[Federal Register Volume 60, Number 44 (Tuesday, March 7, 1995)]
[Notices]
[Pages 12578-12581]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-5495]



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NUCLEAR REGULATORY COMMISSION
[Docket No. 70-27 and License No. SNM-42 EA 94-169]


Babcock and Wilcox Company, Lynchburg, Virginia; Order Imposing 
Civil Monetary Penalty

I

    Babcock and Wilcox Company (Licensee) is the holder of Special 
Nuclear Material (SNM) License No. SNM-42 issued by the Nuclear 
Regulatory Commission (NRC or Commission) on May 31, 1984. The license 
authorizes the Licensee to possess and use Special Nuclear Material in 
accordance with the conditions specified therein.

II

    Inspections of the Licensee's activities were conducted on June 1-
July 1, 1994, July 1-8, 1994, and July 1--August 9, 1994. The results 
of these inspections indicated that the Licensee had not conducted its 
activities in full compliance with NRC requirements. A written Notice 
of Violation and Proposed Imposition of Civil Penalty (Notice) was 
served upon the Licensee by letter dated October 21, 1994. The Notice 
states the nature of the violations, the provisions of the NRC's 
requirements that the Licensee had violated, and the amount of the 
civil penalty proposed for Violations I.A and I.B.
    The Licensee responded to the Notice in two letters, both dated 
November 20, 1994. In its responses, the Licensee protested the 
proposed imposition of the civil penalty, disagreed with NRC statements 
concluding that the violations represented a Severity Level III 
problem, denied Violations I.B.1, I.B.2, and II.C, and disagreed with 
the application of the escalation and mitigation factors.

III

    After consideration of the Licensee's responses and the statements 
of fact, explanation, and argument for mitigation contained therein, 
the NRC staff has determined, as set forth in the Appendix to this 
Order, that the violations occurred as stated and that the penalty 
proposed for the violations designated in the Notice should be imposed.

IV

    In view of the foregoing and pursuant to Section 234 of the Atomic 
Energy Act of 1954, as amended (Act), 42 U.S.C. 2282, and 10 CFR 2.205, 
it is hereby ordered that:

    The Licensee pay a civil penalty in the amount of $37,500 within 
30 days of the date of this order, by check, draft, money order, or 
electronic transfer, payable to the Treasurer of the United States 
and mailed to Mr. James Lieberman, Director, Office of Enforcement, 
U.S. Nuclear Regulatory Commission, One White Flint North, 11555 
Rockville Pike, Rockville, MD 20852-2738.

V

    The Licensee may request a hearing within 30 days of the date of 
this Order. A request for a hearing should be clearly marked as a 
``Request for an Enforcement Hearing'' and shall be addressed to the 
Director, Office of Enforcement, U.S. Nuclear Regulatory Commission, 
Washington, DC 20555, with a copy to the Commission's Document Control 
Desk, Washington, DC 20555. Copies also shall be sent to the Assistant 
General Counsel for Hearings and Enforcement at the same address and to 
the Regional Administrator, NRC Region II, 101 Marietta Street, NW., 
Suite 2900, Atlanta, GA 30323.
    If a hearing is requested, the Commission will issue an Order 
designating the time and place of the hearing. If the Licensee fails to 
request a hearing within 30 days of the date of the order, the 
provisions of this Order shall be effective without further 
proceedings. If payment has not been made by that time, the matter may 
be referred to the Attorney General for collection. [[Page 12579]] 
    In the event the Licensee requests a hearing as provided above, the 
issues to be considered at such hearing shall be:

    (a) Whether the Licensee was in violation of the Commission's 
requirements set forth in Violations I.B.1 and I.B.2, as set forth 
in the Notice, and
    (b) Whether, on the basis of such violations and the additional 
violations set forth in Section I of the Notice that the Licensee 
admitted, this Order should be sustained.

    Dated at Rockville, Maryland this 27th day of February 1995.
    For the Nuclear Regulatory Commission.
Hugh L. Thompson, Jr.,
Deputy Executive Director for Nuclear Materials Safety, Safeguards and 
Operations Support.

