[Federal Register Volume 59, Number 52 (Thursday, March 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-6232]


[[Page Unknown]]

[Federal Register: March 17, 1994]


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NUCLEAR REGULATORY COMMISSION

10 CFR Parts 170 and 171

[Docket No. PRM-170-3]

 

American College of Nuclear Physicians and the Society of Nuclear 
Medicine; Denial of Petition for Rulemaking

AGENCY: Nuclear Regulatory Commission.

ACTION: Petition for rulemaking; denial.

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SUMMARY: The Nuclear Regulatory Commission (``NRC'' or ``Commission'') 
received a petition for rulemaking submitted by the American College of 
Nuclear Physicians (``ACNP'') and the Society of Nuclear Medicine 
(``SNM'') (``petitioners''). The petitioners requested that the 
Commission amend its regulations governing the user and annual fees 
charged to their members due to increases in those fees. Among the 
specific requests contained in the petition were to establish a generic 
exemption for medical licensees who provide services in nonprofit 
institutions and to allow NRC licensees a greater voice in the 
development of new regulations by the NRC. After careful consideration, 
the Commission has decided not to adopt the proposals made in the 
petition.

ADDRESSES: Copies of the petition for rulemaking, the public comments 
received, and the NRC's letter to the petitioner are available for 
public inspection or copying in the NRC Public Document Room, 2120 L 
Street, NW. (Lower Level), Washington, DC 20555.

FOR FURTHER INFORMATION CONTACT: L. Michael Rafky, Office of the 
General Counsel, U.S. Nuclear Regulatory Commission, Washington, DC 
20555, telephone 301-504-1974.

SUPPLEMENTARY INFORMATION:

I. Background.
II. Responses to comments.

I. Background

    On February 18, 1992, the NRC received a petition for rulemaking 
submitted by petitioners ACNP and SNM. The petitioners requested that 
the NRC amend 10 CFR parts 170 and 171 which govern the annual and user 
fees imposed on most NRC materials licensees by the Commission since 
the advent of 100 percent fee recovery in FY 1991. The petitioners 
requested these amendments because of the substantial adverse impacts 
experienced by their members following increases in the NRC's user and 
annual fees.
    On May 12, 1992 (57 FR 20211), the NRC published a notice in the 
Federal Register announcing receipt of the petition. In that notice, 
the NRC stated that it would consider the issues raised by petitioners 
within the context of the review and evaluation of the fee program for 
FY 1993 conducted as part of the NRC's continued implementation of 
Public Law 101-508, the Omnibus Budget Reconciliation Act of 1990, as 
amended (OBRA-90). On October 13, 1992 (57 FR 46818), the NRC published 
a notice requesting public comment on the issues raised in the 
petition.
    The NRC received nearly 100 comments in response to this request, 
with the vast majority in favor of granting the petition. After careful 
consideration of the comments, the Commission has decided to deny the 
petition for rulemaking, for reasons stated below.

