrow.
    I thank the Chair.
    Senator Inhofe. Thank you, Senator Lieberman.
    Senator Allard?

            OPENING STATEMENT OF HON. WAYNE ALLARD, 
            U.S. SENATOR FROM THE STATE OF COLORADO

    Senator Allard. Thank you, Mr. Chairman.
    I would like to associate myself with your remarks and the 
Chairman of the full committee and what he had to say this 
morning.
    I want to thank you for holding this hearing. There's been 
a directive from the leadership in the Senate that committees 
ought to be reviewing carefully those agencies under their 
jurisdiction. Obviously, you've taken that very seriously. I 
know a lot of chairmen in the Senate have taken the time to go 
ahead and do these types of important reviews. So I think it's 
commendable to you that you've taken on this responsibility.
    I'm anxious to hear both from the industry as well as the 
regulators. I want to see good science applied in the 
regulatory process. I've looked at what's been happening here 
in this country and I don't see much building of new plants, I 
see what we have on-line as aging plants so we need to watch 
carefully with aging technology because equipment wears out and 
there obviously is some opportunity with the wearing out of 
equipment for perhaps some increased risk. So I'm looking 
forward to this testimony.
    I also want to see a balance so that the regulators don't 
get so carried away that they actually get too involved in the 
day-to-day operation that it becomes impossible to provide a 
fifth of the electrical energy that this country uses to meet 
its needs. Personally, I want to see a balance in the way we 
provide electricity to this country. I want to see a 
combination of natural gas, a combination of coal-fired and 
nuclear power plants and any other energy resources that we can 
get out there. The more diffuse we keep the industry so we 
don't have monopolies, I think the better off America will be 
and the better off we will be competitively.
    So I'm going to listen carefully to this testimony because 
I want to make sure that we're not placing a regulatory burden 
on the industry out there that doesn't warrant it based on 
public health risks and perhaps some risk to the environment.
    So, Mr. Chairman, I'm looking forward to the comments and 
appreciate having an opportunity to serve with you on this 
committee.
    Senator Inhofe. Thank you, Senator Allard.
    Senator Sessions?

           OPENING STATEMENT OF HON. JEFF SESSIONS, 
             U.S. SENATOR FROM THE STATE OF ALABAMA

    Senator Sessions. Thank you, Mr. Chairman.
    I'd like to associate myself with the remarks I've heard so 
far. It seems to me without any doubt that nuclear power is a 
critical part of our energy needs in America. This committee 
you chair deals with clean air. We talk on a regular basis 
about how to reduce particulate and other matter discharges 
into the air as a result of our need to produce power. Nuclear 
power produces no discharges into the air; it is a clean source 
of energy and it produces 20 percent of the electric power in 
America.
    We have no plans, it seems to me, whatsoever, to re-
energize that source of power, we have no new plants that 
appear to be on the way to being on the way to being brought on 
line and as a result, we can certainly predict that we're going 
to have to be using more fossil fuels instead of nuclear 
energy. One of the reasons for that I think is a genuine 
perception among leaders in private industry that you're 
overregulated; if you try to build a new plant, the inspection 
process could be so burdensome that it could not be economical. 
Maybe there are other factors in making it economical also. I 
know there are in oil and gas and in prices.
    I think we've got to re-energize this energy source; we've 
got to expect our Nuclear Regulatory Commission to be a 
positive force in developing ways to allow this Nation to 
continue to develop nuclear power. The rest of the world is. 
All over the world, they're doing this. We're not doing it. 
We're falling behind. It will have the potential of degrading 
our air and I don't believe among reasonable experts there is 
disagreement about the belief that there is excessive 
regulation in some areas that provide no safety benefit. That 
is a genuine perception I've heard throughout.
    I'm new to this body; I'm not an expert in nuclear energy. 
Just as a citizen, it seems to me quite plain, we ought to be 
expanding our nuclear program like the rest of the world rather 
than having it dry up and disappear. I'd like to be a part of 
that. I think it's good for America. I think this Commission 
ought to be leading in that regard.
    Mr. Diaz, I appreciate some of your remarks. I just read 
your testimony and I share much of what you say and I thank you 
for adding your comments to the Chairman's which I respect 
also.
    Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Senator Sessions.
    Senator Hutchinson?

           OPENING STATEMENT OF HON. TIM HUTCHINSON, 
            U.S. SENATOR FROM THE STATE OF ARKANSAS

    Senator Hutchinson. Thank you, Mr. Chairman.
    I have a longer statement I would like to have included in 
the record without objection.
    [The prepared statement of Senator Hutchinson follows:]
Prepared Statement of Hon. Tim Hutchinson, U.S. Senator from the State 
                              of Arkansas
    Thank you, Mr. Chairman. I would also like to extend my thanks to 
the panel members for taking time out of their busy schedules to be 
with us. I am extremely pleased that we are having this hearing today. 
Everyone here knows of the great importance of the Nuclear Regulatory 
Commission, and I believe that it has been far too long since we have 
taken a close look at what is working well at the NRC and what we can 
improve upon.
    I see today's hearing not as an end in and of itself, hut as a 
starting point for dialog and reform that this Subcommittee and the 
entire Congress will continue to followup on in the future.
    Accounting for approximately 20 percent of the nation's electric 
power generation, nuclear power is generated in all but 18 states. In 
my home state of Arkansas, nuclear power accounts for nearly a third of 
all electricity generated.
    Nuclear power has the potential to become even more important to 
the United States in the future. While scientists remain divided as to 
whether human activities are causing global warming, it is clear that 
nuclear power would be a, if not the only, viable alternative to fossil 
fuel generated power. Currently we derive 55 percent of our electricity 
just from coal and any shift away would require an increase in output 
from another source. The experiences of countries such as France and 
Sweden demonstrate that nuclear power could fill this void.
    As the independent agency charged with ensuring the safety of 
nuclear plants, the NRC plays a vital role in nuclear power generation. 
Because of the great importance of nuclear power and the obvious need 
to maintain stringent levels of protection and safety, I am deeply 
concerned about the manner in which nuclear plants are currently being 
evaluated. I am worried about reports that assessments of nuclear 
plants are not being administered in a consistent and objective manner.
    When assessments are made not on the basis of objective criteria, 
but on subjective and arbitrary measures, the very ability to the NRC 
to tell the difference between a safe and unsafe plant is caller! into 
question.
    I believe we must do all we can to ensure that nuclear power is 
generated in a safe manner which protects the health of the public. I 
am not in favor of any relaxation or easement of safety standards. 
Quite to the contrary, I believe that nuclear plants should be required 
to maintain an extremely high standard of safety. The NRC must do a 
better job, however, of assessing plants in a consistent and fair 
manner.
    One of the most often heard criticisms of the NRC is that decisions 
take entirely too long to be made. I looked up the Nuclear Regulatory 
Commission in my U.S. Government Manual, and found that one of the 
Congressionally charged duties of the NRC is to make ``timely 
regulatory judgments''.
    I understand that in response to recent criticisms the NRC has been 
examining ways in which it can do better job of regulating the nuclear 
industry. In testimony submitted for this hearing Chairman Jackson 
states that the NRC agrees that it must become more efficient and 
accelerate the pace of decisionmaking. I commend the NRC for its 
willingness to consider new ways to improve itself. I would caution, 
however, that such openness to criticism is meaningless, unless real 
change actually occurs.
    I am confident that with the input of the NRC, the nuclear 
industry, other interested groups and of Congress, we will be able to 
effectively address those problems that will be discussed today. Again, 
I would like to thank the Chairman for calling this hearing today and I 
look forward to hearing the testimony of the witnesses.
    Senator Hutchinson. I also want to commend you. I think 
it's been far too long since we've taken a close look at the 
NRC, what's working and what's not working, where we have 
improvements and I think you deserve a lot of credit for 
calling this hearing.
    I see today's hearing not as an end in itself but as a 
starting point for dialogue and reform and that this 
subcommittee as well as the entire Congress will need to follow 
up and continue these efforts in the future.
    As the Senator from Alabama said, one-fifth, 20 percent, of 
our Nation's energy is generated from nuclear power. In my home 
State of Arkansas, it's one-third which is quite amazing that 
one-third of all the power generated is from our nuclear power 
plants.
    As the independent agency charged with ensuring the safety 
of nuclear plants, the NRC I think plays a very vital role and 
because of the great importance of nuclear power in this mix of 
our energy generation of this country, it is essential that we 
maintain stringent levels of protection and safety and that the 
public feel confident that nuclear power is in fact safe and 
that they can live in the vicinity of a power plant and know 
that their lives and the lives of their children are not 
endangered.
    What I'm concerned about is the manner in which nuclear 
plants are currently being evaluated. I'm worried about reports 
that assessments of nuclear plants are not being administered 
in a consistent and objective manner. When assessments are made 
not on the basis of objective criteria but on subjective and 
arbitrary measures, the very ability of NRC to tell the 
difference between a safe and unsafe plant is called into 
question.
    I think we must do all we can to ensure that nuclear power 
is generated in a safe manner which protects the health of the 
public safety. I want to emphasize that because I think when 
Senator Allard and Senator Sessions--and I didn't get to hear 
the Chairman's comments--but when we talk about our concern 
about how enforcement and regulations are being applied, that 
we immediately are sometimes placed in the category of wanting 
to deregulate or to somehow make these standards less 
stringent. That's not at all what I'm talking about.
    I believe we should not relax easement of safety standards. 
I think nuclear plants should be required to maintain an 
extremely high standard of safety. The NRC must do a better job 
of assessing plants in a consistent and fair manner and in an 
expeditious manner. One of the most often heard criticisms of 
the NRC is the decisions take entirely too long. I looked up 
the Nuclear Regulatory Commission in my United States 
Government Manual and found that one of the congressionally-
charged duties of the NRC is to make 'timely regulatory 
judgments.'' That is the charge; that's what we mandated.
    So I think consistently, having objective criteria and 
making these decisions expeditiously are areas I'm concerned 
about and that I think this subcommittee must look closely at. 
I'm confident with the input of the NRC and the reforms that 
are already being implemented, we can not only reassure the 
public about safety but we can also ensure the industry that 
they can expect to have consistent, objective criteria and 
expeditious decisions from the Commission.
    Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Senator Hutchinson.
    While I appreciate the comments and praise that we're 
having this, I frankly admit this is long overdue. I think this 
committee has been so busy. You know, here in Washington, we 
always put out the biggest fire first and there have been other 
bigger fires and we've gotten around to this one now.
    Our first panel will consist of three Commissioners, our 
chairman and the other two commissioners. Since I want to be 
sure we get a full round of questioning, I'd like you to adhere 
to the time limit. We'll have the light system used for 5 
minute opening statements because we want to get right to the 
questions in case some of our Senators have to leave.
    I would mention that while some of the subcommittee members 
are not here, they are represented by staff. There will be 
questions submitted to all witnesses, the first panel and the 
second panel, in writing.
    Let's start off with Chairman Jackson with your opening 
statement.

 STATEMENT OF SHIRLEY A. JACKSON, CHAIRMAN, NUCLEAR REGULATORY 
                           COMMISSION

    Commissioner Jackson. Thank you, Mr. Chairman and members 
of the subcommittee.
    The Commission is pleased to appear before you to discuss 
nuclear safety regulatory issues and the programs of the 
Nuclear Regulatory Commission, the NRC.
    In recent months, as many of you stated, the NRC has been 
the subject of a number of external reviews, some of them 
sharply critical, from our congressional appropriations 
committees, the General Accounting Office, and other 
stakeholders. The critiques have not all been in one direction. 
Some groups have implied that nuclear energy has become 
economically burdened as a result of NRC overregulation; others 
have cited the lack of NRC rigor in demanding adherence to 
clear safety standards and have demanded stronger NRC oversight 
of its power reactor licensees.
    Whether or not one agrees with these observations, we 
believe that they do provide a useful opportunity to review 
improvements we already have put into place, to examine the 
initiatives we have started and to accelerate and adjust those 
initiatives and to address newly-identified issues. That said, 
we also believe that given our regulatory health and safety 
mandate and given the nature of the industries we regulate, we 
must be careful and thoughtful but certainly not sluggish in 
analyzing, optimizing and accomplishing the needed changes to 
our processes.
    The testimony we have submitted for the record summarizes 
this full spectrum of issues raised with our analysis and 
response. Most NRC observers are calling for a more rapid move 
through a regulatory framework that is more risk-informed with 
areas of highest risk receiving the greatest focus, and more 
performance-based, that is, more results oriented with licensee 
afforded more flexibility in meeting requirements.
    The Commission has supported strongly and continues to 
support strongly this change in regulatory approach, and we 
agree that initiatives underway should be accelerated. Under 
our probabilistic risk assessment and implementation plan, we 
have published both generic and specific guidance to facilitate 
risk-informed plant changes through staff training, program 
reviews and stakeholder interactions. We continue to make our 
rulemaking, inspection, enforcement and assessment processes 
more risk-informed and where appropriate, performance-based. 
This will enhance our decisionmaking, improve efficiency, 
reduce licensee burden and provide a coherent and defensible 
framework for all of our functions.
    In fact, we have invited the Nuclear Energy Institute, NEI, 
to submit to the Commission a petition for rulemaking outlining 
areas where it feels NRC regulations are duplicative, 
unnecessary in light of other rules or not sufficiently risk-
informed. Similarly, our reactor oversight processes have been 
criticized for focus on issues of relatively low safety 
significance.
    While we have, in fact, been working to improve each of 
these functional areas, we agree that additional enhancements 
are needed. We recognize the resource demands associated with 
NRC enforcement of low level violations and we are taking 
actions to simplify their disposition. We're nearing the 
completion of a full scope review of all of our reactor-related 
assessment processes that should improve their risk, focus and 
objectivity, enhance scrutability and reduce resource demands.
    As we do so, we intend to interact strongly with NEI on a 
proposal recently submitted by them for a risk-informed, 
performance-based assessment process. We have taken measures to 
ensure that our more informal processes are subject to proper 
controls. The Commission also has taken strong action to 
streamline our licensing and adjudicatory processes.
    Finally, observers have focused on our organization, 
management and self-assessment capabilities with specific 
suggestions for significant staffing and resource reductions. 
On these matters, let me simply say that the Commission has 
focused since late 1995 on ensuring a coherent, defensible and 
dynamic framework for strategic planning and resource 
management. We've used that framework to develop our strategic 
plan, performance plan and now program level operating plans.
    Let me just say in summary that we are accelerating change 
where appropriate and necessary and we are working with our 
various stakeholders as we do so. We thank the members of this 
committee for the hearing, for the support they consistently 
provide to the Commission and for the opportunity for our 
perspectives to be heard.
    Senator Inhofe. Thank you, Chairman Jackson.
    Commissioner Diaz, did you want to make any statement or 
response? Your statement will be submitted in the record.

   STATEMENT OF NILS DIAZ, COMMISSIONER, NUCLEAR REGULATORY 
                           COMMISSION

    Commissioner Diaz. I would appreciate the opportunity.
    Mr. Chairman and members of the subcommittee, I appreciate 
the opportunity to testify today. I have submitted a prepared 
statement which I would like to be included in the record. I 
will briefly summarize my testimony.
    I believe there is a consensus for the need to change the 
United States Nuclear Regulatory Commission's licensing and 
regulatory framework and its implementation processes. This is 
not an indictment of the past, but a requirement of the present 
and a demand of the future. Why we should change is no longer 
the issue; the how and the rate of change are. The fundamental 
premise, and I believe the majority of stakeholders will agree, 
is that regulatory activities should have well-defined 
boundaries, be consistent and accountable, and result only in 
necessary burden. It is our job to assure adequate, requisite 
safety but not to impose requirements beyond this envelope of 
adequate safety without the most rigorous consideration of 
costs and benefits.
    The task of establishing defined regulatory boundaries that 
reflect and accommodate application of risk insights could have 
been very difficult a few years ago, but the changes made by 
industry, the advances in risk methodologies and information 
technology, and yes, the pressures of the marketplace now make 
this task possible and needed.
    The fundamental changes that have been envisioned can occur 
and must occur, and they should be timely. Many are now taking 
place. Some started years ago and others recently. There is no 
doubt that the oversight process the Congress has undertaken 
has rapidly accelerated change. I might digress here by stating 
that I am not requesting monthly oversight hearings but the 
compound effect of the inquiries, criticisms and 
recommendations from multiple sources has been healthy and is 
appreciated.
    I assure you I will work to preserve the functional core of 
the agency and work to change what is needed. I do understand 
the bottom line is results, results, results. I look forward to 
the opportunity to return here with results.
    I appreciate the opportunity to present my views. I would 
be pleased to answer any questions that you may have.
    Senator Inhofe. Thank you, Commissioner Diaz.
    Commissioner McGaffigan?

    STATEMENT OF EDWARD MC GAFFIGAN, COMMISSIONER, NUCLEAR 
                     REGULATORY COMMISSION

    Commissioner McGaffigan. Mr. Chairman, I don't have 
prepared remarks, but I might respond to opening remarks of 
some of the Senators very briefly.
    I very much appreciate the oversight hearing. I think such 
hearings are very useful. I came out of the Armed Services 
Committee where I worked for Senator Bingaman and with several 
of the members of this subcommittee. As you know, the Armed 
Services Committee conducts very thorough hearings on the 
Department of Defense and the Department of Energy.
    I'd like to agree with the Chairman that we face some major 
challenges as we go forward in that our adjudicatory hearing 
process has not worked well in the specific instances that you 
cite. The challenge is even larger in some ways than you allude 
to because not only are we faced with relicensing, but next 
year we expect the U.S. Enrichment Corporation will apply for 
an atomic vapor laser isotope separation enrichment plant and 
we will face a very major challenge there.
    We have requests for license transfers coming forward, 
Three Mile Island's transfer from GPU to Peco. We will license 
the high level waste repository either under current law or any 
new law that is passed. So we face major challenges and we are 
trying to face those challenges within the legal framework that 
we have, but in all honesty, in the case of the enrichment 
plant, for example, we have no flexibility but to conduct a 
very likely long and resource intensive adjudicatory hearing 
because Section 193 of the Atomic Energy Act specifically 
requires an adjudicatory hearing.
    We have strengths as an agency, and Senator Lieberman 
referred to one of them, the openness of this agency. I think 
it is a tremendous strength. Senator Allard referred to another 
one of our strengths, which is that we are well-founded in 
science. I think that the agency has a tremendous repository of 
knowledge on the issues. We sometimes get into arguments with 
our sister regulatory agency, the EPA, and we generally argue, 
as Senator Lieberman knows, that our science is well-founded on 
those matters.
    With regard to the issue of excessive regulation and 
regulatory reform, that is an issue, not just for our agency, 
but really across government. It is very difficult to make 
regulatory reform a priority. I was involved in working for 
Senator Bingaman in partnership with Senator Wallop on the 
Section 800 requirement, which led to regulatory reform in the 
procurement system. It was very hard to get the Pentagon to 
come forward with proposals to fix itself. We eventually went 
to another body, Admiral Vincent chaired it and in 1993, we got 
recommendations and in 1994-1995, Congress passed far-reaching 
reforms. So self-criticism is hard; making regulatory reform a 
priority is hard.
    I think the approach the Chairman has outlined of trying to 
get a very significant petition for rulemaking from the 
Institute that we would then give high priority to makes sense. 
There were attempts made in the Reagan Administration and the 
Bush Administration and in the Clinton Administration towards 
regulatory reform and I think the results have been less than 
you would have liked, than we would have liked, than I would 
have liked.
    Finally, with regard to evaluation and the consistency of 
the evaluation of our plants, we are trying to improve our 
assessment of plants but as a general defense of where we are 
and the openness of our process, I think we do very well and 
generally our plant evaluations are very consistent within 
INPOs. You'll hear from INPO later, the Institute for Nuclear 
Power Operations. And we are very open, going back to Senator 
Lieberman's point, in discussing these assessments.
    Are they perfectly objective? Can I justify why each plant 
gets the number it gets? I think the staff can but there is 
some subjectivity there. We can do better, we will do better, 
but we don't do badly, especially in comparison say with the 
FAA or other agencies which are often criticized for you not 
knowing where the licensed bodies stand vis a vis the 
regulator. You know where our licensees stand vis a vis us.
    So I leave it with that and look forward to the 
questioning. As I said at the outset, I very much appreciate 
the chance to have the hearing.
    Senator Inhofe. Thank you, Commissioner. I appreciate all 
your comments.
    Ms. Jackson, in my opening statement, I talked about the 
very long delays that I didn't understand and I've talked it 
over with my staff in the case of the uranium enrichment in 
Louisiana about 7 years and the Vogtle operation, about 4-1/2 
years, the latter being as near as I can determine only a name 
change because you had the same company, the same employees, 
the same parent company but just changing subsidiaries. I know 
there's such things as the whistleblower and some claims, but 
I'd like to ask you specifically how you react to these long 
delays?
    Commissioner Jackson. I think that as a group the 
Commission would clearly say that long, unnecessary delays in 
licensing proceedings, including license transfers, are 
unacceptable. I believe you know that none of the current 
members of the Commission were members of the Commission at the 
time of the Vogtle transfer. In addition, the LES, the 
Louisiana Enrichment Services proceeding was well underway and/
or completed before we got here.
    Nonetheless, I had asked our Atomic Safety Licensing Board 
to generate lessons learned, particularly relative to the 
Louisiana Enrichment Services proceeding because that 
overlapped with my tenure and the tenure of some of the 
Commission members at the NRC. I think what we have learned and 
what we are now intending to apply, particularly for license 
renewal, are these. That is, that we have an opportunity to be 
more clear, as clear as possible, up front on acceptance 
criteria and the information needed to reach safety decisions 
so that licensees can make high quality submittals to us and 
thereby minimize the number of interactions for review.
    The Commission itself, because we have an inherent 
supervisory authority, needs to monitor its adjudicatory 
process more carefully, including setting reasonable schedules 
for decisions to be made and to have a process for the 
identification as early in the process as possible of policy 
issues so that it can give appropriate guidance.
    Senator Inhofe. Madam Chairman, let me just say and I 
recognize, of course, that you folks weren't there but it's 
been my experience that when you have a commission that is in 
charge of its staff and perhaps in the staff there were some 
frailties there that caused the unnecessary delays, I just 
would want to know what plans you have to preclude that from 
happening again and what caused those, specifically answering 
that question.
    Commissioner Jackson. Well, what I'm trying to say to you 
is that there are a number of complexities in the particular 
case of the Vogtle license transfer that involved accusations 
of significant wrongdoing involving very high level officials 
in the company. My understanding is that the delays in the 
proceeding relative to the Vogtle license transfer had much to 
do with that.
    Senator Inhofe. Yes, I understand, the whistleblower and 
that, but this is going to happen, isn't it, in almost every 
case that comes up, or in many cases, as it will?
    Commissioner Jackson. That's right and so what I'm saying 
is what the Commission has the opportunity and responsibility 
to do is to exercise its inherent supervisory authority over 
its licensing panels so that it doesn't happen and that 
specifically is what this Commission has taken steps to do.
    Senator Inhofe. We are coming up with this license process 
and this is something that deeply disturbs me because we're 
talking about something that happens very 40 years and now I 
understand you already have applications in for a couple of 
license renewals some 10 years in advance. It's my 
understanding that the reason they're coming in 10 years in 
advance is they figure it's going to take that long to do it.
    We're not talking about new companies. I think Senator 
Allard brought up a very good point about some aging machinery 
and things that might have to be looked at, but then again, 
it's not as if we're licensing for the first time.. How long do 
you anticipate the process to last for each renewal?
    Commissioner Jackson. We've set a schedule for the initial 
renewals of 30 to 36 months.
    Senator Inhofe. Senator Chafee?
    Senator Chafee. I'd like to just ask one quick question.
    I missed part of your statement, Madam Chairman, but I 
would ask you as I understand, you asked industry for comments, 
what you could do to improve your operations from their point 
of view. Did you get those comments?
    Commissioner Jackson. No. What I've had discussions with 
the NEI about, in particular Mr. Colvin, is that I've invited 
NEI to submit a petition for rulemaking to the NRC to point out 
instances where they feel that we have regulations that are 
duplicative, unnecessary or not sufficiently risk-informed so 
that we can in fact focus on those areas and do a systematic 
review and use that as a mechanism to come out with a set of 
regulations that are more sharply focused, more risk-informed 
and are not duplicative.
    I'm sure as you understand when you have an agency that is 
essentially the derivative agency of a 40-year-old agency, 
starting back with the Atomic Energy Commission when it had its 
regulatory side, there is a body of regulations that developed 
over time that are piecemeal. It's time for a coherent review 
of those regulations. I have always maintained that regulatory 
effectiveness demands that our regulations are risk-informed, 
that our regulations aren't duplicative, that they don't 
unnecessarily overlap. The issue becomes what is an effective 
mechanism to have that kind of systematic review.
    Senator Chafee. I would think they'd take you up on your 
proposal. It seems to me to make sense. When did you make the 
offer?
    Commissioner Jackson. This specific one has come out of 
discussions that we've had with NEI in recent weeks. 
Nonetheless, I have consistently asked for strawmen. My point 
of view is the following. That if there are problems, then the 
easiest way to address them is to come up with solutions and 
solutions, to me, that are efficacious are ones that present 
proposals. That's what I call strawmen.
    We've invited that with respect to our rule change on 50.59 
which is the rule change that allows licensees to make changes 
to their plants without coming to the NRC first, as well as in 
a host of other areas. We're going to be interacting with the 
NEI on a proposal they recently advanced on developing a risk-
informed plant assessment process. That should complement and 
dovetail with our own review of our reactor assessment 
processes, my point being that nothing focuses the mind like a 
concrete proposal. What form it comes out to be depends upon 
the interactions with all of our stakeholders but the challenge 
is to clearly identify regulations where there is a belief that 
there is not the safety benefit that they should have.
    I have my own list but we believe that in an effort to be 
responsive, it is useful to have the industry itself come 
forward with some kind of proposals.
    Senator Chafee. Commissioner McGaffigan?
    Commissioner McGaffigan. Just one addendum to the Chairman, 
anticipating your criticism and explaining why I said what I 
said earlier, NEI will tell you the past petitions for 
rulemaking submitted to the Commission historically did not 
receive much priority and indeed languished for years.
    What we are saying is if this petition for rulemaking comes 
in this time asking for significant reform, and I presume 
reform is necessary, that we will devote the resources 
necessary to getting the rulemaking done. As I said earlier, if 
you look at the historical record, we have tended to let such 
petitions, which have never been comprehensive before, but have 
been piecemeal, languish at the bottom of the rulemaking to do 
list. This time we intend to give it very high priority.
    Senator Chafee. Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Mr. Chairman.
    Senator Lieberman?
    Senator Lieberman. Thank you, Mr. Chairman.
    Dr. Jackson, I wanted to ask you, at the outset, just some 
baseline questions about nuclear energy in the country. Some of 
my colleagues have mentioned this 20 percent figure and I've 
used it myself in the past, which is that 20 percent of our 
electric power comes from nuclear energy. Is that about right?
    Commissioner Jackson. It's 20 percent of net electrical 
generation.
    Senator Lieberman. Twenty percent of net electrical 
generation in the United States comes from nuclear power. 
Today, how many plants do we have operating?
    Commissioner Jackson. 104.
    Senator Lieberman. How many are on your watch list at this 
time of those 104?
    Commissioner Jackson. Three involving five units, five 
reactors.
    Senator Lieberman. To say the obvious, the overwhelming 
majority of nuclear power plants in the country are operating 
in a manner that the Commission deems to be fairly safe?
    Commissioner Jackson. Let me make the following statement. 
Even plants that are on the watch list may be operating. We may 
have significant concerns in terms of erosion of safety margins 
or other issues that warrant increased agency attention, which 
is the reason they're on the watch list.
    I think there has often been a misunderstanding of what the 
watch list means. The watch list was developed and, in fact, in 
response to congressional desires some years ago to ensure that 
the agency had a consistent way of focusing appropriate 
attention on plants that we deemed to have problems beyond the 
norm.
    It is not meant to say that the given plants are unsafe to 
operate or that the margins have come to a point that they need 
to be shut down. There are some plants--there's only one--that 
remains where the Commission has said that it will remain shut 
down until the Commission as a commission decides to let it 
start up, and as you know, that's the Millstone Unit 2.
    Other plants are shut down for various reasons, not under 
orders from the Commission and when they work through the 
issues, they will restart. They may or may not come off the 
watch list depending upon the overall performance and the 
attention the agency has to give, but your statement is true, 
there are 5 out of 104.
    Senator Lieberman. I appreciate that clarification. That's 
an important point because if you thought they were unsafe, 
they wouldn't only be on the watch list, they'd be shut down.
    Commissioner Jackson. Right.
    Senator Lieberman. In fact, that's what happened in 
Connecticut.
    I want to ask you a question which I want to ask for a 
written answer because I don't know that you have it now and 
it's probably more detailed, which is I'd be interested in 
seeing a projection out 10, 20 years, going with the current 
104, the number of nuclear power plants over that period of 
time that in the normal order of business, assuming no crises, 
will continue to provide power, and to that extent, if you can 
estimate what will happen to that 20 percent net electricity 
generating capacity over a period of 20 years?
    In other words, some of the plants are obviously aging. 
We've had one of the four closed in Connecticut as you know 
that we've all decided--the company and yourself--that it's not 
worth opening, it requires too much to invest to get it back to 
a point where it's going to produce.
    I think that would be helpful to me and I hope certainly to 
the committee.
    [The additional information follows:]
    The NRC does not make its own estimates or projections of the 
impact of nuclear plant shutdowns on the contribution of nuclear power 
generation to total electricity supply because the development of such 
estimates does not fall within NRC'S regulatory jurisdiction, However, 
based on data from the Internet site of the Energy Information 
Administration (EIA) of the Department of Energy, the following 
projections of nuclear capacity (i.e., total potential generating 
capacity) are available through the year 2020 for reference, high, and 
low cases:

                                           Total U.S. Nuclear Capacity
                                                   (Megawatts)
----------------------------------------------------------------------------------------------------------------
                                        1996                                                             2020
                                      (Actual)   2000(Proj.)  2005(Proj.)  2010(Proj.)  2015(Proj.)    (Proj.)
----------------------------------------------------------------------------------------------------------------
Reference case....................      100,817       95,605       86,800       80,357       63,881       49,217
High case.........................      100,817       97,635       95,555       93,525       86,800       80,357
Low case..........................      100,817       92,653       63,811       49,217       22,154        2,320
----------------------------------------------------------------------------------------------------------------

    The assumptions of the reference case include most plants operating 
until their 40-year operating license term ends, with some plants 
obtaining license extension and some shutting down prematurely because 
of economic or other conditions. The high case assumes that relatively 
more plants obtain license extensions and relatively fewer plants shut 
down prematurely. In the low case, there are relatively more premature 
shutdowns and relatively fewer license extensions. Thus, over 
approximately the next 20 years (i.e., given that the EIA projections 
are in 5-year increments, until 2015), U.S. nuclear generating capacity 
could decline by as little as 13.9 percent in the high case, to 36.6 
percent in the reference case, to 78.0 percent in the low case.
    Currently, nuclear generating capacity is approximately 14 percent 
of total U.S. generating capacity. if it is assumed that U.S. 
generating capacity from all fuel sources grows at approximately 1.5 
percent annually to 2015, total U.S. generating capacity would increase 
from approximately 700 gigawatts in 1995 to 950 gigawatts in 2015. 
Using the EIA projections, nuclear power's contribution to total 
generating capacity in 2015 would range from 2.3 percent for EIA's low 
case, to 6.7 percent for the reference case, to 9.1 percent for the 
high case.
    In terms of actual generation (i.e. total megawatt-hours 
generated), nuclear power plants currently constitute approximately 20 
percent of total U.S. electricity generation. This is because nuclear 
plants are designed to be baseload plants and run most of the time; 
whereas some other fuel sources (e.g., natural gas) are used as peaking 
facilities to satisfy high demand periods and thus are not run as much 
of the year. With other factors being equal, the decline in nuclear 
generation as a percent of total U.S. generation would be closely 
related to EIA's projections of the decline in nuclear capacity. 
However, in recent years, average nuclear plant capacity factors have 
increased to about 75 percent. It would be expected that less efficient 
nuclear plants with lower capacity factors would be relatively more 
vulnerable to premature shutdown. Further, those nuclear plants that 
continue to operate may be able to increase their capacity factors 
further. The likely result would be that even though there will likely 
be fewer nuclear plants operating in 2015, those nuclear plants that 
remain in operation will likely be more productive. Although the NRC 
cannot project future capacity factors of the nuclear plants that it 
licenses, such an increase in productivity would tend to mitigate a 
decline in nuclear generation's contribution to total U.S. generation.
    Senator Lieberman. Commissioner Diaz, I noticed you heading 
toward the mike when I was talking. Did you have something you 
wanted to say about that?
    Commissioner Diaz. I was just going back to the issue of 
how many plants are going to be on line and licensed and the 
time that it takes to renew a license. I just want to make the 
point that I don't think the licensees expect a 10-year license 
renewal period.
    Senator Inhofe. Say that again?
    Commissioner Diaz. The licensees, when they submit an 
application, they are not doing it 10 years earlier because 
they think it's going to take 10 years to do it. I think there 
is a major economical reason to do that, which is, before they 
undertake major repairs, upgrades that cost $100-$200 million, 
they want to make sure the plant will be able to be operated. 
So that is what brings the issue forward of the license 
renewal. It's a very important issue to the Commission which we 
are addressing, and an issue for the industry--the loss of lead 
time--that they have to attack. They can make major changes if 
they get the license renewal. They can change steam generators, 
they can spend $100 million but not if they do not have the 
license.
    Senator Lieberman. Yes, absolutely.
    Dr. Jackson, during the recent appropriations process this 
session, it obviously became clear that there are people who 
believe the NRC has too many inspectors, or are concerned the 
NRC has too many inspectors and spends too much time on reactor 
safety.
    I've heard you say that you're often asked why if nuclear 
safety performance is improving at plants as it is, there isn't 
a corresponding decrease in the level of NRC regulation and 
inspections. I wanted to ask you that question and ask you to 
respond to it at this time.
    Commissioner Jackson. First, what I would like to say is 
that there has been a net decrease in the inspection in the 
sense of the number of inspection hours which, over the last 4 
years, have gone from 3,100 on average per plant to 2,500. We 
do have a formula for assigning inspectors to nuclear power 
plants which is the so-called n + 1 formula which says if there 
are n reactors at a site, they have n + 1 inspectors.
    We're looking at the numbers but we feel that they have to 
come out of some key decisions the Commission has to make on 
what constitutes a risk-informed, baseline inspection program. 
In the end, nuclear oversight will always require inspection. 
The question becomes what do we inspect and how many resources 
do we need.
    Today, we do adjust the amount of inspection to the 
performance of nuclear facilities, but we feel we can make more 
refinement and we intend to do that, but in the end, there will 
always be a risk-informed baseline inspection program.
    If I may make an analogy to the airline industry, even 
airlines that have not had an accident in 20 years get a 
certain amount of baseline inspection, but the question is 
making sure that inspection is focused on the right things, 
risk-informed, and that we adjust the resources accordingly.
    Senator Lieberman. Thank you, Dr. Jackson.
    My time is up. Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Senator Lieberman.
    Senator Allard?
    Senator Allard. Thank you, Mr. Chairman. I'd like to follow 
up on my Connecticut colleague's questioning on the number of 
employees you have.
    You're familiar with the Martin Report which was an 
assessment, I assume, of the NRC fiscal year 1995 budget 
estimates. In that report, what they did is they looked at the 
number of employees in France and Japan, combined that with the 
number of employees that we have here, and looked at the number 
of plants they had in those countries, plus their safety record 
and said, it looks like they're getting the same job done with 
half as many employees as you have.
    If I was in your position, I think that would disturb me to 
a certain degree because I'd want to know whether everybody was 
performing for the job we're paying. I think those figures are 
rather remarkable and the fact they compared that to other 
countries who have the same number of nuclear power plants, and 
have the same performance record or the same safety record, and 
went so far as to say you could save $90 million with that.
    I'm wondering if you have done a study. Maybe if you're not 
building new power plants, maybe you don't need people there 
that get involved in construction of new power plants. Maybe 
there is an opportunity for savings there. Have you looked at 
those kinds of areas? Have you looked at the qualifications of 
your inspectors? Maybe there is a need to do that.
    Have you looked at your personnel file to see if you have 
somebody that once on board, how difficult is it to get them 
reassigned or to eliminate their position. I'd like to have 
your comment on that.
    Commissioner Jackson. Thank you for asking that question. 
Let me talk directly to this issue of comparisons between the 
Nuclear Regulatory Commission and its staffing levels and a sum 
of staffing levels with Japan and France. It is true that if 
you add up the number of nuclear reactors in France and Japan, 
you come out with roughly the same.
    What we have said is that the comparison is not as simple 
as that because of the fact that first of all, in those 
countries, what you call the regulatory body is a very 
different body than what the NRC is, and let me explain that to 
you.
    The regulatory body which may look very thinly staffed is 
supported in those countries by so-called technical support 
organizations, so that is No. 1.
    Senator Allard. So they work closely with the industry and 
they do a lot of self-inspection? Is that what happens?
    Commissioner Jackson. No, it is not that. They actually 
have governmental technical support organizations which 
actually do the technical work. Then they have research 
organizations.
    Senator Allard. And those were not included in the figures?
    Commissioner Jackson. They were not included in those 
figures.
    Senator Allard. Did you try and bring those into the 
figures?
    Commissioner Jackson. Absolutely.
    Senator Allard. Do you have a corrected number?
    Commissioner Jackson. I can provide you with a number but I 
got calls from my colleagues from abroad who read about some of 
this in the press and they said that's a comparison that you 
cannot make because there is a difference.
    Senator Allard. Don't you think it would be helpful though 
to follow up and try and correct those numbers?
    Commissioner Jackson. I agree with you but I do believe 
there is utility in benchmarking how we handle our regulatory 
program with how other countries handle their's, but being 
mindful of commonalities and differences between not only the 
regulatory regimes but how those regulatory regimes are rooted 
in the legal and institutional framework of those countries.
    Having said that, we are looking at our staffing as part of 
our strategic assessment and re-baselining. We've been looking 
very broadly at our core competencies and key skills. We've had 
a specific study done of our inspection--it's called a job task 
analysis. We also are going to do a more comprehensive review 
of our inspection program beginning this fall.
    Nonetheless, we are doing and planning to make targeted 
reductions in certain areas and/or reassignments because as 
plants shut down and decommission, the nature of the work 
changes. So we have some opportunities in that regard.
    Again, I would just say, and I'll be happy to provide the 
best figures that I can dig up, that the strict comparisons to 
what is called the regulatory body to the NRC, one has to be 
careful.
    The final comment I would make is that our range of 
responsibilities encompass more than the regulators do in other 
countries; what they do and what they're required to do under 
the law is very different.
    Senator Allard. It would be helpful to me if you could get 
to this committee just what your scope of responsibility would 
be in comparison to these other countries.
    Commissioner Jackson. I would be happy to provide that.
    Senator Allard. I think if you're at that place where 
you've got a great opportunity to upgrade your work force, take 
those that are nonperforming employees and take those that are 
perhaps not as qualified and you take your more qualified and 
move those into your most needed positions, your most 
responsible positions and take those that are less qualified 
and nonperforming and get rid of them.
    Commissioner Jackson. Let me say this quickly. We have a 
very high quality work force. Nonetheless, there's always 
opportunity for improvement. In fact, one of the initiatives 
that has occurred coming out of a reorganization that we had a 
couple of years ago is also a revamping of how we do a 
performance appraisal, consistent with the laws of the 
government, but particularly with respect to managers. So we're 
doing a lot of that. It's less obvious and transparent than 
some other things because you're dealing with personnel policy, 
but I appreciate your comment.
    Senator Allard. Mr. Chairman, my time is running out, but 
I'd like to give the other Commissioner an opportunity. He's 
been looking to respond to my question, I'd like to give him 
the time to do that.
    Commissioner McGaffigan. If I could just very briefly 
comment on Senator Allard's question about the Martin Report. 
In France, one of the countries that the Martin Report compared 
us to, there is a recent report of a member of Parliament, and 
apparently there is going to be legislation later this year 
reorganizing France's nuclear regulation, but the press reports 
I saw--I think it's Monsieur Le Deout's report--may tip the 
balance in the other direction. We may be cost effective 
compared to the French once you do an apples and apples 
comparison of what he is proposing. He is now bringing 
everything together into one regulatory body that looks more 
similar to us.
    So once this reform is completed in France later this year, 
we may look cost effective compared to the French, is the first 
point.
    Point two on the quality of our personnel, I want to second 
the Chairman. I had a lot of experience overseeing the 
Department of Defense and the Department of Energy's nuclear 
programs over many years working for Senator Bingaman and I 
would compare our staff to DARPA's which I think is one of the 
best staffs in the Pentagon.
    We have very effective, very dedicated civil servants with 
very high technical credentials. The question we have to 
address is how to best utilize those credentials going forward, 
but I think we need them to meet all the challenges that we 
face, not that we haven't made reductions and won't continue to 
make reductions to adjust to budget realities and to adjust to 
workload realities. We have very, very good people. The 
challenge I think we face is managing them well and getting on 
with things like this rulemaking that's required and speeding 
up our processes.
    Senator Allard. Thank you, Mr. Chairman.
    Senator Inhofe. Senator Sessions?
    Senator Sessions. A little bit on that point, according to 
the study you referred to, in England, there was 5.7 inspectors 
to 1 plant where we're at 14.5. That's closer to three times as 
many.
    I would just encourage you because it's not easy. I took 
over the Attorney General's Office of Alabama in 1994 and we 
faced a budget crisis and the hardest thing I ever had to do 
was to terminate the employment of 25 percent of that office 
the day I took office and we still hardly managed to balance 
the budget, and we did more quality legal work, everybody 
reorganized, rethought, challenged ourselves, and I couldn't 
have been more pleased.
    I would just say to you, as you indicated, this is a 40-
year-old process, it's built up, you've got regulations, some 
of which no longer are relevant. You're saying the things that 
I think are right. We want to help you, we want to see you move 
this to a lean, effective, rational, scientifically-based 
review process that will not only allow the industry to 
function and keep the rates as low as possible, but perhaps 
will allow us to bring on more plants in the future.
    With regard to that, Chairman Jackson, let me ask you, what 
prospects do you see in this country that we can have the 
rebirth of the nuclear industry and the building of some new 
plants? What prospects are there?
    Commissioner Jackson. Let me state for the record that I am 
a supporter of nuclear power. In fact, I was on the board of a 
nuclear utility company for 8 years before I came to this job 
and that gave me some perspective, not the ultimate perspective 
but some perspective in terms of some of the thinking.
    I think what will affect the future course of nuclear 
power--I never make predictions about absolute numbers. I think 
that's dangerous as the Chairman of the Nuclear Regulatory 
Commission, but I think we have three opportunities before us.
    One is license renewal. Why license renewal? Because it 
allows licensees to get the maximum return our of their already 
sunk investments. It also is what I would call a confidence 
builder, confidence relative to the industry itself in terms of 
the future of nuclear power, but confidence in the regulatory 
process, that we can in fact do a timely but effective review 
of renewal of a license. So I call that a gating function.
    The second key opportunity relates to the fact that we do 
have a new regulation, Part 52, for streamlined licensing of 
new reactor technology and it includes as part of that, prior 
certification of the designs of more evolutionary, advanced 
reactors. We have, in fact, design certified two new reactors, 
one designed by General Electric and one by ABB Combustion 
Engineering. We're in the process of doing the final design 
approval on a Westinghouse design which we expect to have done 
by the end of the third quarter of this year.
    What's different about that is that it allows for one step 
licensing, the issuance of a combined construction and 
operating license at one time provided what's built is one of 
these certified designs. I think what we're putting into place 
for license renewal will allow us to propagate the lessons 
learned into licensing a new reactor design.
    The third opportunity, but it's a problem today, has to do 
with resolving the high level waste issue. If we can do that, 
then I think these are what I call the top three.
    Senator Sessions. I think we can do that. I think we 
probably ought to be removed from office if we can't take 
nuclear wastes and store them safe in this country. That is, to 
me, beyond rationality, if this Government can't find a place 
to store spent nuclear materials is beyond belief. So I think 
we can solve that problem or we all ought to be removed from 
office, it seems to me.
    You really didn't kind of answer my question. I think 
you're right that we need to have some standard design approval 
so that a company can reasonably expect that their plant, once 
built, will be approved because we do have plants that have had 
problems in that regard, but what is the prospect? How many 
plants now are on the drawing board moving toward development 
in the United States at this point?
    Commissioner Jackson. There are three advanced reactor 
designs. To my knowledge, no utility or power company is moving 
toward specifically applying to license the construction and 
operation.
    Senator Sessions. That means the whole agency is going to 
be kaput pretty soon if we don't build a new one and all of 
them have to be shut down, they have a life span. That is a 
serious concern, isn't it--20 percent of our power that 
produces no air pollution is heading to extinction.
    Do you consider that the NRC has any role in the future to 
try to develop ways we could make nuclear power feasible here 
where other countries apparently find it is?
    Commissioner Jackson. As you know, the NRC's role is 
legally or statutorily not promotional. Nonetheless, picking up 
on your earlier comments, I believe that the NRC's role in 
facilitating the safe use of nuclear power in this country has 
to do with having an efficient, timely, risk-informed, 
performance results-oriented and fair regulatory process as the 
key elements.
    That is what you're looking for from us and this is what 
our standard is for ourselves. I believe this Commission is 
committed to making a change.
    Senator Sessions. I hear you saying that you're not worried 
about that and that's not a function--you don't have a staff on 
board studying this phenomenon of no more plants and developing 
any thought to it as to what we ought to do?
    Commissioner Jackson. The decision to build the plants is 
going to come out of business decisions.
    Senator Sessions. But the agency itself does not have a 
team that's analyzing this problem and proposing any solutions 
to it?
    Commissioner Jackson. Our way of having a solution is to do 
our job in the way that is as least burdensome as possible, is 
risk-informed, is timely.
    Senator Sessions. I respect that.
    Senator Inhofe. Thank you, Senator Sessions.
    We do have another panel. I think since we're down to three 
Senators, I'd like to do one more round. We will be having to 
vacate this room at 11:45 a.m., so we want to give adequate 
time for our next panel and I've completely rewritten all my 
questions for them after hearing this testimony here.
    I think we've already accomplished a great deal today and I 
appreciate your response of 30 to 36 months on your license 
renewal plan. I would like to ask would it be unreasonable to 
ask you to supply us with a detailed license renewal plan by 
sometime this fall?
    Commissioner Jackson. I would be happy to do that because 
we've done integrative planning for both the technical reviews 
and the adjudicatory process.
    Senator Inhofe. All right. Thank you very much.
    I'm concerned also about the streamlining. I don't mean 
this critically but when I saw your testimony come in and it 
was 80 pages long, I thought it might be kind of difficult to 
streamline anything around here.
    Commissioner Jackson. That was the streamlined testimony.
    [Laughter.]
    Senator Inhofe. Commissioner Diaz, I'd like to read to you 
a statement that was made by former Commissioner Remick, 
``You''--meaning the NRC--``are seen as having lost focus and 
perspective on what constitutes safety and adequate protection 
of the public and are striving instead to duplicate industry's 
initiative of seeking excellence in plant operation. You speak 
of striving to be risk-informed and you speak of the need for 
performance-based, regulatory implementation but little impact 
is seen in the field.'' Is Dr. Remick correct?
    Commissioner Diaz. He's reasonably correct. I would say 
that there has been a change in the last year. We have 
accelerated significantly our emphasis on one part of that 
statement which is risk-informed regulations.
    We can do risk information much easier across the board of 
many of our activities than we can do performance based. It is 
possible that in the last few years, a bit of the focus on 
safety was lost and emphasis was put in areas of what we call 
compliance, meaning that the processes became so important, and 
the detail in the processes became overwhelmingly a concern for 
the agency.
    I believe that the Commission has taken the necessary steps 
to stop that from happening. This is an issue that has been 
called safety and compliance. I think that s now better 
defined. I think that the agency--and I believe I speak for all 
my colleagues--have now placed ``risk-informed and performance-
based'' on a separate basis so they can be dealt with as the 
circumstances permit. That's an important thing.
    Senator Inhofe. Thank you, Commissioner.
    I'd like to have a reaction from the rest of you but I'm 
going to go ahead and read a couple of other statements. If you 
would make some notes and give us your response. This is from 
Dr. Pate, former head of INPO.
    He said, ``Headquarters and regional personnel routinely 
every day and indeed every hour impose requirements on the 
plants that the Commission or other senior managers would not 
support if in each instance you knew what was happening.''
    Further from Commissioner Remick, ``To be blunt, the 
Commission does not know in detail how the agency's programs 
are being preformed in the field. The over emphasis on blind 
adherence to strict compliance in every confusing regulation 
and strict compliance with documents never intended for that 
purpose is, in some cases, diverting attention from more safety 
related activities.'' Anyone want to respond to that?
    Commissioner Jackson. Let me talk about some specific steps 
that the agency has taken with respect to what many perceive as 
an apparent disconnect between headquarters or Commission 
expectations and what goes on in the field. I'd like to preface 
what I say by reiterating an earlier statement which is that 
NRC has a very focused and dedicated staff. The job for the 
Commission and the senior managers is to provide the 
appropriate leadership.
    We have given increased focus to providing appropriate 
guidance, appropriate training of our people in the field and 
particularly management oversight and leadership. That is what 
needs to happens.
    If I may take one additional moment, the Commission 
promulgated a statement on safety and compliance because there 
were discussions in the agency of safety versus compliance, and 
for a regulatory agency, that doesn't make sense. I've always 
said that if we have regulations or requirements that don't 
make safety sense, we should change them. It's our job to do. 
If the industry is aware of them, they should do it.
    I just have one minor correction to what my colleague, 
Commissioner Diaz, says. We have accelerated a number of things 
within the last year but 3 years ago, the Commission directed 
the staff to develop specific regulatory guidance documents on 
the use of probabilistic risk assessment, regulatory 
decisionmaking, to use them to review pilot submittals from our 
licensees on risk-informed changed to in-service inspection, 
in-service testing, technical specifications, as well as graded 
quality assurance.
    So there is a comprehensive program underway. It has been 
underway since before my time. It has gotten sharper focus and 
acceleration recently.
    Senator Inhofe. Would you like to respond to that, 
Commissioner Diaz?
    Commissioner Diaz. Just briefly. I completely agree that 
Chairman Jackson started an overlaying program that should 
provide this but the gist of what you read was right. Where 
there are problems in emphasizing compliance or safety, I think 
the answer has to be yes. Are we aware of it? Yes. Are we 
responding to it? Yes. Do we expect that we will be able to fix 
it? I believe the answer is yes.
    Senator Inhofe. Very good. I know my time is expired but 
I'd like to give Commissioner McGaffigan a chance to respond.
    Commissioner McGaffigan. These issues that are coming up 
unfortunately are not new. Mr. Colvin, who is on the next panel 
and I'll help pave the way for him, used at the July 17 public 
meeting, his 1989 viewgraphs which he told us were on point for 
the 1998 Commission as well.
    So I welcome the spotlight that is being shined on us, or 
the floodlight that is being shined on us. We need to make 
commitments to change and to be the agents of change. We have 
made some progress, but there are things we have to fix.
    He'll talk about our enforcement policy and the Chairman's 
testimony talks about it but there are some things that have 
happened on our watch--this increase in nonescalated 
enforcement actions--that we need to fix and we've made 
commitments that we will fix and do it relatively promptly.
    The final point I'll make is we need to move forward. 
Unfortunately, Mr. Colvin can use 1989 viewgraphs and they are 
still relevant in 1998. That means that something has gone 
wrong in the intervening 9 years that needs to be addressed.
    Senator Inhofe. Senator Lieberman?
    Senator Lieberman. Thanks again, Mr. Chairman.
    I do want to pick up for a moment before I ask a question 
on Senator Sessions' conversation with you. I do think there is 
agreement here across party lines at least on this subcommittee 
about what is really a pressing matter of national energy 
policy which is that no new nuclear power plants are being 
built in this country today and they are being built in most of 
the major industrial powers and the developing industrial 
powers such as China.
    The reason for that I think is that it's more complicated 
than this but my own sense is that the most important reason 
for that is that the nuclear power industry has decided that 
the public will not support the building of additional nuclear 
power plants because of safety fears, the Three Mile Island era 
situation and to a certain extent, I suppose, Chernobyl where 
there is no real, accurate or fair comparison to our nuclear 
power plants and what was happening at Chernobyl.
    That is where I think your work, the NRC's work, is so 
critically important, to restore public confidence in the 
safety of nuclear power. Then I think we have an obligation and 
the people in the industry have an obligation to go out and 
make the case to the public that we've got a source of power 
here that will help us to be more energy independent with all 
of the implications for our national security involved in that 
and in fact, will help protect our environment.
    Okay, there were some mistakes made at an earlier point but 
you said it, 104 plants are operating today, they're operating 
safely. If they weren't operating safely, you would shut them 
down, which you did in Connecticut.
    The other side of it is who forms the national energy 
policy and of course that is the responsibility, I believe, 
more of the Department of Energy and perhaps Administration 
officials generally than of the NRC. And it's our 
responsibility in Congress to help form that policy and in that 
sense to educate, inform and build a climate where we can see 
some of those standardized designs, big advance over the 
future.
    We've got four nuclear power plants in Connecticut, each of 
them a different design. That complicates not only their 
operation but your responsibilities in ensuring their safety. 
So we're taking a critical step here in having at least three 
standardized designs.
    I know there is some work going on over at the Department 
of Energy to encourage next generation nuclear power plants but 
I hope that one of the results of our oversight of NRC will be 
to have a broader understanding of why your regulatory 
authority is so critical not only to the safety of the current 
plants but to building a public constituency or at least public 
acceptance of the need for a next generation of plants and then 
the rest of it is up to the DOE and us, really, to make the 
case to the public.
    On the question of safety, I want to come to a different 
point. There as a GAO report that Congressman Dingell and I 
requested a while back that reviewed the process at NRC and the 
Department of Labor for protecting whistleblowers and contained 
a number of recommendations for improving the process.
    This whole nightmare we went through in Connecticut, part 
of it was the result of whistleblowers, the people who work in 
the plants who, in a sense--when I was attorney general of 
Connecticut, Senator Sessions was attorney general before--we 
used to have what we called the Private AG's Act, the sort of 
baby attorneys general where we'd give private litigants the 
authority to help us enforce the law. In a way, every employee 
in a nuclear power plant has the ability to assist in 
guaranteeing the safety of those plants and whistleblowers are 
a part of that.
    I wanted to ask you what changes to the whistleblower 
protection system has the NRC made in response to the GAO 
report or your own evaluation and do you think there is any 
additional legislative authority you need to improve the rights 
and opportunities of whistleblowers to help you do your job?
    Commissioner Jackson. We've taken action at three levels. 
One is the policy level; the second is the functional level; 
and the third is on the legislative front.
    At the policy level, the Commission itself issued a policy 
statement relating to the freedom of employees, it's 
expectations relative to the freedom of employees in the 
nuclear industry to raise safety concerns without fear of 
retaliation. We thought it was important to send a clear 
message in that regard, that people have the opportunity and 
the right to raise safety issues without being harassed and 
intimidated.
    On the implementation side, we've taken a number of steps. 
There were a number of specific GAO recommendations related to 
protecting the identity of allegers and we've taken explicit 
process and management steps to do that. With respect to the 
tracking of allegations, we've implemented a new system using 
information technology to do better tracking of allegations. 
We've created the position of an agency allegation advisor who 
has a specific point of accountability with respect to 
allegation issues, but also has the responsibility to not just 
bean count but to extract what is safety significant. We then 
use that information as part of our senior management meeting 
and plant assessment process, not bean counting but what 
underlies the allegations.
    We had a recent hiccup because of a conflict between the 
FOIA requirements and the protection of allegers at one of the 
nuclear plant where some names were inadvertently released and 
that has made us step back and reinstitute certain management 
controls and have special document handling requirements for 
FOIA requests vis a vis protecting allegers' identities, et 
cetera. So we've taken a number of very concrete steps in that 
regard.
    Finally, we've been working with the Department of Labor to 
get them to transfer the treatment of harassment and 
intimidation cases from their Wage and Hour Division to OSHA 
and also working with them on legislation for methods to speed 
up the proceedings relative to harassment and discrimination 
cases.
    Senator Lieberman. I look forward to seeing the results of 
those inquiries and possible legislation when they are 
completed.
    I want to thank you, Dr. Jackson, and Commissioner 
McGaffigan and Commissioner Diaz for the very important and I 
think extraordinary able job you're doing.
    Thank you very much, Mr. Chairman.
    Senator Inhofe. Thank you, Senator Lieberman.
    Senator Sessions?
    Senator Sessions. Thank you.
    Senator Lieberman, you do suggest something that is a 
perception that I think is not really true and that is that 
people are terrified of nuclear power. Tennessee Valley 
Authority is seeking to bring on a Bellefont plant that was 
nearly completed and stopped because of various things a number 
of years ago.
    Every city council, the county commissioners and everybody 
in that area is supporting bringing on that plant. We got 
almost no objection from the people who live within a 
significant radius of that community and they universally 
recognize the benefits of a clean nuclear plant, well-paying 
jobs, no truckloads of coal, no pipelines of natural gas, no 
pollution into the atmosphere. It's just a win-win prospect if 
it's economically feasible.
    Chairman Jackson, I have one thing let's see if we can tie 
down a bit. You did say in your public hearing on July 17 at 
Rockville, a little self criticism on the endorsement process, 
``A number of our enforcement actions, for instance, frequently 
are not focused on what is safety significant and can serve 
unwittingly the misdirected purpose of misdirecting licensees' 
attention. There is a burden that we place on our licensees for 
relatively low level, non-safety significant violations and we 
need to look at that.''
    That is consistent with this report that has been referred 
to earlier where you've got an increased number of severity 
Level 4 violations which are the least significant violations 
and not the more serious ones.
    I guess my question is--and we are behind you on this--will 
you take steps to deal with this and are you doing so now, and 
when can we expect results?
    Commissioner Jackson. Let me take the question in inverse 
order. I think you can expect results within the next 6 months. 
Yes, we are taking specific steps, particularly with respect to 
severity Level 4 violations in terms of how they are 
dispositioned and how much burden we place on our licensees to 
respond to them. The actual change, the staff is working on 
that and it has to come to the Commission for its approval in 
terms of this change in how we implement our enforcement 
policy.
    In addition, we had earlier but we see a need to enhance 
the connectivity between our various severity levels and 
consideration of risk significance. So we're taking specific 
short-term steps with respect, particularly, to severity Level 
4 violations.
    Having said that, it doesn't mean that there will not be 
those and it doesn't mean that we won't trend or track them 
because they can be, if one gets to the heart of them, 
precursors to the beginning of larger problems, but they do not 
need to be if they are not risk significant, the burden on our 
licensees that they have been. We want the plants safe, but we 
want the resources focused as effectively as possible. When you 
don't have new plants coming on line, which I could see would 
utilize a lot of people, and you've got mature plants with 
mature staffs, you should have less violations and probably 
need for less regulators.
    Senator Sessions. Mr. McGaffigan?
    Mr. McGaffigan. Senator Sessions, that's the point I made 
earlier in response to Senator Inhofe. The answer to your 
question is yes and soon and I hope we can do even better than 
the 6-months in terms of addressing this. Clearly, very little 
violations going up by a factor of three over the last 3 years 
doesn't make sense. We probably don't have the right threshold. 
Mr. Colvin will cite a few later with regard to books being 
left in the wrong place and if there were an earthquake, it 
might--we need to get out of citing those sorts of violations 
and focus on more significant things.
    Senator Sessions. Mr. Diaz?
    Mr. Diaz. Senator, one problem you and Senator Lieberman 
referred to was public information and I didn't want to pass 
the opportunity to tell you that we are concerned and we 
believe that the Commission has a responsibility to present 
factual information to the public, that we cannot let 
information that does not reflect the safety significance of 
each use to be propagated and actually scare the people of this 
country.
    A year ago, the Commission took steps to analyze how do we 
address this interface. We are now finishing or have finished 
the analysis and I'm sure my colleagues are looking forward to 
presenting a better way to deal with public information that is 
very responsive to the needs of the public.
    Commissioner Jackson. May I make just two additional 
comments?
    What my colleague says is true. Coming out of our strategic 
assessment and rebaselining, we had a specific public 
communications initiative. There were certain points that 
Commissioner Diaz particularly brought up with regard to how 
the agency presents results of its inspections, assessments, et 
cetera that were folded into that, and we expect to see some 
major change.
    We have an agency of engineers----
    Senator Sessions. They don't like change? Lawyers don't 
like change.
    Commissioner Jackson. We have lawyers too.
    My final comment is that it may be true, and it is true, 
that there has been a run-up obviously in the severity Level 4 
violations, but interestingly enough they actually came out of 
steps taken to correct a different problem. That problem had to 
do with consistency, consistency of documentation, consistency 
of what gets reported through inspections, consistency in 
approach from region to region. That had been a problem at NRC.
    In doing that, coupled with the rising ability level of our 
inspectors and more of a focus in certain areas on compliance, 
has led to a run-up in these severity Level 4 violations. The 
Commission has been taking a look at that and I already 
outlined the steps the staff is taking to address that issue 
but we still have to maintain the consistency.
    Senator Sessions. You have to be strong because established 
governmental agencies don't like change and you're going to 
have to be strong and we will back you. We expect some progress 
in this area since all of us agree that it is a problem and I 
hope that you can report soon that you have made progress.
    Commissioner Jackson. Thank you.
    Senator Inhofe. Thank you, Senator Sessions.
    I have one last question. I understand the meeting you had 
on July 17 was with industry and the purpose was to have a 
dialogue to bring out these problems. When was there one before 
that?
    Commissioner Jackson. We had a meeting earlier in the 
summer with NEI to talk about design basis issues.
    Senator Inhofe. So you have had regular meetings with 
industry, this is not just a first?
    Commissioner Jackson. Well, we have meetings, public 
meetings, as a commission, sitting as a commission.
    Senator Inhofe. No, I'm talking about meetings like the 
July 17 meeting?
    Commissioner Jackson. We don't always have Commission 
meetings with industry but industry representatives----
    Senator Inhofe. Was this a meeting with industry?
    Commissioner Jackson. This was an open Commission meeting.
    Senator Inhofe. You've been there since 1995, have you had 
other ones like this?
    Commissioner Jackson. We have had meetings on specific 
topics with industry, yes.
    Senator Inhofe. I'm very pleased. We're going to be hearing 
back on specific things. I like the idea of the 6-months. Let 
me go ahead and announce right now that we will be having a 
meeting of this committee which will be 6 months from today, 
the 28th of January, to follow up. We look forward to seeing 
you and having a lot of streamlining and a lot of progress made 
at that time.
    Thank you so much for taking the time to come and we'd now 
invite the second panel to appear.
    I would introduce our second panel. We have, first of all, 
Mr. Joe F. Colvin, President and CEO, NEI; Dr. James T. Rhodes, 
Chairman and CEO, Institute for Nuclear Power Operations; Ms. 
Gary Jones, Associate Director, Energy Resources and Science 
Issues, GAO; Mr. David Lochbaum, Nuclear Safety Engineer, Union 
of Concerned Scientists; and Mr. Steven M. Fetter, Managing 
Director, Global Power Group.
    Ladies and gentlemen, you heard the instructions to the 
first panel. We will have 1 hour and 5 minutes here and I know 
that we probably took too long for the first panel, but we have 
a lot of things to ask you. If you could hold your opening 
statements to a minimum, hopefully we won't have to worry about 
the red light coming on.
    We will start with you, Mr. Colvin.

 STATEMENT OF JOE F. COLVIN, PRESIDENT AND CEO, NUCLEAR ENERGY 
                           INSTITUTE

    Mr. Colvin. Thank you, Mr. Chairman.
    I'll try to keep my comments brief.
    We've had considerable comments about the important role of 
nuclear energy in the United States as it relates to energy 
supply and energy security, diversity and its emission-free 
basis. The point I'd like to make in that area is that as we 
move forward in our industry and as we move to a competitive 
electricity market, the most significant business uncertainty 
that we face from the industry standpoint is not the cost of 
fuel or other parameters as we go into competition, it's really 
the uncertainty of the regulatory process that we face. This is 
the safety regulatory process and the requirements that are 
imposed that really do not directly relate to public health and 
safety.
    In response to Senator Lieberman's statement about the 
public and subsequent statements, we really see that 70 percent 
of the public at large supports nuclear energy both now and in 
the future in the United States and yet they are somewhat 
confused by the messages they receive from the media, from 
reports from the Nuclear Regulatory Commission and others which 
cause some uncertainty in this process. I think Mr. Fetter will 
likely talk about the uncertainty that causes within the 
financial community.
    The second point I'd like to talk about is we have seen 
important change in the regulatory program, a program that has 
really evolved over 40 years. However, that change has not been 
effective in making the transition that needs to be made given 
the levels of performance in the industry.
    While we see comments by this Commission and initiatives by 
this Commission, the reality is, as Mr. McGaffigan pointed out, 
I've testified before committees such as yours over the past 15 
years and I've been involved in five previous initiatives with 
the Commission to effect change in these fundamental areas, and 
we really haven't seen that change.
    That is why I think it is essential that this committee and 
you, Mr. Chairman, participate and support these changes that 
are necessary to correct these underlying cultural and 
fundamental issues that exist within the process. While we 
focus primarily on the discussion of regulations, the reality, 
in my view, is that the problem is not just with the 
regulations. It goes much deeper than that, and we have to look 
at how regulations are interpreted, reinterpreted and how they 
really are carried out by people in the field.
    I think that there is an issue of burden of proof, issues 
of various documents and processes that are used that go 
outside the formal regulatory process, that really need to be 
looked at that would bring some stability within the agency.
    I'd like to make three recommendations in this regard and 
I'll be happy to talk about these in more detail. First, we 
believe that this committee should reauthorize the agency's 
budget in 1 year increments until this committee and the 
appropriations committees are satisfied that these changes are 
being brought about.
    My second recommendation, Mr. Chairman, you have already 
taken to heart, and that is that the NRC should regularly 
report to Congress, and you should continue to have oversight 
hearings. You've already scheduled the first one of those for 
early next year.
    The last thing, which I think is a very important point and 
a point that was made by members of the Commission, there needs 
to be an independent review of the NRC's activities. I stress 
the word independent. As Commissioner McGaffigan indicated, 
we've been at this a long time, and there needs to be some 
fundamental change. It hasn't changed, and there needs to be an 
external look at how the agency does its business and how it 
can improve its efficiency and effectiveness and how it can 
carry out its important role in regulating the safety of 
nuclear power today and into the future.
    Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Mr. Colvin.
    Dr. Rhodes?

 STATEMENT OF JAMES T. RHODES, CHAIRMAN AND CEO, INSTITUTE OF 
                    NUCLEAR POWER OPERATIONS

    Mr. Rhodes. Thank you, Mr. Chairman.
    I am Jim Rhodes, Chairman and CEO of the Institute of 
Nuclear Power Operations, INPO, headquartered in Atlanta.
    For those of you who may not know, INPO is a technical, 
nonprofit organization with all U.S. utilities that operate 
nuclear plants being a member. INPO was formed in 1979 in the 
aftermath of the Three Mile Island nuclear accident. Its goal 
is to promote the highest levels of safety and reliability in 
operating nuclear power plants--to promote excellence, as we 
say.
    We have four cornerstone programs. First, we do periodic 
evaluations of all the nuclear power plants in the United 
States every 12 to 24 months; second, we provide a great deal 
of training to nuclear plant personnel and accredited training 
programs that are sites for training nuclear folks; third, we 
analyze events that occur at various nuclear plants and make 
sure that the lessons learned from these events are 
communicated throughout the industry; and finally, we also 
provide a range of assistance activity to all the nuclear 
plants in the country.
    We do not engage in public, media or legislative activities 
to promote nuclear power.
    Let me say a word about our relationship with the NRC. INPO 
is independent from but its role is complementary to the NRC. 
The ultimate goal of both organizations is the same, to protect 
the health and safety of the public in operating nuclear power 
plants. However, INPO is different in the sense that we promote 
the highest standards in the operation of nuclear power 
plants--beyond the basic regulatory requirements. As I 
mentioned, we also share information among nuclear power plants 
to enhance the safety and reliability of the operation of those 
plants.
    INPO grew out of a commission that President Carter 
appointed in 1979, the so-called Kemeny Commission on the Three 
Mile accident that said the industry should go beyond 
regulations in operating nuclear plants.
    Let me turn to the performance of the nuclear plants in the 
United States. This has been alluded to as having greatly 
improved over the last decade, and I just want to give you some 
examples.
    First of all, we in the industry have ten so-called 
performance indicators that are objective and performance-
based. I have in my written testimony the record of those 
indicators. It is INPO's annual report. I won't go into detail, 
but as you can imagine, they cover virtually all areas in the 
operation and performance of a nuclear plant: such as, what 
percentage of the time is a plant forced off-line over the 
period of a year.
    I'd like to show you some examples to give you an 
indication of how the industry performance has improved. If 
you'll look over to your right, one of the performance 
indicators is a so-called safety system performance. As you 
well know, there are many safety systems in a nuclear power 
plant, redundant systems. This indicator is a measure of the 
percentage of those systems that meet very high standards of 
availability, over 97 percent in most cases.
    As you can see, over the last 8 years or so, this indicator 
has gone from about 70 percent to 94 percent and exceeds the 
goal the industry set some years ago of 85 percent, a goal that 
we obviously should also achieve in the year 2000 because we're 
beating it now. This is just one indication of the improvement 
in performance in the industry.
    The second chart is what we call our performance indicator 
index. This is really a composite of all ten indicators on a 
relative scale. This particular chart goes back to 1985, some 
12 or 13 years ago. This shows on a scale of 100 the composite 
improvement in the industry of these ten objective indicators. 
It goes from 43 to 86.
    Senator Inhofe. From what year to what year?
    Mr. Rhodes. 1985 through 1997. It shows a tremendous record 
of improvement in performance by our overall objective 
assessment.
    The third chart has information which really comes from the 
Nuclear Regulatory Commission and it gives the significant 
events which may be personnel errors, loss in some function of 
safety equipment, or whatever, over the same period, 1985 to 
1997. As you can see, there has been a tremendous improvement, 
in fact an improvement by a factor of 20 between 1985 and 1997.
    As I said, this is NRC data. INPO has data that 
corroborates this very much, so this just gives an indication 
of how much the industry performance has improved in the 
nuclear area over the last decade or so.
    Let me conclude my remarks by saying the industry, as you 
well know, does face challenges. We've talked about the need 
for nuclear power from the standpoint of environmental 
favorability. Also, I don't think it has been mentioned, but I 
think the pressures on nuclear power are increasing from an 
economic standpoint because of the economic deregulation in the 
electric utility industry that has been going on several years 
now.
    I think its is really incumbent upon all of us involved in 
the industry to make sure that plants are certainly safe and 
reliable, but also economic. The three are very compatible. 
Prior to coming to INPO a few months ago, I was head of 
Virginia Power for 26 years and about a third of our 
electricity is generated by nuclear power I'm proud to say, at 
least in the decade of the 1990's, Virginia's power plants 
operate very safely and also very economically, and they are 
very compatible factors.
    I think all of us, including the NRC, need to focus on the 
most efficient way to operate and regulate these plants as we 
go forward.
    Senator Inhofe. Thank you, Dr. Rhodes.
    Ms. Jones?

STATEMENT OF GARY JONES, ASSOCIATE DIRECTOR, ENERGY, RESOURCES 
     AND SCIENCE ISSUES, RESOURCES, COMMUNITY AND ECONOMIC 
        DEVELOPMENT DIVISION, GENERAL ACCOUNTING OFFICE

    Ms. Jones. Thank you for the opportunity to be here this 
morning, Mr. Chairman, to highlight several points from our 
report issued last year on aspects of NRC's nuclear regulatory 
program.
    As I think all the members of the subcommittee mentioned 
this morning, and as our report also points out, the Congress 
and the public need confidence in NRC's ability to ensure that 
the nuclear industry performs to high safety standards. While 
we did not make judgments about the safety of nuclear plants or 
the appropriateness of NRC's current regulatory structure, the 
many safety problems identified at plants we examined raised 
questions about whether NRC's regulatory program was working as 
it should.
    One of the reasons we couldn't make judgments about the 
safety of plants is that GAO starts its work by looking at the 
criteria that underpins any program. The difficulty in this 
situation is that NRC does not precisely define safety. 
Instead, it presumes that nuclear plants are safe if they 
operate within their approved design basis and meet NRC's 
regulations.
    The foundation of NRC's confidence that nuclear plants are 
safe is the redundancy of safety systems or as they call it, 
defense in-depth. As a result, safety significance is difficult 
to determine and becomes largely subjective because NRC does 
not have an effective way to quantify the safety of plants that 
deviate from their approved designs or violate regulations.
    The conditions found at the three plants we reviewed 
challenged NRC's confidence that plants are operating as 
designed. It recently completed inspections focused on design 
basis at 16 other sites and found significant problems, 
including instances in which licensees had not properly tested 
safety-related components or documented design modifications 
related to safety systems.
    Let me turn to NRC's inspection program for a moment. One 
goal of that program is to ensure that deficiencies will be 
corrected in a timely way. However, we found that the licensees 
of the three facilities we examined failed to fix substantial 
and recurring safety problems in a timely manner. NRC allowed 
these licensees repeated opportunities to correct their safety 
problems. However, implementation of corrective action plans 
were never fully completed and although management promised to 
fix problems but did not always follow through. Also, NRC used 
enforcement actions too late to effect change.
    For example, all but 5 of the 43 deficiencies that NRC 
required Salem to fix before its reactors can be restarted had 
been cited as problems before the plant shut down. NRC allowed 
Cooper to restart its reactors because the licensee promised to 
fix recurrent problems, but after restart, NRC found problems 
that had not been corrected.
    The nuclear industry and NRC officials widely agree that 
the competency of a nuclear plant's management is perhaps the 
most critical factor in safe performance. NRC cited management 
weaknesses as a cause for safety problems at the three plants 
we reviewed and recently found weak management processes and a 
lack of management involvement as the principal reasons for 
safety problems found at two plants in Illinois.
    Despite the importance of competent management to safe 
operations, NRC does not assess management as it relates to 
safety in its plant inspection program. Individual inspection 
reports specifically avoid any references to management's 
competency. NRC's references to management weaknesses are 
usually made retrospectively, often after the licensee admits 
to management deficiencies and after the window of opportunity 
to provide an early warning has closed.
    Although NRC's watch list targets regulatory emphasis to 
correcting problems before they lead to shutdown, NRC has been 
slow to place problem plants on this list. For example, the 
Salem and Millstone plants were under discussion by NRC for at 
least three to 4 years before they were placed on the watch 
list. Further, an Arthur Andersen report identified 10 plants 
that were not placed on the watch list but whose performance 
indicators were similar to those that are listed. This 
inconsistency has been attributed in part to the lack of 
specific criteria for making decisions on a consistent basis 
and the subjective nature of the process.
    As others have clearly articulated this morning, Mr. 
Chairman, the world is changing for the nuclear industry. 
However, that underscores for us the need to ensure that NRC's 
regulatory program works effectively to protect the health and 
safety of the public.
    The NRC said this morning it is assessing change on a 
number of fronts, but we believe that NRC's future direction 
needs to be anchored in goals and objectives that are clearly 
articulated and performance measures that hold NRC managers as 
well as licensees accountable. In addition, NRC needs reliable 
information on which to determine safe operations and 
enforcement structure that clearly lays out a range of 
sanctions that will be imposed on the basis of potential 
seriousness of the safety problems found.
    I also wanted to note, Mr. Chairman, that I think our work 
has been characterized this morning as being maybe counter to 
what the industry wants. I think the kinds of recommendations 
that we made to the NRC to clearly lay out the expectations, to 
hold licensees accountable for what they say they're going to 
do in the time frames they say they're going to do it, and also 
to lay out sanctions associated with various levels of safety 
risk is consistent with what the industry is looking for.
    Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Ms. Jones.
    We're going to go to the next witness but I want to make 
sure I wrote this down correctly. I'm still in a little bit of 
a shock here. Did I understand you to say that the NRC should 
assess the performance and competency of the licensee's 
management? Is that correct?
    Ms. Jones. Yes, sir. What we're talking about is as the 
inspectors go out, if they have observations about management, 
the safety culture.
    Senator Inhofe. I'll have some questions about that at the 
appropriate time.
    Mr. Lochbaum?

STATEMENT OF DAVID LOCHBAUM, NUCLEAR SAFETY ENGINEER, UNION OF 
                      CONCERNED SCIENTISTS

    Mr. Lochbaum. I appreciate this opportunity to testify 
before the subcommittee regarding this important topic.
    The industry representatives on this panel are justifiably 
proud of nuclear power's record over the past decade and indeed 
they paint a very rosy picture in our view that the industry's 
healthy performance warrants redirected NRC oversight effort. 
My objective today is to caution you to watch out for the 
thorns as you enjoy these roses.
    The industry sometimes touts its record in ways that 
implies it was achieved in spite of the NRC. That is not fair 
or accurate. The industry's performance over the past 10 years 
benefited from NRC initiatives such as the maintenance rule and 
its need for plant-specific risk assessments and also from the 
NRC's support for industry initiatives such as cost beneficial 
licensing actions.
    The industry cites data such as higher plant capacity 
factors, fewer plant trips and fewer safety system actuations 
as evidence of healthy performance. This information is valid 
but does not provide the complete picture. At this moment, 
there are nine nuclear plants shut down in the United States 
protracted shutdowns of many months. These plants are not shut 
down because the NRC issued them too many uncited and Level 4 
violations or because the NRC is dragging its feet on risk-
informed regulation. These plants are shutdown because their 
owners failed to properly discharge their recordkeeping of how, 
what, when and why information for their emergency equipment 
which is also known as design control and configuration 
management.
    In the late 1980's, NRC inspections at several plants 
revealed that their owners had made physical changes to 
emergency equipment to solve one problem only to create other 
problems. These errors occurred because these owners had not 
fully understood or had lost track of the design basis for this 
emergency equipment.
    The NRC proposed a new rule that would have required all 
plant owners to fully document the design basis for their 
emergency equipment and to recreate any information that was 
missing. The industry opposed this rule and convinced the NRC 
that they could handle the problem internally. So the NRC 
dropped its plans for the rule.
    The industry was wrong. Millstone has clearly demonstrated 
that some nuclear plants have operated with vital safety 
systems that would not or may not have functioned had there 
been an accident. For example, owners of the Big Rock Point 
plant in Michigan reported just 2 weeks ago that one of its 
safety systems would not have functioned during the last 13 
years of this plant's life.
    An NRC team discovered in 1996 that the piping for safety 
systems at the Head of Neck plant in Connecticut was too small 
to ensure adequate cooling of the reactor core during that 
plant's entire 28 year operating lifetime. The nine plants 
shutdown today are fixing design control problems like these.
    We should not be operating nuclear power plants unless we 
know with reasonable certainty that they are safe, their 
systems needed to protect the public during an accident will 
work. There have been an alarming number of reports in recent 
years which clearly show that several plants have operated 
without fully functional safety systems. These cases are Maine 
Yankee, the Donald C. Cook plant in Michigan, Beaver Valley in 
Pennsylvania, Millstone and Big Rock Point. In these cases, the 
public was protected by luck as much as by defense in depth.
    Speaking of being protected by luck, the industry wants to 
push the NRC more rapidly towards risk-informed regulation. The 
development of plant-specific risk assessments this past decade 
has provided valuable insights which promoted many plant owners 
to voluntarily make physical changes to their facilities that 
increased their safety margins. Unfortunately, these risk 
assessments assume that the plants have no design control and 
configuration management problems. For some plants, this is not 
a valid assumption. Thus, their risk assessments are inaccurate 
and nonconservative. Design, control and configuration 
management problems must be corrected at all nuclear plants 
before risk-informed regulation can advance.
    The industry cites examples of NRC overregulation but there 
are examples of underregulation as well. Both sets of these 
examples are probably valid because the NRC regulates 
subjectively and inconsistently. In a report entitled, ``The 
Good, the Bad and the Ugly,'' which we issued last month, we 
documented a wide gap in safety performance in our ten plant 
focus group. This discernible difference is due to the NRC's 
subjectivity. We think instead the NRC should develop objective 
standards which it consistently enforces, particularly when it 
comes to decisions about whether problem plants should be shut 
down or allowed to restart. It is a daunting challenge but we 
think it can be done.
    Commissioner McGaffigan pointed out during the July 17 
stakeholders meeting that the NRC does a good job on matters in 
its spotlight. We fully agree with this contention, although we 
think the NRC needs a larger floodlight. This little penlight 
job isn't going to allow the NRC to handle the important items 
on its plate in a timely manner.
    The NRC could do a better job if it developed and also used 
good procedures. Procedures are like the conveyor belt in a 
factory, they move work products from one station to another 
until the work is completed. Good procedures are like a strong, 
wide conveyor belt because they handle most of the work items. 
Bad procedures are like a thin, unreliable conveyor belt 
because too many items must be hand carried throughout the 
process. The NRC needs to have better and to follow better 
procedures.
    I must comment briefly on an industry complaint about the 
service it gets from the NRC. In recent years, a top NRC 
priority has been its review and certification of advanced 
reactor division. To our knowledge, a line of potential buyers 
for advanced reactors is not forming anywhere in the country. 
However, there seems to be a market for these things overseas. 
We do not oppose efforts to improve U.S. trade, it is simply 
incomprehensible to us that nuclear safety issues would linger 
while the certification of advanced reactor design gets fast 
tracked through the agency.
    In closing, I'd like to thank the subcommittee for 
providing this opportunity to share our views with you.
    Thank you very much.
    Senator Inhofe. Thank you, Mr. Lochbaum.
    Mr. Fetter?

STATEMENT OF STEVEN M. FETTER, MANAGING DIRECTOR, GLOBAL POWER 
                    GROUP, FITCH IBCA, INC.