Appendix--Evaluations and Conclusion

    On October 21, 1994, a Notice of Violation and Proposed 
Imposition of Civil Penalty (Notice) was issued for violations 
identified during NRC inspections conducted on June 1-July 1, 1994, 
July 1-8, 1994, and July 1-August 9, 1994. Babcock and Wilcox Naval 
Nuclear Fuel Division (Licensee) responded to the Notice with a 
reply and an answer, both dated November 20, 1994. The Licensee 
admitted Violations I.A.1, I.A.2, II.A, and II.B, denied Violations 
I.B.1, I.B.2, and II.C, protested the proposed imposition of the 
civil penalty, disagreed with NRC statements concluding that the 
violations represented a Severity Level III problem, and disagreed 
with the application of the escalation and mitigation factors. The 
NRC's evaluations and conclusion regarding the Licensee's requests 
are as follows:

I. Evaluation of Violations Assessed a Civil Penalty

Restatement of Violation I.B.1

    License Condition No. S-1 of SNM-42 requires that licensed 
material be used in accordance with statements, representations, and 
conditions contained in Sections I through IV of the application 
dated February 22, 1982, and supplements thereto.
    Section III, Paragraph 2.0, of the application requires that the 
design of equipment and establishment of operating safety limits 
consider the pertinent process conditions and known modes of 
failure. Certain conditions may be deemed incredible if specifically 
excluded by experimental evidence or design considerations.
    Section II, Paragraph 3.1, of the application states that the 
Change Review Board (CRB) reviews the effect on nuclear criticality 
safety, radiation protection, and other regulatory requirements of 
new and revised facilities, equipment and processes involving 
special nuclear material and ensures appropriate safety controls are 
considered.
    Contrary to the above, pertinent process conditions and known 
modes of failure were not adequately considered in establishing 
operating safety controls or limits in that:
    1. On June 7, 1990, the CRB reviewed and approved License 
Evaluation Request 89-155 based on a nuclear criticality safety 
analysis of acceptable material types, but failed to consider 
pertinent process conditions related to the operation of the drum 
counter system that were not excluded by experimental evidence or 
design considerations. This resulted in a failure to accurately 
measure quantities of U-235 in 2-liter bottles.

Summary of Licensee's Response to Violation I.B.1

    In its reply to the Notice, the Licensee denies that a violation 
occurred as stated. The Licensee states that its nuclear criticality 
safety (NCS) evaluation did consider pertinent process conditions 
and known modes of failure in establishing operating safety limits 
for the low-level dissolution process in Uranium Recovery, and that 
the Nuclear Licensing Board (NLB), now CRB, did review the effect on 
NCS from processing materials measured by the drum counter in low-
level dissolution and did ensure that appropriate safety controls 
were considered. The Licensee states that its Licensee Evaluation 
Request 89-155 was submitted, evaluated, and approved only because 
of the drum counter measurement problem which resulted in the low-
level dissolution NCS limit being exceeded in 1989 and that the 
purpose of the NCS evaluation and NLB review and approval was to 
consider the pertinent process conditions and known modes of failure 
identified by the 1989 problem. The Licensee also states that the 
violation statement that pertinent process conditions and known 
modes of failure were not considered cannot be true since these were 
the only issues that were considered.
    The Licensee further suggests that the evaluation was adequate 
in that the LER requested approval of processing only certain 
material types in low-level dissolution based on drum count 
measurements and only those types were approved for processing based 
upon the information in the LER. Further, the Licensee states that 
none of these material types were inaccurately measured by the drum 
counter subsequent to the approval, and the processing of these 
material types did not result in NCS limit violations.
    The Licensee states that the scope of the LER was the use of 
drum counter measurements to comply with NCS limits for low-level 
dissolution and that no restraints were placed on the measurement of 
materials when the LER was approved; rather, restraints were placed 
only on the use of the measurements. The Licensee states that 
restraints on measuring materials by drum counting would be 
inappropriate. The Licensee adds that the primary purpose of the 
drum counter is to measure materials for material control and 
accountability and that the accuracy of the drum counter 
measurements is not a safety issue unless the measurements are used 
to meet safety limits. The Licensee adds that the NLB appropriately 
prohibited the use of the measurements of certain material types to 
meet safety limits for low-level dissolution, but also appropriately 
did not prohibit the measurement of any materials using the drum 
counter.