II. Responses to Comments

    1. Comment. The majority of commenters simply restated their 
support for some or all of the requested changes in NRC policy detailed 
in the petition. In their petition, ACNP and SNM stated that NRC fee 
increases under the 100 percent recovery regime were adversely 
affecting their members' practice of nuclear medicine, in the process 
harming the societal benefits which stem from that field of medicine. 
The petitioners claimed that they could not recoup the costs of NRC 
fees because Medicare reimbursement levels are inadequate and because 
competing nuclear medicine alternatives are not regulated (or charged 
fees) by the NRC. Petitioners then compared their treatment under the 
NRC's fee rules to that of nonprofit educational institutions, power 
reactors and small entities, all of whom petitioners claimed receive 
special treatment by the NRC, and argued that for exemption purposes 
medical licensees should not be lumped together with all other 
materials licensees.
    For these reasons, ACNP and SNM requested that the Commission take 
the following policy actions:
    (1) Grant a generic exemption for medical services provided in 
nonprofit institutions, such as hospitals, similar to that granted to 
nonprofit educational institutions;
    (2) Provide individualized exemption criteria for medical 
licensees, by means of a ``simple template for structuring exemption 
requests;''
    (3) Adopt a sliding scale of minimum fees that grants nuclear 
physicians more relief than the current small entity classification 
(which grants relief to physicians in private practice with less than 
$1,000,000 in gross receipts); and
    (4) Give NRC licensees a greater voice in the NRC's decisionmaking 
process for developing new regulatory programs.
    In that regard, petitioners suggested that the criteria contained 
in the NRC's backfit rule be applied to the development of all new 
regulatory programs. That is, if a regulation is not necessary for the 
adequate protection of the public health and safety, the NRC would be 
required to show that the rule would substantially increase safety and 
that its benefits outweigh its costs.
    Response. The Commission does not believe that the analogy between 
colleges and universities and medical services provided in a nonprofit 
institution is a valid one. The Commission recently decided to 
reinstate a longstanding (but temporarily withdrawn) fee exemption for 
nonprofit educational institutions. The key to educational 
institutions' singular treatment, however, is not their nonprofit 
status, nor the fact that they provide valuable social benefits; 
rather, it is the existence of certain structural market failures in 
educational institutions' production of new knowledge. In other words, 
colleges and universities produce new knowledge primarily through basic 
research, and disseminate it (essentially for free) to all who want it, 
without receiving compensation from those benefitting. In economic 
terms, this new knowledge is often termed a ``public good.''1
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    \1\The Commission's analysis of this aspect of the petition is 
based in part on a memorandum prepared by an NRC consultant on the 
topic of externalized benefits and public goods. This memorandum has 
been placed in the NRC Public Document Room for examination by any 
interested persons. See Memorandum to NRC Staff from Stephen J.K. 
Walters, Professor of Economics, Loyola College (Md.), dated January 
4, 1994.
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    Two defining characteristics of a public good are its 
nondepletability and nonexcludability. That is, one person's 
acquisition of knowledge does not reduce the amount available to 
others; further, it is not efficient--and often is impossible, as a 
practical matter--to prevent others from acquiring it at a zero price. 
These characteristics make it difficult to recoup the costs of 
producing new knowledge. Because the value of a public good may be very 
great, but the costs of producing it impossible to recapture, public 
subsidies may be necessary for production to occur at all. The 
Commission has decided to exempt nonprofit educational institutions 
from annual fees to advance continued production of new knowledge.
    By contrast, medical practitioners have the capability of obtaining 
compensation for the benefits they provide. Unlike new knowledge, 
medical services are both depletable and excludable. The benefits of 
medicine, while unquestionably significant, are therefore a private 
rather than a public good, in economic terms. The Commission believes, 
in sum, that the market failure considerations that apply to 
educational institutions' attempts to produce new knowledge simply do 
not apply to medical practitioners. There is no structural barrier to 
the recovery of costs incurred in producing the benefits of medicine. 
The situation of the medical practitioners is not fundamentally 
different from that of the for-profit licensees whose claims for 
exemption on grounds of inability to pass through costs the Commission 
has rejected in the past. (See 58 FR 38666-68; July 20, 1993.)
    In this regard, the Commission notes petitioners' claim that 
Medicare may not account for NRC fees when reimbursing physicians and 