    Mr. Fetter. Today I will offer my views based on my 
membership in the financial community at Fitch IBCA, which is 
an international rating agency based in New York and London, 
but also based on my experience as a former State utility 
regulator as Chairman of the Michigan Public Service 
Commission.
    The Nuclear Regulatory Commission is at the center of 
investors' perceptions with regard to financial risks facing 
the nuclear industry. To the extent that the NRC carries out 
its responsibilities in a consistent and predictable manner, 
the financial community gains comfort and investors are more 
willing to put forward their dollars into the future.
    I personally find it difficult to envision a competitive 
market developing around the country without nuclear power 
playing a significant role. As we heard earlier, it provides 
about 20 percent of electricity supply currently and with 
stranded cost reimbursement being provided, almost totally and 
completely by State regulators, many are counting on the low 
variable cost of nuclear power to support a competitive 
industry going forward.
    To achieve that goal, the NRC will have to balance their 
oversight responsibilities versus the necessities that a free 
market requires. In the past, it's been difficult for investors 
to predict with any certainty just what factors the NRC would 
use in rating plants, in modifying SALP ratings, or in putting 
plants on or off the watch list.
    As a former regulator, I can appreciate the pressures that 
the NRC operates under. It has a statutory scheme that seems 
aimed at strict adherence as a goal, but when operating such a 
system with so many standards and requirements, it makes it 
very difficult for utilities to allocate resources and it also 
makes it difficult for the financial community to assess risk.
    This is very important from the financial community's point 
of view because the repercussions are so severe. For example, 
when a plant goes on the watch list, the utility owning that 
plant usually ends up with a lower stock price, reduced access 
to equity markets, weakening bond and commercial paper ratings 
and therefore, a higher cost of debt.
    Probably the biggest fear is that once something goes wrong 
at a nuclear facility, there are so many regulations and 
standards that the NRC has the ability to find many other 
violations or potential violations and this could result, and 
often does result, in prolonged outages.
    The situation probably applies to every plant in the 
country. As one CEO confided to me, and this is someone who 
praises Chairman Jackson's leadership at the NRC, ``Under the 
current system, every nuclear plant in the country is 10 
minutes away from being off line for a year or two.'' Needless 
to say, a situation like this creates a great deal of unease 
among debt and equity investors and inhibits new investment in 
nuclear as competition comes to the electric sector.
    Interestingly, I called a few utilities that have had close 
interaction with the NRC over the last few years. I asked them 
for the pros and cons of their experience and they said, thanks 
but no thanks, they would just as soon keep their heads down 
for fear that if the NRC or the staff so desired, there are so 
many regulations, requirements and standards that they could 
find something wrong at any utility plant, nuclear plant in the 
country.
    What this points to is the crucial nature of the 
sensitivity the NRC will have to bring to companies, utilities, 
that will be moving into a competitive environment with nuclear 
plants. It is incumbent upon the NRC to differentiate between 
safety items and nonsafety items with strict and strong 
vigilance on safety and more flexibility on nonsafety.
    During my time as chairman of the Michigan Public Service 
Commission, we had great success with performance-based 
ratemaking which provides more discretion to the utilities 
within limits and it brings mutual benefits to shareholders and 
ratepayers. The time is right for risk-informed, performance-
based regulation at the NRC and I'm encouraged by Chairman 
Jackson's comments earlier today.
    In closing, let me say that the financial community is 
watching closely the license renewal process and also the 
potential transfers of licenses from one company to another. If 
the NRC can deliver on its promise of a fair, effective and 
efficient license renewal process and shows a similar resolve 
with regard to the potential transfers of licenses, it points 
toward continued financial support for nuclear which would 
ensure a place for nuclear power in the new competitive 
electricity environment.
    Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Mr. Fetter.
    Ms. Jones, don't take this personally. One of the other 
committees that I chair is the Readiness Subcommittee to the 
Senate Armed Services Committee and we work so closely with the 
GAO and they've been a real godsend to us in making 
evaluations, but I just must be missing something here. It's 
never occurred to me that it could be the function of a 
regulator to assess the performance and competency of 
management.
    The bureaucracy normally who is in front of this committee 
is the EPA and I can't imagine Carol Browner assessing the 
competency of the management of Halliburton or OxyUSA or the 
FAA assessing the competency of the management of Boeing.
    I would just like to ask any of the other four if you 
believe that it's either appropriate or if they have the 
necessary skills to do what has been suggested here, and 
particularly you, Mr. Fetter, where does the market fit into 
this?
    Mr. Fetter. I should say first, as a former regulator, I 
certainly had opinions on the quality of the management of the 
utilities within my State. As to my ability to make public 
assessments and pronouncements, I would be much less 
comfortable with regard to that.
    As far as the market, the markets make assessments on 
managements----.
    Senator Inhofe. Yes, the market can. The government, no.
    Mr. Fetter. And I would expect that would continue. But I 
would not think the market would support the NRC coming out 
with a report card of management on a regular basis.
    Senator Inhofe. Anybody else want to respond to that? Mr. 
Colvin?
    Mr. Colvin. There is an appropriate role for the NRC to 
look at management and management's ability to safely operate 
their facilities. That role currently is embodied in the 
regulations. That is part of their initial review for 
licensing. The NCR looks at the experience levels of 
management, the background, and things of that nature. That's 
part of the licensing decisionmaking process. I think that 
certainly is appropriate.
    The issue you raised, which is the competence of management 
in their day-to-day decisionmaking, is an inappropriate role 
for the agency.
    Ms. Jones. Mr. Chairman, might I clarify in terms of GAO's 
position on that issue because when we talk about management 
competence, we are talking about safety culture as it directly 
relates to the safety operations of the plant.
    I think our report points out that you've got inspectors at 
those plants on a day-to-day basis and if they have 
observations to make about decisions that are being made that 
would directly affect the safety culture, that is just another 
piece of information that senior NRC management can use to look 
at the safety of the plant.
    Senator Inhofe. All right. Thank you for that 
clarification.
    You heard me during the first panel quote two individuals. 
Does anyone want to respond to those quotes that I repeated to 
the first panel or were you listening?
    Ms. Jones. We were listening but we didn't write them down.
    Senator Inhofe. Let's go back to this July 17 meeting. I'd 
like to have someone from industry, probably you Mr. Colvin, 
characterize the nature of that meeting, what was accomplished 
at that meeting and comments about that meeting you can share 
with us.
    Mr. Colvin. As a participant of that meeting, I would first 
say thanks to the Chairman and the Commission and to NRC senior 
management for establishing that meeting. That was a very 
positive step, I think an initial step in trying to bring about 
a reflection and introspection about some of the changes that 
are necessary. I thought there was an excellent exchange of 
ideas and concepts at that meeting. I'd like to take that as a 
step to move forward in our dialogue with the agency.
    Senator Inhofe. Was that the first such meeting that 
followed that format?
    Mr. Colvin. Yes, sir. That's the first such meeting that 
industry has participated in with the Commission since 1994 
where we had a meeting on industry concerns about the 
regulatory process with previous commissioners.
    Senator Inhofe. Wouldn't you think it would be a good idea 
to add that to your list of three and make it a list of four 
when you said 1 year reassessment, oversight hearings and 
independent evaluation? Maybe this would be a good fourth thing 
to add to that list.
    Mr. Colvin. Yes, sir, it is an excellent opportunity.
    Senator Inhofe. On the independent evaluation 
recommendation, a lot was said about the Martin Report and 
those recommendations. Does anyone have any comments to make 
about the Martin Report?
    Mr. Colvin. My understanding from reading the report is 
that Mr. Martin looked at the agency with a few basic tools 
used in organizational reviews. He looked at positions where 
there was a one-over-one reporting relationship. In most 
organizational reviews, that shows that one person is 
unnecessary. Then he looked at where there was duplication 
across branches of the agency where similar functions were done 
in different branches or departments.
    That review came up with an approximate 700 full time 
employee equivalents, that could be reduced from the agency 
without really losing any process efficiencies. As Senator 
Sessions indicated, the Commission needs to undertake a very 
introspective look at its staffing levels and processes.
    In order to do that, they have to go back to the basics. As 
I mentioned earlier, we've talked a lot about regulations and 
risk-informed and performance-based regulation models. In large 
part, the regulations are only part of the problem; it's the 
inconsistency of their implementation, it is the fact that I 
believe the staff does not abide by its own rules and 
regulations. Third, there are other means that are used to 
exercise commitments or extract commitments from the 
licensees--confirmatory action letters, responses to generic 
letters and bulletins, the SALP process, as well as the watch 
list, that tend to undermine this relationship and confidence.
    Senator Inhofe. I had some other questions that I think 
probably Senator Sessions is going to follow up on since he 
brought it up insofar as the comparison. It's always helpful to 
us since we're not experts and normally people out there are to 
see how we compare whether it's to other countries, whether 
it's apples and apples as Chairman Jackson suggested maybe it 
wasn't in this case. I hope we can get a chance to pursue that.
    Senator Sessions?
    Senator Sessions. I think if you ask the people who 
populate NRC, they'll say they're not overstaffed, but 
management has got to challenge the culture, I believe, and 
find out exactly what the level is that is appropriate for the 
taxpayer and the industry who has to pay fees which is a form 
of tax, who should not pay more than they should pay. 
Certainly, I share that.
    Let me ask those of you from the industry is there, in your 
opinion--first of all, I believe Mr. Fetter mentioned fear. I 
talked to someone recently and they were just very cautious. 
They didn't want anything said that they complained. That was 
clear.
    Is there in private conversation a consensus fairly stated 
that regulations are not effective to accomplish what they want 
and the regulators often are unwise in applying the regulations 
that exist and significant improvement could be accomplished?
    Mr. Fetter. I wouldn't use the word unwise. They're going 
about the task to find anything that might be violating a huge 
list of regulations. Perhaps, in the old world, a developing 
nuclear industry had more of a place than in a more competitive 
world. I think the industry and the regulators have the ability 
to work together to figure out where their attention would be 
best focused in the future. For instance, Mr. Lochbaum 
mentioned a few safety systems that were uncovered that would 
not have operated properly.
    I'm not sure if perhaps there were risk-informed, 
performance-based regulations, then more of the resources could 
go toward the more important aspects he points to and less of 
the resources would be put towards things that are not safety-
related.
    Senator Sessions. Do you agree with that, Mr. Colvin?
    Mr. Colvin. Absolutely, Senator Sessions. We have initiated 
on the industry's behalf a number of proposed changes over many 
years. There is a risk-informed, quality assurance program 
petition for rulemaking that's been under review by the NRC for 
over 4 years; we have other examples of where we are trying to 
focus our resources and the NRC's resources on what is really 
important.
    I would like to add one comment to the issue. The issue is, 
in many ways, an uncertainty in what is required from the 
regulatory inspector perspective. That causes uncertainty for 
the licensee, the utilities and uncertainty even for the NRC 
staff.
    That uncertainty then results in some tension and debate 
that ends up chilling the environment that Mr. Fetter has 
talked about and giving people concern about raising an issue 
because ultimately it will come back to you.
    I think we also see that chilled environment within the 
staff. I talk to a number of NRC staff in the field who are 
unwilling to differ with agency management on what should and 
what should not be done. That's why I mention we really need to 
look deeply into the underlying issues that affect the 
relationship and affect how we regulate these plants. That's 
where we need to focus our energies.
    Senator Sessions. Mr. Lochbaum, I appreciate your comments 
and concerns.
    We could probably talk about this for a long time, but just 
briefly, as a concerned scientist, as you evaluate the utility 
of nuclear power, do you consider things such as black lung and 
so forth that is caused by coal mining or air pollution, or the 
danger of natural gas explosions and losses of life in that 
fashion? Have you considered that, at least within the United 
States, all the indications are that it's getting safer and 
safer. Presumably a newer plant would be even safer than the 
older plants because we've learned a lot about our designs. 
Isn't this a direction that the country ought to give serious 
consideration, that is utilizing nuclear power more rather than 
ending it?
    Mr. Lochbaum. In my testimony, I point out that not all 
indications show that everything is getting safer, just some of 
the indications show that everything is getting safer, so I 
guess I wouldn't buy into that.
    Senator Sessions. Well, we haven't lost any lives in 
nuclear power.
    Mr. Lochbaum. That's true but the amount you could lose if 
there was an accident is such that we need to avoid that rather 
than prevent the next one.
    Senator Sessions. We need to be careful.
    Mr. Lochbaum. The Union of Concerned Scientists issued a 
study last June in conjunction with five other organizations 
that looked at this country's energy needs out through the year 
2030 in order to meet environmental, economic and policy 
issues. For the purpose of that study, we considered that the 
current fleet of operating plants would run to the end of their 
40-year lifetime. That assumption has turned out not to be good 
because some of the owners have chosen to shut the plants down 
early due to economics, but we assumed they would be there for 
all 40 years.
    We found that you could achieve all of our economic needs, 
the environmental needs, objectives of the report without any 
new nuclear power plants. I think we stand behind that report 
in meeting global warming changes and climate change.
    Senator Sessions. We're not turning our air conditioning up 
too much.
    Mr. Lochbaum. No, and we didn't advocate that either.
    Senator Sessions. We've got more people and more demand, so 
it's difficult for me to understand how we won't need more 
energy. So you're prepared to provide that energy with fossil 
fuel systems?
    Mr. Lochbaum. No. It was renewable energy and energy 
efficiency. I'll be glad to get you a copy of that report.
    Senator Sessions. It hasn't proven to be a reality yet.
    Dr. Rhodes, are you confident that the nuclear power 
industry is safer today than it was 5 years ago or 10 years 
ago, the plants that are operating?
    Mr. Rhodes. Yes, Senator Sessions, I am. I think it's 
significantly safer than it was a decade or so ago.
    Senator Sessions. Mr. Fetter and Mr. Colvin, you discussed 
the possibility of the problem of investors making decisions. 
Do you foresee investors in the near future making a decision 
to expand nuclear power? Do you see any immediate prospects of 
that?
    Mr. Fetter. I think the decision facing investors right now 
is whether to invest in existing plants. That was the 
discussion earlier--about the long lead time and the license 
renewal process--whether investors will put up more money now 
for existing plants.
    Senator Sessions. To keep them running at the current 
level?
    Mr. Fetter. To keep them running or to have their licenses 
extended. If a plant is going to go off line 8 years from now 
and will not be extended, investors will view it differently 
than if they find out it can go on for another x number of 
years beyond that.
    As far as a new round of nuclear, it would seem to me what 
investors would want to see prior to that would be greater 
sensitivity at the NRC. I described that they have to be 
sensitive to the new challenges of the competitive market that 
the utilities will face, some standardization or streamlined 
process for figuring out the right design for the next 
generation of reactors, and third, but probably most important, 
as to what you can do, Senator Sessions, would be solving the 
high level nuclear waste issue. Until that is solved, there can 
be no serious thought of investment for a new generation.
    Senator Sessions. So you would say that not only do we have 
the obvious risk of nuclear materials all over the country 
stored on-site is not a healthy thing, but you're saying that 
until we get that solved, there's not going to be any serious 
evaluation of new nuclear plants?
    Mr. Fetter. That would be my view.
    Senator Sessions. I think that's a challenge for us, Mr. 
Chairman, because I do not feel that we have done a good enough 
job in bringing that problem to a conclusion.
    Senator Inhofe. Thank you, Senator Sessions.
    To show that Senator Lieberman is a man of his word, he 
said he'd be back and he's back. Senator Lieberman, take all 
the time you want.
    Senator Lieberman. Thanks, Mr. Chairman. I regret that I 
had a meeting associated with my responsibilities on the Armed 
Services Committee that I had to attend.
    I invite the witnesses to tell me whether I'm asking 
questions that you've already covered and not force you to go 
through it again.
    I want to start with a question to Ms. Jones and Mr. 
Lochbaum which is that each of you, in one way or another, has 
expressed concern that the NRC does not have a clear definition 
of safety when monitoring safety at nuclear power plants.
    We had this come up in our experience in Connecticut and I 
wanted to ask you both what should the NRC be doing or have 
they done enough since your criticism to clarify the definition 
of the basic concept or goal which is the safety of these power 
plants?
    Ms. Jones. Senator Lieberman, I think as the Chairman 
stated this morning, Chairman Jackson, they are moving in that 
direction but since our report was issued, they're just really 
starting to take steps in that direction.
    I think what we were looking for was for them to clearly 
lay out expectations in terms of well-defined boundaries. We 
understand that it can't be a black and white; there is always 
going to be some subjective judgment made in terms of nuclear 
power plant safety but there needs to be better guidance so 
that the Commissioners, senior NRC managers, as well as the 
inspectors that are out there on a day-to-day basis, understand 
how safe is safe and be able to make judgments about that in an 
informed way.
    Senator Lieberman. Mr. Lochbaum?
    Mr. Lochbaum. I would agree with that position. We think 
the NRC is sincere and is moving in the right direction, but we 
think they need to pick up the pace a bit because they are 
still quite a distance away from being at the point where they 
have subjective criteria that everybody could look at whether 
the industry, the public or within the staff itself to 
determine when a problem plant needs to be shut down for safety 
reasons or when is it safe enough to restart a problem plant. 
We think that criteria is lacking right now and it's a very 
subjective process. I think that is one of the reasons there is 
some uncertainty or some lack of confidence in the regulatory 
process.
    Senator Lieberman. Is it possible to make it more 
objective, less subjective?
    Mr. Lochbaum. If we knew an equation that could do that, we 
would definitely provide it. We think, as a minimum, you could 
come up with an empirical database. There have been things that 
have shut down plants in the past. So, as a minimum, when a new 
issue comes up, you could say was this equal to what we shut 
down that plant last year for? If it was, then you'd consider 
shutting down the plant. We don't even see that standard being 
applied today.
    Senator Lieberman. Do any of the other three on the panel 
want to comment on that question which is how well or poorly 
the NRC defines safety, which is what they're supposed to be 
all about? Mr. Colvin?
    Mr. Colvin. Senator, I'd like to comment on an element of 
that. We need to move forward in that direction with criteria 
as objective as possible. I support Mr. Lochbaum's statements 
in that regard.
    We need to move in that direction. In fact, as the Chairman 
indicated, the industry has proposed an assessment process that 
includes and overlaps the inspection and enforcement processes 
in a way that really ties it as directly to safety as we can 
conceive. I think if we can take out as much of the uncertainty 
or inconsistency in the application of the assessment process, 
we will make a significant step forward.
    As one example, as pointed out by Mr. Lochbaum in the July 
17 meeting, we have one criterion. We allow a plant to continue 
operating with some known deficiencies because we've evaluated 
those as not being important enough to safety to shut the plant 
down, and yet when the plant shuts down for any other reason, 
those deficiencies become barriers to allowing the plant to 
restart.
    If there are issues which need to be dealt with from a 
safety perspective, they ought to be dealt with, and we would 
support that. I think it's that inconsistency and that change 
that takes place over time that brings about a lot of the 
uncertainty that we see in this process.
    Senator Lieberman. Mr. Fetter, Dr. Rhodes?
    Mr. Rhodes. I might just comment on the INPO experience 
over the last 18 or 19 years. I described the evaluations that 
we do and unfortunately, Senator, we do periodic evaluations of 
plants every year or two and use these performance indicators.
    We have tried over the years to be performance-based, 
objective, and to minimize subjective evaluations. I think that 
has helped the industry a great deal. I submit that as a case 
study in what I think has been a very successful program.
    Mr. Fetter. Senator, I should mention that I am not an 
expert on nuclear engineering or physics, so I'm a good 
representative from the financial community because there are 
not many experts on those issues on Wall Street.
    Accordingly, to the extent that the NRC and the industry 
can help define what are the safety issues and what are less 
important issues, then Wall Street is able to react and not be 
so concerned. If the NRC brings something to the fore that is 
not safety related, but needs to be corrected, that would be 
important for us on Wall Street to know, that would affect our 
investment decisions.
    The way it is now, we do not have a strong sense of the 
factors that lead to a plant moving onto the watch list--change 
in ratings, rating of individual plants--and so we have to rely 
pretty much after the fact on NRC actions and decisions. 
Usually when that happens, the reaction of the financial 
markets is much more severe.
    Senator Lieberman. That's an important point. I'm going to 
come back to that in a minute.
    Let me pose my hearing of a conversation related to the 
industry and ask any of you who want to respond to do so. I've 
heard some people on the industry side seeming to criticize the 
NRC for setting a standard for plant operation that is above 
compliance with the rules. To some extent, we've touched on 
this in the previous question about the definition of safety.
    I think if I hear the industry, or at least these voices, 
it is that striving for excellence beyond compliance is an 
appropriate standard but it ought to be set by the industry 
itself by its own actions and not imposed as it were, even 
incentivized, by the NRC.
    On the other side, I think those that would defend the NRC 
cite other regulatory agencies which are trying to create 
incentives, dare I mention EPA, to take regulated entities 
beyond simple compliance to a higher standard at least with 
incentives.
    My question is, am I hearing this dialogue correctly but if 
I am, what is your reaction to it? What is the appropriate role 
for the NRC in setting a standard for nuclear power plant 
operation that may be above compliance with the specifics of 
law or regulation?
    Mr. Colvin?
    Mr. Colvin. Senator Lieberman, I think the issue is if you 
look at the statutory underpinnings of the agency and the 
Atomic Energy Act, they have the statutory mandate to issue 
regulations necessary for the adequate protection of public 
health and safety. Those regulations are not the minimum levels 
necessary. There is margin, both in design and operating 
parameters, built in.
    The NRC then issues regulations that it has have determined 
are a benefit to safety that is worth the cost of 
implementation and other sections of those regulations. So we 
have a mix of regulatory requirements that, in fact, have 
established a threshold level that has some margin in it, 
another set of regulations where there is an increased benefit 
above that level, and then we have the NRC's inspection 
activities and the utility's own management and other oversight 
activities from INPO and other inspection activities that 
provide an additional basis.
    The real question comes down to how does the NRC know what 
is required of the licensee if in fact you are continually 
striving to do better and how does the licensee know what is 
expected of it by the regulatory agency.
    So you're into an area where the individual inspectors or 
the individual operators are changing what the expectations are 
on a continuing basis. In a regulatory system, that does not 
work. It does work in the INPO model when the industry is 
setting standards and learning as we go on how to improve, 
because it's done by the utilities themselves.
    Senator Lieberman. Mr. Lochbaum, do you have a response?
    Mr. Lochbaum. I guess the way we view that question is it 
gets back to the objective criteria. The NRC would come in and 
evaluate a plant and if it feels that is a good performing 
plant, all the findings will be discounted or there would be no 
findings.
    If that utility gets into regulatory distress for whatever 
reason, all of a sudden those findings which were discounted or 
not written up before are now given a violation stage or civil 
penalty stage.
    Performance doesn't change like that overnight. The NRC's 
perception does. The NRC needs to have objective criteria to 
understand what plant performance is. They don't have that and 
that puts them into this box where a good performing plant 
overnight comes on the watch list or is headed for the watch 
list. That is not fair to anybody involved.
    Senator Lieberman. That leads me to my final question--I 
appreciate your courtesy, Mr. Chairman, with the time--and that 
is on the watch list process which you referred to, Mr. Fetter.
    We all go about our lives and are not focused; we turn on 
the switches and a light comes on; and we are not focused on 
nuclear power plants in our respective States or jurisdictions. 
We were stunned when the actions were taken against the plants 
in Connecticut. We had high confidence in the management and it 
was a big surprise. To a certain extent, we had a little bit of 
a covert early warning system going through some of the 
whistleblowers, but still there was widespread surprise.
    My question is about the watch list process. If you've 
talked about this at length, don't talk about it at length 
again, but the question is, is there something we should do, 
that the NRC should do to provide an early warning system 
regarding problem plants before they get on the watch list? Ms. 
Jones?
    Ms. Jones. Senator Lieberman, I think the watch list was 
intended to be used to help plants not to become problems.
    Senator Lieberman. To be the early warning.
    Ms. Jones. And I think the point is that the NRC is really 
taking too long to get plants on. They wait until a significant 
event to put them on the watch list, whereas if they had put 
them on earlier and maybe watched them, they wouldn't have 
gotten to that significant event.
    Senator Lieberman. Which might mean that there would be 
more plants on the watch list at any given time but it would 
have less--I don't want to say urgency but it would be for 
reasons that are less dire as it were.
    Mr. Fetter?
    Mr. Fetter. I think the fact that it's unpredictable from 
the point of view of the financial community leads us to treat 
every plant like it might be on the watch list tomorrow. That 
uncertainty does not help the industry and does not help the 
ultimate consumer.
    Senator Lieberman. Thanks to all of you and Mr. Chairman, 
thank you.
    Senator Inhofe. Thank you, Senator Lieberman.
    Let me make a couple of observations and ask a couple of 
questions.
    One is safety is very important and we all understand that, 
but I think almost equally important is the perception of 
safety and I think we've come a long ways. When the percentage 
was used--I believe there was one member in the first panel, 
I'm not sure who used it--it was 70 percent of the public 
approved of nuclear power. Is this a figure you've heard 
before? Is this a good figure?
    Mr. Colvin. The industry runs the public opinion polls 
routinely and over the years, certainly since the mid-1980's, 
somewhere between 65 to 75 percent of the public supports both 
current nuclear energy in the United States and future building 
of new plants as well as extending the licenses of these 
plants.
    The most recent study identified a fact that we also have 
seen in our same reviews from the congressional staff 
perspective and that is there is a significant perception gap 
in what an individual thinks and what they believe their 
neighbors think. So while I might say I support nuclear energy 
and I'm part of that 70 percent, my good neighbor, Dr. Rhodes, 
I might think he would not support it and we identified two 
basic reasons. One is that it is somewhat controversial and the 
individuals have little substantive information on which to 
base any dialogue or debate. So we have to narrow this gap in 
perception.
    As you pointed out, Senator Sessions, when you go to the 
local communities that have been and around these plants and 
the people work in those areas, even in your State, Senator, 
these people believe very strongly in that support and they are 
confident in the safety. Sometimes that is undermined, then 
that confidence gets rebuilt but as a matter of national 
policy, about 70 percent has been the number over the last 10-
15 years.
    Senator Inhofe. Do you think the heightened visibility of 
other forces of energy and power and the problems associated 
with them such as having gone through the particulate matter, 
the ozone and all of this might be contributing to the public 
acceptance of nuclear power?
    Mr. Colvin. I think there is an important relationship 
there that is being brought about the debate, the dialogue on 
the Kyoto protocol and other issues. I guess there are two 
factors that bring that about. One is certainly the 
environment, the realization that we have to protect the 
environment and what are the real means available to us to do 
that. The second issue is the drive towards competition because 
in the policy arena that drive is forcing a realistic debate 
and in many ways, an unemotional debate, on the technologies 
that exist to meet energy demand today and do it in an economic 
way.
    Nuclear power is the second cheapest source of electricity 
in the United States on a marginal cost basis on average. It's 
slightly above coal and it's about half of natural gas. We have 
some factors like investment and other issues which are being 
dealt with.
    To answer your question, Mr. Chairman, we have this debate 
that we're having on both competition and it's connection to 
the environment which are really bringing about a new way of 
thinking. I think that is being felt across the Nation by the 
public because of their desire to look at the environment for 
now and for the future.
    Senator Inhofe. I would like, Dr. Rhodes, to have gone into 
some of the ten indicators that you have and perhaps we can get 
educated after this meeting on that. I'm very pleased with the 
results you have and I want to see how you developed those 
results.
    Were all of you pretty pleased with the assessment in terms 
of 30 to 36 months in terms of the relicensing process that 
Chairman Jackson shared with us?
    Mr. Colvin. That's a good start, sir. We hope that with 
learning from the successes and obstacles in the first two 
license renewal applications, the agency will be able to 
improve that process significantly. I know that certainly is 
the desire of the Chairman and the Commission.
    Senator Inhofe. I would just say that that's one of the 
reasons we will be having another oversight hearing and we will 
take into consideration your concern for a shorter period of 
time in terms of reauthorization. I think you probably know 
it's been the history of this committee to use the 5-year 
period. This might be an exception to that. We will be visiting 
with members of the committee as well as the Chairman.
    We will complete our hearing with questions by Senator 
Sessions.
    Senator Sessions. I'll just make a comment and see if 
anyone else would express their thoughts on it.
    One issue we haven't talked about, Mr. Chairman, is the 
vacancies on the Commission. We have I believe two now. There 
has been a renomination of Ms. Dokas. I've had an opportunity 
to meet with her and I enjoyed that conversation.
    I also know that there is another position that is 
considered a Republican-appointed position. A name has been 
submitted to the President for over a year and he has not acted 
on that. I think we need to deal with that.
    We need a full Commission. I think it would not hurt the 
Commission to have another two Republican members of it. It 
might be helpful to it. I think it's a pretty serious issue and 
I think we ought to be pretty strong about this. We expect the 
President to cooperate and we'll try to cooperate and improve 
this agency. I just wonder would anyone else like to comment 
about that subject?
    Mr. Colvin. Here, here.
    Senator Sessions. I would yield back my time, Mr. Chairman.
    I would just say this. I think Chairman Jackson has 
recognized some of the problems and we need to encourage and 
support her in her efforts.
    Senator Inhofe. Senator Sessions, I would say that 
privately Chairman Jackson has expressed a concern for filling 
those slots too. I think we'll try to use this committee to 
encourage that to be done.
    Again, on the 28th of January, all of you who are 
participating today, I think it would be appropriate to have 
you on that list so you might be planning in advance.
    We appreciate very much the time you've given from both 
panelists.
    We are adjourned.
    [Whereupon, at 11:47 a.m., the subcommittee was adjourned, 
to reconvene at the call of the Chair.]
    [Additional statements submitted for the record follow:]
Statement of Hon. Joseph R. Biden, Jr., U.S. Senator from the State of 
                                Delaware
    Mr. Chairman, thank you for providing me the opportunity to testify 
before your committee today.
    The NRC and its oversight responsibility of nuclear power plants 
has been a top concern of mine for the last 20 years. As you know, 
that's why I requested that this committee hold an oversight hearing to 
further investigate the NRC's safety enforcement record.
    The NRC's lax safety record was detailed in a 1997 GAO report that 
I--along with Senator Lieberman--requested, which concluded that there 
was an attitude within the NRC, a ``culture of tolerating problems,'' 
that allowed nuclear plants to deteriorate, year after year.
    Frankly, my concerns about the NRC originated back in the mid-
1970's with the Salem Nuclear Generating Facility, which is located 
practically in my State's backyard--just across the Delaware River. 
Repeated serious incidents over years and years were met with what 
appeared to be reluctance on the part of the NRC to take the type of 
tough action needed to ensure the protection of the public health and 
safety.
    Just a couple of examples: In 1983, an automatic safety system, 
designed to stop nuclear reactions when the plant's computer determines 
the reactor is approaching danger, failed twice in 4 days. NRC seemed 
unwilling to require improvements in the plant and allowed for a 
restart with no assurances that the plant was safe. In November 1991, a 
devastating accident shut down operations for months, after three 
control valves failed, allowing the main turbine and generator to spin 
to its destruction.
    Just a year later, a computer glitch in the control room knocked 
out dozens of warning lights and alarms, freezing indicator panels for 
more than an hour and a half, without anyone noticing that something 
was wrong. And in 1994, operators lost partial control of the reactor 
pressure and temperature for more than 5 hours. Yet, despite this 
checkered past, NRC repeated avoided taking aggressive action. Let me 
briefly discuss the findings of the 1997 GAO report. The report 
investigated NRC's oversight and safety conditions at three nuclear 
generating facilities: the Salem Generating Station in Salem, New 
Jersey; the Millstone Nuclear Power Station near New London, 
Connecticut; and the Cooper Nuclear Station near Brownville, Nebraska.
    Among the GAO's findings:

  The NRC failed to take aggressive enforcement action on 
    safety requirements.
  When violations were uncovered, NRC often relied on the 
    plants' promises to make changes--yet rarely followed up to ensure 
    that corrective measures were taken.
  NRC's lack of aggressive action when problems were first 
    reported made unsafe conditions at the plants worse. For example: 
    GAO found that of the 43 deficiencies that must be addressed before 
    the Salem reactors could be restarted, all but 5 existed when the 
    reactor was operating. When the NRC did act, it was often too late.
  Finally, competent plant management, which everyone agrees is 
    key to safe operations, was not even assessed directly in NRC 
    inspections and reports.

    So what can be done to rebuild the public's trust in the NRC and 
make sure that these plants are operated safely? This congressional 
hearing is one step to further explore NRC's shortcomings and what the 
Commission can do immediately to further address these failings.
    I would urge my colleagues to keep the heat on the NRC; to demand a 
top-to-bottom review of its inspection processes and insist that this 
agency do a much better job of seeing to it that problems are detected 
and dealt with in a timely manner.
    Finally, the NRC must assess the competency and performance of 
plant management. While we want to encourage more effective industry 
self-policing, we need more than that if we are going to be confident 
of the public's safety. We need to have the mechanisms in place to make 
sure that we never have a lax management team running any nuclear 
plant.
    Now, to be fair, the NRC has taken some positive steps over the 
past year to address these problems. I also think the new management at 
the Salem Nuclear Power plants has made significant progress since it 
voluntarily shut down both units in 1995. Deficiencies at both Salem I 
and Salem II have been corrected and the units are operational once 
again. Nonetheless, I would hope the NRC would welcome this opportunity 
to restore the public's faith, and prove to us that we can rely on this 
regulatory agency to do its job of protecting the public health and 
safety.
    Again, I want thank the chairman and committee for holding this 
hearing. I sincerely hope that it leads to a more effective NRC that 
places a greater importance on the safe operations at nuclear power 
plants.
                               __________
 Statement of Hon. Christopher J. Dodd, U.S. Senator from the State of 
                              Connecticut
    I would like to thank Subcommittee Chairman Inhofe and Senator 
Graham for scheduling today's hearing on the Nuclear Regulatory 
Commission (NRC). Last year, I joined with Senator Lieberman in 
requesting a hearing to review management and oversight practices at 
the NRC, with specific regard to its regulation of Connecticut 
facilities. I look forward to hearing from the NRC and the General 
Accounting Office (GAO).
    I have been a long-time supporter of nuclear energy. A safe, 
reliable source of power is critically important to the well being of 
my state. Unfortunately, through first-hand experience, I have learned 
what happens when the public loses confidence in the practices of the 
nuclear industry and the agency tasked to regulate that industry.
    For many years, the nuclear industry in Connecticut was plagued by 
mismanagement and lax oversight, culminating with our four nuclear 
facilities being placed on the NRC Watch List. The four facilities were 
shut down and require NRC approval before being allowed to restart. In 
July, the newest and largest of the facilities was allowed to restart. 
Two of the older facilities have been permanently shut down and will be 
decommissioned, and the remaining facility is preparing for restart.
    During this troubling time in Connecticut, both the nuclear 
industry and the NRC came under attack. The NRC levied millions of 
dollars in fines on the Connecticut facilities and others throughout 
the country, for a variety of safety and technical violations. In 
addition, in 1997, the GAO issued a report stating that the NRC was not 
aggressive enough in their enforcement action and allowed deficiencies 
to go uncorrected for too long a time, at the total discretion of the 
individual licensee.
    As a result of the GAO report recommendations and the experiences 
in Connecticut, the NRC, under the direction of Dr. Jackson, has 
undertaken new initiatives to address oversight problems and be more 
responsive to concerns raised by whistle blowers. It is imperative that 
the NRC make internal changes to adequately regulate the operating 
facilities and those that are being decommissioned. Continued vigilance 
is imperative.
    In specifically dealing with the situation in Connecticut, I want 
to thank Dr. Jackson for coming to Connecticut at my and Senator 
Lieberman's request. In an unprecedented practice, the NRC held public 
hearings in Connecticut, providing a forum for concerned citizens to 
directly interact with agency representatives to discuss the situation.
    In response to the situation in Connecticut, I introduced S. 960, 
the Distressed Communities Support Act. This legislation would allow 
half of all fines levied by the NRC to be funneled back to communities 
impacted by plant problems or decommissioning. When a plant is poorly 
operated or inadequately regulated, towns and cities are left with 
exorbitant safety and economic concerns. This bill would help towns 
develop health, safety, environmental and economic programs. I would 
appreciate the committee's and the NRC's comments.
                               __________
    Statement of Shirley Ann Jackson, Chairman, Nuclear Regulatory 
                               Commission
    Mr. Chairman and members of the Subcommittee, the Commission is 
pleased to appear before you to discuss nuclear safety regulatory 
issues and the programs of the Nuclear Regulatory Commission (NRC). I 
would like to begin by providing the Committee with a brief summary of 
topics that are of particular interest.
    In the broadest sense, the mission of the NRC in fiscal year 1999 
remains the same as when the Congress created the NRC with the Energy 
Reorganization Act of 1974: that is, to ensure the protection of public 
health and safety, the common defense and security, and the environment 
in the civilian use of source, byproduct, and special nuclear 
materials. Periodically, however, the NRC has engaged in self-
examination and reassessment of its regulatory functions--both as a 
stimulus for continued improvement and in response to changes in the 
industries we regulate. The 3-years since the initiation of the NRC 
Strategic Assessment and Rebaselining effort in 1995 have been a time 
of self-evaluation, as we have prepared to realign our regulatory 
policies and programs in order to improve our own effectiveness and 
efficiency, as well as to position the agency for changes in the 
regulated environment, such as those resulting from electric utility 
deregulation and restructuring.
    In recent months, the NRC has been the subject of a number of 
external reviews, some of them sharply critical, from our Congressional 
appropriations committees, the General Accounting Office (GAO), the NRC 
Inspector General, the nuclear industry, and other stakeholders. 
Whether or not one agrees with these criticisms, we believe that they 
are worthy of careful consideration. They provide a useful opportunity 
to review the improvements we already have put into place; to examine 
the initiatives we have started and to evaluate the need for 
accelerating or adjusting the emphasis of those initiatives; and to 
address new issues where they have been identified. In addition, given 
the public manner in which the NRC conducts its affairs, we believe 
these critiques have provided a useful impetus for engaging in active 
dialogue with our stakeholders. Earlier this month, in fact, the 
Commission invited a number of these stakeholders, including some of 
our harshest critics, to engage in a round-table discussion, open to 
the NRC staff, the press, and the public. As anticipated, this meeting 
provided the Commission with beneficial insights, including a range of 
perspectives on the strengths and the weaknesses of NRC regulatory 
programs and policies.
    We believe this Commission has been willing to tackle difficult 
technical and policy issues--many of which have become multi-
dimensional and complex through a history of providing short-term or 
incomplete resolution. While this willingness to take on challenges may 
have uncovered or highlighted areas in need of change, we believe we 
also have pursued a solutions-oriented focus toward accomplishing those 
changes in a comprehensive and enduring manner.
    Regarding the criticisms leveled recently, it is important to note 
that they have not been all from one direction. Certain critiques have 
been perceived to be driven by pressure from the nuclear power 
industry, with implied or overt accusations that nuclear energy has 
become economically burdened as the result of NRC over-regulation. On 
the other hand, the General Accounting Office (GAO), the Union of 
Concerned Scientists, and other groups have been vocal in criticizing 
the NRC for a lack of rigor in demanding strict adherence to clear 
safety standards. These organizations are demanding even stronger NRC 
regulatory oversight of its power reactor licensees.
    We would submit that, as an independent regulatory agency, the NRC 
must be careful to maintain a focus on meeting its legislatively 
established health and safety mission. While we must be fair in 
considering the views of all our stakeholders, and while we must 
endeavor to accomplish our mission as effectively and efficiently as 
possible, we cannot afford to be propelled back and forth by every 
current in the river. Given our health and safety mandate, and given 
the nature of the industries we regulate, we believe there is virtue in 
being deliberate--not sluggish, but careful and thoughtful--in 
analyzing, optimizing, and accomplishing the necessary changes to our 
processes.
    While this testimony is provided as input to an oversight hearing, 
it also is structured to provide, clearly and directly, the NRC 
analysis of and response to the critiques I have mentioned. A more 
complete discussion of the full spectrum of NRC programs is provided as 
background information in an appendix to this testimony. I will focus 
on the specific areas that have been criticized.
    In May 1997, the GAO issued a report entitled ``Nuclear 
Regulation--Preventing Problem Plants Requires More Effective NRC 
Action.'' Criticisms in the GAO report focused on the perceived lack of 
early NRC intervention and enforcement action to prevent declines in 
nuclear plant performance. The GAO recommended an increased NRC focus 
on licensee responsiveness to identified problems, with specific 
strategies for NRC action when licensees allow problems to go 
uncorrected, and an increased NRC focus on licensee management 
competence as a component of NRC inspection and assessment.
    We believe that changes we have initiated to our reactor inspection 
and performance assessment processes will address most of the GAO 
concerns. These changes include: (1) efforts to develop and rely on 
more objective performance indicators; (2) the integrated review of our 
reactor assessment processes (known as IRAP), which I will address in 
more detail shortly; (3) an increased emphasis on the FSAR as a current 
reference document; and (4) a review of NRC practices in following up 
on licensee commitments. In addition, the NRC will increase its focus 
on performance-based (i.e., outcomes-oriented) inspections as the basis 
for drawing conclusions related to licensee management processes and 
controls.
    In a separate report, issued in March 1997, the GAO focused on the 
NRC system for handling the safety concerns, or allegations, raised by 
licensee employees. The GAO observations and recommendations covered a 
wide spectrum, generally centered around: (1) the timeliness of the 
Department of Labor (DOL) process for addressing discrimination 
complaints filed under Section 211 of the Energy Reorganization Act of 
1974; (2) NRC capabilities for monitoring the allegation process; and 
(3) NRC knowledge of the work environment at nuclear power plants.
    The NRC has taken aggressive action to improve its overall 
allegation program through increased management emphasis on the 
treatment of allegations and the protection of alleger identity, more 
effective and efficient allegation-related processes, improved 
timeliness and quality in communications with allegers, upgraded NRC 
employee training, a new software system for tracking and trending 
allegations, and specific process changes to incorporate allegation-
related insights into the evaluation of licensee performance in NRC 
Senior Management Meetings. We have taken specific measures to 
eliminate a vulnerability related to protecting alleger identity in the 
release of documents under our Freedom of Information Act (FOIA) 
processes. In addition, in our interactions with the Department of 
Labor, we have undertaken a number of measures that will enhance the 
joint agency treatment of Section 211 complaints.
    In June 1998, the NRC received a number of critiques, including 
reports from both the House and Senate Committees on Appropriations, 
that covered a broad range of NRC programs perceived to be in need of 
improvement. For treatment in this testimony, we have grouped these 
criticisms into the following categories: (1) risk-informed and 
performance-based regulation; (2) reactor inspection and enforcement; 
(3) reactor licensee performance assessment; (4) reactor licensing and 
oversight; (5) uranium recovery; and (6) NRC organization and 
management effectiveness and efficiency.
    A major area of criticism focused on NRC processes that result in 
expending undue NRC and licensee resources to address NRC requirements 
that are of relatively low safety significance. NRC critics, in 
general, believe that the NRC needs to accelerate its move toward 
making the entire NRC regulatory framework more risk-informed (i.e., 
such that areas of highest risk receive the greatest focus), and more 
performance-based (i.e., more results-oriented, and more open to 
allowing licensee flexibility in how to meet NRC regulatory 
requirements).
    The Commission has been very supportive of this adjustment in 
regulatory approach, as a means toward enhanced decision-making, 
improved efficiency, and reduced licensee burden in both the reactor 
and materials arenas. We agree, however, that the pace of current 
actions should be accelerated, and we are open to working with our 
stakeholders toward that end. Long-term NRC initiatives such as the 
Cost Beneficial Licensing Action program and Improved Standard 
Technical Specifications were designed to concentrate NRC and licensee 
resources on more safety significant aspects of nuclear power plant 
operation, and to remove or modify requirements with little safety 
benefit and high cost. Under the Probabilistic Risk Assessment (PRA) 
Implementation Plan, the NRC more recently published generic regulatory 
guidance to support risk-informed plant changes, as well as 
application-specific guidance in the areas of technical specifications, 
in-service testing, in-service inspection of piping, and graded quality 
assurance. The Commission also has emphasized an approach to rulemaking 
that is risk-informed and, where appropriate, performance-based, in 
order to reduce the burden associated with overly conservative or 
prescriptive requirements and to sharpen the focus on matters of 
highest risk. As one example, in September 1995 the Commission approved 
the issuance of a revision to 10 CFR Part 50, Appendix J, ``Primary 
Reactor Containment Leakage Testing for Water-Cooled Power Reactors.'' 
The revision added an option entitled ``Performance-Based 
Requirements,'' to allow licensees to replace voluntarily the 
prescriptive testing requirements of Appendix J with testing 
requirements, based both on overall performance and on the performance 
of individual components. Another example is the NRC Maintenance Rule--
made effective in July 1996 and now being revised--which uses a risk-
informed and performance-based approach to ensure the availability and 
reliability of key structures, systems, and components in power reactor 
facilities. Through training, program reviews, and stakeholder 
interactions, the NRC also is working to make its inspection, 
enforcement, and assessment processes more risk-informed and, where 
appropriate, performance-based, in order to provide a coherent, 
defensible, and consistent framework for the entire spectrum of NRC 
regulatory functions.
    In the area of reactor inspection, the NRC has been criticized for 
failing to reduce the inspection-related licensee burden in a manner 
commensurate with overall industry improvements in safety and 
efficiency. Similarly, regarding NRC enforcement practices, critics 
have stated, among other contentions: (1) that the recent increase in 
non-escalated enforcement reflects a change in NRC culture rather than 
a decline in licensee performance; (2) that the cost of responding to 
violations of low severity is excessive; (3) that enforcement is not 
properly focused on safety and matters of high risk; and (4) that the 
NRC needs to abandon its reliance on an approach that demands strict 
compliance with its regulations, without regard to the relative safety 
significance of individual issues.
    While the NRC believes that the basic focus and emphases of its 
inspection and enforcement programs are sound, we agree that 
improvements are needed in both areas. The average number of inspection 
hours has, in fact, decreased, and the gradient has increased between 
the amount of inspection received by the best performing plants and 
plants experiencing performance problems. While short-term efforts are 
focused on increasing the incorporation of risk information into 
inspection planning and execution, we also plan to initiate, in October 
1998, a review of the inspection program structure, focus, and 
procedures. The decision to perform this review was a result of 
initiatives which occurred over the past year that were aimed at 
achieving regulatory excellence. These include the ongoing review of 
our reactor performance assessment process, our improvements to the 
Senior Management Meeting process, and our performance of a job task 
analysis for personnel involved in our reactor inspection program.
    Regarding the criticisms of our enforcement practices, we believe 
that the increase in non-escalated enforcement actions stems from an 
concerted effort to improve consistency, together with an increased 
focus on compliance, and a specific emphasis on ensuring that reactor 
plant design bases have been maintained. The NRC does not believe that 
this increase in violations reflects a decline in reactor safety 
performance. In fact, as part of the efforts described above, we may 
have inadvertently created too low a threshold for Severity Level IV 
violations, as compared to minor violations. The NRC recognizes the 
resource demands associated with relatively low-level violations, and 
we have taken several short-term actions to simplify the disposition of 
these non-compliances. We have increased the level of centralized 
oversight to ensure consistency in this area, and we have increased the 
headquarters oversight and coordination of the appeal process for 
disputing low-level violations. As directed by the Commission, the NRC 
staff has changed one of the criteria for distinguishing minor 
violations from Severity Level IV violations. As an overall effort to 
improve our enforcement practices, we also intend: (1) to continue to 
meet with stakeholders to consider the need for further change, 
including identifying unnecessary or duplicative regulations or 
requirements and removing the burden of responding to low severity 
level violations; (2) to improve guidance on factoring risk into 
enforcement decisions; (3) to use training, internal audits, and 
stronger management oversight to identify and correct inconsistencies 
and other problems; and (4) to provide closer coordination between 
inspection and enforcement activities.
    In the area of reactor performance assessment, the strongest 
overall criticism has centered around the subjectivity and lack of 
scrutability of our assessment processes. In particular, critics have 
faulted these processes for the lack of clear, objective assessment 
criteria--including criteria used to place nuclear power plants on the 
NRC ``Watch List.'' Taken as a whole, these processes have been 
characterized as being redundant and too resource-intensive, both for 
licensees and for the NRC.
    The NRC agrees with the thrust of these criticisms. However, we 
would note that these flaws have been the focus of considerable 
Commission attention, and that specific agency initiatives are underway 
to address these very concerns. In 1996, the Commission directed a 
study of the Senior Management Meeting (SMM) process by Arthur 
Andersen, which resulted in an increased emphasis on objective, 
quantitative information, as well a number of SMM process improvements. 
From that study, the increased scrutiny of the overall assessment 
function led to initiating the IRAP--a full-scope, integrated review 
encompassing all NRC reactor-related performance assessment processes--
with the goal of developing a single, integrated process that is more 
objective, more scrutable, and less resource intensive than the current 
mix of processes. We expect to complete the IRAP by late this year. In 
the interim, the Commission has initiated several other changes, which 
include: (1) changing the frequency of the SMM from semiannual to 
annual; (2) requiring a more systematic processing and comparison of 
regulatory performance data in the areas of human performance, 
enforcement, allegations, and risk; (3) providing a structured analysis 
of performance data in a publicly released plant issues matrix for each 
plant; and (4) providing for Commission approval of actions taken at 
the Senior Management Meeting.
    In the area of reactor licensing and oversight, the primary 
criticisms have been: (1) that the NRC has implemented informal 
processes that bypass formal procedures, thereby imposing requirements 
inappropriately; (2) that the NRC has reinterpreted improperly what 
constitutes design basis information, in a manner that is unclear, 
unduly burdensome, and unproductive; and (3) that NRC adjudicatory 
processes take too long and cost too much.
    Once again, the NRC agrees with the general thrust of these issues, 
and we are taking action to address the concerns expressed. Regarding 
regulatory process controls, we have adopted measures that internally 
challenge the need for each generic communication, to ensure that the 
licensee actions requested and responses required are commensurate with 
the safety significance of the issues involved. In addition, we will 
increase NRC management oversight of the issuance of Confirmatory 
Action Letters, to ensure that proper controls are exercised in NRC 
staff confirmation and documentation of licensee commitments, and that 
licensees are not pressured into actions in excess of regulatory 
requirements. Regarding our focus on design basis information, the 
Commission has issued revised guidance to clarify the evaluation 
process for resolving degraded and nonconforming conditions, and we are 
committed to providing more flexibility for our licensees to make 
facility changes without NRC approval (i.e., using 10 CFR 50.59). We 
will continue to work with the industry to bring clarity and a risk-
informed approach to this area. Finally, regarding adjudicatory 
processes, the Commission has been working to implement several 
measures, including: (1) streamlining the hearing process, (2) clearly 
delineating Commission expectations for adjudicatory proceedings, such 
as schedules and sua sponte reviews; and (3) making provisions for 
Commission guidance to licensing boards on individual proceedings, 
timely identification of any open generic policy issues for Commission 
decision, and effective integration of the technical review and 
adjudicatory schedules. While these measures are designed to improve 
the timeliness of all NRC adjudicatory proceedings, we have given 
particular consideration to ensuring that the process for reactor 
license renewal will be efficient, fair to all parties involved, and 
focused on the technical merits of the applications. We also will 
examine whether changes (including legislation) would be appropriate to 
expand our use of more informal or legislative-style hearings in 
licensing proceedings.
    Several criticisms have related to the overall topic of NRC 
organization, management effectiveness, and efficiency. Critics have 
called for an agency-wide review, contending that the NRC has been 
unresponsive to previous internal and external reviews, and faulting 
the agency for an overall lack of self-assessment capability. 
Significant NRC staffing and resource reductions have been suggested, 
targeting the areas of management and support, human resources, 
finance, professional staff (particularly in the area of reactor 
oversight), research, and international programs.
    Perhaps the most compelling NRC response to these concerns is the 
extensive effort we have made, in recent years, to construct a 
coherent, defensible, and dynamic framework for strategic planning and 
resource management. In 1995, the Commission initiated the Strategic 
Assessment and Rebaselining review, which compared agency programs to 
Congressionally mandated NRC authorities and responsibilities, and 
provided the foundation for developing our fiscal year 1997-2002 
Strategic Plan, the fiscal year 1999 Performance Plan, and program-
level, outcomes-focused operating plans. We are developing and 
implementing an integrated, coherent, agency-wide process for planning, 
budgeting, and performance management, which builds in accountability 
and self-assessment, and provides a direct means to refocus work or re-
deploy resources in response to change.
    Moreover, as this Committee is aware, the NRC is already much 
smaller than it once was. The NRC's fiscal year 1998 budget, when 
adjusted for inflation, is the lowest in the 23-year history of the 
NRC. As an example, the current NRC research budget has been reduced by 
approximately 80 percent over the past 17 years. Since fiscal year 
1994, the NRC has reduced Senior Executive Service managerial positions 
by 16 percent, from 220 to 185. We have improved the overall 
supervisor-to-employee ratio, and we are striving to reach our goal of 
1:8 by the end of the next fiscal year.
    We believe, further, that the NRC has been vigorous in its self-
assessment, using both broad-scope and specifically focused reviews to 
uncover deficiencies and develop sensible solutions. Some of these 
reviews, such as the IRAP, have been internal, while others have 
employed external consultants, such as our recently initiated 
enlistment of Arthur Andersen and Company to evaluate our planning and 
self-assessment processes, beginning with the Office of Nuclear Reactor 
Regulation (NRR). In addition, we have made a concerted effort to be 
open and receptive to criticism, including the broad array of critiques 
outlined in this testimony. We actively seek interactions with our 
stakeholders to engender feedback and input on our performance in 
various regulatory functions, and to solicit suggestions for continued 
improvement.
    Regarding the specific areas mentioned for staffing reductions, we 
will continue to seek areas in which greater organizational efficiency 
can be achieved. We expect that the enhancements resulting from our 
reactor oversight process reviews will allow a reduction in resources 
in some areas, while retaining the necessary level of expertise and a 
defensible level of oversight. We have made considerable progress in 
reducing our management and support staff, and we will continue to 
target reductions in these areas. Finally, we believe that our 
participation in international activities is beneficial to the 
regulation of U.S. nuclear power plants, and not only augments our 
operational experience database, but, in fact, also plays an important 
role in leveraging our limited resources by allowing cooperative 
research.
    We would like to thank the members of this Committee for the 
support they consistently provide to the Nuclear Regulatory Commission. 
As I have heard said, ``a bend in the road is not the end of the road, 
unless you fail to make the turn.'' I believe I can say, with my 
Commission colleagues, that we intend to make the turn, if, in fact, we 
are facing a bend--or to modulate our trajectory, if that is the degree 
of adjustment needed.
    To proceed with modifying the agency regulatory approach along the 
lines I have discussed requires that we have adequate resources. As you 
know, both the House and Senate have passed Energy and Water 
appropriations bills for fiscal year 1999. The Senate would appropriate 
$470.8 million for the NRC, including the NRC Inspector General, and 
the House version would appropriate $467.5 million. Either bill would 
constitute a sizeable reduction from the requested level of $488.6 
million. As requested, that level did little more than to enable the 
agency to maintain its resources in the face of inflation. The present 
reduction, if carried out, will require the NRC to reduce its planned 
fiscal year 1999 programs by at least $17.8 million. As a result, the 
NRC will cut back on its reactor inspection and reactor oversight 
programs, curtail selected safety research, eliminate studies of 
nuclear materials operating experience, and substantially reduce many 
of its support activities.
    With the Senate and House appropriations bills as a catalyst, our 
fiscal year 2000 budget proposal will reflect an approach that 
accelerates many of our efforts leading to a revised regulatory 
framework. We believe that accelerating our efforts toward a risk-
informed and, where appropriate, performance-based regulatory approach 
will both enhance our safety decisions and provide a coherent basis for 
our regulatory processes. Through the full implementation of our 
Planning, Budgeting and Performance Management Process, our fiscal year 
2000 program resource requirements will reflect additional efficiencies 
and more streamlined processes. Some of that streamlining already has 
begun, and is reflected in the current fiscal year 1999 budget 
estimate. As I have outlined earlier, we are committed to examining 
broad aspects of our reactor inspection, enforcement, and performance 
assessment processes (as well as other programs), and we will make the 
adjustments needed to optimize our performance in those areas. Where 
criticisms are found to be valid, our decisions to make additional 
adjustments--or to accelerate changes already in progress--may require 
further changes to the fiscal year 2000 program and the associated 
budgetary resources.
    As you know, the Omnibus Budget Reconciliation Act of 1990, as 
amended, requires the NRC to recover 100 percent of its new budget 
authority, less the amount appropriated from the Nuclear Waste Fund for 
high level waste activities, by assessing fees. However, the NRC 100 
percent fee recovery requirement reverts to 33 percent at the end of 
fiscal year 1998, if the current requirement is not extended. The 
Committee on Environment and Public Works has approved unanimously S. 
2090, ``NRC Fairness in Funding Act of 1998,'' which would extend the 
authority of the NRC to collect fees through 2003. Both the House and 
Senate appropriations bills for fiscal year 1999 contain general 
provisions extending approximately 100 percent fee recovery for fiscal 
year 1999 only. The Commission encourages the Congress to act on the 
fee authority extension in S. 2090 so as to provide a sound future 
funding base for NRC programs.
    The Commission, NRC licensees, and the Congress have expressed 
concerns regarding the fairness and equity of charging licensees for 
certain agency expenses that cannot be attributed to individual 
licensees or classes of licensees. The Commission recently has 
considered issues associated with fees, and has concluded that reducing 
the fee-based portion of our budget would address these fairness and 
equity issues. Thus the Commission supports removing a portion of NRC 
funding from the fee base, and covering it with separate 
appropriations, as provided for in S. 2090.
    In conclusion, the Commission is committed to making the changes 
necessary to maximize NRC regulatory effectiveness, and we are 
sensitive to the need to contain the costs of doing business in order 
to minimize the financial impact to our licensees. At the same time, we 
take very seriously our responsibility to provide reasonable assurance 
of adequate protection of public health and safety in the use of 
nuclear materials in the United States. The NRC greatly appreciates the 
support for its programs and resource needs that this Committee has 
afforded the agency in the past. We look forward to our continued 
interactions.
                               __________
       Appendix A: Enhanced Discussion and Additional Information
    The discussions that follow provide the Subcommittee with further 
details on the activities that we have outlined in this testimony. A 
table of contents is provided for ready reference to areas of specific 
interest.
                           table of contents
    I. Expectations for a Health and Safety Regulator
    II. NRC Response to the May 1997 GAO Report, ``Nuclear Regulation--
Preventing Problem Plants Requires More Effective NRC Action''
    III. NRC Response to the March 1997 GAO Report, ``Nuclear Employee 
Safety Concerns--Allegation System Offers Better Protection, But 
Important Issues Remain''
    IV. NRC Response to the May 1998 Senate Appropriations Committee 
Report and Related Studies
A. Risk-Informed and Performance-Based Regulation
B. Inspection and Enforcement
    Inspection
    Enforcement
    Summary
C. Reactor Licensee Performance Assessment
D. Reactor Licensing and Oversight
    Regulatory Processes
    Design Basis Information
    Power Reactor License Renewal and NRC Adjudicatory Processes
E. Uranium Recovery
F. Organization and Management Effectiveness and Efficiency
    Organization and Planning
    Information Technology and Information Management
    NRC Self-Assessment
    Management and Support Staffing
    NRC Participation in International Activities
    Summary
    V. Other Agency Programs and Areas of Focus
A. Electric Utility Deregulation
    Cost-Competitiveness and Safe Nuclear Operations
    Electrical Grid Reliability
    Decommissioning Funding Assurance
    License Transfers and Timeliness of NRC Reviews
B. NRC Certification of Advanced Reactor Designs
C. Status of the NRC Materials Program
    Materials Program Initiatives
    Oversight of the U.S. Enrichment Corporation
D. High-Level Waste
    NRC Assessment of DOE Progress and Potential for Licensing Success
    Potential Issues
    Status of Spent Fuel Storage
E. Decommissioning and Decontamination; Clean-Up
F. Work with the U.S. Department of Energy (DOE)
    External Regulation of DOE
    Current DOE Privatization Activities
    Tritium Production
    Disposition of Surplus Weapons-Grade Plutonium
G. Significant Research Activities
H. International Cooperation
    Bilateral and Multilateral Activities
    Convention on Nuclear Safety
    I. Year 2000 Systems Corrections
                                 ______
                                 
I. Expectations for a Health and Safety Regulator
    The United States Nuclear Regulatory Commission (NRC) was 
established in 1975 principally because the evolution and development 
of the nuclear power industry had created a new set of regulatory 
challenges, requiring the attention of an exclusively regulatory agency 
to ensure the health and safety of the American public. Created in a 
time of change, the NRC throughout its existence has engaged repeatedly 
in reassessment and recalibration in the light of new data and new 
understanding. In the same way that it demands objective self-
examination and effective corrective action on the part of the 
regulated industry, the NRC recognizes that it must require the same of 
itself. The 3-years since the initiation of the NRC Strategic Planning 
and Rebaselining effort in 1995 have been a time of searching self-
evaluation, as the agency has prepared to realign its regulatory 
policies and programs for nuclear power plants, to take into account 
the variety of changes that will result from the shift to electric 
utility deregulation and associated utility restructuring .
    In recent months, the NRC has been the subject of a number of 
critiques, some of them sharply critical, from our Congressional 
appropriations committees, the General Accounting Office (GAO), the NRC 
Inspector General, the nuclear industry, and other stakeholders. 
Whether or not one agrees with these criticisms, the NRC believes that 
they represent valuable input worthy of careful consideration. They 
also are an appropriate occasion for the agency to continue its own 
rigorous stock-taking; to assess objectively both the strengths and the 
weaknesses of NRC regulatory programs and policies; to understand 
better the impact of those programs and policies on those we regulate; 
to consider how effectively we have responded to change in the 
regulatory environment; and to give open-minded and objective 
consideration to the views and interests of our various constituents.
    Many of the criticisms leveled recently have been perceived as 
driven by pressure from the nuclear power industry, with implied or 
overt accusations that nuclear power has become economically burdened 
as the result of NRC over-regulation. On the other hand, the May 1997 
General Accounting Office (GAO) report (``Nuclear Regulation--
Preventing Problem Plants Requires More Effective NRC Action''), as 
well as the Union of Concerned Scientists and other constituent groups, 
have been vocal in criticizing the NRC for a lack of rigor in demanding 
strict adherence to clear safety standards, and in demanding, if 
anything, stronger NRC regulatory oversight of its power reactor 
licensees.
    We would submit that, as an independent regulatory agency--
regardless of the source of our fees--the NRC must be careful to focus 
on meeting our legislatively established health and safety mission. 
While we must be fair in considering the views of all our stakeholders, 
and while we must endeavor to accomplish our mission as effectively and 
efficiently as possible, we cannot afford to be propelled back and 
forth by every current in the river. In other words, given our health 
and safety mandate, and given the nature of the industries we regulate, 
we believe there is virtue in being deliberate--not sluggish, but 
careful and thoughtful--in analyzing, optimizing, and accomplishing the 
necessary changes to our processes.
    In addition, in reviewing the criticisms that have been directed at 
the NRC regulatory process, it is important both for the NRC and for 
our stakeholders to keep in mind that the basic processes under 
criticism are the same processes that have resulted in the licensing 
and operation of 110 safe nuclear power plants. Today, 104 plants are 
operating to produce 20 percent of our nation's electricity, with an 
enviable record in terms of protecting the health and safety of the 
American people. That should not be taken to imply, by any means, that 
NRC processes are or should be above criticism--far from it. It does, 
however, suggest that caution should be exercised before making 
sweeping changes to ensure that seemingly desirable improvements, made 
in the interest of increased efficiency or diminished regulatory 
burdens, do not turn out to have unforeseen adverse effects on the 
overall objective of ensuring nuclear safety.
II. NRC Response to the May 1997 GAO Report, ``Nuclear Regulation--
        Preventing Problem Plants Requires More Effective NRC Action''
    In its May 1997 report, ``Nuclear Regulation--Preventing Problem 
Plants Requires More Effective NRC Action,'' the General Accounting 
Office (GAO) emphasized that, in order to achieve the NRC safety 
mission, it was critical for the Commission to have a high degree of 
confidence in the ability of its regulatory program to ensure that the 
nuclear industry performs to high safety standards. The GAO observed 
that the NRC determination of adequate protection of public health and 
safety presumptively assumes that licensees will operate their 
facilities within approved designs and in accordance with NRC 
regulations. Within this context, the GAO report gave a number of 
specific criticisms, which included contending:

  that, for some plants, the NRC had not taken aggressive 
    enforcement action to require licensee correction of safety 
    problems on a timely basis;
  that the NRC needed to improve on early intervention and 
    aggressive enforcement action, in order to prevent declines in 
    nuclear plant long-term performance, and in order to increase the 
    assurance that licensees are meeting high safety standards; and
  that the NRC was slow to place plants on the NRC ``Watch 
    List.''

    The GAO report recommended that the NRC develop strategies to take 
more aggressive action on safety deficiencies when they are discovered. 
Specific recommendations included: (1) that NRC inspectors be required 
to document fully the status of licensee actions to address identified 
problems, including timetables for the completion of corrective actions 
and statements as to how the NRC will respond to nonconformances with 
planned actions; (2) that the NRC make licensee responsiveness to 
identified problems a major feature of the Senior Management Meetings, 
to include clarifying the intended NRC response when problems go 
uncorrected; and (3) that the NRC assess licensee management competency 
as a mandatory component of the NRC inspection and assessment 
processes.
    As indicated in its written response to the GAO report, the NRC has 
been developing--and in many cases already has instituted--a variety of 
improvements to its reactor performance assessment processes that will 
address most of the GAO concerns. The NRC staff has worked extensively 
to develop improved performance indicators for use in the assessment of 
reactor licensees--including performance indicators that focus on the 
adequacy of licensee corrective actions. The Integrated Review of the 
NRC Assessment Process for Operating Commercial Nuclear Reactors 
(referred to as IRAP), is an extensive review by the NRC staff of all 
existing reactor-related assessment processes. This review is still 
ongoing, and the final form of the IRAP has yet to be determined; 
however, in keeping with the recommendations made by the GAO and 
others, early stages of the IRAP have considered such changes as: (1) 
streamlining and integrating into a single process the best elements of 
our current processes; (2) tying specific regulatory actions directly 
to the assessments made; (3) improving the systematic use and 
categorization of data; (4) developing and using threshold criteria; 
(5) focusing on performance results; (6) providing opportunity for 
licensee response at appropriate stages; and (7) providing for 
Commission approval of actions taken at the Senior Management Meeting. 
[For additional detail on the IRAP and other aspects of licensee 
performance assessment, see Section IV.C of this testimony.]
    Other NRC initiatives that relate to the GAO report criticisms 
involve a renewed emphasis on the purpose and use of the final safety 
analysis report (FSAR) and a review of NRC practices in following up on 
licensee commitments. The updated FSAR provides a current reference 
document to be used in routine safety analyses performed by the NRC, 
the licensee, and other interested parties. NRC inspection and 
licensing guidance has been clarified to re-emphasize the use of the 
FSAR in providing updated licensing basis information for the plant, 
and the need to review applicable portions of the FSAR and other 
licensing documents during inspections and licensing reviews. The NRC 
staff also is reviewing existing NRC processes for identifying, 
tracking, and verifying licensee commitments made to the NRC, to 
improve NRC staff and industry understanding and performance in this 
area. The NRC has begun discussions with the Nuclear Energy Institute 
(NEI) to determine whether changes in the NEI guidance document on 
licensee commitments might be mutually beneficial for licensees and the 
NRC.
    In the area of assessing management competency, the Commission 
agrees that licensee management has a significant effect on plant 
operation and, by inference, on safety and risk. The NRC role is to 
provide oversight of generic aspects of utility organization and 
employee qualifications commensurate with the need to provide 
reasonable assurance of adequate protection, such as establishing 
minimum qualification requirements for certain positions. However, as 
the Commission recently reaffirmed, NRC inspection and assessment does 
not directly assess licensee management performance or corporate 
culture. Rather, the NRC inspection program emphasizes conducting 
performance-based (i.e., outcomes-focused) inspections in broad areas 
of facility operation and design, and, on the basis of inspection 
results, draws conclusions about the effectiveness of licensee 
management processes and controls. In addition, to be clear, NRC 
regulatory oversight does not extend to NRC involvement in the 
selection process for licensee managers.
III. NRC Response to the March 1997 GAO Report, ``Nuclear Employee 
        Safety Concerns--Allegation System Offers Better Protection, 
        But Important Issues Remain''
    The NRC regulatory program places a high value on a work 
environment, within the licensee community, in which the highest 
standards of quality, integrity, and safety are understood to be in the 
best interest of the licensee and its employees and contractors. The 
NRC allegation program provides a way for individuals working in NRC-
regulated activities and members of the public to provide safety and 
regulatory concerns directly to the NRC. For allegations involving 
potential wrongdoing, the NRC Office of Investigations (OI) works with 
the program offices on follow-up, in-depth investigation, analysis, and 
disposition--including enforcement action. For allegations of 
discrimination under Section 211 of the Energy Reorganization Act of 
1974, the Department of Labor (DOL) provides an investigation and 
adjudicatory process for complainant redress, and the NRC also may 
conduct its own investigation to determine the need for enforcement 
action. The Commission has taken aggressive action to improve the NRC 
treatment of allegations, and to promote within the overall licensee 
community a safety-conscious work environment--in which personnel at 
any level are encouraged to report concerns, and such that concerns are 
promptly reviewed, prioritized, investigated, and if warranted, 
corrected, with appropriate feedback to the individual.
    In its March 1997 report, ``Nuclear Employee Safety Concerns--
Allegation System Offers Better Protection, But Important Issues 
Remain,'' the GAO made a number of observations and recommendations for 
improvement relating to the following general areas: (1) the timeliness 
of the Department of Labor process for providing complainant redress 
under Section 211; (2) NRC capabilities for monitoring the allegation 
process; and (3) NRC knowledge of the work environment at nuclear power 
plants.
    Over the past 18 months, the NRC has made a number of specific 
changes to its allegation program, some of which were in response to 
specific GAO recommendations, and some as part of internal NRC 
initiatives. In general, these changes have focused on emphasizing the 
importance of the allegation program and improving its implementation, 
including NRC processes for allegation receipt, documentation, 
tracking, follow-up, evaluation, and closure. Specific actions include 
the following:
    The NRC Executive Director for Operations issued an announcement to 
agency employees expressing NRC management expectations for NRC staff 
handling of allegations, including comprehensive and timely allegation 
resolution and protection of alleger identity.
    The NRC published a brochure that is provided to allegers. The 
brochure describes the NRC allegation process, the DOL process, and the 
extent to which the NRC can protect the identity of allegers.
    The NRC staff developed and implemented an improved software 
package that has enhanced NRC capabilities for tracking and trending 
allegations, including tracking discrimination complaints from receipt 
through the completion of NRC investigative and enforcement activities 
as well as through the completion of DOL actions.
    Standard training material on the allegation program has been 
developed and implemented, to ensure that NRC employees were current 
and knowledgeable on the important aspects of the allegation program, 
including treating allegers professionally and courteously.
    The NRC developed standard formats for correspondence with 
allegers, to ensure that all necessary topics are discussed and all 
essential information is included in such correspondence. The format 
for acknowledgment letters requires a restatement of the allegations as 
understood by the NRC. Closure letters also now require a restatement 
of the concern, as well as a description of the NRC basis for closing 
the concern.
    Special cover sheets were developed for allegation correspondence 
to increase NRC staff recognition of the special handling requirements 
needed to protect the identity of allegers.
    The Senior Management Meeting assessment process was revised to 
include a discussion of insights gained from the allegation program, to 
assess licensee performance in establishing and maintaining an 
environment conducive to raising safety and regulatory concerns.
    The NRC also has taken a number of actions specifically designed to 
improve the follow-up, investigation, and disposition of Section 211 
discrimination complaints. The NRC Office of Investigations (OI) has 
enhanced its overall program in this area by: (1) ensuring an interview 
with each alleger that has established a prima facie case for Section 
211 discrimination (including those under separate pursuit by the DOL); 
(2) increasing the level of OI involvement in the regional and program 
office Allegation Review Boards, including the analysis and disposition 
of discrimination complaints; (3) upgrading the oversight and training 
of field investigators involved in discrimination investigations; and 
(4) improving the timeliness and quality of OI reports. Given the 
complementary DOL jurisdiction in this area, the NRC has been working 
with the DOL on a range of actions designed to improve the DOL 
investigative and adjudicatory process. These include: (1) the transfer 
of Section 211 complaint investigation responsibility from the DOL Wage 
and Hour office to the DOL Occupational Safety and Health 
Administration (OSHA); (2) a draft revision to the NRC/DOL Memorandum 
of Understanding (MOU) related to Section 211 complaints, which I 
recently signed and forwarded to the Secretary of Labor for her 
signature; and (3) efforts in progress to develop draft legislation 
that, among other enhancements, would improve the effectiveness and 
timeliness for the DOL Section 211 investigative and adjudicatory 
process.
    Within the range of actions described above, the NRC has completed 
its implementation of all but three of the GAO report recommendations. 
Actions still in progress or under consideration are as follows:
    The NRC and DOL staffs have agreed on draft legislative changes 
that would make the timeliness requirements in Section 211 of the 
Energy Reorganization Act more reasonable, and would help to improve 
the effectiveness and timeliness of the DOL process. The NRC staff 
currently is preparing a paper that will forward these proposed changes 
to the Commission for approval and submission to the Congress.
    The NRC still is evaluating the GAO recommendation on routinely 
providing feedback forms in allegation closeout correspondence. Several 
sample studies have been conducted, and the NRC staff will soon provide 
a recommendation to the Commission on this matter.
    The GAO recommended that the NRC improve its capabilities for 
assessing the work environment at licensee facilities. The Commission 
currently is reviewing an NRC staff paper that provides options for 
addressing this issue.
    An additional area needing improvement was revealed when, in 
January 1998, the NRC staff inadvertently revealed the identities of a 
number of allegers while responding to requests for information under 
the Freedom of Information Act (FOIA). The NRC established a special 
team to evaluate the incident and make recommendations to management. 
The audit team found a flaw in NRC processes that involved, in essence, 
two competing interests: (1) the need to ensure that FOIA requests 
receive a prompt and complete response, in keeping with statutory 
timeliness and release requirements and the Commission stance on 
openness and public access to information; and (2) the allegation 
management program mandate on protecting the identity of allegers. The 
release of alleger identities occurred because essentially no agency 
guidance or training existed to address the specific process of 
redacting allegation-related records when responding to an FOIA 
request, to prevent the release of alleger identities. In addition, the 
process for reviewing FOIA responses in the responsible organization 
had undergone an erosion of administrative barriers that at one time 
had included additional layers of review. In addition to the lack of 
procedures and training, NRC management found that there was no single 
point of accountability to ensure that allegation related material was 
not released inappropriately.
    NRC management considers this to be a serious event that revealed a 
significant weakness in its processes. Because of the significance of 
this issue and the broad scope of corrective actions under 
consideration, the NRC Executive Council has become involved directly 
in the evaluation and resolution of this issue. The NRC staff is in the 
process of implementing 30 recommendations with the goal of preventing 
future releases. While the longer term corrective actions are being 
evaluated, the levels of review that had eroded have been reinstated 
and the Agency Allegation Advisor has been identified as the single 
point of accountability and assigned to review all FOIA responses 
involving allegation material.
IV. NRC Response to the May 1998 Senate Appropriations Committee Report 
        and Related Studies
    As indicated earlier, in recent months, the NRC has been the 
subject of a number of critiques, beyond the GAO, some of them sharply 
critical, from Congressional committees, the nuclear industry, and 
other sources. Some of the principal sources include:
    The June 1998 Senate Committee on Appropriations Report Language
    The June 1998 House Committee on Appropriations Report Language
    A study by Tim Martin Associates
    In this section of the testimony, we will attempt to characterize 
those recent criticisms and to provide, for the record, an objective 
and thorough response. The criticisms have been grouped into the 
following categories: (1) risk-informed and performance-based 
regulation; (2) reactor inspection and enforcement; (3) reactor 
licensee performance assessment; (4) reactor licensing and oversight; 
(5) uranium recovery; and (6) NRC organization and management 
effectiveness and efficiency.
    A. Risk-Informed and Performance-Based Regulation
    In this topical area, the basic criticisms are summarized as 
follows:
    Licensees expend considerable resources on NRC requirements that 
are not related to safety or are of low safety significance.
    The NRC needs to create a graded safety value scale.
    The NRC needs to develop and adhere to clear Safety Goals.
    The NRC needs to accelerate the move to risk-informed and 
performance-based regulation.
    The NRC has been moving and will continue to move toward making the 
entire NRC regulatory framework--related to both nuclear reactor safety 
and nuclear materials safety--more risk-informed (i.e., such that areas 
of highest risk receive the greatest focus), and, where appropriate, 
more performance-based (i.e., more results-oriented and more open to 
allowing licensee flexibility in how to meet NRC regulatory 
requirements). The overall goal of this adjustment in regulatory 
approach is to enhance safety decision-making, to improve efficiency, 
and to reduce resources devoted to issues with low safety significance. 
As discussed below, a significant number of NRC efforts related to 
risk-informed regulation have been initiated and are ongoing. 
Nevertheless, the NRC recognizes that the pace of its actions in this 
area should be accelerated, and that improvements are warranted.
    The NRC has been using risk information in some generic and plant-
specific regulatory activities for several years. In 1986, the 
Commission issued its policy statement on Safety Goals which 
characterized the acceptable individual and societal risk from 
accidents at nuclear power plants. The Commission recently has approved 
the development of guidelines for applying the Safety Goals and their 
subsidiary objectives in plant-specific regulatory activities. In 1993, 
a Regulatory Review Group (RRG) was established to study power reactor 
regulations and related processes, placing special attention on the 
potential for using performance-based requirements and guidance in 
place of prescriptive requirements and guidance. In its final report, 
the RRG discussed several areas in which NRC process changes could 
allow significant reductions in industry and NRC resource demands 
without adversely affecting the level of safety at operating plants.
    As one result, the Cost Beneficial Licensing Action (CBLA) program 
was created in 1993 to increase NRC management attention and provide a 
more expeditious review of licensee requests that seek to modify or 
delete requirements that have a small effect on safety and are costly 
to the licensee to implement. As of June 29, 1998, of the 305 CBLAs 
submitted since 1993, 238 have been approved, resulting in cost savings 
(based on licensee estimates) of over $1.25 billion over the life of 
the plants.
    An important longer-term effort is the Technical Specification 
Improvement Plan (TSIP), resulting in the development and use of 
Improved Standard Technical Specifications (ISTS)--designed to focus 
NRC and industry resources on the more safety significant aspects of 
nuclear plant operation. NRC effort and industry input on this 
initiative began in 1986, and culminated in the initial ISTS 
publication in 1992, with a revision in 1995. Currently, 56 plants (92 
units) have volunteered to convert their plant technical specifications 
to the ISTS, and 18 plant conversions (involving 28 units) have been 
approved. Owners groups project annual savings of between $150,000 and 
$1.13 million per site from the program. Plants that have made this 
conversion incur savings because of less restrictive surveillance 
(testing) requirements on specified equipment, as well as from the 
significant decrease in the post-conversion rate of needed license 
amendments.
    In part because of the RRG efforts, the NRC formulated its 
Probabilistic Risk Assessment (PRA) Policy Statement and its PRA 
Implementation Plan. The Commission PRA Policy Statement, first 
proposed in 1994 and published in August 1995, identified the following 
goals: improved decision-making, more efficient use of NRC staff 
resources, and reduced burden on licensees. The PRA Implementation 
Plan, first issued in August 1994, consists of more than 100 
initiatives to enhance the use of risk information in regulation of 
both power reactor and nuclear material licensees, as well as efforts 
to move appropriately toward more performance-based approaches. In 
addition, the Commission has encouraged the consideration of risk 
information in all regulatory activities.
    As part of the PRA Implementation Plan, the Commission recently 
approved for publication generic regulatory guidance, in the form of a 
regulatory guide and standard review plan, that will support 
implementation of risk-informed regulation of power reactor licensees, 
by providing guidance on how to use PRA information to support and 
evaluate plant-specific changes. In addition to the generic guidance 
documents, application-specific guidance has been developed and issued 
for the areas of technical specifications, in-service testing, in-
service inspection of piping, and graded quality assurance. Each of 
these approaches has been proven successful in pilot applications at 
specific power reactor licensees. In the coming year, the NRC will give 
increased focus to the review of license amendments and other 
programmatic changes through the use of these guidance documents.
    The NRC also is working with the Nuclear Energy Institute (NEI) on 
a pilot applications program in which NEI will identify areas where 
regulatory requirements and plant operations can be simplified with 
minimal impact on plant safety. The NRC plans to participate in a study 
by the Center for Strategic and International Studies (CSIS) on risk-
informed and performance-based regulation at the NRC, which also should 
be useful in formulating further recommendations for change.
    The Commission also has sought to increase regulatory effectiveness 
through certain rulemakings. These rule changes have been directed 
toward incorporating risk-informed and performance-based approaches, 
where appropriate, as well as toward reducing the regulatory burden 
associated with overly conservative requirements, and eliminating the 
need to seek exemption from overly prescriptive requirements. As one 
example, on September 12, 1995, the Commission approved the issuance of 
a revision to 10 CFR Part 50, Appendix J, ``Primary Reactor Containment 
Leakage Testing for Water-Cooled Power Reactors.'' The revision added 
an option entitled ``Performance-Based Requirements,'' to allow 
licensees to replace voluntarily the prescriptive testing requirements 
of Appendix J with testing requirements based both on overall 
performance and on the performance of individual components. In another 
instance, the NRC worked with the Department of Transportation to 
provide procedures under new regulations that enable the shipment of 
decommissioned reactor steam generators to a disposal facility, without 
undergoing a specific steam generator transportation certification 
process. A third example is the NRC Maintenance Rule--made effective in 
July 1996 and currently undergoing certain proposed revisions--which 
uses a risk-informed and performance-based approach to ensure the 
availability and reliability of key structures, systems, and components 
in power reactor facilities. The NRC will continue its review of 
existing regulations to identify additional opportunities in which NRC 
requirements can be made more risk-informed and, as appropriate, 
performance-based.
    The NRC also has revised guidance for reactor inspection activities 
to incorporate risk insights and to be more performance-based. These 
revisions provide guidance on using risk insights to help plan 
inspection activities, to evaluate the significance of inspection 
observations and findings, to evaluate the adequacy of licensee 
assessments that have probabilistic risk elements in their bases, and 
to support enforcement activities. Incorporating risk insights into 
inspection procedures is expected to result in more efficient NRC 
inspections, since it will focus attention and resources on the more 
risk-significant items. Other changes to the inspection program are 
being pursued, with the overall goal of having a fully risk-informed 
baseline inspection program.
    Finally, NRC staff training in risk concepts and practices is being 
carried out as part of the PRA Implementation Plan. The NRC has 
mandated training on risk-informed guidance and policy for NRC 
management and technical staff, including site resident inspectors. 
Senior reactor analyst positions also have been established and filled 
with specially trained PRA specialists in each regional office and in 
headquarters, to serve as a primary resource for incorporating risk 
insights and risk perspectives into reactor inspection, enforcement, 
and assessment activities.
    With respect to nuclear materials safety, we have used a variety of 
risk-informed, and, where appropriate, performance-based approaches to 
analyze areas of NRC responsibility beyond reactors, including nuclear 
waste, fuel cycle facilities, and industrial and medical uses of 
nuclear material. We are developing a comprehensive conceptual 
framework for applying risk-informed and performance-based regulation 
in nuclear materials applications. We will use this framework to 
identify areas in which the increased use of risk-informed methods will 
enhance safety and regulatory efficiency. For some nuclear materials 
devices and facilities, the nature of the risks, the types of 
facilities, or other factors may indicate that more traditional 
approaches should be used. Overall, we anticipate that this framework 
will better focus our regulatory resources on the most risk-significant 
aspects of nuclear materials usage.
    In summary, the Commission remains committed to making the entire 
NRC regulatory framework more risk-informed and, where appropriate, 
more performance-based. Short-term actions are being implemented to 
increase the priority, management attention, and pace of 
implementation. These include steps to ensure more prompt review of 
risk-informed reactor licensing submittals, the establishment of a lead 
Project Manager for the coordination of risk-informed and performance-
based licensing actions, and a management oversight steering committee 
to provide policy, technical and priority guidance on risk-informed 
regulation. We will continue to pursue longer-term activities as 
identified in the PRA implementation plan.
    B. Inspection and Enforcement
    Inspection.--The power reactor inspection program serves an 
important role in enabling the NRC to fulfill its mission of ensuring 
public health and safety. This program is designed, through audits of 
licensee activities, to identify safety problems independently at an 
early stage, before significant safety events occur. The NRC has 
defined the minimum set of inspections necessary to meet this objective 
as the Core Inspection Program. Core inspections are performed at all 
sites, independent of licensee safety performance. These inspections 
are intended to emphasize observation and evaluation of those ongoing 
facility operations and supporting activities that are most important 
to reactor safety. The NRC uses additional inspection effort (beyond 
the core program) on a plant-specific basis to gain additional insights 
into licensee performance in selected areas in which (1) the core 
program has identified problems; (2) off-normal events require follow-
up; or (3) emerging safety issues require resolution.
    In this area, the basic criticisms are summarized as follows:
    As nuclear power plant safety and efficiency have improved, 
regulatory burdens have not decreased in a commensurate manner.
    The level of inspection effort at reactor power plants does not 
vary in keeping with variations in actual plant safety performance.
    The NRC inspection program focuses on some activities with very low 
impact on safety.
    The NRC recognizes that the safety performance of U.S. nuclear 
power plants has improved over the past decade as the industry matured. 
In fact, we believe that NRC oversight has contributed to and helped to 
maintain that improvement. The average number of NRC inspection hours 
per plant has been reduced, from 3,100 in 1990 to 2,500 in 1997, and we 
are evaluating further reductions to the inspection program. However, 
part of the NRC caution in approaching these reductions is based on 
past experience--in which, when the NRC reduced its focus on a given 
area, some licensees also reduced their vigilance in that area, with 
the result that performance declined. A recently identified example was 
the decline in attention that had occurred, across the industry, on 
maintaining the facility design basis. In addition, we note that, while 
overall safety performance has improved, some plants continue to 
experience significant problems. These plants require significant 
agency resources for the identification of safety issues and follow-up 
of licensee corrective actions. Based on these types of concerns, we 
believe it is essential to use a risk-informed approach in any further 
inspection program reductions.
    In response to concerns about the distribution of inspection hours, 
the NRC improved the inspection planning process during the early part 
of this decade. These improvements were designed to increase the 
gradient between the amount of inspection received by the best 
performing plants and plants that experienced performance problems, as 
well as to provide a performance-based allocation of inspection 
resources (beyond the core inspection program). Currently, inspection 
effort for plants experiencing performance problems significantly 
exceeds the core inspection program.
    Notwithstanding the changes made to date, we acknowledge the need 
for additional improvements, and the NRC has both short- and long-term 
actions underway to address the concern with the inspection program 
focus, including the focus of the core inspection program. The 
inspection program has shifted away from programmatic reviews toward a 
more performance-based approach. The NRC also has initiated several 
activities to increase the incorporation of risk information into 
inspection planning and execution. The NRC has issued guidance on risk-
informed inspection practices, providing inspectors with expectations 
and guidelines on (1) the relationships between PRA and defense-in-
depth, (2) the integration of non-probabilistic considerations with 
PRA, (3) the communication of PRA insights to licensees, and (4) the 
expected level of inspector PRA use. In addition, as mentioned earlier, 
several training courses have been developed for inspectors and 
managers, to increase the NRC staff level of understanding on PRA uses 
in various regulatory applications.
    As a longer-term action, the NRC will review its inspection 
program, including program structure, focus, and requirements/
procedures, beginning in October 1998. This review is intended to 
determine whether the inspection program achieves its intended goals, 
to identify and eliminate unnecessary inspection requirements, to 
improve the risk-informed focus, and to improve program efficiency.
    Enforcement.--NRC enforcement jurisdiction is drawn from the Atomic 
Energy Act of 1954, as amended, and the Energy Reorganization Act (ERA) 
of 1974, as amended. The NRC enforcement program supports the NRC 
safety mission by seeking to prevent, at NRC-licensed facilities, 
events with impact on public health and safety, through deterrence, 
through prompt problem identification, and through prompt, 
comprehensive corrective action.
    The NRC Enforcement Policy seeks to support this overall goal, 
articulated in the NRC Strategic Plan, by addressing non-compliances in 
a graded approach. The enforcement process begins by categorizing the 
significance of each violation, within the context of associated 
inspection findings. Four levels of severity are used to differentiate 
violations according to their safety significance. Severity Levels I, 
II, and III are used to characterize violations of significant concern, 
and violations at these levels (referred to as ``escalated enforcement 
actions'') also may result in civil penalties. Severity Level IV 
violations, which individually are somewhat less significant (and are 
referred to as ``non-escalated actions), may result in Notices of 
Violation, but do not result in civil penalties. Violations considered 
to be of minor concern do not result in formal enforcement action, and 
generally are not documented. To provide incentives for licensees to 
promptly identify and correct problems associated with violations, 
decisions on whether to issue a civil penalty for a significant 
violation, as well as decisions on whether to issue a Notice of 
Violation for a less significant violation, are based largely on the 
associated licensee efforts to identify and correct the circumstances 
that led to the violation.
    Within this graded approach, it is important to consider that the 
NRC does not find it appropriate to wait for an event or an actual 
safety consequence before taking enforcement action. The primary reason 
for taking action on Severity Level IV violations is to identify and 
correct problems early (as well as to track emergent trends) in the 
interest of deterring more significant issues. As a result, when 
evaluating the significance of a violation, NRC considers not only the 
direct consequences of the specific as-found condition, but also the 
potential safety consequences, or risk. In addition, the NRC considers 
whether the violation involved repetition, willfulness, pervasiveness, 
licensee management involvement, or other characteristics that may make 
the violation more safety significant.
    Within this area, the basic criticisms are summarized as follows:
    The NRC needs to abandon its unsound reliance on an approach that 
rigidly demands strict compliance with the regulations, regardless of 
safety significance.
    Similarly, the NRC focuses unduly on ``paper compliance'' rather 
than emphasizing risk-informed considerations.
    The recent sharp increase in the number of violations reflects a 
changing NRC culture, and is not consistent with the continuing 
improvements in industry safety performance.
    The cost of responding to violations of low severity is excessive.
    NRC civil penalties are excessive.
    The NRC enforcement program is overstaffed.
    The NRC enforces regulations inconsistently.
    As stated above, the NRC uses enforcement to emphasize to its 
licensees the need to prevent violations, and when violations occur, 
the need to identify and to address the issues associated with them 
before they manifest themselves as significant events or challenges to 
safety systems. However, because most of the violations identified are 
relatively low-level, the majority of enforcement actions issued are 
low level. The NRC recognizes the resource demands associated with 
responding to these non-escalated enforcement actions, and has taken 
several short-term actions to reduce the licensee burden in this area. 
The efforts underway (some of which merely involve exercising self-
discipline in carrying out existing NRC policy) include: (1) ensuring 
that the NRC staff gives credit for licensee actions in both 
identifying and correcting violations in deciding whether to cite a 
low-level violation; (2) not requiring a written response when low-
level violations are issued and corrective actions are addressed 
sufficiently in writing elsewhere on the docket (e.g., in a Licensee 
Event Report); (3) providing more consistent treatment when multiple 
violations are identified with a common root cause; and (4) clarifying 
NRC staff guidance for the treatment of violations identified as the 
result of licensee corrective actions. In short, the intent is to 
simplify the disposition of these types of violations. In addition, as 
part of ongoing efforts, such as the NRC enforcement policy revision 
and request for public comment issued in May 1998, the NRC will seek to 
identify other measures to improve consistency and to ensure a safety 
focus in documenting and dispositioning violations. The intent is to 
encourage prompt identification of problems, to ensure corrective 
action commensurate with risk, and not to have problems linger which 
could have a cumulative safety impact. The intent of enforcement is to 
improve performance. The short-term and long-term actions the NRC has 
underway should address the greatest concerns. We are expediting these 
changes.
    The NRC recognizes that civil penalties have increased since the 
1995 revision to the Enforcement Policy. A significant factor in this 
increase appears to be due to increased headquarters involvement in the 
evaluation process, which has improved region-to-region consistency but 
also has resulted in the increased identification of situations that 
warrant escalated action. In general, the NRC believes that its 
practices involving Severity Level I, II, and III violations and civil 
penalty assessments are appropriate. However, as part of the 
improvements discussed in this area, the NRC intends to consider the 
need for additional changes in the escalated enforcement process.
    For licensees and other stakeholders, the area clearly of more 
concern has been the sharp increase in the number of non-escalated 
enforcement actions from 1995 to 1997. In fact, the NRC does not 
believe that this increase reflects a decline in reactor safety 
performance. Rather, the increase is due, at least in part, to our 
efforts to improve the quality and consistency of the inspection and 
enforcement programs and to an increased focus on compliance. 
Inspection guidance issued in fiscal year 1996 resulted in a 
significant improvement in the consistency of documenting inspection 
findings, which in turn resulted in additional violations. Also, 
following pivotal inspections at the Millstone Station and other 
facilities, NRC management placed a greater focus on ensuring that the 
nuclear plant licensing basis has been maintained, including 
maintaining an accurate Updated Final Safety Analysis Report. Special 
initiatives, such as maintenance and design inspections, also have 
contributed to the increased number of violations. The unanticipated 
increase in Severity Level IV violations has led to a sharpened focus 
on long-standing issues related to non-escalated enforcement actions, 
issues which go back over a number of years.
    The NRC has recognized for some time that the relative consistency 
of Enforcement Policy implementation associated with Severity Level I, 
II, and III violations is not demonstrated to a commensurate degree for 
non-escalated actions. Historically, the level of enforcement staff 
resources has only allowed oversight of enforcement actions of higher 
significance. The resulting minimal oversight of low level enforcement 
activities, typically comprising approximately 90 percent of all 
enforcement actions, has allowed inconsistent enforcement practices to 
develop. In recognition of this problem, additional staffing was added 
to the enforcement staff within the past several months, to oversee, in 
part, the consistency and control of low-level violations. As an 
additional measure, the NRC has increased the headquarters oversight 
and coordination of the appeal process for disputing low-level 
violations issued by NRC regional offices, ensuring the opportunity for 
a headquarters review of licensee disputes regarding whether a 
violation actually exists, its severity level, or the appropriateness 
of the sanction. To ensure consistency in the specific areas of the 
Maintenance Rule and 10 CFR 50.59, special enforcement review panels 
have been established to review all associated potential enforcement 
actions.
    Additional efforts planned in this area include: (1) further 
meetings with stakeholders to obtain additional perspectives on 
enforcement and to consider the need for further change; (2) 
improvements to existing guidance on the threshold separating Severity 
Level IV violations and minor violations; (3) the development of 
additional guidance on how risk insights should be factored into 
enforcement decisions, as well as on the use of ``regulatory 
significance'' in evaluating enforcement actions; (4) additional 
training on the results of these changes and initiatives; (5) internal 
audits of the consistency of issuing low-level violations; and (6) 
closer coordination between inspection and enforcement activities.
    Summary.--In summary, the NRC is aware of the impact and resource 
demands that the inspection program place on its licensees, and plans 
to institute a comprehensive review of this program. The NRC also is 
mindful of the licensee burden associated with NRC enforcement actions. 
As described above, we will reinforce existing policy provisions and 
seek additional measures to ensure that enforcement actions are not 
unnecessarily burdensome, and we will focus on ensuring that NRC 
enforcement actions are based appropriately on safety significance. 
Further review of the enforcement program will be conducted as 
described above. Program changes and training for both inspection and 
enforcement will emphasize a risk-informed and performance-based 
approach.
    C. Reactor Licensee Performance Assessment
    Inspection, enforcement, and assessment all play a role in 
evaluating reactor licensee performance to provide reasonable assurance 
of the adequate protection of public health and safety. The specific 
role of assessment is to integrate individual insights, and to arrive 
at an overall conclusion (broader in scope and/or longer in term) with 
respect to licensee safety performance. Currently, the NRC uses several 
processes to assess the safety performance of nuclear reactors, 
including: (1) Plant Performance Reviews (PPRs), conducted every 6 
months by regional managers; (2) Systematic Assessments of Licensee 
Performance (SALPs), conducted every 12 to 24 months by agency middle 
managers; and (3) Senior Management Meetings (SMMs), conducted every 6 
months by agency senior managers, until recently, when the Commission 
directed that SMMs be held annually. These processes were developed and 
implemented at different times over the past 18 years to address 
specific agency concerns, each intended to strengthen the NRC 
assessment of plant performance and to identify performance issues, in 
order to focus agency resources on plants warranting additional 
inspection, and to ensure that problems are corrected before a serious 
decline in nuclear safety emerges.
    Within this area, the basic criticisms are summarized as follows:
    NRC reactor performance assessment processes lack clear, objective 
assessment criteria.
    Specifically, the NRC has no clearly defined criteria for placing 
nuclear power plants on the NRC ``Watch List.''
    NRC reactor performance assessment processes are too resource 
intensive, both for licensees and for the NRC.
    In general, the NRC agrees that these criticisms form the basis of 
specific agency initiatives that are intended to address these very 
concerns. These initiatives are discussed below.
    In 1996, the Commission directed that a study of the SMM process be 
performed. A consultant, Arthur Andersen, conducted a study and 
recommended a number of improvements. Many of these recommendations 
have been incorporated, including: (1) increased emphasis on objective, 
quantitative information; (2) development and use of performance 
indicator trending methodology; (3) increased participation at the SMM 
to ensure a broad perspective; (4) improved process facilitation at 
SMMs; and (5) improvements to the quality and format of the data 
provided to SMM participants.
    The focus on increasing the objectivity of the SMM process led to 
additional scrutiny of the entire NRC function of reactor performance 
assessment. While each of the NRC assessment processes has been subject 
to periodic, detailed reevaluation, it became clear that the agency had 
never conducted an integrated review of the entire assessment function. 
Recognizing the need for such a broad-scope review, in 1997 the 
Commission initiated an Integrated Review of the NRC Assessment Process 
for Operating Commercial Nuclear Reactors (referred to as IRAP). The 
IRAP was conceived as a two-phase effort, with the objective of the 
first phase being the development of a single, integrated assessment 
process that is more objective, more scrutable, and less resource 
intensive than the current mix of processes. Phase two, scheduled to 
begin in October 1998, will direct a similar level of scrutiny at the 
NRC reactor inspection program.
    Early in the concept development stage, the NRC met with 
representatives from the Nuclear Energy Institute (NEI), the Union of 
Concerned Scientists, and other members of the public to get their 
views on the objectives, scope, and outputs of NRC assessment. In March 
1998, the IRAP team forwarded an initial assessment concept to the 
Commission for consideration. The Commission directed the NRC staff to 
solicit public comments on this proposal, and provided general 
principles for assessment activities. As development of the process 
continues, the NRC plans to conduct meetings and workshops with the 
public and the industry, and to discuss possible alternative 
approaches, including a recent NEI proposal on risk-informed and 
performance-based reactor licensee oversight.
    The current assessment processes depend on both qualitative and 
quantitative information. Recognizing the value of clear, quantitative 
assessment criteria, the Commission already has initiated several 
improvements to the current assessment processes to improve 
objectivity, consistency, and scrutability. The improvements include: 
(1) an increased focus on plant safety performance indicators; (2) more 
systematic processing and comparison of regulatory performance data in 
the areas of human performance, enforcement, allegations, and risk; and 
(3) a structured analysis of performance data in a publicly released 
plant issues matrix (PIM) for each plant.
    The NRC will continue to work with its stakeholders to identify and 
develop quantitative indicators. As progress is made, the shift to a 
more quantitative set of measures will continue. However, existing 
high-level quantitative performance indicators are slow to respond to 
actual declines in safety performance (in some cases involving multi-
year response times). Most of the current performance indicators are 
event-based and do not provide a leading indication of trends in 
licensee safety performance. GAO reports in the past have been critical 
of the lack of leading indicators in the NRC performance assessment 
process. Therefore, although NRC will increase the use of quantitative 
information, we also will continue to make use of qualitative insights. 
The Commission has directed the NRC staff to work closely with NEI to 
determine the merits of their proposal for an assessment process based 
on quantitative performance indicators. This action is currently in 
progress.
    In addition, as noted above, the SMM has been moved from a 
semiannual to an annual schedule beginning in fiscal year 1999. This 
adjustment coincides with other changes to the various NRC assessment 
processes, and is commensurate with the overall improvement in industry 
performance and the slow rate of change in the performance of 
individual plants. This short-term change will result in some resource 
savings; however, we hope to achieve more dramatic resource savings 
from the successful development and implementation of the integrated 
assessment process discussed above, particularly as redundancies in the 
current processes are identified and eliminated. As these changes are 
implemented, the NRC periodically will review their effectiveness and 
continue to solicit stakeholder input on emerging issues of concern.
    Since the inception of the NRC performance assessment processes 
(following the Three Mile Island Accident), the agency has periodically 
reviewed, sought stakeholder feedback, and made changes where 
appropriate. Recent criticisms and self-evaluations indicate that some 
additional improvements are warranted to improve objectivity and to 
enhance efficiency and effectiveness, while maintaining the global 
objective of the current processes--that is, to evaluate reactor 
licensee safety performance to ensure the adequate protection of public 
health and safety.
    D. Reactor Licensing and Oversight
    Regulatory Processes.--The NRC strives to maintain open 
communications with its stakeholders regarding their concerns related 
to NRC consistency in implementing its regulations. Past NRC actions to 
address these concerns include: (1) the development and publication of 
the Standard Review Plan and associated regulatory guides to provide 
guidance on implementing the regulations; and (2) the Regulatory Review 
Group and National Performance Review Group studies of regulations and 
related processes. Other measures, such as the backfit rule (10 CFR 
Part 50.109), have been designed to balance the NRC focus on protecting 
public health and safety with the burden of implementing that focus.
    The NRC does not, and legally cannot, impose requirements except in 
accordance with applicable statutory requirements such as the Atomic 
Energy Act and the Administrative Procedure Act. NRC requirements can 
only be promulgated in the form of regulations, licenses and license 
conditions, or orders. However, certain NRC regulatory processes, while 
not actually imposing legally binding requirements, can be perceived as 
pressuring a licensee to take actions that exceed regulatory 
requirements in order to resolve the immediate situation. Such 
situations are perceived, at times, as imposing de facto requirements 
on the licensee, and have been the focus of criticisms that the NRC is 
over-regulating or creating undue regulatory burden for its licensees. 
Recent criticisms in this area are summarized as follows:
    The NRC has implemented informal processes that bypass formal 
procedures, thereby, in effect, imposing requirements inappropriately.
    The NRC should not impose virtual backfits without a formal backfit 
analysis.
    The NRC uses Confirmatory Action Letters to impose conditions on 
licensees even in situations where the NRC is aware that enforcement 
action could not be supported.
    The NRC agrees that a number of regulatory processes should be 
reevaluated in an effort to ensure they are not creating an 
inappropriate burden on its licensees and the NRC staff while 
maintaining an appropriate level of safety. Examples of regulatory 
processes in which such burdens can originate include NRC generic 
communications, Confirmatory Action Letters, diagnostic inspections, 
and the SALP process (discussed in Section IV.C of this testimony).
    NRC generic letters and NRC bulletins legally can require that 
information be provided to the NRC, but legally cannot create a new 
requirement for a specific course of action to resolve an issue. 
Generic communications have been used, however, to provide new or 
clarified interpretations of existing requirements. The NRC recognizes, 
further, that the production of information itself can be burdensome, 
and that the actions requested, in some instances, can be construed as 
the imposition of new requirements. As a result, the NRC has adopted 
measures that internally challenge the need for each generic 
communication, and provide the industry and the public with the 
opportunity to comment on the actions requested and on their cost and 
safety benefit. In addition, proposed generic letters and bulletins now 
are reviewed and discussed by NRC executive management at the earliest 
stages of formulation. These controls are intended to ensure that, if a 
proposed generic communication is approved for further development, the 
requested actions and the required response are commensurate with the 
safety significance of the issue involved. Equally important is the 
publication of proposed generic letters and bulletins for public 
comment, to ensure that efforts to reduce unnecessary regulatory burden 
do not result in inappropriate reductions in safety margins. 
Ultimately, the Commission is informed prior to the issuance of each 
generic letter. An NRC self-assessment is in progress which, in part, 
will focus on the development of generic communications.
    If the NRC were to impose on a licensee a new interpretation of an 
existing requirement without adding a new regulation (for example 
through a generic letter), the NRC first must meet the requirements of 
10 CFR 50.109 relating to plant-specific backfits. In most cases these 
new interpretations are issued for comment before they are imposed on 
other licensees. Backfits that require a regulatory analysis must be 
approved by the NRC Executive Director for Operations before being 
forwarded to the licensee, and a process exists for the licensee to 
appeal the imposition of any backfit.
    A Confirmatory Action Letter (CAL) is sent by the NRC to a 
particular licensee to confirm and document a commitment by that 
licensee to take certain actions in response to an identified safety or 
regulatory issue. Properly used and written, a CAL does not impose 
legally binding and enforceable requirements. Rather, it documents the 
NRC understanding of a voluntary licensee commitment to actions that 
will resolve the issue. The NRC and the licensee should discuss and 
agree on the actions necessary or appropriate to address the underlying 
issue. In fact, one of the functions of a CAL is to ensure that no 
misunderstanding arises about the actions to which the licensee is 
committing. The licensee is not required to make any commitments, but 
may choose to do so as a means to resolve the issue without the need 
for more formal NRC action to address the underlying issue. If the 
licensee chooses not to commit to actions that resolve the issue, the 
NRC must decide whether its obligation to ensure adequate protection of 
public health and safety warrants more formal action, such as the 
issuance of an order, to require the licensee to address the underlying 
issue. The licensee has administrative and legal recourse if it 
disagrees with the NRC action.
    Used appropriately, CALs have proven to be an effective regulatory 
tool to ensure that a licensee promptly addresses identified safety 
issues. Properly used, CALs should serve the interests of licensees, 
the NRC, and the public. However, the NRC acknowledges that a licensee 
may agree to a CAL and the associated actions simply to avoid lengthy 
discussions with the NRC over plant readiness for restart. In this 
context, a commitment to an action outside regulatory requirements (or 
that is perceived to be outside regulatory requirements) may appear to 
be the most expedient course of action. To ensure that CALs are used in 
an appropriate manner, the NRC intends to re-emphasize to NRC 
management and staff the proper use and wording of CALs. There also 
will be increased NRC management oversight of the issuance and 
implementation of CALs. The NRC also will examine the need for 
establishing a threshold for issuing a CAL. Licensees are encouraged 
strongly to bring any future concerns related to CALs to the attention 
of NRC senior management and the Commission.
    In keeping with its obligations to the public it serves, the NRC 
conducts its business in open forums whenever feasible. The NRC will 
maintain an open dialogue with the public and industry concerning its 
regulatory processes.
    Design Basis Information.--In this topical area, the basic 
criticisms are summarized as follows:
    The NRC has reinterpreted improperly what constitutes design basis 
information.
    The NRC review of design baselines is unduly burdensome, and is 
unproductive in terms of safety benefit.
    The NRC should define its requirements in this area.
    To place these criticisms in perspective requires at least a brief 
historical context. In the mid-to-late 1980's, the NRC identified 
concerns that certain design basis information was not being maintained 
properly, and that plant modifications were being made without the 
licensee having a complete understanding of the plant design basis. 
These NRC findings heightened awareness in the nuclear power industry 
of the need to improve the adequacy of design documentation. Many 
licensees voluntarily initiated extensive efforts to retrieve and 
reconstitute the design basis information for their plants. To assist 
the industry in performing design basis improvement programs, the 
Nuclear Management and Resources Council (NUMARC), the predecessor to 
NEI, developed guidelines providing a standard framework for licensee 
programs to improve design basis information.
    In late 1991, the NRC evaluated whether rulemaking, guidance, or a 
policy statement was needed to address this need for licensees to 
retain accurate design bases information. In August 1992, the 
Commission issued a policy statement concerning the adequacy and 
availability of design basis information, stressing the importance of 
maintaining design basis information and recommending that all power 
reactor licensees assess the accessibility and adequacy of their design 
basis documentation. In the same time-frame, the 1991 Regulatory Impact 
Survey highlighted the regulatory burden on licensees occasioned by NRC 
team inspections, with the result that, over the next several years, 
the NRC reduced its effort to conduct specific, design-related team 
inspections. Instead, issues related to maintaining accurate and 
accessible plant design documentation were addressed principally as 
elements of inspection and follow-up of operations-related activities.
    During a number of inspections in 1995, inspectors found, in some 
cases, that design bases were not being maintained or adhered to 
appropriately. As a consequence of this new information, the NRC 
recognized that voluntary industry efforts to improve and maintain 
plant design basis information had not been effective in all cases. In 
October 1996, the agency issued 50.54(f) letters to power reactor 
licensees, requesting that they submit information that would provide 
the NRC added confidence and assurance that facilities were being 
operated and maintained within their design bases, and that any 
deviations were being reconciled in a timely manner. Licensee responses 
were used to prioritize selected team inspections that focused on 
design issues of risk-significant safety systems. These inspections 
resulted in significant findings, which included, among other things: 
(1) plant modifications or evaluations that had resulted in operation 
outside the design basis; (2) modifications or evaluations resulting in 
safety systems not being able to perform their intended safety 
functions; and (3) inadequate testing of safety-related components. 
Some of the findings resulted in declaring equipment or systems 
inoperable, requiring plant modifications and resulting in voluntary or 
technical-specification-required plant shutdown. These findings were 
detailed to the nuclear power industry in Information Notice 98-22, 
issued June 17, 1998. Although licensees expended significant resources 
to document their design bases, significant safety issues were found 
and corrected that otherwise might have gone undetected.
    The NRC has concluded that past efforts may have provided short-
term emphases rather than long-term resolution to the issue of adequacy 
of design-basis information. In addition, initiatives such as risk-
informed and performance-based regulation emphasize the importance of a 
common understanding between the NRC and its licensees on the 
maintenance and application of design-basis information within the 
regulatory framework. The NRC believes, however, that a combination of 
recent and upcoming NRC actions will contribute to the final resolution 
of this issue.
    Among the short-term improvements associated with the plant design 
basis and the related regulatory framework, the NRC has: (1) issued 
revised guidance to the industry explicitly discussing the evaluation 
process to be used in resolving degraded and nonconforming conditions 
at power reactor facilities; (2) held a Commission-level meeting with 
the Nuclear Energy Institute (NEI) in June 1998 to discuss issues 
related to design basis information; and (3) held a working-level 
meeting with NEI to resolve outstanding issues, with the goal of 
endorsing NEI guidance that would clarify what types of information 
should be considered design basis information.
    In the longer-term, the NRC intends, as one significant measure, to 
provide more specificity and flexibility in 10 CFR 50.59, the 
regulation under which licensees can make changes to their facilities 
and procedures without NRC approval. The NRC will support the 
completion of an industry guidance document related to design-basis 
information. In addition, the NRC intends to develop an Advance Notice 
of Proposed Rulemaking that would solicit public comment on possible 
rule changes. These rule changes are intended to clarify which design 
or analysis deficiencies require reporting, and to specify the 
timeliness of such reporting.
    Power Reactor License Renewal and NRC Adjudicatory Processes.--
Although the NRC only recently received its first two applications for 
the renewal of power reactor licenses, preparations for license renewal 
has been a long-term effort. Within this specific context, as well as 
more generally, NRC adjudicatory processes have been a target of 
criticism. The basic criticisms in this area are summarized as follows:
    NRC adjudicatory processes take too long, and cost too much.
    Specifically, the Atomic Safety and Licensing Board (ASLB) is too 
costly for the benefit it provides.
    Legislative-style hearings should replace NRC adjudication 
processes.
    The review process for power reactor license renewal applications 
is an appropriate arena in which to implement new adjudicatory 
procedures.
    The Commission has been working to pursue the implementation of 
measures that would streamline the hearing process--both in 
anticipation of license renewal applications and in general. The 
Commission has issued a policy statement clearly delineating Commission 
expectations with regard to the conduct of adjudicatory proceedings, 
including license renewal proceedings. In addition, the Commission 
intends to provide guidance to licensing boards in individual 
proceedings, to ensure that proceedings are conducted in a fair and 
efficient manner, and that they result in adequate records for 
decision. Provisions also have been made for the timely identification 
of any open generic policy issues for Commission decision, and 
effective integration of the technical review and adjudicatory 
schedules. As a result of these actions, the NRC expects to complete 
the review of the initial license renewal applications, including the 
safety review, environmental review, and public hearing, within 
approximately 30 to 36 months from the receipt of the application. 
Based on that experience, the Commission expects that the review 
process for subsequent applications will be more efficient. Finally, we 
recognize that the NRC is unique among Federal health and safety 
regulators in the degree to which we historically have used judicial 
trial-type procedures to resolve technical issues. We will examine 
whether changes (including legislation) would be appropriate to expand 
our use of more informal or legislative-style hearings in licensing 
proceedings.
    In the specific area of power reactor license renewal, the 
Commission recognizes that permitting plants to operate for an 
additional 20 years, where appropriate, may be an important factor in 
ensuring a diverse energy mix for the nation in the future. Nuclear 
power plants produce approximately 20 percent of all electric power 
produced in the United States. Approximately 10 percent of the current 
operating licenses will expire by the end of 2010, and more than 40 
percent will expire by 2015. License renewal also may be important to 
the economic viability of a utility because of the additional time over 
which its investment can be amortized.
    To prepare early on for this possibility, the NRC issued the 
license renewal rule (10 CFR Part 54) in 1991, to establish the 
technical and procedural requirements for renewal of operating 
licenses. Based on initial experience in implementing the rule, the 
Commission recognized that a more stable and predictable regulatory 
process for license renewal could be established, and amended the rule 
in 1995, to limit the scope of the license renewal review to particular 
time-dependent design analyses, and to aging management of long-lived 
passive structures, systems, and components. Additionally, the NRC 
environmental regulation (10 CFR Part 51) was amended in 1996 to focus 
our environmental review process for license renewal. This revision 
streamlined the environmental review process by having a large number 
of environmental issues addressed in a Generic Environmental Impact 
Statement, thereby eliminating the need for such issues to be addressed 
individually by each license renewal applicant.
    Up to this point, the industry approach to license renewal has been 
to submit for NRC approval plant-specific and generic technical reports 
on specific topics, before submitting complete license renewal 
applications. This approach was intended to establish a foundation of 
technical information that a licensee can use to evaluate the 
feasibility of a license renewal application, and to reference that 
information later in the application itself. On April 10, 1998, 
Baltimore Gas and Electric delivered the first license renewal 
application for their two-unit Calvert Cliffs plant to the NRC. 
Subsequently, on July 7, 1998, Duke Power Company submitted a license 
renewal application for their three-unit Oconee plant. Additionally, 
the Southern Nuclear Operating Company recently announced plans to 
consider license renewal for its two Hatch units. This means that 
license renewal is no longer a theoretical exercise. Therefore, our 
focus has changed. The NRC is working to ensure that a disciplined 
license renewal path exists, fair to all parties involved and focused 
on the technical merits of the applications.
    To that end, the Executive Council of the NRC (comprised of the 
Executive Director for Operations, the Chief Financial Officer, and the 
Chief Information Officer) has been tasked to ensure that the 
implementation of license renewal is a unified and coherent process. 
These senior managers will focus on three areas: oversight, 
coordination, and strategic implementation. I reminded the Executive 
Council to ensure that policy matters warranting Commission attention 
are promptly identified and communicated to the Commission. In 
addition, the NRC Chief Financial Officer and Chief Information Officer 
have been tasked, under the aegis of the Executive Council, with 
establishing a process for efficiently shifting or refocusing 
resources, as needed, to ensure a timely license renewal review.
    The Nuclear Energy Institute continues to sponsor various industry 
initiatives for license renewal, and has established an industry 
working group to address license renewal issues. The NRC has developed 
new practices and procedures for the conduct of the license renewal 
reviews. These procedures include specific provisions to identify and 
prioritize generic technical issues in support of, and without 
jeopardizing, the aggressive review schedules established for the 
initial renewal application reviews. These practices also are derived 
from and build upon the broader improvements to the reactor licensing 
process, previously described.
    In summary, the Commission believes that these measures, including 
the measures designed to streamline NRC adjudicatory processes, will be 
effective in ensuring a technically sound but timely process for power 
reactor license renewal.
    E. Uranium Recovery
    In this area, the basic criticisms can be summarized as follows:
    The NRC may have expanded inappropriately the scope of its reviews.
    The NRC has interpreted the law inappropriately to limit the use of 
mill tailings impoundments for other radioactive wastes.
    The NRC inappropriately imposes an economic feasibility requirement 
on some applicants.
    The scope of NRC reviews, particularly its authority for regulating 
the ground-water aspects of in situ leach (ISL) facility operations, is 
based on the Atomic Energy Act (AEA) provisions for NRC regulation of 
the production of uranium. The Uranium Mill Tailings Radiation Control 
Act (UMTRCA) and the National Environmental Protection Act of 1969 
reinforced the NRC regulatory authority provided by the AEA. Currently, 
the NRC is working with individual States to identify ways in which we 
can rely on State reviews of ground-water protection at ISL facilities. 
By doing this, we believe that we can eliminate dual regulation between 
the NRC and the States.
    Although the NRC agrees that it can be in the national interest to 
use mill tailings impoundments as disposal sites for AEA waste other 
than 11e.(2) byproduct material, one consideration should be 
willingness of the Department of Energy (DOE) to take possession of 
these sites under current statutes. Under UMTRCA, the long-term 
custodian (i.e., the State, or the DOE if the State refuses) is only 
required to take 11e.(2) byproduct material. If other material is 
placed in the cell, the long-term custodian must agree to take the cell 
for long-term care. In the past, the DOE has been hesitant to do so, 
since this could create a situation of perpetual dual regulation. The 
DOE has agreed to allow the disposal of hazardous material at one mill 
site. However, such disposal required permitting by the U.S. 
Environmental Protection Agency, and a perpetual indemnification from 
the licensee guaranteeing cleanup. In September 1995, the NRC staff 
issued guidance outlining criteria that would allow for disposal of 
material other than 11e.(2) byproduct material in mill tailings 
impoundments. The NRC staff currently is reviewing these criteria, to 
determine whether they can be made less restrictive without creating a 
situation in which mill tailings sites would be subject to dual 
regulation.
    The NRC does not impose an economic-feasibility requirement for the 
processing of alternate feedstock material at uranium mills; however, 
existing NRC guidance provides that a licensee must certify that it is 
processing alternate feedstock for its uranium content. The guidance 
describes plausible grounds for making this certification, which 
include financial considerations, high uranium content of the alternate 
feedstock, or other bases.
    This issue is of particular concern to the State of Utah, which 
filed a petition to intervene on an application for processing 
alternate feedstock. The Utah petition raised concerns that, by taking 
alternate feedstock, the licensee was operating a low-level waste 
disposal cell, which was under regulatory authority of the State of 
Utah. Utah argued that, to avoid State regulation, the licensee was 
processing the material to change its legal definition to 11e.(2) 
byproduct material. Recently, the NRC has granted a uranium mill 
authority to process alternate feedstock. As a result of this action, 
the NRC has received letters of concern from Congressmen James V. 
Hansen and Merrill Cook; from the Speaker of the State of Utah House 
and President of the State of Utah Senate; from the County Council in 
Tooele County, Utah; from the Utah Department of Environmental Quality; 
and from the Navajo Nation. Because the processing of alternate 
feedstock material is controversial, and in order to ensure that NRC-
licensed uranium mills do not undertake processing of material simply 
to avoid other regulatory requirements, the NRC requires the 
certification test discussed above.
    These issues have been recently raised to the Commission in a white 
paper submitted by the National Mining Association (NMA). The NRC 
believes that additional progress can be achieved on licensee and 
stakeholder concerns related to uranium recovery facilities. To that 
end, in early fiscal year 1998, the NRC initiated an evaluation of the 
entire regulatory framework for uranium recovery facilities. This 
evaluation includes the issues identified in the NMA white paper. As 
part of the evaluation, the NRC will hold public meetings in Texas, 
Colorado, New Mexico, and Wyoming to discuss the regulatory framework 
for uranium recovery. From this dialogue, the NRC intends to enhance 
the effectiveness and efficiency of the uranium recovery regulatory 
program. The NRC staff has prepared and the Commission is reviewing an 
overarching risk goal for the decommissioning of uranium recovery 
facilities.
    F. Organization and Management Effectiveness and Efficiency
    In this overall topical area, the basic criticisms can be 
summarized as follows:
    The NRC needs a significant, agency-wide review.
    The NRC has done little to respond to previous internal and 
external reviews.
    NRC staffing should be sharply reduced, particularly in the areas 
of management and support, human resources, finance, and professional 
staff. Reorganization to combine groups according to processes would 
add efficiency.
    NRC research efforts should decrease to reflect industry maturity.
    NRC involvement in international activities is excessive.
    Even with severe budget cuts, NRC staffing would exceed that of the 
nuclear regulatory bodies of other countries.
    In responding to these criticisms, we begin by noting that the NRC 
is responsible for the regulation of a complex technology and, as a 
result, one might expect that differing views will exist as to what are 
the best regulatory solutions to various issues. However, the NRC 
historically has initiated programs and processes designed to assess 
its own regulatory requirements and framework, to determine whether 
adjustments can be made to improve safety, to reduce unnecessary 
licensee burden, and to improve NRC efficiency. Particularly in recent 
years, the Commission has been active in seeking ways to improve its 
regulatory effectiveness and efficiency.
    Organization and Planning.--In August 1995, the Commission 
initiated a Strategic Assessment and Rebaselining review. Designed to 
be introspective and self-critical, this full-scope analysis explored 
the relationship of agency programs to Congressionally mandated 
authorities and responsibilities, with the objective of providing a 
solid, reliable foundation on which to base a strategic framework for 
future decision-making. This study was used as the foundation for 
developing the NRC fiscal year 1997-2002 Strategic Plan, the fiscal 
year 1999 Performance Plan, and program-level outcomes-focused 
operating plans.
    Another NRC organizational tool, a key component in ensuring 
effectiveness and efficiency, is the agency-wide Planning, Budgeting, 
and Performance Management Process (PBPM). As a natural outgrowth of 
the Strategic Assessment and Rebaselining initiative, the PBPM allows 
the agency to implement the Government Performance and Results Act 
(GPRA) and other Congressional and Administration initiatives that 
demand greater accountability for results. The PBPM involves the 
following four main components:

    Setting the strategic direction and performance expectations for 
    the organization;
    Determining the programs, resources and planned accomplishments 
    needed to meet those expectations;
    Measuring and monitoring performance against the established 
    expectations; and
    Assessing performance in light of lessons learned and applying the 
    results.

    This builds in accountability for the accomplishment of work, and 
provides a direct means to refocus work or to re-deploy resources to 
adjust to emergent or competing demands.
    Information Technology and Information Management.--The NRC has 
changed its process for information management and the for the 
deployment of information technology, and thereby has improved 
effectiveness and reduced cost. This change is driven by the Clinger-
Cohen Act, and more fundamentally by the overall desire of NRC 
management to identify opportunities for reducing the cost of doing 
business. Aggressive internal cost improvement activities have reduced 
NRC operating costs, while still funding needed improved management 
processes and IT investments.
    A number of NRC initiatives have strengthened our management of 
information technology (IT) and information management. One example is 
our implementation of a robust Capital Planning and Investment Control 
process (CPIC), which ensures that NRC IT projects have a strong 
business case, a demonstrable return on investment, and adequate 
planning and project management to ensure success. The CPIC process has 
been used to approve four major IT investments to date: (1) STARFIRE, 
an integrated resource management system; (2) the NRC Reactor Programs 
System (RPS); (3) our Agency Documents Access and Management System 
(ADAMS); and (4) our Personal Computer Refresh system. Three of the 
four projects are on schedule and on budget. The fourth project, RPS, 
has identified new requirements due to a business change, and currently 
is under review for an increased scope and budget.
    A second initiative has been the development of an Information 
Technology Architecture to ensure that IT investments will work 
together effectively. The NRC has developed a detailed architecture of 
standards covering not only hardware and telecommunications but also 
how application systems must work together and share data. We have used 
this architecture as a framework for studying whether the 13 different 
types of large-scale computers currently in use could be used more 
effectively. As a result, we have found a way to move systems so that 
we can retire an aging and expensive-to-maintain minicomputer. We will 
continue to use this architecture to ensure the stable operation of the 
NRC technology infrastructure, and to detect overlap and duplication.
    Perhaps the most significant IT initiative is the development of a 
comprehensive plan for the remediation of all the NRC mission-critical 
and business-essential systems, to ensure that they will be Year 2000 
compliant. [For additional discussion of overall NRC efforts to address 
the Year 2000 technology problem, see Section V.I.]
    NRC Self-Assessment.--Self-assessment plays a critical role in NRC 
organizational and management effectiveness. Through the PBPM, the NRC 
has sought to institutionalize self-assessment in our normal agency 
processes. As discussed throughout this testimony, we are continuing to 
evaluate and reform our technical and support functions in order to 
enhance effectiveness and efficiency. In addition to the reactor 
inspection, enforcement, performance assessment, and licensing reviews 
already mentioned, our self-assessments to date have led to the 
restructuring of our research and rulemaking programs to be more 
responsive to regulatory priorities, as well as to the closure of the 
NRC Walnut Creek Field Office in California to achieve process 
efficiencies. We have been conducting an interoffice assessment of 
event analysis activities to eliminate overlap and duplication, and we 
are preparing to issue an Advance Notice of Proposed Rulemaking that 
would modify event reporting requirements to make them less burdensome 
and more risk-informed. Our self-assessments of the NRC research 
program led to its downsizing by approximately 80 percent over the last 
17 years, and we will continue to adjust its content and resource 
levels to reflect changes in the industry and in regulatory need.
    The NRC encourages constructive criticism of its actions, and views 
this as a means for improving the regulatory process. The NRC Office of 
Nuclear Reactor Regulation (NRR) holds annual Regulatory Information 
Conferences, during which current and important regulatory issues are 
discussed openly and candidly with the nuclear power industry and the 
public. Workshops and other public meetings are held regularly to 
discuss regulatory developments in an open forum. Public comments 
invariably are sought on major regulatory actions, and the agency 
currently is working with the industries it regulates on a broad range 
of regulatory and technical issues.
    As a significant example of soliciting stakeholder inputs in a 
public forum, the Commission earlier this month hosted a round-table 
discussion, open to the NRC staff, the industry, Congressional staff, 
the press, and the general public, to understand more clearly the 
recent criticisms of various NRC programs, and to invite additional 
comments and insights from a wide range of participants. The meeting 
was widely attended, and included participation by the Commission, 
senior NRC management, industry representatives, the Union of Concerned 
Scientists, and a former NRC Commissioner. The discussion included a 
vigorous dissection of various NRC reactor oversight functions and 
regulatory processes, and was helpful in providing additional insight 
and perspective on the areas of criticism already discussed.
    In addition to these public forums, the Commission has created 
internal processes to encourage licensees to bring their concerns 
directly to the attention of NRC management. The NRC staff also 
solicits more routine feedback from licensees, to gain a broader view 
of the effect of NRC activities on the safe operation of nuclear power 
plants. The NRC evaluates this feedback, along with information from 
other sources (such as the Institute of Nuclear Power Operations (INPO) 
or NEI), to determine appropriate follow-up actions. The results are 
tracked and reported annually to the Commission.
    To augment our self-assessment capabilities, we recently obtained 
the services of Arthur Andersen and Company to look at our PBPM 
process, focusing on how we conduct self-assessments and program and 
resources planning in reactor-related programs. This study will be 
ongoing in fiscal year 1999, and will be expanded to include our 
support functions.
    Management and Support Staffing.--In addition to the critical 
reviews of our program activities, we believe our management and 
support programs also must be efficient and proportionally sized to our 
mission functions. Since fiscal year 1994, the NRC has reduced Senior 
Executive Service managerial positions by 16 percent, from 220 to 185, 
and we have improved the overall supervisor-to-employee ratio from 1:4 
to 1:6 (633 to 402). Reductions in these areas will continue into 
fiscal year 1999.
    NRC Participation in International Activities.--With regard to 
agency participation in international activities, the international 
activities in which the NRC participates, and which the NRC funds, do 
in fact contribute to and are beneficial to the regulation of U.S. 
nuclear power plants, and are not duplicative of activities performed 
by other groups. As a simple illustration: when considering the 
population of nuclear power plants based on or derived from U.S. 
technology, more are operating outside the United States than inside 
the United States. To make optimal use of this operational experience 
database requires access to and interaction with the operators and 
regulators of these facilities, as well as interactions with 
organizations such as the World Association of Nuclear Operators 
(WANO). Such insights provide an important input to NRC regulatory 
activities, and can directly benefit the U.S. nuclear industry when 
relevant safety issues are surfaced abroad before they surface in U.S. 
plants. Moreover, with the decline of our research budget, the NRC must 
leverage its limited resources to obtain the information necessary to 
respond to emerging safety issues and to industry initiatives.
    While there certainly are lessons to be learned from foreign 
nuclear organizations, the NRC does not believe it is appropriate to 
size its organization based on foreign organizations. Differences 
between the size of the NRC professional staff and that of other 
national nuclear regulatory organizations are due to significant 
institutional, economic, and legal differences. Some foreign 
governments divide the responsibility for regulation of nuclear-related 
activities among several different entities, whereas U.S. law provides 
the NRC with nuclear safety and regulatory responsibilities for a very 
broad range of nuclear-related activities. [For additional detail on 
NRC international programs, see Section V.H of this testimony.]
    Summary.--In summary, the Commission has made and will continue to 
make changes to enhance the efficiency and effectiveness of the NRC. To 
ensure this progress, the Commission will employ its agency-wide 
Planning, Budgeting and Performance Management process, internal self-
assessments, and, as necessary and appropriate, the use of outside 
consultants. In addition, the NRC will continue to operate in an 
atmosphere of openness, candor, and a willingness to stimulate feedback 
and to listen to constructive criticism from its stakeholders.
V. Other Agency Programs and Areas of Focus
    A. Electric Utility Deregulation
    The economic deregulation of electric utilities has continued its 
transition from the wholesale to the retail environment. While the 
Federal Energy Regulatory Commission (FERC) and the State Public 
Utility Commissions (PUCs) have the responsibility for rate regulation, 
several areas of NRC focus also have emerged as the transition to a 
competitive market has begun to take shape. These are not areas of 
major resource expenditure for the NRC; however, as utilities 
restructure internally, as ownership arrangements change, as mergers 
occur, and as licensees work to control and reduce costs, the NRC must 
understand and respond appropriately to the effects the that changing 
business environment could have on nuclear safety. NRC areas of focus 
related to electric utility restructuring fall under four general 
headings: (1) any impact of cost-competitiveness on safe nuclear 
operations; (2) electrical grid reliability; (3) the availability of 
funds for decommissioning; and (4) license transfers and timeliness of 
NRC reviews. Several specific actions have been taken in this area. The 
NRC believes that its regulatory framework is generally sufficient, at 
this time, to address the restructuring and reorganization that likely 
will arise as a result of electric utility deregulation.
    Cost-Competitiveness and Safe Nuclear Operations.--The NRC 
continues to study possible impacts of cost-competitiveness pressures 
on safe nuclear operations. NRC safety assessments at some reactor 
facilities have identified deficiencies that may stem from the economic 
pressure on a licensee to be a low-cost energy producer, which in turn 
may limit the resources available for corrective actions and plant 
maintenance. The NRC is developing measures that could help to identify 
plants where economic stress may be adversely impacting safety. 
However, the NRC has not found an overall correlation between cost 
cutting and a decline in safety performance; rather, in general, the 
best managed and most cost efficient facilities are those with the best 
economic and safety performance.
    In addition to the potential impact on safe operations, cost-
competitiveness could become a factor in nuclear plant license renewal. 
The impacts here can be complex. In an effort to make nuclear 
facilities competitive in a deregulated market, in some instances State 
PUCs have taken steps toward offering limited-time opportunities that 
would allow utilities to recoup sunk investments in generation. For 
licensees with a longer-term focus, the financial benefits of license 
renewal may make the option of continued operation attractive.
    Electrical Grid Reliability.--Another important area of NRC focus 
has been electrical grid reliability. In recent years, NRC 
probabilistic risk assessments have made it clear that a ``Station 
Blackout'' at a nuclear power station is a major contributor to core 
damage frequency. The term ``Station Blackout'' is used, in the nuclear 
power industry, to refer to an event in which a loss of offsite power 
is coupled with the inability of the onsite emergency diesel generators 
to provide vital power to plant safety equipment. While the estimated 
frequency of these events is very low, because of the potential 
consequences, the possibility of a Station Blackout continues to be an 
area of NRC focus. The analysis of power reactor experience in this 
area shows that nuclear generating stations are robust in design and 
operational standards, allowing them to help stabilize the electrical 
grid. However, analysis also makes clear that nuclear generating 
stations are vulnerable to grid disturbances, and especially to loss-
of-offsite-power events. Grid reliability governance must take account 
of these factors. Standards of performance, operational criteria, and 
training of personnel are oversight issues that all must be addressed 
as deregulation goes forward. The NRC has established a grid 
reliability action plan to address concerns regarding the impact of 
utility deregulation on the reliability of the grid in supplying 
offsite power to nuclear power plants.
    To address related issues, the DOE has created a working advisory 
committee on the reliability of the U.S. electric system. In July 1997, 
this committee issued a report to the Secretary of Energy recommending 
that Federal legislation be considered to clarify the authority and 
responsibility for setting reliability standards, and that the FERC 
should review the policy, standards, and governance organization of 
reliability entities. The committee also has issued two draft reports, 
one relating to technical transmission issues, and the other addressing 
the roles and responsibilities of independent system operators. The NRC 
has been coordinating with the DOE, and will continue to monitor 
closely the impact of electric utility restructuring on grid 
reliability. In February 1998, the NRC issued an Information Notice 
entitled, ``Offsite Power Reliability Challenges from Industry 
Deregulation.''
    The NRC also has issued a draft report on the evaluation of loss-
of-offsite-power events at nuclear power plants for external peer 
review. This information in this report will be used to evaluate 
Station Blackout assumptions as they relate to grid reliability. This 
evaluation is scheduled for completion in fiscal year 1999.
    Decommissioning Funding AssuranceExisting NRC decommissioning 
regulations require power reactor licensees either to set aside funds 
periodically in external trust fund accounts or to provide third-party 
guarantees for estimated decommissioning costs. As such, by the time a 
licensee permanently ceases operations at the end of its licensed term, 
the total amount of funds estimated as needed to complete 
decommissioning is expected to be available. In the emerging 
environment of electric utility restructuring, the NRC has had to 
reevaluate certain aspects of these provisions for decommissioning 
funding assurance, including the NRC definition of ``electric 
utility,'' the potential impact of new ownership arrangements, and the 
problem of above-market or ``stranded'' costs. Several specific actions 
have resulted.
    On August 19, 1997, the Commission issued a final policy statement 
on electric utility restructuring and deregulation. The policy 
statement indicates that the NRC will continue to conduct its financial 
qualifications, decommissioning funding, and antitrust reviews; will 
identify all direct and indirect owners of nuclear power plants; will 
establish and maintain working relationships with rate regulators 
(including the FERC and the State PUCs); and will reevaluate the 
adequacy of its regulations in this area.
    On September 10, 1997, the NRC issued for public comment a Proposed 
Rule on decommissioning funding. The NRC staff has developed a final 
rule that currently is being considered by the Commission. We expect to 
issue the final rule shortly. As currently written, the rule would 
modify NRC decommissioning regulations in four areas. First, it would 
revise NRC regulations to ensure that decommissioning funding assurance 
requirements are clarified for all responsible licensee entities, not 
merely for ``electric utilities.'' Second, it would allow credit on the 
earnings from decommissioning trust funds. Third, to keep the NRC 
informed of licensee decommissioning fund status, it would require 
periodic licensee reports on the status of such funds and any changes 
to licensee external trust agreements. Finally, to ensure adequate 
licensee accumulation of decommissioning funds, the NRC would take 
additional action as needed on a case-by-case basis, either 
independently or in cooperation with the FERC and the State PUCs, 
including the modification of a licensee schedule for accumulation of 
decommissioning funds.
    The NRC also has taken other actions in this area. NRC staff 
guidance has been developed for reviews of licensee financial 
qualifications and decommissioning plans, as well as in the area of 
antitrust reviews. Numerous meetings have been held with industry 
representatives, State and Federal rate regulators, the financial 
community, and other stakeholders. Staff-level liaisons have been 
established where appropriate. The overall effect of these measures has 
been to improve NRC, licensee, and public awareness on issues related 
to electric utility restructuring.
    License Transfers and Timeliness of NRC reviews.--The NRC 
regulation covering power reactor license transfers, 10 CFR 50.80, 
prohibits the transfer or assignment of a power reactor license, in any 
manner, without written Commission consent. The NRC evaluates such 
transfers to determine whether the proposed transferee is technically 
and financially qualified to conduct the activities covered by the 
license. The NRC examination of the financial qualifications of the 
proposed transferee includes three factors: (1) financial 
qualifications for operations; (2) decommissioning funding assurance; 
and (3) antitrust considerations. The NRC also must determine whether 
the transfer would lead to foreign ownership, domination, or control of 
the facility.
    In the past several years, the NRC has seen an increase in transfer 
applications, primarily as a result of corporate restructuring actions 
in anticipation of economic deregulation. The restructuring actions 
that the NRC has evaluated include: (1) mergers, either between 
electric utilities or between an electric utility and a company outside 
the power generation industry; (2) formations of holding companies; (3) 
sales of ownership shares of nuclear plants; and (4) formations of 
operating subsidiaries to run nuclear plants for an owner or owners. 
With the recent announcement of the sale of Three Mile Island, Unit 1, 
by GPU Nuclear, Inc. to Amergen, Inc. (a jointly-owned subsidiary of 
PECO Energy Company and British Energy, Inc.), the NRC likely will be 
asked to approve the sale of an entire nuclear plant for the first 
time. The NRC also expects to receive future requests for other types 
of direct or indirect transfers (e.g., joint ventures).
    Because of the variety of current and potential transfer requests, 
the NRC has evaluated each request based on its particular factual 
situation. However, the NRC has issued guidance on several aspects of 
its transfer reviews in the final Standard Review Plan on Antitrust 
Reviews and the draft Standard Review Plan on Power Reactor Licensee 
Financial Qualifications and Decommissioning Funding Assurance, which 
we expect to issue as a final report later this year. The NRC also has 
developed draft criteria for evaluating license transfers to non-owner 
operators of nuclear power plants. In addition, the NRC staff has met 
and remains willing to meet with representatives of licensees and/or 
intended transferees to discuss requirements of the transfer process.
    Notwithstanding our current case-by-case approach, virtually all 
transfer requests have been completed in a timely fashion. We are not 
aware of any recent transfer requests in which we have caused any delay 
of completing the transaction. A ``typical'' transfer usually can be 
approved within three to 6 months of receiving the transfer 
application. NRC approval consists of an order issued by the Director, 
Office of Nuclear Reactor Regulation, followed by a ministerial license 
amendment (to add or change names of licensees) if changes to the 
license are needed. If a conforming amendment to the license is 
required to reflect administrative changes to the license, such an 
amendment does not involve a significant hazard consideration. For some 
facilities, the staff may conduct a significant changes review, in 
consultation with the Department of Justice, regarding the antitrust 
implications of the transfer. No hearing on the antitrust aspects of 
the transfer would be held except in situations in which the NRC finds 
significant changes. However, 53 of the nuclear reactor units currently 
licensed to operate have been ``grandfathered'' and, consequently, are 
not subject to any NRC antitrust review. The NRC has not had antitrust 
or other hearings for any of the 45 to 50 transfer applications we have 
approved in the last 5 years. In view of the fact that NRC antitrust 
responsibilities tend to duplicate antitrust review responsibilities of 
other Federal agencies (e.g., the FERC and the Department of Justice), 
the NRC supports legislation introduced by the Administration to 
eliminate future NRC antitrust reviews.
    B. NRC Certification of Advanced Reactor Designs
    In the past 2 years, the NRC has reached significant milestones in 
the certification of advanced reactor designs, and in the 
implementation of the associated combined licensing process. As far 
back as the late 1970's and early 1980's, the experience gained in 
licensing existing U.S. nuclear power plants indicated that the 
licensing process for new nuclear power plants could be improved in 
ways that would enhance safety, improve stability, and reduce industry 
and agency uncertainty by achieving earlier resolution of technical and 
policy issues. Taking advantage of this insight, however, proved to be 
an arduous effort that included legislative reform, a Commission Policy 
Statement on Standardization, extensive litigation, and rulemaking. The 
overall result has been 10 CFR Part 52, a reformed licensing process 
that provides for combined licenses, early site permits, and certified 
standard designs.
    In May 1997, the NRC certificated the General Electric Advanced 
Boiling Water Reactor (GE ABWR) design and the ABB Combustion 
Engineering System 80+ design. This certification marked the final step 
in the design certification process, an effort that encompassed both 
the development and promulgation of Part 52, and that involved the most 
rigorous technical and safety reviews ever performed for a nuclear 
plant design. The goals of this process included design 
standardization, enhanced safety and reliability features, and a more 
predictable and stable licensing process. Both the ABWR, a 1,350-
megawatt boiling water reactor, and the System 80+, a 1,400-megawatt 
pressurized water reactor, incorporate features that would mitigate the 
effects of severe accidents.
    In addition to these two designs, the NRC is continuing the review 
process for a third advanced reactor design, the Westinghouse AP600--a 
600-megawatt pressurized water reactor that uses passive safety 
features, employing gravity, natural circulation, convection, 
evaporation, and condensation for plant protection. The NRC independent 
AP600 research program played a key role in identifying significant 
design issues which, if not corrected in time by Westinghouse, would 
have resulted in significant schedule delays. The NRC research program 
also helped to resolve issues that were not covered by the vendor test 
program, and contributed significantly to the overall understanding of 
the AP600 design.
    The NRC staff has continued to devote a significant level of 
attention and resources toward completing the AP600 review by bringing 
to closure the remaining technical issues. The NRC staff issued an 
advanced copy of the AP600 Final Safety Evaluation Report (SER) in May 
1998. The Advisory Committee on Reactor Safeguards (ACRS) also made a 
concerted effort to expedite its review process, which resulted in 
issuing the ACRS design approval letter earlier this month. The NRC 
staff expects to be able to release the final AP600 SER next month, 
with the Final Design Approval to follow in September.
    Even given the advantages of these advanced designs, the Commission 
recognizes that the timing and likelihood of renewed demand for nuclear 
construction in the U.S. remains unclear. The design certification 
process, however, has been effective in providing enhancements to 
safety in design, drawing from experience in a manner that will 
increase the predictability of the licensing process, and that will 
ensure NRC readiness for future licensing actions.
    C. Status of the Materials Program
    Materials Program Initiatives.--The NRC continues to oversee the 
safe use of radioactive materials by approximately 5,900 specific 
medical, academic, industrial, and commercial licensees, and an 
additional 45,000 general licensees. Key areas of improvement include: 
(1) the implementation of an action plan for improving licensee 
accountability of licensed materials; (2) the consolidation of NRC 
guidance for materials licensees; (3) the revision of Part 35, 
``Medical Use of Byproduct Material''; and (4) the revision of Part 70, 
``Domestic Licensing of Special Nuclear Material.'' The NRC also is 
continuing to improve its effectiveness in relationships with other 
regulatory entities, such as Agreement States.
    The Commission recently approved an action plan to address licensee 
accountability for certain kinds of licensed materials encompassing 
approximately 24,000 devices. The action plan was developed in response 
to recommendations provided by an Agreement State-NRC working group 
that evaluated current licensee accountability of devices. A 
registration program would require certain general licensees to 
register their devices with the NRC annually. This program will ensure 
that licensees still can maintain accountability of their devices, and 
will allow the NRC to maintain a database of devices possessed by the 
licensees.
    The NRC is continuing to streamline the process for handling 
materials license and amendment requests. The NRC staff is midway 
through the process of updating and consolidating hundreds of guidance 
documents into approximately 20-30 comprehensive topical reports for 
use by materials users. These reports will contain licensing checklists 
and audit guidelines to assist licensees in developing their programs. 
As a result of these efforts, we expect increased clarity on and 
understanding of NRC requirements, more completeness in license 
applications and license amendments, and more timely processing and 
review of licensee submittals.
    The Commission has completed a multi-phase review of its medical 
use program, which included an independent study conducted by the 
National Research Council for the National Academy of Sciences' 
Institute of Medicine. As a result of this detailed review, the 
Commission directed the NRC staff to develop recommendations for 
revising the 1979 Commission Medical Policy Statement and 10 CFR Part 
35, ``Medical Uses of Byproduct Material.'' The revision of Part 35 
would achieve several specific improvements, which would include 
focusing the regulations on medical procedures that pose the highest 
radiation safety risk, with a subsequent decrease in the oversight and 
regulatory burden for low-risk activities. The Commission recently 
approved a proposed rule for publication and solicitation of public 
comment. This rulemaking has a targeted completion date of June 1999. 
The Commission used a process that encouraged and facilitated early 
State and stakeholder involvement in the development of proposed 
revisions to Part 35.
    The Commission also is pursuing a risk-informed and performance-
based approach for regulating fuel cycle facilities. In this context, 
the NRC currently is revising 10 CFR Part 70, ``Domestic Licensing of 
Special Nuclear Material,'' to increase NRC confidence in the margin of 
safety at major fuel cycle facilities. Based on current intentions, 
this revision: (1) would identify appropriate consequence criteria and 
the level of protection needed to prevent or mitigate accidents that 
exceed these criteria; (2) would require affected licensees to perform 
an integrated safety analysis (ISA) to identify potential accidents at 
the facility and the items relied on for safety; and (3) would require 
the implementation of measures to ensure that the items relied on for 
safety are continuously available and reliable.
    In the area of Agreement States, the NRC recognizes its shared 
responsibility to ensure that the regulatory programs of the NRC and 
Agreement States collectively establish a coherent nationwide effort in 
the safe use of nuclear materials. The 30 existing Agreement States 
regulate approximately 16,000 specific and 90,000 general licensees. 
The 1997 signing of an agreement between NRC and the Commonwealth of 
Massachusetts transferred about 425 materials licensees to 
Massachusetts regulatory oversight. In addition, Ohio (with about 600 
materials licenses) is scheduled to become an Agreement State in fiscal 
year 1999, and Pennsylvania (with about 800 materials licenses) and 
Oklahoma (with about 225 materials licenses) currently are scheduled to 
become Agreement States in fiscal year 2000.
    Oversight of the U.S. Enrichment Corporation (USEC).--The NRC 
issued initial certificates of compliance for both USEC gaseous 
diffusion plants in November 1996, and assumed regulatory jurisdiction 
in March 1997. In January 1998, the NRC issued its first annual report 
to Congress on the gaseous diffusion plants, including an assessment of 
facility compliance with regulatory requirements. The NRC will conduct 
the first recertification in fiscal year 1999, in accordance with the 
USEC Privatization Act, which requires that the NRC recertify the 
plants at least once every 5 years.
    In addition, the NRC has developed a standard review plan, in 
coordination with other agencies, for NRC activities specifically 
related to USEC privatization. The NRC staff has used this standard 
review plan to address NRC review activities required to support USEC 
privatization. In accordance with the USEC Privatization Act, USEC has 
begun the privatization process, and expects to become a private entity 
early in the second half of this year through an initial offering of 
stock to the public. The NRC will continue to report annually to the 
Congress on the status of the USEC plants and their compliance with NRC 
standards, and will continue to undertake an active, comprehensive 
inspection program to verify operational safety and review of plant 
incidents and events. This inspection program will continue to include 
NRC resident inspectors at each plant.
    The NRC also is preparing to review an application from USEC for 
commercial deployment of the Atomic Vapor Laser Isotope Separation 
(AVLIS) technology, and is engaging in pre-licensing discussions and 
reviews in support of the USEC application. The USEC has advised the 
NRC that it plans to submit an AVLIS application in February 1999.
    D. High-Level Waste
    In the critical area of managing high-level waste, NRC continues to 
believe that a permanent geologic repository is the appropriate 
mechanism for the nation to manage, safely and ultimately, spent fuel 
and other high-level nuclear waste. The Congress has assigned to the 
NRC significant responsibilities as a part of the national repository 
program. In accordance with statutory direction in the Nuclear Waste 
Policy Act of 1982, as amended, and the Energy Policy Act of 1992, the 
NRC must consult extensively with the DOE before licensing a 
repository. The 1987 revisions to the Nuclear Waste Policy Act focused 
DOE high-level waste repository efforts exclusively on the site at 
Yucca Mountain, Nevada. The NRC has several objectives in this pre-
licensing consultation phase: (1) to develop a regulatory framework 
(regulations and guidance); (2) to ensure that the DOE is aware of the 
elements comprising a quality license application; (3) to evaluate the 
adequacy of the site characterization and waste form in the DOE site 
suitability recommendation to the President; and, (4) ultimately, to 
determine whether the NRC, through its licensing and oversight 
processes, can authorize repository construction, receipt of waste, 
repository operations, and final repository closure and 
decommissioning.
    In order to enhance the effectiveness of the NRC program and in 
response to budget constraints, the NRC in fiscal year 1996 refocused 
its high-level waste program on resolution of the ten key technical 
issues most important to repository safety and, consequently, most 
important to licensing. These issues cover areas such as groundwater 
flow, thermal effects, potential disruptive events, container releases, 
and total system performance. The NRC has continued to make progress 
toward resolution of these issues, including the documentation of 
corresponding acceptance criteria and early feedback to the DOE for 
preparation of its Viability Assessment throughout fiscal year 1996-
1998. In restructuring its pre-licensing regulatory program, the 
Commission has applied a risk-informed and performance-based approach 
to the performance of a geologic repository system--a system with 
unique physical characteristics, failure mechanisms, and lifetime. 
Application of this philosophy has resulted in the development of an 
integrated regulatory approach under which the key issues important to 
repository performance and safety will guide the revision of NRC 
regulations, the development of a Yucca Mountain review plan and 
independent analytical techniques, and the resolution of issues.
    One key technical issue for NRC is the development of a site-
specific, performance-based regulation applicable to the proposed 
repository at Yucca Mountain. Proposed and final regulations are 
planned for fiscal year 1999 to provide a regulatory framework for the 
DOE submittal of a license application in 2002. These criteria are 
being developed to implement health-based standards for Yucca Mountain 
that are consistent with the recommendations of the National Academy of 
Science (NAS) in their 1995 technical report on Yucca Mountain, in 
accordance with the Energy Policy Act of 1992.
    NRC Assessment of DOE Progress and Potential for Licensing 
Success.--During fiscal year 1999, the NRC will review the DOE 
Viability Assessment to identify potential licensing vulnerabilities 
and any major concerns with DOE test plans, design concepts, and Total 
System Performance Assessment that, if unresolved, could result in an 
incomplete or unacceptable license application. While the NRC review of 
the DOE Viability Assessment is not required explicitly under statute, 
the NRC expects to be asked to provide its independent licensing view 
as important input to the decisions that the President and the Congress 
will make concerning the future of the repository program at the Yucca 
Mountain site. Moreover, the NRC believes that its views, supported by 
independent NRC analyses, will contribute to public confidence in the 
credibility of the decision-making process.
    The NRC is encouraged that the DOE now is conducting a performance-
based program to focus on those issues most important to repository 
safety. In addition, the DOE recently issued its Repository Safety 
Strategy (previously called the Waste Isolation and Containment 
Strategy). This strategy provides the DOE explanation of the role that 
natural and engineered barriers are expected to play in the containment 
of radionuclides within the waste package, and in ensuring that the 
annual dose to persons living near the site is acceptable. The NRC 
believes that the DOE has made significant progress in its site 
characterization program for the candidate repository at Yucca 
Mountain, including the completion of the Exploratory Studies Facility, 
the recent initiation of the East-West Drift for the enhanced 
characterization of the repository block, and the surface-based and 
subsurface testing.
    On the basis of what is known today, the NRC is confident that it 
will be able to determine, with reasonable assurance, whether spent 
fuel and other high-level waste can be disposed of safely in a geologic 
repository at Yucca Mountain, provided that: (1) the NRC receives a 
high-quality license application from the DOE; (2) NRC requirements are 
met; (3) the NRC is permitted to maintain its technical capability for 
licensing a geologic repository in the face of budget constraints, and 
(4) timely, reasonable, and implementable standards are developed for 
the repository. Ensuring that the NRC is prepared to review a DOE 
license application for a geologic repository in a timely manner is a 
Commission priority. To this end, a credible, technically competent, 
and adequately funded pre-licensing regulatory program is essential.
    Potential Issues.--The Commission is continuing to work with the 
DOE, the Office of Management and Budget (OMB), the Office of Science 
and Technology Policy (OSTP), and the Environmental Protection Agency 
(EPA), to ensure that the EPA high-level radioactive waste standard, 
when issued, is both appropriate and implementable. However, many 
issues related to the EPA high-level waste standard are similar to 
those related to the NRC cleanup rule for sites undergoing 
decommissioning. As a result, the NRC recently wrote to the Senate 
Committee on Environment and Public Works, suggesting that a 
legislative solution may be necessary.
    The Commission also is aware that the Congress is contemplating new 
legislation that would alter the national high-level waste program. The 
Commission agrees with the basic approach taken in both the House and 
Senate bills, including the use of an all-pathways radiation standard, 
and believes that both contain the fundamental elements of an 
integrated waste management system needed for the protection of public 
health and safety. That being said, however, the Commission recommends 
that the Congress take particular care that the overall schedule for 
DOE acceptance of waste for storage at a licensed interim storage 
facility and its obligation to submit a license application for a 
permanent repository do not set these two important programs on a 
collision course with respect to their needs for limited resources. 
Centralized interim storage and permanent geologic disposal are key 
elements of the integrated waste management systems laid out in both 
bills. The development and licensing of each should be afforded 
sufficient time and adequate funding.
    Status of Spent Fuel Storage.--Currently, it is primarily the 
responsibility of licensed utilities to manage the spent fuel from 
commercial nuclear power reactors. The NRC reviews the designs for and 
operation of facilities for the storage of spent fuel in fuel pools and 
independent spent fuel storage installations, primarily located at 
reactor sites. The NRC has certified 13 cask designs for spent fuel 
storage under the use of either a general license or as part of a site-
specific license--and has certified two cask designs to be fabricated 
for the transport of spent fuel. In fiscal year 1999, the NRC 
anticipates reviewing approximately 50 applications for commercial 
spent fuel transport designs, Department of Transportation and DOE 
spent fuel transport designs, commercial spent fuel storage designs, 
and interim storage of spent fuel, including ten independent spent fuel 
storage installations (ISFSIs), one of which would be a privately 
owned, away-from-reactor interim spent fuel storage facility. 
Associated review and inspection activities will ensure that safety and 
regulatory compliance are achieved and maintained for these designs and 
installations. Additionally, the NRC will continue its review of a 
spent fuel dry transfer system, which would allow cask-to-cask 
transfers and would, among other features, obviate the need for using a 
spent fuel pool in conducting a transfer, which would facilitate timely 
and safe decommissioning of shutdown commercial power reactors.
    E. Decommissioning and Decontamination; Clean-Up
    Decommissioning involves removing radioactive contamination in 
buildings, equipment, groundwater, and soils to such levels that a 
facility can be released for either unrestricted or restricted use. In 
addition to the cleanup of hundreds of facilities each year, the NRC is 
continuing to encourage timely cleanup of approximately 40 more complex 
material and fuel cycle facility sites through the implementation of 
its Site Decommissioning Management Plan. Five sites were successfully 
decommissioned and removed from the Site Decommissioning Management 
Plan list in fiscal year 1997. The NRC expects three more sites to be 
removed each year in fiscal year 1998 and fiscal year 1999. In 
addition, decommissioning was completed and the operating license 
terminated for the Fort St. Vrain Nuclear Generating Station, Unit 1, 
owned by the Public Service Company of Colorado. Except for the 
independent spent fuel storage installation, the site was released for 
unrestricted use.
    After an extensive rulemaking process that involved several years 
of enhanced stakeholder interaction through workshops and public 
meetings, the Commission in July 1997 issued a final rule to establish 
radiological criteria for decommissioning and license termination. The 
NRC rule contains an all-pathways radiation standard that is consistent 
with recommendations of national and international scientific 
organizations. The NRC use of an all-pathways standard is also 
consistent with the all-pathways approach reflected in the high-level 
waste bills currently under Congressional consideration. During earlier 
discussions, the staff of the U.S. Environmental Protection Agency 
(EPA) had expressed concern with certain provisions of the rule, 
including the lack of a separate groundwater standard. As a result, the 
NRC and the EPA held a public meeting in April 1997, after which the 
NRC revised its proposed final rule on two issues in response to EPA 
concerns. However, it should be noted that the NRC fundamentally 
disagrees with the need for a separate groundwater standard. Before 
finalization of the rule, I met with the EPA Deputy Administrator, on 
behalf of the Commission, to review the rule and to discuss how the 
views and concerns that the EPA had expressed might be accommodated in 
individual license termination requests from licensees. In addition, we 
discussed the possibility of developing some type of binding agreement 
on the finality of NRC license termination decisions.
    In August 1997, I sent to Administrator Browner a draft Memorandum 
of Understanding (MOU) entitled ``Consultation and Finality on 
Decommissioning and Decontamination of Contaminated Sites.'' This draft 
MOU identifies the responsibilities of each agency for the 
decommissioning and decontamination of contaminated sites, and 
specifies the ways in which these responsibilities would be carried out 
to achieve finality in license termination decisions. Later in August, 
we received a copy of EPA guidance entitled ``Establishment of Cleanup 
Levels for CERCLA Sites with Radioactive Contamination.'' This document 
provides clarifying EPA guidance for establishing protective cleanup 
levels for radioactive contamination at sites that come under the 
Comprehensive Environmental Response, Compensation, and Liability Act 
of 1980 (CERCLA). We were disappointed to see in this guidance the EPA 
assertion that the dose limits in the NRC final rule generally will not 
provide a protective basis for establishing preliminary remediation 
goals for cleanup at CERCLA sites, and that the NRC sites would require 
further remediation. A principal NRC concern with this guidance and the 
EPA position is the question of finality for sites that have complied 
with the NRC or equivalent Agreement State cleanup standards and have 
had their licenses terminated. To address this concern, the Commission 
proposed legislation that would amend CERCLA to recognize NRC cleanup 
standards as sufficiently protective, and that would provide finality 
to sites that have complied with the NRC or equivalent Agreement State 
cleanup standards.
    In December 1997, I sent a letter to Administrator Browner 
detailing NRC concerns and comments on the EPA CERCLA guidance. The EPA 
responded to the NRC-proposed MOU on February 19, 1998, and to NRC 
comments on the CERCLA guidance on February 20. In reviewing these 
responses, the Commission found that the EPA was continuing to oppose 
finality for sites that comply with NRC cleanup standards. Therefore, 
in April 1998, I again wrote to Administrator Browner, stating that 
there appear to be fundamental differences between the NRC and the EPA 
on the basis for protecting public health and safety and the 
environment, and that the Commission continues to believe, consistent 
with standards of the international community, that the regulatory 
approach used by the NRC will be sufficient to ensure adequate 
protection of public health and safety and the environment in this 
area. I also stated that the Commission recognizes that the resolution 
of the differences between our agencies is a matter of policy that can 
best be solved by Congressional action. Subsequently, Administrator 
Browner categorically rejected the NRC legislative approach, and 
informed me that if an agreement satisfactory to both agencies cannot 
be developed, the EPA may decide to apply its standards unilaterally 
and require remediation under CERCLA for NRC sites after they have been 
decommissioned.
    In summary, the NRC supports legislation that would establish 
finality for sites that comply with NRC cleanup standards. Dual 
regulation is wasteful of both government resources and the resources 
of American citizens to whom the regulations apply. Therefore, the 
Commission supports language comparable to that found in section 810 of 
H.R. 3000. This provision would effectively prevent later imposition of 
additional remediation standards or requirements at decommissioned 
sites that have met the NRC cleanup standards.
    F. Work with the U.S. Department of Energy (DOE)
    Several areas of change for the NRC involve work with the 
Department of Energy (DOE). We are positioning the NRC to become, 
potentially, the external regulator of DOE nuclear activities, and to 
license DOE privatized facilities. On the basis of a DOE/NRC memorandum 
of understanding (MOU), a pilot program for the regulation of DOE 
nuclear facilities has begun. In addition, as part of plans to 
stabilize the Hanford tank waste through a remediation project, the DOE 
is proposing to privatize the operation, and to have the NRC license 
the private enterprise. The NRC has been providing technical assistance 
and support for this project, including reviews of contractor proposals 
and the development of a regulatory program, to ensure a smooth 
transition later in the project for NRC regulatory oversight. We also 
have approved a license amendment authorizing the irradiation of 
tritium-producing lead test assemblies at Watts Bar Unit 1, and we will 
continue to work with the DOE on the use of a commercial light-water 
reactor for tritium production, if the Congress and the Administration 
support this approach. Finally, we have begun discussions with the DOE 
regarding NRC involvement in either of two DOE strategies for disposal 
of excess weapons-grade plutonium: (1) immobilizing surplus plutonium 
with high-level waste in ceramic material for geologic disposal, and 
(2) burning surplus plutonium as a component of mixed-oxide fuel in 
existing commercial reactors.
    External Regulation of DOE.--In December 1996, following a report 
by a DOE Advisory Committee on External Regulation and further study by 
a DOE working group, the Secretary of Energy announced that the 
Administration would take certain measures toward giving the NRC the 
responsibility for the regulation of nuclear safety at nearly all DOE 
nuclear facilities, phased in over a 10-year period. The Advisory 
Committee and the working group had concluded that external regulation 
of DOE nuclear safety would increase the assurance of safety, give the 
public and workers more confidence in the safety of DOE operations, 
make safety regulation of DOE nuclear facilities more stable, require 
operations managers to be more accountable for nuclear safety, and 
minimize redundancy in the safety regulation of DOE nuclear facilities. 
The NRC evaluation of this concept was part of the NRC Strategic 
Assessment and Rebaselining initiative. In the course of that 
evaluation, public comments overwhelmingly favored NRC regulation of 
DOE nuclear facilities. These two factors--the DOE decision and the 
public commentary--weighed heavily in the Commission decision to 
endorse NRC oversight of DOE facilities. In June 1997, the DOE and the 
NRC agreed to pursue NRC regulation of DOE nuclear facilities on a 
pilot program basis.
    The pilot program is to determine the feasibility of NRC regulatory 
oversight of DOE nuclear facilities, and to support a decision on 
whether to seek legislation to authorize NRC regulation of DOE nuclear 
facilities. On November 21, 1997, DOE Secretary Pena and I (on behalf 
of the Commission) signed a Memorandum of Understanding (MOU) between 
the NRC and the DOE that details the specific conditions and activities 
associated with the pilot program. The MOU objectives include: (1) 
determining the value added by NRC regulatory oversight; (2) testing 
various regulatory approaches (for example, licensing and 
certification); (3) determining the status of DOE pilot facilities with 
respect to meeting existing NRC requirements, or acceptable 
alternatives, and identifying any significant safety issues; (4) 
determining the costs (to both agencies) of NRC regulation; (5) 
evaluating alternative regulatory relationships, and determining DOE 
contract changes that might be necessary to provide for NRC oversight; 
(6) identifying transition issues and solutions; (7) identifying 
legislative and regulatory changes needed; and (8) evaluating 
appropriate processes for stakeholder involvement should the NRC assume 
broad external regulatory authority over DOE nuclear facilities.
    The pilot program began in the Fall of 1997 at Lawrence Berkeley 
National Laboratory (LBNL). On-site work for the Lawrence Berkeley 
National Laboratory pilot was completed on January 15, 1998. No 
significant safety issues were identified at LBNL. After completing the 
Berkeley site report, the Commission has requested that the NRC staff 
prepare a revised MOU, in consultation with the DOE, that would 
incorporate lessons learned during the process and, if agreed, allow 
the agencies to recommend jointly that the Administration seek 
legislation promptly for NRC regulatory authority for a specific pilot 
facility or class of facilities, on the basis of information gained 
during a specific pilot.
    The field work on the second pilot site, the Radiochemical 
Engineering Development Center (REDC) at Oak Ridge National Laboratory, 
was completed in June 1998. The tentative conclusions of the work to 
date are that REDC as well as LBNL are licensable without significant 
changes to the facilities or their radiation safety programs. However, 
several major policy issues have resurfaced recently that could delay 
completing both reports. These issues are: (1) Who should be the 
licensee (i.e., the DOE or the contractor)? (2) What, if anything, 
should be done about legacy materials and buildings? and (3) Should the 
NRC seek jurisdiction over DOE accelerators and over DOE naturally-
occurring and accelerator-produced radioactive materials? The NRC and 
the DOE are working together to resolve their differences on these 
policy issues.
    The third pilot for fiscal year 1998 is underway at the Savannah 
River Site Receiving Basin for Offsite Fuels, and is scheduled for 
completion in late 1998. During fiscal year 1999, the NRC intends to 
continue the pilot program, starting with the Pacific Northwest 
National Laboratory and adding facilities of greater complexity that 
would provide expanded information on the major objectives previously 
outlined. In addition, the NRC staff has begun work on draft 
legislation that would support NRC oversight of specific facilities.
    Current DOE Privatization Activities.--The NRC also is 
participating in the DOE Hanford tank waste remediation system project, 
a major privatization initiative, located on the Hanford Reservation in 
Richland, Washington. An NRC/DOE MOU was executed on January 29, 1997, 
specifically for the demonstration phase (Phase I) of this project. 
This MOU calls for the NRC to provide technical assistance and support 
to the DOE in the development of a comprehensive regulatory program, 
consistent with the NRC regulatory approach, for processing all Hanford 
tank wastes into forms suitable for final disposal, while protecting 
the general public, workers, and the environment. The Congress 
continued to appropriate funding for NRC participation in this project 
for fiscal year 1998. To support this phase, the NRC has established a 
permanent on-site representative on the Hanford site, and continues to 
assist in the review of initial DOE privatization contractor 
submittals, as well as in the DOE development of guidance documents for 
the privatization contractors. Throughout Phase I of this program, the 
DOE is responsible for regulating the activities of the privatization 
contractors. However, the ultimate goal of NRC participation is to 
provide a smooth transition into the DOE-proposed NRC licensing of the 
privatized contractor. Legislation may be necessary to clarify NRC 
authority to regulate these activities.
    Tritium Production.--The evaluation of options for tritium 
production is another DOE activity that the NRC is supporting. The 
United States stopped producing tritium in 1988, when the last nuclear 
weapons production reactor at the DOE Savannah River site was shut 
down. The most recent projection calls for resumption of tritium 
production by the end of 2005. To meet this need, the DOE has chosen a 
dual-path strategy involving the evaluation of the two most promising 
tritium supply alternatives: (1) to produce tritium in commercial 
light-water reactors, either through acquisition of reactors under 
government ownership, or by contracting for target irradiation services 
under private ownership; and (2) to design, build, and test critical 
components of an accelerator system for tritium production. It is our 
understanding that the DOE plans to select one of these approaches by 
the end of 1998 to serve as the primary source of tritium. The other 
alternative, if feasible, will continue to be developed as a backup 
tritium source.11The commercial reactor option has been split into two 
phases. The first phase, a demonstration phase currently under way at 
the Tennessee Valley Authority's Watts Bar Unit 1 nuclear plant, 
involves the irradiation of 32 tritium-producing burnable absorber rods 
(referred to as a ``lead test assembly''). These rods were placed in 
the Watts Bar reactor core during the first refueling outage (in the 
Fall of 1997), following issuance of a license amendment by the NRC. 
The rods are scheduled to be removed from the core during the Spring 
1999 outage and shipped to a DOE facility for post-irradiation 
examination. We understand that this tritium will not be used for 
defense purposes. Consistent with Administration and Congressional 
decisions and guidance, the second phase of the commercial reactor 
option is the irradiation of up to about 3300 rods in a tritium 
production core. The DOE expects to submit its tritium production core 
topical report for NRC review later this summer. Assuming any necessary 
legislative and programmatic approvals are in place, and the DOE 
proceeds with its program, a plant-specific application for an 
amendment to the facility operating license is expected in 1999 or 
2000. Under such a scenario, licensees undertaking tritium production 
core irradiation would need NRC authorization in 2002 or 2003 in order 
to meet the DOE requirement for extraction of tritium gas by the end of 
2005.
    Disposition of Surplus Weapons-Grade Plutonium.--Under a 
reimbursable agreement signed by the NRC and the DOE in September 1995, 
the NRC agreed to provide assistance to the DOE Office of Fissile 
Materials Disposition in the review of potential disposition 
alternatives for plutonium declared excess to the needs of the U.S. 
nuclear weapons program. In January 1997, the DOE issued its Record of 
Decision that reflected a dual strategy for plutonium disposition: (1) 
immobilization of some of the surplus plutonium in ceramic material, 
after mixing with high-level waste, for disposal in a geologic 
repository; and (2) burning of some plutonium as a component of mixed-
oxide (MOX) fuel in existing commercial reactors. With respect to the 
MOX fuel strategy, the DOE indicated that it anticipates that the MOX 
fuel fabrication facility would be licensed by the NRC at a DOE-owned 
facility, and that the MOX fuel would be irradiated in a commercial 
power reactor. The DOE has announced that its Savannah River site would 
be the location of the MOX fuel fabrication facility. The referenced 
reimbursable agreement was modified to cover the NRC costs of NRC 
assistance in preparing for eventual licensing activities.
    We also are reviewing a number of issues that may require 
legislation, related to the roles of the NRC and the DOE in the MOX 
fuel program. Some of these issues include: (1) whether such a facility 
should be regulated by a licensing or a certificate-of-compliance 
approach; (2) whether the DOE or a contractor (or both) would be the 
regulated entity; (3) the role of other Federal agencies; (4) the role 
of the Defense Nuclear Facilities Safety Board; (5) who should be 
responsible for certain activities related to the MOX fuel facility, 
such as physical protection, MOX fuel transportation safety, low-level 
radioactive waste disposal, liability coverage, and facility 
decommissioning; and (6) whether the MOX fuel program and facility 
would or would not be considered a ``defense activity or facility'' 
under 42 U.S.C. 7272.
    G. Significant Research Activities
    To make timely and technically credible regulatory judgements and 
to anticipate problems of potential safety significance, the NRC must 
have independent technical expertise and information. Key to providing 
this capability is the NRC research program. This program is both 
confirmatory and anticipatory, and resolves uncertainties associated 
with the most safety significant regulatory issues. The NRC conducts 
reactor and plant performance research to provide in-depth examination 
and understanding in support of other regulatory functions. For 
example, the recent rebaselining of the reactor source term, under the 
NRC research program, will facilitate the approval of utility requests 
for changes to some operational limits. Current areas of significant 
research emphasis include high burnup fuel behavior, reactor pressure 
vessel integrity, steam generator research, environmentally assisted 
cracking, radionuclide transport, thermal-hydraulic research, severe 
accident research, probabilistic risk assessment, and environmental 
qualification of electrical cables.
    The NRC routinely seeks opportunities in its relationships with 
outside organizations, both domestic and foreign, to enter into 
cooperative research agreements through which it can leverage available 
research resources. These organizations include other Federal agencies, 
the Electric Power Research Institute (which conducts research for the 
U.S. industry), and members of the international regulatory community 
engaged in nuclear safety research. These agreements result in both the 
sharing of information and the sharing of research costs, the effect of 
which is to maximize the use of our research resources, and at the same 
time to enhance our own research capabilities.
    By maintaining a viable research program, the NRC has access to 
research through approximately 35 active cooperative agreements, as 
well as through another 45 agreements that are being extended or 
considered with organizations in more than 25 countries, including 
countries from the former Soviet Union. Through these agreements, the 
NRC contributes about $8 million annually, but receives the benefits of 
research valued at approximately $85 million annually. In addition, the 
NRC receives about $1.3 million each year in support of its various 
research programs.
    A good example of NRC cooperative efforts and leveraging of 
research resources is the joint U.S.-Russian research program on 
radiation health effects, which is being performed under the auspices 
of the U.S.-Russian Joint Coordinating Committee on Radiation Effects 
Research (JCCRER). While the studies can involve both U.S. and Russian 
populations, the initial focus is on the unique opportunities in the 
southern Urals in Russia, particularly in the vicinity of the Mayak 
nuclear complex. There, as a result of past poor operating practices 
and accidents, workers and the surrounding populations were exposed to 
significant amounts of radiation. The characteristics of these 
exposures are different in many respects from those for populations 
previously studied for radiation health effects, such as the survivors 
of Hiroshima and Nagasaki.
    Present radiation protection standards have been developed by 
making assumptions on how to extrapolate the risks of deleterious 
health effects from those observed in populations exposed to short 
bursts of radiation (such as the atomic bomb survivors) to the chronic 
exposures that are characteristic in facilities subject to NRC 
regulation. The studies in the southern Urals will contribute to a 
better understanding of what models are most appropriate to describe 
the relationship between low dose rate (chronic) radiation exposures 
and radiation-induced health effects.
    The DOE is the U.S. executive agency for the JCCRER, and the NRC is 
sponsoring a portion of the research. Other Federal agencies 
participating in the JCCRER are the EPA, NASA, and DOD.
    H. International Cooperation
    Bilateral and Multilateral Activities.--The NRC has long maintained 
a wide-ranging program of international cooperative exchanges to ensure 
the peaceful, safe, and environmentally acceptable uses of nuclear 
energy in the United States and abroad. This cooperation is conducted 
through a variety of bilateral and multilateral relationships. As the 
regulator of the world's largest civilian nuclear program, the NRC has 
broad capabilities to contribute to international programs on nuclear 
power safety, radiation protection, nuclear material protection control 
and accounting, waste management, and decommissioning of nuclear 
facilities. At the same time, the Commission can benefit from the 
experience and expertise gained by foreign nuclear operations.
    In supporting U.S. non-proliferation objectives, the NRC is working 
with the Executive Branch to facilitate the effective implementation of 
the Strengthened Safeguards System of the International Atomic Energy 
Agency (IAEA). The NRC will participate with other involved agencies in 
the preparations for implementation of the Additional Protocol to the 
US/IAEA Safeguards Agreement. Subsequently, the Protocol provisions 
will be implemented at applicable NRC licensed facilities.
    Currently, the NRC is involved in 33 bilateral safety arrangements 
with other countries on five continents. These relationships provide 
the framework for providing technical advice and assistance to other 
countries, as well as for exchanging significant safety and research 
information.
    Convention on Nuclear Safety.--The NRC has worked extensively in 
the development of the International Convention on Nuclear Safety--the 
first instrument to address directly the safety of nuclear power plants 
worldwide. This convention obliges contracting parties to establish and 
maintain proper legislative and regulatory frameworks to govern safety. 
The Convention on Nuclear Safety has been transmitted to the U.S. 
Senate for review and action during the current session.
    I. Year 2000 Systems Corrections
    As a preliminary comment in this area, I would note that on June 
12, 1998, I testified on the subject of Year 2000 Readiness of the 
Utility Industry before the Senate Special Committee on the Year 2000 
Technology Problem. In addition, on May 14, 1998, NRC management 
testified on Year 2000 issues before the Subcommittee on Technology, 
House Science Committee.
    The NRC continues to leverage information technology to provide the 
capacity needed to manage effectively the regulatory, scientific, 
administrative, financial, and records data that are vital to 
fulfillment of the NRC mission. The NRC is fully aware of the 
challenges we face in ensuring that our computer applications and 
hardware systems continue to function properly in the year 2000 and 
beyond, and we have established an aggressive program to address those 
challenges directly. We estimate that the total cost to the NRC will be 
$10.9 million.
    The NRC has completed its assessment of the scope of the Year 2000 
computer problem as it relates to computer systems that we use 
directly. We also are communicating with agencies with which we 
exchange electronic information, to ensure that our data exchange 
formats will properly represent dates beyond 1999. The NRC has 
developed an action plan and schedules to ensure that the systems most 
vital to NRC operations are repaired well before the year 2000, with 
appropriate repair schedules for systems less critical to mission-
related activities. The NRC is pursuing aggressively the certification 
of Year 2000 compliancy for products and services that we acquire or 
use from commercial sources. The NRC Year 2000 program is in compliance 
with the most current Year 2000 program guidance issued by the Office 
of Management and Budget.
    The NRC also is fully aware of the need to address the Year 2000 
computer problem in relation to the use of computers in the nuclear 
industry. To ensure proper focus on this issue by the nuclear power 
industry, the NRC staff met with the Nuclear Energy Institute (NEI) to 
obtain industry support in addressing the concern. NEI has agreed to 
initiate an effort on the Year 2000 computer problem and, working 
jointly with the Nuclear Utilities Software Management Group, has 
promulgated a guidance document to assist nuclear power plant licensees 
in developing programs to address this issue effectively. This 
document, entitled ``Nuclear Utility Year 2000 Readiness,'' has been 
issued to all nuclear power plant licensees, and a related workshop was 
conducted in November 1997. NEI also met with utility senior executives 
in November to remind them of the importance of addressing the Year 
2000 computer problem at their facilities, and to establish a mechanism 
for exchange of information among licensees as they implement their 
programs.
    In December 1997, the NRC developed a draft generic letter, 
entitled ``Year 2000 Readiness of Computer Systems at Nuclear Power 
Plants,'' to ensure that licensees provide assurance of this readiness. 
As part of the Federal Register notice soliciting public comment, the 
NRC requested proposed alternatives to the generic letter, such as a 
voluntary industry initiative that would satisfy the same intent. The 
NRC staff has met with the staff of the General Accounting Office 
(GAO), and factored GAO comments into the final generic letter. The 
final generic letter was issued to nuclear power plant licensees on May 
11, 1998. The generic letter requires licensees to confirm, within 90 
days of the date of the letter, that they are pursuing a program to 
address the Year 2000 problem, and, by July 1, 1999, to confirm that 
they will be Year 2000 ready or to provide the schedule for remaining 
actions to achieve readiness. In addition to requiring licensees to 
report on the existence of Year 2000 programs and to confirm their 
readiness, the NRC has recommended that licensees establish contingency 
plans. The NRC will conduct inspections of approximately 12 nuclear 
power plant licensee Year 2000 programs, on a sample basis, during 1998 
and 1999. In addition, the NRC will continue to monitor licensee 
efforts to address the Year 2000 computer problem through attendance at 
related workshops and meetings over the next 2 years. We believe that 
our timetables have been established prudently, allowing consideration 
of the need to issue shutdown orders (in the unlikely event that a 
reasonable assurance of safety cannot be concluded) well before the end 
of 1999, thus allowing for contingency planning on the part of affected 
utilities.
    Over the past year, the NRC has taken a number of actions to ensure 
that the Year 2000 computer problem will be either eliminated or 
minimized for its materials licensees as well. We have sent our 
materials licensees two Information Notices on this problem, as well as 
conducting on-site and telephone sampling interviews with management 
from various types of NRC materials licensees. Interviews were 
conducted with gauge manufacturers, teletherapy device manufactures, 
fuel cycle organizations, uranium extraction companies, broad-scope 
medical institutions, and the US Enrichment Corporation gaseous 
diffusion plants, to identify any additional problems or issues that 
warranted further action. NRC materials licensee inspectors have been 
instructed to confirm licensee receipt of NRC Information Notices, to 
determine whether licensees have identified any potential problems, and 
to note any corrective actions taken.
                               __________
Responses by the Commissioners of the Nuclear Regulatory Commission to 
                Additional Questions from Senator Inhofe
    Question 1. What is the NRC's plan for continued oversight and 
inspection at Millstone Unit 3 to ensure safe operation of the plant?

    Response. Millstone Unit 3 is on the NRC watchlist as a Category 2 
plant, which ensures that it receives increased NRC management 
oversight until such time as plant performance dictates that a category 
change is called for. Region I has the responsibility for management 
oversight and inspection and has assigned a senior NRC manager and 
staff to implement the inspection program to assure the safe operation 
of the plant. In addition, the Millstone Restart Assessment Panel, 
which is comprised of regional and headquarters managers, senior 
residents, and project managers, will continue, for the foreseeable 
future, to meet periodically with the licensee, assess Unit 3 
performance, and provide input to the inspection program.

    Question 2. What is the NRC's plan to ensure that Millstone 2 does 
not reopen until restart is safe?

    Response. Millstone Unit 2 continues to remain shut down pending 
the licensee's completion of its corrective actions and NRC's 
verification and formal authorization to restart. The licensee has 
implemented a Configuration Management Plan (CMP) for Unit 2 as its 
principal program to provide reasonable assurance that design-bases 
weaknesses have been effectively corrected. COP includes both efforts 
to understand the licensing- and design-bases issues and actions to 
prevent recurrence of those issues. Before NRC can reach a decision to 
approve restart for Unit 2, the licensee must determine that the plant 
conforms with applicable NRC regulations, licensing conditions, the 
Updated Final Safety Analysis Report (UFSAR), and that applicable 
licensing commitments have been met. NRC must then agree with that 
determination.
    As a result of the NRC issuing a confirmatory order on August 14, 
1996, the licensee was directed to contract with a third party to 
implement an Independent Corrective Action Verification Program (ICAVP) 
to verify the adequacy of its efforts to establish adequate design 
bases and design controls. The ICAVP is intended to provide additional 
assurance, before unit restart, that the licensee has identified and 
corrected existing problems in the design and configuration control 
processes. Because of the scope and depth of the corrective actions for 
Millstone, the date for restart of the Millstone Unit 2 has not been 
established. NRC's program for assessing the corrective actions at 
Millstone will continue to focus on a thorough examination of the 
issues identified in the NRC staff's restart assessment plan.
    In SECY-97-003, ``Millstone Restart Review Process,'' dated January 
3, 1997, the staff provided to the Commission the NRC staff's processes 
and approaches that will be used to oversee the corrective action 
programs at the Millstone Nuclear Power Station. The staff is applying 
the guidelines of NRC Manual Chapter (MC) 0350, ``Staff Guidelines for 
Restart Approval,'' to the restart approval of Millstone Unit 2. The 
NRC restart actions plan for Unit 2 consists of several major elements, 
including corrective action programs, work planning and control 
improvements, procedure upgrade programs, quality assurance and 
management oversight improvements, and completion of ICAVP.

    Question 3. The GAO report included a recommendation that 
inspection reports fully document the status of the licensee's actions 
to address identified problems under NRC corrective action 
requirements.
    (a) What has the NRC done to respond to this recommendation?

    Response. The NRC acknowledged the GAO recommendation and on August 
18, 1997 provided following response:
    The NRC agrees with the recommendation to improve oversight of 
licensees' timely resolution of problems. The staff has long recognized 
the importance of the licensee's corrective actions and has several 
processes that focus inspection effort and licensee's management 
attention on this area, as described below:
    NRC inspectors currently review the adequacy and timeliness of 
corrective actions taken by the licensees in response to violations of 
NRC requirements and deviations from licensing commitments. They 
document these reviews in inspection reports, which are public 
documents. These violations and deviations result from nonconformances 
identified during NRC inspections of the facility or by the licensee's 
own problem identification process.
    NRC inspectors routinely monitor, review, and verify the adequacy 
of licensee corrective actions. Since licensees annually identify 
thousands of deficiencies, NRC resource limitations demand that these 
inspections are performed on a selective basis, focusing on those 
issues that are most risk- and safety-significant.
    In addition, the NRC reviews the licensee's corrective action 
program at each reactor facility on a periodic basis (Inspection 
Procedure 40500, ``Effectiveness of Licensee Controls in Identifying, 
Resolving, and Preventing Problems'') to verify that the licensee is 
implementing an adequate program.
    NRC's enforcement policy specifies appropriate enforcement actions 
for nonconformances with planned and required corrective actions. 
Additionally, to encourage licensees to identify and resolve problems, 
the enforcement policy provides for mitigation of the sanction for 
timely identification and appropriate corrective actions by the 
licensee.
    Problems identified at the Millstone and Salem plants related to 
the licensees failure to take prompt corrective action, as noted in the 
GAO report, indicate this area warrants greater attention from the NRC. 
The staff has begun a review of its internal processes to identify 
areas for improvement in assessing the timeliness, prioritization, 
engineering support, and quality of the corrective actions taken by 
licensees. Some areas included in the staff's review are the plant 
performance review, and the senior management meeting (SMM) processes. 
The agency is strengthening its processes for assessing the 
effectiveness of a licensee's corrective action program by focusing on 
what a licensee has done as opposed to what it plans to do. In that 
regard, the NRC intends to provide additional guidance on how 
inspectors should close out issues identified in NRC inspection 
reports. The staff is also developing a process to better identify and 
track licensing commitments and to verify their implementation.
    While the NRC intends to follow more closely the corrective actions 
for issues included in inspection reports, the NRC does not agree with 
the specific recommendation to track and document in the inspection 
reports the status of corrective actions for all licensee-identified 
issues. Criterion XVI of 10 CFR Part 50, Appendix B. requires licensees 
to promptly identify and correct failures, malfunctions, deficiencies, 
deviations, defective material and equipment, and nonconformances. 
Given the number of issues identified, the efforts required by the NRC 
to document and track deficiencies regardless of safety significance, 
as recommended in the GAO report, would be large and without a 
commensurate safety benefit.
    Based on our response dated August 18, 1997 to the GAO report, NRR 
prepared draft inspection procedure changes to provide additional 
guidance on how inspectors should close out issues (severity level IV 
violations, open and unresolved items) identified in NRC inspection 
reports. However, because of the recent changes being proposed to the 
enforcement program which may require no additional NRC review of less 
risk significant severity level IV violations as long as these issues 
are captured in the licensee's corrective action program, NRR has 
postponed implementing the draft procedures. Once the Office of 
Enforcement's review of how severity level IV violations should be 
processed by the Agency is completed, NRR will integrate the OE's 
recommendations into the NRR's guidance on how to close out open issues 
so that the OE's and NRR's processes are consistent.