NRC Evaluation of Licensee's Response to Violation I.B.1

    The NRC does not agree with the Licensee's statements that the 
Licensee considered pertinent process conditions and known modes of 
failure in establishing operating safety limits for the low-level 
dissolution process in Uranium Recovery and that the NLB reviewed 
the effect on NCS of the approval of processing materials measured 
by the drum counter in low-level dissolution. The Licensee was 
presented with a known mode of failure regarding a system that was 
used to demonstrate compliance with NCS limits. The known mode of 
failure was that the drum counter measurements could underestimate 
the amount of U-235 in a container.
    The Licensee failed to consider pertinent process conditions 
such as scrap/waste generation, packaging, labeling, and storage 
that could affect the drum counter system's U-235 measurement 
accuracy and, therefore, did not ensure that pertinent and 
appropriate operating safety controls were considered to prevent the 
known failure. Thus, the review and approval of LER 89-155 was not 
considered adequate in establishing operating NCS controls or 
limits.
    With respect to the Licensee's statement regarding the adequacy 
of its review of LER 89-155, the NRC notes that the review of the 
specific items in the single LER as presented may have been adequate 
for the very narrow and limited conditions of the LER presented; 
however, the license requires the Licensee to consider pertinent 
process conditions and known modes of failure in establishing NCS 
safety controls and limits and the Licensee failed to consider such 
conditions and known modes of failure.
    The NRC agrees with the Licensee's statement that the primary 
purpose of using the drum counter is to measure materials for 
material control and accountability. However, in this case the 
Licensee was relying on the drum counter measurements to ensure that 
NCS limits were not exceeded. Given the nature of the Licensee's use 
of the measurements, the Licensee did fail to consider all failure 
modes that were not specifically excluded by experimental evidence 
or design considerations because, despite the Licensee's knowledge 
that drum counter mesaurements were inaccurate, such measurements 
were used for estimating quantities of U-235 in 2-liter bottles.
    The NRC concludes that the Licensee did not provide bases to 
withdraw the violation; therefore, the violation occurred as stated.

Restatement of Violation I.B.2

    License Condition No. S-1 of SNM-42 requires that licensed 
material be used in accordance with statements, representations, and 
conditions contained in Sections I through IV of the application 
dated February 22, 1982, and supplements thereto.
    Section III, Paragraph 2.0, of the application requires that the 
design of equipment and establishment of operating safety limits 
consider the pertinent process conditions and known modes of 
failure. Certain conditions may be deemed incredible if specifically 
excluded by experimental evidence or design considerations.
    Section II, Paragraph 3.1, of the application states that the 
Change Review Board (CRB) reviews the effect on nuclear criticality 
safety, radiation protection, and other [[Page 12580]] regulatory 
requirements of new and revised facilities, equipment and processes 
involving special nuclear material and ensures appropriate safety 
controls are considered. Contrary to the above, pertinent process 
conditions and known modes of failure were not adequately considered 
in establishing operating safety controls or limits in that:
    2. From March 1989 through November 1990, the CRB reviewed drum 
counter evaluations that revealed measurement problems associated 
with material type and container fill level, but failed to establish 
requirements for remeasurement of materials previously measured by 
the drum counter and stored at the facility.

Summary of Licensee's Response to Violation I.B.2

    In its reply to the Notice, the Licensee does not agree that 
this violation relates to the stated requirements. The Licensee 
further states that the need for remeasurement of materials in 1990 
was neither a part of equipment design or the establishment of 
safety limits nor a part of the consideration of safety controls for 
low-level dissolution. The Licensee further states that the NLB is 
chartered to review and approve new or modified facilities, 
equipment, and processes and that it is not chartered to investigate 
safety problems or require actions to resolve safety problems. The 
Licensee maintains that the review and approval of changes to the 
low-level dissolution process did not impact the safety of material 
storage and, therefore, the need for remeasurement of material was 
not within the charter of the NLB.
    The Licensee states that no information was presented to the NLB 
which indicated a need for remeasurement of scrap materials in 
storage. The Licensee states that the materials which were in 
storage and had not been acceptably measured were never identified 
during the evaluation, review, and approval process, and, therefore, 
there appeared to be no need for remeasurement.
    The Licensee acknowledges that there were deficiencies related 
to the problems discussed, including the inaccurate measurements. 
However, the Licensee indicates that these deficiencies did not 
constitute the violation as stated.

