[Federal Register Volume 64, Number 2 (Tuesday, January 5, 1999)]
[Proposed Rules]
[Pages 432-435]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-97]


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NUCLEAR REGULATORY COMMISSION

10 CFR Part 50

[Docket No. PRM-50-64]


Atlantic City Electric Company, Austin Energy, Central Maine 
Power Company, Delmarva Power & Light Company, South Mississippi 
Electric Power Association, and Washington Electric Cooperative, Inc.; 
Receipt of Petition for Rulemaking

AGENCY: Nuclear Regulatory Commission.

ACTION: Petition for rulemaking; notice of receipt.

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SUMMARY: The Nuclear Regulatory Commission (NRC) has received and 
requests public comment on a petition for rulemaking filed by the 
Atlantic City Electric Company, Austin Energy, Central Maine Power 
Company, Delmarva Power & Light Company, South Mississippi Electric 
Power Association, and Washington Electric Cooperative, Inc. 
(petitioners). The petition has been docketed by the Commission and has 
been assigned Docket No. PRM-50-64. The petitioners are all non-
operating joint owners of nuclear plants who have concerns about 
potential safety impacts that could result from economic deregulation 
and restructuring of the electric utility industry. The petitioners are 
requesting that the enforcement provisions of NRC regulations be 
amended to clarify NRC policy regarding the potential liability of 
joint owners if other joint owners become financially incapable of 
bearing their share of the burden for safe operation or decommissioning 
of a nuclear power plant.

DATES: Submit comments by March 22, 1999. Comments received after this 
date will be considered if it is practical to do so, but assurance of 
consideration cannot be given except as to comments received on or 
before this date.

ADDRESSES: Submit comments to: Secretary, U.S. Nuclear Regulatory 
Commission, Washington, DC 20555. Attention: Rulemaking and 
Adjudications staff.
    Deliver comments to 11555 Rockville Pike, Rockville, Maryland, 
between 7:30 a.m. and 4:15 p.m. on Federal workdays.
    For a copy of the petition, write: David L. Meyer, Chief, Rules and 
Directives Branch, Division of Administrative Services, Office of 
Administration, U.S. Nuclear Regulatory Commission, Washington, DC 
20555-0001.
    You may also provide comments via the NRC's interactive rulemaking 
website through the NRC home page (http://www.nrc.gov). This site 
provides the availability to upload comments as files (any format), if 
your web browser supports that function. For information about the 
interactive rulemaking website, contact Ms. Carol Gallagher, (301) 415-
5905 (e-mail: [email protected]).

FOR FURTHER INFORMATION CONTACT: David L. Meyer, Office of 
Administration, U.S. Nuclear Regulatory Commission, Washington, DC 
20555. Telephone: 301-415-7163 or Toll Free: 1-800-368-5642 or E-mail: 
[email protected].


[[Page 433]]


SUPPLEMENTARY INFORMATION:

Background

    The Nuclear Regulatory Commission received a petition for 
rulemaking submitted by the petitioners. The petitioners are all non-
operating joint owners of nuclear power plants who are concerned about 
their potential liability in the event that other co-owners or the 
licensee(s) licensed to possess and operate those nuclear power plants 
were to default on, or become financially incapable of bearing, their 
share of the costs of operating in accordance with NRC requirements. 
Specifically, the petitioners are concerned that the NRC's ``Final 
Policy Statement on the Restructuring and Economic Deregulation of the 
Electric Utility Industry'' (Policy Statement) published on August 19, 
1997 (62 FR 44071), has resulted in confusion among joint owners of 
nuclear power plants regarding the potential liability of the owner of 
a relatively small ownership share of a nuclear power plant. The 
petitioners believe that a joint owner could incur the burden of all or 
an excessive portion of a plant's costs if other joint owners or the 
operators defaulted or became financially incapable of bearing their 
share of the burden. The petitioners believe that the NRC might ignore 
existing pro rata cost sharing arrangements. The petitioners also 
believe that the NRC has published no information regarding what would 
constitute a de minimis share and under what circumstances the NRC 
might find the imposition of joint and several liability necessary to 
protect the public health and safety.
    The petitioners have concluded that these factors have caused much 
confusion and uncertainty about the potential liability of a joint 
owner, and can adversely affect the ability to raise capital in an 
uncertain market that is undergoing consolidation and restructuring. 
The petitioners believe that the Policy Statement might stifle the 
emerging market for the sale of nuclear power plants and associated 
interests, and have concluded that the unsettled nature of potential 
liability would adversely affect joint owners who wish to be acquired 
by other utilities because decommissioning costs are unknown. The 
petitioners request that the issue of potential liability among joint 
owners be resolved by amending the regulations pertaining to 
enforcement in 10 CFR Part 50.
    The NRC has determined that the petition meets the threshold 
sufficiency requirements for a petition for rulemaking under 10 CFR 
2.802. The petition has been docketed as PRM-50-64. The NRC is 
soliciting public comment on the petition for rulemaking.