    Question 3. NRC's role in future nuclear energy development vis-a-
vis DOE. (b) Include detailed plans and schedules for the NRC review of 
the Calvert Cliffs license renewal and the transfer of ownership of TMI 
Unit 1.

    Response. The technical review plan for the Calvert Cliffs renewal 
application was forwarded to Baltimore Gas & Electric in a letter dated 
June 17, 1998. The milestones in the Calvert Cliffs schedule are as 
follows:

 
------------------------------------------------------------------------
           Calvert Cliffs Renewal Milestone                   Date
------------------------------------------------------------------------
Receive Renewal Application..........................            4/10/98
Notice Application Tendered..........................            4/25/98
Complete Acceptance & Docketing......................            5/10/98
Public Meeting & Environmental Impact Statement (EIS)             7/9/98
 Scoping.............................................
Staff Complete Technical Requests for Additional                  9/7/98
 Information (RAIs)..................................
Staff Complete Environmental RAIs....................            10/7/98
Applicant Complete Technical RAI Responses...........           11/21/98
Applicant Complete Response to Environmental RAIs....            12/6/98
Issue Draft Environmental Statement (DES) for Comment             3/6/99
Staff Complete Safety Evaluation Report (SER) and                3/21/99
 Identify Open Items.................................
Public Meeting to Discuss DES........................             4/5/99
Complete DES Comments................................            5/20/99
Applicant Complete Response to Open Items............            7/19/99
Staff Issue Supplemental SER & Final Environmental              11/16/99
 Statement (FES).....................................
ACRS Recommendations to Commission on Application....            2/14/00
Commission Decision on Application...................       before 10/00
------------------------------------------------------------------------

    On July 8, 1998, a Notice of Opportunity for Hearing was published 
in the Federal Register related to the renewal application for Calvert 
Cliffs. As of August 10, 1998, one petition for leave to intervene has 
been received in connection with the Calvert Cliffs renewal 
application.
    The Commission may issue a case-specific order providing further 
guidance on procedures and scheduling matters.
    The NRC also received a license renewal application on July 7, 1998 
from Duke Energy Corporation for their three-unit Oconee plant. The 
staff established similar milestones for the review of the second 
renewal application, which were forwarded to Duke in a letter dated 
July 31, 1998.
    Both renewal reviews are proceeding as scheduled. NRC management 
and the NRC License Renewal Steering Committee will meet with BGE and 
Duke management on August 20, 1998, to discuss the plans and progress 
on the renewal reviews.
    The NRC has not yet received a request from Amergen (a consortium 
formed by PECO Energy, Inc., and British Energy) to transfer ownership 
and operating authority of the Three Mile Island, Unit 1, plant. Among 
other matters, the issue of foreign ownership, domination, or control 
will have to be addressed in light of the prohibition in the Atomic 
Energy Act of 1954, as amended, against such interests. Given the 
unknowns, the NRC has established the following schedule, expressed in 
terms of weeks following receipt of an application, for review of the 
license transfer request, including a provision for an adjudicatory 
process, associated with the purchase of Three Mile Island, Unit 1 
(TMI-1) by Amergen, Inc.:

 
------------------------------------------------------------------------
                            Milestone                             *Weeks
------------------------------------------------------------------------
Complete Acceptance Review; publish Notice of Application and          2
 Opportunity for Hearing in Federal Register and identify case-
 specific schedule factors......................................
Complete preparation and submittal of Commission paper on              8
 analysis of policy and legal issues associated with foreign
 ownership, domination, or control of TMI-1.....................
Complete reviews of decommissioning funding assurance, financial      12
 qualifications, technical qualifications, foreign ownership,
 and antitrust. (Note that the license for TMI-1 was issued
 under Section 104b of the AEA. As such, the facility and its
 licensees are ``grandfathered'' from antitrust reviews.) Issue
 order (and associated license amendment) approving or
 disapproving license transfer. If required, also issue
 Environmental Assessment and Finding of No Significant Impact.
 (Note that the Commission has determined that any hearing that
 might be granted in connection with a transfer order need not
 be completed before the issuance of such order. Pursuant to 10
 CFR 50.92, the conforming amendment to the license does not
 typically involve a significant hazard consideration and may
 take effect upon issuance. However, the order and any
 conforming amendment are subject to the outcome of any hearing
 that may be conducted in connection with the transfer
 application.)..................................................
Complete hearing process, if required.                              **36
------------------------------------------------------------------------
*Cumulative weeks following receipt of an application for transfer of
  ownership
** The estimated duration of any hearing that might be held is based
  upon the Commission's currently applicable Rules of Practice and the
  recently issued Statement of Policy on Conduct of Adjudicatory
  Proceedings, 63 F.R. 41,872 (August 5, 1998), as well as the issuance
  of a case-specific order by the Commission providing further direction
  regarding the conduct and scheduling of the hearing. It should also be
  noted that a proposed rule, which would revise the Commission's rules
  of practice to provide streamlined licensing procedures specifically
  applicable to license transfer proceedings, was published in the
  Federal Register on September 11, 1998. A 30-day public comment period
  is provided.


    Question 3. NRC's role in future nuclear energy development vis-a-
vis DOE. (c) Discuss the factors that contributed to delays in 
regulatory action with Vogtle and LES, and the steps taken to prevent 
their recurrence.

    Response. The Vogtle proceeding involved an application for the 
transfer of control of the facility's operating license from Georgia 
Power Company to the Southern Nuclear Operating Company which was 
challenged on grounds related to the character and integrity of the 
current and prospective licensee's management. Unlike other 
proceedings, concurrent with the ongoing licensing proceeding, the 
intervener had filed a petition under the Commission's regulations 
requesting that an enforcement action be taken against the licensee 
based on the same facts asserted as grounds for denying the license 
transfer. These facts further related to a then ongoing investigation 
being undertaken by the NRC's Office of Investigations, which entailed 
a referral to the Department of Justice for consideration of criminal 
prosecution. Because of the related enforcement aspects, the staff 
declined to prove the transfer of operating authority and related 
amendments until completion of the proceeding. The delays in completion 
of the proceeding likewise stemmed largely from decisions to delay 
litigation pending resolution of the ongoing investigation. This action 
was also complicated by the need for the staff to decide whether to 
take enforcement action. In retrospect, it seems clear that at least 
some of the delay was not legally compelled.
    Louisiana Energy Services (LES) proceeding involved a first-of-a-
kind application for a private enrichment facility, involving a 
technology which had not previously been licensed by the Commission. 
During both the technical review and adjudicatory process, a number of 
novel legal and technical issues had to be addressed. With respect to 
the staff's technical review, it is now apparent that the application 
submitted by LES was not sufficient to enable the staff's review to be 
conducted on a timely basis, but that the staff did not aggressively 
address its shortcomings nor was the applicant fully responsive to 
staff requests for additional information.
    In regard to the LES adjudicatory process, the record developed was 
complex and involved issues of first impression which, although brought 
to the Commission's attention, were not resolved in a timely manner. In 
addition, in an attempt to ensure that all issues were thoroughly 
addressed, the Licensing Board allowed a large amount of information 
into the record without insisting on adequate sponsorship by the 
parties to explain the significance of that information, which then had 
to be considered by the Board in reaching its decisions. These 
decisions themselves were excessively delayed, as the Licensing Board 
itself has acknowledged.
    Notwithstanding that both the Vogtle and LES proceedings involved 
unique considerations not believed likely to recur, the Commission has 
attempted to address sources of potential delay in future licensing 
actions in several ways. The staff now prepares a detailed review 
schedule for significant licensing actions such as license renewal, 
including the need to assure the adequacy of the license application 
itself and for bringing emerging technical issues to NRC management 
attention and, if necessary, to the Commission for guidance (both 
matters which also contributed to the delay of the LES proceeding).
    In addition, the Commission has taken steps to streamline the 
adjudicatory process, while still assuring that a clear and complete 
record is created. The Commission has commenced a study of the entire 
hearing process and expects to receive recommendations, including 
recommendations on the need for legislation, by the end of this year. 
In the interim, on July 28, 1998, the Commission issued a ``Statement 
of Policy on Conduct of Adjudicatory Proceedings,'' which provides 
guidance to the licensing boards, presiding officers and parties to 
Commission proceedings on how the Commission expects its proceedings to 
be conducted. The policy statement encourages licensing boards and 
presiding officers to establish case-specific schedules which are to be 
followed, to shorten filing and response times where practical, to 
manage discovery to avoid unnecessary delays in that stage of the 
adjudicatory process, to make sure that the parties comply with the 
Commission's regulations governing the submission of admissible 
contentions, and to issue decisions in a timely manner. It also 
stresses the obligations of all parties to adhere to the Commission's 
Rules of Practice and their respective burdens as participants, for 
example, with respect to submitting contentions and for offering 
evidence. In addition, the Commission indicated that it will itself 
carefully and actively monitor ongoing licensing proceedings to ensure 
that they are conducted expeditiously and that the boards, staff and 
other parties receive prompt guidance on emerging technical, policy and 
legal issues, as necessary. Consistent with its desire for expeditious 
processing of license applications, the Commission, on August 19, 1998, 
issued and order giving guidance and recommending a schedule to the 
Licensing Board that will preside over the licensing renewal proceeding 
for the Calvert Cliffs Nuclear Power Plant. Moreover, it is now 
considering whether to establish new, informal procedures for license 
transfer hearings that, if promulgated as a final rule, could, in 
general, substantially reduce the time for such hearings.

    Question 4. Early warning for plants that exhibit declining safety 
performance is very important. The GAO report concluded that the NRC 
needs to make clear how it will respond--including a clear statement on 
what sanctions will be applied--when inspections identify problems. 
What steps has the NRC taken to address this concern.

    Response. The NRC acknowledged the GAO recommendation and on August 
18, 1997 provided the following response:

    The NRC agrees that the licensee's responsiveness to identified 
    problems is a critical performance criterion. The current NRC 
    inspection and enforcement programs have well-established 
    requirements that focus on this criterion. Recent changes to the 
    SMM process, including development of an SMM nuclear power plant 
    performance evaluation template, have clearly emphasized the 
    importance of evaluating the licensee's responsiveness to 
    identified problems. The staff has recently strengthened the 
    corrective action evaluation criteria found in the ``Staff 
    Guidelines for Restart Approval'' (Inspection Manual Chapter 0350), 
    which is the guidance document used by the staff in assessing 
    plants that are in an extended shutdown as a result of performance 
    issues. In addition, the Commission directed the staff to further 
    improve the SMM process by developing better indicators that can 
    provide a more objective basis for judging whether a plant should 
    be placed on or removed from the NRC Watch List. These improved 
    performance indicators and objective measures will enhance staff's 
    ability to take appropriate regulatory actions including additional 
    enforcement where past enforcement actions have not been effective.

    Question 4. The NRC's enforcement policy already identifies 
sanctions for licensees that fail to resolve problems within a 
definitive period. The NRC's enforcement policy provides for matching 
sanctions for a violation to the safety and regulatory significance of 
the violation and establishes a graduated system of sanctions that 
include noncited violations, notices of violations, civil penalties, 
and orders to modify, suspend, or revoke a license. The NRC imposes 
more substantial penalties for more significant problems. In 
determining the significance of a problem and the appropriate 
enforcement sanction, the established process also takes into 
consideration (1) the licensee's previous opportunity to identify and 
resolve the problem and (2) the length of time the problem remained 
unresolved because of the licensee's failure to take corrective 
actions.
    Response. The enforcement history has been an important 
consideration in the SMM process. However, enforcement actions are 
taken on a timely basis and are not delayed until the next SMM. As a 
part of our effort to improve the SMM and the licensee performance 
assessment process, we will consider ways to make clear what NRC 
actions will be considered and applied when problems are not corrected 
in a timely manner.

    Question 5. NRC's rule containing radiological criteria for license 
termination set an all pathways dose of 25 millirem/year for the 
unrestricted release of a decommissioned site. EPA encouraged the NRC 
to adopt a maximum level of residual contamination of 15 mrem/year with 
a separate 4 mrem/year ground water standard. EPA Administrator has 
threatened that EPA would apply the Comprehensive Environmental 
Response, Compensation, and Liability Act (through Superfund listing) 
if NRC and EPA do not reach agreement on applicable standards through a 
memorandum of agreement. Isn't this a classic example of dual 
regulation?

    Response. Yes, this is an example of dual regulation. Fundamental 
policy differences exist involving the acceptable dose level (25 mrem/y 
vs. 15 mrem/y) and EPA's belief that a separate pathway standard for 
groundwater in addition to an all pathways standard is necessary.
    NRC published a final rule establishing radiological criteria for 
decommissioning in July 1997. This rule established 25 millirem per 
year (mrem/yr) from all potential exposure pathways as the acceptable 
criterion for release of licensed sites for unrestricted use. The rule 
also requires that radiation doses be reduced below the rule's dose 
criterion through the As Low As Reasonably Achievable process. This 
rule is consistent with international and national scientific 
recommendations as well as EPA's 1994 draft Federal Radiation 
Protection Guidance for Federal Agencies. EPA stated that this is not 
protective of the public health and the environment, and that 15 mrem/
yr from all pathways, with separate limits established for groundwater, 
is necessary. The EPA limits on groundwater would be the Maximum 
Contaminant Levels (MCLs). EPA would apply MCLs in groundwater, not at 
tap as specified in 40 CFR 141, National Primary Drinking Water 
Regulations, which are normally applied to drinking water at the tap. 
NRC disagrees with the EPA position, as discussed below.
    First, the approach suggested by EPA results in the imposition of 
the Comprehensive Environmental Response, Compensation and Liability 
Act (CERCLA) risk range on radionuclides without the informed and open 
discussions that would be part of the rulemaking process to establish 
such radiation protections standards--a process which NRC completed in 
1997. The Commission's final rule is based on considerations of risk, 
radiation protection principles, national and international standards, 
and costs compared to associated benefits of cleanup. Second, there is 
no reason from the standpoint of protection of the public health and 
safety to have a separate, lower dose criterion for one of the pathways 
(i.e., groundwater) as long as, when combined, the dose from all 
pathways does not exceed the all-pathways dose standard. EPA's approach 
also overlooks the fact that MCLs, which EPA espouses for groundwater 
cleanup, are not set at consistent risk levels and include some that 
could result in exposures that exceed NRC's 25 mrem/yr all-pathways 
dose criterion, as well as others set at small fractions of a mrem. In 
issuing the final rule, NRC concluded that the final rule not only 
protects the public health and safety, but also establishes a framework 
to address the limited number of difficult cases which would otherwise 
require consideration of case-by-case exemptions. NRC considers that 
this approach provides adequate protection of the public health and 
safety and the environment, and constitutes cost effective regulation. 
NRC is also concerned that EPA's threat to apply CERCLA raises the 
question of finality for sites that have complied with the NRC or 
equivalent Agreement State cleanup standards and have had their 
licenses terminated. NRC considers that it is important to provide for 
finality in NRC and Agreement State license termination decisions in 
order to provide licensees and the public with a stable and predictable 
regulatory framework that is adequately protective of public health and 
safety and the environment.
    In summary, dual regulation by EPA under Superfund is not necessary 
and is not a good use of limited Government resources and the resources 
of American citizens to whom the regulations apply.

    Question 6. Is the NRC's radiological criteria for license 
termination consistent with international standards set by the 
International Commission on Radiological Protection (ICRP) and the 
National Council on Radiation Protection and Measurement (NCRP)?

    Response. Yes, the NRC's radiological criteria for license 
termination are consistent with standards set by ICRP and NCRP. 
Applicable ICRP and NCRP findings are contained in ICRP Publication 60 
and in NCRP No. 116, respectively. Based on review of health and 
societal issues, both documents (while acknowledging the difficulty of 
setting standards for an ``acceptable'' public dose limit) arrive at 
100 mrem/yr from all sources of radiation as a level that can be said 
to be acceptable. NCRP 116 notes that this value includes a review of 
risks of mortality faced by the public. The ICRP and NCRP approaches 
further reduce their 100 mrem/yr limit by the principle of 
``optimization,'' which includes considerations of constraints and 
cost-effectiveness. Specifically, NCRP 116 notes that no single source 
or set of sources should result in an individual being exposed to more 
than 25 mrem/yr. This fraction (of 100 mrem/yr) was presented as a 
simple alternative to having a site operator investigate all man-made 
exposures that an individual at the site would be exposed to so as to 
demonstrate that the total dose does not exceed 100 mrem/yr. The clear 
implication in this simple alternative is that, if individual sources 
are constrained to 25 mrem/yr, NCRP believes it likely, given the low 
potential for multiple exposures, that the public dose limit will be 
met. Further reductions considering ALARA would still be considered by 
NCRP 116. It is also important to note that ICRP, in its recent 
Publication 77, identifies 30 mrem/yr as the appropriate individual 
dose limit for the disposal of radioactive waste.
    Using the nationally and internationally adopted principles of 
setting ``individual dose and risk limits'' and ``optimization of 
protection'' (noted above) and an additional margin of safety to allow 
for the potential for exposure to more than one radiation source, the 
NRC developed its final rule on radiological criteria for license 
termination.

    Question 7. (A) Is legislative action necessary to resolve this 
[dual regulation] problem?

    Response. The Commission has tried to develop an understanding with 
EPA in the form of a Memorandum of Understanding on decommissioning and 
decontamination of contaminated sites. However, in over a year of 
effort to reach an agreement, there has not been progress made to date. 
It has become apparent that EPA's commitment to its current regulatory 
approach differs significantly from NRC's support of fundamental 
radiation protection standards, as described in national and 
international standards, that are based on considerations of risk and 
costs compared to associated benefits of clean up.
    In other words, there are substantial differences between NRC and 
EPA on the basis for protection of public health and safety and the 
environment. Among other things, this raises the issue of finality of 
NRC or Agreement State decisions on license termination. NRC believes 
that it is important to provide for finality in such decisions thereby 
establishing a stable and predictable regulatory framework that is 
adequately protective of public health and safety. Recognizing that 
dual regulation is wasteful of Government resources and the resources 
of the American people, the Commission has concluded that the 
resolution of the differences between the EPA and the NRC with respect 
to cleanup of radioactive contamination is a matter of policy that can 
best be solved by Congressional action. The NRC Chairman sent a letter 
to Senator Chafee on July 16, 1998, recommending that Congress address 
this issue. A copy of Chairman Jackson's letter is enclosed.
                                 ______
                                 
       enclosure: letter to senator chafee from chairman jackson
                                                      July 16, 1998
    The Honorable John H. Chafee, Chairman
    Committee on Environment and Public Works
    U.S. Senate
    Washington, D.C. 20510

    Dear Mr. Chairman: The purpose of this letter is to express the 
views of the Nuclear Regulatory Commission (NRC) regarding the 
resolution of the differences between the Environmental Protection 
Agency (EPA) and the NRC with respect to cleanup of radioactive 
contamination. We had discussed this matter when I met with you on 
April 28, 1998 And. as you are aware, the EPA forwarded its views to 
you via a letter dated March 28, 1998. For the reasons explained in 
this letter, the Commission believes that the resolution of these 
differences is a matter of policy that can best be solved by 
Congressional action.
    The NRC is committed to fundamental radiation protection standards, 
as described in national and international standards. This commitment 
is reflected in NRC's Rule on Radiological Criteria for License 
Termination, which was issued on July 21, 1997. The rule was arrived at 
through an enhanced participator rulemaking process and was accompanied 
by a voluminous environmental impact statement and extensive regulatory 
analysis. It is based on considerations of risk, radiation protection 
principles, national and international standards, and costs compared to 
associated benefits of cleanup. It uses the principles of setting of an 
individual dose limit, risk limits, and optimization of protection, 
plus an additional margin to allow for the potential for exposure to 
more than one radiation source. NRC's rule includes an all pathways 
dose criterion of 25 mrem/yr and, additionally, requires that doses be 
reduced below the rule's dose criterion through the ALARA process, 
which requires NRC licensees to achieve doses to members of the public 
that are as low as reasonably achievable. Demonstration of compliance 
with the all-pathways dose criterion requires evaluation of the 
groundwater pathway. The approach of using an all-pathways dose 
criterion provides a dependable, risk-based standard and is consistent 
with the recommendations of the National Academy of Sciences, national 
and international scientific organizations, as well as EPA's 1994 draft 
Federal Radiation Protection Guidance for Federal Agencies.
    Nevertheless, EPA questions basic aspects of NRC's Rule on 
Radiological Criteria for License Termination, maintains that NRC's 
radiological criteria for license termination are not protective of 
public health and the environment, and asserts that if EPA is not 
satisfied with cleanups conducted to the NRC-established level, EPA may 
decide to list a previously NRC decommissioned licensee on the National 
Priorities List. Among other things, this raises the issue of finality 
of license termination, and possible EPA actions at sites that have 
complied with the NRC or equivalent Agreement State cleanup standards 
and had their licenses terminated. We believe that it is important to 
provide for finality in NRC and Agreement State license termination 
decisions order to provide licensees and the public with a stable and 
predictable regulatory framework that is adequately protective of 
public health and safety and the environment.
    In addition, EPA faults the NRC for not establishing a separate, 
specific requirement for groundwater pathways. This ignores the fact 
that, under the standards established by the NRC, the dose to a member 
of the public from all pathways of exposure (air, water, food, and 
direct radiation) would not be permitted to exceed 25 mrem/yr for those 
cases in which the NRC would permit unrestricted release of the 
decontaminated site. It also overlooks the fact that maximum 
contaminant levels (MCLs) established under the Safe Drinking Water Act 
(SDWA), which EPA espouses for groundwater cleanup, are not set at 
consistent risk levels (and include some that are above the NRC's dose 
criterion). Further, the costs of meeting certain MCLs may be excessive 
compared to the benefits obtained (in some cases, trillions of dollars 
per individual health effect averted).
    Another aspect of NRC's concern with the application of MCLs is 
EPA's position that it lacks flexibility with respect to setting 
drinking water standards and MCLs of radionuclides under the Safe 
Drinking Water Act and, as such, the application of MCLs for 
radionuclides under the Comprehensive Environmental Response, 
Compensation, and Liability Act of 1980 (CERCLA). It is also EPA's view 
that application of drinking venter standards in other contexts, such 
as cleanup standards for radioactive contamination or standards of 
control for monitoring radioactive waste disposal facilities, has no 
bearing on the proper setting of the drinking water standard, and that 
the legislative direction in the SDWA prohibits increasing any 
groundwater standards, such as MCLs, regardless of what changes in 
science may indicate. In contrast, NRC is not subject to any statutory 
prohibition on using the latest methodology or advances in science for 
limiting radiation doses to individuals or principles established in 
international agreements in setting standards to maximize protection of 
the public's health and safety. This difference in legislative mandates 
further exacerbates the differences between the NRC and EPA on 
radioactive disposal and cleanup.
    We recognize that dual regulation is wasteful of both Government 
resources and the resources of American citizens to whom the 
regulations apply. Therefore, we have attempted to reach an 
understanding with EPA in the form of a Memorandum of Understanding 
(MOW) on decommissioning and decontamination of contaminated sites. I 
sent EPA Administrator Browner a draft MOU on the subject on August 6, 
1997. In response, on February 19, 1998, EPA sent Its a revised MOU for 
consideration. After NRC staff reviewed the EPA-revised MOU' the 
Commission came to the conclusion that fundamental differences exist 
between our two agencies, on the basis for protection of public health 
and safety and the environment. These fundamental differences have the 
potential for severely impacting a number of areas that (all under NRC 
jurisdiction such as high-level waste, transportation, and use of 
radioactive material in medicine.
    In sum, the Commission believes that Congressional action can best 
resolve the differences between EPA and the NRC. Further, we continue 
to believe, consistent with the standards of the international 
community, that the approach used in NRC's cleanup rule provides all 
the regulation necessary for adequate protection of public health and 
safety and the environment. We are aware, of course, that EPA opposes 
that view, and has expressed a preference for continuing interagency 
deliberations. However. we believe that the EPA's commitment to its 
current regulatory approach differs so significantly from NRC's support 
of fundamental radiation protection standards as described in national 
and international standards that a Congressional resolution of the 
differences is desirable.
            Sincerely,
                                       Shirley Ann Jackson.

    Question 7. (B) If so, what action should Congress take to address 
this problem?

    Response. The Commission urges that any legislation reauthorizing 
CERCLA contain language comparable to that found in section 810 of H.R. 
3000. The NRC believes, consistent with the standards of the 
international community, that the approach used in NRC's Rule on 
Radiological Criteria for License Termination, issued on July 21, 1997, 
provides all the regulation necessary for adequate protection of public 
health and safety and the environment, and we strongly urge support of 
that approach in legislation for the reauthorization of CERCLA. The 
rule was arrived at through an enhanced participatory rulemaking 
process and was accompanied by a voluminous environmental impact 
statement and extensive regulatory analysis. It is based on 
considerations of risk, radiation protection principles, national and 
international standards, and costs compared to associated benefits of 
cleanup. It uses the principles of setting of an individual dose limit, 
risk limits, and optimization of protection, plus an additional margin 
to allow for the potential for exposure to more than one radiation 
source.

    Question 8. You discussed your NRC Strategic Assessment and 
Rebaselining effort which is over 3 years old. What are the most 
serious self criticisms that came out of that self evaluation, and what 
have you done about them? (page 1)

    Response. The most significant self-criticisms concerned (1) the 
slow progress of moving toward a more risk-informed and performance-
based regulatory framework, (2) the excessive duration and effort 
needed to complete some licensing actions, (3) the efficiency and 
effectiveness of the inspection, performance assessment and enforcement 
processes and (4) the less than optimal organizational relationships 
and responsibilities to support regulatory initiatives.
    To address these issues the Agency has, for example, (1) developed 
guidance documents for risk-informed applications, implemented a senior 
management oversight committee, and monitored higher priority risk-
informed licensing submittals; (2) sought to better define the 
organizational responsibilities of the Office of Nuclear Reactor 
Regulation to focus on the timely completion of licensing submittals; 
(3) worked with industry to identify improvements in our inspection, 
assessment, and enforcement processes that focus on safety and risk 
significance; and (4) shifted the responsibility for rulemaking 
activities from the Office of Regulatory Research to the cognizant 
Program office to provide a more effective and efficient rulemaking 
process.
    The Strategic Assessment and Rebaselining effort was the initial 
step in implementing a new planning, budgeting, and performance 
management process. One of the principal purposes of NRC Strategic 
Assessment and Rebaselining effort was to identify activities that the 
NRC engages in, group these activities appropriately, identify 
potential strategic or direction setting issues associated with these 
groups of activities, and provide an opportunity for the Commission to 
define a long term direction for the Agency. Commission decisions, for 
example, associated with the Strategic Assessment and Rebaselining 
effort dealt with areas such as oversight of the Department of Energy; 
risk-informed and performance-based regulation; high-level waste; the 
role of industry and public communications. The process provided the 
Commission with options for reaffirming or changing the direction of 
the agency. The Strategic Assessment and Rebaselining effort supported 
the subsequent development of the agencies Strategic Plan, the agency's 
Performance Plan, and each office's Operating Plan by helping to 
prioritize activities and identifying areas were process or activities 
should be eliminated or enhanced. Resources and planned accomplishments 
were identified to implement the Strategic Plan and as the agency moves 
forward performance assessment and monitoring will provide feedback to 
further refine our strategic direction.
    Over the last 2 years, critical self-assessments have resulted from 
implementation of the Commission decisions associated with the 
Strategic Assessment and Rebaselining effort, from resolution of over 
200 process- and implementation-related issues identified during 
development of the directions setting issues, and from the oversight 
afforded by the enhanced budgeting and planning process.

    Question 9. (A) What are your ``clear safety standards''? (page 2) 
How are they defined? How do they relate to the regulations? How are 
they implemented?
    (B) How do you ensure the inspectors and reviewers don't go beyond 
the legitimate bounds in assessing ``safety standards''? What direction 
do you give to your managers when they determine reviewers have gone 
beyond the bounds of the ``safety standards''?

    Response. (At The referenced quotation from page 2 of the statement 
submitted by the USNRC to this Senate Subcommittee notes that NRC has 
been criticized for a ``lack of rigor in demanding strict adherence to 
clear safety standards.'' This criticism, in part, is that NRC lacks 
clear safety standards. The Atomic Energy Act of 1954, as amended, 
establishes ``adequate protection'' as the standard of safety on which 
NRC regulation is based. The Commission's regulations establish the 
basis for meeting that standard. In addition, regulations require the 
license (including the Technical Specifications) and Updated Final 
Safety Analysis Report to provide further plant-specific detail as to 
the standards that a plant must meet to operate safely.
    Some of the Commission's regulations are prescriptive, describing 
precisely what is required for compliance. However, most of the 
regulations are based on a recognition that there are multiple means of 
achieving equivalent degrees of safety. Therefore, the Commission has 
established guidance documents such as NUREGs, Regulatory Guides, the 
Standard Review Plan, and Branch Technical Positions to state methods 
of achieving compliance that are acceptable to the Commission. 
Licensees may propose alternative methods of compliance that provide 
equivalent degree of safety. Therefore, safety standards are defined by 
NRC regulation and associated guidance documents.
    (B) Assurance that a licensed facility meets the regulations is 
gained through the licensing and inspection processes. To provide for 
consistency, evaluations of current plant design and operation 
conducted by inspectors and evaluations of proposed licenses and 
amendments conducted by technical reviewers are required to follow a 
set of guidance documents. The Standard Review Plan (NUREG 0800) 
supplements the various regulatory guidance documents to provide a 
framework for licensing technical review. A detailed inspection program 
manual and implementing procedures, the Enforcement Manual, and 
enforcement guidance memoranda provide guidance for inspectors in 
evaluating a licensee's implementation of the approved design and 
ongoing operation of the facility. Additional process guidance is 
provided in NRR and Region Office Letters and policy memoranda. This 
guidance is generally available in the public domain.
    When an NRC manager determines that an inspector or reviewer has 
made conclusions that are inconsistent with established guidelines, the 
manager is expected to resolve the issue and ensure that the 
assessments and conclusions are consistent with established guidance 
documents, provide an appropriate characterization of safety aspects of 
the review, contain no additional policy issues, and communicates the 
appropriate message to licensees. In the case of inspection reports, 
inspectors and the licensee meet, prior to publication of the report, 
to discuss inspection findings and provide an opportunity for the 
licensee to discuss concerns with the agency's assessment. Inspection 
reports are reviewed by the appropriate level of management prior to 
being issued to licensee.
    In addition to management oversight of the licensing review and 
inspection programs, both internal NRC policy and the regulations 
themselves provide opportunities for interested stakeholders to contest 
the staff's actions. For the industry, perceived NRC staff excesses may 
be challenged through four processes that monitor concerns raised by 
licensees. (1) Licensees can report concerns to NRC management during 
periodic site visits required by Inspection Manual Chapter (IMC) 0102, 
``Oversight and Objectivity of Inspectors and Examiners at Reactor 
Facilities.'' IMC 0102 requires NRC management to make periodic site 
visits to solicit feedback from their licensee counterparts regarding 
implementation of the NRC regulatory programs at their facility. 
Concerns raised by licensees during IMC 0102 visits are evaluated 
annually with the results reported to the Commission. (2) Each region 
has a formal process to evaluate and resolve licensees' complaints of 
inappropriate regulatory action by NRC employees. Each procedure 
requires a determination if the issue should be pursued by the Office 
of the Inspector General (OIG) or the region. For issues reviewed by 
the region, the regional administrator approves a course of action 
including any specific remedial actions. (3) If the issue is referred 
to the OIG, the matter is handled in accordance with Management 
Directive 7.4, ``Reporting Suspected Wrongdoing and Processing OIG 
Referrals.'' (4) A formal process was established in July 1995 for 
senior power reactor licensee officials to report perceived 
inappropriate regulatory action directly to the Office of the EDO. 
Independent of these processes, licensees can informally discuss any 
concern directly with their counterpart in the regional office or in 
ERR at any time. In addition, if the staff's action is perceived as 
being too lenient, any person may file a request pursuant to 10 CFR 
2.206 to institute a proceeding to modify, suspend, or revoke a 
license, or for other such action as may be proper.

    Question 10. What are your objective performance standards? What 
are your metrics? (page 3)

    Response. As discussed in response to Question 9, historically, 
safety performance has been assessed by NRC judgment of how well a 
licensee adheres to the safety standards defined by NRC regulation and 
implemented through licensing processes. The NRC's regulations 
promulgate requirements ranging from the highly prescriptive, to 
requirements that are more broadly stated which require supplemental 
regulatory guidance (e.g. NRC Regulatory Guides and Standard Review 
Plans) reflecting one or more acceptable implementation alternatives. 
These Guides are not designed to cover every option, but are instead a 
yardstick against which to measure alternatives.
    Currently, NRC uses processes such as Senior Management Meetings 
(SMMs), and Plant Performance Reviews (PPRs) to perform a qualitative 
integrated assessment of licensee performance. Additionally, NRC uses 
quantitative performance data (such as forced outage rate; number of 
safety system failures; equipment forced outages; automatic scrams 
while critical; collective radiation exposure; and number and severity 
level of recent enforcement actions) at the SMMs to support findings of 
performance changes.
    NRC has initiated efforts to develop and rely on more objective 
nuclear plant performance indicators for reactor inspection and 
assessment processes. Several public meetings have recently been held 
with industry representatives and a major public workshop is scheduled 
for late September 1998 to discuss industry and NRC perspectives on 
attaining a more objective performance assessment process which would 
integrate information sources, including a set of selected performance 
indicators. This effort is intended to develop a process that will 
allow transition to a more quantitative set of performance indicators 
and has near-term deliverable dates in early 1999.

    Question 11. (A) You mention ``improved efficiency''. (page 5) How 
does NRC measure internal work processes efficiency?
    (B) What expectations have been provided to the staff relative to 
expected review times?
    (C) How successful have you been in improving process times? Have 
you started measuring process times?

    Response. The NRC developed a Strategic Plan and a Performance Plan 
for the Agency and Operating Plans for the individual Agency Offices 
and Regions. The Office and Regional Operating Plans contain 
performance plan output measures which in turn contain activity-
specific milestones and metrics. The metrics contain standards for 
quantity, quality, timeliness, and efficiency. Labor rates obtained 
from the Office tracking systems are typically used to measure the 
efficiency of the work process. The staff participates in the 
development of the Operating Plans and the goals set forth in the 
Operating Plans are being incorporated into staff performance 
appraisals. Work processes are monitored by management, and as 
activities are carried out, schedules are adjusted accordingly. 
Operating Plan standards are being reviewed and improved as needed on a 
quarterly basis.
    Using these standards, the NRC measures review process efficiency 
several ways including product volume (licensing actions completed), 
backlog inventory and backlog age demographics.
    Expectations regarding expected review time are related directly to 
the priority assigned to the review. The priority of a review task is 
determined primarily on the basis of safety significance, risk 
considerations, and operational impact. However, in some situations, 
priority is dictated by Commission or EDO directive resulting from 
policy considerations, or by statutory requirements such as deadlines 
imposed by rule or regulation. For example, policy considerations have 
a significant bearing on the priority assigned to review tasks for 
license renewal. Four levels of review priority are broadly defined in 
staff guidance. Higher priority work is to be accomplished first; 
however technical complexity may dictate that the review takes longer 
than other tasks of low priority and low complexity. Other factors may 
affect review times are quality of the submittal in support of the 
proposed action and timeliness of the applicant's response to requests 
for additional information.
    Until recently, the expectations were that 80 percent of licensing 
action review tasks would be completed within 1 year, 95 percent would 
be completed within 2 years and all tasks would be completed within 3 
years. As a result of a recent Commission directive, the expectations 
have been raised and resources have been applied to achieve the higher 
expectations. In general, the new expectations are that 95 percent of 
licensing action review tasks will be completed within 1 year and all 
tasks will be completed within 2 years.
    The number of licensing actions completed, the current inventory, 
and the actual number and percentage of licensing actions exceeding 2 
years are reported to management on a monthly basis. Recently, the 
volume of licensing actions completed has improved, although the 
percentage of licensing actions exceeding the age goals has increased 
somewhat. Thus, we recognize improvements are needed. Management 
attention is being focused on this area.
    The Commission recently challenged the staff to reduce the 
licensing inventory to a historic low of 700 licensing actions by the 
end of fiscal year 2000. The NRC's fiscal year 2000 budget proposal 
will include the resources needed to achieve this goal.
    The Regional Offices measure their performance in a similar way by 
monitoring inspections completed (and associated number of inspection 
hours completed at each site), timeliness, and quality of inspection 
and associated assessment reports, and enforcement actions. These 
indicators have shown continued improvement over the past several 
months.

    Question 12. You say you are working to make inspection, 
enforcement and assessment processes better. (page 6) How are you 
monitoring abuses of these activities?

    Response. The NRC interacts regularly with industry groups (NEI and 
INPO) to gain the group's perspective on various regulatory issues. 
Additionally, the NRC has four processes that monitor concerns raised 
by licensees. Independent of these processes, licensees can informally 
discuss any concern directly with their counterpart in the regional 
office or in NRR at any time. (1) Licensees can report concerns to NRC 
management during periodic site visits required by Inspection Manual 
Chapter (IMC) 0102, ``Oversight and Objectivity of Inspectors and 
Examiners at Reactor Facilities.'' IMC 0102 requires NRC management to 
make periodic site visits to solicit feedback from their licensee 
counterparts regarding implementation of the NRC regulatory programs at 
their facility. Concerns raised by licensees during IMC 0102 visits are 
evaluated annually with the results reported to the Commission. (2) 
Each region has a formal process to evaluate and resolve licensees' 
complaints of inappropriate regulatory action by NRC employees. Each 
procedure requires a determination if the issue should be pursued by 
the Office of the Inspector General (OIG) or the region. For issues 
reviewed by the region, the regional administrator approves a course of 
action including any specific remedial actions. (3) If the issue is 
referred to the OIG, the matter is handled in accordance with 
Management Directive 7.4, ``Reporting Suspected Wrongdoing and 
Processing OIG Referrals.'' (4) A formal process was established in 
July 1995 for senior power reactor licensee officials to report 
perceived inappropriate regulatory action directly to the Office of the 
EDO.

    Question 13. You talk about ``plants experiencing performance 
problems.'' (page 6) How do you judge performance? What metrics do you 
use? How do they relate to safety?

    Response. Historically the NRC has judged plant performance through 
the integration of a combination of performance indicators such as the 
frequency and severity of plant events, and the results of NRC 
inspections including enforcement history. Such information available 
to the NRC is brought together for review of each plant on a six month 
cycle (Plant Performance Review) to adjust regional inspection 
resources and to detect adverse trends potentially stemming from 
programmatic weaknesses. Additionally, senior agency managers meet 
annually (recently changed to an annual Senior Management Meeting 
[SMM]), previously was semiannual to review plants whose poor 
performance may warrant increased NRC senior management attention and 
overall agency resource expenditures. Quantitative data are used at 
these senior management meetings to support findings of performance 
changes. This evaluation process integrates quantitative and 
qualitative performance measures such as Plant Performance review 
findings, safety inspection findings, enforcement history, safety 
equipment performance history, Licensee Event Reports, number of 
allegations received, and trend plots of some of these indicators. 
However, performance assessment processes in general have not relied 
solely on these data to determine outcomes, but have utilized a 
diversity of NRC participants to help achieve consistency across 
plants, regions, and time. The level of safety performance by any 
specific plant is determined through the assessment processes noted 
above. Changes to these processes within the last year have included an 
effort to make the bases for their outcomes more clear, such as 
publishing the Plant Issues Matrix (basis for PPR outcome) and minutes 
of the SMMs. Additionally, the Commission recently authorized 
suspension of the Systematic Assessment of Licensee Performance in 
order to allow additional resources to be devoted to development of a 
new assessment process. The NRC initiative includes input from industry 
and public participation, to determine if safety performance can be 
more directly tied to measurable indicators, where such indicators can 
be shown to be closely aligned with plant risk.

    Question 14. (A) You state that you have ``adopted measures that 
internally challenge the need for each generic communication.'' How 
have you done that?

    Response. The internal challenge on the need for a generic 
communication is done in a series of reviews with an increasing level 
of management involvement based on its overall significance. As a first 
step, a multidisciplinary staff level review of a potential problem is 
performed by the Events Assessment Panel with representatives from the 
offices of Nuclear Reactor Regulation (NRR), Analysis and Evaluation of 
Operational data (AEOD), and Office of Regulatory Research (RES). This 
panel reviews the need for each generic communication and suggests the 
appropriate type of communication.
    Generic letters and bulletins require senior management approval. 
In an August 7, 1998 memorandum, the director of NRR provided guidance 
to the staff regarding the need to brief senior management before 
preparing a generic letter or bulletin. The briefing must show the 
safety benefit achieved compared to the burden imposed on licensees and 
staff is justified before the generic communication is allowed to 
proceed through a defined review process. Next, the Committee to Review 
Generic Requirements (CRGR) conducts a structured review of all 
proposed generic letters and bulletins in accordance with an 
established process intended to assure there is ``value-added'' from 
the particular communication. At this stage, the office of General 
Counsel reviews the document and if requested it is forwarded to the 
Advisory Committee on Reactor Safeguards (ACRS).
    Public comments on the draft generic letter or bulletin are sought 
through Federal Register Notice. The Commission also reviews 
significant final communications before issuance. (See the response to 
question No: 61 for the various types of NRC communications).

    Question 14. (B) How have you applied the backfit rule to these 
communications?

    Response. Generic letters and bulletins only request actions and do 
not impose requirements. Licensees have the option to propose alternate 
actions or take no action with appropriate justification. The backfit 
rule (10 CFR 50.109) does not strictly apply until the point at which a 
backfit is required by rule or order. However, new generic positions in 
documents such as bulletins, generic letters and regulatory guides are 
internally reviewed as potential backfits to ensure that they meet the 
standards of the backfit rule before they are issued.
    In the course of preparing bulletins and generic letters, as 
described in the answer to question in 14a, NRC staff must prepare a 
package for CRGR review that provides, in part, the regulatory basis 
for a proposed staff position, and the rationale for it being an 
adequate protection or compliance backfit pursuant to 10 CFR 
50.109(a)(4), rather than a backfit pursuant to 10 CFR 50.109(a)(2). 
Furthermore, the bulletin or generic letter itself must contain a 
backfit discussion which provides the rationale for the NRC staff 
finding. The CRGR reviews all draft bulletins and generic letters to 
ensure that the regulatory basis for the proposed staff position is 
appropriate, and in conformance with the standards of the backfit rule. 
If the CRGR finds that a proposed staff position involves a backfit 
pursuant to 10 CFR 50.109(a)(2), the CRGR will recommend to the 
Executive Director for Operations disapproval of the proposed staff 
position. Further effort on the bulletin or generic letter will cease, 
pending referral of the matter to the Office of Nuclear Regulatory 
Research to conduct a backfit analysis pursuant to 10 CFR 50.109(c), in 
accordance with the directives and guidance of NUREG/BR-0058 and NUREG/
BR-0184.

    Question 15. How will you avoid your staff pressuring licensees 
``into actions in excess of regulatory requirements''? (page 9) What 
sanctions will you put in place? What recourse method will you provide 
utilities to challenge staff pressure? Will you set up a ``licensee 
concerns'' program?

    Response. The NRC implements numerous actions to train its staff as 
to expected professional performance, including the area of 
inappropriate staff pressure. Standards for staff professionalism and 
behavior are addressed in the ``NRC Principles of Good Regulations'' 
and in the NRC technical staff performance expectations issued to each 
employee. These requirements are reinforced by senior NRC managers in 
the course ``Fundamentals of Inspection'' and related refresher courses 
and in resident counterpart meetings, workshops, and training courses. 
Additionally, the NRC actively solicits feedback from licensees to 
promptly identify and resolve any improper staff actions. In July 1995 
the Commission issued a policy statement to establish clearly its 
expectation for the NRC staff and licensees to have open and 
professional communication at all organizational levels. In the policy, 
the Commission also encouraged licensees to raise issues regarding 
inappropriate regulatory action by a member of the NRC staff.
    Licensees can informally discuss any concern directly with their 
counterpart in the regional office or in NRR at any time. As noted in 
response to questions No. 9 and No. 12, licensees have several 
processes available to them to raise concerns and seek recourse, 
including concerns regarding staff pressure. Licensees can report 
concerns to NRC management during periodic site visits. Inspection 
Manual Chapter (IMC) 0102, ``Oversight and Objectivity of inspectors 
and Examiners at Reactor Facilities'' requires NRC management to make 
periodic site visits to solicit feedback from their licensee 
counterparts regarding implementation of the NRC regulatory programs at 
their facility. Concerns raised by licensees during IMC 0102 visits are 
promptly addressed and subsequently evaluated annually with the results 
reported to the Commission. Additionally, each region has a formal 
process to evaluate and resolve licensees' complaints of inappropriate 
regulatory action by NRC employees. The procedures require a 
determination of whether the issue should be pursued by the Office of 
the Inspector General (OIG) or the region. For issues reviewed by the 
region, the regional administrator approves a course of action 
including any specific remedial actions. If the issue is referred to 
the OIG, the matter is handled in accordance with Management Directive 
7.4, ``Reporting Suspected Wrongdoing and Processing OIG Referrals.'' 
Finally, in July 1995, a formal process was established for senior 
power reactor licensee officials to report perceived inappropriate 
regulatory action directly to the Office of the EDO. Regarding 
sanctions, if an issue is substantiated, agency management develops a 
plan, including a schedule for implementation, to execute remedial 
actions; communicates the findings and concerns to the employee; and 
initiates a corrective action plan, which depending upon the severity 
of the issue, could include personnel action.

    Question 16. You state that the NRC is adopting a risk-informed, 
performance-based approach to rulemaking (page 5) and you cite two 
examples: (1) Appendix J. Option B and (2) the Maintenance Rule. What 
other regulations have been modified or do these ``examples'' represent 
all that has been accomplished so far?

    Response. The Commission has worked, and is continuing to work, to 
achieve an appropriate balance between deterministic and risk-informed 
regulations and between prescriptive and performance-based regulations. 
The two rulemakings were cited as examples of performance-based 
regulatory initiatives. In fact, in several rulemakings that have been 
conducted over the past few years, the Commission has considered and 
taken a risk-informed and/or performance-based approach when making 
rule changes. In the reactor area, requirements associated with 
anticipated transients without scram events (10 CFR 50.62), loss of 
alternating current electric power (10 CFR 50.63), technical 
specifications (10 CFR 50/36), and changes to the required frequency of 
FSAR updates (10 CFR 50.71), appropriately incorporated risk-informed, 
performance-based concepts.
    NRC's existing HLW and LLW disposal regulations, 10 CFR 60 and 10 
CFR 61 respectively, are both risk-informed and performance based. 
Recent revisions to 10 CFR Parts 34, ``Licenses for Industrial 
Radiography and Radiation Safety Requirements for Industrial 
Radiographic Operations,'' and 36, ``Licenses and Radiation Safety 
Requirements for Irradiators,'' were developed using risk information. 
The revision to Part 34 incorporates a number of changes that provide 
greater flexibility to radiographers in a number of performance review 
areas. In addition the Commission, in revising 10 CFR Part 35, 
``Medical Use of Byproduct Material,'' is restructuring it into a risk-
informed, more performance-based regulation. Modifications to Part 39, 
``Licenses and Radiation Safety Requirements for Well Logging,'' using 
risk information are currently ongoing to address newer technology. 
There have been several revisions to 10 CFR Part 20, ``Standards for 
Protection against Radiation,'' which are risk-informed and performance 
based. These include revision to the doses received from individuals 
administered radioactive material and released in accordance with 
35.75, revision of the monitoring criteria for declared pregnant 
workers and minors, and radiological criteria for release of sites for 
restricted or unrestricted use.
    The staff is developing new regulations specific to Yucca Mountain 
for disposal of high level waste in a geologic repository using a risk-
informed, performance-based approach. The staff is revising 10 CFR Part 
70, ``Domestic Licensing of Special Nuclear Material'' to make it move 
risk-informed and less prescriptive based on risk insights gained from 
regulating these types of facilities for several decades.
    The staff is revising 10 CFR Part 72, ``Licensing Requirements for 
the Independent Storage of Spent Nuclear Fuel and High-Level 
Radioactive Waste,'' to use a risk-informed approach regarding the 
seismic criteria for siting independent spent fuel storage 
installations. The staff is also revising 10 CFR 50.59 and 72.48 
concerning the processes controlling licensee changes, tests, and 
experiments to take a more risk-informed approach.
    The NRC worked with the Department of Transportation to provide 
procedures under new regulations that enable the shipment of 
decommissioned reactor steam generators to a disposal facility, without 
undergoing a specific steam generator transportation certification 
process. Moreover, the staff is taking into account risk information in 
its assessment regarding the technical adequacy of shipping the Trojan 
reactor vessel intact with its internals.
    As other regulations are revised or developed, the staff has been 
directed to consider whether a risk-informed and/or performance-based 
approach can be adopted.

    Question 17. With respect to enforcement, you state (page 7) that 
the increase in non-escalated violations stems from a concerted effort 
to improve consistency across the agency. Striving for consistency in a 
process that is inconsistent with industry performance does not appear 
to be a good use of NRC resources. What other remedies are you 
contemplating to fix this problem?

    Response. The NRC has taken several short-term actions to address 
the non-escalated enforcement process and ensure that enforcement 
related activities are based upon safety significance. The proposed 
changes are also expected to reduce the licensee burden in this area. 
The efforts underway (some of which merely involve exercising self-
discipline in carrying out existing NRC policy) include: (1) ensuring 
that the NRC staff gives credit for licensee actions both in 
identifying and correcting violations in deciding whether to cite a 
low-level violation; (2) not requiring a written response when low-
level violations are issued and corrective actions are addressed 
sufficiently in writing elsewhere on the docket (e.g., in a Licensee 
Event Report); (3) providing more consistent treatment when multiple 
violations are identified with a common root cause; and (4) clarifying 
NRC staff guidance for the treatment of violations identified as the 
result of licensee corrective actions. In short, the intent is to 
simplify the disposition of these types of violations. The NRC's Office 
of Enforcement issued enforcement guidance memorandum (EGM 98-006) on 
these issues on July 27, 1998, and subsequently provided training to 
key staff.
    In addition, as part of ongoing efforts, such as the NRC 
enforcement policy revision and request for public comment issued in 
May 1998, the NRC will seek to identify other measures to improve 
consistency and to ensure a safety focus in documenting and 
dispositioning violations.
    The NRC held a public meeting with stakeholders on September 3, 
1998, to solicit input on possible enforcement policy revisions. A 
revision of non-escalated enforcement policy is expected to be 
presented to the Commission in October for their approval. The NRC 
staff is expected to develop additional guidance on regulatory 
significance by late Fall of this year and thresholds for low-level and 
minor violations at the end of this year. The NRC staff plans on 
developing risk-informed examples for inclusion in the supplements of 
the enforcement policy in the Spring of 1999. The NRC staff also 
expects a proposal from NEI for changes in escalated enforcement policy 
and will review that proposal and report to the Commission in the 
Spring of 1999.

    Question 18. On page A-20, you state the number of NRC inspection 
hours per plant has been reduced from 3100 in 1990 to 2500 in 1997. 
This is a decrease of about 20 percent. However, the number of FTEs 
devoted to reactor safety was 1480 in 1990 and 1499 in 1997, an 
increase of 1 percent. Please explain where these reduced inspection 
hours went? Why didn't the total number of FTEs decrease in response to 
reduced inspection activity?

    Response. The Reactor Safety and Safeguards level of effort of 1480 
FTE (fiscal year 1990), referred to in the question, reflects the 
office of Nuclear Reactor Regulation (NRR) and Regional effort in 
support of the Nuclear Reactor Safety Program. The NRC Budget for that 
year was developed organizationally, whereas the fiscal year 1997 
budget was developed programmatically. Therefore, the FTE level of 1499 
in fiscal year 1997 includes not only NRR and Regional support efforts, 
but also 5 additional NRC offices contributing to the Nuclear Reactor 
Safety Program. In fiscal year 1997, the FTE associated with just NRR 
and Regional effort is 1187 FTE, which when compared to 1480 FTE in 
fiscal year 1990 represents approximately a 20 percent reduction and is 
consistent with the reduction in the inspection hours.

    Question 19. On page 7, you should state that the agency intends to 
improve guidance on factoring risk into enforcement decisions. Is it 
true that the current enforcement policy only allows risk insights to 
increase civil penalties, but can't be used to decrease the severity 
level of a violation? If so, how can this ``one-way'' approach be truly 
risk-informed?

    Response. It is not true that the enforcement policy does not allow 
risk insights to decrease the severity level of a violation. The 
enforcement policy states that the first step of the enforcement 
process is to evaluate the relative importance of each violation, 
including both the technical and regulatory significance (e.g., 
repetition, willfulness, pervasiveness). The enforcement policy was 
revised on December 10, 1996, to clarify that technical significance 
includes both actual and potential consequences and that risk is an 
appropriate consideration in evaluating the technical significance of a 
violation. The Statements of Consideration stated:

    In analyzing risk, the NRC recognizes the uncertainties associated 
    with risk assessment. Generally, qualitative rather than 
    quantitative risk assessments are made given the number of 
    variables associated with risk assessment. Risk should be a 
    consideration in proposing enforcement actions, but not necessarily 
    determinatative. In developing higher civil penalties, the 
    Commission intends to consider, where appropriate, assessing 
    separate civil penalties for each violation that is aggregated into 
    a Severity Level II problem.

    The staff issued additional guidance on risk considerations in 
enforcement actions in an enforcement guidance memorandum (EGM 97-011), 
dated June 6, 1997. The guidance states that risk is a relevant 
consideration in enforcement decisions concerning severity levels, 
appropriateness of sanctions, and the exercising of enforcement 
discretion. It also stated that the staff should continue to balance 
risk information against the guidance currently provided in the 
enforcement policy and the enforcement policy supplements. Judgment 
must be exercised in the use of risk significance as a factor in 
decisions regarding the appropriateness of the sanction. While there 
may be cases where, due to increased risk significance, it is 
appropriate to escalate both the severity level and the sanction in 
order to convey the correct regulatory message to the licensee and the 
use of enforcement discretion may be warranted to reach the proper 
enforcement action, it may also be appropriate to reduce levels of 
enforcement due to low risk significance. This guidance document did 
not address this aspect of using risk information and the staff is 
currently revising its enforcement manual to make this clear.
    While a higher severity level and sanction may be warranted for 
violations that have greater risk significance, it may be appropriate 
to consider a lower severity level or enforcement action for issues 
that have low risk significance. As stated before, risk is only one 
component in the consideration of the appropriate severity level. 
Severity level considers actual consequence, potential consequence 
(risk), and regulatory significance. Therefore, a violation with little 
or no actual safety consequence and lower risk significance may still 
pose a significant regulatory concern and warrant a higher severity 
level and/or sanction. In deciding whether a violation should be 
categorized at Severity Level III or IV, risk significance is 
considered. In some cases, the matter may be so minor, it need not be 
cited. Low risk does not excuse noncompliance. If a licensee believes 
an issue is of low risk and not worthy of being a requirement, the 
licensee may seek a change to the requirement. However, compliance is 
required until the requirement is.
    Finally, it is important to recognize that risk insights have an 
opportunity to influence agency action from the point of identification 
in the inspection process through the point of disposition in the 
enforcement process. As more risk-informed and performance-based 
approaches are applied to the agency's regulatory process and 
inspection activities, these approaches will be inherently factored 
into the enforcement process.

    Question 20. We understand that the enforcement policy was removed 
from the regulations and is now a Commission Policy Statement. Given 
that it is no longer burdened with the constraints of your rulemaking 
process, why will it take you 6 months to revise your own policy that 
is within your control to change?

    Response. First, as a point of clarification, from October 7, 1980, 
when the NRC enforcement policy was first published and codified in the 
Code of Federal Regulations (CFR) at 10 CFR Part 2, Appendix C, up 
until June 30, 1995, when it was removed, the Commission maintained 
that the enforcement policy was a policy statement and not a 
regulation. The enforcement policy was included in the Code of Federal 
Regulations to provide widespread dissemination. The enforcement policy 
was removed from the regulations in 1995 (60 FR 34380) after concerns 
were raised that it could inadvertently be considered as a regulation 
instead of a policy statement. The enforcement policy was subsequently 
published as NUREG-1600 to ensure continuing widespread dissemination.
    It is true that as a policy statement, the Commission has more 
flexibility in revising its enforcement procedures than if it were a 
regulation. However, the Commission recognizes the importance of this 
policy statement and judiciously revises it after appropriate analysis 
and consideration. More than ever, the Commission recognizes the need 
to solicit input from its stakeholders to ensure meaningful outputs and 
outcomes from any proposed policy revisions. The agency staff met with 
its stakeholders to discuss its enforcement policy, with an emphasis on 
non-escalated enforcement, on September 3, 1998. The Commission intends 
to move forward as expeditiously as possible in making appropriate 
revisions to its enforcement policy as described in response to 
Question 17 and in providing training to its staff.

    Question 21. On page 11, you note that the proposed fiscal year 
1999 appropriations level will reduce your budget request by at least 
$17.8 million, causing you to curtail inspection and reactor oversight 
programs, curtail safety research and substantially reduce many support 
activities. Given that $17.8 million is only 3.5 percent of your 
requested budget, please explain why this small reduction would have 
such a dramatic impact on these programs. Why can't this small 
reduction be absorbed by eliminating low value programs and activities?

    Response. A reduction of $17.8 million represents a challenging 
reduction for the agency to absorb. The NRC budget has been declining 
over the past several years. As measured in constant fiscal year 1993 
dollars, the NRC budget has been reduced over 20 percent through fiscal 
year 1998, from $540 million to $422 million. The $17.8 million 
reduction is amplified by the need to absorb a higher than budgeted 
Federal pay raise, unbudgeted costs in carrying out personnel 
reductions, and Commission decisions since the budget was submitted to 
add resources in areas such as control of orphan sources, speeding 
licensing reviews, development of a recycle rule, dry cask storage 
reviews, preparation for an AVLIS enrichment plant application, etc. 
The NRC budget has little flexibility, and reductions in funding result 
in program and support activities being deferred. Reductions were 
indeed focused on lower priority activities.
                      answer of commissioner diaz
    In my view the NRC can improve its processes to ensure that no 
reduction in adequate protection of public health and safety results if 
these reductions are effected. Even with the contemplated reduction, 
planned programmatic changes and improved processes can still assure 
adequate protection.

    Question 22. (A) On page A-15, you state that the Commission has 
approved the development of guidelines for applying Safety Goals and 
their subsidiary objectives in plant-specific regulatory activities. 
When will the safety goal policy be applied to the regulations on a 
generic basis?

    Response. The Commission's Safety Goal Policy Statement was issued 
in 1986. As indicated therein, and in the Commission's June 15, 1990 
Staff requirements Memorandum, the original intended use was for 
examination of regulations and other generic matters, and not for 
making plant-specific decisions. The staff presently does apply safety 
goal considerations in the regulatory analyses conducted on all 
proposed reactor rulemakings or generic requirements. This requirement 
is documented in NUREG/BR-0058, Rev. 2, ``Regulatory Analysis 
Guidelines of the U.S. Nuclear Regulatory Commission'' issued in 
November 1995. However, many of the Commission's regulations were in 
place prior to issuance of the Safety Goal Policy and, therefore, were 
not assessed in light of that policy. Accordingly, the NRC is currently 
considering options for reviewing all reactor regulations with respect 
to their safety significance (considering factors such as the Safety 
Goal Policy) and will decide in the near future on a course of action.

    Question 22. (B) Why is this activity limited to just plant-
specific regulatory actions and not the regulations themselves?

    Response. The Commission's Regulatory Analysis Guidelines already 
require consideration of Safety Goals in imposing new generic 
requirements, including changes in regulations. The development of new 
guidelines referenced on page A-15 refers to extending the existing 
policy on a plant-specific basis. As discussed in the response to 
Question 22(A), the Commission is considering options for assessing all 
reactor regulations with respect to their safety significance.

    Question 23. (A) In your oral testimony, you stated that you have 
asked the industry to submit rulemaking petitions to make reactor 
regulations risk-informed. Why, when the NRC is responsible under the 
Atomic Energy Act for promulgating requirements to establish adequate 
protection, do you think this is the industry's responsibility?

    Response. The NRC is responsible for promulgating requirements for 
adequate protection, and the existing requirements are sufficient for 
this purpose. The NRC does not rely on rulemaking petitions to initiate 
rulemaking. However, we operate in an open forum and always encourage 
public, including industry, input to our processes. From the 
perspective of nuclear safety, it is vital that licensees of nuclear 
power plants play a large and integral role in the development of 
safety requirements because licensees have prime responsibility for 
ensuring the safe design, construction and operation of their 
facilities. From the perspective of regulatory policy, it is vital that 
the NRC seek the views of all stakeholders that will be affected by new 
requirements. One consequence of not doing this in an effective way 
with respect to the nuclear industry can include a drawn out rulemaking 
process due to a protracted dialogue over numerous technical and 
process issues or resultant requirements that are overly prescriptive 
and burdensome. Lessons learned from previous rulemaking activities 
indicate that soliciting rulemaking petitions from our stakeholders 
provides an important opportunity to consider and understand stake-
holder priorities and help ensure the efficient use of both industry 
and NRC resources.

    Question 23. (B) What effort is underway within the NRC to identify 
regulations that can be made risk-informed and changed by the agency?

    Response. The agency is currently in the process of revising the 
event reporting requirements for nuclear power reactors contained in 10 
CFR 50.72 and 50.73 (1) to reduce or eliminate the reporting burden 
associated with events of little or no safety significance, and (2) to 
better align the rules with the NRC's current needs, including (a) 
revising reporting requirements based on importance to risk and (b) 
extending the required reporting times consistent with the need for 
prompt NRC action. The NRC has requested public, including industry, 
comments on these rules and any other reporting requirements that can 
be risk-informed or simplified. An advance notice of proposed 
rulemaking was published in the Federal Register on July 23, 1998. A 
public meeting on the subject was held on August 21, 1998. The proposed 
rule is scheduled to be published on April 2, 1999, and the final rule 
is scheduled to be published on January 7, 2000.
    In addition, we have initiated rulemaking to revise rules on source 
terms; maintenance; and changes, tests, and experiments (10 CFR 50.59).
    We also plan to institute an interoffice review which will take a 
fresh look at items including the NRC regulations, and will also 
consider the results from the NEI Whole Plant Pilot initiative and 
recommendations from the Center for Strategic and International Studies 
project to assess the NRC's efforts to improve its reactor regulatory 
process. The staff is preparing an options paper for Commission 
decision on modifying Part 50 to be risk-informed.

    Question 24. (A) On page A-16, you state that each of the pilot 
risk applications (inservice inspection, inservice testing, graded QA 
and technical specifications) have proven successful at specific power 
reactor licensees. As of the date of the hearing, how many plants in 
each area have received approval by the NRC to apply the approach?

    Response. One plant (the South Texas Project, the pilot plant) has 
received approval for their graded QA program, and four plants (San 
Onofre Nuclear Generating Station, the South Texas Project, 
Fitzpatrick, and Fermi 2) have received risk-informed technical 
specifications amendments. In addition, the Commanche Peak inservice 
testing pilot review has been completed since the hearing date. Several 
pilot applications for risk-informed inservice inspection are in an 
advanced state of review and are scheduled for completion by January 
1999.

    Question 24. (B) What is your measure of ``success''?

    Response. The NRC considers the pilot activities to be successful 
when they resolve significant technical and process issues that would 
otherwise be an issue in the review of each subsequent plant specific 
submittals. Pilot reviews provide licensees with ``up front'' guidance 
for planning and preparing proposals to the NRC and allow the NRC an 
opportunity to improve the efficiency of its review procedures. Pilot 
activities are considered to be complete when the NRC takes a formal 
action with respect to the pilot proposal such as issuance of a license 
amendment, promulgation of a new or revised requirement, or acceptance 
of a program or process via completion of an inspection. The ultimate 
success of the pilot activities will be measured by how the industry 
and NRC apply lessons learned to improve the regulatory processes, to 
reduce unnecessary burden and review time for future risk-informed 
submittals, and to proceed more rapidly toward more risk-informed, 
performance-based regulatory approaches.

    Question 24. (C) Does the industry agree that these pilot 
applications were successful?

    Response. Several industry representatives have expressed 
dissatisfaction publicly with aspects of the pilot applications. 
Industry concerns have, in general, been associated with the extended 
duration, the level of detailed information, and the resources 
necessary to support the pilot activities. One licensee, after 
completing a graded quality assurance pilot application, expressed 
concerns that they were unable to realize the expected implementation 
benefits, in part, because of other regulatory requirements. The NRC 
will continue to solicit feedback of the effectiveness of both our 
pilot activities and our transition to more risk-informed and 
performance-based approaches. While we recognize the industry 
dissatisfaction with some of the pilot activities, we continue to 
believe that the ultimate success of the pilot activities will be 
measured by how the industry and NRC apply lessons learned to improve 
the regulatory processes, to reduce unnecessary burden and review time 
for future risk-informed submittals, and to proceed more rapidly toward 
more risk-informed, performance-based regulatory approaches.

    Question 25. (A) Why did the pilot risk applications take 4 to 6 
years to complete when no rulemaking activity was required?

    Response. Although the pilot activities did not culminate in 
promulgation of requirements, they have been linked with the 
development of new NRC procedures and policies, and industry guidance 
documents which required resolution of a number of complex and 
difficult technical issues applicable to all risk-informed licensing 
reviews. The most significant issues include: (1) developing a risk-
informed framework and acceptance guidelines that could be applied in 
plant specific licensing decisions, including the pilot applications; 
(2) defining and articulating the scope and quality of a PRA being used 
to support a licensing proposal; and (3) developing a practical 
approach to address uncertainty in PRAs. The process for resolving 
these issues included the development of candidate resolutions through 
recommendations by the NRC staff, review and consideration of the 
various options by the Commission and its independent advisory groups, 
and review and comment by the public. As regulatory positions were 
being established through this process, licensees were asked to 
supplement their original pilot risk proposals with information to 
address these positions. Although this process has been time consuming, 
and at times inefficient, the NRC staff believes that it was necessary 
to ensure a coherent and predictable process for conducting licensing 
reviews that satisfy all of the objectives of the Commission's policy 
statement on the use of PRA (i.e., to enhance the process for making 
safety decisions, to make more efficient use of agency resources, and 
to remove unnecessary burdens on licensees).
    Clearly, future reviews of risk-informed licensing actions will 
have to be more timely than the pilot applications were. The NRC has 
committed to several actions to expedite the review process by 
increasing the priority for risk-informed licensing action reviews. 
Allocation of staff resources will be based on potential safety 
benefits of the action, and on potential savings of staff and licensee 
resources. In addition, a lead project manager (PM) for the 
coordination of risk-informed, performance-based licensing actions has 
been identified. This lead PM will identify, monitor, and coordinate 
risk-informed licensing actions; keep track of the review schedules; 
help identify problems that may require management attention; and 
coordinate followup actions (if any). Also, the management oversight 
steering committee on PRA has been reestablished to provide policy, 
technical, and priority guidance on risk-informed regulation; the 
committee consists of the NRC Office Directors from the Office of 
Nuclear Reactor Regulation, the Office of Nuclear Regulatory Research, 
the Office of Analysis and Evaluation of Operational Data, and the 
Office of Nuclear Material Safety and Safeguards. Finally, a risk-
informed licensing panel is assisting in focusing management attention, 
as necessary, on risk-informed licensing actions.

    Question 25. (B) What incentives are there for the industry to 
propose risk-informed changes to the regulations themselves given this 
track record?

    Response. NRC discussions with the industry indicate that the 
industry sees risk-informed initiatives as a viable approach to 
reducing costs and regulatory burdens while maintaining or even 
improving safety. The Commission's PRA Policy Statement, staff 
training, and activities to develop guidance on using risk-informed 
approaches have all served to make the increased use of risk 
information in the regulatory process a reality. In addition, the 
management oversight steering committee on PRA will help ensure a more 
disciplined, timely process by providing policy, technical, and 
priority guidance on risk-informed regulation. The NRC is now in a 
position to work efficiently and effectively with the industry to 
approve risk-informed applications which enhance or maintain safety 
while reducing unnecessary regulatory burden.

    Question 26. On page A-18, you state that the NRC has revised 
guidance for reactor inspection activities to incorporate risk insights 
and to be more performance-based. When were these improvements 
promulgated? What results have you seen?

    Response. Inspection Manual Chapter 2515 ``Light Water Reactor 
Inspection Program Operations Phase'' Appendix C ``Use of Insights 
Derived from Probabilistic Risk Assessment (PRA)'' was revised and 
reissued in September 1997 as improved implementation guidance for 
inspectors. More than 2 years prior, when it was first determined that 
new inspector guidance was needed, it was also determined that this 
guidance alone would not be sufficient to effect a significant change 
in the way the inspection program was conducted. Therefore, the 
approach taken was four-pronged: 1) revise the inspection manual 
guidance, 2) expand the application-oriented PRA training designed 
specifically for the inspector (2 weeks in length), 3) train and 
qualify ten experienced inspectors (Senior Reactor Analysts) in 
advanced PRA techniques and locate two SRAs in each regional office and 
two at headquarters, and 4) require a 3-day PRA training course 
directed toward all NRC technical managers and supervisors. To date, 1) 
inspection guidance has been issued, 2) inspector training commenced in 
January 1998, and with one class scheduled each quarter we are on track 
to have at least one resident inspector so trained at each reactor site 
by the end of fiscal year 1998, 3) all SRA positions have been filled 
and only two SRAs remain in training, and 4) training for two-thirds of 
the managers and supervisors is expected to be complete by the end of 
fiscal year 1998 with the remainder complete by the end of fiscal year 
1999 Insufficient time has passed to directly measure results from 
these efforts in the day-to-day conduct of the inspection program. Our 
expectation is that as more people are trained, the published 
implementation guidance will be more effectively implemented. 
Furthermore, we are currently planning to restructure the inspection 
program on a more risk-informed basis in 1999 to more quickly achieve a 
risk-informed focus of our inspections.
    However, results to date have been achieved predominantly through 
the activities of the SRAs. These individuals are actively involved in 
regional assessments of the significance of operating events and 
proposed enforcement actions, in providing plant-specific risk insights 
during the various integrated performance review processes, in 
providing advice and expertise to assist other regional inspectors with 
inspection planning and, when necessary, leading inspection teams.

    Question 27. On page A-19, you state that core inspections are 
performed at all sites, independent of licensee safety performance. 
What considerations have you given to reducing core inspections for 
plants with good performance by relying more on self-assessments and 
audits performed by these licensees?

    Response. The core inspection program is the minimum inspection 
effort that is performed at a site to confirm licensee performance and 
identify potential problems in the early stages. When an event or issue 
requires additional inspection to the core inspection program, regional 
initiative inspection is performed in those functional areas where 
licensee performance has been rated as not meeting Systematic 
Assessment of Licensee Performance (SALP) of 1 (the highest rating for 
a good performing licensee). Regional management may recognize a 
licensee's good performance and self-assessment capability by reducing 
the scope of NRC inspection effort for regional initiatives. Since the 
core program is the minimum inspection effort performed by NRC at good 
performing licensees, reduction of inspection effort for licensee self-
assessment for the core is not currently allowed. Recently, the NRC 
formed a task force to redefine the core inspection program, with the 
goal of making it more effective, efficient, and risk-informed. This 
effort is being conducted together with a similar effort regarding the 
NRC's plant performance assessment process. Both of these efforts will 
define what plant performance indicators are important from a risk 
perspective and where such performance data can be obtained. 
Performance indicators and/or licensee self-assessment data will be 
used in determining the level of NRC inspection activity.

    Question 28. (A) On page A-20, you state that there was an ``across 
the industry'' decline in attention to maintaining the facility design 
basis. If this is so, why did you stop your A/E inspections?

    Response. In 1997 and 1998 the NRC performed A/E inspections at 20 
facilities. These facilities were selected for inspection based upon 
several factors including the age of the facility, probabilistic 
insights, problem plant status, performance in the engineering area, 
and the licensee response to the agency's 50.54(f) letter on adequacy 
and availability of design bases information. This letter had been sent 
in October 1996 to all plants after design basis issues had arisen at 
Millstone, Maine Yankee, Haddem Neck and Crystal River. Selections were 
also made to assess engineering at plants where Regions had concerns 
regarding engineering performance. Based on the selection process, 20 
facilities were selected where NRC had potential concerns about design 
basis issues. From these 20 inspections, the NRC gained a general 
understanding of the extent and safety significance of design basis 
issues across the industry. This was documented for the initial 16 
inspections in Information Notice 98-22, ``Deficiencies Identified 
During NRC Design Inspections.'' The inspections were stopped because 
the program had fulfilled its objectives of (1) ensuring the safety of 
those facilities where design basis issues were of potential concern 
and (2) providing the NRC generic information from which decisions 
could be made on the need for future regulatory action in this area and 
because the body of the results from the A/E inspections did not 
establish an across-the-industry decline in attention to, or 
maintenance of, the facility design basis. The NRC does recognize that 
the lack of completeness and availability of design basis information 
is not necessarily equivalent to design safety issues.
    While the resource-intensive A/E inspections were terminated, the 
NRC plans to continue inspections of design basis issues as resources 
permit at other plants identified by NRC reviews of licensee responses 
to the October 1996 50.54(f) letter. While the 20 A/E inspections 
addressed the highest priority plants, the remaining design basis 
inspections will utilize a less intrusive inspection procedure, IP 
93809, ``Safety System Engineering Inspection,'' which was developed in 
response to the design bases concerns. Since the mid 1980's, the NRC 
has conducted various types of safety system design basis inspections 
such as Safety System Functional Inspections, Electrical Distribution 
System Functional Inspections, and Service Water System Operational 
Performance Inspections. These inspections have focused on the adequacy 
of safety system designs and conformance of the facility with the 
design basis. The A/E inspections were not a new concept but 
represented a short time increase in focus of the design area.
                chairman jackson's additional statement
    I support the staff view that there had been a general decline in 
attention to facility design and licensing bases. As a result of the A/
E inspections and licensees' responses to the 10 CFR 50.54(f) letter, 
licensees appeared to have appropriately focused attention on 
maintaining facility design bases. Therefore, the A/E inspections 
accomplished their objectives, and were replaced by a less intrusive 
inspection: ``Safety System Engineering Inspection.''

    Question 28. (B) What was the safety significance of this lack of 
attention at a typical facility? If the safety significance of design 
basis deficiencies was low, what does this tell you about the safety 
focus of your requirements?

    Response. Of the initial 12 A/E inspections, one plant (D.C. Cook) 
elected to shut down two operating units because of concerns identified 
during the inspection. Four other plants (TMI, Perry, H. B. Robinson, 
and Vermont Yankee) were issued Notices of Violation at a Severity 
Level lilt These significant violations were issued because of the lack 
of assurance that safety systems were able to perform their intended 
functions under certain conditions. For more recent A/E inspections, 
there have been some inspection findings that appear to represent 
similar inadequacies relative to the ability of systems to perform 
their intended safety functions. These findings are currently being 
evaluated in accordance with the enforcement process. For some recent 
inspections licensees have self-identified equally significant problems 
on their own prior to the inspection. These A/E inspections showed that 
the industry, with the noted exceptions, did not have serious safety 
problems as a result of design-basis issues. While the inspections did 
identify the need for additional definition, documentation and 
compliance, adequate protection of public health and safety was not 
compromised. Given these findings, the NRC staff believes the safety 
focus of our requirements was appropriate.
                chairman jackson's additional statement
    While it is true that the majority of A/E team inspections did not 
identify significant safety problems at the facilities inspected, the 
significance of the errors identified at D.C. Cook, Three Mile Island, 
H.B. Robinson, Perry, and Vermont Yankee indicate the importance of 
maintaining design basis information, and the configuration of a given 
facility, up-to-date and accurate. Further, the results of the A/E team 
inspections relate only to the specific population of facilities 
inspected, not the industry as a whole. Significant design basis issues 
have been identified, both by NRC and licensees, outside of the A/E 
team inspection process. Examples include design and licensing basis 
issues at Crystal River 3, Millstone, Haddam Neck, and Maine Yankee.

    Question 29. In response to an oral question regarding the Tim 
Martin Associates study, you indicated that comparisons between NRC 
staffing levels per reactor to levels for other countries could not be 
made because other countries use manpower from external sources to 
augment their program. Your fiscal year 1999 budget estimate shows that 
40 percent of your budget is for contractor support.
    (B) Do you plan to conduct any studies of foreign regulatory 
programs to determine how consistent your ratios are with theirs? If 
not, why not?

    Response. The unavailability of, and disparities in, data 
concerning key elements of foreign regulatory processes make it 
extremely challenging to develop reliable information which would yield 
practical insights for assessing whether NRC's regulatory approach 
requires disproportionate resources compared to foreign countries. 
However, we are in the process of trying to develop a comparison and 
will provide it to the Committee.

    Question 29a. In response to an oral question regarding the Tim 
Martin Associates study, you indicated that comparisons between NRC 
staffing levels per reactor to levels for other countries could not be 
made because other countries use manpower from external sources to 
augment their program. Your fiscal year 1999 budget estimate shows that 
40 percent of your budget is for contractor support. How many 
contractor FTEs are included in this amount?

    Response. The NRC uses contractor support in areas where it is 
economically beneficial. This includes using contractors to provide 
expertise where it does not exist within the NRC and would not be cost 
beneficial to hire staff with the expertise. These services procured 
through contracts include areas such as administrative support, 
information technology systems support, and technical and scientific 
analysis. It is estimated that in fiscal year 1999, the NRC budget 
would support approximately 850-900 contractor employees. This reflects 
the number of people performing work supported by NRC's contractor 
support funding. This figure should be viewed as an estimate of the 
level of effort involved with NRC activities at any one time, although 
there is considerable movement within the mix of activities and 
individuals. Civil servant staffing levels are estimated across the 
government as full-time equivalents (FTE) based on a standard 
calculation of available hours to be worked. It cannot be assumed that 
an agency's FTE level represents the number of people on the payroll at 
any time.

    Question 30. What steps does the Commission intend to take to 
ensure that licensing proceedings, like the license transfer proceeding 
associated with the sale of TMI Unit 1, remain focused only on issues 
directly pertinent to the subject of the proceeding (e.g., in the case 
of the TMI Unit 1 sale, the technical and financial qualifications of 
the prospective owner/operator)?

    Response. The Commission has been engaged in an ongoing process to 
streamline licensing proceedings including those associated with 
license transfers. In connection with license transfers, the 
Commission's regulations require consideration of the technical and 
financial qualifications of the proposed transferee to the extent 
appropriate to the authority being sought in the transfer application; 
a review of antitrust matters may also be needed. Among the more 
important matters, the staff reviews the financial qualifications and 
decommissioning funding assurance provisions made by the proposed 
transferee. In this regard, a Standard Review Plan (SRP) on Power 
Reactor Licensee Financial Qualifications and Decommissioning Funding 
Assurance reviews, now before the Commission, provides a plan of action 
for how the NRC staff will evaluate, among other areas, license 
transfer requests under 10 CFR 50.80, with focus on the issues of (1) 
transferee's financial qualifications and (2) methods by which the 
transferee will provide decommissioning funding assurance acceptable to 
the NRC. By adhering to the SRP, the staff's review should remain 
focused on issues directly pertinent to the evaluation of the technical 
and financial qualifications of the prospective owner/operator.
    The NRC has received and processed about 45 license transfer 
requests over the past 5 years. Depending on the accuracy and 
completeness of the transferee's application, the NRC staff has 
typically completed its review of the financial qualifications and 
decommissioning funding assurance aspects of the proposed transfer 
within 2 months of receipt of the application. With environmental 
assessment notices and preparation and execution of orders approving 
the transfer, the total approval process typically takes about 3 
months. However, atypical applications may take longer, particularly if 
unusual issues of antitrust or foreign ownership, domination, or 
control are involved. There is also the possibility that a hearing 
request filed by an intervener could extend the overall process, 
although the Commission, in 15392, determined a hearing need not be 
held prior to action on the transfer application itself once the staff 
has otherwise completed its review of the application.
    The SRP also generally addresses reviews required under the Atomic 
Energy Act of 1954, as amended (AEA), to determine whether proposed 
transferees are owned, dominated, or controlled by foreign entities. 
However, because foreign ownership issues are case-specific and because 
there remain difficult policy and legal issues that are contingent on 
the specifics of each transfer application, the NRC intends to evaluate 
this issue as specific transfer requests are submitted. The staff is 
also preparing an SRP to address foreign ownership issues.
    In addition, the NRC issued a final SRP on Antitrust Reviews in 
December 1997, which contains a detailed description of the review 
process of the antitrust concerns that the NRC is required to evaluate 
under Section 105 of the AEA. In the NRC's license transfer reviews, 
antitrust considerations have not been a significant issue. 
Nevertheless, because of the requirements in the AEA for coordination 
with the Department of Justice, the potential remains for an 
uncontested ``significant change'' antitrust review to take 9 months or 
more. An antitrust review contested by interveners may well take 
longer. In the specific case of the TMI Unit 1 sale, the facility has a 
license issued under Section 104b of the AEA, and is grandfathered from 
antitrust reviews.
    The NRC staff is also developing a plan of action and milestone 
schedule for those future transfer requests that involve previously 
unevaluated technical qualifications issues or which involve transfers 
to non-owner operators.
    Finally, on September 11, 1998, the Commission published in the 
Federal Register for a 30-day comment period a proposed rule that would 
establish new, informal procedures for license transfer hearings that, 
if promulgated as a final rule, could, in general, substantially reduce 
the time for such hearings. The Commission has also expressed its 
support for legislation which would remove the Commission's role in 
antitrust reviews (part of the President's electric utility 
restructuring legislation) and for legislation which would repeal the 
foreign ownership and control provisions of sections 103b and 104b of 
the Atomic Energy Act for utilization facilities.

    Question 31. The Federal Energy Regulatory Commission recently 
completed a four month study to evaluate ways to streamline the 
agency's activities to more effectively address the needs of the 
industries it regulates. FERC announced that it will implement 
improvements identified in the study including (1) bench marking FERC 
activities; (2) promoting competitive markets through a pre-filing 
process to reduce agency processing time; (3) implementing 
collaborative pre-filing procedures to achieve earlier resolution of 
issues and more timely decisions; and (4) establishing a structure for 
gathering and considering proposals for policy changes. On their face, 
these are innovative approaches some of which could be adopted by the 
NRC.
    (A) What actions will the NRC take to develop way to reduce 
processing staff time, to engage in more collaborative activity with 
the industry, and to implement more efficient methods to accomplish the 
agency's regulatory mission?

    Response. During a licensing workshop with the industry on July 20 
and 21, 1998, the NRC staff discussed the possibility for using 
collaborative pre-filing procedures to achieve earlier resolution of 
issues and more timely decisions. The NRC staff has committed to work 
further with the industry to evaluate means of implementing a number of 
concepts discussed at the workshop to improve process efficiency. In 
developing a collaborative pre-filing process, the NRC staff remains 
sensitive to the need to ensure a process that is open and accessible 
to the public.
    In addition, the Commission encourages the industry to work 
together to develop collaborative solutions to issues that affect large 
groups of facilities. Such collaboration has been accomplished through 
the Nuclear Energy Institute, the Electric Power Research Institute, 
vendor owners' groups and other ad hoc organizations. Such 
collaborative efforts on the part of industry have proven effective in 
resolving significant issues while reducing resource allocations for 
both the industry and the NRC staff.
    The NRC has been interacting with its stakeholders through its 
public meeting process, and has increased the frequency of its public 
meetings with its stakeholders, including the industry. The NRC has 
asked the Nuclear Energy Institute to provide proposed rulemakings in 
areas believed by industry to be in need of regulatory reform and has 
committed to give a high priority to these areas One example area where 
there is priority attention given industry concerns is the acceleration 
of the implementation of risk-informed and performance-based 
regulation. Another is licensing and rulemaking of dual-purpose 
cannisters for spent fuel.
    The NRC is using its Strategic Assessment and Rebaselining process 
as a basis for its self-assessment processes and for the implementation 
of more efficient methods for accomplishing the agency's regulatory 
mission. Reorganizations are being implemented which will streamline 
the operation of the offices and realign and consolidate office 
functions. The Operating Plans for each office are being used to 
benchmark performance, and these are updated on a quarterly basis.
    To reduce processing staff time, NMSS is using or developing 
standard review plans (SRPs). Management is strengthening its oversight 
of staffs implementation of these plans to ensure that issues are 
pertinent and are not overly conservative. In addition to documenting 
application deficiencies, NMSS is now meeting with applicants to ensure 
that both parties have a clear understanding of what NMSS seeks. NMSS' 
immediate goal is to have no more than two rounds of questions on an 
application; NMSS' long term goal is to make guidance and SRPs 
sufficiently clear that application submittals will be acceptable 
without additional questions.
    NMSS is already engaged in collaborative activity with industry and 
with the Department of Energy. For example, NMSS has involved industry 
representatives and NEI in the development of the new medical rule, 10 
CFR Part 35, and in the revision to the fuel cycle facilities rule, 10 
CFR Part 70. In the waste management area, NMSS meets extensively with 
licensees, other Federal agencies, and the public. More specifically, 
NMSS has worked extensively with DOE for more than a decade to ensure 
that both agencies have a common understanding of the requirements and 
information being developed for licensing a high-level waste 
repository.
    NMSS is actively implementing more efficient methods to accomplish 
the agency's regulatory mission through activities such as continued 
expansion of the electronic process for material license application 
submittal, review, and evaluation; and consolidation and updating of 
guidance documents. As mentioned above, NMSS is increasing the use of 
meetings with licensees and applicants to supplement written 
communications. Experience is showing that these meetings significantly 
increase the efficiency of NMSS interactions with the licensee 
community.
    The Commission has moved to streamline the adjudicatory process, 
while still ensuring that a fair hearing is conducted and a clear and 
complete record is created. The Commission has commenced a study of the 
entire hearing process and expects to receive staff recommendations by 
the end of this year on specific changes that would make NRC 
proceedings more efficient and timely. The Commission expects that this 
study will specifically address the question of need for legislation to 
streamline the hearing process as well as the viability of rulemaking, 
without legislation, to streamline that process.
    In the interim, the Commission has developed and issued a 
``Statement of Policy on Conduct of Adjudicatory Proceedings'' which 
provides guidance to the licensing boards and parties to Commission 
proceedings on how the Commission expects its proceedings to be 
conducted. The Policy Statement encourages licensing boards to 
establish and adhere to case-specific schedules, to shorten filing and 
response times where practical, to manage discovery to avoid 
unnecessary delays in that stage of the adjudicatory process, to make 
sure that the parties comply with the Commission's regulations 
governing the submission of admissible contentions, and to issue 
decisions in a timely manner. The Statement further makes it clear that 
the Commission itself will carefully and actively monitor ongoing 
licensing proceedings to ensure that they are conducted expeditiously 
and that the boards, staff and other parties receive prompt guidance on 
emerging technical, policy and legal issues, as necessary.
    Consistent with the desire for expeditious processing of licensing 
actions, the Commission on August 19, 1998, issued an order giving 
guidance and recommending a schedule to the Licensing board that will 
preside over the licensing renewal proceeding for the Calvert Cliffs 
Nuclear Power Plant and a similar order on September 15, 1998 for the 
Oconee license renewal proceeding.
    The Commission has also published for comment a proposed rule that 
would establish new, informal procedures for license transfer hearings 
that, if promulgated as a final rule, could, in general, substantially 
reduce the time for such hearings.
    Finally, the Commission has directed the staff to seek legislation 
that supports the NRC's reading of section 189a of the Atomic Energy 
Act to reflect the reading that formal adjudications are not required. 
Further, with the anticipated application from USEC for the AVLIS 
uranium enrichment process expected early next year, the NRC will 
consider seeking legislation that would modify section 193's inflexible 
approach to hearings.

    Question 31. (B) Does the Commission have any plans to implement a 
bench marking process? If so, please provide the schedule for 
implementation.