NRC Evaluation of Licensee's Response to Violation I.B.2

    The Licensee appears to take the wording of the violation out of 
context in that the Licensee has argued that the NLB is only 
responsible for considering information contained in LERs. The NLB, 
or another body of the Licensee's organization, should have 
established requirements for remeasurement of materials previously 
measured by the drum counter and stored at the facility. The 
Licensee's argument further heightens the NRC's concern as to 
whether the Licensee has an oversight organization that is charged 
with this responsibility. In addition, the argument points out that 
such narrow views are, in part, the reason for the Licensee's 
continued NCS problems (i.e., exceeding NCS limits). The license 
requires the Licensee to review the effect on NCS of new and revised 
processes involving special nuclear material (SNM) and to ensure 
that appropriate safety controls are considered.
    During a review of revised drum counting processes, the NLB was 
presented with evidence that demonstrated problems existed which 
were associated with drum counter measurement accuracy. The NLB was, 
therefore, required to review the effect on NCS of items or 
processes that were using drum counter measurement results to 
deomonstrate compliance with NCS limits. Such a review should have 
included drum counter measurement results or materials stored in 55-
gallon drums used to demonstrate compliance with the NCS limit of 
350 grams of U-235 per drum.
    The NRC concludes that the Licensee did not provide bases to 
withdraw the violation; therefore, the violation occurred as stated.

II. Evaluation of Violation not assessed a Civil Penalty, Restatement 
of Violation II.C

    License Condition No. S-1 of SNM-42 requires that licensed 
material be used in accordance with statements, representations, and 
conditions contained in Sections I through IV of the application 
dated February 22, 1982 and supplements thereto.
    Section II, Paragraph 10.4 of the application requires the 
retention of records of Change Review Board (CRB) actions for the 
longer of either two years or six months after termination of the 
operation.
    Contrary to the above, as of June 29, 1994, records associated 
with License Evaluation Request (LER) 89-124, which provided the 
basis for a CRB action on LER 89-155, approving the counting of 
partially-filled bottles on the drum counter (an operation that was 
currently being performed), were not retained and the operation had 
not been terminated.

Summary of Licensee's Response to Violation II.C

    In its reply, the Licensee denies that the violation occurred as 
stated. The Licensee states that the NLB (now CRB) took no action 
with regard to LER 89-124 because it was withdrawn and no 
information associated with LER 89-124 formed a basis for any NLB 
action on LER 89-155.

NRC Evaluation of Licensee's Response to Violation II.C

    The Licensee's license requires the retention of records of NLB 
actions. The LER 89-155 file contains a document which reads: 
``Subject: Low-Level Dissolving of Partial Containers, Reference: 
LER 89-124.'' This document states that the subject LER contained a 
description of all types of material normally processed in the low-
level dissolvers and the means used to ensure nuclear safety while 
processing the various types of material. The document also states: 
``After a thorough review of all the material presented in the LER 
[89-124] it was concluded [emphasis added] by the Nuclear Licensing 
Board that processing of partial containers was not the main area of 
concern.'' Therefore, the NLB did consider information from LER 89-
124 in its review of LER 89-155. However, the LER 89-155 file does 
not contain any of the material that was thoroughly reviewed and 
used as the basis for the NLB to conclude that processing of partial 
bottles was not the main area of concern in the approval of LER 89-
155.
    The NRC concludes that the Licensee did not provide bases to 
withdraw the violation; therefore, the violation occurred as stated.