Discussion of the Petition

    The petitioners note that the NRC Policy Statement issued on August 
13, 1997 and published in the Federal Register on August 19, 1997 (62 
Fed. Reg. 44071), ``Final Policy Statement on the Restructuring and 
Economic Deregulation of the Electric Utility Industry'' (Policy 
Statement) contemplated how NRC would respond to potential safety 
impacts on power reactor licensees that could result from economic 
deregulation and restructuring of the electric utility industry. 
Although the NRC recognized that many licensed nuclear power plants are 
jointly owned facilities, the petitioners are concerned that the NRC 
stated that pro rata cost sharing arrangements might be ignored in 
``highly unusual situations where adequate protection of public health 
and safety would be compromised if such action were not taken, to 
consider imposing joint and several liability on co-owners of more than 
a de minimis share when one or more co-owners have defaulted.'' The 
petitioners are also concerned that the NRC has published no 
information regarding what would constitute a de minimis share and the 
situation where the NRC might find the imposition of joint and several 
liability necessary to protect the public health and safety. The 
petitioners believe that the quoted portion of the Policy Statement 
appears to create a possibility that the owner of a small share of a 
nuclear power plant could be held responsible for all or an excessive 
portion of a plant's costs if other co-owners or the operators became 
financially incapable of meeting their pro rata obligations.
    The petitioners contend that these factors create much uncertainty 
as to the potential liability of a joint owner and could adversely 
affect a joint owner's ability to raise capital in an industry 
undergoing consolidation and restructuring. The petitioners believe 
there is an emerging market for the sale of nuclear power plants and 
interest in those plants that could be stifled. The petitioners also 
believe that the unsettled potential liability issue could prevent co-
owning utilities from being acquired by other utilities because actual 
or projected costs, such as decommissioning costs, are unknown.
    The petitioners stated that a group of joint owners requested NRC 
review of the Policy Statement and ultimately petitioned for judicial 
review in the U.S. Court of Appeals for the D.C. Circuit, American 
Public Power Association, et al. v. Nuclear Regulatory Commission, et 
al. (Case No. 98-1219). Although the case was dismissed after an 
agreement between the parties, the NRC stipulated that future legal 
challenges on the potential liability issue of joint owners would not 
be precluded by the dismissal.
    The petitioners have proposed the following language they believe 
will eliminate confusion and establish a stable regulatory process on 
the potential liability issue, and request that it be included among 
the enforcement provisions in 10 CFR part 50:

    Whenever the Commission finds it necessary or desirable to 
impose additional requirements by rule, order or amendment on a 
person subject to this part to promote or protect the public health 
and safety, the additional requirements will be directed first to 
the person licensed to possess and operate the facility. If it 
becomes necessary to impose additional requirements on persons who 
only own the facility, and were never licensed to operate, then the 
Commission will not impose greater than the agreed allocation of 
responsibility among all the owners and operators reflected in 
applicable joint ownership or similar agreements pertaining to the 
plant.

    Although the petitioners agree that all licensees must comply with 
their licenses, they believe the prospect of joint and several 
liability is directly contrary to joint ownership agreements in which 
ownership commitments were made and substantial sums of capital were 
raised based on a contractual pro rata allocation of liability for 
plant costs. The petitioners also contend that accounting of assets and 
liabilities for potential sales of ownership interests is made more 
uncertain because of the unsettled potential joint liability issue.
    In addition to the petition for rulemaking, the petitioners have 
attached a document entitled, ``Memorandum of Law in Support of 
Petition for Rulemaking.'' The petitioners state that the Atomic Energy 
Act of 1954, as amended (AEA), does not authorize the NRC to impose any 
liability (per se) and only allows the NRC to impose certain 
substantive safety obligations on licensees. The petitioners state that 
the Price Anderson Act (AEA Sec. 170), contains an elaborate statutory 
framework for public liability and associated actions, and provides for 
various fees and NRC involvement in deferred premiums. However, the 
petitioners contend that the NRC has no public safety authority to 
impose liability or initiate or adjudicate claims of liability on 
behalf of the public.
    Under the Price Anderson Act, the petitioners note that legal 
actions are brought by injured persons, rules for