    Response. The NRC has contracted with Arthur Andersen and Company 
to (1) conduct an assessment of the Office of Nuclear Reactor 
Regulation programs and activities to ensure that they are derived in 
response to strategic goals and that they achieve their intended 
purpose in an effective and efficient manner, and (2) evaluate the 
NRC's current practices for developing and executing its planning, 
operating plan, budgeting, program assessment and performance measures 
and monitoring practices and processes. As part of the assessment, 
Arthur Andersen and Company will evaluate how NRC performs these 
activities in recognition of best practices in both the public and 
private sectors. The NRC also plans to initiate, in fiscal year 1999, 
an evaluation of its support activities using an experienced contractor 
(e.g., Arthur Anderson and Company). This task will also include a 
comparison of NRC's support activities to the best practices in both 
the public and private sectors. Additionally, the NRC consulted with 
the Federal Aviation Administration and the Department of 
Transportation to gain information on other Federal agency program 
effectiveness.

    Question 32. Many past reviews point out consistent problems with 
the NRC's regulations and administration of the regulatory system. 
These reviews include the Kemeny Report (1979), the Rogovin Report 
(1980), the Regulatory Impact Surveys (1981; 1989), the National 
Academy of Science report (1992), the Regulatory Review Task Force 
Briefing (1994), and the Towers Perrin Report (1994). Most recently, 
members of the industry and public expressed their ongoing concerns at 
the July 17, 1998 stakeholders meeting sponsored by the Commission. 
Criticism of the NRC common to the reviews include: the NRC's highly 
prescriptive regulation/lack of performance-based regulation; the 
failure to focus NRC resources on higher priority safety-related 
issues; the pervasive subjectivity in NRC regulatory decisions and 
processes; the failure to exercise adequate management control and 
oversight of NRC staff; the significant overlap and duplication of 
roles and responsibilities within the NRC; and the intrusiveness of NRC 
regulatory processes that add little to the safely margin of nuclear 
plants. We are concerned that these problems were identified almost two 
decades ago and still have not been effectively addressed.
    (A) What action will the Commission take to ensure that these long 
standing problems will be permanently corrected?
    (B) Please describe each action or activity designed to address the 
problems identified above and their expected date of completion.

    Response. Since the early 1990's, the NRC has initiated programs 
and processes that have, as a principal goal, reviewed our current 
regulatory requirements to determine whether they can be modified or 
eliminated to improve safety, reduce unnecessary licensee burden, or 
improve staff efficiency. Included among these efforts were the 
National Performance Review for all areas, the Regulatory Review Group 
for reactor-related areas and the Business Process Reengineering 
process for materials-related areas. These efforts and others would 
show that NRC has attempted to address a number of industry concerns. 
However, we did not progress to the extent we had hoped in improving 
our regulatory processes and programs. Currently, we are trying to 
learn from the mistakes in the past and establish processes that are 
scrutable and adequately balance safety and concerns about unnecessary 
regulatory burden.
    While not all of the issues or problems in each of the reports in 
the question have been resolved, much work has been done. Many of the 
actions described in responses to these and other Congressional 
questions are actions that were initiated prior to the July 30, 1998 
Authorization hearing. However, these same responses show that change 
is needed and that much effort remains.
    The Chairman, on behalf of the Commission, has issued an August 7, 
1998 memorandum to the Executive Director for Operations raising 
concerns about several issues: the predictability, objectivity, and 
timeliness of NRC decisions; the focus of NRC activities; the quality 
of NRC licensee interactions; the implementation of NRC programs; and 
the size of the NRC staff. The Executive Director for Operations in an 
August 25, 1998 memorandum replied to the concerns and described a 
number of issues that need to be resolved with corresponding milestones 
and dates for when the actions are to be completed. This ``plan'' for 
improving regulatory processes and programs is considered to be a 
living document and will be updated on a periodic basis. We recognize 
we need to improve, and we are aggressively seeking solutions to these 
and other concerns and will continue to look for ways to improve NRC's 
performance.

    Question 33. For the past 3 years, the Chairman has provided the 
other Commissioners Staff papers and other information only after the 
Chairman reviewed the papers and/or information and changes requested 
by the Chairman have been made. This appears to be contrary to 
Congress's deliberate decision in the Energy Reorganization Act to 
create a Commission rather than a single administrator to establish the 
NRC policies.
    (A) How does this approach advance the Commission's ability to 
manage the NRC in a timely and efficient manner?
    (B) What action will be taken to ensure that each Commissioner is 
fully informed about agency policy matters without first being filtered 
through the Chairman's office?
                       answer of chairman jackson
    It is true that the Energy Reorganization Act of 1974 created the 
Nuclear Regulatory Commission (NRC) and the commission format to 
establish NRC Policies. As Chairman I have worked to fully comply with 
the statutes underlying the NRC. In order to do so I believe it is 
important to recognize that Reorganization Plan No. 1, passed by 
Congress in 1980 (1980 Plan) made changes to the organizational 
structure established by the Act of 1974.
    The 1980 plan states under section 2 (b) of the Plan, ``[t]he 
Chairman . . . shall be responsible to the Commission for developing 
``policy planning and guidance for consideration by the Commission.'' 
(Emphasis added.) The House Report 96-1043 leading up to the Plan at 
page 4 states: ``without a central authority to focus agency 
objectives, Commissioners have been able to follow individual interests 
without the appropriate coordination required in the development of 
policy.'' The Senate Report 96-790 leading up to the Plan at page 13 
notes that ``[t]he amendments [to the Plan] will free him [the 
Chairman] to be the chief architect of NRC policy and the focal point 
for development of consensus on the demanding and highly complex issues 
considered by the Commission.'' Thus, the review of draft papers 
allowed the Chairman to carry out the function of developing policy 
guidance before it was presented to the Commission for consideration, 
as the central authority to focus agency objectives and as the chief 
architect of policy, as Congress intended. The intent of this approach 
was to ensure that all policy options were considered and assessed for 
the Commission. The review by the Chairman did, in some cases, result 
in the addition of policy options. However, there were no reviews which 
resulted in changes which eliminated options presented by the staff. 
The approach in no way precluded the Commission from having ``equal 
responsibility and authority'' in the decision the Commission made on 
the paper, nor was it intended to stifle the flow of information to the 
Commissioners. In fact the process was intended to enhance the 
Commission policy review and consideration. See Energy Reorganization 
Act of 1974, section 201 (a)(1).
    The Commission has recently reexamined the approach for policy 
development and determined that modifications were needed. Effective 
June 30, 1998, the Commission approved revised internal Commission 
procedures that are being implemented which state:
    ``The Chairman and the Executive Director for Operations, through 
the Chairman, are responsible for ensuring that the Commission is fully 
and currently informed about matters within its functions (Id., Section 
2(c)) [of the Reorganization Plan No. 1 of 1980]. The Chairman shall 
ensure prompt and full delivery of original information with any 
changes thereto, including draft SECYs and COMs, except preliminary 
information for development of Section 2(b) [of the Reorganization Plan 
No. 1 of 1980] proposals and estimates [i.e., proposals for 
reorganization of the major offices within the Commission, the budget 
estimate for the Commission, and the proposed distribution of 
appropriated funds according to major programs and purposes] unless 
expressly requested by the Commission. The Executive Director for 
Operations reports for all matters to the Chairman (Id.; Section 4(b)) 
[of the Plan].'' (Emphasis added.) NRC Internal Commission Procedures 
at p. 1-5.
    To clarify the papers (i.e., SECYs and COMs) mentioned in the above 
reference, the primary decision-making tool of the collegial Commission 
is the written issue paper submitted by the staff and is best known as 
a SECY paper. The Commission also receives memoranda from the staff, 
and at times a staff memorandum may contain a recommendation or seek 
guidance from the Commission. This type of memorandum is known as a 
COM. See NRC Internal Commission Procedures at p. II-1.
                      answer of commissioner diaz
    This question appears to call principally for a response from the 
Chairman. Chairman Jackson is providing her individual response on her 
intent and past practice regarding the transmission of NRC staff papers 
and/or information to the other Commissioners after her review and the 
execution of her requested changes. Thus, I am not in a position to 
comment fully or endorse the Chairman's response. I provide this 
separate response as an individual Commissioner. As the question 
indicates, the flow of information to the full Commission is closely 
related to the Congressional decision to establish a collegial 
decision-making body rather than a single administrator. In creating a 
multi-member body, with staggered terms and diverse party affiliation, 
Congress has provided the necessary checks and balances for decision-
making. The collegial decision-making structure promotes full and fair 
consideration of complex nuclear tissues and thus addresses sensitive 
public concern regarding the use of nuclear energy. The free flow of 
information to the Commission has long been understood to be critical 
to the Commission's deliberative function. The principle of full access 
to information for each Commissioner has been a part of nuclear 
regulation since 1955. The Energy Reorganization Act of 1974 continued 
to provide that each member of the Commission ``shall have full access 
to information relating to the performance of his duties or 
responsibilities'' and Reorganization Plan No. 1 of 1980 charges that 
``[t]he Chairman, and the Executive Director for Operations, through 
the Chairman, shall be responsible for insuring that the Commission is 
fully and currently informed about matters within its functions.'' 
These statutory directives provide important underpinnings for an 
effective Commission. Unless the Commissioners are fully and currently 
informed, they cannot properly exercise their responsibility for policy 
formulation (including management policy), most rulemaking, and 
oversight of the agency. The full Commission's access to the staff's 
independent and sometimes diverse views allows for better-informed 
Commission decisions. It also enhances the ability of each Commissioner 
to articulate and consider differing positions and makes more 
transparent to the Commission the Chairman's actions in the performance 
of her functions. Therefore, I have requested and supported actions 
that would assure the sharing of the staff's papers and analyses with 
the full Commission when such information is made available to the 
Chairman. By its revisions to the Internal Commission Procedures, the 
Commission took steps to return to the status quo ante so as to ensure 
that each Commissioner is fully and currently informed and fully able 
to discharge his or her duties. As a consequence of adherence to these 
procedures, the public will have the benefit of assurances of adequate 
protection resulting from the diversity of judgment that is expected of 
this collegial body. The revised Internal Commission Procedures 
actually enhance the Chairman's ability to discharge the Chairman's 
responsibility ``to the Commission for developing policy planning and 
guidance for consideration by the Commission'' in accordance with 
section 2(b) of Reorganization Plan No. 1 of 1980. The legislative 
history of Reorganization Plan No. 1 of 1980 quite plainly expresses 
the Congressional intent that the Chairman's coordinating role does not 
justify delay in transmitting information forwarded by the staff as 
information relating to the Commission's functions. See, ma., S. Rep. 
96-790, 96? Cong., 2d Sess. at 7-9, 18, 1920 (1980). While the Chairman 
and the NRC staff need not share administrative details on a daily 
basis or preliminary development of budgetary and reorganization 
proposals for the Commission's consideration unless specifically 
requested by the Commission, transparency in the broader development of 
non-routine matters of policy assists the Chairman and the staff in 
keeping the Commission fully and currently informed and helps avoid 
oscillations in policy setting and regulation. Therefore, as Congress 
intended, the agency and each Commissioner best discharge their 
responsibility to the country when all Commissioners have early and 
complete knowledge of key policy issues and proposals.
                   answer of commissioner mcgaffigan
    I was concerned with the Chairman's prior review of staff papers 
before they were submitted to the Commission. For that reason I 
supported the revision to Commission procedures which was finalized on 
June 30, 1998. Under the new procedures staff papers will be submitted 
to the Chairman and all Commissioners simultaneously. This process 
appears to be working well in its first 3 months and has enhanced 
dialogue on policy matters between the staff and the Commission as a 
whole.
    Under the revised Commission procedures, each Commissioner should 
be informed about agency policy matters directly by the staff without 
filtering through the Chairman's office. However, the Reorganization 
Plan of 1980 gives the Chairman primacy in certain matters, for 
example, presentation of proposed budgets for the Commission, 
presentation of proposals for reorganization of major offices, serving 
as official spokesperson for the Commission, etc. In these areas, the 
Chairman by statute serves as a filter to the Commission. The goal of 
the collegial Commission process is to ensure, even in these cases, 
that the Commission is fully and currently informed. In the case of 
budget preparation, for example, the Chairman in my 2 years on the 
Commission has taken by all reports unprecedented steps to make 
transparent both her proposal and various scenarios that are options to 
modify her proposal. I have been very satisfied with the Chairman's 
efforts to ensure Commissioners are fully informed in budget matters 
and her willingness to make further incremental improvements in the 
budget preparation process.

    Question 34. We understand that at the stakeholders meeting held on 
July 18, 1998, that you alluded to a mechanism for remedying the 
situation where licensees pay for agency services that do not benefit 
licensees. These services amount to $56.2 million and include:
  International cooperative safety programs and international 
    safeguards activities
  Agreement state oversight
  Site decommissioning management plan activities not 
    recoverable under 10 CFR 170
  Fee exemption for nonprofit educational institutions
  Licensing and inspection activities associated with other 
    Federal agencies
  Cost not recovered from Part 171 for small entities
  Regulatory support for agreement states
  Decommissioning/reclamation
    (A) What is the actual fee reduction you will propose?

    Response. The Commission has determined that reducing the 
percentage amount the NRC must recover through fees accomplishes the 
goal of reducing the financial burden on NRC licensees attributable to 
fairness and equity issues while allowing the NRC to budget for 
activities which support necessary government functions or national 
policy requirements. We have notified the Office of Management and 
Budget that if Congress does not enact such legislation in fiscal year 
1999, the Commission intends to develop, as part of our fiscal year 
2000 budget request, a legislative proposal to revise the Omnibus 
Budget Reconciliation Act of 1990 (OBRA-90) to reduce the percentage 
amount of budget authority that the NRC is required to collect in fees. 
Based on previous work, the collection requirement could be revised to 
remove 10 percent of the agency's budget authority from the fee-based 
category, in addition to amounts appropriated from the Nuclear Waste 
Fund and for regulatory reviews and other assistance provided to DOE.

    Question 34. (B) What changes will be made in the NRC's budget to 
accommodate the fee reduction? If the basis is a percentage reduction, 
how does this percentage relate to actual expenses for these 
activities?

    Response. If legislation is enacted to exclude additional costs 
from fee recovery, the NRC's budget request will continue to include 
the resources necessary to accomplish our mission, including those 
activities excluded from fee recovery. Fee collections would 
approximate the amount appropriated, less the excluded amounts. For 
example, if NRC's (non-high-level waste, non-DOE) budget is $450 
million and $45 million is excluded from fee recovery, fee collections 
would be approximately $405 million.
    It is expected that 10 percent of the total budget would be close 
to the budgeted amounts for these activities. The NRC's intent is to 
provide a simple yet accurate process for estimating the amount we 
expect to expend in these areas. The amount is not the same each year 
and is dependent upon such factors as the number of licensees, the 
number of Agreement States, and the number of licensees that meet the 
agency criteria for a small entity.

    Question 34. (C) Does the proposed fee reduction include all of the 
activities described above as currently comprising the 56.2 million.? 
Will overhead costs associated with these activities also be 
eliminated?

    Response. Yes, all the previously mentioned activities comprise the 
existing fairness and equity concern categories. As a point of 
clarification, the categories of budgeted costs that raise fairness and 
equity concerns include all international activities (except import/
export licensing activities), not just those described above, and only 
generic decommissioning and reclamation activities (specific licensing 
and inspection activities related to decommissioning and reclamation 
are charged to the specific licensee receiving the service). We expect 
that a 10 percent reduction would include funding required for these 
activities and would provide stability.
    Where appropriate, the estimated amounts include a portion of 
associated overhead and agency general and administrative costs, and 
therefore would be excluded from fee recovery.

    Question 34. (D) Where will the funds come from to pay for these 
services if they are excluded from user fees?

    Response. Amounts off the fee base are not be collected by the NRC 
to offset the agency's budget. The excluded costs would be included in 
the net amount appropriated to the agency from the general fund. 
Legislation could also be enacted to revise the IOAA to allow NRC to 
change other Federal agencies for services rendered (i.e., Part 170 
fees).

    Question 34. (E) How will your proposal ensure that licensees will 
not pay for these activities in the future?

    Response. The NRC's fees are established by regulation to meet, but 
not exceed, the legislatively required fee recovery amount. It is the 
agency's intent that any fee-reduction proposal it submits be used to 
modify the OBRA-90, or similar legislation enacted by Congress, and 
therefore remain in effect as long as that legislation is in effect.

    Question 35. (A) Please explain why action to address NRC's fee 
inequities has been delayed for more than 5 years.
    What is the Commission doing to rectify the NRC's fee inequities?
    (B) Please identify each action NRC has taken to address any 
concerns raised by Office of Management and Budget regarding the NRC 
fee structure.

    Response. Absent legislative relief, the Commission has limited 
ability to remedy any inequities in its fee structure because it is 
required to collect approximately 100 percent of its budget in fees. 
The NRC has taken several actions within existing fee laws to address 
concerns regarding its fee structure:

  Identified fairness and equity concern categories in the 
    February 1994 Report to Congress on NRC Fee Policy, indicating that 
    legislation was necessary to address these concerns. The 
    recommended legislation was not enacted.
  In fiscal year 1995, acted under existing fee laws to help to 
    mitigate the fairness and equity concerns by treating costs for 
    these activities similar to overhead and distributing the costs to 
    the broadest base of NRC licensees.
  Established a policy to obtain reimbursement for services 
    provided to other Federal agencies when such reimbursements are 
    authorized by law.
  Obtained appropriation legislation which removed from the fee 
    base certain costs incurred as a result of regulatory reviews and 
    other assistance provided to the Department of Energy and other 
    Federal agencies.
  Initiated a study in 1997 which led to changes in NRC's 
    fiscal year 1998 fee rule to shift cost recovery for certain 
    activities from annual fees to specific fees for services. For 
    example, effective with the fiscal year 1998 final fee rule, the 
    NRC is assessing fees to the major licensees to recover the full 
    cost of resident inspectors. In addition, costs incurred within 30 
    days after the issuance of an inspection report are being billed to 
    the specific licensee.
  As part of the Strategic Realignment and Baselining 
    initiative (DSI 21) in late 1996, updated the information presented 
    in the 1994 Report to Congress on NRC Fee Policy, and posed the 
    policy issued again to the Commission. Based on that update and 
    subsequent information, the Commission notified OMB in June, 1998, 
    that the NRC intends to propose, as part of its fiscal year 2000 
    budget submission, legislation which would reduce the portion of 
    our budget authority that the NRC is required to collect in fees, 
    if Congress does not enact such legislation in fiscal year 1999. In 
    the past, the OMB has advised that such legislation, which would 
    address fairness and equity concerns, would be inconsistent with 
    the President's budget.
  Continuing ongoing studies that may impact the fiscal year 
    1999 fee rule.

    Question 36. The NRC has stated that a portion of its 3 percent 
increase in its budget is attributable to an $8.9 million increase in 
contractor support. Excluding the $2.5 million related to high-level 
waste activities, please provide a detailed description of how the 
remaining $6.4 million for contractor support is allocated.

    Response. The net increase of $6.4 million is primarily 
attributable to the following arenas:

 
----------------------------------------------------------------------------------------------------------------
                      ARENA                                            COMMENTS                           $M
----------------------------------------------------------------------------------------------------------------
 
Nuclear Materials Safety........................  Increased requirements to support United States            2.2
                                                   Enrichment Corp.'s Atomic Vapor Isotope
                                                   Separation (AVLIS) facility licensing review;.
                                                  Initiate program to register Licensees' devices
                                                   and continue development of the Licensing and
                                                   Inspection Online System;.
                                                  Develop, revise and improve procedures in the
                                                   Agreement States program Fund effort for
                                                   developing trend analysis of material licensee
                                                   safety performance;.
                                                  Evaluate nuclear materials event experience on a
                                                   risk performance basis;.
                                                  Expand support for investigation of harrassment
                                                   and intimidation cases.
Nuclear Waste Safety............................  Support review of increase in number of spent              0.8
                                                   fuel storage and transportation licenses.
Common Defense and Security and International     Additional costs to support the Nuclear Materials          0.5
 Development.                                      Management Safeguards Systems.
Protecting the Environment......................  Increased support for decommissioning activities           1.7
                                                   due to additional plants entering
                                                   decommissioning status;.
                                                  Increased requirements for decommissioning
                                                   research and regulation development related to
                                                   transportation process.
Management and Support..........................  Increased rent for Headquarters and regional               3.5
                                                   offices, and increased building and maintenance
                                                   operations;.
                                                  Increased Information Technology requirements for
                                                   user technical support, maintenance and
                                                   operation of agency information systems;.
                                                  Continued development of agency-wide integrated
                                                   resource management system.
Reactor Safety..................................  Reduced contractor support for power reactor              -2.4
                                                   inspection activities;.
                                                  Reduced support for reactor performance
                                                   assessment and data analysis activities;.
                                                  Reduced research in thermal hydraulics related to
                                                   power reactors;.
                                                  Reduced contractor support for analysis of
                                                   operational experience data based on
                                                   strengthening agency civil service resources.
Inspector General...............................  Additional support requirements..................          0.1
                                                                                                    ------------
                                                  TOTAL                                                      6.4
----------------------------------------------------------------------------------------------------------------


    Question 37. Other agencies that use a fee-based system allocate a 
much higher percentage of their fees to specific services. Yet the NRC 
fee schedule collects approximately 80 percent of the total fees for 
generic activities. Approximately only 20 percent of NRC fees are 
allocated for discrete services. In response to a question by 
Congressman Schaefer, the NRC has said that reasons for the low 
percentage of its fees being allocated to specific services include (1) 
NRC inability to recover costs for providing specific services to most 
Federal agencies and for infrastructural services rendered to Agreement 
States; (2) exemption of nonprofit educational institutions from fees; 
and (3) a reduction in fees for small businesses. These activities only 
account for $56.2 million of the 80 percent generic fees collected.
    (A) What agency activities are supported by the remaining $304 
million in generic fees?

    Response. As required by OBRA-90, the agency first recovers fees 
for services under the IOAA, and the remainder of the budget authority 
is to be recovered through annual fees. In addition to the costs for 
generic activities (such as direct program costs for rulemaking, 
research, and maintenance of an incident response center), the annual 
fees also include costs of activities that are not recovered from IOAA 
fees assessed to applicants and licensees (such as contested hearings, 
responses to allegations, and investigations). The agency has 
previously requested public comment on assessing IOAA fees for these 
activities, but the comments received did not support changing the 
current policy. The Commission is taking steps to shift the balance 
away from annual fees to fees for specific services. Several changes to 
the Commission's fee policy were made in the fiscal year 1998 fee rule 
that result in additional activities being subject to specific 
licensing and inspections fees, such as full cost recovery for resident 
inspectors and costs expended for inspection activities that occur 
within 30 days after an inspection report is issued. The agency is 
currently undertaking a comprehensive review of other activities for 
potential cost recovery as fees for services to be included in the 
fiscal year 1999 proposed fee rule for public comment.

    Question 37. (B) What steps are you taking to significantly 
increase the percentage of fees allocated to discrete services so that 
the benefits derived from NRC activities are more visible to the 
regulated community?

    Response. The Commission is taking steps to shift the balance away 
from annual fees. Several changes to the Commission's fees were made in 
the fiscal year 1998 fee rule that result in additional activities 
being subject to specific licensing and inspections fees, such as full 
cost recovery for resident inspectors and costs expended for inspection 
activities that occur within 30 days after an inspection report is 
issued. We are currently undertaking a comprehensive review of other 
activities for potential cost recovery as fees for services to be 
included in the fiscal year 1999 proposed fee rule for public comment.

    Question 38. $97 million of the NRC's fiscal year 1999 budget is 
designated for contractor fees for Management and Support. In response 
to a question by Congressman Schaefer on the management and support 
services that must be contracted for, the NRC identified as examples 
services for elevator maintenance and software upgrades. Excluding 
elevator maintenance and software upgrades, what accounts for the $97 
million in contractor fees?

    Response. The remaining $95 million for Management and Support 
primarily represents the agency's investment in information technology, 
information management, human resources, administrative services, and 
financial management. The funding for these activities are as follows:

 
------------------------------------------------------------------------
                                                           $ Million
------------------------------------------------------------------------
Rental payments on Headquarters and regional offices/               25.5
 facilities operations and support...................
Telecommunications support, including local and long                 8.2
 distance telephone services, Internet service
 providers, and other operator services..............
Support and maintenance of financial systems,                        7.9
 including financial audit services, maintenance of
 financial systems for fee collection, payroll and
 other services......................................
Workstation upgrades, computer operations, and                       7.0
 timesharing.........................................
Permanent Change of station..........................                5.9
Local and Wide Area Network maintenance..............                5.5
Records management (Preservation, disposition,                       4.8
 storage, collections, access) and library operations
Development and implementation of Agency-wide                        4.6
 Document Management System..........................
Duplicating, printing and graphics...................                3.3
Guard services and security support..................                3.3
Contract support services that provide specialized                   3.0
 adjudicatory support, transcript services, and other
 administrative services.............................
Training and Development.............................                2.5
System development and integration...................                1.8
General supplies, equipment and transportation.......                1.8
Computer systems operations and support activities...                1.7
Year 2000 corrections................................                1.1
Policy, planning and acquisition support activities..                1.0
Personnel and Administrative IT operations and                       1.0
 maintenance.........................................
HR IT systems operations and maintenance.............                1.0
Workman Compensation.................................                0.7
Other Human Resources activities (recruitment and                    0.7
 personnel record management)........................
Inspector General investigations, audits, evaluation                 0.7
 and assessment, and information technology
 activities..........................................
Health and Employee services.........................                0.6
                                                      ------------------
    TOTAL............................................               95.0
------------------------------------------------------------------------


    Question 39. Much of the work performed by NRC Office of Research 
appears to be duplicative of research performed by industry and 
government national laboratories.
    (A) How does the NRC determine the value of the research performed 
by the Office of Research?

    Response. NRC does not duplicate industry research. The answer to 
part (c) of this question discusses this. The NRC determines the value 
of research performed by the Office of Research in terms of its 
contributions to the quality and timeliness of regulatory decisions 
made by the NRC. Eighty percent of our research directly supports 
regulatory decisions made by NRC's licensing offices. The other 20 
percent is anticipatory. It is focused on the potential safety 
implications of new technology and emerging safety issues to improve 
NRC effectiveness and to position NRC to respond to agency initiatives.
    A key contribution of the Office of Research lies in the 
identification of risk significant vulnerabilities early and the 
development of the technical basis for resolution of such issues before 
they become a threat to public health and safety. The identification of 
the significance of pressurized thermal shock events for nuclear 
reactors and the development of the technical basis for regulatory 
requirements to mitigate undesirable consequences illustrates the value 
of the NRC's research. Its value is also measured in terms of the long 
term strategic perspective that it brings to the identification and 
resolution of safety issues independent from the operational focus of 
the licensing offices. For example, without the ground breaking work 
done by the Office of Research in the field of probabilistic risk 
assessment, the technical basis would not exist for moving to a risk-
informed regulatory approach. Another important contribution lies in 
the elimination of the need for excessive conservatism in licensing 
decisions which results from gaps in regulatory knowledge. For example, 
the Piping Integrity Research Program provided the technical basis and 
promulgated an amendment to 10 CFR Part 50 Appendix A, General Design 
Criteria eliminating the requirement to consider dynamic effects of 
double ended pipe failure for qualifying piping systems. This led to 
the elimination of massive pipe whip restraints in nuclear power 
plants. Similarly, the research program provided the technical basis 
for the Emergency Core Cooling System (ECCS) rule which allows 
licensees to increase power rate and reduce regulatory burden. Research 
also provides the basis for risk-informed and performance based 
requirements which can allow licensees more flexibility in achieving 
compliance with NRC regulations and encourage use of cost-effective 
alternatives. For example, licensees may now utilize risk-informed 
methodologies that extend testing and inspection intervals as a result 
of NRC research. The Office of Research also adds value by keeping pace 
with new technology such that the regulatory process does not impede 
the incorporation of such new technology in nuclear plants. In this 
regard, the Office of Research's High Burn-Up Fuel Program is directed 
at developing a technical basis for reviewing industry's proposal to 
use advanced fuel designs in a timely fashion and increase burn-up 
limits resulting in economic benefits.
    As a result of an increasingly competitive environment, the nuclear 
power industry is now focusing on increased performance by utilizing 
new technology and taking advantage of margins inherent in current 
designs and operating conditions. In effect, the design basis envelopes 
of the U.S. nuclear power plants will change as requests to modify 
operating licenses (e.g., technical specifications, power upgrades) and 
improve operational performance (e.g., longer operating cycles, new 
fuel designs) continue to be sought. However, these initiatives to 
improve performance involve complex designs operating in a demanding 
environment of high radiation, temperature and stress, combined with 
uncertainties in physical phenomena which occur during transients and 
accidents. The NRC believes there is a great value in having a vigorous 
independent research program that will allow the agency to make sound 
regulatory decisions relative to these initiatives.
    Listed below are additional examples of where NRC's research 
program has added value by enhancing safety by reducing risk at a 
justified cost, reducing burden on 34 licensees, and by providing a 
technical basis for credible and timely regulatory decisions. Estimates 
on the order of magnitude of the outcomes, in risk reduction or cost 
savings, are several hundreds of millions of dollars for the nuclear 
industry.

  The PRA research program led to the development of regulatory 
    guides that lay out the process, principles and guidance for 
    licensees to make risk-informed changes to their licensing basis-
    in-service testing (RG 1.175), graded Quality Assurance (RG 1.176), 
    and technical specifications (RG 1.177). A regulatory guide on 
    risk-informed inservice inspection is nearing completion.
  The Pressure Vessel Safety research program provided the 
    technical basis for a regulation (10 CFR 50.66) and regulatory 
    guide (1.162) accepting thermal annealing of the reactor pressure 
    vessel as a viable method to mitigate the effects of neutron 
    irradiation.
  The Piping Integrity research program provided the technical 
    basis for staff's acceptance of weld overlay repairs off BWR piping 
    as a permanent repair, avoiding costs to replace recirculation 
    piping; resolved concerns over reductions in fracture toughness of 
    cast stainless steel; and provided realistic predictive models for 
    use in evaluating these materials in lieu of very conservative 
    methods put forward by a reactor vendor.
  The Mechanical Engineering research program provided 
    experimental results that identified the potential for certain 
    safety-related motor-operated valves to fail under design basis 
    loadings. This led the staff to issue Generic Letter 89-10 and to 
    require licensee programs to evaluate their motor operated valves 
    to assure their operability under the design basis conditions.
  The Severe Accident research program provided the resolution 
    of the hydrogen combustion issue for all large dry containments 
    resulting in averting the installation of hydrogen igniters on 
    these containments; developed the technical basis for backfitting 
    the requirement for hardened vents in BWR Mark I containments; 
    resolved concern for direct containment heating for large dry 
    containments; and updated the source term (NUREG-1465) which will 
    allow operational improvements and cost savings.
  The Decommissioning research program developed the technical 
    bases for a regulatory guide, and accompanying NUREGs, to support a 
    rule that established radiological criteria for license 
    termination, and based on results of NRC's research program, 
    assisted licensees in conducting radiological surveys and dose 
    assessments. It is expected that these tools will enable many of 
    NRC's licensees to move through the decommissioning process at 
    substantial cost savings from the past with case-by-case 
    decommissioning.

    Question 39. Much of the work performed by NRC Office of Research 
appears to be duplicative of research performed by industry and 
government national laboratories.
    (B) What efficiency improvements has the NRC considered applying to 
the Office of Research?

    Response. NRC is pursuing a number of measures to become more 
efficient in conducting research. Among them are:

  Seeking every opportunity to obtain needed resource 
    information through cooperative research programs with industry, 
    the Department of Energy and with foreign countries. Through these 
    cooperative programs NRC has, in the past, and will continue in the 
    future, to highly leverage its funds, and thereby obtain valuable 
    research results at a fraction of what the cost would be if NRC 
    pursued the work unilaterally. Reducing the number of contracts 
    being administered by the Research staff through consolidation of 
    smaller contracts into larger ones targeted at centers of 
    excellence.
  Performing more analytical work using the NRC research staff, 
    in lieu of contracting for these services, when it is cost 
    effective to do so.
  Reducing the Generic Safety issue resolution staff in 
    research by utilizing staff resources in the Office of Analysis and 
    Evaluation of Operational Data to help prioritize and analyze 
    issues.
  Applying PC based computer technology to both our technical 
    and administrative work to achieve both staff and dollar savings.
  Consolidating several computer codes for the analysis of 
    thermal hydraulic transients into a single, easy to use code which 
    will, in the future, reduce maintenance costs by $1.7M per year and 
    will consume less staff time to run the codes.
  Using internet-based collaborative computing technology and 
    video-conferencing to reduce travel costs.
    It should be noted that the NRC research program has been reduced 
substantially over the years to recognize (a) changes in the industry, 
(b) the fact that there are no new reactor license applications, (c) 
the minimal demand for advanced reactors, 35 and (d) that licensees and 
vendors perform their own analyses as part of their submittals. 
Seventeen years ago, the research budget was over $200M and 5 years ago 
it was over $100M. Today that same budget is under $50M, reflecting a 
purchasing power of less that one-tenth of what it was 17 years ago.

    Question 39. Much of the work performed by NRC Office of Research 
appears to be duplicative of research performed by industry and 
government national laboratories.
    (C) What consideration has the NRC given to assigning the NRC 
Office of Research to conduct peer reviews of research performed by the 
industry so as not to duplicate industry research?

    Response. NRC does not duplicate industry research. In each of our 
areas of research we maintain an awareness of related research being 
planned and conducted by the industry, both domestically and 
internationally through personal contacts at the staff level and 
through more formal joint workshops. NRC's research is either of an 
independent confirmatory nature or is anticipatory research looking at 
potential or emerging issues to better understand their safety 
implications. Sometimes, because the NRC and industry are conducting 
research in similar areas, it may appear to be duplicative when it is 
not. A good example of this situation is the work NRC and industry are 
doing with respect to steam generator tube degradation and rupture.
    Relative to steam generators, as appropriate for a regulator, the 
NRC's research program is addressing (1) independent verification of 
the capabilities of non-destructive examination techniques currently in 
use, (2) and the development and validation of models used to predict 
the failure of degraded steam generator tubes, and (3) the likelihood 
of that failure resulting in a stable leak versus a full rupture of the 
tube. To fulfill their primary responsibility for safety, industry 
efforts are more directed to developing new inspection techniques and 
to developing methods for mitigating the degradation. However, there 
are common interests in many of these areas. Consequently, the NRC, the 
Electric Power Research Institute, and some foreign organizations are 
forming a collaborative research effort to share information, and 
cofund activities to avoid duplication and minimize costs.
    NRC has a Memorandum of Understanding with EPRI and our staffs meet 
periodically to coordinate our respective research efforts. We also 
meet periodically with the Department of Energy for the same purpose. 
These meetings help assure that we cooperate when possible and avoid 
duplication of effort. In addition we have approximately 35 active 
Cooperative Bilateral Research Agreements, as well as another 45 
Cooperative Research Agreements that are being extended or considered 
with organizations in more than 25 countries.

    Question 40. The Office of Research's responsibility for rulemaking 
activities has been transferred to the Office of Nuclear Reactor 
Regulation.
    (A) Prior to this transfer, what percentage of the Office of 
Research budget!was allocated to rulemaking activities?

    Response. Prior to the rulemaking transfer, the fiscal year 1998 
budget for the Office of Nuclear Regulatory Research had 13.1 percent 
of its FTE and 4.2 percent of its contract support/travel funds 
allocated to the rulemaking function.

    Question 40. The Office of Research's responsibility for rulemaking 
activities has been transferred to the Office of Nuclear Reactor 
Regulation
    (B) What changes have been made in the Office of Research budget to 
reflect the reduction in responsibility?

    Response. Twenty-six FTE and contracts with a value of 
approximately $2.0M were transferred from the fiscal year 1998 research 
budget to the budgets of the Office of Nuclear Materials Safety and 
Safeguards, the Office of Nuclear Reactor Regulation and the Office of 
Administration. These transfers moved all of the resources for research 
rulemaking activities into these three offices.

    Question 41. The Office of Research expends funds to evaluate 
phenomenological sequences associated with severe accidents for which 
there is virtually no empirical data. This lack of data results in high 
uncertainty in the results, potentially leading to more and more 
research.
    Given the low likelihood that a definitive determination about 
phenomenological sequences can be made, what is the benefit of 
continuing to expend resources in this area of research?

    Response. Severe accident research has been conducted is to obtain 
data on phenomena associated with low probability events and for which 
little if any data exists from operating experience. Although an 
extensive severe accident research program was conducted in the past, 
most of the research programs have now been completed. Most of these 
efforts were ended when it was determined that there was a sufficient 
understanding of the severe accident phenomena to support needed 
regulatory decisions. As part of this determination, programs have not 
been continued when it was determined that there was a low likelihood 
that further research would provide additional benefit in resolving 
severe accident issues or when bounding assumptions could be used to 
account for the continued uncertainty in understanding the phenomena. 
As progress has been made in understanding severe accident phenomena, 
the NRC severe accident research program has brought a number of issues 
to closure and therefore, has been substantially reduced over the past 
several years. Program results have been used to develop analytical 
tools to predict the course and consequences from such low probability 
accidents. The current program focuses primarily on maintaining and 
consolidating the existing analytical tools which preserve the 
knowledge and understanding resulting from previous severe accident 
research. At this time only a small portion of our current severe 
accident research budget is for experimental work and this is directed 
at improving our analytical tools where such improvements will support 
the resolution of remaining severe accident safety issues.

    Question 42. (A) In response to a question by Congressman Schaefer, 
the NRC indicated that it will commit 25 FTEs to review each license 
renewal application. Yet, a response to another question indicated that 
a portion of the NRC's budgeted $8.9 million in contractor fees will go 
to contractor support to review reactor license renewal applications. 
Given the relatively narrow scope of the license renewal application, 
25 FTEs would seem to be sufficient to review each license renewal 
application on a relatively abbreviated schedule.
    Please provide the job task analysis upon which the decision to 
allocate 25 FTEs to each license renewal application was based?

    Response. A formal job task analysis is not the appropriate tool to 
estimate the resources necessary to support the review process for a 
license renewal application. The NRC's process for controlling the 
review of a license renewal application is contained in NRR Office 
Letter No. 805, ``License Renewal Application Review Process.'' This 
office letter describes the process steps for the review of an 
application, the responsibilities of staff organizations involved in 
the review, and provides a method for identifying and implementing 
lessons learned from the review of the first applications. Based on the 
experience gained from the review of the first applications, the 
Commission expects that the review process for subsequent renewal 
applications will be more efficient. Our current estimate is that it 
will take approximately 22 direct FTE to review each license renewal 
application.
    The NRC has established plant-specific schedules to ensure that 
reviews of license renewal applications are completed within 30-36 
months of receipt of the application, including any hearings. The 
milestones in the schedules are as follows:

 
------------------------------------------------------------------------
                         Milestone                               Week
------------------------------------------------------------------------
Receive renewal application................................            0
Notice application tendered................................            2
Complete acceptance and docketing..........................            4
Public meeting and environmental impact statement (EIS)               12
 scoping...................................................
Staff complete technical requests for information (RAIs)...           20
Staff complete environmental RAIs..........................           24
Applicant complete technical RAI responses.................           30
Applicant complete response to environmental RAIs..........           32
Issue draft environmental statement (DES) for comment......           44
Staff complete safety evaluation report (SER) and identify            46
 open items................................................
Public meeting to discuss DES..............................           48
Complete DES comments......................................           54
Applicant complete response to open items..................           62
Staff issue supplemental SER & final environmental                    78
 statement (FES)...........................................
ACRS Recommendation to Commission on Application...........           90
Commission decision on application.........................          120
Issue new license..........................................      120-146
------------------------------------------------------------------------

    The milestone schedules and the detailed process described in 
Office Letter No. 805 were used to determine the resources needed to 
complete the review of a renewal application. The model developed 
describes the tasks and corresponding milestones and evaluates the 
functions and expertise necessary to complete the review. Resources are 
currently being allocated to meet the milestone schedules.

    Question 42. (B) What contractor services are anticipated to be 
needed for license renewal reviews that cannot be performed by the 25 
FTEs?

    Response. Contractor services are used to provide specialized 
technical expertise not available on the staff. For the review of 
license renewal applications, contractor services are used primarily 
for the resolution of generic issues and for performing environmental 
assessments. Only a small portion of the $8.9 million increase in NRC's 
contract assistance funding is allocated to the review of license 
renewal applications (approximately $11OK per application per year).

    Question 42. (C) Given that there are to be 25 FTEs and contractor 
support assigned to each license renewal application, why will it take 
the staff 18 months to issue the Safety Evaluation Report?

    Response. Upon receipt of a license renewal application, the NRC 
(1) reviews the technical information contained in the application for 
compliance with the applicable regulations, (2) assesses potential 
environmental impacts in accordance with the requirements of the 
National Environmental Policy Act, (3) performs verification 
inspections of selected site-specific programs and activities credited 
for license renewal, and (4) participates in adjudicatory hearing 
activities, if a hearing is requested. Experience has shown that 
initially submitted applications do not always contain all the 
information necessary for the NRC to make the findings required for 
issuance of a license, requiring additional time for the NRC to request 
additional information from the applicant, the applicant to prepare and 
submit the information, and the staff to review the submitted 
information. The schedule also reflects the necessary public 
participation in the environmental review which occurs during the same 
period. The NRC's schedule integrates these activities, conducting them 
in parallel to the maximum extent possible to ensure an expeditious 
review.

    Question 43. (A). Despite many revisions to the NRC's enforcement 
program since its inception in 1980, the industry and the Union of 
Concerned Scientists continue to criticize the NRC for its failure to 
correct the many problems that have been identified. These problems 
include failing to properly focus NRC and licensee resources on issues 
most important to safe plant operation; aggregating violations to 
support a higher violation level or civil penalty; extrapolating 
programmatic deficiencies from a given event or violation; and basing 
enforcement decisions on subjective, undefined terms such as 
``regulatory concern'' and ``regulatory significance.'' We understand 
that both the industry and the Union of Concerned Scientists recently 
have suggested that the NRC make significant revisions to eliminate 
these deficiencies.
    What steps will the NRC take to ensure that each enforcement action 
is directly related to safety significance of the noncompliance?
    Response. Noncompliances vary in their degree of safety, 
safeguards, or environmental significance; for that reason, the 
enforcement policy provides a graduated system of sanctions, varied 
according to the technical significance (i.e., actual and potential 
consequences) and the regulatory significance. This graduated system 
appears both in the range of severity levels assigned to different 
violations, and in the availability of different enforcement actions 
(e.g., Non-Cited Violations (NCVs), Notices of Violation (NOVs), civil 
penalties, and orders). Maintaining a safety focus was addressed in the 
1995 enforcement program reassessment (NUREG-1525) and the recent 1998 
enforcement program review (NUREG-1622).
    Modifications have been made to the enforcement policy to assist 
the staff and industry in maintaining a safety focus. For example, 
Section IV of the enforcement policy provides that minor violations not 
be the subject of formal enforcement action and not normally be 
documented in inspection reports. When sufficient information regarding 
a licensee's corrective actions exists on the docket, the NRC may waive 
a licensee's response to an NOV. Civil penalties are no longer proposed 
for repetitive Severity Level IV violations, unless the repetitive 
violation is such that it warrants classifying the matter as a Severity 
Level III violation. The enforcement policy continues to provide that 
Licensee-identified and corrected Severity Level IV violations be 
dispositioned as NCVs, provided they meet the remaining criteria for 
discretion in the policy.
    In a Staff Requirements Memorandum (SRM) dated August 25, 1997, the 
Commission outlined a general approach to safety and compliance. The 
discussion stated:
    As commonly understood, safety means freedom from exposure to 
danger, or protection from harm. In a practical sense, an activity is 
deemed to be safe if the perceived risks are judged to be acceptable. 
The Atomic Energy Act of 1954, as amended, establishes ``adequate 
protection'' as the standard of safety on which NRC regulation is 
based. In the context of NRC regulation, safety means avoiding undue 
risk or, stated another way, providing reasonable assurance of adequate 
protection for the public in connection with the use of source, 
byproduct and special nuclear materials.
    While there is agreement on the need to maintain a safety focus, 
disagreements may occur as to the safety significance of any particular 
violation. In the view of the NRC, a violation need not always result 
in an actual impact to the public or to an employee (e.g., a release of 
radioactive material to the public or an employee overexposure to 
radiation) before it is considered significant. In resolving differing 
views on safety significance, considerations should include all aspects 
of safety significance as applied to enforcement, including the actual 
safety consequence, the potential safety consequence, and the 
regulatory significance. Violations may be indicative of performance 
that could have consequence or potential consequences if not corrected, 
and therefore have regulatory significance. These include willful 
violations, false statements, programmatic issues, repetitive 
violations, and cases where it is fortuitous that a more significant 
violation did not occur with actual consequences.
    As noted in the Commission-approved discussion on safety and 
compliance in a August 1997 SRM on the subject:
    Safety is the fundamental regulatory objective, and compliance with 
NRC requirements plays a fundamental role in giving the NRC confidence 
that safety is being maintained. NRC requirements, including technical 
specifications, other license conditions, orders, and regulations, have 
been designed to ensure adequate protection--which corresponds to ``no 
undue risk to public health and safety''--through acceptable design, 
construction, operation, maintenance, modification, and quality 
assurance measures. In the context of risk-informed regulation, 
compliance plays a very important role in ensuring that key assumptions 
used in underlying risk and engineering analyses remain valid.
    Given the misperception that safety significance is always 
synonymous with actual consequence, additional enforcement guidance was 
provided directing that correspondence transmitting escalated 
enforcement actions indicate whether the issue was safety significant 
because of the actual or potential consequence or because of the 
regulatory significance (e.g., repetitive, willful, programmatic, 
etc.), or because of a combination of these issues. In addition, the 
NRC is currently working on clarifying the term regulatory significance 
and evaluating whether it should be included as a component of safety 
significance.

    Question 43. (B) What actions will the NRC take to ensure that 
enforcement action is based on specific, objective and, as feasible, 
risk-informed criteria?

    Response. Future efforts to improve the enforcement program 
include: (1) further meetings with stakeholders to obtain additional 
perspectives on enforcement and to consider the need for changes to the 
enforcement program, with the short-term focus on non-escalated 
enforcement, as described in response to Question 17 and longer term 
focus on escalated enforcement, including consideration of a forth 
coming NEI proposal, (2) developing additional guidance on thresholds 
for low-level and minor violations, (3) developing additional guidance 
to consider risk in enforcement decisions and the use of regulatory 
significance for significant enforcement actions, (4) conducting 
additional training describing the guidance for these changes and 
initiatives for staff involved in inspection and enforcement 
activities, (5) auditing the consistency of issuance of low-level 
violations, and (6) developing closer coordination between inspection 
and enforcement activities.

    Question 43. (C) What actions will the NRC take to eliminate 
enforcement actions based on subjective judgments?

    Response. As stated before, the NRC will continue to develop 
additional guidance to consider risk in enforcement decisions and the 
use of regulatory significance for significant enforcement actions. 
Additional training describing the guidance for these changes will be 
conducted for the staff. While there is a commitment to minimize 
subjectivity and increase objectivity and predictability, the 
enforcement process by its nature and the breadth of NRC licensed 
activities requires the exercise of judgment and discretion. Thus, all 
subjectivity cannot realistically be eliminated.

    Question 43. (D) What action will the NRC take to incorporate into 
its enforcement program progressive enforcement approaches used by 
other Federal agencies with public health and safety responsibilities?

    Response. The NRC reviewed other enforcement programs and policies 
as part of its 1995 program assessment. Most recently, the NRC met with 
Federal Aviation Administration (FAA) senior representatives on July 
27, 1998, to discuss its enforcement programs and approaches suggested 
by industry. Like the NRC's enforcement program, many of the FAA 
programs also consider issues of identification, corrective action, and 
whether violations were committed willfully. While there are 
similarities in the approaches, differences in the regulated programs 
may not make some of the approaches appropriate for the NRC. Although 
industry suggested that the NRC consider enforcement approaches 
employed by the Occupational Safety and Health Administration (OSHA), 
the NRC has not looked into the OSHA program because of the significant 
differences in the NRC and OSHA regulatory approach. Specifically, OSHA 
does not have licensees and OSHA does not generally perform routine, 
periodic inspections of entities that are subject to their regulations. 
We have also discussed enforcement approaches with the Environmental 
Protection Agency (EPA) and the Department of Transportation. NRC will 
continue to evaluate other enforcement approaches as part of broader 
potential changes being considered.

    Question 44. In light of the significant strides the industry has 
made in achieving sustained safe plant performance over the past 
several decades, we are concerned about the NRC's enforcement 
statistics for 1997. For example, both NRC and industry indicators 
confirm a continuing trend of safe performance and improving 
reliability. Yet the NRC issued 50 percent more violations to the 
industry between 1996 and 1997; and the NRC issued 92 percent more 
violations since 1990. Of significant concern is that most of these 
violations (1427 of 150--?) were for noncompliances determined by the 
NRC to be of low safety significance. Since 1995, the NRC has also 
issued 66 percent more non-cited violations and deviations, i.e., 
enforcement action for matters that, by definition, are predominantly 
administrative. The NRC's enforcement approach seems to require 
licensees to apply considerable resources to processing low safety 
significant enforcement actions, thereby diverting NRC and licensee 
attention from potentially more safety significant issues.
    (A) What actions will the NRC take to ensure that its enforcement 
process recognizes sustained good performance by the industry?

    Response. The NRC's enforcement program currently recognizes good 
performance by the industry in both its escalated and non-escalated 
programs. If a licensee displays good performance by identifying and 
correcting non-repetitive low-level violations, the NRC dispositions 
the issues as Non-Cited Violations (NCVs): an administrative tool to 
document and track the issue that does not require a licensee response. 
In the escalated program, if a licensee has not had escalated 
enforcement action within a 2-year or 2-inspection period (whichever is 
longer), the decision or whether or not a civil penalty will be 
proposed is based solely on whether the licensee's corrective actions 
were prompt and comprehensive. In addition, notwithstanding the normal 
enforcement process, the enforcement policy provides the necessary 
flexibility to recognize good overall sustained performance by reducing 
or refraining from issuance of a civil penalty to a Notice of Violation 
through the exercise of enforcement discretion (i.e., Section VII.B.3, 
``Violations Involving Old Design Issues,'' and Section VII.B.6, 
``Violations Involving Special Circumstances'').
    Enforcement is an integral part of the NRC and NRC stakeholder 
effort to develop a licensee performance assessment process that makes 
increased use of objective performance indicators. As this process is 
developed and implemented, the enforcement program will be modified to 
incorporate the new methodologies and ensure that both NRC and licensee 
resources are directed to the more safety significant issues.

    Question 44. (B) What action will the NRC take to ensure that its 
enforcement action does not force the licensee and the NRC to focus 
resources on nonsafety significant matters.

    Response. As stated before, efforts are underway to reinforce 
existing guidance and policy to (1) give credit for licensee actions in 
both identifying and correcting violations in deciding whether to cite 
a low-level violation, (2) not require a written response when low-
level violations are issued and corrective actions are sufficiently 
addressed in writing elsewhere on the docket, e.g., in a Licensee Event 
Report, (3) provide more consistent treatment for multiple violations 
with common root causes, and (4) clarify guidance for violations 
identified as a result of licensees' corrective actions. As a result of 
ongoing efforts, such as the review of the NRC enforcement program 
issued in April 1998 (NUREG-1622, ``NRC Enforcement Policy Review''), 
the NRC recognizes that improvements can and must be made in its 
efforts to focus on safety and on consistency in its treatment of 
violations, especially the thresholds for low-level violations. Special 
enforcement review panels were established to review all potential 
Maintenance Rule and 10 CFR 50.59 escalated and non-escalated 
enforcement actions for consistency of approach and determination of 
safety significance. In addition, future efforts include: (1) further 
meetings with stakeholders to obtain additional perspectives--on 
enforcement and to consider the need for changes to the enforcement 
program, (2) developing additional guidance on thresholds for low-level 
and minor violations, and (3) developing additional guidance to 
consider risk in enforcement decisions and the use of regulatory 
significance for significant enforcement actions.

    Question 44. (C) Please provide a schedule for completion of all 
actions cited above to revise the NRC's enforcement program.
    Response. The NRC issued an Enforcement Guidance Memorandum (EGM 
98-006) on July 27, 1998, that reinforced existing guidance and policy 
on not citing licensee-identified and corrected nonrepetitive 
violations, waiving licensee's responses when corrective action 
information is already on the docket, and treatment of multiple 
violations and violations identified as a result of a licensee's 
corrective actions (items (1)-(4) in the previous question). The NRC 
held a public meeting with stakeholders on September 3, 1998, to 
solicit input on possible enforcement policy revisions. A revision of 
nonescalated enforcement policy is expected to be presented to the 
Commission in October for their approval. The NRC staff is expected to 
develop additional guidance on regulatory significance by late Fall of 
this year and thresholds for low-level and minor violations at the end 
of this year. The NRC staff plans on developing risk-informed examples 
for inclusion in the supplements of the enforcement policy in the 
Spring of 1999. The NRC staff also expects a proposal from NEI for 
changes in escalated enforcement policy and will review that proposal 
and report to the Commission in the Spring of 1999.

    Question 45. (A) The NRC has stated that it takes enforcement 
action to ``send a message'' regarding the ``regulatory significance'' 
of a violation as well as the agency's underlying ``regulatory 
concerns.'' Neither ``regulatory significance'' nor ``regulatory 
concern'' is a defined term, and therefore both are extremely 
subjective. Particularly given the nature of enforcement action, using 
these terms as the basis for enforcement action would seem 
inappropriate.
    How does the NRC distinguish between regulatory significance and 
regulatory concern as a basis for taking enforcement action?

    Response. Noncompliances have varying degrees of safety, 
safeguards, or environmental significance. The enforcement policy 
provides a graduated system of sanctions, varied according to the 
technical significance (i.e., actual and potential consequences) and 
the regulatory significance. Regulatory significance, while not 
``defined, '' has traditionally been understood to involve issues that 
have the potential for impact on safety, such as programmatic failures, 
repetitive violations, willful violations, reporting failures, 
licensees' refusal to comply, and management involvement. The NRC 
reviews each case on its own merits to ensure the severity of the 
violation is characterized at the level best suited to the significance 
of the particular violation.
    When an issue is evaluated and categorized at the Severity Level 
III level, by definition it is, ``cause for significant regulatory 
concern.'' \1\ As a regulator mandated to ensure that the civilian uses 
of nuclear materials in the United States are carried out with adequate 
protection of public health and safety, we are concerned when a system 
designed to perform a certain safety function would fail to operate 
under certain circumstances if called upon to work. Defense in depth 
and acceptable margins of safety are at the foundation of the NRC 
regulatory process. We are also concerned when a worker falsifies a 
surveillance test because our regulatory program is based on licensees 
and their contractors and employees acting with integrity and 
communicating accurately. At an individual level, instances of willful 
misconduct reduce the NRC's confidence that if these individuals were 
subsequently involved in licensed activities, the activities would be 
conducted in a manner that adequately protects the public health and 
safety. At a higher level, instances of willful misconduct may also 
raise questions about the potential pervasiveness of the problem and 
the licensee's ability to establish a safety-conscious work 
environment.
---------------------------------------------------------------------------
    \1\ Section IV of the Enforcement Policy, NUREG-1600, Rev. 1.
---------------------------------------------------------------------------
    The regulation of nuclear activities does not always lend itself to 
a mechanistic treatment. Judgment and discretion must be exercised in 
determining the severity levels of violations and the appropriate 
sanction. As such, to ensure consistency, technical accuracy, and 
balanced views, issues that may be categorized at Severity Level 111 
are addressed in enforcement review panels with routine participation 
from regional offices, the Office of Enforcement, and the Office of 
Nuclear Reactor Regulation. Special scrutiny is given to those cases 
that include issues that have regulatory significance (e.g., 
programmatic failures, willful violations, repetitive violations, 
etc.).

    Question 45. (B) What actions will the NRC to eliminate undefined 
terms such as ``regulatory concern'' or ``regulatory significance'' 
from its enforcement process?

    Response. The Commission recently requested that the staff develop 
a definition and explanation of ``regulatory concern'' and ``regulatory 
significance'' for possible inclusion in the enforcement policy. The 
staff will also review the advantages and disadvantages of the current 
inclusion of regulatory significance'' as a component of safety 
significance. The NRC staff is expected to report back to the 
Commission in the late Fall.

    Question 45. (C) What is the NRC's criteria for ``sending a 
message'' through the enforcement process?

    Response. The NRC does not have any defined criteria for ``sending 
a message'' through the enforcement process. Instead, the enforcement 
policy is structured to provide a graduated approach to noncompliances 
and provides examples of noncompliances at various levels of 
significance to aid the staff in developing the appropriate enforcement 
sanction for a given set of facts and circumstances. However, the 
regulation of nuclear activities in many cases does not lend itself to 
a mechanistic treatment. Accordingly, the NRC's enforcement process 
provides that judgment and discretion be exercised in determining the 
severity levels of violations and the appropriate sanction as provided 
in Section VII, to ``ensure that the resulting enforcement action 
appropriately reflects the level of NRC concern regarding the violation 
at issue and conveys the appropriate message to the licensee.''
    Enforcement actions are legal sanctions based on noncompliances 
with legal requirements. The byproduct of a cohesive enforcement action 
is an effective communication tool. Enforcement action transmittal 
letters communicate with a range of audiences, some more familiar than 
others with the inspection findings. While the primary audience is the 
involved licensee, secondary audiences may include site management, 
corporate officials not directly involved in nuclear activities, other 
licensees with similar activities, NRC staff, the media, and interested 
members of the public. Enforcement actions can serve a valuable purpose 
in making sure that licensees understand the importance of compliance. 
Incentives are provided to identify and correct violations. There is 
also a deterrent purpose. As such, enforcement actions should be 
constructed to convey the regulatory message derived from applying the 
enforcement policy to the circumstances of the particular case. The NRC 
has encouraged, for instance, including a description of the licensee's 
corrective action, to give credit where good action has been taken. By 
emphasizing those aspects of licensee performance that the NRC 
considers important, other licensees gain ideas on how to improve their 
performance in similar areas. In addition, the letters may address the 
need to avoid violations, the need to be responsive to opportunities to 
identify violations, the need to reverse past poor performance and 
sustain good performance, the significance of multiple violations, the 
impact of violations of extended duration, and the need to maintain 
high standards of integrity.

    Question 46. The NRC states that its Enforcement Policy encourages 
licensee to self identify and correct noncompliances. Yet the NRC may 
impose a 100 percent penalty if either the licensee does not identify 
or satisfactorily correct a noncompliance. The Enforcement policy also 
provides for the imposition of a 200 percent penalty if the licensee 
neither identifies nor corrects the noncompliance. This approach 
appears to be very punitive.
    How does withholding extraordinary punishment ensure licensee self 
identification and correction of noncompliances.

    Response. The current civil penalty assessment process is not 
limited to the consideration of two factors, identification and 
corrective action. Instead, the assessment process considers four 
decisional points, involving past performance, identification, 
corrective action, and those issues that may warrant exercising 
enforcement discretion.
    The first decisional point addresses whether the violation is the 
first escalated enforcement action that the licensee has had during the 
past 2 years or past two inspections. If the licensee has not had any 
past escalated actions, the assessment process then addresses the 
promptness and comprehensiveness of the licensee's corrective actions 
and then whether there are special circumstances that may warrant 
discretion. In this scenario, the issue of identification is not 
considered. In other words, even if the NRC identified the violation, 
this strategy is designed to provide flexibility for licensees who have 
traditionally been good performers. This strategy also places a premium 
on corrective action.
    On the other hand, if a licensee has had past escalated actions, 
the process addresses whether the licensee should be given credit for 
actions related to identification and corrective actions and then 
whether there are special circumstances that may warrant discretion. In 
this scenario, the staff believes a base civil penalty \2\ is 
appropriate if the licensee only warrants credit for either self-
identification or corrective action because the process reflects that 
the licensee has had a history of escalated action. However, even if a 
licensee has had a history of past actions, under the assessment 
process, a licensee would not normally be subject to a civil penalty if 
it identified and corrected the current violation. As stated before, 
this strategy gives more weight to the licensee's current performance 
and provides incentives to identify and correct violations.
---------------------------------------------------------------------------
    \2\ It should be noted that most enforcement actions for reactor 
licensees include Severity Level III violations or problems and that 
the base civil penalty at this level is $55,000; half the amount 
allowed by statute. The assessment process is not designed to maximize 
penalties. Under the Atomic Energy Act, the NRC has authority to issue 
penalties of $110,000 per violation per day.
---------------------------------------------------------------------------
    In addition to the civil penalty assessment process, the 
Enforcement Policy provides incentives to identify and correct 
violations by exercising discretion and reducing or refraining from 
issuing sanctions for (1) violations identified during extended 
outages, (2) violations involving old design issues, (3) violations 
identified as a result of corrective actions being taken in response to 
previous violations, (4) violations involving certain discrimination 
issues where the licensee, without government intervention, provides a 
remedy to the person discriminated against and takes comprehensive 
corrective action.
    The purpose of the NRC enforcement program is not to penalize 
licensees or maximize penalties, but to emphasize the need for 
licensees to prevent violations and, when they occur, to identify and 
correct them before events occur with potential impact on the public. 
Compared to the numbers of licensee personnel, NRC has very few 
inspectors available to confirm compliance with regulations. Licensee 
employees are in the best position to identify noncompliances based not 
only on their numbers, but also by their thorough knowledge of the 
facilities. This capability can be rewarded by avoidance of Notices of 
Violation or complete mitigation of civil penalties when licensee self-
identification reveals violations and the violations are corrected and 
reasonable actions are taken to prevent recurrence.

    Question 47. The NRC states that it rewards licensees through the 
enforcement process ``by avoidance of Notices of Violation or complete 
mitigation of civil penalties when licensee self identification reveals 
violations, the violations are corrected and reasonable actions are 
taken to prevent recurrence.'' Yet, in response to a question by 
Congressman Schaefer, the NRC indicates that 40 percent of the level 
four violations issued in 1997 were self-identified.
    If these violations also were satisfactorily corrected, why was 
enforcement action nevertheless taken?

    Response. As a point of clarification, during 1997, approximately 
40 percent of Severity Level IV violations were not formally cited 
through mitigation discretion. A NonCited Violation documents a 
noncompliance in an inspection report for tracking purposes, but does 
not result in a formal enforcement action or require a licensee 
response. It is recognition that while no violation is acceptable, the 
licensee took positive action by identifying and correcting the 
violation. Avoidance of formal enforcement action with the burden of a 
response may provide incentives to identify and correct violations 
without NRC involvement.

    Question 48. The NRC takes enforcement action for low safety 
significant violations because ``in different circumstances the 
occurrence of the same or a similar violation may be more significant 
because of the coincidence of other factors.'' This seems to provide 
the NRC staff with an unlimited opportunity to conjure up scenarios 
that may be extremely far afield from the original violation. Please 
list all violations where this has been the basis for the imposition of 
enforcement action in 1997-1998.

    Response. The NRC does not maintain a list where this particular 
factor has been the basis for enforcement actions. Development of such 
a historical list would require manual review of inspection reports and 
would involve significant resource expenditures. The underlying basis 
of nonenforcement actions is the failure to comply with legally binding 
regulatory requirements. The manner in which a violation is 
dispositioned (i.e., escalated or non-escalated action, or Non-Cited 
Violation) is based on an assessment of its safety significance. Safety 
significance, as used in the enforcement program includes consideration 
of the actual consequence, the potential consequence, as well as other 
factors that may represent regulatory significance, e.g., repetition, 
willfulness, pervasiveness. Severity Level IV violations by definition 
are less serious than Severity Level III violations (``cause for 
significant regulatory concern''), but are of more than minor concern; 
i.e., if left uncorrected, they could lead to a more serious concern. 
Evaluating and categorizing the severity of violations requires 
judgment. The key to a fair assessment is that the facts be weighed and 
reasonable scenarios be considered. For example, the failure to post a 
high radiation area that has changing dose rates (such as a fuel 
transfer canal) may not result in an actual consequence on a given 
occasion because of the position of the fuel. However, it is reasonable 
to conclude that the same failure to post the high radiation area could 
just as easily result in an overexposure on another occasion due to the 
new position of the fuel. The failure to perform a post-maintenance 
test on a pump does not result in an actual consequence when the pump 
was properly serviced and restored. However, it is reasonable to 
conclude that the same failure on another pump could result in an 
actual consequence, such as the pump failing to operate when called 
upon to perform its safety function, had the pump been inoperable when 
returned to service.

    Question 49. (A) We understand the NRC is engaged in an effort to 
review its assessment process, including the Senior Management Meeting 
(Watch List process) and the Systematic Assessment of Licensee 
Performance. We also understand that the vote sheets on the staff's 
request to issue the revised assessment process for public comment 
suggest that the Commission had significant concerns about the revised 
process.
    When do you expect the evaluation of the assessment process to be 
completed?

    Response. By January 1, 1999, the NRC staff will have completed the 
evaluation of the assessment process and will have made recommendations 
to the Commission for improvements to the process. Resolution of 
public, industry, NRC staff and Commission comments play an integral 
part in the recommendations for improvement. The public comment period 
for improvements to the performance assessment process will end in 
October 1998.

    Question 49. (B) Given that the industry has suggested an 
alternative assessment approach, is the NRC working with the industry 
to address their concerns?

    Response. Yes, the NRC is working with the industry to develop 
improvements to the assessment process. Several meetings have been held 
with representatives of the Nuclear Energy Institute to review the NEI 
proposal for an alternative assessment approach. Further, the NRC held 
a public workshop in September 1998, during which the NRC staff worked 
with members of the industry and public to develop improvements to the 
assessment and regulatory oversight processes.

    Question 50. A primary concern expressed about the NRC's current 
assessment process is the lack of definition of what constitutes 
acceptable performance. Adding to this concern are the assessment's 
subjectivity, lack of objective indicators, lack of safety focus, and 
overemphasis on enforcement actions.
    (A) How does the NRC's assessment process address each of these 
concerns?

    Response. The NRC is currently working with industry, the public, 
and other stakeholders to develop a revised assessment process. A 4-day 
public workshop is scheduled for September 1998 to expedite development 
of the improvements and to seek stakeholder input. The proposed 
improvements will be provided to the Commission in early January 1999 
for approval. The assessment process improvements will be directed at 
increasing the use of objective, risk-informed (where possible) 
performance indicators in the NRC assessment process. This will 
decrease subjectivity, add objective indicators, and increase safety 
focus. This will also reduce the emphasis on enforcement actions. The 
goal is to reduce the influence of enforcement actions on the 
assessment process such that enforcement actions would override 
performance indicator results in only very limited circumstances.

    Question 50. (B) Does the NRC's process eliminate the ``Watch 
List'' as it currently exists?

    Response. The effectiveness of the NRC ``Watch List'' is being 
evaluated. It is possible that the proposal in early January 1999 will 
include a recommendation to either modify or eliminate the ``Watch 
List,'' but the Commission has not yet made this decision.

    Question 50. (C) Will the revised assessment process change the 
NRC's inspection and enforcement processes to improve the safety focus 
of each of these oversight activities? If so, please describe the 
contemplated changes.

    Response. Review efforts are underway to identify improvements to 
the inspection and enforcement processes that will increase their 
safety focus. Changes to the NRC's inspection and enforcement process 
will be coordinated with changes to the assessment process to improve 
the safety focus and integration of all three processes. Changes being 
contemplated include developing and implementing a risk-informed 
baseline inspection program and improving the safety focus of NRC 
violations. (See question 27 for an additional discussion on the 
possible changes to the NRC programs and procedures.)

    Question 51. We understand that the NRC's initial proposal for its 
revised assessment process included review of licensee management 
effectiveness. Among the items cited for review were ``organizational 
environment, shared perception of the organization including the 
traditions, values, customs, practices and socialization processes.'' 
Although the review of these features is not explicitly included in the 
revised assessment approved for public comment, SECY 98-045 states that 
the staff intends to continue to assess ways to evaluate management 
effectiveness.
    What NRC regulation requires it to review licensee management 
effectiveness?

    Response. The NRC's regulations do not explicitly require the 
evaluation of plant management.
    After several recent reviews of this area, the NRC has decided that 
it will continue its practice of conducting performance-based 
inspections by observing the conduct of operations, the material 
condition of the plant, the performance of licensee personnel, the 
quality of engineering work, and the licensee's performance in problem 
identification and resolution. The NRC will continue to examine 
operational events to identify root causes, such as human error, design 
deficiencies, and administrative controls. The process for assessing 
plant performance will continue to be based on inspection findings, 
enforcement actions, operational events, and performance indicators. It 
has been and will remain the NRC's practice to conduct performance-
based inspections in all areas of facility operation and design and, on 
the basis of the inspection results, to draw conclusions about the 
effectiveness of the licensee's management to the extent that it 
relates to safe operation of the facility.
    In its May 30, 1997, report entitled, ``Nuclear Regulation: 
Preventing Problem Plants Requires More Effective NRC Action,'' the 
General Accounting Office (GAO) stated that NRC does not have an 
effective process for ensuring that licensees maintain competent 
management in their nuclear plants. In addition, the GAO recommended 
that the assessment of management's competency and performance be a 
mandatory component of NRC's inspection process.
    In response to the GAO report and as part of the NRC's effort to 
improve the Senior Management Meeting process, the staff investigated 
the development of management performance assessment tools for 
improving the current plant performance evaluation methodology as 
stated in SECY 98-045. This effort included two one-week-long workshops 
in August 1997 and December 1 997 involving NRC staff and experts from 
the research community. While the consensus of the workshop 
participants was that management and organizational factors do 
influence human performance and hardware operation, it was also decided 
that a management assessment based on the current inspection program 
data would not likely result in a leading indicator of plant 
performance or in a comprehensive and direct assessment of licensee 
management performance.
    On March 26, 1998, the staff proposed to the Commission in SECY-98-
059, five options for assessing the performance and competency of 
licensee management and delineated associated policy issues for the 
Commission's consideration and comment. This paper followed up on the 
views expressed in the staff's earlier paper, SECY-98-045. The options 
were summarized as follows:
    1. Continue to conduct performance-based inspections in all areas 
of facility operation design; however, do not attempt to infer or 
articulate conclusions regarding the performance or competency of 
licensee management.
    2. Infer licensee management performance from the results of the 
current performance-based inspection program on overall plant 
performance. Strengthen guidance to improve the quality and consistency 
of the management performance assessment.
    3. Assess the performance of licensee management through targeted 
operational performance inspections using specific inspection 
procedures, trained staff, and contractors.
    4. Assess the performance of licensee management by evaluating and 
documenting management performance attributes as part of the routine 
inspection program. Implement the necessary regulations. Revise the 
inspection, staff training, and qualification programs accordingly.
    5. Assess the competency of licensee management by evaluating 
management competency attributes using specific inspection procedures, 
trained staff, and contractors. Implement the necessary regulations. 
Revise the inspection, staff training, and qualification programs 
accordingly.
    After considering the five options contained in SECY-98-059, the 
Commission approved only those elements of Option 2 associated with the 
current staff practice of inferring licensee management performance 
from performance-based inspections, routine assessments, and event 
followup. The Commission also determined that efforts to develop 
leading indicators of performance should not use licensee management 
performance or competency as an input, and that the inspection program 
should focus on performance-based inspection findings. In addition, the 
Commission approved the elimination of any fiscal year 1998 resource 
expenditures specifically directed toward developing a systematic 
method of assessing management performance and disapproved any use of 
fiscal year 1999 or fiscal year 2000 resources for these purposes.
    As a result, the NRC staff is currently implementing the inspection 
program as outlined, in part, by Option 2, which requires no additional 
inspection effort or resources above those required for implementing 
the original inspection program. The NRC staff will continue its 
practice of conducting performance-based inspections by observing the 
conduct of operations, the material condition of the plant, the 
performance of licensee personnel, the quality of engineering work, and 
the licensee's performance in problem identification and resolution. 
The NRC will continue to examine operational events to identify root 
causes, such as human error, design deficiencies, and administrative 
controls. The process for assessing plant performance will continue to 
be based on inspection findings, enforcement actions, operational 
events, and performance indicators. It has been and will remain the 
NRC's practice to conduct performance-based inspections in all areas of 
facility operation and design and, on the basis of the inspection 
results, to draw conclusions about the effectiveness of the licensee's 
management to the extent that it relates to safe operation of the 
facility.
    Finally, the NRC staff is currently exploring improvements to the 
process for assessing plant performance. This effort is known as the 
integrated review of the assessment process (IRAP). A trial application 
of this process was conducted in the spring of 1998 and utilized an 
updated version of the NRC Plant Performance Template, which consisted 
of five performance categories (see response to GAO Recommendation 2, 
dated January 28, 1998). However, the assessment area regarding 
management effectiveness was not included on the basis of the 
Commission's approval of only those elements of Option 2 associated 
with the current staff practice of inferring licensee management 
performance. The staff will continue using the NRC Plant Performance 
Template for the evaluation of the remaining five performance 
categories and the results will be discussed during public workshops 
scheduled for the fall of 1998.

    Question 52. In addition, the NRC stated in response to Congressman 
Schaefer's questions that the staff has identified ``regulatory 
excellence strategies'' to improve the NRC's regulatory program.
    (A) Please list each regulation eliminated or modified under these 
programs since 1990.

    Response. Prior to 1992 the NRC did not categorize rulemakings as 
to whether they might be safety enhancements or promulgated to provide 
additional regulatory flexibility or burden relief. However, what 
follows is a list of rulemakings specifically focused on providing 
power reactor licensees with additional regulatory flexibility and 
burden relief. Over that same period, 1992 through 1997, the NRC 
promulgated approximately 50 rulemakings affecting nuclear power 
reactor licensees. 45 Hence, as can be seen from the list below, about 
half of NRC's reactor rulemaking effort is directed at regulatory 
flexibility and burden relief.
   burden reduction/regulatory reform/added flexibility rulemakings 
                          published final in:
1992
    Frequency of Radiological Effluent Reports, Part 50.36a
    Frequency of FSAR Updates, Part 50.71
    Frequency of Design Change Reports, Part 50.59
    Use of Fuel with Zirconium Based Cladding, Part 50.44, 50.46, 
Appendix K
    Partial Withdrawal of NRC Information Collection Requirements for 
Fitness For Duty Programs, Part 26
    Disposal of Waste Oil by Incineration
1993
    Monitoring the Effectiveness of Maintenance at Nuclear Power 
Plants, Part 50.65a.3
1994
    Changes to Random Testing Rates for Fitness to Duty Programs, Part 
26
    Renewal of Licenses and Requalification Requirements for Licensed 
Operators, Part 55
1995
    License Renewal, Part 54
    License Renewal for NPPs; Scope of Environmental Effects, Part 51
    Procurement of Commercial Grade Items by Nuclear Power Plant 
Licensees, Part 21
    Performance-Based Primary Reactor Containment Leakage Testing for 
Water-Cooled Power Reactors, Part 50) (Part 50, Appendix J. Option B)
    Change To Nuclear Power Reactor Security Requirements Associated 
With
    Containment Access Control, Part 73.55 (d)(8)
    Physical Security Plan Format Changes, Parts 50, 70
    Incorporate TS Criteria, Part 50.36
    Radiation Protection Requirements; Amended Definitions and 
Criteria, Parts 19, 20
1996
    Codes and Standards for Nuclear Power Plants (ASME Code, Section 
Xl, Division 1
    Subsection IWE and Subsection IWL), Part 50
    Constraint Level for Air Emissions of Radionuclides, Part 20
    Decommissioning of Nuclear Power Reactors, Part 50
    Reactor Site Criteria; Including Seismic and Earthquake Engineering 
Criteria for Nuclear Power Plants, Parts 50, 52, 100
1997
    Reduction In Nuclear Power Reactor Security Requirements Associated 
With Insider Threat, Part 73.55
    Design Certification for Advanced Boiling Water Reactor (ABWR) AND 
SYSTEM 80+, Part 52
    Radiological Criteria for License Termination of Nuclear 
Facilities, Parts 20, 30, 40, 50, 51, 70, 72
1998
    Revision to Nuclear Power Reactor Decommissioning Financial 
Assurance Implementation Requirements, 10 CFR 50.2 and 10 CFR 50.75 
final rule sent to the Federal Register for publication--week of 
September 21, 1998
    Audit Frequency for Emergency Planning and Security, Part 50, PRM-
50-59, PRM-50-60 final rule to be sent to the Federal Register for 
publication by December 1998

    Question 52. (B) Please describe in detail the actions that have 
been taken as a result of the implementation of the ``regulatory 
excellence strategies.''

    Response. In April 1998, the NRC staff presented to the Commission 
a draft Excellence Plan describing in detail 13 strategies intended to 
improve the effectiveness and efficiency of the NRC. The Commission 
considered that, in light of the changes in the NRC's planning, 
budgeting, and performance management process that have occurred as a 
result of the Government Performance and Results Act of 1993, there was 
no need to maintain the Excellence Plan as a separate formal agency 
document. The staff was directed to ``sunset'' this plan as a separate 
document, and activities from these strategies were integrated into the 
various operating plans of the organizational entities responsible for 
each strategy.
    Consistent with this approach and the description of the strategies 
in the draft Excellence Plan, significant activities are ongoing in the 
following areas:
  Improvement of the reactor inspection program
  Improvement of the licensing support and regulatory oversight 
    of operating reactors
  Use of risk insights to enhance safety decision making, make 
    more efficient use of NRC resources, and reduce burden on licensees 
    46
  Improvement of the medical regulatory program by modifying 10 
    CFR Part 35 to be more risk-informed and performance based
  Development of a process to identify candidate issues for 
    improving the effectiveness and efficiency of rules, standards, 
    regulatory guidance, and their application Increase in the 
    effectiveness and efficiency of the regulatory process by 
    expediting evaluation of industry initiatives and promoting more 
    rapid adoption of consensus standards
  Assessment of core capability needs by comparing requirements 
    to current availability
  Assessment of the effectiveness, including integration and 
    data sharing, of information systems supporting NRC's major 
    business areas
  Improvement of the information systems supporting resource 
    management (STARFIRE)
  Improvement of information systems supporting document and 
    records management (ADAMS)
  Improvement of information systems supporting the reactor 
    inspection and licensing programs (Reactor Program System--RPS)

    Question 53. In response to a question by Congressman Schaefer, the 
NRC stated that there is an initiative to transition to more risk-
informed and, when appropriate, performance based regulatory 
approaches. What has the agency done to apply risk information to add, 
remove or modify NRC regulations? Please list all regulations that have 
been added, removed or modified using this process since 1990? 1994?

    Response. Since the first nuclear reactor PRAs, the NRC has 
increasingly used risk information to prioritize and resolve safety 
issues and has issued reactor-related regulations directly related to 
risk insights: requirements for reduction of risk from anticipated 
transients without scram events for light-water-cooled nuclear power 
plants (10 CFR 50.62, April 1989) and loss of alternating current power 
(10 CFR 50.63, June 1988). PRA played a key role in the System 80+ and 
ABWR designs, for which standard design certifications were issued 
(Appendices A and B to 10 CFR Part 52, May 1997). In 1995, the 
Commission issued a policy statement to declare the agency's commitment 
to increased use of PRA methods and insights in its reactor regulatory 
activities. The NRC has taken a risk-informed or performance-based 
approach in the following reactor-related rulemakings: promulgation of 
performance-based containment leakage testing requirements (10 CFR 50 
Appendix J. option B. September 1995), requirements for monitoring the 
effectiveness of maintenance at nuclear power plants (10 CFR 50.65, 
July 1996), changes to the required frequency of FSAR updates (10 CFR 
50.71 (e)(4), August 1992), and technical specifications (10 CFR 
50.36(c)(2)(ii)(D), July 1996).
    In the materials area, the NRC used risk information in 1990 to 
develop its policy on Below Regulatory Concern, whose purpose was to 
reduce burdens on industry while continuing to protect public health 
and safety. (This policy was later rescinded at the direction of 
Congress.)
    The Commission is working to achieve an appropriate balance between 
deterministic and risk-informed regulations and between prescriptive 
and performance-based regulations. The overarching 10 CFR Part 20, 
``Standards for Protection against Radiation,'' contains quantitative 
radiation protection standards that apply to all licensees. These 
standards establish limits on allowable doses (which can be converted 
to risk) and are implemented using a fundamentally performance-based 
approach. Thus, the central standards on which all nuclear materials 
regulation is ultimately based are implemented at a first level using a 
risk-informed, performance-based regulatory approach. There have been 
several revisions to 10 CFR Part 20, which are risk-informed and 
performance based. These include revision to the criteria for the safe 
release from hospitals of individuals who have been administered 
radioactive material, revision of the monitoring criteria for declared 
pregnant workers and minors, and radiological criteria for 
decontamination and decommissioning.
    Recent revisions to 10 CFR Parts 34, ``Licenses for Industrial 
Radiography and Radiation Safety Requirements for Industrial 
Radiographic Operations,'' and 36, ``Licenses and Radiation Safety 
Requirements for Irradiators,'' were developed using risk information. 
In addition the Commission, in revising 10 CFR Part 35, ``Medical Uses 
of Byproduct Material,'' is restructuring it into a risk-informed, more 
performance-based regulation. Modifications to Part 39, ``Licenses and 
Radiation Safety Requirements for Well Logging,'' using risk 
information are currently ongoing to address newer technology. For some 
uses of byproduct material, such as radiography, medical uses, 
irradiators, and well logging, there is both a potential for and a 
history of overexposures. Therefore, while these regulations are risk-
informed, there are situations that require prescriptive requirements 
for higher risk activities.
    The following materials-related regulations were published between 
1990 and 1993:

 
----------------------------------------------------------------------------------------------------------------
                             Title                                  Publication Date            FRN Notice
----------------------------------------------------------------------------------------------------------------
Use and Preparation of Radiopharmaceuticals For Diagnosis,                      8/23/90              55 FR 34513
 Therapy, or Medical Research (Interim Rule)..................
Standards for Protection Against Radiation (Part 20)..........                  5/21/91              56 FR 23360
Twenty-Four Hour Notification of Incidents For Non-Rectors....                  8/16/91              56 FR 40757
Licenses and Radiation Safety Requirements for Large                            2/09/93               58 FR 7715
 Irradiators..................................................
----------------------------------------------------------------------------------------------------------------

    The following materials-related regulations have been published 
since 1994:

 
----------------------------------------------------------------------------------------------------------------
                             Title                                  Publication Date            FRN Notice
----------------------------------------------------------------------------------------------------------------
Change to Part 40, Appendix A Uranium Tailings Regulation;                      6/01/94              59 FR 28220
 Conforming NRC Requirements to EPA Standards.................
Use And Preparation of Radioparmaceuticals For Diagnosis                       12/02/94              59 FR 61767
 Therapy, or Medical Research.................................
Notification of Incidents or Accidents, 10 CFR Part 72........                 12/14/94              59 FR 64283
Preparation, Transfer for Commercial Distribution, and Use of                   1/04/95                60 FR 322
 Byproduct Material for Medical Use, Revised Final Rule, Part
 32...........................................................
Administration of Radiopharmaceuticals to The Wrong Patient,                    9/20/95              60 FR 48612
 Part 35......................................................
Criteria For Release of Patients Administered Byproduct                         1/29/97               62 FR 4120
 Material 10 CFR Parts 20 and 35..............................
Radiography and Radiation Safety Requirements For Radiography                   5/28/97              62 FR 28948
 Operations, Revision To 10 CFR Part 34.......................
Radiological Criteria For Decommissioning.....................                  7/21/97              62 FR 39058
Medical Use of Carbon-14 For the Detection of Helicobacter                      12/2/97              62 FR 63634
 Pylori-RM#432................................................
Requirements for Shipping Packages Used to Transport Vitrified                  6/15/98              63 FR 32600
 Wastes Containing PU [Part 71]...............................
Revision of Prototype Testing Requirements for Watches                          6/17/98              63 FR 32969
 Containing Tritium [Sec. 3214]...............................
Minor corrections, clarifying changes and a minor policy                        7/23/98              63 FR 39477
 change [Part 20].............................................
----------------------------------------------------------------------------------------------------------------


    Question 54. The NRC has stated that where requirements exist that 
have no safely benefit, are duplicative, unnecessary or unnecessarily 
burdensome, the NRC can and should take action to modify or remove such 
requirements.
    Will the NRC conduct a review of each of its regulations to 
identify those that should be eliminated based upon the above criteria?

    Response. Over the past several years, the NRC has conducted a 
number of regulatory and burden reduction rulemakings in several areas 
including license renewal, decommissioning, and standard design 
certification. However, at present resources do not permit the NRC to 
undertake a systematic section-by-section assessment and 48 possible 
revision of its portion of Title 10 of the Code of Federal Regulations. 
Nevertheless, the NRC remains committed to continuing efforts to modify 
or eliminate regulations to improve safety, reduce unnecessary licensee 
burden and improve staff efficiency; for example, the ongoing revisions 
of 10 CFR 50.59 and Part 35 and use of a revised source term. The 
Commission recently increased rulemaking resources available to the 
Office of Nuclear Reactor Regulation (NRR) in the revised fiscal year 
1999 and the proposed fiscal year 2000 budgets to increase burden 
reduction rulemakings. Accordingly, the NRC intends to continue 
discussions and seek new opportunities to work with the industry on 
regulatory requirements which may need reevaluation as potential 
candidates for burden relief.

    Question 55. The NRC recently issued the results of a survey on NRC 
safety culture and climate. Some of the information obtained through 
that survey seems to indicate that the Commission and senior management 
does not have the full support of the staff in many of the important 
initiatives the Commission has identified as top priorities. For 
example, only 32 percent of NRC employees believe that the agency's 
increased focus on risk-informed performance based regulation would 
improve the agency's regulatory effectiveness.
    (A) What steps will the Commission take to obtain the support of 
NRC staff in order to carry out the Commission's stated intent to focus 
on risk-informed performance based regulation?
    (B) What steps will the Commission take to address the fact that 
only 25 percent of NRC employees believe that NRC senior management is 
doing a good job in implementing programs and processes for improving 
regulatory effectiveness?
    (C) What steps will the Commission take to address the fact that 
only 24 percent of NRC employees believe that NRC senior management is 
doing a good job in providing the tools and resources required for 
improving regulatory effectiveness?
    (D) What steps will the Commission take to address the fact that 
only 15 percent of NRC employees believe that NRC senior management is 
doing a good job of using employee input to improve regulatory 
effectiveness? (E) What steps will the Commission take to address the 
fact that only 20 percent of NRC employees believe that NRC senior 
management is doing a good job ``leading by example'' in the area of 
regulatory effectiveness?

    Response. We recognize that the support and endorsement of the NRC 
staff will be critical to success in implementation of more risk-
informed and performance-based regulation. Our implementation plans in 
this regard will focus on clear and extensive communication between 
staff and management and solicitation of staff input on effective 
implementation strategies.
    The results of the safety culture and climate survey were only 
recently presented to the staff by the Inspector General's (IG's) 
contractor. The staff has been reviewing the individual results and the 
Executive Director for Operations has directed that a plan of action be 
formulated by the end of this year. An interim review is scheduled for 
the end of October and Office Directors and Regional Administrators 
have been asked to provide input by the end of September. We are 
currently developing an internal communications plan which has as its 
primary goals, communicating the need for change and soliciting active 
interaction and participation by the staff in the change process.
    Clearly, the broad implications of the survey are that NRC senior 
managers have a substantial challenge ahead to engage the staff in 
meaningful improvements to regulatory effectiveness.

    Question 56. The NRC has been subjected to significant criticism 
for the length of time it has taken to render decisions in licensing 
actions. The Louisiana Enrichment Services, L.P. (LES) application for 
a uranium enrichment facility license is a recent example of the 
breakdown of the NRC's licensing process. As a result of delay in the 
NRC licensing process, LES recently withdrew its license application 
after spending more than $30 million to prepare and process it and 
participating in the licensing process for more than 7 years. The NRC's 
failure to resolve LES's licensing issues in a timely manner occurred 
despite the fact that Congress had amended the Atomic Energy Act 
specifically to mandate the use of a streamlined, one stage licensing 
process for uranium enrichment facilities like the one proposed by LES. 
Given that there are now license renewal applications being submitted, 
we are very concerned that the same delays not be experienced by those 
applicants.
    (A) What action will the NRC take to address the obvious need to 
reform its licensing process so that future license applicants will not 
be subjected to the same delays and lack of discipline experienced by 
LES?