III. Summary of Licensee's Request for Mitigation

    In its answer to the Notice, the Licensee states that a civil 
penalty was proposed based on Violations I.A and I.B constituting, 
in the aggregate, a Severity Level III problem. The Licensee argues 
that since Violation I.B is not a violation, only Violation I.A. 
remains and no aggregation can occur; therefore, there is no basis 
for a civil penalty. The Licensee maintains that even if Violation 
I.B were a violation, sufficient basis does not exist for a civil 
penalty and that the statements in Violation I.B, if accurate, would 
be causes of Violation I.A and should be written as part of 
Violation I.A. In addition, the Licensee believes aggregating a 
violation which may have occurred in 1990 with one which occurred in 
1994 is inappropriate.
    As to certain statements made in the Notice, the Licensee 
disagrees that there have been many examples of inadequate 
evaluations relating to known modes of failure, that it has had 
continued poor performance in the area of NCS, and that extensive 
management attention has not been directed toward identifying and 
correcting NCS problems. The Licensee indicates that the issues for 
which the civil penalty is being proposed were primarily caused by 
problems which predate most of its efforts and that it is applying 
significant attention and resources to strengthen its NCS program.
    With respect to the application of escalation and mitigation 
factors the Licensee states that Violation I.A was not a self-
disclosing event because if the operators had not compared the 
output values from the dissolvers to the mass limit and reported the 
limit violation, Violation I.A. would not have been known since 
there was no requirement to make such comparison. Further, the 
Licensee requests full mitigation because it showed enormous 
initiative in identifying the root causes, contrary to the NRC's 
Notice, which stated that the Licensee did not demonstrate 
initiative in identifying the root causes of the Violations I.A. and 
I.B, and because it developed long-term corrective actions in a 
timely manner. The Licensee also states that it suspended or 
severely restricted activities involving scrap and waste to prevent 
recurrence. The Licensee states that the September 23, 1994 report 
to the NRC addressed in detail why procedures, controls, and 
implementation were inadequate and did address corrective actions 
for the underlying problems revealed by the event. Additional 
information regarding other causes and corrective actions was 
provided to the NRC on November 16, 1994. Thus, based on all of its 
corrective actions, the Licensee indicates that a civil penalty is 
unwarranted. The Licensee also states that escalation of 100 percent 
for prior opportunity to identify is not warranted since it 
demonstrated that the February 1994 event did not provide 
opportunities for identification and that the March 1989 problem 
provided limited opportunities for this identification. 
[[Page 12581]] 