[[Page 434]]

decision in public liability cases are derived from State law, and that 
the U.S. district courts have jurisdiction to adjudicate claims. The 
petitioners note that although the AEA and congressional appropriations 
acts permit the NRC to impose and collect fees, they believe the power 
to create fee liability does not extend to other types of liability. 
The petitioners believe that although the NRC has authority to impose 
financial qualifications requirements and has used this authority to 
require funds to be provided for decommissioning, no comparable funding 
requirement for operation exists. The petitioners also note that 
although the Environmental Protection Agency, under the Comprehensive 
Environmental Response, Compensation, and Liability Act (CERCLA), has 
authority to initiate safety improvements at taxpayers' expense and 
then sue the licensee for reimbursement, nothing in the AEA allows the 
NRC to decommission a plant and impose liability for reimbursement. The 
petitioners state that the NRC policy on joint and several liability 
could be understood to ``. . . hold co-licensees jointly and severally 
responsible for meeting specific substantive safety obligations under 
the AEA. However, even as so understood, the Commission's statement is 
directly contrary to the contractual basis on which joint ownership 
arrangements for nuclear power plants have been structured. In most, if 
not all, such arrangements, ownership commitments were made and 
substantial sums of capital raised based on a contractual pro rata 
allocation of responsibility for plant costs.'' (Emphasis in original). 
The petitioners state that because the NRC has implicitly accepted 
these arrangements, all interested parties would have their reasonable 
expectations overturned by the imposition of joint and several 
liability.
    The petitioners assert that NRC has approved many agreements among 
co-owners based on a contractual pro rata allocation of responsibility 
for plant costs. The petitioners assert that a draconian imposition of 
liability is not necessary because even nuclear power plant licensees 
in bankruptcy have always been able to comply with NRC safety 
requirements. The petitioners note that the situation at Three Mile 
Island Unit 2 after the accident was adequately addressed by the 
accident cleanup insurance requirements in 10 CFR 50.54(w). The 
petitioners believe that the NRC has never faced a situation where a 
nuclear power reactor licensee was financially unable to meet its 
safety obligations and that even with the operating licensee in 
bankruptcy, the NRC's safety authority is preserved. The petitioners 
cite Midlantic National Bank v. New Jersey Department of Environmental 
Protection, 474 U.S. 494, 506-507 (1986); Ohio v. Kovacs, 469 U.S. 274 
(1985); and Penn Terra, Ltd. v. Department of Environmental Resources, 
733 F. 2d 267 (3rd Cir. 1984), as cases which found that a bankruptcy 
court does not have the power to authorize an abandonment without 
compliance with environmental laws and protection of the public's 
health and safety.
    The petitioners also believe the Policy Statement is inconsistent 
with the final rule published on September 22, 1998 (63 FR 50465), and 
associated proposed rule that was published on September 10, 1997 (62 
FR 47588), ``Financial Assurance Requirements for Decommissioning 
Nuclear Power Reactors,'' in which the NRC noted difficulties that 
could stem from attempting to impose joint liability on co-owners and 
co-licensees for decommissioning costs. These difficulties included 
problems regarding potential disagreements on decommissioning methods, 
the inhibition of flexibility, the weakening of competitive position, 
and implementation that the petitioners believe exist regarding 
potential joint owner liability. The petitioners reiterate that under 
the AEA, it would be unreasonable and unlawful for the NRC to impose 
``an onerous safety obligation on non-operating co-owners simply 
because the person with the real safety obligation'the operator'is 
facing financial difficulty'' especially when the NRC has the authority 
to impose financial qualifications requirements on those who propose to 
operate a reactor.
    The petitioners also contend that the Policy Statement raises 
questions of impermissible retroactivity to nuclear power plant owners. 
The petitioners note that in Landgraf v. USI Film Products, 511 U.S. 
244, 265-266 (1994), the Supreme Court has held that:

    [E]lementary considerations of fairness dictate that individuals 
should have an opportunity to know what the law is and to conform 
their conduct accordingly; settled expectations should not be 
lightly disrupted * * *. In a free, dynamic, society, creativity in 
both commercial and artistic endeavors is fostered by a rule of Law 
that gives people confidence about the legal consequences of their 
actions.