    Response. The slow pace and delays that characterized the Louisiana 
Energy Services (LES) proceeding had many causes. In retrospect it is 
clear that in several 49 ways the NRC could have done a more efficient 
job. The Commission through its July 28, 1998, ``Statement of Policy on 
Conduct of Adjudicatory Proceedings'' (enclosed) has taken initial 
action to ensure that the licensing process will function more 
effectively in future proceedings of this nature, and the Commission 
plans further steps, described later in this response.
    Nevertheless, the problems that delayed LES cannot all be 
attributed to ``lack of discipline'' or defects In the licensing 
process. The LES proceeding involved a first-of-a-kind application for 
a private enrichment facility, involving a technology which had not 
previously been licensed by the Commission. New standards for decision 
had to be established by the Commission at the outset, and it turned 
out that these were not always easy to apply. During both the technical 
review and adjudicatory process, a number of novel legal and technical 
issues had to be addressed. Setting more precise standards and 
providing clearer guidance at the beginning would have reduced 
subsequent litigative controversy. These needs are now recognized, and 
the ``lesson learned'' will be applied in future licensing actions.
    With respect to the staff's technical review in the LES proceeding, 
it is now apparent that the application submitted by LES was not 
sufficient to enable the staff's review to be conducted on a timely 
basis. While the NRC staff could have addressed the application's 
shortcomings more aggressively, the applicant was not fully responsive 
to staff requests for additional information.
    In regard to the LES adjudicatory process, several issues of first 
impression were brought to the Commission's attention but were not 
always resolved in a timely manner. In addition, in an attempt to 
ensure that all issues were thoroughly addressed, the Licensing Board 
allowed a large amount of information into the record, without 
insisting on adequate sponsorship by the parties to explain the 
significance of that information. This material then had to be dealt 
with by the Board in reaching its decisions, which were in turn 
delayed. Even allowing for the complexity of the case, however, the 
Licensing Board's decisions in LES were excessively delayed, as the 
Licensing Board itself has acknowledged. Recent directives by the Chief 
Administrative Judge of the Atomic Safety and Licensing Board Panel 
that the Board's judges should not allow into evidence unsponsored and 
unexplained documents should substantially reduce this problem.
    The Commission has attempted to address sources of potential delay 
in future licensing actions in several ways. The staff now prepares a 
detailed review schedule for significant licensing actions such as 
license renewal, including the need to ensure the adequacy of the 
license application itself and for bringing emerging technical issues 
to NRC management attention and, if necessary, to the Commission for 
guidance (both matters which also contributed to the delay of the LES 
proceeding). In addition, the Commission has moved to streamline the 
adjudicatory process, while still ensuring that a fair hearing is 
conducted and a clear and complete record is created. The Commission 
has commenced a study of the entire hearing process and expects to 
receive staff recommendations by the end of this year on specific 
changes that would make NRC proceedings more efficient and timely. The 
Commission expects that this study will specifically address the 
question of need for legislation to streamline the hearing process as 
well as the viability of rulemaking, without legislation, to streamline 
that process.
    The NRC will seek legislation that supports the NRC's reading of 
section 189a of the Atomic Energy Act to reflect the reading that 
formal adjudications are not required. Further, with the anticipated 
application from USEC for the AVLIS uranium enrichment process expected 
early next year, the NRC will consider seeking legislation that would 
modify section 193's inflexible approach to hearings.
    In the interim, as noted above, the Commission has developed and 
issued a ``Statement of Policy on Conduct of Adjudicatory Proceedings'' 
which provides guidance to the licensing boards and parties to 
Commission proceedings on how the Commission expects its proceedings to 
be conducted. The Policy Statement encourages licensing boards to 
establish and adhere to case-specific schedules, to shorten filing and 
response times where practical, to manage discovery to avoid 
unnecessary delays in that stage of the adjudicatory process, to make 
sure that the parties comply with the Commission's regulations 
governing the submission of admissible contentions, and to issue 
decisions in a timely manner. It also stresses the obligations of all 
parties to comply with the Commission's Rules of Practice as well as 
their other obligations as participants, such as, with respect to 
submitting contentions and offering evidence.
    The Policy Statement further makes it clear that the Commission 
itself will carefully and actively monitor ongoing licensing 
proceedings to ensure that they are conducted expeditiously and that 
the boards, staff and other parties receive prompt guidance on emerging 
technical, policy and legal issues, as necessary. Consistent with the 
desire for expeditious processing of license applications, the 
Commission 50 on August 19, 1998 issued an order giving guidance and 
recommending a schedule to the Licensing Board that will preside over 
the licensing renewal proceeding for the Calvert Cliffs Nuclear Power 
Plant. On September 15, 1998, the Commission issued a similar order to 
govern the license renewal proceeding for Oconee Nuclear Station, Units 
1, 2 and 3. Moreover, the Commission has published a proposed rule that 
would establish new, informal procedures for license transfer hearings 
that could substantially reduce the time for such hearings.
                                 ______
                                 
                     Enclosure: Statement of Policy
         united states of america nuclear regulatory commission
    commissioners: shirley jackson, chairman; nils j. diaz; edward 
                            mcgaffigan, jr.
  statement of policy on conduct of adjudicatory proceedings cli-98-12
I. Introduction
    As part of broader efforts to improve the effectiveness of the 
agency's programs and processes, the Commission has critically 
reassessed its practices and procedures for conducting adjudicatory 
proceedings, within the framework of its existing Rules of Practice in 
10 C.F.R. Part 2, primarily Subpart G. With the potential institution 
of a number of proceedings in the next few years to consider 
applications to renew reactor operating licenses, to reflect 
restructuring in the electric utility industry, and to license waste 
storage facilities, such assessment is particularly appropriate ensure 
that agency proceedings are conducted efficiently and focus on issues 
germane to the proposed actions under consideration. In its review, the 
Commission has considered its existing policies and rules governing 
adjudicatory proceedings, recent experience and criticism of agency 
proceedings, and innovative techniques used by our own hearing boards 
and presiding officers and by other tribunals. Although current rules 
and policies provide means to achieve a prompt and fair resolution of 
proceedings, the Commission is directing its hearing boards and 
presiding officers to employ certain measures described in this policy 
statement to ensure the efficient conduct of proceedings.
    The Commission continues to endorse the guidance in its current 
policy, issued in 1981, on the conduct of adjudicatory proceedings. 
Statement of Policy on Conduct of Licensing Proceedings, CLI-81-8, 13 
NRC 452 (May 20, 1981); 46 Fed. Reg. 28, 533 (May 27, 1981). The 1981 
policy statement provided guidance to the Atomic Safety and Licensing 
Boards (licensing boards) on the use of tools, such as the 
establishment and adherence to reasonable schedules and discovery 
management, intended to reduce the time for completing licensing 
proceedings while ensuring that hearings were fair and produced 
adequate records. Now, as then, the Commission's objectives are to 
provide a fair hearing process, to avoid unnecessary delays in the 
NRC's review and hearing processes, and to produce an informed 
adjudicatory record that supports agency decision making on matters 
related to the NRC's responsibilities for protecting public health and 
safety, the common defense and security, and the environment In this 
context, the opportunity for hearing should be a meaningful one that 
focuses on genuine issues and real disputes regarding agency actions 
subject to adjudication. By the same token, however, applicants for a 
license are also entitled to a prompt resolution of disputes concerning 
their applications. The Commission emphasizes its expectation that the 
boards will enforce adherence to the hearing procedures set forth in 
the Commission's Rules of Practice in 10 C.F.R. Part 2, as interpreted 
by the Commission. In addition, the Commission has identified certain 
specific approaches for its boards to consider implementing in 
individual proceedings, if appropriate, to reduce the time for 
completing licensing and other proceedings. The measures suggested in 
this policy statement can be accomplished within the framework of the 
Commission's existing Rules of Practice. The Commission may consider 
further changes to the Rules of Practice as appropriate to enable 
additional improvements to the adjudicatory process.
II. Specific Guidance
    Current adjudicatory procedures and policies a latitude to the 
Commission, its licensing boards and presiding officers to instill 
discipline in the hearing process and ensure a prompt yet fair 
resolution of contested issues in adjudicatory proceedings. In the 1981 
policy statement, the Commission encouraged licensing boards to use a 
number of techniques for effective case management including: setting 
reasonable schedules for proceedings; consolidating parties; 
encouraging negotiation and settlement conferences; carefully managing 
and supervising discovery; issuing timely rulings on preheating 
matters; requiring trial briefs, prefiled testimony, and cross-
examination plans; and issuing initial decisions as soon as practicable 
after the parties file proposed findings of fact and conclusions of 
law. Licensing boards and presiding officers in current NRC 
adjudications use many of these techniques, and should continue to do 
so.
    As set forth below, the Commission has identified several of these 
techniques, as applied in the context of the current Rules of Practice 
in 10 C.F.R. Part 2, as well as variations in procedure permitted under 
the current Rules of Practice that licensing boards should apply to 
proceedings. The Commission also intends to exercise its inherent 
supervisory authority, including its power to assume part or all of the 
functions of the presiding officer in a given adjudication, as 
appropriate in the context of a particular proceeding. See, e.g., 
Public Service Co. of New Hampshire (Seabrook Station, Units 1 and 2), 
CLI-9-3, 31 NRC 219, 229 (1990). The Commission intends to promptly 
respond to adjudicatory matters placed before it, and such matters 
should ordinarily take priority over other actions before the 
Commissioners.
1. Hearing Schedules
    The Commission expects licensing boards to establish schedules for 
promptly deciding the issues before them, with due regard to the 
complexity of the contested issues and the interests of the parties. 
The Commission's regulations in 10 C.F.R. Sec. 2.718 provide licensing 
boards all powers necessary to regulate the course of proceedings, 
including the authority to set schedules, resolve discovery disputes, 
and take other action appropriate to avoid delay. Powers granted under 
section 2.718 are sufficient for licensing boards to control the 
supplementation of petitions for leave to intervene or requests for 
hearing, the filing of contentions, discovery, dispositive motions, 
hearings, and the submission of findings of fact and conclusions of 
law.
    Many provisions in Part 2 establish schedules for various filings, 
which can be varied ``as otherwise ordered by the presiding officer.'' 
Boards should exercise their authority under these options and 10 
C.F.R. Sec. 2.718 to shorten the filing and response times set forth in 
the regulations to the extent practical in a specific proceeding. In 
addition, where such latitude is not explicitly afforded, as well as in 
instances in which sequential (rather than simultaneous) filings are 
provided for, boards should explore with the parties all reasonable 
approaches to reduce response times and to provide for simultaneous 
filing of documents.
    Although current regulations do not specifically address service by 
electronic means, licensing boards, as they have in other proceedings, 
should establish procedures for electronic filing with appropriate 
filing deadlines, unless doing so would significantly deprive a party 
of an opportunity to participate meaningfully in the proceeding. Other 
expedited forms of service of documents in proceedings may also be 
appropriate. The Commission encourages the licensing boards to consider 
the use of new technologies to expedite proceedings as those 
technologies become available.
    Boards should forego the use of motions summary disposition, except 
upon a written finding that such a motion will likely substantially 
reduce the number of issues to be decided, or otherwise expedite the 
proceeding. In addition, any evidentiary hearing should not commence. 
before completion of the staff's Safety Evaluation Report (SER) or 
Final Environmental Statement (FES) regarding an application, unless 
the presiding officer finds that beginning earlier, e.g., by starting 
the hearing with respect to safety issues prior to issuance of the SER, 
will indeed expedite the proceeding, taking into account the effect of 
going forward on the staff's ability to complete its evaluations in a 
timely manner. Boards are strongly encouraged to expedite the issuance 
of interlocutory rulings. The Commission further strongly encourages 
presiding officers to issue decisions within 60 days after the parties 
file the last pleadings permitted by the board's schedule for the 
proceeding.
    Appointment of additional presiding officers or licensing boards to 
preside over discrete issues simultaneously in a proceeding has the 
potential to expedite the process, and the Chief Administrative Judge 
of the Atomic Safety and Licensing Board Panel (ASLBP) should consider 
this measure under appropriate circumstances. In doing so, however, the 
Commission expects the Chief Administrative Judge to exercise the 
authority to establish multiple boards only if: (1) the proceeding 
involves discrete and severable issues; (2) the issues can be more 
expeditiously handled by multiple boards than by a single board; and 
(3) the multiple boards can conduct the proceeding in a manner that 
will not unduly burden the parties. Private Fuel Storage, LL.C. 
(Private Fuel Storage Facility), CLI-9-7, 47 NRC--(1998).
    The Commission itself may set milestones for the completion of 
proceedings. If the Commission sets milestones in a particular 
proceeding and the board determines that any single milestone could be 
missed by more than 30 days, the licensing board must promptly so 
inform the Commission in writing. The board should explain why the 
milestone cannot be met and what measures the will take insofar as is 
possible to restore the proceeding to the overall schedule.
2. Parties' Obligations
    Although the Commission expects its licensing boards to set and 
adhere to reasonable schedules for the various steps in the hearing 
process, the Commission recognizes that the boards will be unable to 
achieve the objectives of this policy statement unless the parties 
satisfy their obligations. The parties to a proceeding, therefore, are 
expected to adhere to the timeframes specified in the Rules of Practice 
in 10 C.F.R. Part 2 for filing and the scheduling orders in the 
proceeding. As set forth in the 1981 policy statement, the licensing 
boards are expected to take appropriate actions to enforce compliance 
with these schedules. The Commission, of course, recognizes that the 
boards may grant extensions of time under some circumstances, but this 
should be done only when warranted by unavoidable and extreme 
circumstances.
    Parties are also obligated in their filings before the board and 
the Commission to ensure that their arguments and assertions am 
supported by appropriate and accurate references to legal authority and 
factual basis, including, as appropriate, citation to the record. 
Failure to do so may result in material being stricken from the record 
or, in extreme circumstances, in a party being dismissed.
3. Contentions
    Currently, in proceedings governed by the provisions of Subpart G, 
10 C.F.R. Sec. 2.714(b)(2)(iii) requires that a petitioner for 
intervention shall provide sufficient information to show that a 
genuine dispute exists with the applicant on a material issue of law or 
fact. \3\ The Commission has stated that a board may appropriately view 
a petitioner's support for its contention in a light that is favorable 
to the petitioner, but the board cannot do so by ignoring the 
acquirements set forth in section 2.714(b)(2). Arizona Public Service 
Co. (Palo Verde Nuclear Generating Station, Units 1, 2, and 3), CLI-91-
12, 34 NRC 149, 155 (1991). The Commission reemphasizes that licensing 
boards should continue to require adherence to section 2.714(b)(2), and 
that the burden of coming forward with admissible contentions is on 
their proponent. A contention's proponent, not the licensing board, is 
responsible for formulating the contention and providing the necessary 
information to satisfy the basis requirement for the admission of 
contentions in 10 C.F.R. Sec. 2.714(b)(2). The scope of a proceeding, 
and, as a consequence, the scope of contentions that may be admitted, 
is limited by the nature of the application and pertinent Commission 
regulations. For example, with respect to license renewal, under the 
governing regulations in 10 C.F.R. Part 54, the review of license 
renewal applications is confined to matters relevant to the extended 
period of operation requested by the applicant. he safety review is 
limited to the plant systems, structures, and components (as delineated 
in 1D C.F.R. Sec. 54.4) that will require an aging management review 
for the period of extended operation or are subject to an evaluation of 
time-limited aging analyses. See 10 C.F.R. dd 54.21 (a) and (c), 54.29, 
and 54.30. In addition, the review of environmental issues is limbed by 
rule by the generic findings In NUREG-1427, ``Generic Environmental 
Impact Statement [GEIS) for License Renewal of Nuclear Plants.'' See 10 
C.F.R. Sec. Sec. 55.71(d) and 51.95(c).
---------------------------------------------------------------------------
    \3\ ``[A]t the contention filing stage, the factual support 
necessary to show that a genuine dispute exists need not be in 
affidavit or formal evidentiary form and need not be of the quality 
necessary to withstand a summary disposition motion''. Rules of 
Practice for Domestic Licensing Proceedings--Procedural Changes in the 
Hearing Process, Final Rule, 64 Fed. Reg. 33, 168, 33, 171 (Aug. 11, 
1989).
---------------------------------------------------------------------------
    Under the Commission's Rules of Practice, a licensing board may 
consider matters on its motion only where it finds that a serious 
safety, environmental, or common defense and security matter exists. 10 
C.F.R. Sec. 2.760a. Such authority is to be exercised only in 
extraordinary circumstances. If a board decides to raise matters on its 
own initiative, a copy of its ruling, setting forth in general terms 
its reasons, must be transmitted to the Commission and the General 
Counsel. Texas Utilities Generating Co. (Comanche Peak Steam Electric 
Station, Units and 2), CLI-81-24, 14 NRC 614 (1981). The board may not 
proceed further with sua sponte issues absent the Commission's 
approval. The scope of a particular proceeding is limited to the scope 
of the admitted contentions and any issues the Commission authorizes 
the board to raise sua sponte.
    Currently, 10 C.F.R. Sec.  2.714a allows a party to appeal a ruling 
on contentions only if (a) the order wholly denies a petition for leave 
to intervene (i.e., the order denies the petitioner's standing or the 
admission of all of a petitioner's contentions) or (b) a party other 
than the petitioner alleges that a petition for leave to intervene or a 
request for a hearing should have been wholly denied. Although the 
regulation reflects the Commission's general policy to minimize 
interlocutory review, under this practice, some novel issues that could 
benefit from early Commission review will not be presented to the 
Commission. For example, matters of first impression involving 
interpretation of 10 C.F.R. Part 54 may arise as the staff and 
licensing board begin considering applications for renewal of power 
reactor operating licenses. Accordingly, the Commission encourages the 
licensing boards to refer rulings or certify questions on proposed 
contentions involving novel issues to the Commission in accordance with 
10 C.F.R. Sec. 2.730(f) early in the proceeding. In addition, boards 
are encouraged to certify novel legal or policy questions related to 
admitted issues to the Commission as early as possible in the 
proceeding. The Commission may also exercise its authority to direst 
certification of such particular questions under 10 C.F.R. 
Sec. 2.718(i). The Commission, however, will evaluate any matter put 
before it to ensure that interlocutory review is warranted.
4. Discovery Management
    Efficient of the pretrial discovery process is critical to the 
overall progress of a proceeding. Because a great deal of information 
on a particular application is routinely placed in the agency's public 
document rooms, Commission regulations already lima discovery against 
the staff. See, e.g., 10 C.F.R. Sec. Sec. 2.720(h), 2.744. Under the 
existing practice, however, the staff frequently agrees to discovery 
without waiving its rights to object to discovery under the rules, and 
refers any discovery requests it finds objectionable to the board for 
resolution. This practice remains acceptable.
    Application in a particular case of procedures similar to 
provisions in the 1993 amendments to Rule 26 of the Federal Rules of 
Civil Procedure or informal discovery can improve the efficiency of the 
discovery process among other parties. The 1993 amendments to Rule 26 
provide, in part, that a party shall provide certain information to 
other parties without waiting for a discovery request. This information 
includes the names and addresses, if known, of individuals likely to 
have discoverable information relevant to disputed facts and copies or 
descriptions, including location, of all documents or tangible things 
in the possession or control of the party that are relevant to the 
disputed facts. The Commission expects the licensing boards to order 
similar disclosure (and pertinent updates) if appropriate in the 
circumstances of individual proceedings. With regard to the staff, such 
orders shall provide only that the staff identify the witnesses whose 
testimony the staff intends to present at hearing. The licensing boards 
should also consider requiring the parties to specify the issues for 
which discovery is necessary; If this may narrow the issues requiring 
discovery.
    Upon the board's completion of rulings on contentions, the staff 
will establish a case file containing the application and any 
amendments to it, and, as relevant to the application, any NRD report 
and any correspondence between the applicant and the NRC. Such a case 
file should be treated in the same manner as a hearing file established 
pursuant to 10 C.F.R. Sec. 2.1231. Accordingly, the staff should make 
the case file available lo all parties and should periodically update 
it.
    Except for establishment of the case file, generally the licensing 
board should suspend discovery against the staff until the staff issues 
its review documents regarding the application. Unless the presiding 
officer has found that starting discovery against the staff before the 
staffs review documents are issued will expedite the hearing, discovery 
against the staff on safety [issues may commence upon issuance of the 
SER, and discovery on environmental issues upon issuance of the FES. 
Upon issuance of an SER or FES regarding an application, and consistent 
with such limitations as may be appropriate to protect proprietary or 
other properly withheld information, the staff should update the case 
file to include the SER and FES and any supporting documents relied 
upon in the SER or FES not already included in the file.
    The foregoing procedures should allow the boards to set reasonable 
bounds and schedules for any.remaining discovery, e.g., by limiting the 
number of rounds of interrogatories or rdepositions or the time for 
completion of discovery, and thereby reduce the time spent in the pre-
hearing stage of the hearing process. In particular, the board should 
allow only a single round of discovery regarding admitted contentions 
related to the SER or the FES, and the discovery respective to each 
document should commence shortly after As issuance.
III. Conclusion
    The Commission reiterates its long-standing commitment to the 
expeditious completion of adjudicatory proceedings while still ensuring 
that hearings are fair and produce an adequate record for decision. The 
Commission intends to monitor its proceedings to ensure that they are 
being concluded in a fair and timely fashion. The Commission will take 
action in individual proceedings, as appropriate, to provide guidance 
to the boards and parties and to decide issues in the interest of a 
prompt and effective resolution of the matters set for adjudication.
    Dated at Rockville, Maryland, this 28th day of July, 1998

            For the Commission
                                       Annette Vietti-Cook,
                             Assistant Secretary of the Commission.

    Question 57. The NRC has been subjected to substantial criticism 
for its handling of the license transfer proceeding for Plant Vogtle. 
While we understand that some of the inordinate length of the Vogtle 
proceeding was due to the NRC Staff's on-going review of allegations, 
the fact remains that it took four and one-half years after the 
application was submitted for the license to be granted--and the 
proceeding actually was terminated without a decision by the Atomic 
Safety and Licensing Board through a settlement. We expect the rate of 
license transfer requests to increase as the electric utility industry, 
including the nuclear industry, begin operating in a competitive 
environment. For example, PECO Energy and British Energy recently 
announced plans to buy the Three Mile Island (TMI) nuclear plant. In 
approximately 90 days, PECO is expected to file with the NRC its 
application to transfer TMI's license to PECO. PECO has a long standing 
history of solid performance as nuclear licensee. Assuming that there 
is no public health and safety issue disclosed during the license 
transfer process, these facts would seem to suggest that the NRC could 
conduct a relatively speedy licensing process.
    (A) Has the Commission issued guidance to the Atomic Safety and 
Licensing Board Panel directing Boards to limit the scope of license 
transfer, license amendment and license renewal proceedings to 
pertinent issues? Please provide the guidance.

    Response. At present the Commission's adjudicatory proceedings for 
the transfer, amendment, or renewal of licenses are conducted pursuant 
to the Commission's Rules of Practice in 10 C.F.R. Part 2. In the event 
that a hearing request is filed by an intervener, the Commission's 
regulations and practice require that the subject matter of the hearing 
be limited to issues that are pertinent to the licensing action under 
review. On July 28, 1998, the Commission issued a ``Statement of Policy 
on Conduct of Adjudicatory Proceedings'' (henceforth, ``Policy 
Statement'') In the Policy Statement, the Commission noted specifically 
with respect to license renewal:

  ``The scope of a proceeding, and, as a consequence, the scope of 
    contentions that may be admitted, is limited by the nature of the 
    application and the pertinent regulations. For example, with 
    respect to license renewal, under the governing regulations in 10 
    C.F.R. Part 54, the review of license renewal applications is 
    confined to matters relevant to the extended period of operation 
    requested by the applicant. The safety review is limited to the 
    plant systems, structures, and components (as delineated in 10 
    C.F.R. 54.4) that will require an aging management review of the 
    period of extended operation or are subject to an evaluation of 
    time-limited aging analyses. See 10 C.F.R. 54.21(a) and (c), 54.29 
    and 54.30. In addition, the review of environmental issues is 
    limited by rule by the generic findings in NUREG-1427, ``Generic 
    Environmental Impact Statement (GEIS) for License Renewal of 
    Nuclear Plants'' See 10 C.F.R. Sec. Sec. 55.71 (d) and 51.95(c).

    Thus, the Commission has directed that the issues for hearing 
include only those necessary to resolve genuinely controverted issues 
of law and fact raised by the participants that are material to the 
Commission's ultimate decision whether to approve the application in 
question. The Policy Statement also reiterates limits on the Licensing 
Board's ability to introduce issues on their own by requiring 
Commission approval for the admission and litigation of such sua sponte 
issues.
    The Commission also has the authority under existing statutes to 
issue an order approving a license transfer during the pendency of a 
hearing request. License amendments associated with a license transfer 
similarly may be issued and made effective prior to the completion of a 
hearing if the NRC makes a finding under section 189a.(I)(A) that the 
amendments involve ``no significant hazards consideration.''
    On September 11, 1998, the Commission published in the Federal 
Register for a 30-day comment period a proposed rule that would 
establish new, informal procedures for license transfer hearings that, 
if promulgated as a final rule, could, in general, substantially reduce 
the time for such hearings.

    Question 57. (B) Has the Commission issued any guidance to the 
Atomic Safety and Licensing Board Panel setting out schedules in 
licensing cases or directing Boards to do so? Please provide the 
guidance.

    Response. The July 28, 1998 Policy Statement notes that ``[t]he 
Commission expects licensing boards to establish schedules for promptly 
deciding the issues before them, with due regard to the complexity of 
the contested issues and the interests of the parties.'' Boards are 
encouraged to exercise their authority ``to shorten the filing and 
response times set forth in the regulations ``to the extent practical 
in a specific proceeding.'' The Policy Statement also provides that the 
Commission itself may set milestones for the completion of proceedings 
and the Commission will monitor compliance with the milestone 
schedules. The Commission has taken this step in the license renewal 
proceeding recently initiated by the Baltimore Gas & Electric Company's 
application to renew the operating licenses for its Calvert Cliffs 
Nuclear Power Plant Units 1 and 2. In an order issued August 19, 1998, 
the Commission directed the Licensing Board to set a schedule for any 
hearing granted in this proceeding that will establish as a goal the 
Issuance of a Commission decision on the pending application in about 
2\1/2\ years from the time the application was received (April 1998). 
In this order, the Commission also provided guidance concerning 
specific milestones for the conclusion of significant steps in the 
adjudicatory proceeding. For example, the Commission directs the 
Licensing Board to complete its decision on intervention petitions and 
contentions within 90 days of the date of the Commission's order. The 
order then sets additional milestones in the event that a hearing is 
granted and further directs that ``the Licensing Board should not grant 
requests for extensions of time absent unavoidable and extreme 
circumstances.'' Consistent with the Policy Statement, the Commission's 
order in the Calvert Cliffs license renewal proceeding directs the 
Licensing Board to inform the Commission promptly in writing if any 
single milestone could be missed by more than 30 days, together with an 
explanation why the milestone cannot be met and the measures the Board 
will take to restore the proceeding to the overall schedule. On 
September 15, 1998, the Commission issued a similar directive with 
regard to the licensing renewal proceeding for Oconee Nuclear Station, 
Units 1, 2, and 3.

    Question 57. (C) What oversight process has the NRC established to 
ensure that Commission's scheduler directions are adhered to by Atomic 
Safety and Licensing Boards?

    Response. The July 28, 1998, Statement of Policy declares:

  The Commission itself may set milestones for the completion of 
    proceedings. If the Commission sets milestones in a particular 
    proceeding and the board determines that any single milestone could 
    by missed by more than 30 days, the licensing board must promptly 
    so inform the Commission in writing. The Board should explain why 
    the milestone cannot be met and what measures the Board will take 
    insofar as is possible to restore the proceeding to the overall 
    schedule. In a case-specific order issued on August 19, 1998 in the 
    Calvert Cliffs license renewal proceeding the Commission provided 
    guidance regarding milestones for the conclusion of significant 
    steps in the adjudicatory proceeding in the event that a hearing is 
    granted and directed the Licensing Board to inform the Commission 
    promptly if it appears that any single milestone could be missed by 
    more than 30 days, to explain why the milestone cannot be met, and 
    to specify the measures the Board will take to restore the 
    proceeding to the overall schedule. (See the response to the 
    previous question and attached order CLI-98-14).

    In addition, agency adjudicatory proceedings are closely monitored 
by the Office of Commission Appellate Adjudication which may recommend 
issuance of Commission orders during the course of a proceeding to give 
the licensing board guidance.

    Question 57. (D) Will the Commission review the performance of the 
Atomic Safety and Licensing Board Panel and its individual members? If 
such a review has been conducted, when was that review performed? What 
actions have been taken based upon the review?

    Response. The Chairman, in consultation with the Commission, each 
year prepares the annual performance appraisal of the Chief 
Administrative Judge, Atomic Safety and Licensing Board Panel. To keep 
the Commission apprised of the Panel's activities, the Chief 
Administrative Judge prepares a written report for the Commission each 
month which provides the status of ongoing proceedings. In addition, 
the Chief Administrative Judge periodically meets with individual 
Commissioners, including the Chairman, to discuss procedural matters. 
Under the Administrative Procedure Act, discussion of substantive 
matters pending before a Licensing Board is generally barred in these 
meetings. The Commission, of course, acting in its adjudicatory 
capacity, has the opportunity to review each decision issued by a 
Licensing Board, provide guidance, and correct any errors. It would be 
inappropriate for the Commission to provide performance appraisals for 
Atomic Safety and Licensing Board members as this could be perceived as 
compromising the independence of our administrative judges, thereby 
reducing public confidence in the NRC licensing process. In 5 U.S.C. 
4301(2)(d), Congress has exempted Administrative Law Judges from the 
performance appraisal requirement and the Commission has chosen to do 
the same for its Administrative Judges because they perform the same 
functions as Administrative Law Judges.

    Question 57. (E) Please provide a schedule for completion of all 
changes the NRC will implement to ensure that its licensing process 
does not impede the business/corporate decisions made by nuclear 
utilities to address the competitive environment.

    Response. On September 11, 1998, the Commission published in the 
Federal Register for a 30-day comment period a proposed rule that would 
establish new, informal procedures for license transfer hearings that 
could substantially reduce the time to complete such hearings. These 
procedures would be designed to provide for public input in the event 
of requests for a hearing on a license transfer application, while at 
the same time providing an efficient process that recognizes the time 
sensitivity and typical nature of the issues normally present in 
transfer cases.
    Pursuant to the Commission's direction, the Office of the General 
Counsel (OGC) is also reviewing the entire hearing process to identify 
those areas where legislation might be needed or useful to address the 
hearing process and to identify additional areas for rulemaking to 
simplify and streamline the hearing process. OGC will forward its 
analysis and recommendations to the Commission by the end of 1998.
    The NRC will seek legislation that supports the NRC's reading of 
section 1 89a of the Atomic Energy Act to reflect the reading that 
formal adjudications are not required. Further, with the anticipated 
application from USEC for the AVLIS uranium enrichment process expected 
early next year, the NRC will consider seeking legislation that would 
modify section 193's inflexible approach to hearings.

    Question 58. (A) The NRC has participated in several pilot projects 
(ISI/IST) to apply risk insights. However, it has taken the NRC 4 years 
to develop implementation guidance for the application of the risk 
insights. The industry is concerned about the lack of timeliness on the 
part of the NRC. Please explain why it has taken more than 4 years to 
develop implementation guidance for these applications?

    Response. As discussed in the response to question No. 24, the 
primary reason that the risk-informed pilot licensing activities have 
taken longer than other past pilot licensing activities is that they 
have been linked with the development of new NRC procedures and 
policies, which required resolution of number of complex and difficult 
technical issues applicable to all risk-informed licensing reviews. The 
most significant issues include: (1) developing a risk-informed 
framework and acceptance guidelines that could be applied in plant-
specific licensing decisions, including the pilot applications; (2) 
defining and articulating the scope and quality of a PRA being used to 
support a licensing proposal; and (3) developing a practical approach 
to addressing uncertainty in PRAs. The process for resolving these 
issues included the development of candidate resolutions with 
recommendations by the NRC staff, review and consideration of the 
various options by the Commission and its independent advisory groups, 
and review and comment by the public. As regulatory positions were 
being established through this process, pilot licensees were asked to 
supplement their original proposals with information to address these 
positions. While this process has been time consuming, the NRC staff 
believes that it was necessary to ensure a coherent and predictable 
process for conducting licensing reviews that satisfied all of the 
objectives of the Commission's policy statement on the use of PRA, 
i.e., to enhance the process for making safety decisions, to make more 
efficient use of agency resources, and to remove unnecessary burdens on 
licensees.

    Question 58. (B) What actions will the NRC take to streamline its 
process for those applicants who seek to use the implementation 
guidance?

    Response. The NRC committed to several actions to expedite the 
review process by increasing the priority for risk-informed licensing 
action reviews. Allocation of staff resources will be based on 
potential safety benefits of the action, and on potential savings of 
staff and licensee resources. In addition, a lead project manager for 
the coordination of risk-informed, performance-based licensing actions 
has been identified. This lead PM will identify, monitor, and 
coordinate risk-informed licensing actions; keep track of the review 
schedules; help identify problems that may require management 
attention; and coordinate followup actions (if any). Also, the 
management oversight steering committee has been reestablished to 
provide policy, technical, and priority guidance on risk-informed 
regulation. Finally, a risk-informed licensing panel is assisting in 
focusing mangement attention, as necessary, on risk-informed licensing 
actions. A schedule has been laid out for completing the most 
significant licensing reviews in the response to the Chairman's tasking 
memo.

    Question 59. The NRC has been subjected to significant criticism 
regarding its failure to fully consider and apply the backfit rule as 
it develops and imposes staff positions, e.g., hot shorts, spurious 
actuations.
    (A) How does the Commission ensure that NRC staff properly applies 
the backfit rule?

    Response. The NRC has established procedures \4\ and programmatic 
controls to ensure that the staff properly applies the backfit rule for 
power reactors, Title 10, Code of Federal Regulations, Section 50.109 
(10 CFR 50.109). For example, the Commission-approved Charter of the 
Committee to Review Generic Requirements (CRGR) establishes specific 
agency controls for generic backfitting actions (those that apply to 
multiple plants) and NRC Management Directive 8.4 (Manual Chapter 
0514), ``NRC Program for Management of Plant-Specific Backfitting of 
Nuclear Power Plants,'' establishes additional controls for plant-
specific backfitting. Individual Offices and Regions are responsible 
for identifying and justifying potential generic and plantspecific 
backfits, before they are imposed. The Director of the Office for 
Analysis and Evaluation of Operational Data (AEOD) is responsible for 
oversight of the backfitting programs, including conducting audits, 
providing training and obtaining industry feedback on the effectiveness 
of the NRC's nuclear regulatory backfitting process.
---------------------------------------------------------------------------
    \4\ NUREG-1409, ``Backfitting Guidelines,'' dated July 1990, 
contains staff guidance on implementing the requirements of 10 CFR 
50.109. NRC backfitting procedures and staff guidance for generic 
communications are included, in the Commission-approved Charter of the 
Committee To Review Generic Requirements; NRC Inspection Manual--Manual 
Chapter 0720, ``Nuclear Regulatory Commission Generic Communications 
Regarding Nuclear Reactor issues'' (MC 0720); NRR Office Letter No. 
500, Revision 2, ``Procedures for Controlling the Development of New 
and Revised Generic Requirements for Power Reactor Licensees'' (OL 
500); and NRR Office Letter No. 503, ``Procedures for Integrated 
Identification, Evaluation, Prioritization, Management, and Resolution 
of Generic Issues,'' (OL 503). NRR Office Letter No. 901, UProcedures 
for Managing Plant-Specific Backfits and 10 CFR 50.54(f) Information 
Request,'' contains individual office guidance, including management of 
the backfit appeal process. In addition, each Regional Office uses a 
formal procedure for controlling plant specific backfitting and 
handling of backfit appeals.
---------------------------------------------------------------------------
    The CRGR, an independent Committee of senior managers from several 
offices, reviews proposed generic backfits and provides a 
recommendation to the EDO as to whether the proposed actions should be 
issued, modified, or withdrawn. In addition, a key element to 
developing and imposing well justified generic requirements is openness 
and responsiveness to the stakeholders. Therefore, the NRC has 
implemented the practice of issuing proposed generic actions for public 
comment. The Commission urges stakeholders to actively participate in 
the public comment process for proposed generic actions. This is 
helpful to the NRC in developing carefully thought out, well justified, 
risk-informed, and less prescriptive regulatory requirements, since the 
staff must address public comments, modify the proposal as appropriate, 
and resubmit it for a formal review by the CRGR.
    The CRGR submits an annual report to the Commission on the value 
added to the NRC mission by its activities, including the result of a 
self-assessment, and input from various stakeholders. This report 
includes the highlights of the CRGR members' visits to nuclear 
facilities to obtain feedback on how the backfitting process is 
working. This report also includes the highlights of the CRGR Chairman 
and staff periodic meetings with industry-supported organizations to 
obtain industry feedback on the effectiveness of the backfitting 
process.
    Notwithstanding the NRC backfit procedures and programmatic 
controls, the Commission has been made aware of industry concerns via 
the meetings with industry representatives discussed above. Some 
concerns result from the licensing review process through requests for 
additional information. Although specific details have not been 
provided, the general concern has been provided to senior managers in 
NRR who are responsible for ensuring that unauthorized plant specific 
backfits are not imposed in the licensing review process. Some concerns 
result from inspection activities. Last year, the Commission expanded 
the scope of the CRGR Charter to include review of inspection guidance. 
Some concerns arise because of industry misunderstanding regarding 
actions that are authorized (i.e., justified as an information request, 
a compliance backfit, and/or a cost-justified substantial safety 
improvement backfit). This indicates a need for additional workshops 
with industry representatives and, although such workshops are not 
currently scheduled, they will be planned in the near future. Currently 
an independent NRC panel is reviewing a formal backfit appeal from 
Maine Yankee, and recommendations for further improvements in the 
backfit management process may be forthcoming from that review. In 
early September, NRC and NEI Senior Managers met on issues of mutual 
interest, including the backfit rule. In addition the staff backfit 
training and audit activities which are planned for fiscal year 1999 
may indicate additional specific areas in need of improvement. Where 
needed improvements are identified, we will take appropriate corrective 
action.
    Regarding the examples cited, the generic technical and safety 
issues associated with hot shorts and spurious actuations are expressly 
covered by existing regulatory requirements. Specifically, the NRC 
regulatory requirements for fire protection address the potential for 
nuclear power plant fires to cause hot shorts and specify that such 
circuit failures shall not prevent the operation or cause the 
maloperation (spurious actuation) of components required to achieve 
safe shutdown. The NRC staff is working in cooperation with the Nuclear 
Energy Institute and other nuclear power industry representatives to 
resolve these issues. To date, these efforts have been within the scope 
of the existing regulation and have not resulted in any potential 
generic or plant-specific backfits. If future actions to fully resolve 
these issues involve potential backfits, the staff will follow its 
established backfitting procedures before they are imposed.

    Question 59. (B) What programs are in place to train NRC personnel 
about the applicability and use of the backfit rule?

    Response. Backfit training is included in the initial training and 
qualification of new resident inspectors. In addition, the AEOD staff 
has periodically provided backfit training to both the headquarters and 
the regional technical personnel and audited the plant-specific 
backfitting programs of their offices. Backfit training involved 
presentations and dialogue during seminars and regional inspector 
counterpart meetings. The training was reinforced by reviews of 
applicable regulation and staff guidance (e.g., the backfit rule (10 
CFR 50.109) and NUREG-1409, ``Backfitting Guidelines'') and specific 
agency procedures (e.g., the CRGR Charter, NRR office procedures, and 
NRC Inspection Manual--Manual Chapter 0720), and by conducting four 
regional NRC-industry workshops on the backfitting process. Backfit 
audits involved an assessment of the backfitting practices of each 
region/office by detailed reviews of their records and by conducting 
interviews with the backfit coordinators and managers, including the 
Regional Administrators. A database of plant-specific backfits and 
backfit appeals is maintained and used to assist in auditing the 
process.
    Backfit training for the headquarters staff was last conducted 4 
years ago. Until fiscal year 1996, the regional periodic training and 
auditing were conducted annually; however, at that time it was decided 
that the objectives could be met by conducting these activities every 
other year. Because of resource constraints, the scheduled fiscal year 
1998 regional training and auditing were not conducted. It is expected 
that the headquarters and the regional backfit training and audits will 
be completed during fiscal year 1999.

    Question 59. (C) What action will the NRC take to ensure that the 
backfit appeal process provides an opportunity for an impartial review 
of the licensee complaint?

    Response. The NRC urges licensees to exercise their right to appeal 
any action that they consider to be a backfit that was not identified 
and justified as such, or an identified backfit for which the 
justification is inadequate. However, in the past dozen years there 
have been very few appeals.
    A plant-specific backfit appeal is reviewed by a panel appointed by 
the cognizant regional administrator or office director. The panel 
members are NRC managers who are knowledgeable of the backfitting 
process and the technical issues at hand, and who have not been 
involved in the decision-making process involving the issue in 
question. The panel reviews the issue being appealed and provides its 
recommendation to the office director or regional administrator. In 
case of an unfavorable decision, the licensee may appeal to the EDO.
    Generic backfits may be appealed to the Director of the Office of 
NRR or to the EDO. Typically, such an appeal would be referred to the 
CRGR to review the matter and provide a recommendation to the EDO.
    The NRC is aware that power reactor licensees are generally 
hesitant to initiate a formal backfit appeal out of concern that doing 
so may adversely impact their relationship with the NRC. However, the 
NRC encourages the licensees to exercise the backfit appeal process, as 
it is an important and an integral part of the regulatory process. It 
can provide the NRC with valuable opportunities to address licensee 
concerns, assess adequacy and effectiveness of its own backfitting 
activities, sensitize the staff, and assure an effective backfit 
management process in the future. The EDO and the Office of the 
Inspector General stand ready to deal with any evidence that staff 
objectivity was affected by a licensee exercising their right to appeal 
the improper imposition of a new staff position or requirement.

    Question 60. (A) How does the NRC ensure that when a staff member 
identifies an ``agency position'' it has been reviewed by senior NRC 
staff or the Commission?

    Response. Documented products such as licensing actions and 
inspection reports receive management review prior to issuance. Part of 
this review is to ensure that any regulatory decision is consistent 
with agency direction, and that there are no new ``agency positions.'' 
If individual reviews are raising concerns that are not documented and 
are new positions, the response that follows for part B of this 
question would be applicable.

    Question 60. (B) What oversight mechanism has been established to 
ensure that licensees are not asked to take action beyond NRC 
regulatory requirements?

    Response. The NRC has four processes that monitor concerns raised 
by licensees about pressures to take action beyond regulatory 
requirements. (1) Licensees can report concerns to NRC management 
during periodic site visits required by Inspection Manual Chapter (IMC) 
0102, ``Oversight and Objectivity of Inspectors and Examiners at 
Reactor Facilities.'' IMC 0102 requires NRC management to make periodic 
site visits to solicit feedback from their licensee counterparts 
regarding implementation of the NRC regulatory programs at their 
facility. Concerns raised by licensees during IMC 0102 visits are 
evaluated annually with the results reported to the Commission. (2) 
Each region has a formal process to evaluate and resolve licensees'' 
complaints of inappropriate regulatory action by NRC employees. Each 
procedure requires a determination if the issue should be pursued by 
the Office of the Inspector General (OIG) or the region. For issues 
reviewed by the region, the regional administrator approves a course of 
action including any specific remedial actions. (3) If the issue is 
referred to the OIG, the matter is handled in accordance with 
Management Directive 7.4, ``Reporting Suspected Wrongdoing and 
Processing OIG Referrals.'' (4) A formal process was established in 
July 1995 for senior power reactor licensee officials to report 
perceived inappropriate regulatory action directly to the Office of the 
EDO. Independent of these processes, licensees can informally discuss 
any concern directly with their counterpart in the regional office or 
in NRR at any time.

    Question 60. (C) What protection has the NRC provided for licensees 
against any perceived or actual regulatory retaliation they experience? 
How does the NRC measure whether such protection is effective?

    Response. As discussed in the response to the previous question, 
the NRC has four processes that monitor concerns raised by licensees. 
Although the NRC does not have a formal metric for measuring program 
effectiveness, the NRC does not tolerate any regulatory retaliation 
against its licensees. Any retaliation should be reported promptly to 
the appropriate Office Director, the Executive Director for Operations, 
the Inspector General, or the Commission itself so the matter can be 
promptly addressed by senior agency management. The processes described 
in Question 60(B) are also available to detect any potential 
retaliation and to assess whether these mechanisms are effective.

    Question 61. The NRC issues administrative letters, information 
notices, bulletins and generic letters. Each of these communications 
have significant impact on licensees because they become, de facto, 
equivalent to regulatory requirements. It would appear that by issuing 
these communications, the NRC is not following the formal procedures 
required by the Administrative Procedures Act for imposing regulatory 
requirements. What oversight does the Commission exercise to ensure 
that these communications do not impose additional regulatory 
requirements?

    Response. Generic communications issued by the NRC have different 
purposes. Administrative letters and information notices contain no 
requirements. Administrative letters inform licensees of administrative 
procedure changes relating to the implementation of NRC regulations. 
Information notices (INs) are used to bring significant safety, 
security, or environmental information to the attention of licensees. 
INs are not used to convey or imply new requirements. Administrative 
Letters and INs do not require response from licensees.
    Bulletins and generic letters are a type of generic communication 
based on an existing requirement that transmit information to, requests 
specified action by, and requires a written response in accordance with 
Section 182a, Atomic Energy Act of 1954, as amended, and 10 CFR 50.54 
(f) from addressees regarding matters of safety, safeguards, or 
environmental significance. Bulletins generally do not request 
continuing actions. Generic letters may request that analyses be 
performed or descriptions of proposed corrective actions be submitted 
regarding matters of safety, safeguards, or environmental significance. 
Generic letters may also request addressees to submit technical 
information to assess present plant conditions. Requests for analyses 
or technical information may be on a voluntary basis or required in 
accordance with Section 182a, Atomic Energy Act of 1954, as amended, 
and 10 CFR 50.54 (f). Generic letters are also used to provide staff 
technical or policy positions not previously communicated or broadly 
understood.
    Generic letters and bulletins require senior management approval. 
In an August 7, 1998 memorandum, the director of NRR provided guidance 
to the staff regarding the need to brief senior management before 
preparing generic letter or bulletin. The briefing must show the safety 
benefit achieved compared to the burden imposed on licensees and staff 
is justified before the generic communication is allowed to proceed 
through a defined review process. Next, the Committee to Review Generic 
Requirements (CRGR) conducts a structured review of ale proposed 
generic letters and bulletins in accordance with an established process 
intended to assure the ``value-added'' from the particular 
communication is justified. At this stage, the office of General 
Counsel reviews the document and if requested it is also forwarded to 
the Advisory Committee on Reactor Safeguards (ACRS). Industry comments 
are sought through a publication in the Federal Register. The 
Commission also reviewed the proposed final document before issuance.

    Question 62. During the July 17, 1998, roundtable discussion held 
by the NRC, former Commissioner Remick stated that the use of 
``Confirmatory Action Letters has grown by leaps and bounds recently, 
and these are viewed as convenient techniques to obtain changes that 
the staff wants done, while getting around the backfit rule, the 
regulations and the Commission.'' Commissioner Remmick ``urge[d]'' the 
Commission to consider the following criteria before issuing 
confirmatory Action Letters:

  What is the relative safety significance of the individual 
    actions being confirmed? Are the actions, in effect, new 
    requirements?
  Where are the actions specified in the regulations?
  Do the actions meet the criteria of the backfit rule?
  Is the letter truly ``confirmatory?''

    (A) Does the Commission intend to review recently issued 
Confirmatory Action Letters against these criteria?

    Response. Following the Commission's appearance before the Senate 
Subcommittee on Clean Air, Wetlands, Private Property, and Nuclear 
Safety on July 30, 1998, the Chairman issued a tasking memorandum 
directing the staff to identify, define, and prioritize those areas 
which support our long term performance goals and which will receive 
near-term attention. A review of our Confirmatory Action Letter process 
and criteria has been included in the response to the Chairman's 
tasking memorandum. As part of this effort, the Commission will 
integrate the criteria suggested by Commissioner Remick in a review of 
recently issued Confirmatory Action Letters. 60

    Question 62. (B) Please provide the results of your review.

    Response. The results will be provided following completion of the 
review. The results of the review are scheduled to be provided in 
January 1999.

    Question 62. (C) What is the current criteria used to determine 
whether to issue a Confirmatory Action Letter?

    Response. The current criteria used to determine whether to issue a 
Confirmatory Action Letter (CAL) are found in NUREG/BR-0195, Revision 
1, ``NRC Enforcement Manual.'' As stated in Chapter 4.6 of the NRC 
Enforcement Manual:

  ``CALs are letters issued to licensees or vendors to emphasize and 
    confirm a licensee's or vendor's agreement to take certain actions 
    in response to specific issues. The NRC expects licensees and 
    vendors to adhere to any obligations and commitments addressed in a 
    CAL and will issue appropriate orders to ensure that the 
    obligations and commitments are met. CALs are normally used for 
    emergent situations where the staff believes that it is not 
    necessary or appropriate to develop a legally binding requirement, 
    in light of the agreed-upon commitment. CALs are flexible and 
    valuable tools available to the staff to resolve licensee issues in 
    a timely and efficient manner.''

    Question 62. (D) Does the Commission intend to change the criteria 
for issuing future Confirmatory Action Letters?

    Response. The Commission will determine the need to change the 
criteria for issuing CALs following completion of the above review of 
recently issued CALs. A discussion of this decision will be provided 
with the results of item (A) in January 1999.
                               __________
 Statement of Nils J. Diaz, Commissioner, Nuclear Regulatory Commission
    Mr. Chairman, members of the Subcommittee, I appreciate the 
opportunity to appear before you with Chairman Jackson and my 
colleague, Commissioner McGaffigan, to add my individual statement, 
which I request be included as part of the record of the Commission 
testimony at this hearing. It is my understanding that the hearing will 
focus on how efficiently NRC is conducting its operations.
    The United States Senate has asked for solutions to several issues 
facing the NRC; budgetary constraints have been proposed, yet requisite 
health and safety performance must be maintained. The Commission's 
testimony reflects many new and ongoing initiatives, as well as recent 
actions of the Commission, that I fully support. There is little doubt 
that the Commission is acting on many fronts to become more efficient, 
more focused on risk, and less burdensome. In the coming fiscal year, 
the Commission, and I hope it is a full Commission, must and will take 
many steps in this direction.
    There is no doubt that much good has been done using a solid core 
of precepts that center around a deterministic adequate-protection 
base. Yet, there are areas in which I wish to express my particular 
perspective on recent and current agency performance and our future 
course because I believe fundamental changes are needed, can occur and 
must occur to keep our regulatory processes in step with advancements 
in technology, safety assessment methodologies, and the new competitive 
environment.
    To embody solutions within resource availability, the NRC has to 
systematically establish a state-of-the-art regulatory structure that 
is consistent with the NRC's mission, the policies of the U.S. 
Government, and the needs of its people: a regulatory fabric that 
clearly reflects, defines and implements Adequate protection of health 
and safety'' without unbending fear of change and its associated 
impacts.
    The NRC's mission is carried out by a mandate to license and 
regulate nuclear activities. From my vantage point, the key elements of 
this mission have been achieved, when final results are used as the 
performance measuring stick. In the area of achieved nuclear reactor 
safety, the country has done exceedingly well, especially in the last 
10 years. But adequacy of results is only one measure, albeit the key 
one, of the overall performance of health and safety regulatory 
agencies in the United States of America. In this context, it is worth 
recalling that one of the declared purposes of the Atomic Energy Act is 
``to make the maximum contribution to the general welfare, subject at 
all times to the paramount objective of making the maximum contribution 
to the common defense and security;'' the NRC, as an instrument of this 
policy, has the duty to foster attainment of these objectives in a 
balanced fashion, within our established mandate.
    The NRC needs to assure that the uses of nuclear energy and 
radiation are conducted within the envelope of ``adequate protection of 
health and safety'' so the nation benefits from each and every one of 
the regulated activities. Many present questions and criticisms of this 
agency's performance stem from the fact that this envelope and its 
margins of safety have not been well defined, or are rigidly applied, 
especially when viewed in light of the 1998 state-of-the art. The 
existing regulatory envelope, old and very conservative with many 
archaic requirements that flow from it, limits the ability of the 
agency to optimize its performance. The NRC needs to use today's best 
available knowledge so as to govern and direct activities in proportion 
to the health and safety risks they impose, and to do so with only 
necessary burden. The cost of regulatory burden is paid by the people 
of this country, and it is widely accepted that excessive burden 
undermines general welfare. Regulatory requirements without enhancement 
of safety need to be eliminated in a timely fashion, and those with 
little significance have to be placed in the appropriate resource and 
enforcement focus. Much needs to be done to accelerate the advancement 
of rules and regulations and their implementation and enforcement using 
present know-how, with due consideration of risks, and balance between 
costs and benefits. Therefore, the agency needs to fix:

    the compendium of rules and regulations, based on old scientific, 
    technological and legal bases, that do not adequately meet the 
    needs of 1998; and the delivery system that ranges from sound, 
    structured regulation, to a not-so-objective ``good guy'' or ``bad 
    guy'' framework, to attempts to control or manage regulated 
    entities.

    I would interject that the NRC's activities have been and are well-
intentioned, and the majority produce good results. Notwithstanding the 
intention, the resulting enhancement of safety is sometimes 
questionable, and the costs are frequently large. In my view, the 
Commission took important steps to correct its course in the past year 
when it assumed responsibility for the acceptability of the results of 
the Senior Management Meeting and the NRC Watch List, and when it 
decided not to directly assess licensee management performance and 
licensee corporate culture.
    In the context of implementation of our regulations, it is probably 
good to learn from TMI and Millstone, from 1979 and 1996. The NRC was 
not prepared for TMI. TMI was a significant safety event. Our lessons-
learned provided good safety fixes, but there was also costly 
overreaction. Indeed, the NRC tried for years afterward to control and 
manage beyond the level of adequate protection. Maybe that was 
inevitable because it was a big event, albeit devoid of public health 
and safety consequences. The NRC was not prepared for Millstone, and it 
should have been. There was no significant safety event. In fact there 
were a limited number of issues with safety significance--but there was 
a pervasive lack of sound corrective actions and failures to address 
employee concerns. Also, these issues arose against a backdrop of the 
Commission having not clearly defined what constituted safety. It was 
the concern, probably correct, that the Millstone units were poorly 
managed, and that we, the NRC, had not previously done our job to 
correct the regulatory deficiencies that drove the Millstone actions. I 
believe the NRC overreacted, specifically in response to design bases 
issues, because it has not developed a regulatory structure in which 
requisite performance is proportional to risk.
    Risk assessment is very much a part of the nuclear business and the 
use of risk information is much talked about. Yet, after over 20 years, 
it is more a promise than a fait accompli. The NRC staff is ambivalent 
about it, the industry is ambivalent about it, and the Commission has 
been ambivalent about it. I believe it is no longer sensible to conduct 
our regulatory responsibilities without risk-informed assessment and 
decision-making. And if being risk-informed means systematically 
relinquishing the status quo or the comfortable design basis framework, 
I propose we do it sooner, rather than later. However, the industry has 
to buy into it and be convinced of the benefits.
    I believe the proposed Senate authorization is sufficient to 
maintain NRC's functions and to generate change. Profound changes might 
eventually be costly up-front, but the efficiencies eventually realized 
will be multiplied in their effects on a safe operating nuclear power 
industry.
    In the context of the above statement, the following key areas of 
disagreement with the agency testimony were not resolved within the 
time frame for submittal to the Subcommittee:
    1. The testimony states (p. 11, last paragraph, last sentence):

    ``The present reduction, if carried out, will require the NRC to 
    reduce its planned fiscal year 1999 programs by at least $17.8 
    million. As a result, the NRC will cut back on its reactor 
    inspection and reactor oversight programs, curtail selected safety 
    research, eliminate studies of nuclear materials operating 
    experience, and substantially reduce many of its support 
    activities.''

    I proposed to replace that sentence with the following:

    ``If these reductions are effected, the NRC shall improve its 
    processes to ensure that no reduction in adequate protection of 
    public health and safety will result.''

    I believe that the overall message of the paragraph is that we will 
not have adequate resources, with the contemplated reductions, to 
modify the agency regulatory approaches along the lines discussed in 
the testimony, and the planned reduction will seriously and adversely 
affect important health and safety programs. The case for that message 
has not been made to me. Indeed, it is my informed view that planned 
programmatic changes and improved processes can assure adequate 
protection within the contemplated reduction, and that this important 
message needs to be conveyed.
    2. The testimony states (p. 6, 2nd full paragraph, 1st line):

    ``While the NRC believes that the basic focus and emphases of its 
    inspection and enforcement programs are sound, we agree that 
    improvements are needed in both areas.''

    I proposed deleting the first clause because nearly everyone, 
including the Commission itself, seems to be in agreement that 
highlighted problems and issues warrant further major reviews and 
fundamental changes in both areas. Therefore, I believe the basic focus 
and emphases of inspection and, more so, enforcement, are not 
``sound''; in fact, accelerating changes in these areas support this 
last proposition.
    3. The Appendix includes the following statement (p.A-5, 2nd full 
paragraph):

    ``In addition, in reviewing the criticisms that have been directed 
    at the NRC regulatory processes, it is important both for the NRC 
    and for our stakeholders to keep in mind that the basic processes 
    under criticism are the same processes that have resulted in the 
    licensing and operation of 110 safe nuclear power plants. Today, 
    104 plants are operating to produce 20 percent of our nation's 
    electricity, with an enviable record in terms of protecting the 
    health and safety of the American people. That should not be taken 
    to imply, by any means, that NRC processes are or should be above 
    criticism--far from it. It does, however, suggest that caution 
    should be exercised in making sweeping changes to ensure that 
    seemingly desirable improvements, made in the interest of increased 
    efficiency or diminished regulatory burdens, do not turn out to 
    have unforeseen adverse effects on the overall objective of 
    ensuring nuclear safety.''

    I objected to this paragraph because it appears to imply that 
robust changes could have adverse effects on nuclear safety. It is 
difficult to conceive of changes to NRC requirements that would not be 
rigorously safety-scrutinized; changes need to be made to enhance 
regulatory efficiency without raising thresholds or decreasing overall 
requisite safety. Furthermore, the point that the same basic processes 
were used to license and operate nuclear power plants--for 30, 25 or 20 
years--is supportive of the need to change them for responsiveness to 
present scenarios: many are no longer current or consistent with each 
other.
    4. The Appendix includes the following statement (p. A-20, 2nd 
paragraph, 5th line):

    ``A recently identified example was the decline in attention that 
    had occurred, across the industry, on maintaining the facility 
    design basis.''

    I proposed deletion of this sentence. I do not believe the case has 
been made that there was an across-the-industry decline in attention 
to, or maintenance of, the facility design basis. The completeness and 
the availability of design basis information are not necessarily 
equivalent to design safety issues.
    5. The Appendix includes the following statement (p. A-36, first 
partial paragraph, beginning in 7th line):

    ``These inspections resulted in significant findings, which 
    included, among other things: (1) plant modifications or 
    evaluations that had resulted in operation outside the design 
    basis; (2) modifications or evaluations resulting in safety systems 
    not being able to perform their intended safety functions; and (3) 
    inadequate testing of safety related components. Some of these 
    findings resulted in declaring equipment or systems inoperable, 
    requiring plant modifications and resulting in voluntary or 
    technical-specification-required plant shutdown. These findings 
    were detailed to the nuclear power industry in Information Notice 
    98-22, issued June 17, 1998. Although licensees expended 
    significant resources to document their design bases, significant 
    safety issues were found and corrected that otherwise might have 
    gone undetected.''

    I recommended that this portion of the paragraph be replaced by the 
following:

    ``These inspections showed that the rest of the industry, overall, 
    did not have safety problems as a result of design basis issues. 
    While the inspections did identify the need for additional 
    definition, documentation, and compliance, it should be emphasized 
    that safety was not compromised. This result underscores the 
    mismatch that exists between the NRC's current regulation/
    regulatory processes and protection of public health and safety. 
    This mismatch can be eliminated through the use of risk-informed, 
    and where appropriate, performance-based inspections.''

    My essential point was that the testimony suggests that there were 
industry-wide, significant safety problems and widespread compromises 
of overall safety. However, I believe the results of NRC inspections do 
not support that conclusion and that significant deficiencies were only 
found in a few plants. The Architect/Engineer (AK) inspection effort 
referred to in this passage was terminated because the resource 
expenditure was not justified by the safety findings. This further 
supports my conclusion on item 4 above. Our own Inspector General 
concluded (OIG/97A-01 at 8):

    ``We believe that while recent regulatory actions and requirements 
    may have enhanced NRC's confidence in Licensees' design control 
    practices, they may not necessarily produce a safety benefit 
    commensurate with their cost to the industry to implement and the 
    agency to enforce.''

    ``While compliance with regulatory requirements is important, in a 
    time of diminishing resources NRC needs to focus on those areas 
    which provide the greater safety benefit. Emphasizing strict 
    adherence to all NRC requirements, some of which may not be safety 
    significant, may result in an ineffective use of resources.''

    I have tried to provide the Subcommittee with my perspective and 
understanding on some important areas of the Commission's testimony. I 
would like to take the opportunity to pledge that I will work for 
change, not for change's sake, but for safety's sake and for the well-
being of the country.
    I appreciate the opportunity to present my views and would be 
pleased to answer any questions that you may have.
                               __________
   Statement of Joe F. Colvin, President and Chief Executive Officer 
                        Nuclear Energy Institute
    Mr. Chairman, Ranking Member Graham and distinguished members of 
the subcommittee, my name is Joe Colvin. I am president and chief 
executive officer of the Nuclear Energy Institute. The Institute is 
responsible for setting policy on matters affecting the nuclear energy 
industry, including Federal regulatory practices that influence day-to-
day operations of nuclear power plants. NEI represents more than 275 
companies, including every U.S. utility licensed to operate a 
commercial nuclear reactor, their suppliers, fuel fabrication 
facilities, architect and engineering firms, labor unions and law 
firms, radiopharmaceutical companies, universities and international 
nuclear organizations.
    I would like to thank the committee for considering the nuclear 
energy industry's views on this matter, particularly in light of the 
industry's long-standing recommendation for comprehensive reform of 
Nuclear Regulatory Commission's regulatory regime. As the industry's 
policy leader, NEI is committed to ensuring the continued, safe 
operation of more than 100 nuclear power plants amid a changing 
marketplace. Today, the focus is on nuclear power plant regulations, 
but concerns about reform are issues that apply to all licensees.
    My testimony will provide a historical account of NRC's attempts at 
reform, but more importantly reiterate the need for a new regulatory 
process that continues to protect public health and safety, but is more 
efficient, less intrusive and less costly. The shift to a new 
regulatory framework should recognize the appropriate balance of risk 
insights and safety, and lessons learned from four decades of 
consistently improved performance.
    The safety, reliability and economic performance of U.S. nuclear 
power stations have improved dramatically during the past two decades, 
yet the NRC's regulatory programs and oversight have failed to 
recognize these changes. Assessment, inspection and enforcement 
policies are inconsistent with the industry's high level of 
performance. The NRC's comprehensive regulatory approach remains 
focused on an old paradigm-the assumption that licensees will not 
maintain compliance or make required safety improvements unless 
enforcement actions are taken routinely in response to noncompliance. 
Recent operating and safety statistics prove otherwise. By any set of 
standards, including the NRC's Office for Analysis and Evaluation of 
Operational Data, the industry's safety record supports a fundamental 
change in the NRC regulatory process. The agency, however, operates 
under an outdated regulatory process that is mired by conflicting 
regulatory interpretations that often circumvent the formal rulemaking 
process. NRC enforcement action focuses on strict compliance, and its 
inherently subjective concept of ``regulatory significance'' is 
misplaced and has the potential to adversely affect safety. The 
commission also suffers from chronic delays in issuing licenses and 
responding to other industry petitions.
    The NRC must undergo comprehensive regulatory reform that includes 
safety-focused regulations, consistent guidelines for meeting these 
regulations, efficient inspections to verify compliance, and a balanced 
enforcement program to respond to noncompliance. In doing so, the 
agency should adopt the best practices and efficient processes 
identified and in use at other Federal agencies that have undergone 
similar reform. The NRC has already begun this effort in some aspects 
of its regulatory scheme, and the industry commends the commission's 
work, under the leadership of Chairman Shirley Ann Jackson, on many 
fronts, such as license renewal rule. There also are signs that the NRC 
is considering revamping its highly subjective plant assessment process 
to one based on objective criteria.
Introduction
    Nuclear energy is America's leading source of emission-free 
electricity, supplying nearly 20 percent of our power at a competitive 
price. The industry has more than 40 years of operating experience in 
the United States and is the global leader in nuclear safety. Since the 
early 1970's, nuclear power has strengthened the diversity and security 
of our energy supply, powered economic development and helped raise our 
quality of life. More than 435 nuclear power plants produce 17 percent 
of the world's electricity. Nuclear energy's clean air benefits also 
are a significant factor in many developed countries' plans to meet 
emissions reductions outlined in the Kyoto Protocol.
    The nuclear energy industry consistently has supported the NRC's 
mission as a strong and credible regulator. Safety is and always will 
be the industry's first priority, and a strong, credible regulator is 
essential to instill public trust and confidence in our industry. But 
effective and efficient regulation that protects public health and 
safety should be accomplished through a regulatory approach that 
focuses on safety and allows industry and the NRC to allocate resources 
to those areas most important to safety.
    As the United States makes the transition to a competitive market 
for electricity production and distribution, our most significant 
business uncertainty is not the cost of fuel, such as natural gas, or 
changing environmental requirements on emissions that may increase the 
cost of, or limit production from, fossil fuel sources. The most 
significant area of uncertainty is the NRC's inconsistent, outdated 
regulatory process, its drain on the agency budget and utility 
resources, and its failure to focus directly on regulations that are 
most important to protecting public health and safety.
    As states confront the dual challenges of industry competition and 
stringent emissions reductions requirements, energy officials 
increasingly are recognizing the ``hidden value'' of the continued 
operation of emission-free energy sources. Nuclear energy's transition 
to a competitive market will depend, in part, on the NRC's ability to 
adapt to the same changing environment and how swiftly the agency 
responds to nuclear power plant license transfers and other licensee 
petitions to the agency.
    History, however, demonstrates that the agency is slow to change. 
At its best, the agency has shown a willingness only to embrace short-
term, piecemeal reform. At its worst, the agency has not responded to 
numerous, independent recommenda-tions for integrated, systemic change. 
The NRC also has undertaken a number of self-assessments and industry 
reviews, but none have resulted in significant change in NRC process or 
culture.
    Congress has the opportunity to provide the necessary impetus for 
change through ongoing oversight and guidance that would sustain 
fundamental reform of the NRC's regulatory process. Just as the 
industry has made a significant transition in the way it operates in a 
competitive market, the NRC must replace an outdated regulatory 
framework with one that is safety-focused and responsive. As part of 
this need for fundamental change, Congress should ensure that the 
agency is successfully on the path of implementing meaningful reforms. 
NRC's past reluctance to initiate a self-directed reform program 
demonstrates this need for continued congressional oversight. Given the 
onset of electricity competition, reform of the regulatory process must 
be accomplished without delay.
    Regardless of the transition to a competitive electricity market, 
the NRC-like all Federal agencies-is obligated to provide the least 
intrusive, most efficient and most cost-effective regulation 
commensurate with protecting public health and safety. The NRC has an 
obligation to electricity consumers and the industry to follow the lead 
of other Federal agencies in undertaking reform that reflects today's 
business environment.
    For example, the Federal Energy Regulatory Commission (FERC) 
announced on June 10 that it recently completed a 4-month study about 
how to streamline the agency's procedures to keep pace with rapid 
industry changes. The agency intends to enhance the timeliness of its 
decisions and focus more resources on market issues. FERC Chairman 
James Hoecker describes the reform effort as ``our way of acting 
strategically to make regulation efficient and beneficial where it is 
required and less intrusive or even unnecessary where it is not ...The 
commission must embrace the culture of customer service and advanced 
technology into which regulated companies are swiftly being drawn. 
\1\``1 FERC intends to implement operating changes in phases during the 
next 2 years.
---------------------------------------------------------------------------
    \1\ Federal Regulatory Commission news release, ``Commission Plans 
Major Changes to Keep Pace with Regulated Industries,'' June 11, 1998.
---------------------------------------------------------------------------
Congressional Recognition of Need for Regulatory Reform
    The industry applauds this committee's oversight, including today's 
hearing to examine a sensible, meaningful approach toward reform of the 
NRC's regulatory process. We encourage your ongoing direction of the 
commission's regulatory reform activities. Similarly, Senate 
appropriators have undertaken a broad examination of the regulatory 
process as part of the Federal budget review. The Senate Appropriations 
Committee in June sent a strong message to the NRC about persistent 
weaknesses in its implementation and enforcement of regulatory 
requirements.
    The committee noted that six major reviews of the agency since 1979 
have revealed common criticisms, including: ``the NRC's approach to 
regulation is punitive rather than performance based, licensees are 
forced to expend considerable resources on regulations that are not 
related to safety, the NRC is unnecessarily prescriptive, licensees 
fear retribution for criticism, there are not specific criteria for 
important NRC actions such as placing a reactor on the watch list, and 
the NRC focus on paper compliance is not related to and can distract 
from safety activities.''
    The committee added that it ``is concerned that the NRC has done 
little to respond to these reviews and believes that a major review 
should be undertaken to improve the efficiency of the NRC and the 
manner in which it oversees public health and safety.'' As part of this 
review, NRC was directed to issue monthly reports on the progress of 
its licensing and regulatory duties.
    More telling, perhaps, of the committee's dissatisfaction is its 
recommendation to limit extension of the agency's user fee to 1-year 
increments, rather than the NRC-requested 5-year authorization. The 
NRC's authority to assess licensees for 100 percent of budgetary 
expenses expires in fiscal year 1998. The industry supports the 1-year 
reauthorization to provide an opportunity for continuing oversight 
until Congress is satisfied with improvements in the regulatory system.
    The nuclear energy industry applauds the Senate appropriators' 
vigilance and also urges this committee to support the 1-year 
reauthorization of NRC's user fee collections until the agency 
successfully implements regulatory reform. Congress also should require 
the NRC to measure its success at implementing overall regulatory 
reforms and regularly report its progress to this committee.
NRC Reform: A History of False Starts
    An unacceptable lag time has developed between the understanding 
that regulatory reform must take place at the NRC and a serious attempt 
to accomplish it. Nearly 20 years have past since the first NRC review 
recommended the need for a shift in the agency's regulatory process.
    In 1979, the President's Commission on the Accident at Three Mile 
Island provided one of the first accounts of the need for regulatory 
improvement. The so-called Kemeny commission was appointed by President 
Carter to review the accident at the Three Mile Island nuclear power 
plant. \2\ One of its conclusions-that ``NRC tends to focus industry 
attention narrowly on the meeting of regulations rather than on a 
systemic concern for safety'' remain relevant today.
---------------------------------------------------------------------------
    \2\ Report of the President's Commission on the Accident at Three 
Mile Island,'' October 1979.
---------------------------------------------------------------------------
    The Kemeny Commission also noted ``a preoccupation [by NRC] with 
regulations . . . We are convinced that regulations alone cannot assure 
safety. Indeed, once regulations become as voluminous and complex as 
those regulations now in place, they can serve as a negative factor in 
nuclear safety.''
    At least five other independent reviews of the NRC's regulatory 
practices echo the Kemeny report's conclusions. The agency's own 
internal examinations also have found fault with NRC practices. For 
example, a 1981 Regulatory Impact Survey by senior NRC management 
reviewing the safety impact of regulatory activities determined that, 
``notwithstanding the competence and good intentions of the [NRC] staff 
. . . the [slow] pace and nature of regulatory actions have created a 
potential safety problem of unknown dimensions.'' \3\
---------------------------------------------------------------------------
    \3\  NUREG-0839, 1981: ``A Survey by Senior NRC Management to 
Obtain Viewpoints on the Safety Impact of Regulatory Activities from 
Representative Utilities Operating and Constructing Nuclear Power 
Plants.''
---------------------------------------------------------------------------
    A chronology of recommendations to reform the regulatory process 
and false starts on the part of NRC at reform are attached to this 
testimony (Attachment A). These recommendations include:
      An Oct. 15, 1986 letter from the chairman of the Advisory 
Committee on Reactor Safeguards to the NRC chairman. The ACRS chairman 
said that NRC staff ``has a tendency to regulate in an economically 
wasteful fashion.''
      A Nov. 24, 1989 letter from the chairman of the Advisory 
Committee on Reactor Safeguards to the NRC chairman addressed coherence 
in the regulatory process. The letter described a ``problem of the 
regional administrators, who sometimes have practices that differ from 
each other, and from headquarters. In the end, it is the regional 
administrators with whom a licensee has the most contact, and who 
embody NRC in the field, and there are too many cases in which their 
dicta go well beyond the policies set by the commission [NRC].''
      A 1989-90 Regulatory Impact Survey found that ``licensees 
acquiesce to NRC requests to avoid poor numerical Systematic Assessment 
of Licensee Performance ratings and the consequent financial and public 
perception problems that result, even if the requests require the 
expenditure of significant licensee resources on matters of marginal 
safety significance.''
      A 1992 National Academy of Sciences study concluded that 
``an obstacle to continued nuclear power development has been the 
uncertainties in the Nuclear Regulatory Commission's licensing 
process.''
      A 1994 industry study conducted by Towers Perrin found 
that NRC's regulatory practices did not increase the safety margin at 
nuclear power plants. Nuclear licensees also reported an increase in 
``pressure to take actions not required by regulation.'' \4\
---------------------------------------------------------------------------
    \4\ Nuclear Regulatory Review Study, ``Final Report,'' p. 3.
---------------------------------------------------------------------------
    A chart attached to this testimony (Attachment B) further 
demonstrates that NRC's regulatory weaknesses have been repeatedly 
identified for reform through independent reviews.
Regulatory Process In Need of Systemic Improvement
    NRC's regulatory programs and enforcement policy are inconsistent 
with the industry's high level of operating performance. As a result, 
agency and industry resources are consumed by matters that have low 
safety significance, including a dramatic rise in enforcement actions 
where there is no tie to safety.
    The industry applauds the commission's work on many fronts, such as 
the license renewal rule, and there are signs that the NRC is 
considering revamping its highly subjective plant assessment process to 
one based on objective criteria. Nonetheless, immediate, fundamental 
changes in policy and culture are necessary to ensure that a tightly 
focused regulatory system is established and effectively implemented.
    At every turn, NRC's regulatory procedures are overly prescriptive-
a process rooted in the 1950's, when knowledge about nuclear safety and 
nuclear plant operating experience was evolving. In 1979, regulations 
for operating nuclear power plants were complex and prescriptive. 
Rather than heeding the Kemeny Commission's recommendations, the 
regulations and regulatory requirements have become even more complex 
today.
    The complexity of regulatory requirements stems in part from the 
different vehicles NRC uses to issue guidance. However, NRC's informal, 
subjective guidance imposes obligations on licensees without undergoing 
the notice and comment procedures established by the Administrative 
Procedures Act. These practices include:

      Issuing informal guidance through generic NRC 
communications that utilities feel obligated to follow, and 
confirmatory action letters that provide specific recommendations to 
plant operators concerning corrective action. These letters and 
guidance ultimately become regulatory obligations.
      Examples of NRC's subjective practices include 
determining which plants should be placed on the watch list and rating 
plants through the systematic assessment of licensee performance.

    These practices often are confounded by conflicting interpretations 
from NRC's regional offices. At an NRC roundtable discussion earlier 
this month, Dr. Zack Pate, chairman of the World Association of Nuclear 
Operators, said ``Headquarters and regional personnel routinely, every 
day, indeed every hour, impose requirements on the plants that the 
Commission or the EDO or other senior managers would not support if in 
each instance you knew what was happening. Time and time again over 
these past 18 years that I have been observing, when such examples are 
brought to the attention of an individual commissioner or the EDO, you 
[NRC management] find the situation to be just as unreasonable as I do, 
but this continues. The Towers-Perrin study, conducted some 4 years 
ago, illustrates this problem quite clearly, even dramatically.''
    The NRC's regulatory inconsistencies also contradict the Clinton 
Administration's regulatory reform initiative. Executive Order 12866, 
issued in 1993, envisions a Federal regulatory system that ``protects 
and improves health, safety, environment and well-being without 
imposing unacceptable or unreasonable costs on society.''
Far More Burden, No More Benefit
    NRC's emphasis on strict adherence to requirements that lack safety 
significance has created a regulatory environment that suffers from a 
lack of prioritization. Licensees are penalized based on regulation to 
a zero-defect threshold at a time when industry safety reliability and 
economic performance are at an all-time high. \5\ Regulating to a zero-
defect threshold results in a broad spectrum of requirements that 
presumably are equally important, and ultimately, detract from the 
important safety mission.
---------------------------------------------------------------------------
    \5\  For example, in 1997, the median value for unplanned automatic 
shutdowns at nuclear power plants was 0 per 7,000 critical hours, down 
from 7.3 in 1980, according to the 1997 World Association of Nuclear 
Operators Performance Indicators.
---------------------------------------------------------------------------
    The regulatory disconnect also is recognized by Wall Street. A June 
report from Moody's Investor Service takes note of the NRC's heavy 
regulatory burden and its bearing on the industry's future. ``Despite 
safety performance records that are at an all-time high, continued 
close scrutiny by the Nuclear Regulatory Commission also represents a 
challenge for all nuclear utilities.'' \6\
---------------------------------------------------------------------------
    \6\ Moody's Investor Service, Special Comment, ``Restructuring 
Reduces Fallout from Deregulation for Nuclear Utilities,'' June 1998.
---------------------------------------------------------------------------
    Another industry concern stemming from NRC's varying guidance 
mechanisms is that regulation should be consistent with NRC's backfit 
rule, which requires that new interpretations of existing regulations 
or newly issued regulations must be reviewed under 10 CFR 50.109 to 
determine if they are necessary to preserve adequate protection or to 
bring a plant into regulatory compliance. If neither of those 
conditions are met, then NRC regulations require backfits to undergo a 
cost-benefit analysis demonstrating that such an action will result in 
a substantial increase in public safety and be cost beneficial.
    The methods used to determine the cost-benefit analysis by the NRC 
can, and have, justified nearly any new regulation imposed by the 
agency. For example, the NRC takes ``averted on-site costs'' into 
consideration in the cost-benefit calculation of a new regulation. 
This, in effect, is an assumption of the economic loss to a licensee 
due to a plant shutdown-the cost of replacement power, labor, etc., 
that could be incurred if such a regulation was not in place. This 
``benefit'' is then used to justify the imposition of a new regulation 
that could not be justified otherwise. This results in the licensee 
committing budget and resources to implement a regulation not needed 
for safety.
    Equally troubling to NRC licensees is the lack of relative priority 
given to non-safety related compliance issues by the agency staff both 
at headquarters and in the regions. There is widespread agreement by 
the industry and the commission that nuclear safety would be enhanced 
by a more objective prioritization of available resources based on the 
objective safety significance. There is a high level of safety in the 
industry today. And while the industry certainly can accomplish the 
most important safety goals, it should not be required to devote the 
same level of resources to non-safety significant requirements.
    The agency's inconsistent approach to the regulatory process and 
shifting interpretation of some regulations makes it difficult for 
utilities to consistently prioritize activities subject to NRC 
regulation. Adopting a performance-based regulatory framework would 
permit utilities to focus resources on areas that are most important to 
the continued protection of public health and safety.
No Margin For Error
    The industry recognizes that the NRC has conducted a number of 
reviews of the enforcement policy during the past 4 years, \7\ with the 
intent of improving its effectiveness and implementation. While some 
productive changes have resulted from NRC's redesign, the agency 
continues to isolate its review of the enforcement process from overall 
reform. Yet in order for NRC's enforcement procedures to be truly 
effective, they must be part of an integrated, comprehensive regulatory 
framework. That framework must include safety-focused regulations, 
consistent guidelines for meeting these regulations, efficient 
inspections to verify safety-based compliance and a balanced 
enforcement program to respond to noncompliance when it affects safety.
---------------------------------------------------------------------------
    \7\ The latest revisions to the enforcement policy, NUREG-1600, 
``General Statement of Policy and Procedure for NRC Enforcement 
Actions,'' were published May 13 in the Federal Register.
---------------------------------------------------------------------------
    Despite the industry's long-standing recommendation to reform the 
enforcement process, NRC remains wedded to the view that unless 
enforcement action is taken, licensees will not take steps to maintain 
safety. This approach is not only outdated based on industry 
performance, but it also is rooted in the agency's assessment process, 
which focuses in part on the number and types of violations NRC or 
licensees report.
    In the past 2 years, the industry has witnessed a sharp spike in 
the total number of violations, despite improvements in industry safety 
trends. For example, NRC imposed 50 percent more industry violations 
(1,519) in 1997 than a year earlier. This increase belies the 
performance of the industry and underscores the disconnect between the 
inspection process and the NRC's goal of assuring adequate safety in 
the sense that the industry spends significant time on areas of 
compliance that have a relatively low impact on safety. This process of 
responding to low-level violations must be revamped so that the 
industry and NRC can maintain their focus on safety significant issues.
    The Union of Concerned Scientists (UCS) told the commission 
recently that the largest problem with inspection enforcement and 
assessment is tied to ``how the NRC classifies the plant's performance, 
or how it predetermines the plant performance. If a plant is in good 
standing, then it gets good inspections. It gets good enforcement 
action, and it gets good performance assessment. If the NRC places that 
plant into the regulatory distress category, then all these things drop 
off the board, and there's a step change virtually overnight into the 
other category.'' UCS safety engineer David Lochbaum told the 
commission that ``the plant's status did not change overnight, just the 
NRC's perception of that plant. What in the past apparently was written 
up as a non-cited violation is now being cited as a violation. The 
standard shouldn't change. If there were problems before, they should 
have been reported as problems before. If they're not problems today, 
they shouldn't be reported as problems today. There's something wrong 
with that kind of performance.''
Response to Violations with Low Safety Significance
    Of the 1,519 violations in 1997, 1,417, or more than 90 percent, 
fell into the category of least safety significance-severity level IV. 
Often, these violations have little relevance to a plant's overall 
performance. The following examples illustrate these flaws:

  In May 1997, NRC inspectors noticed three-ring binders 
    resting above a main control room panel at a nuclear plant and 
    issued a level IV violation. \8\ According to the NRC, the binders 
    could have posed a potential safety problem if they became 
    dislodged during an earthquake.
---------------------------------------------------------------------------
    \8\ NRC Inspection No. 97-06, May 16, 1997. Instead of instructing 
the plant operator simply to move the binders, the inspector cited the 
plant. The utility had failed to conduct a written evaluation to ensure 
that the binders did not involve an ``unreviewed safety question.''
---------------------------------------------------------------------------
  Another utility was cited because a diesel generator proved 
    to be more robust than regulatory guidelines required. \9\
---------------------------------------------------------------------------
    \9\ NRC Inspection No. 97-11, August 8, 1997. In performing its 
standard loading test of an emergency diesel generator, a utility 
operated the generator at a capacity greater than 4,700 kilowatts, even 
though guidelines specify the generator should be operated at less than 
4,700 kilowatts, but greater than 4,450 kilowatts during an allotted 
period.
---------------------------------------------------------------------------
  NRC issued a level IV citation to a nuclear plant for failing 
    to mark a procedure in an operations manual with a double asterisk. 
    \10\
---------------------------------------------------------------------------
    \10\ Years before, the plant had committed to NRC to mark the 
procedure with a double asterisk as a reminder to operators that they 
must read the procedure step by step when they perform it. When the 
operations manual was revised, an adminstrative assistent inadvertently 
left off the double asterisk. The plant was fined for not meeting a 
regulatory commitment.