NRC Evaluation of Licensee's Request for Mitigation

    With respect to the Licensee's argument that aggregating 
Violations I.A and I.B is inappropriate, the NRC concluded, as 
described above, that Violation I.B occurred as stated. The NRC 
determined that Violations I.A and I.B were related in that they 
have the same fundamental underlying cause and similar programmatic 
deficiencies, namely, the lack of management attention to NCS 
controls. Violation I.A involved exceeding a NCS limit. Violation 
I.B was issued for failure to consider process conditions and known 
modes of failure in the NCS analysis. These are two different issues 
in NCS controls and two different license requirements. Therefore, 
the NRC concludes both that aggregating Violations I.A and I.B as a 
Severity Level III was appropriate regardless of the time period 
between the two violations and that an escalated enforcement action 
was warranted.
    With regard to the Licensee's disagreement with NRC statements, 
the NRC notes that there are 17 documented Licensee violations of 
NRC requirements involving NCS controls over the past two years. 
Despite these noted numerous weaknesses, the Licensee's NCS 
evaluations and analyses have not been adequately strengthened as 
evidenced by the failures described in NRC inspection reports 70-27/
94-12, 94-15, and 94-16. These violations and other weaknesses 
clearly represent continued poor performance and inadequate 
management attention because the Licensee has not sufficiently 
improved its performance over the past two years to prevent 
recurring problems in the area of NCS. Furthermore, the Licensee's 
argument regarding the function of the NLB is narrow and does not 
support the Licensee's statements that extensive management 
attention has been placed in this area to ensure identification and 
correction of NCS problems. While the NRC acknowledges that some 
management attention has been directed toward identifying and 
correcting NCS problems, Licensee management must ensure that proper 
NCS controls and oversight are in place and are adhered to, and that 
NCS problems are thoroughly investigated to ensure that effective 
corrective actions are in place to prevent such problems from 
recurring or leading to other problems.
    The NRC neither escalated nor mitigated for the identification 
factor because while the NRC recognizes that the Licensee identified 
Violation I.A, the Licensee should note that the NRC identified 
Violation I.B. In addition, Section VI of the Enforcement Policy 
states, in part, that a ``self-disclosing' event as used in this 
policy statement means an event that is readily obvious by human 
observation * * *'' The Licensee's Chemical Processing operating 
procedures required operators to: compare the amount of U-235 added 
to the low-level dissolvers with the amount removed, determine if 
the difference between the two exceeded 40 percent and, if so, 
report such excessive differences to management. Also, the 
Licensee's NCS limits required the amount of U-235 in each low-level 
dissolver zone be limited to 350 grams. Because the license requires 
procedures and postings to be followed and because doing so made the 
350 gram limit violation readily obvious to human observation, the 
event was correctly categorized as self-disclosing.
    Furthermore, Section VI of the Enforcement Policy also states, 
in part, that ``The base civil penalty may also be mitigated up to 
25% when the licensee identifies a violation resulting from a self-
disclosing event where the licensee demonstrates initiative in 
identifying the root cause of the violation.'' While the NRC 
acknowledged that the Licensee identified inadequacies in 
procedures, controls, and implementation systems, the NRC maintains 
that the Licensee did not demonstrate initiative in identifying the 
root cause of the violations because its analysis did not ask or 
answer why these procedures, controls, and systems were inadequate 
and what should be done to prevent such recurrence. Specifically, 
NRC involvement was needed before acceptable corrective action was 
taken in that it was not until NRC requested and conducted a 
management meeting with the Licensee on August 3, 1994, that the 
Licensee agreed to evaluate the series of incidents that had been 
occurring in an attempt to uncover the underlying generic root 
cause(s).
    With regard to the corrective action factor, the NRC 
acknowledged that the Licensee took some immediate corrective 
actions to stop operations of the low-level dissolver and formed an 
incident review team to review the event in detail and determine 
appropriate corrective actions. The NRC did give the Licensee credit 
for these corrective actions in that escalation for this factor was 
not applied. However, the NRC affirms that full mitigation for this 
factor is not warranted because: (1) The Licensee did not 
demonstrate initiative in identifying the root cause of the 
violations because NRC involvement was needed before adequate 
actions were taken; (2) the Licensee's initial long term corrective 
actions were not comprehensive; and (3) the Licensee's development 
of long term corrective actions was not timely.
    As noted earlier, it was not until NRC requested and conducted a 
management meeting that the Licensee agreed to evaluate the series 
of incidents in an attempt to identify the root cause. The results 
of that evaluation were discussed in a management meeting on 
November 16, 1994, and were submitted by the Licensee on November 
20, 1994, as an attachment to the Licensee's reply to the Notice. 
Furthermore, on July 8, 1994, as the NRC's Augmented Inspection Team 
discussed its findings with Licensee management, the Licensee was 
requested to submit a copy of its investigation team findings, 
including corrective actions, to the NRC. The Licensee stated that 
the report would be completed and made available to the NRC on or 
about August 5, 1994. However, the report was not completed and made 
available to the NRC until September 23, 1994, after the enforcement 
conference. During the enforcement conference, NRC asked the 
Licensee for a time schedule for implementing the corrective actions 
discussed by the Licensee at the conference. More than two months 
after the low-level dissolver event, the Licensee did not have long-
term corrective action time schedules firmly in place.
    Regarding the prior opportunity to identify factor, the NRC 
believes that effective corrective action, if taken, for events 
occurring in March 1989 and February 1994, which revealed weaknesses 
in the drum counter measurement system, could have prevented the 
June 1994 event. Specifically, if the Licensee had adequately 
reviewed the effect on NCS of items or processes that were using 
drum counter measurement results and implemented effective 
corrective actions, the June 1994 event could have been prevented. 
Following the March 1989 and February 1994 events, a formal incident 
review and root cause analysis were not performed and corrective 
actions were not taken. The NRC expects licensees to learn from 
their mistakes and implement adequate and effective corrective 
actions to prevent recurrence. In its answer to the Notice, the 
Licensee acknowledges that its corrective actions would have 
prevented the low-level dissolution violation had they been 
followed.
    The NRC concludes that the escalation and mitigation factors 
were applied appropriately and in accordance with the Enforcement 
Policy.

NRC Conclusion

    The NRC concludes that Violations I.B.1, I.B.2, and II.C 
occurred as stated, that Violations I.A and I.B were appropriately 
categorized as a Severity Level III problem, and that an adequate 
basis for mitigation of the proposed civil penalty was not provided 
by the Licensee. Consequently, the proposed civil penalty in the 
amount of $37,500 should be imposed by Order.

[FR Doc. 95-5495 Filed 3-6-95; 8:45 am]
BILLING CODE 7590-01-M