hospitals. The Commission is also aware of pricing pressures caused by 
competing nuclear medicine modalities not regulated (or charged fees) 
by the NRC. However, as the Commission explained in its FY 1993 fee 
rule, it is impracticable for this agency to evaluate the merits of 
such empirical claims regarding the ability of licensees to pass 
through fee costs to their customers. (See 58 FR 38666, 38667-68; July 
20, 1993.) The Commission ``does not believe it has the expertise or 
information needed to undertake the subtle and complex inquiry whether 
in a market economy particular licensees can or cannot easily recapture 
the costs of annual fees from their customers.'' (58 FR 38667; July 20, 
1993.) This statement applies equally to medical licensees as it does 
to all others whose products cannot be characterized as a ``public 
good.''
    Addressing the petition's second major point, the Commission 
disagrees with those commenters who call for new individualized 
exemption criteria for medical licensees. The Commission believes that 
the current exemption process for materials licensees, as codified in 
10 CFR 171.11(d), provides medical licensees with the opportunity to 
request an exemption by means of detailing their particularized 
circumstances.
    Both exemption procedures (power reactor and materials licensee) 
contained in Sec. 171.11 allow the requester to inform the Commission 
of ``[a]ny * * * relevant matter that the licensee believes'' should 
impact on the exemption decision. This allows the Commission 
flexibility to consider each situation on its own merits. Were the 
Commission to attempt to establish specific criteria for each type of 
materials licensee, itself a daunting task, it might then be prevented 
from considering factors which did not fall precisely within those 
enumerated. And if the Commission retained the open-ended provision 
quoted above, it would have expended considerable time and resources to 
little purpose, as licensees could make the same claims under new 
criteria that they can at this time.
    Petitioners also complained that the NRC had established a high 
threshold for granting materials exemption requests. In this regard, 
the Commission explained in the first 100 percent fee recovery rule, in 
FY 1991, that because it was statutorily required to collect 100 
percent, it could not easily exempt licensees from fees. If one 
licensee or class of licensees is exempted, those fees must then be 
placed on other licensees, increasing their fee burden. It is for that 
reason that the Commission only grants exemptions in exceptional 
circumstances. (See 56 FR 31472, 31485; July 10, 1991.)
    Petitioners' third request, that the Commission establish a sliding 
scale of minimum fees based on the size of the licensee, which 
``reflects the unique constraints on physicians'', also is denied. In 
its FY 1991 fee rule, the Commission explained in great detail why it 
devised its fee schedules in the manner it did, basing fees on classes 
of licensees rather than licensee-by-licensee. (See FY 1991 Final Rule, 
56 FR 31472, and Appendix A to the Final Rule; July 10, 1991.) There is 
no information contained in either the petition or comments on the 
petition which would lead the Commission to reconsider this approach, 
and therefore the Commission must deny this aspect of the petition as 
well.
    However, the Commission intends to re-examine the size standards it 
uses to define small entities within the context of compliance with the 
Regulatory Flexibility Act. The Commission will conduct this review 
within the context of revision of the small business size standards 
proposed by the Small Business Administration (``SBA'') (58 FR 46573; 
September 2, 1993). The Commission will not complete this review until 
the SBA promulgates its final rule on this matter. These activities may 
result in a revised definition of ``small entity'' more favorable to 
petitioners.
    Finally, the Commission denies petitioners' request that licensees 
be provided more power over the development of NRC regulations, and 
that a new backfit rule incorporating cost-benefit analysis be 
instituted to evaluate the agency's regulatory programs. The Commission 
denied similar requests in its FY 1991 fee rule, explaining that the 
NRC is not exempt ``from the normal Government review and budgetmaking 
process.'' The Commission at that time pointed out that ``the 
Government is not subject to audit by outside parties,'' and that 
``[a]udits are performed by the General Accounting Office or the 
agency's Inspector General, as appropriate.'' (56 FR 31472, 31482; July 
10, 1991.) Additionally, the NRC complies with Federal regulations such 
as the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.) and the 
Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et seq.) that require 
agency analysis of the economic effects of new regulations on 
licensees. The NRC Staff also prepares detailed cost-benefit analyses 
to justify any new regulatory requirements; these analyses are 
carefully reviewed by the Commission. The Commission has seen nothing 
either in the petition or comments on the petition that would lead it 
to change its approach in this area. The Commission would like to 
emphasize, however, that licensees are always welcome and expected to 