    Despite their relatively low safety significance, severity level IV 
violations nonetheless demand a timely response. A timely response, 
however, demands resources. And a plant operator has no choice but to 
divert these resources away from matters that may be of greater safety 
concern. In effect, the NRC is managing a plant's priorities when it 
issues severity level IV violations with a train of paperwork and 
corrective action.
    The industry believes other flaws exist within NRC's enforcement 
procedure, such as the aggregation of violations.
Combining and Elevating Violations
    The NRC often aggregates violations that it believes arise out of 
the same circumstances or that share common root causes and combines 
them to impose a violation of a higher severity level. For example, 
several relatively minor violations can become a severity level III 
candidate.
    In 1997, the NRC significantly increased its practice of 
aggregating minor violations, thereby elevating or ``escalating'' the 
level of violations, industry data demonstrates. The number of 
aggregated violations cited in an escalated action was almost three 
times that of 1990. Many licensees believe that aggregation is used to 
unduly inflate the perceived significance of problems that are of 
themselves not safety-related.
    A November 1997 aggregated violation illustrates this point. \11\ 
NRC cited a nuclear power plant where a control switch on a backup 
emergency diesel generator was improperly positioned. The utility 
received six separate procedural violations relating to the failure to 
correct the switch position error and record it in an operating log. 
Collectively, the violations became a severity level III violation.
---------------------------------------------------------------------------
    \11\ NRC Inspection No. 97-10, Nov. 7, 1997.
---------------------------------------------------------------------------
    In another case, during a period between July 1994 and July 1995, a 
utility's salt service water system recorded temperatures that exceeded 
the design bases. The NRC did not identify those temperature changes 
until 1997, when the agency issued seven violations to the utility. At 
no time prior to the citation's issuance had NRC notified the plant 
that the agency determined its temperature variations were in excess of 
plant requirements. The violations were combined and escalated to a 
severity level III violation, which includes a $55,000 fine.
    The NRC's use of aggregation is problematic because of its inherent 
subjectivity and the discretion it inserts into the enforcement 
process. Are minor problems linked? Should they be aggregated? Do they 
reflect a broad performance problem? These are questions that have less 
to do with the actual violations and their consequences, and more to do 
with individual perceptions of licensee programs, processes and 
performance.
Licensing Reviews and Staff Changes Mired in Bureaucracy
    NRC requires agency approval prior to a wide range of industry 
activities. Many, such as licensing applications and corporate license 
transfers, are accepted as priorities for review. Other requests, such 
as those seeking code relief for plant repairs, rank low in NRC 
consideration.
    However, industry experience proves that a priority in the queue 
doesn't necessarily translate into timely review. Despite NRC pledges 
of expedience, many industry requests are subject to unreasonable 
delays. Such inaction can prevent private companies from safely meeting 
the needs of the marketplace-often at considerable expense. As a result 
of delay in the NRC licensing process, Louisiana Enrichment Services, 
L.L.P. withdrew its application after spending $34 million and more 
than 7 years participating in the licensing process.
    The Louisiana company in April withdrew its NRC application for a 
license to construct and operate the Claiborne Enrichment Center. ``The 
inability of the licensing process to operate in a predictable, 
efficient and timely manner'' was the driving factor in abandoning the 
fuel enrichment project, LES President Roland Jensen told the NRC. LES 
had filed its application with the NRC on Jan. 31, 1991, with the 
expectation of operating the nation's first privately owned nuclear 
fuel enrichment facility by 1996.
    The NRC failed to resolve LES's licensing issues in a timely manner 
despite the fact that Congress, as part of the Energy Policy Act of 
1992, amended the Atomic Energy Act expressly for that purpose-to 
mandate a streamlined, one-stage licensing process for uranium 
enrichment facilities.
    Evidence of NRC inaction abounds in other areas.
    Portland General Electric Co. is awaiting an NRC decision on its 
application to ship a reactor vessel with internal components intact to 
a low-level radioactive waste disposal facility in Hanford, WA. \12\ 
The company submitted its application in the summer of 1996 in hopes of 
meeting a summer 1998 shipment date. After significant delays on NRC's 
part, PGE has been forced to delay its shipment until 1999.
---------------------------------------------------------------------------
    \12\ Portland General Electric Co. submitted an application for 
exemption from Part 71 to ship the Trojan reactor vessel with internals 
intact to the Hanford low-level waste disposal site.
---------------------------------------------------------------------------
    Portland General Electric proposed the shipment to significantly 
limit worker exposure to radioactive elements within the reactor vessel 
that otherwise would be dismantled for shipping. In addition, PGE's 
proposed method-a practice the Navy routinely uses in shipments \13\--
would save $14 million in decommissioning costs.
---------------------------------------------------------------------------
    \13\ The Navy conducts approximately nine shipments of reactor 
vessels a year to the Hanford disposal facility.
---------------------------------------------------------------------------
    Today, PGE still awaits NRC action.
    In the past, the NRC also has been slow to authorize nuclear plant 
license transfers. An NRC decision on Georgia Power Co.'s request to 
transfer its Vogtle power station license to the Southern Nuclear 
Operating Co. as part of a corporate reorganization took more than 4 
years. \14\
---------------------------------------------------------------------------
    \14\ An intervenor used the license transfer proceeding to address 
a complaint about management at the electric company. The licensing 
authority allowed this to sidetrack the transfer process and destroy 
the discipline of the process.
---------------------------------------------------------------------------
    Both companies are subsidiaries of the Southern Company. The 
transfer did not entail a change in Vogtle's staff or management 
structure.
    The Vogtle experience serves as fresh evidence that the NRC's 
licensing procedures are in need of revision to respond to today's high 
level of plant operating performance and the emerging business climate. 
The NRC must instill proper focus and discipline to its licensing 
procedures for commercial nuclear facilities. In a competitive market, 
electric companies' success will be measured in part by the speed with 
which they can respond to business decisions. NRC's license transfer 
process must strike a balance between the need to ensure corporate 
resources are adequate to safely operate a nuclear power plant and the 
new business paradigm in the electricity market.
    As retail competition emerges, more electricity generation 
facilities of all types will be bought and sold, thereby requiring a 
timely license review to keep pace with industry changes. For example, 
GPU Nuclear, Inc. announced earlier this month that it has reached 
agreement in principle to sell Three Mile Island (TMI) Unit 1 to 
AmerGen Energy Co., jointly owned by PECO Energy Co. and British 
Energy. The sale-the first of an operating nuclear plant in the United 
States-will require regulatory approval and license transfer. Several 
agencies, including the NRC, will review the sale during the next 12 to 
24 months.
    Similar transactions of electric generating facilities are expected 
to follow as the retail market continues to evolve.
Creating Regulatory Burdens At Safety's Expense
    Safety is the nuclear energy industry's top priority, and we 
recognize the statutory responsibility that the NRC has to assure 
adequate protection of public health and safety. However, the industry 
is concerned that the NRC has created a regulatory environment in which 
the agency's overly conservative, compliance-oriented approach 
compromises attention to safety.
    In a 1997 audit, the NRC's Office of Inspector General recognized a 
conflict between the commission's goal of focusing on issues of 
greatest safety significance and actual resources devoted to verifying 
license compliance with regulations of limited safety benefit. \15\ The 
report, which focused on NRC events surrounding refueling practices at 
Northeast Utilities' Millstone Unit 1 that were outside of the plant's 
design bases, concluded that the commission should adopt a risk-
informed, performance-based regulatory system-that is, a system that 
measures an acceptable level of risk and weighs plant performance or 
outcomes accordingly.
---------------------------------------------------------------------------
    \15\ OIG/97A-01, NRC Needs Comprehensive Plan to Resolve Regulatory 
Issues, Aug. 21, 1997.
---------------------------------------------------------------------------
    Concerns at Millstone prompted the NRC in October 1996 to seek 
assurances that all nuclear power plants were operated and maintained 
in accordance with their design bases. Licensees were given 3 months to 
respond.
    NRC's request carried the weight of a formal rule and utilities 
worked diligently to respond to the detailed request for information 
ranging from engineering design and configuration control processes to 
a plant's procedure for identifying problems and implementing 
corrective actions. \16\
---------------------------------------------------------------------------
    \16\ Oct. 9, 1996 NRC letter: ``Request for Information Pursuant to 
10 CFR 50.54(f) Regarding Adequacy and Availability of Design Bases 
Information.''
---------------------------------------------------------------------------
    While the agency estimated the letter would require a licensee's 
staff to spend 400 hours to respond to the letter, licensees devoted an 
average of 2,000 staff hours per plant, according to industry 
estimates. As one utility told the NRC, ``We have expended considerable 
efforts to collect, compile and evaluate data.'' One licensee assigned 
a 30-member team that spent 15,000 man hours responding to risk 
significant systems reviews-only one of the five areas in which NRC 
requested information. \17\ Another utility reviewed 105 separate plant 
systems to assure conformance with the design bases. \18\
---------------------------------------------------------------------------
    \17\ Feb. 12, 1997, North Atlantic Energy Service Corp. response to 
NRC request for Seabrook Station's reply to 10 CFR 50.54(f) letter.
    \18\ Feb. 8, 1997, Florida Power Corp. response to 10 CFR 50.54(f) 
letter for Crystal River Unit 3.
---------------------------------------------------------------------------
    In addition to the time devoted to respond to the letter, some 
utilities said their efforts to verify conformance with design bases 
requests and reconcile deviations cost millions of dollars.
    Indeed, the NRC Inspector General's audit said, ``NRC needs to 
recognize the cost to verify compliance with regulatory requirements 
may not produce commensurate safety benefits.''
    More importantly, however, the exercise revealed virtually no 
safety significant findings while diverting valuable plant resources 
from increasing plant safety.
    A survey by the NRC's Office of Analysis and Evaluation of 
Operational Data (AEOD) further supports this point. AEOD reviewed 1997 
design bases events covered under 10 CFR 50.72 and 10 CFR 50.73. Of the 
296 events recorded, only two events could have had an impact on-and an 
extremely low probability of affecting public health and safety. What's 
more, 28 percent of the events cited occurred at the Millstone, Point 
Beach and Crystal River plants, which were shut down at the time.
    This type of regulation continues to focus on compliance and 
prescriptive procedures about how outcomes should be achieved at 
plants, rather than the actual outcomes. The industry strongly supports 
the NRC's attempts to move toward risk-informed, performance-based 
regulation that would focus on plant results and sharpen the safety 
focus. To that end, the agency must expedite its transition to this new 
regulatory system.
Conclusion
    Recent events concerning NRC enforcement, compliance, reporting and 
licensing procedures have demonstrated persistent weaknesses in the 
agency's regulatory system. The NRC's regulatory procedures clearly are 
broken and are in desperate need of a fix.
    In order to regulate more effectively, the NRC must undergo 
fundamental reform so that agency activities are more attuned to the 
experience and improvement gained from 40 years of nuclear energy 
operation and the rapid changes affecting the industry it regulates. 
NRC Commissioner Edward McGaffigan accurately portrayed the need to 
revamp the regulatory process during a 1997 meeting of all NRC 
employees. ``The old model of a ponderous industry dealing with 
ponderous state utility commissions and a ponderous regulator [is] not 
going to be viable for very much longer,'' Commissioner McGaffigan 
said.
    Just as the industry has made a significant transition in the way 
it operates in a competitive market, the NRC must replace an outdated, 
ineffective regulatory framework with one that is objective, safety-
focused and responsive. The agency can achieve these goals by adopting 
risk-informed and performance-based concepts in its regulatory.
    Under risk-informed regulation, the NRC would use nuclear power 
plants' operating experience and analytical tools, such as the 
probabilistic safety assessment (PSA), to match design and operational 
issues with their relative importance to public health and safety. The 
NRC currently employs a prescriptive and deterministic regulatory 
approach that does not rely on plant operating experience or PSAs.
    NRC's new regulatory culture also should embrace a performance-
based approach-that is, regulation that focuses on results as the 
primary means for oversight-not procedures. Performance-based 
regulation demonstrates the following attributes:

      Measures of plant and license performance;
      Objective criteria to assess performance, such as 
performance history; and
      Flexibility for licensees to determine how they can best 
meet the performance criteria.

    While the NRC must immediately undertake fundamental change, 
Congress should take the following steps:

      Authorize the agency's budget in 1-year increments until 
the committee is satisfied that the agency is successfully implementing 
meaningful reforms. Long-standing issues and problems have been 
identified in six major reviews since 1979, but the commission has not 
responded to these reviews. The NRC's program should include benchmarks 
to measure the progress that the agency is making the transition to a 
more effective agency.
      Congress should require that the NRC report its progress 
at regular intervals, and Congress should hold regular oversight 
hearings to ensure reform is undertaken expeditiously.
      Congress should require an independent study of the 
effectiveness of NRC programs, as well as management and staff.

    The industry is committed to working with the commission in a 
partnership that is built on trust, cooperation and the common goal of 
protecting public health and safety. In recent months, the commission 
has demonstrated a good-faith effort to move forward with critical 
reform. The industry is encouraged by these actions and offered the NRC 
eight areas of regulatory improvement. A similar version of the 
suggested improvements is attached to this testimony (Attachment C).
    Nuclear power is one of our most important energy sources, and will 
be even more vital as we strive to meet future energy and environmental 
goals that are inextricably linked. In the same context, the NRC-like 
most other Federal agencies-must undergo fundamental change in the way 
is regulates our industry so that it is focused on those regulations 
that are important to safety and responsive to emerging issues. This 
reform is vital for the nuclear industry will continue to provide broad 
benefits to society, including electricity for 65 million American 
households that rely on these facilities to produce their electricity.
                                 ______
                                 
                              ATTACHMENT A
                               chronology
A. The President's Commission on the Accident at Three Mile Island (The 
        Kemeny Report), October 1979
                              key excerpts
    1. ``The existence of a vast body of regulations by NRC tends to 
focus industry attention narrowly on the meeting of regulations rather 
than on a systematic concern safety. Furthermore, the nature of some of 
the regulations, in combination with the way rate bases are established 
for utilities, may in some instances have served as a deterrent for 
utilities or their suppliers to take the initiative in proposing 
measures for improved safety.''
    2. ``We note a preoccupation with regulations. It is, of course, 
the responsibility of the Nuclear Regulatory Commission to issue 
regulations to assure the safety of nuclear power plants. However, we 
are convinced that regulations alone cannot assure safety. Indeed, once 
regulations become as voluminous and complex as those regulations now 
in place, they can serve as a negative factor in nuclear safety. The 
regulations are so complex that immense efforts are required by the 
utility, by its suppliers, and by the NRC to assure that regulations 
are complied with.''
B. NUREG-0585, ``TMI-2 Lessons Learned Task Force Final Report,'' 
        October 1979
                              key excerpts
    3. ``This opportunity has led us to a critical scrutiny of NRC 
safety policy. What we have found is that prescriptive and narrow 
licensing requirements only add to the quilt work of regulatory 
practice and do little to directly address the nation's heightened 
concern for the safety of nuclear power plants.''
    4. ``The Commission should undertake with the staff the development 
and articulation of clear criteria to define the basic safety goal for 
nuclear power plant regulation. Since this goal will be used as a 
benchmark by the staff in defining new regulatory requirements, 
definitive policy guidance should also be developed regarding the 
threshold for backfitting of new requirements to existing plants. The 
Task Force believes that the goal should be supplemented where possible 
with qualitative reliability or risk criteria, with limitations being 
place on their use to assure that such criteria do not impede the 
capability for timely decisionmaking.''
C. ``Three Mile Island--Report to the Commissioners and to the Public'' 
        (Rogovin Report) January 1980
                              key excerpts
    5. ``We have found in the Nuclear Regulatory Commission an 
organization that is not so much badly managed as it is not managed at 
all. . . Obviously, one of the Commission's functions is to manage and 
set policy for its staff. But in practice, the Commission has isolated 
itself from the NRC staff. The Commission does not directly supervise 
the staff's day-to-day work.''
    6. ``More surprising than that the Commission spends very little 
time managing or setting goals for the NRC staff if the fact that until 
recently it has spent very little time as a Commission deliberating or 
deciding any of the broad or important issues relating to reactor 
safety. . . lnstead it appears that the Commission has traditionally 
spent the bulk of its meeting time on dozens of specific, isolated 
safety-related matter, on personnel and budgetary matter, 
administrative chores, and such issues as export licensing.''
D. Regulatory Impact Survey of 1981, NUREG-839 (``A Survey by Senior 
        NRC Management to Obtain Viewpoints on the Safety Impact of 
        Regulatory Activities from Representative Utilities Operating 
        and Constructing Nuclear Power Plants'')
                     executive summary of comments
    7. ``A major issue identified is the imposition of requirements. 
Licensees consider the NRC system of imposing requirements to be ``out 
of control'' (generic letters, bulletins, circulars, notices, orders, 
rule changes, NUREGs, Regulatory Guides).''
    8 ``The licensees consistently commented that they no longer manage 
their own resources or set their own priorities. They assert that NRC 
functionally dictates their plans and schedules by virtue of work 
activities necessary to satisfy NRC-imposed requirements on NRC-
required schedules. It was the licensees' view that NRC does not live 
in the real world of planning and scheduling.''
                             survey finding
    9. ``It is the finding, notwithstanding the competence and good 
intentions of the (NRC) staff, that the pace and nature of regulatory 
actions have created a potential safety problem of unknown 
dimensions.''
E. Report of the Regulatory Reform Task Force on Nuclear Licensing 
        Reform (DRAFT), November 1982 (A report prepared by the 
        Regulatory Reform Task Force, a group comprised of senior NRC 
        personnel to review the reactor licensing process at the 
        request of NRC Chairman Palladino)
                              key excerpts
    10. ``The suggestion has been made that undisciplined backfitting 
may have made nuclear plants more difficult to operate and maintain 
and, hence, may have had an adverse effect on the public health and 
safety. It has been variously suggested that backfitting leads to less 
than optimal design arrangements; that it compels personnel to 
constantly face the uncertainties associated with change and perpetual 
retraining; that it sometimes requires a high level of construction, 
creating distraction and, therefore, a negative effect on operation. . 
. ''
F. ``Report of the Edison Electric Institute on Nuclear Power'', 
        February 1985 (An Industry Task Force comprised of the Chief 
        Executive Officers of seven utilities, Messrs T. Justice Moore, 
        Jr. (Chairman), Virginia Electric and Power Company; Edward L. 
        Addison, The Southem Company; Howard P. Allen, Southern 
        California Edison Company; William B. Ellis, Northeast 
        Utilities; William S. Lee, Duke Power Company; Donald W. 
        McCarthy, Northem States Power Company; Marshall McDonald, 
        Florida Power & Light Company; John J. Keamey, Edison Electric 
        Institute; developed this report for the industry. Its results 
        were communicated to the NRC).
                       findings & recommendations
    11. ``[u]nder present regulatory and institutional arrangements, no 
American electric utility would consider ordering a new nuclear power 
plant. The costs and risks of nuclear development in the United States 
have become unacceptably high.''
    12. One specific recommendation was the ``[e]xamination of the 
management structure of the NRC with the objective of improving the 
organization's effectiveness and efficiency.''
G. ``A Report on the Management Structure of the Nuclear Regulatory 
        Commission,'' June 1986 (Prepared for Edison Electric 
        Institute)
    13. ``. . . new commitments for nuclear energy plants essentially 
stopped about the time the Commission was formed. Every civilian 
nuclear energy plant ordered after the Commission was established has 
either been canceled or placed on indefinite deferral. While many 
factors contributed to this drop-off in commitments to nuclear energy, 
the organizational structure of the Commission is viewed as one 
contributor to the unpredictability and lack of stability in the 
Federal safety licensing process. Without predictability and stability, 
the nation's utilities are unable and unwilling to call on new nuclear 
energy plants to fill the energy needs of a growing economy.''
H. ``Leadership in Achieving Operational Excellence'', August 1986 (A 
        report for the U.S. Nuclear Utility Industry, developed by: 
        Lelan F. Sillin, Jr, past Chairman Northeast Utility, past 
        Chairman of INPO; Marcus A Rowden, former Chairman of the NRC; 
        Eugene P. Wilkinson, first President of INPO: [The Sillin 
        Report])
    14. ``We note, in this regard, the comparative description of the 
U.S. nuclear regulatory approach with that followed in six foreign 
countries surveyed for the NRC whose nuclear regulatory programs, from 
a safety standpoint, have been as successful as ours but are far less 
contentious (Canada, the Federal Republic of Germany, France, Japan, 
Sweden, and the United Kingdom).* In these foreign programs, more 
confidence and greater reliance is placed on the facility operator to 
assure the public health and safety; the regulatory body follows a 
markedly less prescriptive approach in setting safety requirements; and 
the relationship between regulator and regulated is characterized by 
collaboration in pursuing common safety aims.
    15. The prescriptive nature of the U.S. nuclear regulatory process 
has created an unsatisfactory working interface--one which encourages 
licensee dependence on NRC directives rather than licensee safety 
initiative. The post-TMI Kemeny Commission was sharply critical of this 
state of affairs.''
    16. ``The hard fact is that the operators of these licensed plants 
are in the best position to assure their safe and reliable functioning; 
regulation, no matter how competently and rigorously applied, cannot 
assume this role. That reality should be a prominent factor in the 
shaping of regulatory policy affecting the quality of the industrylNRC 
interface.''
I. Letter from the Chairman of the Advisory Committee on Reactor 
        Safeguards to the Chairman of the Nuclear Regulatory 
        Commission, dated, October 15, 1986
    This letter cites a range of weaknesses in the NRC, including:
    17. ``There is a lack of direction within the Agency. The 
(proposed) planning process, no matter how well done, will not be 
executed well because the Commission has trouble, first, in 
articulating its priorities and second, in getting them implemented.''
    18. ``It (the staff) has a tendency to regulate in an economically 
wasteful fashion, NRC must accept its share of the blame that 
backfitting has been necessary and very expensive, that QA/QC 
requirements lead to very high costs, that ``nuclear power has priced 
itself out of the market'' in the words of one utility representative, 
and so on. In some cases it has established unduly conservative, 
expensive, sometimes unnecessary regulations (e.g., 10 CFR Part 21-
Reporting of Defects and Noncompliance). The Staff builds in 
conservatism discipline by discipline and parameter by parameter, 
rather than being as realistic as the technology will support and then 
adding an appropriate factor of safety at the end. It seemingly does 
not act on the results of safety research (if in the direction of 
relaxation), and requirements once established are seldom relaxed. The 
Staff seems frequently not to arrive at practical, cost-effective ways 
to solve problems.''
    19. ``There is a adversarial relationship between the Agency and 
the regulated that sometimes detracts significantly from the ability of 
the Agency to operate in an effective and efficient manner.''
    20. ``It (the NRC) lacks the ability to regulate in a fashion which 
builds confidence and trust in the regulator. It has not exercised 
adequate discretion in avoiding relatively needless modification and 
backfits, although the performance of the Committee to Review Generic 
Requirements (CRGR) has been very encouraging. (There is a need to 
bring more operating experience to the Staff and to improve the 
Agency's understanding of the operational nuances of the plants that it 
regulates.) We are told by industrial representatives that industry 
will not build new plants until it has confidence that a stable, 
predictable regulatory situation exists.''
    21. ``It (the NRC) has developed a regulatory system that is so 
comprehensive, and frequently so prescriptive, that both the NRC and 
many of the operating utilities have come to believe, or act as though 
they believe, that compliance with the regulations is itself sufficient 
to assure safety. The assumption that regulations and safety are 
synonymous may be dangerous and should be reexamined.''
J. Letter from the Chairman of the Advisory Committee on Reactor 
        Safeguards (ACRS) to the Chairman of the Nuclear Regulatory 
        Commission regarding coherence in the regulatory process, dated 
        November 24, 1989
                                excerpts
    22. ``As we have observed in a number of the referenced reports, 
the NRC seems to suffer increasingly from a lack of coherence in the 
formulation and implementation of its regulatory strategy. . . . .It 
seems to us axiomatic that regulation will be most effective in support 
of nuclear safety--our common objective--if it is coherent and 
defensible, and thereby understood and respected by those who are 
regulated.''
    23. ``There is the problem of the Regional Administrators, who 
sometimes have practices that differ from each other, and from 
Headquarters. In the end, it is the Regional Administrators with whom a 
licensee has most contact, and who embody NRC in the field, and there 
are too many cases in which their dicta go well beyond the policies set 
by the Commission.''
K. Letter from the Chairman of the ACRS to the Chairman of the NRC 
        regarding the status of the SALP process, dated December 21, 
        1989
    24. ``The SALP ratings are extremely important to the licensee, for 
both economic and other reasons; it is therefore essential that the 
process through which they are determined be as objective and credible 
as it is possible to make it. We recognize that there is not available 
a set of fully objective performance indicators and that any rating 
system must therefore have an element of subjectivity. It is then 
doubly important that the procedures incorporate a set of credible 
checks and balances to minimize the effect of the personal 
predilections of the board members.
    Instead we learned from this briefing that the process is almost 
entirely (we were told 80 percent) in the hands of the Regional 
Administrator, who not only appoints most of the board from among his 
own personnel, but is even free to reject an [sic] SALP rating he 
doesn't like, and reconstitute the board as he wishes. The rating 
therefore provides still another weapon for the Administrator to 
enforce his personal views, effectively free of restraint. There is no 
appeal procedure. Even with the best of Regional Administrators this 
strikes us as unwise, with the worst it could make a mockery of 
coherent regulation.
    During our briefing, we were variously told that the purpose of an 
SALP rating is to advise the Regional Administrator (though he signs 
it), and then to help him advise the licensee. At the end it wasn't 
clear which. We were also told that a licensee must exhibit a steady 
improvement to keep his SALP rating constant, then that he needn't, and 
finally that he did. If true, that is not consistent regulation. 
Improvement toward what end? You may wish to read the transcript of our 
meeting.
    We could continue, but the message is that your staff has created a 
process which is out of control. If indeed all the questions we asked 
have reasonable answers, they were not known to the responsible staff 
elements, even during a prepared briefing devoted to the subject.
    On this isolated example of incoherence, we think you should make a 
clear statement of the purpose of SALP ratings, insist that your staff 
implement that purpose and no other, insist that the staff not use the 
ratings as weapons to enforce obedience to idiosyncratic policies that 
are not yours, greatly dilute the Regional autarchy in the process, and 
institute a workable set of checks and balances. Abuses of SALP abound 
and they bring no credit to the regulatory process.
    We also believe that this is a sufficiently important problem to 
justify consideration of suspension of the program and issuance of no 
new SALP ratings until enough reform measures are instituted to lend 
credibility to the process.''
L. Regulatory Impact Survey of 1989/90, draft NUREG 1395 (``Industry 
        Perceptions of the U.S Nuclear Regulatory Commission on Nuclear 
        Power Plant Activities'')
    The Executive Summary of the report on this survey, prepared by the 
NRC staff, identifies the ``principal themes of the survey'' as:
    25. ``NRC so dominates licensee resources through its existing and 
changing formal and informal requirements that licensees believe that 
their plants, though not unsafe, would be easier to operate, have 
better reliability, and may even achieve a higher degree of safety, if 
they were freer to manage their own resources'' and,
    26. ``licensees (utilities) acquiesce to NRC requests to avoid poor 
numerical Systematic Assessment of Licensee Performance (SALP) ratings 
and the consequent financial and public perception problems that 
result, even if the requests require the expenditure of significant 
licensee resources on matters of marginal safety significance.''
M. Letter from a member of the Advisory Council on Reactor Safeguards 
        to NRC Chairman Kenneth M. Carr regarding coherence in the 
        regulatory process, February 15, 1990
    27. ``It is almost as if the NRC were created to be incoherent. 
There are five Commissioners and five statutory offices. There are many 
branches and five Regional Offices, with a kind of matrix management 
tying it all together. Regulatory power is spread throughout, resulting 
in a melange of technical positions, regulatory guides, generic 
letters, policy statements, undocumented pressures, enforcement 
actions, etc. The mechanisms for providing incentive to the various 
elements of the staff to test their actions in the light of Commission 
objectives are inadequate. Indeed those objectives are not always easy 
to determine, for reasons that need no elaboration here. This is not to 
say that anyone is deliberately misbehaving, only that too many are 
free to proceed in the light of their own best judgment.''
N. Letter from a member of the Advisory Committee on Reactor Safeguards 
        to the five NRC Commissioners, entitled ``Impact of the 
        Regulatory Failure to Recognize the Law of Diminishing 
        Returns,'' July 13, 1990
    28. The situation depicted in NUREG-1395 has many facets and 
manifestations, but in principle the morass of associated difficulties 
stems primarily from the lack of coherence among the NRC staff members 
and from their ignoring the Law of Diminishing Returns. That law is as 
immutable as the Law of Gravity. The particular corollary which is--and 
has been increasingly ignored in the regulation of operating nuclear 
power plants is that the extra effort necessary to achieve further 
imposed ``improvement'' in any one aspect of such a multipronged 
endeavor will at some point become detrimental to effective--and safe--
achievement of the objectives of the endeavor as a whole. In my 
judgment the point where the continuing search for further 
``improvement'' became counterproductive was reached some time ago with 
respect to many aspects of nuclear power plant operation.''
    29. ``I believe and have believed for some time that there is a 
pervasive, insidious and ever-worsening aspect of the implementation of 
NRC requirements that has become detrimental to the safe operation of 
all nuclear power plants. The symptoms of this problem and many of its 
associated difficulties are dramatically revealed by the utility 
comments recorded at length in Appendix A (109 pages) to NUREG-1395, 
``Industry Perceptions of the Impact of the U.S. Nuclear Regulatory 
Commission on Nuclear Power Plant Activities'' (Draft Report dated 
March 4990),''
    30. ``The current results of this chronic situation include:
      Frustration and resentment on the part of utility 
personnel at all organizational levels,
      Ever-growing, yet eternally overloaded, plant and plant 
support organizations. This leads to blurred lines of authority and 
accountability, to less effective communication, and to impaired 
understanding and cooperation between support groups,
      Creation of vastly more extensive procedures, training 
programs, correspondence and paper work of all sorts, reviews and 
audits, recordkeeping and futility of commitment ``control'' processes,
      Greater opportunities for (and probability of) violations 
and ``lack of responsiveness''; thus, ``justification'' for imposition 
of more ``improvements,''
      Reduced opportunity and motivation for people to ``stop 
and think'' rather than to ``do it by rote,''
      Increased concentration on the relatively probable and 
probably trivial, at the expense of the relatively improbable, but 
potentially serious.
    In my personal judgment such a situation constitutes the basis for 
real and immediate concern as to the detrimental effects on nuclear 
safety of current NRC staff practice with respect to operational 
``improvements'' at nuclear power plants.''
O. Survey of NRC Staff Insights on Regulatory Impact, SECY 90-250, 
        dated July 16, 1990
    (In followup to the survey of utility personnel cited in item L 
above, the NRC Commissioners asked for this survey of the NRC staff The 
results were reported to the Commissioners by the Executive Director of 
Operations in SECY 9?250 Key excerpts follow.)
    31. ``In general, an underlying observation expressed by most of 
the (NRC) staff surveyed, regardless of the specific NRC program being 
discussed, was that licensees are extremely sensitive to NRC activities 
and sometimes acquiesce to avoid confrontations that could create the 
perception that they are unresponsive. To this extent, licensees are 
vulnerable to potential abuses of regulatory authority.''
    32. ``In addition to this general observation, the following more 
specific principal themes emerged:
  a. Many of those surveyed felt that the NRC does not consider the 
    cumulative impact of requirements on licensees and does not 
    adequately communicate to licensees the priority of each new 
    requirement.
  b. Many of those surveyed stated that the volume and scheduling of 
    NRC activities onsite, particularly team inspections, significantly 
    impact licensees.
  c. To a lesser extent, persons surveyed expressed the view that a 
    continued loss of experienced professionals has depleted the 
    knowledge and experience base of the NRC. Examples vere cited where 
    a lack of experience, training, or careful management oversight 
    resulted in an unnecessary impact to licensees.''
P. Letter from the Advisory Council on Reactor Safeguards to Chairman 
        Kenneth M. Carr regarding the reevaluation of the SALP program, 
        September 12, 1990
    33. ``We have concluded that the recommended programmatic changes 
are appropriate and generally consistent with the objectives that have 
been defined for the program. However, we do not believe that these 
changes go far enough. . . We believe that such changes are needed in 
the interest of improving the overall coherence of the agency's 
regulatory process. This view is strongly supported by the regulatory 
impact surveys of both licensees and staff members.''
Q. Presentation to the NRC Commissioners on the State of the Industry, 
        October 26, 1990 (A presentation to the NRC Commissioners by a 
        NUMARC panel comprised of Messrs. Eugene R. McGrath, Chairman 
        and Chief Executive Office of Consolidated Edison Company of 
        New York and Chairman of NUMARC; John C. Brons, Executive Vice 
        President of New York Power Authority; Byron Lee, President and 
        Chief Executive Officer of NUMARC, and Joe F. Colvin, Executive 
        Vice President of NUMARC.)
                   comment by the chairman of numarc
    34. ``The results we have achieved so far working together in the 
areas of maintenance and procurement are, unfortunately, not the rule. 
Frankly, the view from the trenches is not so good. The cumulative 
impact of regulation and enforcement by the NRC and I mean both 
headquarters staff and the regional offices--is significant, and not 
always conducive to our efforts to improve our operations and our 
striving for excellence.''
R. Letter from the President of the Institute of Nuclear Power 
        Operations to the Chairman of the Nuclear Regulatory 
        Commission, dated December 11, 1990
                           opening paragraphs
    35. ``As you are aware, there is a long-standing concern over the 
potentially adverse impact of this nation's regulatory process, 
particularly the cumulative impact on utility management's 
responsibilities and prerogatives related to nuclear safety. This 
concern has been raised in various reports in the past, including:
      Report of the President's Commission on The Accident at 
Three Mile Island (Kemeny Commission Report), October 1979
      Three Mile Island--A Report to the Commissioners and to 
the Public (Rogovin Report), dated January 1980
      A Survey by Senior NRC Management to Obtain Viewpoints on 
the Safety Impact of Regulatory Activities from Representative 
Utilities Operating and Constructing Nuclear Power Plants, August 1981
      Leadership in Achieving Operational Excellence, The 
Challenge for all Nuclear Utilities (Sillin Report), August 1986
    Similar concerns were expressed in ACRS letters on coherence in the 
regulatory process and reevaluation of the SALP program (dated November 
24, 1989; December 21, 1989; and September 12, 1990.)
    The regulatory impact surveys conducted by the NRC in 1989 and 1990 
focus on this same theme. These surveys include the following:
      Industry Perceptions of the Impact of the U.S. Nuclear 
Regulatory Commission on Nuclear Power Plant Activities (NUREG-1395--
Draft Report, March 1990)
      Results of Industry Survey on Licensee Management 
Involvement in Inspections and Audits (SECY-90-205, June 7, 1990)
      Survey of the NRC Staff Insights on Regulatory Impact 
(SECY-90-250, July 1990)
    Most recently NUMARC and industry executives described these same 
types of concerns in their October 26, 1990 meeting with the 
Commissioners.
    The central problem discussed in these documents and the NUMARC 
briefing is consistent with the information INPO is receiving from our 
interactions with utilities and at the nuclear plants.''
S. Letter from NUMARC on behalf of the industry in response to a 
        request for comments on SECY-90-347, ``Regulatory Impact Survey 
        Report,'' January 28, 1991
    36. ``Unfortunately, the corrective actions proposed in SECY-90-347 
fall short of addressing the significant, long-standing and pervasive 
problems in the regulatory process identified by the survey and will 
not correct the underlying causes of those problems. The recommended 
actions fail to address the two principle themes that were developed by 
the staff from licensee concerns with current NRC regulatory activities 
and attitudes.''
    37. ``From our evaluation of the comprehensive survey information 
documented by the NRC we conclude that the underlying element is the 
need for improvement in the overall management effectiveness of the NRC 
in order to achieve appropriate management discipline and 
accountability over NRC regulatory activities and actions.''
    38. ``. . . we encourage the Commission to take advantage of this 
unique opportunity to address the fundamental, long-standing 
institutional and regulatory problems and we encourage the Commission 
to consider the use of outside assistance to evaluate and assess 
management effectiveness.''
T. Staff Requirements Memo on SECY-91-172, ``Regulatory Impact Survey 
        Report--Final,'' December 1991
                              key excerpts
    39. ``The Commission requests that the staff prepare annual updates 
on progress of implementing the activities described in this paper. The 
program assessments should evaluate lessons reamed from the success or 
failure of different efforts, and from licensee assessments of these 
efforts.''
    40. ``In the area of generic communications in which a new staff 
position is articulated or through which staff seeks additional 
licensee commitments (as opposed to simply disseminating knowledge 
gained from operational experience), the Commission should be apprised 
of such communications prior to their issuance. . . since generic 
communications do not provide formal notice and comment opportunities, 
efforts should be made in such canes to solicit the views of interested 
groups.''
    41. ``The staff should undertake a comprehensive review of SALP 
results to determine whether appropriate QA controls are in place to 
ensure consistent and reliable evaluations. The review should: include 
an analysis of both intra- and inter-regional consistency of standards, 
procedures and results; address the mechanisms present to ensure that a 
national standard is present and the temporal implications (``rising 
expectations'') are precluded; and evaluate whether sufficient controls 
are in place to ensure that individual inspector findings and opinions 
cannot unduly influence the final evaluations.''
U. National Academy of Sciences Study: Nuclear Power--Technical and 
        Institutional Options for the Future, 1992
                     conclusions & recommendations
    42. ``Nuclear Regulatory Commission
    An obstacle to continued nuclear power development has been the 
uncertainties in the Nuclear Regulatory Commission's (NRC) licensing 
process. Because the regulatory framework was mainly intended for light 
water reactors (LWR) with active safety systems and because regulatory 
standards were developed piecemeal over many years, without review and 
consolidation, the regulations should be critically reviewed and 
modified (or replaced with a more coherent body of regulations) for 
advanced reactors of other types. The Committee recommends that NRC 
comprehensively review its regulations to prepare for advanced 
reactors, in particular, LWRs with passive safety features. Their view 
should proceed from first principles to develop a coherent, consistent 
set of regulations.
    The Committee concludes that NRC should improve the quality of its 
regulation of existing and future nuclear power plants, including 
tighter management controls over all of its interactions with licensees 
and consistency of regional activities. Industry has proposed such to 
NRC.
    The Committee encourages efforts by NRC to reduce reliance on the 
adversarial approach to issue resolution. The Committee recommends that 
NRC encourage industry self-improvement, accountability, and self-
regulation initiatives. While Federal regulation plays an important 
safety role, it must not be allowed to detract from or undermine the 
accountability of utilities and their line management organizations for 
the safety of their plants.''
V. Letter from Jack Brons, New York Power Authority, to Chairman Ivan 
        Selin, September, 1992
    43. ``The theme develops the point that significant procurement, 
storage, installation, surveillance, inspection, quality control, 
engineering and administrative licensee resources are diverted to 
issues that do not contribute significantly to safety. This is not only 
wasteful but is shown to contribute to safety degradation.''
    44. ``Sometimes the details of the regulations go even beyond the 
situation I have described thus far. In the details of the ATWS rule 
was a requirement for diversity. That is, the hardware was not only 
required to be ``safety grade'' but also redundant trains had to have 
components from different manufacturers.--This of course requires 
separate engineering, drawings, procedures, multiplies stock 
requirements, and in the increased complexity, opens the door for 
error. The industry, supported by the BWR owners group and the 
equipment designers, specifically appealed this expensive nuance at 
several levels with the NRC staff and ultimately gave up at the EDO 
level. The value added to plant safety was never demonstrated.''
    45. ``On a daily or weekly basis, issues of regulatory compliance 
interpretation at this level of importance, or less, occupy the 
attention of the utility staff, require meeting with the NRC 
inspectors, often result in further meetings or discussions with the 
Resident or NRC inspectors at the regional level. . . If a licensee 
chooses to disagree with the inspector, resident or regional official, 
he is frequently viewed as uncooperative or it is pointed out that SALP 
1 plants behave differently.''
W. Letter from Mr. Nicholas S. Reynolds, Esq. Winston & Strawn, to 
        Counsel, U.S. Nuclear Regulatory Commission, dated October 9, 
        1992
                                excerpts
    46. Concerning the SALP process, ``A process for assessing licensee 
performance against subjective criteria exceeding legal requirements 
appears, on its face, to be unlawful. Under the Atomic Energy Act 
(``Act''), the NRC generally has authority to establish binding 
standards governing the activities of licensees by only three means: 
rules, regulations or orders.''
    47. ``Therefore, it is NRC rules, regulations and orders, adopted 
pursuant to the Act and in accordance with the procedural dictates of 
the Administrative Procedure Act (``APA''), that dehme standards of 
licensee performance. In contrast, NRC actions that compel licensees to 
take extra measures as a result of SALP evaluations usually are not 
founded on requirements prescribed through rulemaking or by an order. 
Rather, these extra measures are driven by the Staff s subjective 
evaluation criteria. In order to be deemed an acceptable performer, a 
licensee must satisfy these non-regulatory expectations, these 
``phantom'' requirements.''
    48. ``So postured, the SALP Program appears to exceed the authority 
the NRC under the Act (Atomic Energy Act). . . . In addition, NRC 
implementation of the SALP Program seems to be inconsistent with the 
APA. Specifically, the NRC, in assessing licensee performance on a 
case-by-case basis against standards that are not themselves law, and 
which indeed exceed what is the law--duly promulgated NRC regulations. 
SALP assessments substantially affect NRC licensees. Such assessments 
are action forcing. In practical terms, they compel new measures and 
commitments of licensee resources.''
    49. ``In general, the SALP Program, even with the revisions 
currently under discussion--remains an essentially subjective process 
for rating licensee performance on the basis of undefined criteria in 
excess of regulatory requirements. As a result, licensees are driven to 
make commitments of substantial resources simply to achieve better SALP 
scores, with no demonstrated correlation to compliance with regulatory 
requirements or enhancement of public health and safety. Moreover, SALP 
has the added effect of encroaching on licensee management prerogatives 
by inviting the NRC Staff to ``second-guess'' and, at times, preempt 
management decisionmaking.''
    50. ``The SALP Program, as implemented, appears to exceed NRC's 
lawful authority under the Atomic Energy Act, circumvent the 
Administrative Procedure Act, by-pass the NRC's own backfilling rule 
(10 CFR 50.109), and premise regulation on vague and evolving 
standards.''
X. Letter from the President, Nuclear Management and Resources Council 
        (NUMARC) to the Chairman, U.S Nuclear Regulatory Commission, 
        dated October 20, 1992
    51. ``The definitions of the SALP categories and the pressure from 
the NRC and the financial regulators to improve from a Category 3 
rating ``an level of performance'' to a Category 1 rating--``a superior 
level of performance''--inevitably affects the allocation of licensee 
resources. The ostensible identification of strengths and weaknesses in 
SALP reports and assignment of specific SALP numerical ``grades,'' 
notwithstanding full compliance with all applicable regulations, 
results in pressure for performance to escalating standards that are 
far in excess of regulatory compliance. While the industry is committed 
to strive for excellence, this commitment to excellence cannot, and 
should not, be managed and directed by anyone other than the licensee. 
NRC pressure on individual areas, based on subjective judgments, 
interferes with the industry's overall progress toward excellence and 
is unwarranted--the NRC's statutory responsibility is to assure 
compliance with formally issued regulations. As indicated by the NRC 
staff in the conclusions of NUREG-1395, interference by the NRC into 
areas of utility management and NRC domination of licensee resources 
could actually be detrimental to our mutual goal of plant safety.''
    52. ``Thus, as implemented, the SALP process is inherently flawed. 
The SALP process is subjective, establishing grades based upon opinion 
rather than on established and consistent criteria. This results in a 
``moving target'' for utilities, pushing licensees beyond the scope of 
existing, formal regulations, even though the Commission has directed 
the staff, in a December 1991 Staff Requirements Memo (SRM), to ensure 
that the ``rising expectations'' of the process are precluded.''
Y. ``Regulatory Review Group Charter' provided to Commission through 
        memo from James Taylor, EDO, in response to Commission request 
        (COMIS-92025--Regulatory Review), December 1992
                                purpose
    53. ``A detailed review should be conducted specifically for those 
regulations or implementation practices which appear to go beyond that 
which is required for ``adequate protection.'' In conducting this 
detailed review, special attention will be placed on the feasibility of 
substituting unnecessarily prescriptive requirements and guidance with 
performance based requirements and guidance founded on risk insights. 
Revision of appropriate requirements and guidance in this manner should 
result in increased overall industry flexibility in plant operations 
without impacting reactor operational safety and may in fact contribute 
to operational safety.''
Z. Draft Report of the Regulatory Review Group providing the findings 
        of the Group's comprehensive and disciplined review of power 
        reactor regulation and related processes, programs and 
        practices--submitted for public comment, May 28, 1993
                              key excerpts
    54. ``. . . a deficiency was found to exist in the regulations 
governing the processes that control changes to programs adopted by 
licensees to implement the regulations. . . The Review Group found that 
the word ``commitment'' lacked both a definition and a defined change 
mechanism and that the plans listed have no fixed standard above which 
a licensee can make changes on its own volition. The lack of definition 
of commitment and the lack of a fixed standard for plans leave 
uncertain the degree of autonomy that licensees can exercise in 
carrying out their safety function. Additionally, the opportunity for 
informal backfitsto occur as part of the review and inspection 
processes is enhanced by the lack of definition and standard. The 
contribution to regulatory burden from past commitments beyond what is 
required by the regulations is potentially large. . . ''
    55. ``In the past, numerous generic letters were issued (in 1980, 
113 were issued) to address programmatic resolution of specific items 
or very large issues, such as TMI action items. As a result of what has 
been considered a proliferation of generic communications (as 
identified by the industry over the past several years, including 
during the Regulatory Impact Survey), three major weaknesses with the 
implementation of generic communications were recognized. These were: 
(1 ) the staff rarely considered the cost of the request in the generic 
letter; (2) the industry had no opportunity to comment or participate 
in the technical resolution of an issues until the requests for 
information were spelled out in the generic letter; and (3) there was 
not always a clear tie from the requested action to the regulations.''
AA. Letter from NUMARC to the NRC Regulatory Review Group submitting 
        comments on the group's report, July 1993
    56. ``We endorse the central theme in the report that most of the 
apparent inflexibility in regulatory requirements does not reside in 
the regulations, but rather in the implementing practices and 
associated guidance documents. The over-emphasis on implementing 
practices often has created an inflexible environment where the methods 
of compliance have taken on greater significance than the legal 
requirements themselves. This environment, in tum, results in 
unnecessary expenditures of NRC and industry resources without 
commensurate safety benefit. Before performance-based regulatory 
approaches can be developed and successfully implemented, a clear 
distinction between formal regulatory requirements and informal 
regulatory guidance must be established, both in principle and 
practice.
    We also endorse the implicit finding of the report that, all too 
often, informal regulatory mechanisms are employed as substitutes for 
formal regulatory requirements. . . burdens should not be imposed on 
licensees that are not necessary to ensure an adequate level of 
protection or where the costs, both direct and indirect, of a proposed 
NRC action do not provide a commensurate safety benefit, thereby 
distracting licensees from more safety-significant actions.''
BB. Report of Regulatory Review Group (Final), August 1993
                                summary
    57. ``The Regulatory Review Group has conducted a comprehensive and 
disciplined review of power reactor regulation and related NRC 
processes, programs, and practices for their implementation. In 
conducting this review, special attention was placed in the feasibility 
of substituting performance-based requirements and guidance founded on 
risk insights for existing prescriptive ones. 1 he Review group then 
went beyond specific documents and examined the processes that use and 
generate documents with the view that the documents are a product of a 
process. This examination of processes included industry's role and 
their potential roles. The findings and recommendations of the Review 
Group focused on identifying specific problems, their causes and 
achievable solutions.''
    Note: The NRC action plan to implement the Regulatory Review Group 
report has not yet been released to the public. Any NRC corrective 
actions that have been proposed to address identified problems are, 
therefore, unknown at this time.


                              Attachment C
    Nuclear Energy Industry Recommendations For Improving NRC's 
Regulatory Culture
    NRC needs a new plant assessment process that:
      Objectively measures the safety performance of nuclear 
power plants through quantitative measures;
      Accurately communicates the safety performance of nuclear 
power plants to the public and other stakeholders;and
      Provides actionable thresholds to distinguish when 
licensee action is appropriate and when regulator action is 
appropriate.
    NRC's enforcement policy needs an improved safety focus.
      The increase in industry violations is inconsistent with 
improving industry safety performance; and
      Violations of low safety significance consume NRC and 
industry resources. Minor discrepancies should not be cited, but 
rather, recorded in inspection reports.
    NRC must expedite risk-informed, performance-based regulation.
    The nuclear industry shares NRC's vision of the potential benefits 
of this approach; and
      The current NRC approach is too slow and creates a 
reluctance on the industry's part to invest in this area. The following 
examples illustrate this point:
      NRC staff took 4 years to issue regulatory guides for in-
service inspections, in-service training and graded quality assurance--
all are obvious improvements in safety and efficiency.
      The industry's proposed ``whole-plant'' risk study is in 
jeopardy of being canceled because the NRC staff is unable to act in a 
timely manner on even the simplest proposed item to extend post-trip 
hydrogen sampling times.
    NRC needs strict application of the backfit rule.
      NRC staff routinely impose new, applying the backlit 
rule; and
      The discipline provided by the backlit rule should be 
applied to decommissioning issues and reflect the reduced risk posed by 
plants in a defueled condition.
    NRC communication to licensees should reflect senior management 
direction and policy.
      Management does not exercise its responsibility to 
control individual interpretations of regulations that differ from 
established positions;
      Requests for Additional Information (RAI) frequently 
solicit commitments that exceed established positions; and More 
accountability has to be provided in management oversight.
    NRC should conduct a task analysis of work processes to ensure 
timely action and effective use of resources.
      NRC takes an inordinate length of time to process 
licensing actions, complete enforcement activities, and promulgate 
rulemakings. For instance, the agency takes three to 4 years to certify 
dry storage containers.
    NRC should eliminate duplication of effort. Examples include:
      The industry has established effective programs for 
evaluating events and compiling performance data;
      NRC should review licensee self assessments rather than 
conducting redundant inspections.
    NRC must expedite the certification of dry storage containers.
      Twenty-five plants will lose full core offload capability 
by 2000 if they cannot expand pool storage or use dry storage 
technology.
      Container certifications take three to 4 years. The 
agency should ensure the 1-year goal for certification.
                               __________
 Responses by Joe F. Colvin to Additional Questions from Senator Inhofe
    Question 1. The GAO has concluded that the competency of a nuclear 
plant's management is perhaps the most critical factor in safety 
performance. This conclusion makes basic sense. What are the views of 
Panel II members on this matter? How best can the GAO recommendation be 
implemented, including by the NRC?
    Response. The safe operation of a nuclear power plant requires 
effective design, engineering, operation, and maintenance by people. 
Management's role is to provide the training, tools and equipment, 
processes, procedures and direction that will allow people to do their 
jobs. To determine whether management is competent, one must answer the 
following questions: (1) Are the managers properly qualified to perform 
their jobs? and (2) Are the managers actually achieving safe 
performance?
    The NRC appropriately has established qualification requirements 
for key safety positions at nuclear power plants, including (among 
others) plant managers, managers of operations, maintenance, radiation 
protection, quality assurance, and shift supervisors, who are directly 
responsible for controlling the condition of the plant. These 
qualification requirements include education, training and years of 
experience. The utilities comply with these requirements, and the NRC 
inspects to see that they are met. Therefore, the answer to the first 
question is yes, managers are properly qualified to perform their jobs.
    Management is effective if the safety results for which they are 
responsible are consistently achieved. If the results are not achieved, 
management effectiveness may be the cause, and further evaluation is 
needed. It may just as easily turn out that the cause was defective 
equipment or some factor outside the control of management.
    The GAO recommendation to assess management competence assumes that 
there is an accepted model of how managers should think and act. There 
is no such model. Different management styles and models appear and 
disappear, are proclaimed to be the ``true way'' and then abandoned 
when the next fad appears. For example, one can recall such approaches 
as `` management by objectives,'' ``zero based budgeting,'' ``total 
quality management,'' and ``re-engineering.'' Effective management 
depends on the job situation, the environment, and the personalities 
and skills of the manager and the people working for the manager. It is 
as much an art as a science and cannot be turned into an inspection 
module. It is also very clear that management science has not been able 
to identify what style of management, or set of management attributes, 
predict success, or failure.
    This is not to say that utilities do not attempt to provide their 
managers with ``soft'' management skills. They do. Utility executives 
understand the importance of management and provide training to help 
managers make optimal business and safety decisions. This training is 
provided by internal utility training programs; industry training 
programs such as those sponsored by National Academy for Nuclear 
Training, which operates under the auspices of the Institute of Nuclear 
Power Operations (INPO); and external training programs through 
universities and management consulting firms. But there is not a single 
approach that can be accepted in a regulatory requirement and inspected 
to. Senior NRC management knows this. The GAO recommendation was not 
well thought out and should be rejected.
    The best way to implement the GAO recommendation (to assess 
management competence) is to establish clearly defined and objective 
standards for safety performance results, rather than trying to measure 
subjective and poorly defined attributes for management decisionmaking. 
[Case in point: Who was a more effective manager--General Eisenhower or 
General Patton? Both generals had similar education and experiences, 
but each had totally different management styles. Yet, each general 
achieved his respective objectives.] The only way to know if management 
is effective is by reviewing performance against objective standards 
and outcomes.
    Industry and the NRC are in the process of defining some objective, 
safety-based performance standards against which to measure safety 
performance. If adopted, this process would identify the extent to 
which safety standards were being met. In addition, trending methods 
are included that would provide early warning of a decline in safety 
performance.

    Question 2. You have expressed general agreement that the Watch 
List process--by which the NRC is supposed to provide an early warning 
about problem plants--is not working well. What specific changes would 
you recommend to improve this process?
    Response. The current Watch List process does not provide clear 
safety guidelines or define safety requirements for the evaluated 
categories. The NRC's plant assessment process does a credible job of 
identifying the lower performing plants in the industry, but does not 
determine if this level of performance impacts safety. We have reviewed 
the safety performance data of plants recently placed on the Watch List 
and find that their safety performance is better than the best 
performing plants in 1985. As overall industry performance has 
improved, as shown in the attached WANG 1997 Performance Indicators, 
the threshold for being placed on the Watch List has increased. While 
it is appropriate for the industry to strive for continually improving 
performance, it is not appropriate for the regulator to continually 
change performance standards.
    This very subjective process results in placing a plant on the 
Watch List with substantial consequences. A plant expends an average of 
$200 million per reactor after being placed on the Watch List. Much of 
these funds are spent on issues that have little or no impact on plant 
safety, but are expended to satisfy the regulator that aggressive 
action is being taken. This condition causes two perverse impacts: (1) 
it diverts licensee resources from matters that have higher safety 
significance and (2) it usually causes a drop in company stock values 
and bond ratings, putting further financial pressure on the company.
    The industry has proposed that the Watch List program be replaced 
by a process that establishes clear, objective safety performance 
standards with defined thresholds for regulatory action. The process 
also provides an operating band that defines fully acceptable safety 
performance in which minimal regulatory action is needed. Performance 
below the operating band would result in increased NRC inspection 
activity. The bottom of the operating band is set at a value which 
still provides a high margin to public health and safety and provides 
ample time for the NRC to increase its oversight. The approach is 
described in the attached paper ``A New Regulatory Oversight Process'' 
(draft 8/6/98).
    Adopting the approach outlined in the paper would provide clear, 
objective safety performance standards, provide early warning of plant 
safety problems, and eliminate the uncertainty and ``surprise'' 
associated with the current process. This approach would be a more 
effective way of achieving the objectives of the Watch List 
(identifying declining plant performance to allocate NRC resources) 
without its inherent weaknesses.
                               __________
Statement of James T. Rhodes, Chairman and Chief Executive Officer The 
                 Institute of Nuclear Power Operations
    Thank you, Mr. Chairman. I am James T. Rhodes, chairman and chief 
executive of fleer of the Institute of Nuclear Power Operations, INPO, 
based in Atlanta, Georgia. The purpose of my testimony is to briefly 
outline INPO programs to promote safe and reliable operation of 
commercial nuclear power plants, and discuss how these efforts are 
complementary to but independent of the Nuclear Regulatory Commission; 
to discuss recent nuclear industry performance; and to summarize some 
of the more important challenges facing the commercial nuclear power 
industry in this country.
The Institute of Nuclear Power Operations
    The mission of the Institute of Nuclear Power Operations is to 
promote the highest levels of safety and reliability--to promote 
excellence--in the operation of nuclear electric generating plants. 
INPO was formed by the U.S. nuclear utility industry in 1979. In 
carrying out this mission, INPO does not engage in public, media or 
legislative activities to promote nuclear power.
    INPO is a nonprofit, technical organization, with all U.S. 
utilities that operate commercial nuclear power plants being a member. 
In addition to these domestic member utilities, nuclear operating 
organizations in 15 other countries, and 12 nuclear steam supplier and 
architect-engineering and construction firms from around the world, 
participate in INPO's international and supplier participant programs, 
respectively. To ensure credibility with its members and with the 
Federal Government, INPO maintains its independence with respect to any 
individual member and with respect to government agencies.
    To carry out its mission, INPO has four cornerstone programs:

      On-site evaluations of each operating nuclear plant in 
the United States
      Training, and the accreditation of training programs, for 
key plant personnel
      Analysis of events and communication of lessons learned 
from such events; and
      Assistance to members in a broad range of areas 
pertaining to nuclear plant operations

    The Institutional Plan for the Institute of Nuclear Power 
Operations and our 1997 Annual Report provide additional details about 
INPO's programs and are attached to my written testimony (Attachments A 
and B).
INPO's relationship to NRC
    INPO is independent from, but it's role is complementary to, the 
NRC. The ultimate goal of both organizations is the same--to protect 
the health and safety of the public by helping ensure safe nuclear 
plant operations. However, the means by which we strive to achieve that 
goal are quite different.
    The President's Commission on the Three Mile Island Accident--the 
Kemeny Commission-observed in 1979 that strict NRC safety regulations 
are necessary for nuclear safety, but, standing alone, those 
regulations are not sufficient for nuclear safety. The Commission 
stated in its report to President Carter that: ``We are convinced that 
regulations alone cannot assure safety.'' What was needed alongside the 
NRC's basic regulations was for the men and women who run our country's 
nuclear plants to have a deep commitment to excellence in the pursuit 
of nuclear safety. This professional commitment to excellence simply 
cannot be mandated by regulations, no matter how strict. INPO was 
created to help build this commitment, and it has done so. Accordingly, 
INPO was not created to supplant the regulatory role of the NRC, but to 
provide the means whereby the industry could, acting collectively, make 
its nuclear operations safer and more reliable. INPO recognizes that a 
strong and capable regulator is in the best interest of nuclear safety 
and the nuclear industry.
Summary of industry safety performance
    Over the past decade our country's nuclear plants have become safer 
and more reliable. This improvement is reflected in a set of 10 
objective, performance-based safety performance indicators the U.S. 
commercial nuclear power industry uses to monitor the safety and 
reliability of nuclear plants. This set of indicators has been adopted 
by the World Association of Nuclear Operators, and is now used 
worldwide.
    I won't today discuss each performance indicator in detail--a 
listing of the indicators is provided in the INPO Annual Report 
included as an attachment to my written testimony.
    An example is safety system performance.
    This indicator monitors the availability of three important standby 
safety systems at nuclear plants. The industry's goal is to encourage a 
high state of readiness, with at least 85 percent of these systems 
meeting specific year 2000 goals for availability in excess of 97 
percent. As you can see, the industry trend shows significant 
improvement. The 1997 value represents strong performance well 
exceeding the year 2000 goal.
    Another example is the performance indicator index, which is a 
weighted composite of the individual indicators. This graph of the 
performance indicator index illustrates the industry's dramatic overall 
improvement since 1985.
    Another important indicator of improved industry performance is the 
trend of significant events at nuclear power plants. This trend is 
based on data from the NRC and corroborated by INPO data. The data 
shows a decrease in the number of significant events from 2.38 per unit 
per year in 1985 to 0.10 at the end of 1997. This represents a decrease 
of more than a factor of 20 over the past 12 years, a remarkable 
achievement.
    These are examples of the significant performance improvement the 
industry has achieved over the past 12 years. Now, let me conclude my 
testimony with a brief summary of current and future nuclear industry 
challenges.
Current and Future Industry Challenges
    Primarily due to impending economic deregulation of electric 
utilities, the commercial nuclear utility industry faces strong 
competitive pressures that are forcing unprecedented change. Many 
factors are involved, but the bottom line for the nuclear industry is 
that nuclear plants must operate not just safely and reliably, but also 
economically, to compete with alternative energy sources such as coal 
and natural gas. Nuclear plants that can achieve a high level of safe, 
reliable performance will succeed; those that cannot, will not survive.
    Although the industry has demonstrated a clear, sustained trend of 
improvement over more than a decade, we must consider the potential 
impact of the current economic and regulatory environment on the 
industry. We believe the NRC needs to carefully evaluate its methods 
and processes to ensure they are effective in light of the improved 
industry performance. The agency plays an important role in the 
commercial nuclear power industry. We believe this role can best be 
served if the NRC focuses on issues that directly relate to public 
health and safety, minimizing any subjective, non-safety-related 
regulation that distracts both NRC and utility resources. Additionally, 
there must be close connection between the expectation of the 
Commission and senior officials at NRC and what actually happens in the 
field at the utility and plant interface. This last subject was 
addressed in more detail by Dr. Zack T. Pate, at the July 17, 1998 
public meeting on stakeholder concerns, and I will not repeat his 
comments here. However, a copy of that transcript will be submitted for 
the record.
    Subject to your questions, this concludes my testimony. Thank you.
                                 ______
                                 
   Responses of James T. Rhodes to Additional Questions from Senator 
                               Lieberman
    Question 1. ``The Government Accounting Office (GAO) has concluded 
that the competency of a nuclear plant's management is perhaps the most 
critical factor in safety performance. This conclusion makes basic 
sense. What are the views of Panel II members on this matter? How best 
can the GAO recommendation be implemented, including by the NRC?''
    Response. 1.a. With respect to the first portion of the question, 
``What are the views of Panel II members on this matter (the importance 
of the competency of nuclear plant management)?,'' it is the opinion of 
Institute of Nuclear Power Operations (INPO) that competency of 
management is only one of several key factors that are important to 
safe reliable nuclear power plant performance.
    Competency, as used here, is defined as technical qualifications 
and experience needed by incumbents in key management positions. Such 
qualifications and experience have been established by the industry and 
documented in plant technical specifications and American National 
Standards Institute (ANSI) qualification standards. They are normally 
attained by formal education, plant specific training and experience, 
and other training to be completed prior to, or shortly after, assuming 
key management positions.
    Utility management reviews the technical qualifications of 
candidates they intend to promote to key positions. They compare the 
individuals' education, training, and experience against the 
established standards for the positions. They then take steps to ensure 
appropriate education, training, and experience is attained prior to 
placing the individuals in the positions.
    As part of their Standard Review Plan, the Nuclear Regulatory 
Commission (NRC) staff routinely reviews technical qualifications of 
managers assuming key positions.
    It is considered that the technical qualifications required of key 
managers and the process to help ensure only technically qualified 
individuals are placed in key management positions is well established, 
exercised, and verified.
    1.b. With respect to the second part of the question, ``How best 
can the GAO recommendation be implemented, including by the NRC?''
    The recommendation referred to is, ``Require that the assessment of 
management's competency and performance be a mandatory component of 
NRC's inspection process.''--(GAO report, ``Nuclear Regulation: 
Preventing Problem Plants Requires More Effective NRC Action'' dated 
May 30, 1997)
    Competency is addressed in the answer to question l.a. above and is 
therefore not repeated here.
    Performance of managers once in key positions is the second part of 
this question. Our experience at INPO has shown us that there are many 
management styles in place at nuclear plants, and no one style is 
correct for all plants. What is important is not what management style 
is used but how well key managers work together to achieve safe, 
reliable plant operations. Accordingly, in the INPO evaluation process, 
we do not look at management style but at the effectiveness of the 
management team. The best measure of such effectiveness is overall 
plant performance. INPO provides feedback to utility senior management 
on overall plant performance, noting areas of strength and areas where 
management can be more effective.
    The best way to evaluate management competency and performance is 
to establish clearly defined, objective standards for safe, reliable 
plant performance. Then, measure management performance against how 
well these objective standards are met. Trying to measure performance 
against subjective attributes of what makes a manager effective is not 
considered useful for the NRC or any other external organization.
    Over the years, INPO has established clearly defined, objective 
standards of excellence for plant operations. It is to these standards 
that INPO evaluation teams measure plant performance.
    For the NRC, we believe the objective standards for safe and 
reliable plant operations being developed by the industry, as 
documented in the Nuclear Energy Institute (NEI) draft paper entitled 
``A New Regulatory Oversight Process,'' go a long way to establish 
objective standards to which the NRC should measure how well basic 
public health and safety is protected. (It should be noted that these 
standards are different from INPO's standards of excellence. However, 
it is appropriate that these two independent organizations [NRC and 
INPO], with complementary but different missions, use different 
standards to measure plant performance.)
    The paper, which has been provided to you by NEI, describes 
industry recommended, objective, safety-based performance standards. It 
recommends these standards be used by the NRC to measure plant safety 
performance with respect to public health and safety. If adopted, this 
new process will help identify the extent to which these standards are 
being met. In addition, trending methods are included to help provide 
early warning of declines in safety performance, giving the NRC time to 
respond to such declines before they adversely affect public health and 
safety.
    As it looks at revising its regulatory oversight process, it is our 
opinion that the NRC should consider in detail the concepts presented 
in the NEI draft paper. If the proposed process were adopted, this 
action should go a long way in addressing the GAO recommendation 
concerning NRC's assessment of management performance.

    Question 2. ``You have expressed general agreement that the Watch 
List process--by which the NRC is supposed to provide an early warning 
about problem plants--is not working well. What specific changes would 
you recommend to improve this process?''
    Response. The industry's primary concern with the Watch List 
process is the lack of definition of what constitutes a decline in 
performance warranting placement on the list. By every objective 
measure, including the performance indicators used by the NRC, safety 
performance of the industry has improved steadily over the years. In 
fact, the safety performance of recent watch list plants is better than 
most top-performing plants in 1985. Yet, the Watch List contained up to 
13 plants within the past year.
    As discussed in the answer to question l.b., we believe the 
standards for safe, reliable plant operations being developed by the 
industry, as documented in the NEI draft paper entitled ``A New 
Regulatory Oversight Process,'' go a long way to establish objective 
standards to which the NRC should measure how well basic public health 
and safety is protected, and the need for a specific ``watch list'' 
will be eliminated.
                               __________
  Statement of Gary Jones, Associate Director, Energy, Resources, and 
Science Issues, Resources, Community and Economic Development Division, 
                       General Accounting Office
nuclear regulatory commission: preventing problem plants requires more 
                        effective action by nrc
    Mr. Chairman and Members of the Subcommittee: We are pleased to 
testify on how the Nuclear Regulatory Commission (NRC) oversees the 
nuclear power industry. Among other things, NRC is responsible for 
ensuring that the operation of the nation's 103 commercial nuclear 
power plants occurs in a manner that adequately protects public health 
and safety. Identifying nuclear plants with safety problems and making 
sure that their owners-the licensees correct safety problems promptly 
are essential to NRC's safety mission. This becomes even more critical 
as NRC begins to regulate safety in an environment of electricity 
deregulation.
    Our testimony is based on our May 1997 report about preventing 
problems at nuclear power plants.\1\ Our testimony discusses how NRC 
defines nuclear safety, some of the causes for weaknesses in how NRC 
oversees nuclear plants that have problems, and the challenges ahead 
for NRC safety regulation.
---------------------------------------------------------------------------
    \1\[Nuclear Regulation: Preventing Problem Plants Requires More 
Effective NRC Action (GAO/RCED-97-145, May 30, 1997).
---------------------------------------------------------------------------
    In summary, our 1997 report points out that the Congress and the 
public need confidence in NRC's ability to ensure that the nuclear 
industry performs to high safety standards. While our report did not 
make judgments about the safety of nuclear plants or the 
appropriateness of NRC's current regulatory structure, the many safety 
problems identified at plants we examined raised questions about 
whether NRC's regulatory program was working as it should, and we made 
recommendations to strengthen it. Specifically we found that:
    NRC assumes plants are safe if they operate as designed and follow 
NRC's regulations. However, all three facilities we examined-the 
Millstone Nuclear Power Station in Connecticut, the Salem Generating 
Station in New Jersey, and the Cooper Nuclear Station in Nebraska-were 
operating outside of their approved designs. NRC reasoned that these 
plants were still safe because the many safety features and systems 
built into a plant's design provide an adequate margin of safety. 
However, changes made to plants over time, such as replacing components 
with different parts and reconfiguring systems, can alter a plant's 
design, thus potentially affecting how certain safety systems might 
work in an emergency. NRC has found other plants that are not operating 
as designed and is exploring the reasons that the licensees have not 
maintained current information on their design changes and have not 
examined the impact of such changes on the safe operation of plants. 
Ambiguity over ``how safe is safe'' arises because NRC does not have an 
effective way to quantify the safety of plants that deviate from their 
approved designs.
    The three nuclear plant facilities that we examined had 
longstanding safety problems, and NRC did not take aggressive action to 
ensure that the licensees fixed their safety problems in a timely way. 
These problems ranged from failures of equipment to work properly when 
tested, to weaknesses in how licensees' conducted their maintenance 
programs. As a result, the plants' conditions worsened, reducing safety 
margins. NRC staff repeatedly extended the amount of time it allowed 
the plants' operators to make corrective actions. In addition, although 
nuclear industry and NRC officials agree that the competency of a 
nuclear plant's management is a critical factor in safety performance, 
in the early 1990's, NRC eliminated management assessment in 
streamlining its inspection guidance. Furthermore, NRC was slow to 
place plants with declining performance on its ``Watch List,'' which is 
a tally of plants whose declining performance trends require closer 
regulatory attention.
    NRC faces many challenges to make its regulatory program work as 
effectively as it can, particularly in light of major changes taking 
place in the nuclear industry. As the electric utility industry 
deregulates, safety margins may be compromised when licensees cut costs 
to stay competitive. According to one utility industry study, as many 
as 37 of the nation's nuclear sites are vulnerable to shutdown because 
production costs are higher than the projected electricity prices in 
the market. Decisions that NRC will be making include how safe is safe, 
and what should be the nuclear plant regulatory approach of the future. 
NRC's regulatory approach needs to be anchored in goals and objectives 
that are clearly articulated, and performance measures that hold NRC 
managers as well as licensees accountable.
Background
    Commercial nuclear plants in the United States operate in 31 states 
and provide about 20 percent of the nation's electricity. Five states 
(Connecticut, New Jersey, Vermont, South Carolina, and Illinois) rely 
on nuclear power for about half of their electricity. NRC licenses the 
construction and operation of nuclear power plants, which are owned and 
operated by both public and private utility companies; develops, 
implements, and enforces the rules and regulations that govern nuclear 
activities; inspects facilities to ensure compliance with legal 
requirements; and conducts research to support its programs. NRC's 
fiscal year 1998 budget authorization is $472.8 million, and it has 
requested $488.6 million for fiscal year 1999. Its staff of about 3,000 
is responsible to five Commissioners appointed by the President and 
approved by the Senate. About 55 percent of NRC's professional staff 
are dedicated to nuclear reactor activities.
NRC Does Not Precisely Define Nuclear Plant Safety
    Determining the safety of plants is difficult because NRC does not 
precisely define it. Instead, NRC presumes that nuclear plants are safe 
if they operate within their approved designs (design basis) and meet 
NRC's regulations. However, NRC's regulations and other guidance do not 
provide either the licensees or the public with the specific 
definitions and conditions that define the safety of a plant. As a 
result, NRC does not have an effective way to quantify the safety of 
plants that deviate from their approved designs or violate regulations. 
Determining a plant's safety condition is, therefore, a subjective 
judgment.
    NRC reasons that the many safety features and systems built into a 
plant's design provide an adequate margin of safety, even when some of 
them are not working properly. System redundancies-the duplication of a 
plant's safety systems, structures, and components provide in-depth 
protection to help prevent an accident from releasing radiation to the 
public. This concept, also known as defense-in-depth, forms the 
foundation of NRC's confidence that nuclear plants are safe, even those 
that may be shut down for safety problems.
    The conditions found at Millstone in 1996, however, challenged 
NRC's confidence that it can rely on licensees to ensure that the 
plants are operating within their approved design basis. A special NRC 
inspection team found a number of significant equipment problems and 
concluded that the licensee had not consistently met its license and 
regulatory requirements. NRC's inspectors were unaware of the extent of 
these problems-some of which were not reported by plant managers-and 
thus discovered that the Millstone plants were operating outside their 
design bases. As a result of the conditions found at Millstone and at 
other nuclear plants, NRC is now reemphasizing the need to determine if 
plants are still operating within their design bases. The safety 
significance of design basis issues are hard to quantify because NRC 
does not precisely define safety. Perceptions of safety levels and risk 
are subjective and are not always consistent from inspector to 
inspector. Several current and former NRC inspectors told us that they 
cannot easily distinguish a safe plant from an unsafe one, and that the 
guidance on when to shut down a plant does not cover all situations.
    NRC has incomplete knowledge about the extent to which nuclear 
plants are operating within their design basis. Since the mid-to-late 
1980's, NRC has found that some licensees were not documenting changes 
made to their plants that could affect their approved design basis. 
However, it was not until October 1996, after the problems were 
discovered with Millstone, that NRC required licensees to certify that 
their plants were operating within the plant's design basis. To follow 
up on licensees' certifications, as of May 1998, NRC had inspected 16 
sites to verify that the plants were operating under the terms and 
conditions of their licenses.\2\ Generally, NRC found that some 
utilities had not maintained current information on the design basis 
and had not examined the impact of modifications on safe plant 
operations. NRC identified significant problems during these 
inspections, including instances in which licensees had not properly 
tested safety related components, and had made errors in their analyses 
for how emergency cooling systems would work during a potential 
accident. NRC has concluded that the majority of the problems resulted 
from errors in the original design or from design modifications, 
inadequate testing, and discrepancies in documentation.
---------------------------------------------------------------------------
    \2\These represent sites that NRC has identified for follow up 
inspections.
---------------------------------------------------------------------------
NRC Is Not Effectively Overseeing Problem Plants
    Identifying and correcting safety deficiencies are among the 
licensees' most important responsibilities, and these are a major focus 
of NRC's nuclear plant inspection program. NRC's regulations require 
that nuclear plants have an effective program to ``assure that 
conditions adverse to quality . . . are promptly identified and 
corrected.'' And NRC places importance on evaluating plants' corrective 
action programs to ensure that they will lead to timely correction of 
the identified problems.
    For the three facilities with a history of poor performance that we 
examined (Millstone, Salem, and Cooper), we found that the licensees 
failed to fix their substantial and recurring safety problems in a 
timely manner. Most of these problems were equipment failures. At 
Salem, for example, an air control system and a water pump motor had 
not worked properly for over 6 years. NRC allowed these licensees 
repeated opportunities to correct their safety problems, by relying on 
licensees' corrective action plans that were never fully completed, by 
accepting management's promises to fix problems (though these promises 
were not always met), and by using enforcement actions too late to 
effect change. For example, some of the problems causing the 1994/1995 
shutdown of the Cooper Nuclear Station dated to the plant's first 
start-up in 1974-problems Cooper's management should have addressed 
years earlier, according to the NRC inspectors we interviewed. An NRC 
audit reported that the plant managers were ``living with problems, not 
fixing them'' and that ``ineffective self-assessment'' and a ``weak 
corrective action program'' characterized operations. However, NRC 
allowed Cooper to restart its reactors after the 1994/1995 shutdown on 
the basis of the licensee's promises to fix these recurrent problems 
and contingent upon Cooper's monitoring of its own progress. After 
showing improvements over several months, the plant's performance 
quickly declined. Then NRC discovered that many of the safety problems 
that Cooper's management had promised to correct had not been 
corrected.
    Another tool NRC uses to obtain compliance with its regulations is 
its enforcement program of fines and sanctions, which is designed to 
correct violations promptly, deter future violations, and encourage 
licensees to operate their plants safely. However, NRC was very slow 
imposing fines on the three plants we examined.
    Salem's fines were levied by NRC well after the plants were in 
periods of significant decline, and at the time our report was issued, 
NRC still had not completed its enforcement action against Millstone 
for violations that were first discovered in 1995. NRC can also prevent 
shutdown plants from restarting until all of their safety deficiencies 
are addressed, but this action sometimes has occurred long after 
plants' deficiencies were documented.
    We recommended that NRC aggressively act on identified problems and 
then document what it will do if safety problems go uncorrected. NRC's 
Chairman has complained about the consequences of NRC's patience with 
some problem licensees, adding that the Commission is reviewing its 
internal processes to strengthen its ability to identify and act on 
licensees' corrective action programs. NRC officials agree that they 
need to do a better job of making licensees fix their problems, and 
will bring licensees' unresponsive to corrective actions to the 
attention of NRC's senior managers.
Management Competency Critical to Safety
    The nuclear industry and NRC officials widely agree that Me 
competency of a nuclear plant's management is perhaps the most critical 
factor in safe performance. NRC's audits and reviews frequently cite 
management weaknesses as the major cause of the declining performance 
at nuclear plants. For example, NRC cited a ``poor management safety 
culture,'' ``weak management oversight of engineering programs,'' a 
``fragmented approach'' to resolving problems, and a failure to provide 
an ``adequate level of oversight''\3\ as underlying causes for 
deteriorated conditions at Cooper. Similarly, safety problems found at 
the LaSalle and Zion nuclear plants in Illinois in January, 1997, were 
attributed by NRC to weak management processes and a lack of 
managements involvement.
---------------------------------------------------------------------------
    \3\Supplemental Plant Performance Review, NRC (95-04, Oct. 3, 
1995).
---------------------------------------------------------------------------
    Yet, despite the importance of competent management, NRC does not 
have an effective process for ensuring that licensees maintain it for 
their nuclear plants. NRC does not assess management in its plant 
inspection program, and individual inspection reports specifically 
avoid any references to management's competency. NRC's references to 
management weaknesses are usually made retrospectively, and often only 
after a licensee admits to such deficiencies, or by NRC audit teams or 
special investigations-long after the NRC has lost the opportunity to 
give an early warning about potential management weaknesses. NRC's 
guidance to its inspectors once contained a management assessment 
component, but this was eliminated in the early 1990's when NRC 
streamlined its inspection process.
    Although NRC's regulations do not require the evaluation of plant 
management before a license to operate a nuclear plant can be issued, 
NRC must determine if the prospective licensee is ``technically and 
financially qualified to engage in the activities authorized by the 
operating license.'' Because such qualifications could also reflect on 
a licensee's overall ability to manage a facility competently and 
safety, we recommended that NRC assess management competency and 
performance as part of its inspection process. A 1996 report to NRC by 
Arthur Andersen also points out the importance of evaluating 
management, particularly for NRC to be effective in actively assessing 
plant performance. The report recommended that NRC hire experts or 
train staff to evaluate management's performance and changes in 
management.
    NRC agrees that management's competency is critical to a licensee's 
operational safety performance and told us that its existing evaluation 
processes draw conclusions about the effectiveness of licensees' 
management. NRC staff have proposed options to assess the performance 
and competency of licensees' management, which include changes in 
inspection procedures, more staff training, and use of consultants. But 
the Commission rejected these options in June 1998, and instead 
directed NRC staff to continue with the current practice of inferring 
licensee performance from existing plant inspections and other routine 
assessments. The Commission also withdrew resources specifically 
directed at developing a systematic method to assess licensees' 
competency and management. While we are continuing to study NRC's 
rationale for its decision as part of our ongoing work, we continue to 
believe that evaluating licensees' management competency as part of 
plant inspection would provide a important early warning of potentially 
unsafe practices.
Early Intervention Could Result In Fewer Problem Plants
    NRC's process to focus attention on those plants with declining 
safety performance--the semiannual Senior Management Meeting--needs 
substantial revisions to achieve its purpose as an early warning tool. 
NRC collects enormous amounts of information on nuclear plants, both 
from its own inspectors and from the nuclear plant licensees. Taken 
together, these sources provide NRC with a database to measure and 
monitor plants' safety conditions and safety performance. Despite this 
database, NRC has been slow to identify and place problem plants on its 
``Watch List.'' The Watch List is NRC's tally of plants whose declining 
performance trends require closer regulatory attention. Yet, the List 
is an important early warning tool for NRC to target its regulatory 
emphasis, allowing small problems to be corrected before they lead to 
costly shutdowns.
    The Salem and Millstone plants were under discussion by NRC for 3 
to 4 years before they were placed on the Watch List in 1996 and 1997, 
respectively. NRC discussed the Cooper facility as a problem plant but 
never placed it on the Watch List, even though it was eventually shut 
down for safety reasons. As of May 1997, when we did our analysis, 41 
plants, or more than a third of the nation's nuclear power plants, had 
been placed on the Watch List by NRC since 1986. Twenty-four plants had 
been on the list for 2 or more years. However, about half of the plants 
on the Watch List were known by NRC to be poor performers long before 
being listed. Moreover, the Arthur Andersen report identified 10 plants 
that were not placed on the Watch List but whose performance indicators 
were similar to those that are listed.
    This inconsistency has been attributed, in part, to the lack of 
specific criteria for making decisions on a consistent basis, the 
subjective nature of the process, and some NRC managers' confusion 
about their role in the process. Industry and private interest groups 
alike have criticized NRC for not having specific criteria with which 
to decide when plants should be placed on the Watch List.
    NRC acknowledges that it should do a better job of identifying 
plants deserving attention for and listing on the Watch List. NRC is 
developing a new process for assessing plants' performance. Among other 
things, the new process would eliminate the Watch List, replacing it 
with a process that would include a decision model or criteria so that, 
according to NRC, its actions are predictable, informed regarding risk, 
simple, nonredundant, and efficient. NRC expects to publish the 
proposed process for comment early in August 1998, and hopes it will be 
in place by 1999.
Challenges NRC Faces Regulating in an Evolving Environment
    At the heart of safe operations is holding the licensees 
accountable for fixing their plants' problems more promptly and 
addressing management issues more directly. However, changing NRC's 
culture will not be easy. The need to ensure that NRC's regulatory 
program works as effectively as it can is extremely important, 
particularly in light of mayor changes taking place in the nuclear 
industry.
    NRC officials are concerned that as the electric utility industry 
is deregulated, safety margins may be compromised as licensees cut 
costs to stay competitive. As an example, an independent auditor's 
review of the Millstone plant in 1996 noted that the need to trim costs 
in the face of future competition resulted in managers' choosing to 
defer maintenance and allow backlogs of corrective actions to grow, 
eventually creating a situation that led to a shutdown and several 
hundred million dollars worth of repairs.
    Several estimates have been made about the number of plants that 
might no longer be economically competitive. A private research report 
concluded that because competition will result in lower electricity 
prices in the future, as many as 37 of the nation's nuclear sites are 
vulnerable to shutdown because production costs are higher than the 
projected electricity prices in the market.\4\ Together, these sites 
represent over 40 percent of the U.S. nuclear generating capacity.
---------------------------------------------------------------------------
    \4\Nuclear Power Plant Shutdowns and Implications for Future 
Natural Gas Demand, Washington International Energy Group (Feb. 1997).
---------------------------------------------------------------------------
    For those plants that will continue to operate, NRC reports that 
the nuclear industry has matured to the point that plants have been in 
operation long enough for aging to be a major issue that can affect 
cost and safety. Aging, which affects all of a plant's systems and 
components, can bring conditions causing safety concerns that, if not 
appropriately addressed, could require licensees to shut down plants. 
Already, two plants have formally requested a license extension and 
others plan to operate beyond their original 40 year operating lives.
    NRC is moving to ``risk-informed'' and ``performance based'' 
reactor regulation, which aims to focus regulatory resources on areas 
of the highest safety significance and its regulatory framework more 
results oriented. It is also making changes to the Senior Management 
Meeting process. These changes illustrate an effort by the current 
Chairman and Commissioners to improve NRC's ability to help ensure safe 
operation of the nation's nuclear power industry as well as address 
industry concerns regarding excessive regulation.
    Questions that NRC will be facing include how safe is safe, what 
will the future NRC regulatory approach be, and what level of resources 
will be needed to regulate the Department of Energy's nuclear 
facilities? Whatever NRC decides in answering such questions needs to 
be anchored in goals and objectives that are clearly articulated and 
performance measures that hold NRC managers as well as licensees 
accountable. In addition, NRC needs reliable information on which to 
determine safe operations, training for its staff, and an enforcement 
structure that clearly lays out a range of sanctions that it will 
impose on the basis of the potential seriousness of the safety problems 
found.
    A framework within which NRC can accomplish its missions has been 
provided by the Government Performance and Results Act of 1993. The 
Results Act requires Federal agencies to develop goals, objectives, 
strategies, and performance measures in the form of strategic and 
performance plans. In our review of NRC's first annual performance 
plan, which covers the program activities set out in its fiscal year 
1999 budget\5\, we noted that the plan could provide a clearer picture 
of the intended performance across NRC and better discuss the 
strategies and resources the agency will use to achieve its performance 
goals. For example, nuclear reactor safety is a ``strategic arena'' in 
NRC's strategic plan. While the plan lists specific strategies NRC will 
use against licensees that fail to meet regulatory standards, including 
halting operations if licensee performance falls below an acceptable 
level\6\, NRC has not developed specific criteria for ``acceptable.'' 
Moreover, the performance plan does not provide confidence that the 
agency's performance information will be credible. The development of 
strategic and performance plans is a dynamic process. As the Congress 
and NRC gain more experience in setting goals and measuring results, 
better information will be available to evaluate progress towards 
improving NRC performance.
---------------------------------------------------------------------------
    \5\Results Act: NRC's Annual Performance Plan for Fiscal year 1999 
(GAO/RCED-98-195R, May 27, 1998)
    \6\Only once has NRC issued an order to shut down an operating 
plant, at Peach Bottom, Penn. in 1987. On other occasions, NRC has 
issued such orders only after the licensees had suspended operations.
---------------------------------------------------------------------------
    Mr. Chairman and Members of the Subcommittee, this concludes our 
statement. We would be pleased to respond to any questions you may 
have.
                                 ______
                                 
 Responses by Gary Jones to Additional Questions from Senator Lieberman
    Question 1. The GAO has concluded that the competency of a nuclear 
plant's management is perhaps the most critical factor in safety 
performance. This conclusion makes basic common sense. What are the 
views of Panel II members on this matter? How best can the GAO 
recommendation be implemented, including by the NRC?
    Response. We recognize that there are technical challenges posed by 
assessing management factors as part of the NRC inspection process. To 
assess management, professionals with the proper training and 
experience would be needed, along with objective criteria for making 
judgments. Arthur Andersen, a consulting firm hired by NRC to recommend 
ways to improve how NRC conducts its plant safety assessments, noted 
the importance of management, stating that ``To assess plant 
performance proactively, the NRC needs to remain fully aware of plant 
management activities.'' \1\ In their 1996 report to NRC, Arthur 
Anderson recommended that NRC hire experts or train staff to evaluate 
management performance and changes, which they viewed as necessary 
steps to allow NRC to be more proactive. They also noted that by 
evaluating management factors (and other factors as well), NRC would be 
better positioned to identify problems earlier, which would in turn 
reduce safety risks to the public and lead to an earlier and less 
costly resolution of problems. We agree with Andersen's 
recommendations.
---------------------------------------------------------------------------
    \1\ Recommendations to Improve the Senior Management Meeting 
Process, Arthur Andersen (Dec. 30, 1996).
---------------------------------------------------------------------------
    However, in responding to our report (Nuclear Regulation: 
Preventing Problem Plants Requires More Effective NRC Action (GAO/RCED-
97-145, May 30, 1997), NRC rejected our recommendation to include a 
management assessment component as part of their ongoing plant 
inspection process. While NRC agreed that licensees' management is 
``instrumental'' in the licensee's operational safety performance, they 
told us that they studied the matter and decided that a management 
assessment would ``not likely result in a leading indicator of plant 
performance. . . .'' NRC staff presented options for including a 
management assessment component in their inspection process to the 
Commission. The Commission also decided not to use licensee management 
performance or competency as a leading indicator measure.

    Question 2. You have expressed general agreement that the Watch 
List process--by which the NRC is supposed to provide an early warning 
about problem plants--is not working well. What specific changes would 
you recommend to improve this process?
    Response. The Watch List is an important outcome of NRC's Senior 
Management Meeting (SMM). The SMM process was created in 1986 for the 
purpose of providing NRC with an early warning on plants exhibiting 
declining performance. SMM meetings, which are held twice every year, 
include NRC's senior managers from headquarters and regional directors. 
Data on plant performance are drawn from NRC's performance indicator 
program and from inspection and audit reports so that senior managers 
can take steps to prevent the problems at these plants from worsening. 
A plant's inclusion on the Watch List can lead to more oversight by NRC 
in the form of additional inspections, letters to licensees expressing 
NRC's concern about declining performance, or other actions. Being on 
the Watch List also brings significant public attention to the plant.
    As we reported, the Watch List has not produced a consistent 
inventory of plants with performance problems. The Millstone and Salem 
plants exhibited clear performance declines long before NRC placed them 
on the Watch List in 1996 and 1997, respectively. Salem was placed on 
the Watch List after they were forced to shut down for safety problems. 
Millstone was shut down several times before they were placed on the 
Watch List. Thus, the Watch List actions were far too late to achieve 
the objective of ``early identification of declining performance.'' 
Still other plants, such as Washington Nuclear Power II, had 
performance indicators that were consistently worse than some plants on 
the Watch List. In fact, Arthur Andersen identified 10 plants that were 
not placed on the Watch List but whose performance indicators are 
similar to the average of those on the Watch List.
    We recommended that NRC inspection reports should fully document 
for all plants the status of the licensees' actions to address 
identified problems under NRC's corrective action requirements, 
including timetables for the completion of corrective actions and how 
NRC will respond to nonconformance with planned actions.
    We also recommended that NRC should make licensees' responsiveness 
to identified problems a major feature of the information provided to 
the participants of the Senior Management Meetings, including how NRC 
will respond if problems go uncorrected. For example, NRC should 
describe the range of sanctions that it will impose on the licensees on 
the basis of the potential seriousness of their failure to resolve 
problems within a predetermined time. These sanctions should range from 
assessing fines to involuntary shutdown of the plant.
    Arthur Andersen reported findings that parallel our observations, 
noting that many procedural problems prevent the process from working 
as intended. These problems include a lack of rigor and discipline in 
the process; unclear criteria for placing plants on the Watch List; and 
the confusion among some NRC managers about their role in the process. 
Also noted was the highly subjective nature of the process.
    NRC agreed with us and told us it is taking steps to improve its 
performance indicators to allow more timely regulatory responses. 
However, the effectiveness of these steps remains to be seen. An 
equally important consideration is how NRC will react to plants with 
declining safety performance, once they are identified. This is where 
we found significant problems at the plants we examined. NRC allowed 
these plants to deteriorate before taking strong action. In some cases, 
NRC imposed fines years after the licensee was found deficient.
    NRC agrees it should have been more vigilant in cases where plants 
were found to be in a declining safety condition, but continues to 
believe they have the authority and tools to hold licensees 
accountable. We continue to believe our recommendations are needed to 
ensure that NRC meets its basic responsibility to protect the safety 
and health of the public.
                                 ______
                                 
  Responses by Gary Jones to Additional Questions from Senator Inhofe
    Question 1. Ms. Jones written testimony states ``. . . we [GAO] 
recommend that NRC assess management competency and performance as part 
of its inspection process.''
    What NRC regulation would the NRC be implementing by assessing 
license management competency?
    What other Federal health and safety agencies assess the management 
competency of the regulated industry?
    What criteria are used by other Federal health and safety agencies 
to assess management competency?
    Response. The NRC has well established regulations pertaining to 
the inspection of commercial nuclear power plants in support of its 
statutory responsibility to ``provide adequate protection to the health 
and safety of the public.'' We believe that plant inspections should 
encompass the important conditions that impact plant safety, so that 
licensees and NRC managers can take actions when appropriate. Because 
both the NRC and the nuclear industry agree that management performance 
is ``instrumental'' to safe operations, factors relating to management 
effectiveness would help make the plant inspection process more 
effective. In their report to the NRC, Arthur Andersen reported that 
the NRC needs to be more proactive, and recommended that instead of 
evaluating the leadership and operational causes of past events, the 
NRC should evaluate ``economic, management and operational factors in 
order to prevent future events.''
    At one time, NRC did include a management performance component as 
part of their inspection program. And Arthur Andersen has suggested a 
way in which NRC can include a management assessment component in their 
existing inspection process.
    NRC collects from licensees substantial information on the safety 
operations of nuclear plants. From these data, NRC tells us they 
``infer'' management performance. Indeed, NRC makes substantial public 
comments about the competency of nuclear plant licensee management, 
often concluding that management problems are the main reason for 
declining performance. For example, NRC's audits made many references 
to management's performance in the Commission's reviews of why 
conditions deteriorated at Cooper, including a ``poor management safety 
culture,'' ``weak management oversight of engineering programs,'' a 
``fragmented approach'' to problem resolution, and failure to provide 
an ``adequate level of oversight.'' \2\ At Salem, NRC's audit reports 
also cited the licensee's management as a cause of safety problems.
---------------------------------------------------------------------------
    \2\ Supplemental Plant Performance Review, NRC (95-04, Oct. 3, 
1995).
---------------------------------------------------------------------------
    Additionally, the NRC Chairman stated that the ``. . . . recent 
events at Maine Yankee . . . resulted in a failure to indentify and 
promptly correct problems arising in areas that management viewed, not 
always correctly, as having low safety significance.'' \3\ NRC senior 
managers have also stated that the principal reasons for the safety 
performance problems found at the LaSalle and Zion nuclear plants in 
minois were weak management processes and a lack of management 
involvement.
---------------------------------------------------------------------------
    \3\ Remarks by NRC Chairman Shirley Jackson, November 7, 1996.
---------------------------------------------------------------------------
    Since NRC does not hesitate to draw conclusions about management 
competency after the fact, we believe that such observations could also 
be made during the inspection process, which is the most opportune 
point at which potential safety related causes can be addressed. Acting 
on performance problems by addressing their causes before conditions 
worsen is the key to keeping the industry safe. Preventing problem 
plants from worsening also avoids the enormous costs associated with 
poor performing plants.
    Regarding the experience in other regulatory agencies, we focused 
our review on how NRC meets its responsibilities to help ensure safe 
operation of the nations' commercial nuclear plants. We used as 
criteria the statutes NRC operates under and the regulations it 
promulgates to implement those statutes. As a result, we did not 
compare NRC to other agencies.