In General Motors Corp. v. Romein, 503 U.S. 181, 191 (1992), the 
petitioners note that the Supreme Court ruled that: ``Retroactive 
legislation presents problems of unfairness that are more serious than 
those posed by prospective legislation, because it can deprive citizens 
of legitimate expectations and upset settled transactions.'' In Bowen 
v. Georgetown Univ. Hospital, 488 U.S. 204, 208 (1988), the petitioners 
also noted that the Supreme Court found that ``congressional enactments 
and administrative rules will not be construed to have retroactive 
effect unless their language requires this result.''
    The petitioners believe that these cited decisions illustrate that 
an NRC order imposing onerous safety requirements on a co-owner 
licensee disregard pro rata sharing agreements, defeat legitimate 
expectations, and upset settled transactions. The petitioners assert 
that joint owners have relied upon pro rata arrangements for decades 
with implicit NRC approval and that the industry restructuring and 
emerging market for nuclear power plants require that these sharing 
agreements continue. The petitioners believe that under Bowen, the NRC 
cannot issue retroactive rules unless that authority is granted 
explicitly by statute. The petitioners believe that the NRC does not 
possess this authority because nothing in the AEA specifically gives 
the NRC the power to issue retroactive rules.
    The petitioners distinguish backfit rules from those that are 
retroactive. The petitioners acknowledge that the vast majority of NRC 
backfits apply to plant operation after the effective date of the 
backfit and could never have been applied without the beginning of 
plant operation. However, the petitioners state that the imposition of 
new requirements on non-operating co-owners without regard for pro rata 
cost sharing agreements is distinguishable from a backfit because 
entities licensed to own or operate have no reasonable expectation that 
the NRC will never impose additional safety requirements as a condition 
of continued operation. The petitioners maintain that for non-operating 
co-owners there is reasonable expectation that the NRC would continue 
to honor pro rata cost-sharing contractual agreements even though NRC 
has power to impose additional safety measures.
    The petitioners acknowledge that any determination that an NRC rule 
or order is impermissibly retroactive will be made by the courts. 
However, the petitioners have concluded that an NRC imposition of a new 
operational safety requirement on a non-operating co-owner group that 
holds all co-owners equally responsible and disregards pro rata cost-
sharing agreements would be unreasonable and unlawful.

[[Page 435]]

    Lastly, the petitioners acknowledge that the NRC has the authority 
to prevent an unsafe plant from operating. They also agree that a plant 
that cannot operate is a liability, not an asset. The petitioners cite 
Public Service Company of New Hampshire (Seabrook Station, Units 1 and 
2), CLI-88-10, 28 NRC 573 (1988), and state that it is in the interest 
of all licensees, co-owners, and operators to agree on the funding of 
necessary safety measures so the plant can operate. However, the 
petitioners believe that the Policy Statement interferes with 
licensees' rights to make their own decisions regarding allocation of 
safety expenses. The petitioners have concluded that NRC interference 
in allocation decisions among co-owners is not necessary for safety and 
creates potentially great difficulties for co-owning utilities who wish 
to consolidate, restructure, or sell assets.

The Petitioners' Conclusions

    The petitioners have concluded that the NRC Policy Statement 
regarding electric utility deregulation and restructuring has caused 
great confusion among non-operating co-owners about the issue of 
potential joint liability if an operating licensee becomes financially 
incapable of meeting license conditions. The petitioners have concluded 
that the NRC might ignore existing pro rata contractual agreements 
among joint licensees and that no information has been published 
regarding what would constitute a de minimis share or under what 
circumstances the NRC might find the imposition of joint liability 
necessary to protect the public health and safety. The petitioners have 
also concluded that the unsettled potential liability issue could mean 
that a co-owner of a very small ownership share could become 
financially incapable of fulfilling its contractual obligations. 
Lastly, the petitioners have concluded that these factors might stifle 
an emerging market for the sale of nuclear power plants and associated 
interests because future operating and decommissioning costs are 
unknown.
    The petitioners request that the issue of potential liability among 
joint owners be resolved as requested in their petition by amending the 
regulations pertaining to enforcement in 10 CFR part 50.

    Dated at Rockville, Maryland, this 29th day of December, 1998.

    For the Nuclear Regulatory Commission.
John C. Hoyle,
Secretary of the Commission.
[FR Doc. 99-97 Filed 1-4-99; 8:45 am]
BILLING CODE 7590-01-P