comment on proposed rulemakings, including the accompanying cost-
benefit analyses, and that such comments, along with petitions such as 
the present one, workshops, meetings of the Advisory Committee on the 
Medical Use of Isotopes, and the day-to-day interaction between 
licensees and the agency, in the Commission's view provide an adequate 
and successful method of keeping each group apprised of the other's 
concerns.
    2. Comment. The Commission received a potpourri of comments on 
other aspects of the petition. A number of commenters disagreed with 
the petition, arguing that medical licensees should not receive an 
exemption, as the costs of such an exemption would be borne by other 
licensees to whom the additional fees would have no relation, and that 
every licensee should pay its fair share. Other commenters stated that 
the fees should be abolished entirely, which would remove the dilemma 
over granting exemptions. One commenter argued for basing an exemption 
on the function for which the license is utilized, not the function of 
the licensed organization. Some commenters argued that fees should be 
based on factors such as the amount of radioactive sources possessed, 
the number of procedures performed or the size of the nuclear 
department within a hospital. Certain commenters suggested expanding 
the number of exemptions to include Government agencies, along with 
those licensees which provide products and services to medical and 
educational entities. One commenter requested that the NRC take 
Agreement State schedules into account when setting its own fee 
schedule. Another commenter raised concerns as to the expense of NRC 
contractors and the quality of NRC regulation. And a few commenters 
urged the NRC to reevaluate or abolish its then-recently instituted 
Quality Management (QM) Program.
    Response. As the Commission stated above, it is denying this 
petition for rulemaking, and therefore not exempting medical licensees 
for services provided in a nonprofit institution.
    The Commission cannot abolish its fees unilaterally, as the 
requirement to collect 100 percent of the agency's annual budget 
authority through user and annual fees is statutorily mandated by 
Congress, see section 6101 of OBRA-90.
    The Commission has explained in the past why it did not believe 
that basing fees on factors such as number of sources or the size of 
the facility would result in a fairer allocation of the 100 percent 
recovery requirement. (See FY 1991 Final Rule, 56 FR 31472; July 10, 
1991, and Appendix A to that Final Rule; and Limited Revision of Fee 
Schedules, 57 FR 13625; April 17, 1992.) The Commission has seen no 
evidence in the petition or comments on the petition which would lead 
it to change its current approach of charging fees by class of 
licensee. For reasons similar to those stated in the earlier rules 
cited above, the Commission does not believe it would be feasible to 
base an exemption on the function for which a license is utilized 
rather than on the function of the licensed organization.
    The Commission has also explained in prior rulemakings why it has 
decided to charge Federal agencies annual fees, and has seen nothing in 
comments on the petition which would cause it to change its position on 
this policy matter. (See FY 1991 Final Rule, 56 FR 31472, 31474-45; 
July 10, 1991.) The Commission also does not believe that the exemption 
for nonprofit educational institutions should be expanded to cover 
those private companies supplying services and products to medical or 
educational licensees. The fact that the cost of these services and 
products impacts upon exempt licensees is not sufficient reason to 
exempt private for-profit licensees. By exempting nonprofit educational 
institutions from fees, the Commission has addressed the direct impact 
of its fees on those institutions. Additionally, the Commission has 
discussed in both prior and current rulemakings the necessity of a high 
threshold for exemption requests and the overarching requirement to 
collect as close to 100 percent of its annual budget authority as 
possible; these factors remain valid here.
    While the Commission acknowledges that in many cases Agreement 
States base their fee schedules in some measure on the NRC's fee 
schedule, the NRC cannot do the reverse. The NRC must conform its fees 
to the 100 percent recovery requirements mandated by OBRA-90, 
independent of Agreement State fee schedules over which the agency has 
no control.
    Finally, the Commission believes that comments on the agency's QM 
program, NRC contracting practices and the overall quality of NRC 
regulation are beyond the scope of this notice. However, the Commission 
notes that the agency's regulation codifying its QM program was 
challenged and ultimately upheld in court. See American College of 
Nuclear Physicians and Society of Nuclear Medicine v. United States 
Nuclear Regulatory Commission and United States of America, No. 91-
1431, slip op. at 2 (DC Cir. May 22, 1992) (per curiam).
    Because each of the issues raised in the petition has been 
substantively resolved, the NRC has denied this petition.

    Dated at Rockville, Maryland this 11th day of March, 1994.

    For the Nuclear Regulatory Commission.
Samuel J. Chilk,
Secretary of the Commission.
[FR Doc. 94-6232 Filed 3-16-94; 8:45 am]
BILLING CODE 7590-01-P