    Question 2. The GAO report entitled, ``Preventing Problem Plants 
Requires More Effective NRC Action,'' (GAO/RCED-97-145, at 17) states: 
``Both industry and NRC officials have advised us that management 
competency is considered the licensee's responsibility and that NRC 
lacks the skills and experience to properly assess management.''
    What Federal health and safety agency has employees who are 
currently trained to perform management competency assessments of the 
industry the agency regulates?
    Specifically, what training have those employees received to 
qualify them to assess management competency of the industry the agency 
regulates?
    Response. Because our focus was how the NRC meets is safety 
responsibilities, we did not examine how other agencies regulate. We do 
recognize the technical challenges posed by assessing management 
factors. To assess management, professionals with the proper training 
and experience would be needed, along with objective criteria for 
making judgments. We also believe that gauging management factors is 
critical to the goal of the early identification of the problems in 
nuclear plants.

    Question 3. If the NRC was to make a negative determination 
regarding management competency (on a basis other than educational and 
technical qualification), can the NRC require the licensee to remove 
the employee from NRC licensed activity or in any way change the 
employee's employment status?
    If the NRC makes a negative determination regarding management 
competency (on a basis other than educational and technical 
qualification) and requires the licensee to remove the employee from 
NRC licensed activity or to in any way change the employee's employment 
status, shouldn't the NRC also be responsible for defending the 
licensee in a wrongful termination or other employment-based suit 
brought by the employee?
    Response. The NRC has established procedures for ensuring that 
licensees address deficiencies cited in inspection reports. The finding 
of a management deficiency, if it were part of an inspection finding, 
would likely be treated like any other finding. The action required 
would depend on the safety significance of the finding, and how the 
licensee plans to respond. We are not aware of the NRC ordering 
licensees to change their management, even in those cases where they 
have publically announced that management deficiencies were the cause 
of safety problems.

    Question 4. Ms. Jones written testimony states: ``. . . we continue 
to believe that evaluating licensees' management competency as part of 
plant inspection[s] would provide a[n] important early warning of 
potentially unsafe practices.''
    What management competency evaluative assessment criteria have been 
proven to be dispositive leading indicators providing an early warning 
of potentially unsafe practices?
    Response. NRC would have to decide on the management competency 
components that would be crucial in assessing a plant's safety 
performance. Such a definition would not necessarily be limited to 
technical managerial skills, but rather would likely include factors 
that define how a safe plant should be operated. These could include 
factors such as how well a plant management fosters a proper plant 
safety culture, provides oversight, enhances communications, as well as 
other factors that inspectors may already be examining.
    NRC and its onsite inspectors have vast experience examining the 
causes of declining safety performance. We believe it would be valuable 
if they documented all factors that directly impact the safety 
performance of nuclear plants.
                               __________
       Statement of David Lochbaum, Union of Concerned Scientists
    Good morning. I appreciate this opportunity to testify before the 
Subcommittee regarding this important topic. The industry 
representatives on this panel are justifiably proud of nuclear power's 
record over the past decade. Indeed, they paint a very rosy picture and 
argue that the industry's healthy performance warrants redirected NRC 
oversight effort. My objective is to caution you to watch out for the 
thorns as you enjoy the roses.
    The industry sometimes touts its record in ways which imply that it 
was achieved in spite of the NRC. That's not accurate. The industry's 
performance over the past 10 years benefited from NRC initiatives, such 
as the Maintenance Rule and its need for plant-specific risk 
assessments, and also from the NRC's support for industry initiatives, 
such as cost-beneficial licensing actions.
    The industry cites data such as higher plant capacity factors, 
fewer plant trips, and fewer safety system actuations as evidence of 
healthy performance. This information is valid, but it does not provide 
the complete picture. At this moment, nine US nuclear plants languish 
in protracted shut downs. These plants are not shut down because the 
NRC issued them too many uncited and Level IV violations or because the 
NRC is dragging its feet on risk-informed regulation. No, these plants 
are shut down because their owners failed to properly discharge their 
record-keeping of the how, what, when, and why information for 
emergency equipment, also known as design control and configuration 
management.
    In the mid- and late-1980's, NRC inspections at several plants 
revealed that their owners had made physical changes to emergency 
equipment to solve one problem, only to cause other problems. These 
errors occurred because these owners had not fully understood or had 
lost track of the design bases for the emergency equipment. The NRC 
proposed a new rule that would have required all plant owners to fully 
document the design bases for emergency equipment and to re-create any 
information that was missing. The industry opposed this rule and 
convinced the NRC that they could handle the problem internally. So, 
the NRC dropped its plans for the rule.
    The industry was wrong. Millstone and its fall-out have clearly 
demonstrated that some nuclear plants operated with vital safety 
systems that would not or may not have functioned had there been an 
accident. For example, owners of the Big Rock Point plant in Michigan 
reported 2 weeks ago that one of its safety systems would not have 
functioned during the 13 years before the plant closed last August. An 
NRC team discovered in 1996 that the piping for safety systems at the 
Haddam Neck plant in Connecticut was too small to assure adequate 
cooling of the reactor core during that plant's entire 28-year 
operating lifetime. The nine plants shut down today are fixing design 
control problems like these.
    We should not be operating nuclear power plants unless we know with 
reasonable certainty that their systems needed to protect the public 
during an accident will work. There have been an alarming number of 
reports in recent years which clearly show that several plants have 
operated without fully functional safety systems. In cases like Maine 
Yankee, Donald C. Cook, Beaver Valley, Millstone, and Big Rock Point, 
the public was protected by luck as much as by defense-in-depth.
    The industry wants to push the NRC more rapidly towards risk-
informed regulation. The development of plant-specific risk assessments 
this past decade has provided valuable insights which prompted many 
plant owners to voluntarily make physical changes to their facilities 
that increased safety margins. Unfortunately, these risk assessments 
assume that the plants have no design control and configuration 
management problems. For some plants, this is not a valid assumption. 
Thus, their risk assessments are inaccurate and non-conservative. 
Design control and configuration management problems must be corrected 
at all nuclear plants before risk-informed regulation can advance.
    The industry cites examples of NRC over-regulation, but there are 
examples of under-regulation as well. Both sets of these examples are 
probably valid because the NRC regulates subjectively and 
inconsistently. In a report entitled The Good, The Bad, and The Ugly 
which we issued last month, we documented a wide gap in safety 
performance in our ten-plant ``focus group.'' This discernible 
difference is due to the NRC's subjectivity. Instead, the NRC must 
develop objective standards which it consistently enforces, especially 
when it comes to decisions about whether problem plants should be shut 
down or restarted. It is a daunting challenge, but it can be done.
    Commissioner McGaffigan pointed out during a recent stakeholders' 
meeting that the NRC does a good job on matters in its spotlight. We 
would agree with that contention, although we feel that the NRC needs a 
larger floodlight. This little penlight job just isn't going to allow 
the NRC to handle the important items on its plate in a timely manner. 
The NRC could do a better job if it developed, and used, good 
procedures. Procedures are like the conveyor belt in a factory they 
move products from station to station until the work is completed. Good 
procedures are like a strong, wide conveyor belt because they handle 
most of the work items. Bad procedures are like a thin, unreliable 
conveyor belt because too many items must be hand-carried through the 
process. The NRC really needs to have and follow better procedures.
    I must comment briefly on the industry complaint about the service 
it gets from the NRC. In recent years, a top NRC priority has been its 
review and certification of advanced reactor designs. To our knowledge, 
a line of potential buyers for advanced reactors is not forming 
anywhere in the country. However, there seems to be a market for these 
things overseas. We do not oppose efforts to improve US trade. It is 
simply incomprehensible to us that nuclear safety issues such as fire 
barriers that are combustible linger while the certification of 
advanced reactor designs gets fast-tracked through the NRC. The 
industry is getting very good service from the NRC, compared to that 
afforded public health and safety.
    In closing, I want to again thank the Subcommittee for providing us 
this opportunity to share our views with you. I would also like to 
respectfully suggest that in addition to having the NRC Commissioners 
point to where they are headed, that you formally ask them to provide 
you with their roadmap showing how they intend to reach that 
destination. Reviewing their action plan for achieving their promised 
improvements might make it easier for you to monitor their progress 
along the way. Thank you very much.
       index for documents submitted to supplement oral testimony
Millstone Unit 3
    UCS Letter to NRC Regional Administrator, January 6, 1998
    Key Point: Millstone Units 1, 2 & 3, Salem Units 1 & 2, and Maine 
Yankee began 1997 shut down while safety problems are repaired. Does 
the NRC consider the safety margins at these plants to be adequate? If 
yes, why must they be shut down for so long? If not, why were they 
operating for so long with these problems?
Donald C. Cook Units 1&2
    UCS Petition, October 9, 1997 (without its attachments)
    Key Point: An NRC inspection team looked at two (2) safety systems 
and found problems which prompted an immediate shut down of both units. 
UCS examined the record and discovered that the plant's owners had 
recently reviewed both of these systems and found no serious problems. 
Since the owner's review process was clearly flawed, what assurance is 
there that the other 60-plus safety systems do not have problems like 
those identified by NRC?
    UCS Petition Supplement, January 12, 1998
    Key Point: The restart of D C Cook (then pending) is premature 
because several safety questions have not been answered.
NRC Oversight
    UCS Letter to Senate Appropriations Committee, June 24, 1998 
(without its attachments)
    Key Point: NRC may be guilty of over-regulation at times, but it is 
also guilty of under-regulation. The reason is the same the NRC lacks 
objective criteria when it evaluates licensee performance.
    UCS Handout at NRC Commissioners Meeting with Stakeholders, July 
17, 1998
    Key Point: NRC requires its licensees to meet high management 
standards, yet it frequently fails to meet these same standards. If the 
NRC met these same standards, many of its problems would disappear.
    UCS Letter to NRC Commissioners, July 20, 1998
    Key Point: The industry's push for risk-informed regulation must be 
countered by the ample evidence that many nuclear plants have operated 
well outside the bounds of their recent risk assessments. Thus, NRC 
cannot rely on risk assessments which are mathematically correct but 
which do not reflect reality.
                                                    January 6, 1997
    Hubert J. Miller
    Regional Administrator, Region I
    United States Nuclear Regulatory Commission
    475 Allendale Road
    King of Prussia, PA 19406-1415

Subject: Reactor Safety Questions

    Dear Mr. Miller: Region I entered 1997 with seven nuclear units 
shut down due to reactor safety concerns: the three Millstone units, 
the two Salem units, and Maine Yankee. R. G. Brown & Associates, Inc., 
a financial consulting firm hired by the State of Connecticut's 
Department of Utility Control, recently concluded that Northeast 
Utilities ``lost focus on the safe operation'' of Millstone and placed 
``primary importance on financial issues.'' In 1988, the Nuclear 
Business Unit at Public Service Electric & Gas revised its mission 
statement for the Salem and Hope Creek plants from ``World Class by 
1995'' to one placing greater emphasis on economic performance. 
Consequently, the Salem and Hope Creek plants experienced significant 
regulatory and performance difficulties by 1995. More recently, the NRC 
found that Maine Yankee's problems were caused by that utility's 
economic pressures. Clearly, economics played a significant role in the 
poor safety performance at these troubled nuclear plants.
    In order to better understand the NRC's criteria for assessing 
reactor safety, please address the following question:
    (1) Does the NRC consider the three Millstone units, the two Salem 
units, and Maine Yankee safe enough to allow these plants to restart 
today?
    Depending on the answer to the question above, please address the 
applicable following question:
    (2) If these plants are not safe enough to operate today, does the 
NRC think that these plants were operating safely in the days and weeks 
prior to their being shut down?
    If the safety margins at these plants are not sufficient to allow 
them to restart, it seems evident that these plants operated with 
inadequate safety margins prior to being closed. This determination 
would raise serious doubts about the NRC's ability to protect public 
health and safety following restart of these troubled plants as well as 
during operation of other seemingly untroubled plants.
    (3) If these plants are safe enough to operate today, does the NRC 
have the right to conduct additional inspections and impose additional 
requirements for these troubled plants that prolong the duration, and 
significantly increase the costs, of their outages?
    If these plants had adequate safety margins prior to being closed 
and those safety margins have not been eroded while the plants have 
been idled, it seems evident that the NRC may be unduly harming the 
communities around these plants (as well as the ratepayers and 
stockholders of these utilities) by taking actions that prolong the 
outages and further weaken the economic viability of these plants. If 
these plants are safe enough to operate today, it seems obvious that 
their generating revenues would only enhance the ability of these 
utilities to maintain the necessary safety margins.
    I respectfully request your response to these questions prior to 
the restart of any unit at Millstone, Salem, and Maine Yankee.
            Sincerely,
                                         David A. Lochbaum,
                                            Nuclear Safety Engineer
                                 ______
                                 
                              Union of Concerned Scientists
                              Washington, DC 20548 October 9, 1997.

    L. Joseph Callan,
    Executive Director for Operations,
    Nuclear Regulatory Commission,
    Washington, DC 20555-0001

Subject: Petition Pursuant to 10 CFR 2.206, Donald C. Cook Nuclear 
        Plants Units 1 AND 2, Docket Nos. 50-315 and 50-316
    Dear Mr. Callan: The Union of Concerned Scientists submits this 
petition pursuant to 10 CFR 2.206 requesting that the operating 
licenses for Donald C. Cook Units 1 and 2 be modified, revoked, or 
suspended until there is reasonable assurance that their systems are in 
conformance with design and licensing bases requirements. A process 
comparable to the system certifications recently used by the Salem and 
Millstone licensees would provide this necessary level of assurance. 
UCS additionally requests that a public hearing into this matter be 
held in the Washington, DC area prior to the first unit at D C Cook 
being authorized to restart. At this hearing, we will present 
information supporting the contentions in this petition.
Background
    On October 9, 1996, the NRC requested that its power reactor 
licensees provide information pursuant to 10 CFR 50.54(f) regarding the 
adequacy and availability of design bases information. The NRC's issued 
this request as a result of its investigations at the Millstone Power 
Station. The licensee for the D C Cook plant responded with a letter 
dated February 6, 1997, describing the administrative controls it uses 
to provide assurance that the Cook Nuclear Plant is operated and 
maintained within the established design bases.
    An NRC team recently conducted an architect/engineer design 
inspection at D C Cook. According to the NRC's Project Manager for D C 
Cook, this NRC team examined two safety systems and their supporting 
systems. The team's findings forced the licensee to shut down both 
units on September 10, 1997.
    The NRC issued a confirmatory action letter to the licensee dated 
September 19, 1997, specifying issues arising from the design 
inspection that must be resolved prior to restarting the units. These 
issues (listed in Attachment 1) include physical modifications to the 
plants and revisions to the plants' operating licenses. Numerous NRC 
Daily Event Reports (listed in Attachment 2) described the findings 
from design inspection as reported by the licensee. The NRC has not yet 
released the design inspection report and we have been told that it 
will not be issued until next week at the earliest.
Basis for Requested Action
    The NRC conducted architect/engineer design inspections at only six 
of its nearly 70 operating power reactor licensee sites. These design 
inspections examined only one or two safety systems along with their 
supporting systems at each site. The NRC Project Manager reported that 
the design inspection at D C Cook examined the residual heat removal 
and component cooling water systems along with their supporting 
systems. These design inspections focused on the facilities' original 
design and the licensees' conformance with the safety analysis reports.
    The systems examined by the NRC at D C Cook had already been 
covered by the licensee's design basis documentation reconstitution 
program. Design basis documents (DBDs) for the containment, containment 
structure, containment spray, emergency core cooling, component cooling 
water, and residual heat removal systems had been approved by the 
licensee prior to the NRC team's arrival. The licensee informed the NRC 
that its DBD program had not identified any deficiencies involving 
equipment operability.
    The findings by the NRC design inspection team prompted the 
licensee to declare both trains of the emergency core cooling systems 
and the containment spray system inoperable. The units were shut down 
on September 8 and 9, 1997. The licensee reported making physical 
changes to the plant to correct some of the problems and indicated that 
additional physical changes may be required.
    The licensee has proposed fixing the specific operability issues 
identified during the NRC design inspection and then restarting the 
units. Confining the scope of the restart activities in this way would 
be treating the symptoms rather than the cause of the problems. The NRC 
design inspection revealed serious deficiencies in the licensee's 
design control programs. These deficiencies created the specific 
problems that forced the plants to be shut down. These deficiencies may 
also be responsible for similar problems in other safety systems which 
were not examined by the NRC.
    It is important to note that the NRC identified significant 
operability problems in systems that the licensee had covered in 
recently approved DBDs. The licensee stated in its February 6, 1997, 
submittal that it verifies and validates the information in its DBDs 
via reviews and physical plant walkdowns prior to their approval. Thus, 
the NRC discovered significant problems in systems which had been 
closely scrutinized by the licensee. Had the NRC's findings involved 
systems which have not yet been covered under the licensees' DBD 
program, it might be reasonable to assume that the licensee would have 
identified them at that later date. However, there is little reason to 
believe that these problems would have been resolved unless the NRC had 
identified them.
    Attachment 2 lists NRC Daily Event Reports (DERs) involving issues 
identified by the NRC design inspection at D C Cook. DER Nos. 32740, 
32806, 32822, 32839, 32843, 32875, 32890, 32904, 32914, 32915, 32921, 
32948, and 32988 describe potential deficiencies that appear to have 
existed at D C Cook prior to the initiation of its design basis 
documentation reconstitution effort in 1992. That effort was therefore 
apparently unable to detect these potential deficiencies. DER Nos. 
32823, 32824, 32903, 32939, and 32948 describe potential deficiencies 
that appear to have been introduced since 1992. Thus, the licensee's 
design control and quality assurance programs are apparently unable to 
ensure that the facility is maintained within its design bases.
    UCS feels that the design basis documentation reconstitution and 
Updated Final Safety Analysis Report (UFSAR) validation programs as 
described in the licensee's response to the NRC's 50.54(f) letter lack 
the rigor and focus necessary to identify potential design-related 
operability issues. Our conviction is supported by the findings from 
the NRC design inspection. Since the corrections to the NRC's findings 
were not limited to mere paperwork fixes but included actual changes to 
the plant's physical configuration, the safety significance of these 
and potentially other undetected problems cannot be understated.
    The flaws in the licensee's design control programs must be 
corrected. The systems at D C Cook, at least those with a safety 
function, must be certified to be capable of performing their required 
actions under all design conditions. Then, and only then, can the units 
be restarted with reasonable assurance that public safety will be 
adequately protected. It would be irresponsible to restart these units 
knowing that the programmatic failures that caused the safety problems 
identified by the NRC team may have produced comparable problems 
affecting the operability of other safety systems.
    The legal precedent for our position is stated by the NRC's Atomic 
Safety and Licensing Appeal Board in the Matter of Vermont Yankee 
Nuclear Power Corporation , Memorandum and Order (ALAB-138), dated July 
31, 1973:

  ``As a general rule, the Commission's regulations preclude a 
    challenge to applicable regulations in an individual licensing 
    proceeding. 10 CFR 2.758. This rule has been frequently applied in 
    such proceedings to preclude challenges by intervenors to 
    Commission regulations. Generally, then, an intervenor cannot 
    validly argue on safety grounds that a reactor which meets 
    applicable standards should not be licensed. By the same token, 
    neither the applicant nor the staff should be permitted to 
    challenge applicable regulations, either directly or indirectly. 
    Thus, those parties should not generally be permitted to seek or 
    justify the licensing of a reactor which does not comply with 
    applicable standards. Nor can they avoid compliance by arguing 
    that, although an applicable regulation is not met, the public 
    health and safety will still be protected. For, once a regulation 
    is adopted, the standards it embodies represent the Commission's 
    definition of what is required to protect the public health and 
    safety.'' [emphasis added]
  ``In short, in order for a facility to be licensed to operate, the 
    applicant must establish that the facility complies with all 
    applicable regulations. If the facility does not comply, or if 
    there has been no showing that it does comply, it may not be 
    licensed.'' [emphasis added]
    The NRC design inspection at D C Cook identified significant issues 
which caused both units to be shut down. These issues were caused by 
programmatic deficiencies in the licensee's design control programs. A 
contributing factor for these issues is the failure of the licensee's 
quality assurance and self-assessment programs to detect these 
problems. Nothing in the reported findings from the design inspection 
supports a conclusion that these findings are isolated consequences. 
The NRC's design inspection invalidates any showing that this facility 
complies with all applicable regulations. Therefore, the design control 
deficiencies must be corrected to prevent future non-compliances with 
safety regulations. And just as importantly, a thorough review of all 
systems with safety functions must be completed prior to restart to 
detect and correct past non-compliances.
    UCS is not advocating that the NRC apply a higher standard at D C 
Cook. Instead, we are requesting that the NRC ensure that the D C Cook 
facility is in accordance with the minimum safety standards which 
constitute the legal grounds for allowing the units to operate. Our 
request is consistent with the measures required by the NRC when other 
sampling inspections find problems. We ask the NRC to expand the 
inspection scope based upon the identified problems just as would be 
required when snubber (e.g., pipe restraint) and reactor vessel 
internals inspections found problems.
Requested Actions
    UCS petitions the NRC to protect public health and safety by 
preventing the units at D C Cook from operating until such time that 
there is reasonable assurance that all significant non-compliances have 
been identified and corrected. The system certification process 
recently used at the Salem Generating Station and the Millstone Power 
Station would provide such reasonable assurance. We request a public 
hearing on this matter be held in the Washington, DC area before any 
unit at D C Cook is authorized to restart.
            Sincerely,
                                         David A. Lochbaum,
                                           Nuclear Safety Engineer.
                              attachments:
    1) Design Inspection Issues That Will Be Resolved Prior to D C Cook 
Restart
    2) NRC Daily Event Reports on D C Cook Design Inspection Findings
Attachment 1
    Design Inspection Issues That Will Be Resolved Prior to DC Cook 
Restart
    The following issues, quoted verbatim, were specified on the NRC's 
Confirmatory Action Letter dated September 19, 1997, as requiring 
resolution prior to restart of any D C Cook unit:
    1. Recirculation Sump Inventory/Containment Dead Ended Compartments 
Issue
    Analyses will be performed to demonstrate that the recirculation 
sump level is adequate to preventvortexing, or appropriate 
modifications will be made. [See also Attachment 2--Power Reactor Event 
Number 32890]
    2. Recirculation Sump Venting Issue
    Venting will be re-installed in the recirculation sump cover. The 
design will incorporate foreign material exclusion requirements for the 
sump. [See also Attachment 2 Power Reactor Event Numbers 32875 and 
32903]
    3. Thirty-six Hour Cooldown, with One Train of Cooling
    Analyses will be performed that will demonstrate the capability to 
cool down the units consistent with design basis requirements and 
necessary changes to procedures will be completed.
    4. ES-1.3 (Switchover to Recirculation Sump) Procedure
    Changes to the emergency procedure used for switchover of the 
emergency core cooling and containment spray pumps to the recirculation 
sump will be implemented. These changes will provide assurance there 
will be adequate sump volume, with proper consideration of instrument 
bias and single failure criteria. [See also Att. 2 Power Reactor Event 
Numbers 32806 and 32904]
    5. Compressed Air Overpressure Issue
    Overpressure protection will be provided downstream of the 20 psig, 
50 psig, and 85 psig control air regulators to mitigate the effects of 
a postulated failed regulator. [See also Attachment 2 Power Reactor 
Event Numbers 32939 and 32988]
    6. Residual Heat Removal (RHR) Suction Valve Interlock Issue
    A technical specification change to allow operation in mode 4 with 
the RHR suction valves open and power removed is being processed. 
Approval of this change by the NRC will be required prior to restart. 
[See also Attachment 2 Power Reactor Event Numbers 32914 and 32921]
    7. Fibrous Material in Containment
    Removal of fibrous material from containment that could clog the 
recirculation sump will be completed. [See also Attachment 2 Power 
Reactor Event Number 32948]
Attachment 2
    NRC Daily Event Reports on D C Cook Design Inspection Findings
    The following summaries were taken from the daily event reports 
available on the NRC's website (www.nrc.gov). The only editing involved 
deletion of unnecessary detail, such as who was notified about the 
events, and the addition of clarification for acronyms. Otherwise, 
these narratives are verbatim.
 power reactor event number: 32890 unusual event declared & technical 
    specification required shutdown on both units due to inoperable 
                              containments
    As a result of issues raised during the ongoing architect/engineer 
design inspection, the licensee was reviewing the design aspects of the 
containments (both units have similar containments). After consulting 
with the nuclear steam supply system supplier (Westinghouse) the 
licensee determined that concerns existed about whether adequate 
communication (flow paths) exists between the active and inactive 
portions of the containment sump.
    During certain scenarios, the volume of water flow back to the 
containment recirculation sump may not be adequate to support long-term 
emergency core cooling (ECC) systems (RHR [residual heat removal] 
system, safety injection system, charging system) or containment spray 
pump operation during the recirculation phase of a large or small break 
LOCA. The containment drainage system is designed to ensure that water 
entering the containment from the breach in the reactor coolant system, 
ECC systems injection, and ice condenser melt flows back into the 
containment recirculation sump via drains. Licensee analysis was unable 
to confirm that sufficient communication existed between inactive and 
active volumes of the containment to ensure adequate drainage to the 
recirculation sump. Without adequate drainage into the sump, a low sump 
level will result, which jeopardizes long term operation of the ECC 
Systems and containment spray pumps due to vortexing and air 
entrainment.
    As a conservative measure because of these concerns, the licensee 
declared both trains of the ECC Systems and the containment spray 
system inoperable for both units and entered Technical Specification 
limiting condition for operation action statement 3.0.3 to shut down 
both units. The licensee commenced shutting Unit 1 down from 100 
percent power at 1655 and Unit 2 down from 100 percent power at 1728. 
At 2000, the licensee declared an unusual event on both units due to 
the potential loss of containment barrier on both units.
    The licensee plans to perform further analysis to determine the 
extent of the existing communication between the portions of the sumps 
and whether plant modifications will be necessary.
    The unusual event was terminated and exited at 0303 EDT when Unit 1 
entered mode 5 (cold shutdown). Unit 2 entered mode 5 at 0015 EDT (cold 
shutdown).
                   power reactor event number: 32875
     failure to maintain the containment recirculation sump \1/4\" 
          particulate retention requirement (historical issue)
    A \1/4\" particulate retention requirement for the containment 
recirculation sump was not properly established in 1979 following sump 
modifications. The containment recirculation sump requirement to retain 
\1/4\" particles is to ensure that containment spray nozzles do not 
become plugged. The containment spray system takes suction from the 
containment recirculation sump following injection of the refueling 
water storage tank supply during a loss of coolant accident.
    In 1979, modifications were performed on the containment 
recirculation sump. One of the modifications involved moving a \1/4\" 
retention element from inside the recirculation sump to the entrance of 
the sump. When the retention element was moved, the \1/4\" retention 
requirement was not fully addressed, and pathways exceeding the \1/4\" 
requirement were inadvertently established. The inadvertent pathways 
established included: \3/4\" vents in the roof of the recirculation 
sump entrance, the containment sump drain line from the recirculation 
sump, and small gaps around the sump entrance. These pathways have 
since been eliminated or the \1/4\" requirement has been established.
    The licensee is reporting the fact that since 1979 until the \1/4\" 
requirement was established or the pathway was eliminated, the 
containment recirculation sump did not meet its design requirement.
    The containment recirculation sump currently meets the \1/4\" 
requirement. A condition report has been written to initiate 
investigation into this event and determine appropriate preventive 
actions.
    This event was determined to be reportable at 0856 on September 5, 
1997.
    *** Update at 1905 on 09/10/97 by Randy Ptacek entered by Jolliffe 
***
    After further review of the above condition, the licensee concluded 
that the emergency core cooling (ECC) system was outside its design 
basis as a result of the \1/4\" requirement not being met following the 
1979 plant modifications. By not adequately covering the \1/4\" 
particulate retention requirement, larger particles had the potential 
to enter the recirculation sump. The ECC System has not been analyzed 
for these larger particles nor is it within the design of the ECC 
System to handle these larger particles.
    The licensee has concluded that this event is also reportable to 
the NRC in accordance with the requirements of 10 CFR 
50.72(b)(1)(ii)(a) unanalyzed condition, and 10CF50.72(b)(2)(iii)(d) 
accident mitigation.
                   power reactor event number: 32903
    containment recirculation sump vent holes have been filled with 
                                concrete
    As a result of questions posed by the NRC architect/engineer design 
inspection team, the licensee determined that the inlet venting 
requirement for the containment recirculation sumps was not properly 
maintained following modifications to the Unit 2 sump in 1996 and the 
Unit 1 sump in 1997 (both units have similar containments).
    The containment recirculation sump venting requirement was 
established in 1979 as part of the original sump design to reduce the 
potential for air entrainment through the sump. The venting requirement 
was met through the addition of 5\3/4\-inch diameter holes drilled in 
the roof of the sump inlet. (The holes did not meet the \1/4\-inch 
diameter requirement as reported in Event #32875.) When these holes 
were discovered during the Unit 2 1996 refueling outage and the Unit 1 
1997 refueling outage, they were classified as abandoned equipment 
holes that exceeded the \1/4\-inch particulate retention requirement 
for the sumps and they were filled with concrete.
                   power reactor event number: 32806
  instrumentation indications used to determine when refueling water 
 storage tank to containment switchover is required may not have been 
  correct to prevent vortexing in the containment recirculation sump.
    During the evaluation of a proposed procedure change that affects 
switchover from the refueling water storage tank (RWST) to the 
containment sump during a loss-of-coolant accident (LOCA), it was 
determined that the instrumentation indications used to determine when 
the switchover is required may not have been correct to prevent 
vortexing in the containment recirculation sump.
    To address this situation, procedures associated with the 
switchover (on both units) have been conservatively changed to 
accommodate the related instrument inaccuracies. These changes assure 
adequate RWST water is in containment before switchover to eliminate 
concerns that vortexing would occur in the containment sump after 
switchover.
    The problem is that the RWST water level indicators are connected 
to the suction line that goes to the residual heat removal (RHR) pumps. 
Due to the flow in these lines, the indicated water level at which the 
switchover would be initiated would be less than the actual water level 
of the RWST (the licensee would be putting less water into the 
containment than expected). Also, the licensee said that they had some 
inaccuracies associated with their containment sump instrumentation. 
The licensee adjusted the containment sump indication to assure that 
they have an adequate volume in the containment to prevent vortexing. 
The licensee relies upon two indications for switchover; RWST water 
level and containment water level.
                   power reactor event number: 32904
   single failure during recirc sump switchover could be unanalyzed 
                               condition
    As a result of questions posed by the NRC architect/engineer design 
inspection team, the licensee determined that the possibility of a 
single failure during an accident while performing switchover of the 
emergency core oling system pumps from the refueling water storage tank 
(RWST) suction to the recirculation sump suction could have resulted in 
the plant being in an unanalyzed condition. This condition is outside 
the plant design basis, and it potentially could have prevented the 
fulfillment of a safety function of structures or systems.
    The plant emergency operating procedures (EOPs) as currently 
written require that the west residual heat removal (RHR) pump be the 
first pump switched from the RWST suction to the recirc sump suction. 
Once this is accomplished, the centrifugal charging (CC) pumps' 
suctions and the safety injection (SI) pumps' suctions are then swapped 
from the RWST supply to the discharge of the west RHR pump. If the west 
RHR pump were to fail at this point when all CC and SI pumps were being 
supplied from its discharge, prior to the east RHR pump suction being 
transferred from the RWST to the recirc sump, all CC and SI pumps could 
also fail due to the loss of suction flow. This would result in the 
loss of all high and medium head injection with only the flow from the 
east RHR pump available for injection into the reactor coolant system. 
The licensee is currently reviewing the EOPs to determine an alternate 
switchover sequence that would eliminate the condition as described 
above.
                   power reactor event number: 32939
  installed plant modification introduced the possibility of a single 
   failure which could result in the loss of both trains of the esf 
                          ventilation system.
    At 1620 on 09/16/97, the licensee determined that a plant 
modification installed between December 1996 and August 1997 introduced 
the possibility of a single failure which could result in the loss of 
both trains of the engineered safety features (ESF) ventilation system 
if the 85-psi air header was to be lost. Prior to the installation of 
the plant modification, the ESF ventilation system charcoal inlet and 
bypass dampers both utilized a 20-psi air header and were positioned 
such that the charcoal bypass dampers were normally open and would fail 
closed; and the charcoal inlet dampers were normally closed and would 
fail open. The plant modification installed new bypass dampers which 
required higher air pressure to operate and were, therefore, 
transferred to the 85-psi header. If the 85-psi air header was lost, it 
would result in the repositioning of the normally open bypass dampers 
without the opening of the charcoal inlet dampers on both trains. This 
would result in dead heading of the filter train fans and loss of 
cooling to emergency core cooling system (ECCS) equipment.
                   power reactor event number: 32988
      non-safety related air headers lack overpressure protection
    During an architectural engineering inspection a question was 
raised regarding the lack of overpressure protection on the 20, 50 and 
85 psig control air headers. The specific concern is the potential for 
common mode failure of both trains of safety related equipment served 
by the air headers. The overpressure condition is postulated to be 
caused by regulator failure.
    Although system reviews have found no component failure mode which 
would result in the devices being incapable of going to their fail-safe 
position, a design change package has been prepared to provide 
overpressure protection on the 20, 50 and 85 psig headers.
                   power reactor event number: 32914
   licensee identified that both units had operated their rhr system 
                contrary to the description in the fsar.
    At 1615 EDT, with Units 1 and 2 shutdown in mode 5, it was 
determined that both units have operated contrary to the design basis 
for the residual heat removal (RHR) system as described in the Final 
Safety Analysis report (FSAR). FSAR Chapter 9, Section 9.3, describes 
the interlocks associated with the residual heat removal (RHR) suction 
valves from the reactor coolant system (RCS). The suction line valves 
are interlocked through separate channels of the RCS system pressure 
signals to provide automatic closure of both valves whenever RCS 
pressure exceeds RHR design pressure. The FSAR states that the 
interlock may be defeated when the RCS is open to atmosphere. However, 
for a number of years this interlock has been procedurally defeated on 
both units to prevent inadvertent closure and loss of RHR suction 
during shutdown cooling operation by opening the valves and racking out 
their breakers in mode 4.
    The overpressure protection afforded by the automatic closure 
function described in the FSAR was defeated without a safety evaluation 
being performed. This loss of automatic closure function represents an 
unanalyzed condition and is, therefore, reportable.
    Plans are to degas, depressurize, and open the RCS on both units to 
atmosphere. Degas will start on Unit 1, and when completed, the unit 
will proceed to depressurize while Unit 2 starts degas procedures. When 
the RCS is open to atmosphere on both units, the plant will be in 
compliance with the FSAR.
    This condition was identified by the licensee during an ongoing NRC 
architect/engineer inspection.
    *** Update at 2130 EDT on 9/13/97 from Robert Blyth to S. Sandin 
***
    The licensee has completed its safety evaluation for mode 5 
operation and concluded that there was no unreviewed safety question or 
change of operation as described in the FSAR. Consequently, degas of 
Unit 1 has been terminated, and neither unit will be vented to 
atmosphere.
                   power reactor event number: 32921
the licensee identified that both rhr pumps had been operated when the 
  rcs was depressurized, which is contrary to the description in the 
                                 fsar.
    Chapter 9 of the Final Safety Analysis Report (FSAR) states: 'Only 
one residual heat removal (RHR) pump will be operated when the reactor 
coolant system is open to atmosphere to prevent damaging both pumps in 
the unlikely event that suction should be lost.' Operating procedures 
for the RHR system do not prevent operation of both RHR pumps when the 
reactor coolant system (RCS) is open to atmosphere, and in the past, 
both RHR pumps have been run when the RCS was vented to atmosphere.
    Plant operating procedures are being reviewed to determine the 
impact. Procedure changes will be implemented as necessary to address 
the FSAR requirement. A condition report has been initiated to 
investigate and determine appropriate preventative actions.
                   power reactor event number: 32948
 it was determined that fibrous material is present in both unit 1 and 
 unit 2 containment in enough quantity to potentially cause excessive 
   blockage of the containment recirculation sump screen during the 
           recirculation phase of a loss of coolant accident.
    In 1985, 1986, and 1995 ``Fiberfrax'' refractory insulation 
materials in bulk, blanket or board form were used as damming material 
when installing fire stops in cable trays in both containments. The 
specification governing installation of the fire stops did not require 
removal of the material, only stating that it should be removed ``if 
necessary.'' The material was not removed. The material is present in 
12 cable trays in Unit 1 and 15 cable trays in Unit 2.
    When the Fiberfrax is exposed to water or steam/water environment 
it could potentially break into small pieces, which could be 
transported to the recirculation sump by the water flow in containment 
during a loss of coolant accident. Once it reaches the recirculation 
sump it has the potential to clog the screens in excess of the design 
value. Excessive screen blockage could result in ECCS inoperability 
during the recirculation mode.
    The Fiberfrax material is currently being removed from the 
containments, and removal will be completed prior to restart of the 
units. The possibility that the licensee's work control process allowed 
unencapsulated fibrous material to be installed in other locations 
inside containment is being investigated.
                   power reactor event number: 32740
 units 1 & 2 operated outside the design basis for service water inlet 
                                  temp
    As a result of questions posed by members of the ongoing NRC design 
inspection team, the licensee has determined that Units 1 & 2 have 
operated outside the plant design basis for service water inlet 
temperature.
    The Updated Final Safety Analysis Report (UFSAR), Table 9.5-3, 
lists service water inlet temperature design value as 76 degrees F. 
This value is used as input to analyses such as containment peak 
pressure and control room habitability. Although engineering analyses 
were performed in 1988 raising the temperature to 87.5 degrees F as 
listed in the plant Technical Specifications, a 10 CFR 50.59 safety 
evaluation was never performed, nor was the UFSAR properly revised.
    Plant service water inlet temperature is the same as Lake Michigan 
water temperature. A review of historical data indicates that during 
July and August of any year, Lake Michigan water temperature is likely 
to exceed the 76 degrees F value. Specific data for 1997 shows that 
Lake Michigan water temperature, and therefore plant service water 
inlet temperature, was greater than 76 degrees F on July 17, July 18, 
and August 4, 1997. All plant systems which utilize service water as a 
cooling medium have been determined to be operable. A 10 CFR 50.59 
safety evaluation will be performed and appropriate changes will be 
incorporated into the UFSAR.
    This report is intended to cover any temperature exclusions above 
76 degrees F and below the 87.5 degrees F value listed in the plant 
Technical Specifications that may occur prior to the completion of the 
10 CFR 50.59 safety evaluation.
                   power reactor event number: 32822
  discovery that a normal operating procedure allowed plant operation 
with component cooling water heat exchanger outlet temperatures greater 
  than the design limit specified in the final safety analysis report
    During the ongoing NRC architect/engineer design inspection, a 
question was asked relative to a statement used in the normal operating 
procedure for the component cooling water (CCW) system. The statement 
allows for a heat exchanger outlet temperature for CCW to reach 120 
degrees F for a period of 3 hours during normal cooldown on the 
residual heat removal system. Investigation revealed that this 
statement was in the original issue of the procedure in 1976. However, 
no 10 CFR 50.59 unreviewed safety evaluation determination 
documentation could be found to support this design parameter.
    The licensee's Final Safety Analysis Report (FSAR) states that the 
CCW heat exchanger outlet design temperature is 95 degrees F. Based on 
the FSAR requiring the 95 degrees F outlet temperature and the lack of 
an unreviewed safety question determination to justify operation 
exceeding 95 degrees F, the units were in a condition that allowed 
operation outside the design basis because the procedure allowed 
operation up to 120 degrees F for a period of 3 hours during normal 
cooldown on the residual heat removal system. The units are not 
currently in a Technical Specification limiting condition for operation 
as a result of this issue.
    Procedure changes have been made to remove the inappropriate 
statement. A condition report has also been written to initiate an 
investigation into this event and determine appropriate preventive 
actions.
                   power reactor event number: 32823
failure of a safety review to address final safety analysis attributes 
       on associated component cooling water cooling requirements
    During the ongoing NRC architect/engineer design inspection, a 
question was asked relative to dual train component cooling water (CCW) 
system outages. During dual train CCW outages, CCW cooling is supplied 
to the spent fuel pool (SFP) heat exchanger only from the opposite 
unit. If that unit has a loss of coolant accident (LOCA), CCW to the 
SFP heat exchanger will isolate. Final Safety Analysis Report (FSAR) 
Table 9.5-2, footnote 3, indicates that the SFP heat exchanger is 
assumed to be on the non-accident unit.
    The licensee reported the following inspection questions:
    1) Does a dual train CCW outage represent a condition outside the 
plant design basis?
    2) Was this reviewed as part of the process of allowing a dual 
train CCW outage?
    Based on a review of FSAR Table 9.5-2, it was concluded that 
footnote 3 was established to clarify why no values for SFP heat 
exchanger flow for the unit undergoing the LOCA are listed in the 
table. Footnote 3 reflects normal SFP cooling system design and 
operation.
    A review was performed of the safety evaluation performed for the 
Unit 2 full core offload with one train of spent fuel cooling. This 
safety review covered the Unit 2 refueling outage schedule which 
included a dual train CCW outage.
    Footnote 3 of Table 9.5-2 represents the normal design of the SFP 
cooling system, that is, the SFP cooling system is designed to remove 
the heat generated by stored spent fuel elements in the [SFP]. The 
system incorporates two separate trains.
    The safety review for the Unit 2 full core offload with one train 
of spent fuel cooling addressed the FSAR section 9.4 attribute of the 
SFP cooling dealing with time to boil events and bulk pool temperature 
requirements; however, the safety review failed to address FSAR section 
9.5 attributes associated CCW cooling requirements as given in Table 
9.5-2.
    This issue impacts both units. However, the units are not currently 
in a Technical Specification limiting condition for operation as a 
result of this issue.
                   power reactor event number: 32824
  failure to perform a 10-cfr 50.59 evaluation for a procedure change 
  involving component cooling water heat exchanger outlet temperature 
                                 limits
    During the ongoing NRC architect/engineer design inspection, a 
question was asked relative to the fact that during the last Unit 2 
refueling outage, an administrative limit of 90 degrees F was placed on 
the component cooling water (CCW) system. The thermal analysis 
indicated that a maximum CCW temperature of 90 degrees F would 
eliminate all margin associated with the spent fuel pool (SFP) design 
assuming a design flow of 3,000 gpm.
    The following inspection question was asked: Since a change in CCW 
temperature was required to meet the Final Safety Analysis Report 
(FSAR) value of 160 degrees F for the SFP, was a 10 CFR 50.59 
unreviewed safety evaluation performed?
    The licensee reviewed the change to the procedure to limit CCW 
temperature to 90 degrees F. The licensee considered this change to be 
an administrative change only to lower the allowable temperature to the 
SFP cooling heat exchanger. A 10-CFR 50.59 evaluation was not performed 
because it was not recognized that the 95 degrees F requirement was 
essentially being changed.
    Without the completion of an unreviewed safety question 
determination, the plant was in a condition outside the design basis. 
The units are not currently in a technical specification limiting 
condition for operation as a result of this issue.
    A condition report has been written to initiate actions to 
investigate this event and provide preventive actions. The 90 degrees F 
limit is no longer in the operating procedures.
                   power reactor event number: 32839
      available water volume in rwst not adequate in modes 5 and 6
    During the ongoing NRC architect/engineer design inspection, NRC 
inspectors asked a question about the reactor coolant makeup required 
after a 10 CFR 50, Appendix R fire. To respond to the question, the 
licensee reviewed two associated design calculations. The more 
restrictive calculation was determined to be the calculation of record 
to meet the requirement. This calculation requires 87,000 gallons of 
water to be available in the refueling water storage tank (RWST). The 
value of 87,000 gallons was approved on 02/20/90. During modes 1 
through 4, plant procedures adequately ensure that this requirement is 
met. During modes 5 and 6, plant procedures are not adequate to ensure 
that this requirement is met.
    The plant has been in modes 5 and 6 many times since this 
requirement became effective on 02/20/90. Based on this, the plant has 
been in an unanalyzed condition several times since 02/20/90.
    Currently both units are in mode 1. The licensee is reviewing plant 
operating procedures to determine impact and will implement procedure 
chances as needed prior to either unit entering modes 5 or 6. The 
licensee is continuing to evaluate the subject calculations and plans 
to submit a licensee event report to the NRC on this subject.
                   power reactor event number: 32843
 lake michigan temperature exceeded plant design basis limit in august 
                                  1988
    As a result of questions posed by members of the ongoing NRC 
architect/engineer design inspection team, the licensee has determined 
that the water temperature of Lake Michigan, the plant's ultimate heat 
sink, exceeded the plant design basis lake temperature limit of 76 
degrees F for 22 days during August 1988.
    The control room is normally cooled by an air conditioning system 
which utilizes non-safety related chillers. The safety related portion 
of the control room air conditioning system utilizes water from Lake 
Michigan as the cooling medium. This water would be supplied directly 
to the cooling coils following manual realignment. At an average lake 
temperature of 81 degrees F that existed during the 22 day period in 
August 1988, the temperature inside the control room could have reached 
110.4 degrees F had the non-safety related chillers not functioned. At 
a temperature of 110.4 degrees F, the lifetime of some instrumentation 
inside the control room, the solid state protection system, and the 
nuclear instrumentation, is estimated to be at 150 hours or 6.25 days. 
The impact of this shortened instrument life span on plant operation 
had not been evaluated.
    At the time of this event, the plant Technical Specifications 
allowed continuous operation with control room temperatures up to 120 
degrees F. The Technical Specifications have since been revised such 
that continued operation with control room temperatures in excess of 95 
degrees F is not permitted.
    Operation of the plant during the time period when lake temperature 
exceeded the design basis limit, without analysis indicating acceptable 
control room cooling could be maintained above this temperature limit, 
and without procedures to alert personnel of the situation, is 
considered as operation in an unanalyzed condition. The instrumentation 
was not adversely impacted by the high lake temperatures as the non-
safety related chillers continued to function and maintain acceptable 
control room temperatures.
                   power reactor event number: 32915
 overpressure protection of the component cooling water system piping 
           not in accordance with the ansi code requirements
    Chapter 9.5 of the FSAR states: 'The relief valve on the component 
[cooling water] surge tank is sized to relieve the maximum flow rate of 
water that would enter the surge tank following a rupture of a reactor 
coolant thermal barrier cooling coil. The set pressure assures that the 
design pressure of the component cooling system is not exceeded.'
    The piping design code at the Cook plant is B31.1. B31.1 states 
that an intercepting stop valve cannot be located between the source of 
pressure and the pressure relief device credited for protecting the 
pipe. In this instance, the pressure source is the ruptured thermal 
barrier; the pressure relief device is a safety relief valve on the 
surge tank. Contrary to the code requirement, there are manual valves 
maintained open between the two. These valves were not controlled in 
accordance with or exempted from B31.1.
    An evaluation is being performed to determine the most effective 
method of establishing and maintaining the code requirement. A 
condition report has been written to initiate an investigation into 
this event and determine the appropriate preventative actions.''
    This condition was identified in response to an ongoing NRC 
architect/engineer design inspection.
                                 ______
                                 
                             Union of Concerned Scientists,
                                                   January 12, 1998
    L. Joseph Callan
    Executive Director for Operations
    Nuclear Regulatory Commission
    Washington, DC 20555-0001

Subject: Addendum to Petition Pursuant to 10 CFR 2.206, Donald C. Cook 
        Nuclear Plants Units 1 and 2, Docket Nos. 50-315 and 50-316

    Dear Mr. Callan: The Union of Concerned Scientists submits this 
addendum to the petition pursuant to 10 CFR 2.206 we submitted on 
October 9, 1997 regarding Donald C. Cook Units 1 and 2. This addendum 
was requested by Ms. Elinor Adensam of your staff following my oral 
presentation this morning of our safety concerns. Enclosed is the 
prepared statement which I read during that presentation.
            Sincerely,
                                         David A. Lochbaum,
                                           Nuclear Safety Engineer.
    This is a public meeting, not the public hearing that we requested 
when we submitted our 2.206 petition over 3 months ago. There have not 
been many public hearings held for 2.206 petitions. In fact, it is my 
understanding that I have attended every 2.206 public hearing ever 
held. One. That public hearing was held on the Millstone petition filed 
by We The People and Mr. George Galatis. Mr. Galatis was featured on 
the cover of TIME in March 1996. The first, and only, public hearing 
for a 2.206 petition was held the following month. Coincidence? I 
honestly doubt it. But I will get into statistics and how they are used 
by the NRC later.
    You agreed to this meeting to see if I have ``new'' information 
about D C Cook. Before I present my information, and I'll leave it to 
the NRC staff to determine its age, I will briefly discuss some ``old'' 
information. You have heard this information before, but maybe not yet 
in 1998 the 2.206 petition process is seriously and fundamentally 
broken. It ain't isn't bent, it's broke.
    You revised the 2.206 process 3 or 4 years ago and think it is 
fixed. The process was indeed changed, but it is not fixed. The old 
2.206 process was broken. The new 2.206 process is broken. It needs to 
be fixed, or eliminated.
    I suspect that the NRC's difficulty in stemming declining 
performance by its licensees offers a close parallel with the history 
of the 2.206 petition process. Your inspectors detect a performance 
problem at a plant. Its owner implements corrective actions. You 
conduct a followup inspection. If you find that things are the same, 
you correctly assume that the problem has not been fixed. If you find 
that things are different, you assume that the problem has been fixed. 
However, things can be different but still not fixed. That's your 
trouble with the 2.206 process and may have been the trouble you had 
preventing performance declines during the early stages of Salem and 
Millstone.
    UCS submitted its 2.206 petition on October 9, 1997. We asked for 
two things: specific actions regarding D C Cook and a public hearing to 
present our concerns. To date, UCS has received one piece of paper from 
you concerning our petition a letter dated December 9, 1997, 
acknowledging its receipt. All of the few telephone discussions we've 
had regarding the petition have been originated by me.
    But enough on the 2.206 process. Perhaps too much. Today's meeting 
is for UCS to convey its concerns regarding D C Cook to you. Normally, 
I distribute copies of the slides or handouts to accompany my oral 
remarks. Since I thought, in good faith, that we would be granted a 
public hearing and assumed that I'd have at least 10 days to prepare 
for it, and since that did not happen, I am unable to provide any 
written documentation to you.
    There are six concerns that I would like to discuss with you today.
    My first concern involves D C Cook's ice condenser containment. The 
NRC Inspector General's office was informed last summer about alleged 
problems in the configuration and testing of the ice condenser at Watts 
Bar. Problems with the bay doors and components of the ice baskets were 
specifically identified. The allegations also suggested that many of 
the problems were generic and therefore affected the other ice 
condenser plants, including D C Cook. Finally, it was alleged that the 
problems were known, but not properly reported, by the Watts Bar 
licensee, the D C Cook licensee, the McQuire licensee, and even 
Westinghouse.
    I refer you to Mr. George Mulley in the IG's office for the 
technical issues. I don't want to compromise IG's investigation, any 
more than I've already done. B but these allegations exist and they may 
affect D C Cook. You recently issued an amendment to D C Cook's 
technical specifications involving the amount of ice in the ice 
condenser. The ice condenser licensing bases were changed, albeit to a 
limited extent. It provided another opportunity for the licensee to 
identify and report any ice condenser problems. I did not see any such 
report. Are the Watts Bar ice condenser problems valid? Do they apply 
to D C Cook? I can't answer that at this time. Can you?
    My second concern involves the licensee's 50.59 safety evaluation 
process. From the material I've reviewed, it appeared that you felt the 
licensee's 50.59 safety evaluation process needed improvements. I 
understand that the licensee made changes to its process., I am 
concerned that it is not evident that the licensee made any attempt to 
determine if safety evaluations prepared under the old process led to 
inappropriate conclusions. In other words, did the bad process cause 
bad products?
    Before joining UCS in 1996, I was a consultant on a UFSAR vertical 
slice project for Salem Unit 2. We looked at every safety evaluation 
written for every modification to the systems we examined. Prior to 
that assignment, I was a consultant on the power update project for 
Susquehanna. Although that licensee did not have a suspect 50.59 
process, the effect of increasing the plant's licensed power level 
might have invalidated the conclusions from prior safety evaluations. 
Therefore, we reviewed the summary for every safety evaluation written. 
Prior to that assignment, I was a consultant on the Browns Ferry 
Restart Project. TVA did have a configuration management problem. We 
reviewed every safety evaluation written for every modification to the 
systems we examined.
    So, based on industry experience and common sense, I expected to 
see at least some screening of safety evaluations written at D C Cook 
using the bad process. Has an assessment of D C Cook's safety 
evaluations been performed? If not, could ``bad'' safety evaluations 
prepared using the ``bad'' 50.59 process mean that unidentified safety 
problems remain at D C Cook?
    My third concern involves engineering calculations. From the 
material I've reviewed, it appears that the quality of the licensee's 
calculations was suspect. In fact, the licensee's response to the 
confirmatory action letter (CAL) dated December 2, 1997, stated that a 
root cause for its problems was that ``Some analyses were found to 
contain errors and incorrect assumptions.'' The licensee said a peer 
review process was used to spot check its calculations. According to 
the licensee's response, a total of 191 calculations were peer 
reviewed. Sounds like a broad review. But it's not, for the following 
reason.
    171 calculations were reviewed to resolve the concerns you raised 
during the design inspection. The remaining 20 calculations covered the 
auxiliary feedwater, component cooling water, chemical volume and 
control, containment spray, essential service water, residual heat 
removal, and electrical distribution systems. 20 calculations for 7 
safety systems. That's an average of fewer than 3 calculations reviewed 
per safety system. Even given this tiny sample, the licensee reported 
that ``some administrative and minor technical concerns were 
identified.''
    Is the NRC satisfied that a review of merely 20 calculations is an 
adequate extent of condition assessment? If so, why?
    My fourth concern also involves engineering calculations. Between 
the time we submitted our petition and the time the licensee responded 
to the CAL, I received allegations involving net positive suction head 
(NPSH) calculations performed for D C Cook. The individual making the 
allegations was at D C Cook and told me there were problems with more 
than one NPSH calculation. The alleged problems involved both 
``missing'' and inaccurate calculations. I do not know which pumps were 
affected, but it should not be too difficult for you to check. I am 
unable to check myself since these documents are not publicly 
available. Do the safety-related pumps at D C Cook have adequate NPSH 
as shown by quality calculations?
    My fifth concern involves the credibility of the licensee's 
response to your CAL. By letter dated February 6, 1997, the licensee 
submitted, under oath, its response to the NRC's 50.54(f) request dated 
October 9, 1996. I think it is fair to state that the licensee, in that 
response, told you that there were no major problems with the two 
safety systems you examined in the subsequent design inspection. Each 
of these safety systems had been the subject of a design bases document 
recently issued by the licensee. Essentially, the licensee gave both of 
these safety systems a clean bill of health. Your subsequent design 
inspection clearly showed otherwise. Both units have been shut down for 
over 3 months to fix the problems you identified in the allegedly 
``clean'' systems.
    Since the shut down, the licensee has expended considerable effort 
fixing the many problems you identified. Numerous physical plant 
changes were necessary. However, the licensee has expended less effort 
examining whether the programmatic problems you found affected other 
systems as well. The licensee was unable to identify the problems in 
the two systems you examined during a thorough design bases 
documentation program. It appears that the licensee applied less 
effort, per system, on the recent extent of condition assessment than 
it applied during the design bases document process. Since the larger 
effort failed, can you be sure that the smaller effort succeeded?
    My sixth concern involves the NRC's own inspection process. You 
came in, looked at two safety systems, and found enough problems to 
force both units to shut down. The licensee maintains that these 
problems were confined to these two systems and everything else is 
well. Sound familiar? In 1996, you examined 4 systems at Maine Yankee 
and documented over 70 pages of problems. That licensee claimed the 
problems were limited to just those systems. Last year, you examined 2 
systems at Vermont Yankee and found a serious problem affecting 1 
system and lesser problems affecting the other. That licensee claimed 
the problems were limited to just those systems. If these licensees are 
correct, then you are the best regulator on the planet. You 
consistently find the needles in the haystacks. You find the only 
significant system problems that exist at the plants.
    Were these licensees correct? I don't know. More importantly, you 
don't know either. You've never expanded the scope for system sampling 
inspections. If you had , just once, examined another system or two, 
then you'd really know whether you found the only problems or not.
    You make sure that the licensees fix the problems you find in the 
few systems. That obviously needs to be done. But much more needs to be 
done. The true purpose of the your inspection of sample systems is not 
to ensure the operability of these few systems. Your inspections are 
intended to assess the licensee's programs and controls for maintaining 
all safety systems. Your findings tell you something about the material 
condition of the plant, but they also provide you information on the 
licensee's general safety management ability. Theoretically, you should 
not find anything during an inspection. Thus, any finding actually 
represents two problems a nonconforming condition as well as a failure 
of the licensee's Quality Assurance (QA) process. Too often, you allow 
licensees to simply fix half of the problem the nonconforming 
condition. For example, when you find a broken widget, you make sure 
that the licensee changes the widget. You also need to find out why the 
licensee did not identify the broken widget and if they have any other 
broken widgets. The licensee's programmatic failures must be fixed. 
Otherwise, problems in other systems will remain undetected and future 
problems may be introduced.
    What would it take for you to expand the sample size? This may be a 
rhetorical question since you have never expanded the sample size. It 
should not be a rhetorical question. You must should develop and issue 
clearly defined criteria on when you will require additional system 
assessments based on findings from your system inspections.
    These are my concerns.
    I think UCS asked for very reasonable actions in our petition. The 
significant problems you found raise valid questions about the other 
safety systems at D C Cook. To date, I do not think those questions 
have been adequately answered. It is clearly the licensee's burden to 
answer these questions. It is your burden not to permit D C Cook to 
restart until these questions are answered and the answers indicate the 
plant will be operated safely.
    To be perfectly candid, I never expected our petition to be 
granted. The NRC's record is such that a public petition has very 
little chance of being granted. My fallback position is to monitor 
daily event reports, LERs, and inspection reports after the plants 
restart. When I see a significant problem reported that might have been 
identified and corrected before restart had the NRC granted our 
petition, you can be sure I'll let you know.
                                 ______
                                 
                             Union of Concerned Scientists,
                                                      June 24, 1998
    The Honorable Pete V. Domenici, Chairman,
    The Honorable Harry Reid, Ranking Minority Member
    Subcommittee on Energy and Water Development
    Committee on Appropriations
    United States Senate

    Dear Senators: The Nuclear Regulatory Commission (NRC) has the 
mission of ensuring that the public is adequately protected from the 
radiation hazards of nuclear power plant operation. We had misgivings 
about the NRC staffing cuts recently proposed by your subcommittee 
because we felt they would compromise the agency's ability to carry out 
its oversight function. The position adopted in the final 
appropriations language relieved many of our concerns. The NRC's 
oversight problems identified by the subcommittee warrant further 
scrutiny. We commend the subcommittee for initiating an inquiry into 
these important matters.
    The final appropriations language contains several examples of 
alleged NRC over-regulation. We agree that the NRC should avoid 
regulations or actions which impose unnecessary burdens on nuclear 
plant owners. Unnecessary actions may divert resources that could be 
better used to improve safety performance. Thus, we support the 
initiative undertaken by the subcommittee to examine this issue in the 
context of an investigation of how the NRC implements its oversight 
role.
    However, the emphasis appears focused solely on potential over-
regulation by the NRC. The equally important subject of potential 
under-regulation should also be considered. For example, we call your 
attention to the report released in May 1997 by the United States 
General Accounting Office (GAO) in response to questions from Senators 
Biden and Lieberman. The GAO concluded that the NRC had waited too long 
to stem declining safety performance at the Millstone plant, the Cooper 
nuclear plant in Nebraska, and the Salem nuclear plant in New Jersey. 
The NRC implemented numerous changes as a result of lessons it learned 
from Millstone and other facilities. But we are not confident that 
sufficient progress has been made. For comparison, the NRC ordered 
Millstone's owners to bring in two independent companies to confirm 
that the plant's problems had been fully corrected. The NRC has not had 
comparable appraisals by Congress, or another independent party, to 
confirm that its own problems have been fully remedied.
    We recently released a report called The Good, The Bad, and The 
Ugly: A Report on Safety in America's Nuclear Power Industry. A copy of 
this report is enclosed. We describe numerous safety problems in this 
report which we feel fall into the category of under-regulation by the 
NRC. Please note that most of these safety problems occurred after the 
GAO's report was released.
    We could communicate additional examples of possible under-
regulation by the NRC. We feel that it would be more useful at this 
point to suggest that the fundamental reason for the NRC's possible 
under-regulation is also responsible for its alleged over-regulation 
that the NRC lacks objective standards when monitoring safety at 
nuclear power plants. If our contention is true, then resolution of 
this root cause will remedy both of the adverse consequences from the 
NRC's oversight problems.
    Lacking objective safety standards, the agency cannot pro-actively 
check declining safety levels at a plant. As a result, a watershed 
event or protracted series of troubling incidents must occur before the 
NRC reacts. Considerable work had to be completed at Millstone, Salem, 
and Indian Point 3 before the NRC would permit these plants to restart. 
The volume of these efforts suggests that these plants operated with 
inadequate safety margins before they were shut down.
    We feel that the NRC currently has the means to apply objective 
safety standards in its oversight of nuclear power plants. We recently 
presented our recommended approach at a meeting of the American Nuclear 
Society. A copy of our ANS presentation is enclosed.
    The NRC usually considers the safety implications of degraded plant 
conditions in the wrong context. The NRC only discusses the defense-in-
depth elements (i.e., multiple barriers and redundant equipment) within 
its regulations that provide adequate protection of the public in event 
of an accident. Degraded plant conditions typically involve more than 
one non-conformance with the safety regulations. For example, nearly 70 
physical changes to Millstone Unit 3 were made during its current 
outage to restore the facility into compliance with safety regulations. 
According to the plant's owners, at least 20 problems were corrected 
that had moderate or high safety risk. The virtues of the regulations 
are irrelevant when a plant like Millstone is so far out of compliance 
with them.
    The NRC also underestimates the safety implications from degraded 
plant conditions by independently evaluating each problem. In our view, 
that approach is non-conservative and improper. By analogy, an 
individual can generally tolerate a single bee sting with minor health 
consequences. The effects from 20 to 70 bee stings could be a more 
serious matter.
    We advocate that the NRC evaluate, or require that its licensees 
evaluate, the safety implications of degraded plant conditions in their 
proper context. The purpose of this evaluation would be to determine 
whether the public would have been protected had an accident occurred 
at the plant in its degraded condition. The NRC should determine if the 
public would have been protected had Millstone Unit 3 suffered an 
accident while it operated with so many of its safety systems degraded. 
Occasionally, results from these determinations may indicate that 
public safety could have been compromised. Identification of such near-
misses is vitally important. First, it significantly reduces the 
chances that the problem will recur with potentially more tragic 
consequences. In addition, it prioritizes safety issues into those 
which must be addressed immediately and those which can wait. This 
distinction allows resources to be applied properly from both safety 
and economic perspectives.
    We respectfully ask the subcommittee to consider both under-
regulation and over-regulation as it examines the NRC's effectiveness. 
If there's any way that UCS can be of assistance in your efforts, 
please do not hesitate to contact me.
            Sincerely,
                                         David A. Lochbaum,
                                           Nuclear Safety Engineer.
    Enclosures: 1) UCS Presentation at 1998 ANS Annual Meeting, 
``Reactor Safety Margins,'' June 8, 1998
    2) The Good, The Bad, and The Ugly: A Report on Safety in America's 
Nuclear Power Industry, June 1998
                                 ______
                                 
 Comments and Observations on NRC's Regulatory Structure and Processes
Summary
    Nuclear plant performance is a function of management effectiveness 
more than it is a function of plant age, reactor type, and other 
factors.
    All plants can develop comprehensive corrective action plans. Good 
management ensures that the plans are implemented properly and revised 
as necessary such that the desired objectives are obtained. Bad 
management allows the plan to get waylaid by emerging issues such that 
schedule or quality, or both, suffer. Good management uses yardsticks 
to measure the effectiveness of changes, physical or administrative) 
implemented at their plants. Bad management does not.
    Good management establishes objective standards, which are clearly 
and consistently communicated to plant workers. Bad management sends 
unclear or mixed messages (i.e., either standards are vague/ill-defined 
like excellence' or objectives cannot be attained with resources 
devoted to projects).
    Good management establishes clear accountability, or ownership, for 
issues. Bad management does not, leading to confusion, frustration, 
ineffectiveness, and delays as things get sorted out.
    Good management provides workers with effective procedures and 
policies such that most items can be processed through normal channels. 
Bad management does not, which forces the majority of items to be hand-
carried through the process.
    NRC regulatory performance is a function of management 
effectiveness more than it is a function of staff size, structure, and 
other factors. Unfortunately, the NRC staff more closely resembles bad 
management than good management:
  The NRC staff develops corrective action plans, but fails to 
    adequately monitor them to ensure the stated objectives are 
    obtained (examples: enforcement policy, 2.206 and allegation 
    processes have been revised in recent years, but are no better than 
    they were a decade ago).
  The NRC staff does not consistently enforce criteria whether 
    they are 10 CFR 50 regulations or NRC policies (examples: D C Cook 
    was shut down last September due to LOCA concerns under postulated 
    conditions. Yet suction strainer issues on BWRs, which actually 
    happened and had unusually similar consequences, did not trigger 
    the shut down of any of the affected plants).
  The NRC staff seems to lack clearly defined accountability 
    (example: UCS allegation involving Millstone Unit 3 was purportedly 
    handled' by NRR until the week after the restart vote, then it was 
    passed back to Region I).
  The NRC staff suffers from a lack of continuity (example: 
    allegations, 2.206 petitions, and issues raised by UCS get 
    routinely re-assigned from one interim or transient person to 
    another).
Inspection and Enforcement
    Inspection program is flawed because inspection reports do not 
accurately reflect inspection findings.
    Examples: Maine Yankee ISAT (10/96), Dresden assessment (late 96)
    Inspection program is also flawed because inspection reports are 
primarily dictated by NRC's general impression of the plant's 
performance.
    Example: D C Cook virtually every inspection report issued since 
January 1998 has included one or more violations. In the 2-years prior 
to 1998, fewer than half of the inspection reports contained 
violation(s). Most of the violations cited in 1998 are not for new 
problems, but are for longstanding material condition or administrative 
control problems. The floodgates' at D C Cook are now open.
    Enforcement process is badly broken because it is inconsistent and 
untimely.
    Examples: By policy, licensees who implement good corrective 
actions in a timely manner (i.e., do what the law requires) can have 
their civil penalties totally waived. By practice, licensees who run up 
a huge tab (e.g., Millstone's $2.1 million fine) receive a discount 
because of their protracted outages. The middle-of-the-road plants are 
the only ones paying full fare.
    Largest single failure of inspection and enforcement programs is 
that they lack credibility. From the public's perspective, credibility 
will never be restored as long as NRC staff steadfastly maintains that 
every violation and event lacks safety significance. The public simply 
does not believe that the NRC would fine a utility $2.1 million for 
``safe'' behavior.
Use of Performance Indicators and Performance Assessment
    NRC staff does not need a new or revised performance assessment 
process it needs to do something tangible when the process being used 
indicates a licensee is not performing adequately.
    Examples: Millstone, Salem, and the Watch List perennial Dresden 
Recall Mr. Kenyon's comment to the Commission that he found NU to be 
the most dysfunctional organization he ever saw. If Mr. Kenyon could 
reach that conclusion during his first week at NU, NRC staff must have 
known that Millstone was in trouble.
Development of Risk-informed Regulations and Regulatory Policies
    Risk-informed regulation cannot proceed unless the risks are known. 
Until plants are generally in conformance with their design and 
licensing bases such that their Individual Plant Examinations are 
valid, risk-informed regulation cannot be implemented.
    Examples: Pilgrim, Vermont Yankee, and D C Cook all responded to 
NRC's October 9, 1996 50.54(f) letter on design bases information by 
stating that they everything under control:
    Subsequent NRC inspection showed that Pilgrim did not have strong 
control over design bases and consequently was performing weak' 
operability determinations. Pilgrim committed to DBD effort.
    NRC A/E inspection revealed numerous shortcomings in design bases 
control at Vermont Yankee. Vermont Yankee committed to expanded, 
revamped DBD program.
    NRC A/E inspection triggered shut down of both units at D C Cook. 
Both units are likely to remain shut down for over a year while 
extensive plant and administrative changes are made.
    All of these plants had previously submitted their IPEs in response 
to NRC Generic Letter 88-20. Yet these findings unequivocally 
demonstrate that these risk assessments were useless because they did 
not accurately reflect the actual plant conditions.
    During the current design bases Amnesty Program, licensees have 
reported literally dozens of design bases problems that dated back to 
original construction. Many of these problems required physical plant 
changes or procedure revisions to correct. These deficiencies are 
reality, yet the IPEs do not account for these common-mode failures. 
Risk assessments should account for all possible failure modes, not 
just the mathematically convenient ones.
    The industry is lengthening surveillance and inspection intervals 
based on empirical database of equipment failure rates. However, these 
activities have also detected cases of sabotage and inadvertent 
component mispositioning. It is not apparent that the justification for 
longer testing and inspection intervals has accounted for these other 
risk factors. Risk-informed regulation must include all risks.
Timeliness of NRC Processes
    NRC staff should not establish timeliness goals unless it also 
provides resources and oversight necessary to ensure that time frames 
are not met at the expense of quality.
    Example: Recent emphasis on closing allegations within 180 days may 
be causing a high percentage of them to be closed without the 
underlying issues being addressed.
    Whenever possible, NRC staff should live by same timeliness 
standards mandated for licensees.
    Example: Per 10 CFR Part 21, licensees have up to 60 days from 
discovery of a potential safety hazard to justify hwy it is not a 
problem or report it to the NRC. The NRC, upon receipt of a 10 CFR Part 
21 report, can and will evaluate it at a much more leisurely pace.
                                 ______
                                 
                             Union of Concerned Scientists,
                                                     July 20, 1998.
    Chairman Shirley A. Jackson
    Commissioner Greta J. Dicus
    Commissioner Nils J. Diaz
    Commissioner Edward McGaffigan, Jr.
    United States Nuclear Regulatory Commission
    Washington, DC 20555-0001

    Dear Chairman Jackson and Commissioners: UCS appreciated the 
opportunity to participate in the roundtable discussion on Friday, July 
17, 1998. Three issues raised during that discussion require our 
further comment:
    An industry representative stated Friday, and others have stated 
similar sentiments in various forums, that the NRC over-reacted to 
Millstone. UCS does not share this characterization. In any event, it 
must be noted that an NRC reaction would not have been necessary had 
the Millstone licensee and the industry fulfilled its legal 
obligations. In the late 1980's, the NRC was concerned about design 
bases control and configuration management issues. The industry assured 
the NRC that it had these areas under control. Millstone clearly 
demonstrated that this assurance was unwarranted.
    It should also be pointed out that on the very day of this 
roundtable discussion, ten (10) US nuclear power plants (Clinton, D C 
Cook 1&2, LaSalle 1&2, Millstone 1&2, Beaver Valley 1&2, and Indian 
Point 2) were shut down while they resolved design bases and 
configuration management problems. These plants are not enduring 
protracted outages because the NRC saddled them with too many Level IV 
and uncited violations they are shut down because they failed to 
properly implement their design control and configuration management 
programs.
    Several people commented Friday about ``inspector mischief.'' It is 
UCS's perspective that NRC inspectors are a strength and not a 
weakness. We contend that these capable individuals are inadequately 
managed because they are not given well-defined, objective criteria to 
measure plant performance against. Inspectors cannot be the primary 
fault of the NRC's inspection program their reports are signed out by 
NRC regional and headquarters supervision.
    We maintained that an obstacle to risk-informed regulation was that 
all risks are not being accounted for. For example, design errors are 
handled differently than operator errors. Individual plant examinations 
(IPEs) include probabilities for operator mistakes even through 
licensee event reports contain sections explaining what actions will be 
used to prevent recurrence of such mistakes. Thus, IPEs recognize that 
operator errors are a fact of life.
    Design errors are treated differently. The reality of the past few 
years is that safety systems at many operating nuclear power plants 
contained design errors dating back to original plant construction that 
would have prevented, or seriously impaired, their functioning in case 
of an accident. Yet despite the growing empirical database of such 
findings, IPEs do not account for design errors that might prevent 
safety systems from functioning. It is possible to calculate design 
error probabilities from the existing data just as the operator error 
probabilities are determined.
    While the focus of the roundtable discussion was on areas in which 
the various stakeholders felt that the NRC needed to improve, we would 
be remiss if we did not comment that the NRC does many things very 
well. It is, in fact, this demonstrated capability that gives us hope 
that the NRC will be able to resolve the weak areas discussed last 
Friday.
                                 ______
                                 
  Responses by David A. Lochbaum to Additiona Questions from Senator 
                               Lieberman
    Question 1. You have expressed concern about the use of risk in NRC 
safety regulations, independent of strong design standards and good 
management practices. What is the appropriate use of risk-infommed 
regulation by the NRC, and what are its limitations?
    Response. Risk-informed regulation has been appropriately used by 
the industry and the NRC to establish priorities. For example, plant 
owners routinely use risk infommation to detemmine schedules for 
managing work backlogs. In addition, the NRC uses risk information to 
determine which safety systems their inspectors examine. Results from 
available risk models generally permit the relative importance of 
safety systems to be detemmined such that these kind of applications 
are meaningful.
    The limitations of the risk models and in the conformance of plant 
design and operations with assumptions made in the risk models prevent 
risk-infommed regulation from making go/no-go decisions. Unfortunately, 
risk models have been used for this purpose. For example, the NRC used 
the results from a draft risk assessment to dismiss safety concerns 
about the design of the spent fuel pool cooling system at the 
Susquehanna nuclear plant in Pennsylvania. The draft risk assessment 
contained more than fifty (50) errors and omissions, yet its non-
conservative results were used to dismiss a safety concern that 
affected nearly thirty-five operating nuclear plants.
    Results from available risk models, even if corrected for gross 
errors as in the Susquehanna example, are not reliable enough to define 
the cutoff point for resolving safety concems. At least, not unless 
that threshold is conservatively low, 1x10-6 or lower.
    Risk-infommation regulation is further limited by its emphasis on 
core damage frequencies. Virtually all of the plant-specific risk 
assessments examine postulated accident sequences that culminate in 
severe reactor core damage. Many of the plant systems designed to 
protect the public from radioactivity released during an accident, such 
as the containment filtration systems, cannot fail in any way to 
initiate or exacerbate a core damage accident. Thus, the risk 
assessments assign these plant systems low safety significance. 
However, if there is a reactor core damage event, as occurred at the 
Three Mile Island plant in March 1979, these plant systems must 
function to limit public health consequences.
    UCS feels that risk-infommed regulation must properly recognize the 
vital importance of plant systems which protect the public and the 
environment in event of a reactor core damage event.

    Question 2. The GAO has concluded that the competency of a nuclear 
plant's management is perhaps the most critical factor in safety 
performance. This conclusion makes basic common sense. What are the 
views of Panel II members on this matter? How best can the GAO 
recommendation be implemented, including by the NRC?
    Response. UCS agrees fully with the GAO's conclusion regarding the 
role of management competency in plant safety performance. Prior to 
joining UCS. our nuclear safety engineer worked for 14 years as a 
consultant to the nuclear power industry. He had long-temm assignments 
at some of the best perfomming nuclear plants and also some at plants 
which were deservedly on the NRC's Watch List. The fundamental 
difference in perfommance was management's ability to cultivate and 
sustain a proper attitude toward safety.
    The best way for the NRC to monitor management competency would be 
to consistently implement objective standards in its inspection, 
enforcement, and assessment programs. We feel that the NRC allows its 
inspection findings, its enforcement actions, and its assessment 
reports to be unduly influenced by its subjective evaluation of plant 
perfommance. Consider, for example, two plants which have the same 
degraded condition. The NRC discounts the significance of the problem 
for the plant it feels is in general good health, while it upgrades the 
severity of the very same problem for the plant it feels is not doing 
so well. This subjective treatment artificially widens the perceived 
gap in plant perfommance. The NRC's approach masks declining 
perfommance at a ``good'' plant until it drops so far that it can no 
longer be disregarded. Conversely, the NRC's approach prolongs the time 
that a ``bad'' plant must spend in the regulatory doghouse even though 
its actual perfommance is improving.
    The NRC must allow objective inspection and enforcement data to 
dictate the results from its plant performance evaluation, instead of 
allowing just the opposite. The most accurate measure of management 
competency available to the NRC would be plant perfommance evaluations 
based on consistently applied objective criteria. Then, plants with a 
high number of inspection findings and enforcement actions would 
warrant closer NRC interest in management capability.
    Question 3. You have expressed general agreement that the Watch 
List process--by which the NRC is supposed to provide an early warning 
about problem plants--is not working well. What specific changes would 
you recommend to improve this process?
    Response. UCS recommends that the NRC adopt an assessment process 
that uses objective criteria to determine perfommance rankings. Their 
current process allows NRC senior managers to adjust rankings upward or 
downward based on subjective feelings. In the past, such subjectivity 
masked declining perfommance trends at several plants. It also 
unnecessarily prolonged the time that some plants spent in regulatory 
distress.
    UCS recommends that the NRC's assessment program include a report, 
at no less than an annual frequency, for all operating nuclear plants. 
We suggest that the NRC Regional Administrator could brief the 
Commissioners on the performance on all plant within his/her region. 
The scope of this briefing would cover the NRC's assessment for each 
plant. The briefing would also include the NRC's inspection plans for 
the upcoming year to address regulatory concerns at each plant.
    UCS feels that the current Watch List process is too heavily 
focused on detemmining who makes the list. This emphasis apparently 
distracts the NRC's attention from efforts it needs to take to induce a 
performance turnaround at the problem plants. The nearly seven (7) year 
residence of the Dresden plant on the Watch List is the classic 
example.
    WCS's proposed process would de-emphasize the selection of the 
Watch List plants. The Regional Administrator would discuss the NRC's 
assessment of perfommance at all plants in the region, along with the 
regulatory actions planned to deal with any areas of weaknesses. This 
accountability, explicit on the NRC's part and implicit on the plant 
owner's part, should lessen the chances that poor perfommance will be 
sustained.
    Since the NRC has divided the country into four regions, a Regional 
plant performance briefing could be conducted each quarter. UCS 
recommends that the NRC consider holding these quarterly briefings in 
the NRC's regional offices or in the public meeting room near a plant 
in the region. This would allow the public in the communities around 
the nuclear plants to observe the proceedings.
                                 ______
                                 
  Responses by David A. Lochbaum to Additional Questions from Senator 
                                 Inhofe
    Question 1. In your oral testimony, you stated that UCS has 
completed a study showing that the current US nuclear plant could 
shutdown at the end of their current license period, and be replaced 
with renewables and conservation without the need to emit further 
greenhouse gases into the environment. Please provide a copy of this 
report along with justification of the assumptions used in projecting 
the levels of conservation and development of renewables technology. 
Also provide estimates of the costs that would result if the UCS 
approach were implemented.
    Response. Attached please find a copy of Energy Innovations: A 
Prosperous Path to a Clean Environment, by the Alliance to Save Energy; 
American Council for an Energy-Efficient Economy, Natural Resources 
Defense Council, Tellus Institute and the Union of Concerned 
Scientists. Please note that the conclusion that reductions in 
greenhouse gas emissions can be accomplished while phasing out nuclear 
generation is not based on a projection of energy efficiency and 
renewables under business-as-usual conditions, but as the result of 
specific policy initiatives to promote efficiency and renewables that 
are outlined in the study. The study assumed that nuclear generation 
would be phased out as licenses expire. It examined the level of 
efficiency, renewables, and other electricity supply side measures 
would be needed to achieve carbon emission reductions of 10 percent 
from 1990 levels by 2010. The analysis used the Energy Information 
Administration's National Energy Modeling System (NEMS). [Note: the 
referenced document is retained in committee files.]
    The cost of achieving those reductions was found to be negative. 
The net savings for implementing the efficiency and renewables policies 
was found to grow each year, equaling a levelized $19 billion per year 
through 2010. By 2010, the average household would save $530 per year. 
These policies were also shown to increase Gross Domestic Production by 
$2.8 billion and income by $14 billion with the creation of 773,000 new 
jobs in 2010. Continuation of the policies through the year 2030 was 
found to yield carbon reductions of 45 percent below 1990 levels. The 
economic analysis did not continue past 2010.
    UCS along with members of the organizations which collaborated in 
the development of the Energy Innovations report would be pleased to 
meet with the Subcommittee or staff to discuss the report, its 
methodology, and assumptions.
                               __________
 Testimony of Steven M. Fetter, Managing Director, Global Power Group, 
                  Fitch IBCA, Inc., New York, New York
    I appreciate the opportunity to testify before the Subcommittee on 
Clean Air, Wetlands, Private Property and Nuclear Safety to offer the 
views of Fitch IBCA on the appropriate role for the Nuclear Regulatory 
Committee (NRC) in the evolving utility competitive environment. Fitch 
IBCA is the international credit rating agency that resulted from the 
December 1997 merger between the New York-based Fitch Investors Service 
and IBCA Limited of London. I will speak from the perspective of a 
member of the financial community as well as the former Chairman of the 
Michigan Public Service Commission. I should also note that I am not a 
nuclear engineering or nuclear physics expert, and in this regard I am 
representative of the large majority of investors and financial 
analysts who play some role in assessing the nuclear industry.
    The NRC is at the center of investors' perceptions of the financial 
risks facing the U.S. nuclear industry. In evaluating utilities that 
operate nuclear plants, debt and equity investors study closely the 
processes and actions of the NRC. To the extent that these regulatory 
responsibilities are carried out in a consistent and predictable 
manner, investors find comfort with the outlook for both individual 
nuclear utilities and the nuclear industry as a whole.
    It is difficult to envision a competitive electricity market 
without nuclear being a key element. Nuclear energy today accounts for 
about 20 percent of U.S. power supply. With state regulators generally 
providing utilities with almost total reimbursement for above-market 
generation costs, nuclear plants with their low variable costs are 
being counted on as a major source of low cost electricity for years to 
come. The balance that is ultimately struck by the NRC between its 
oversight responsibilities and the necessities of a free market will be 
crucial in determining whether these expectations are borne out.
    In the past, it has been difficult for investors to predict with 
any certainty the actions of the NRC. As a former regulator, I can 
appreciate the pressures under which the NRC operates, attempting to 
follow statutory mandates that set strict adherence as the goal. 
Unfortunately, such a policy formulation creates a situation where 
there are so many standards and requirements that it is difficult for 
nuclear plant owners to know how to allocate resources, much less for a 
financial analyst to be able to make an assessment of overall risk.
    Investors do not have a clear sense of the factors that the NRC 
uses to rate individual plants, modify Systematic Assessment of 
Licensee Performance (SALP) ratings, or place plants on the Watch List. 
This lack of certainty about the impetus for potential NRC actions has 
a negative impact on how investors evaluate nuclear companies, 
especially when one considers the severity of the resulting effects. 
For example, the posting of a plant to the Watch List is in itself 
likely to constrain a nuclear operator's financial resources and access 
to capital. Once the NRC takes that step, it typically leads to a lower 
stock price, reduced access to the equity market, weakening bond and 
commercial paper ratings, and higher cost of debt.
    To compound the problem, investors perceive that once a plant is 
taken out of service for any reason, there is a tendency for the NRC 
staff to seek out additional flaws or issues, whether safety-related or 
not, for consideration and correction. The result is that an outage of 
any type holds out the potential for an indefinitely prolonged 
stoppage, with effects that utility investors most fear: unrecoverable 
purchase power costs, rate penalties, loss of rate base treatment, and 
potential fines or other expenditures to support required remedial 
steps.
    As one utility CEO recently confided to me, ``We need a new 
regulatory paradigm, because under the current system every nuclear 
plant in the country is 10 minutes away from being offline for a year 
or two.'' And this from someone who praises NRC Chairman Shirley 
Jackson's leadership as ``tough but fair, in a way that has made the 
nuclear industry stronger.'' Needless to say, debt and equity investors 
are keenly aware of the risk created when any major nuclear plant, 
regardless of past history, is potentially moments away from a loss of 
its operating license and a reduction in its market value of hundreds 
of millions of dollars.
    What this means is that going forward the sensitivity of the NRC to 
the challenges facing nuclear utilities will be more important than 
ever before. In the past, utilities operated under a heavily-regulated 
cost of service-based system. To the extent that regulatory mandates 
placed additional costs on utility operations, in most cases those 
expenses were recoverable from ratepayers under cost-based tariffs.
    Now, under the evolving competitive regime, all utilities will be 
called upon to react and deal with marketplace pressures. For nuclear 
utilities, this will be an especial challenge, because their need for 
greater flexibility will likely collide with the NRC's traditional 
highly prescriptive approach to regulating the sector. In the new 
environment, however, it is incumbent upon the NRC to differentiate 
between actions necessary for safety and those that have limited or no 
relationship to safety. The NRC must maintain vigilance over the former 
and allow flexibility with regard to the latter.
    By moving to a risk-informed, performance-based regulatory 
approach, the NRC will be able to maintain its important safety 
oversight role, while allowing nuclear facilities to be viable players 
in the competitive system. During my tenure as a state regulator, the 
Michigan Public Service Commission (MPSC) distinguished itself by 
fashioning incentive-based plans in all regulated industries based on 
performance, service quality, and infrastructure improvement. By 
stepping away from the usual way of doing things, we permitted 
utilities to determine the best means to improve both operational and 
financial performance with benefits flowing through to consumers in the 
form of lower rates and a more efficient regulatory process.para.A 
similar approach at the NRC would seem justified to provide utilities 
operating nuclear plants with the ability and motivation to adopt 
innovative policies that could afford similar mutual benefits.
    Investors and rating agencies will closely monitor the NRC as it 
goes through the first round of license renewals. With two applications 
for extension already filed by Baltimore Gas and Electric Co and Duke 
Power, the NRC has the opportunity to show that its promise of a fair, 
effective and efficient license renewal process will be a reality. If 
it succeeds in its goal, investors will be more willing to invest in 
existing nuclear facilities with the expectation that the plants will 
be able to operate safely and reliably beyond the end of their license 
period. If, however, the process for the first applicants bogs down, 
some plants might be shut down earlier than their currently licensed 
lives due to the unwillingness of investors to provide additional 
capital expenditures for a plant that may not be around long enough to 
provide a fair return.
    A similar situation exists with the recent announcement by PECO 
Energy of their involvement in the proposed acquisition of GPU's Three 
Mile Island nuclear plant. The process the NRC utilizes and the 
regulatory rules imposed during consideration of this and other 
proposed transfers of nuclear facilities will have a major influence on 
the role nuclear will play in the competitive electricity market. An 
appreciation by the NRC and the Congress that the changing dynamic 
calls for reorientation of the NRC from a prescriptive enforcement body 
with regard to everything a nuclear owner does to one focussed more 
closely on true issues of safety will be an important step in ensuring 
a place for nuclear in the new competitive electricity framework.
                                 ______
                                 
  Responses of Steven M. Fetter, to Additional Questions from Senator 
                               Lieberman
    Question 1. The GAO has concluded that the competency of a nuclear 
plant's management is perhaps the most critical factor in safety 
performance. This conclusion makes basic common sense. What are the 
views of Panel 11 members on this matter? How best can the GAO 
recommendation be implemented, including by the NRC?
    Response. The Congress and the NRC have the responsibility to set 
clear and objective standards for the level of training, experience and 
competency necessary of nuclear managers to assure safe operation of 
the nation's nuclear plants. For the NRC, this oversight responsibility 
is ongoing and should not be compromised as a result of the electric 
industry's movement to a competitive orientation. That said, it should 
not be the role of the Congress, the NRC, or the GAO to assess or set 
requirements for the efficient operation of a nuclear plant outside the 
area of safety. In a competitive setting, the market should make those 
judgments.

    Question 2. You have expressed general agreement that the Watch 
List process--by which the NRC is supposed to provide an early warning 
about problem plants--is not working well. What specific changes would 
you recommend to improve this process?
    Response. The concern the financial community has with the Watch 
List stems from the seeming lack of clear, objective standards that can 
be relied upon to predict movement on or off the list. NRC Commissioner 
Edward McGaffigan has shared with me a method by which an analyst can 
track negative movement for a nuclear utility by asking the utility if 
it has been informed by its NRC Regional Administrator that it has been 
a subject of discussion at a periodic management assessment meeting. 
This would be a precursor to potential placement on the Watch List.
    To my mind, a more transparent and public procedure backed by clear 
and objective safety standards would serve the process better. Industry 
participants and observers would benefit from a system based on 
objective standards that provides multiple levels or gradations of 
potential risk. This would diminish the severe ``on-oroff'' financial 
impact of the Watch List process.

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