[Federal Register Volume 67, Number 246 (Monday, December 23, 2002)]
[Rules and Regulations]
[Pages 78130-78150]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-32247]


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NUCLEAR REGULATORY COMMISSION

10 CFR Parts 51, 61, 70, 72, 73, 74, 75, 76, and 150

RIN 3150-AG69


Material Control and Accounting Amendments

AGENCY: Nuclear Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Nuclear Regulatory Commission (NRC) is amending its 
material control and accounting (MC&A) regulations. The reporting 
requirements for submitting Material Balance Reports and Inventory 
Composition Reports are being revised to change both the frequency and 
timing of the reports for all licensees, except for Category I 
licensees. The reporting requirements for Category I facilities remain 
unchanged. The categorical exclusion for approving safeguards plans is 
being revised to specifically include approval of amendments to 
safeguards plans. The MC&A requirements for Category II facilities are 
being revised to be more risk-informed. The amendments are intended to 
reduce unnecessary burden on licensees and the NRC without adversely 
affecting public health and safety.

EFFECTIVE DATES: This final rule is effective on March 24, 2003.

FOR FURTHER INFORMATION CONTACT: Merri Horn, telephone (301) 415-8126, 
e-mail [email protected], Office of Nuclear Material Safety and Safeguards, 
U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001.

SUPPLEMENTARY INFORMATION: 

Background

    The Commission is amending its MC&A requirements to reduce 
unnecessary regulatory burden and to provide additional flexibility to 
licensees required to submit Material Balance Reports and Inventory 
Composition Reports (also called Physical Inventory Listing Reports). 
The current regulations require these reports to be compiled as of 
March 31 and September 30 of each year and submitted within 30 days 
after the end of the period covered by the report. These twice yearly 
reports are typically based on book values as opposed to physical 
inventory results because the dates do not always coincide with the 
time frame for a facility's physical inventory. Physical inventories 
for Category III facilities are conducted on an annual basis, 
semiannually for Category I facilities, and every 2 to 6 months for 
Category II facilities. The term ``Material Status Reports'' refers to 
both the Material Balance Report and the Inventory Composition Report 
and is used in part 75.
    A Category I licensee is one that is licensed to possess and use 
formula quantities of strategic special nuclear material (SSNM) (e.g., 
5 kilograms of uranium enriched to 20 percent or more in the uranium-
235 isotope). SSNM means uranium-235 (contained in uranium enriched to 
20 percent or more in the uranium-235 isotope), uranium-233, or 
plutonium. There are currently two licensed Category I facilities. A 
Category II licensee is one that is licensed to possess and use special 
nuclear material (SNM) of moderate strategic significance (e.g., 10 
kilograms of uranium enriched to 10 percent or more but less than 20 
percent in the uranium-235 isotope, with limited quantities at higher 
enrichments). Currently, there is only one licensed Category II 
facility, General Atomics, and it has a possession-only license and is 
undergoing decommissioning. General Atomics will not be required to 
make changes to meet the new requirements. A Category III licensee is 
one that is licensed to possess and use quantities of SNM of low 
strategic significance (e.g., uranium enriched to less than 10 percent 
in the uranium-235 isotope, with limited quantities at higher 
enrichments). See Table 1 for more specific information on limits for 
Category I, II, and III licensees.

[[Page 78131]]



                                      Table 1.--Categorization of Material
----------------------------------------------------------------------------------------------------------------
            Material                     Form             Category I          Category II        Category III
----------------------------------------------------------------------------------------------------------------
Plutonium......................  Any................  2 kg or more......  Less than 2 kg but  500 g or less.
                                                                           more than 500 g.
Uranium-235....................  Uranium enriched to  5 kg or more......  Less than 5 kg but  1 kg or less.
                                  20 percent U-235                         more than 1 kg.
                                  or more.
                                 Uranium enriched to  ..................  10 kg or more.....  Less than 10 kg.
                                  10 percent U-235
                                  but less than 20
                                  percent.
                                 Uranium enriched     ..................  ..................  10 kg or more.
                                  above natural, but
                                  less than 10
                                  percent U-235.
Uranium-233....................  Any................  2 kg or more......  Less than 2 kg but  500 g or less.
                                                                           more than 500 g.
----------------------------------------------------------------------------------------------------------------

    In 1982, the NRC initiated an effort to move the MC&A requirements 
from 10 CFR part 70, ``Domestic Licensing of Special Nuclear 
Material,'' to 10 CFR part 74, ``Material Control and Accounting of 
Special Nuclear Material.'' The initiative also included efforts to 
make the requirements more performance oriented. In 1985, the MC&A 
requirements for Category III facilities were made more performance 
oriented and moved to part 74 (50 FR 7575; February 25, 1985). The 
requirements for Category I facilities were similarly moved in 1987 (52 
FR 10033; March 30, 1987). The MC&A requirements for Category II 
facilities and the general MC&A requirements are still interspersed 
among the safety and general licensing requirements of part 70. The 
requirements regarding Category II material are also overly 
prescriptive.
    In addition, part 74 includes several typographical errors, old 
implementation dates, and some terminology that are being updated to 
reflect current practice.
    Finally, the currently effective categorical exclusion for approval 
of safeguards plans does not clearly include the approval of an 
amendment to a safeguards plan.

Proposed Rule

    The NRC published the proposed rule, ``Material Control and 
Accounting Amendments'' in the Federal Register on May 30, 2001 (66 FR 
29251). The NRC received four comment letters on the proposed rule. 
These comments and the responses are discussed in the ``Summary of 
Public Comments on the Proposed Rule'' section.

Discussion

    The NRC staff has considered whether this rulemaking should proceed 
at this time or be placed on hold until completion of the NRC staff's 
reevaluation of the safeguards and physical security programs. The NRC 
staff has concluded that this rulemaking should go forward. This 
rulemaking clarifies the MC&A requirements by removing the 
inconsistencies between Category I, II, and III requirements. The 
rulemaking also results in a single location for all the MC&A 
requirements which will help both the NRC and stakeholders to locate 
those requirements that apply to a given facility.

Material Status Reports

    A licensee authorized to possess SNM at any one time or location in 
a quantity totaling more than 350 grams of contained uranium-235, 
uranium-233, or plutonium, or any combination thereof, must complete 
and submit in a computer-readable format a Material Balance Report 
concerning SNM received, produced, possessed, transferred, consumed, 
disposed of, or lost. A Material Balance Report is a summary of nuclear 
material changes from one inventory period to the next. Currently, this 
report must be compiled as of March 31 and September 30 of each year 
and filed within 30 days after the end of the period. Under Sec. Sec.  
76.113, 76.115, and 76.117, the gaseous diffusion plants (certificate 
holders) are also required to submit the report twice yearly on the 
same schedule. (Note that the term ``licensee'', as it is used within 
this statement of considerations, includes the gaseous diffusion plants 
unless otherwise stated.) Each licensee is also required to file a 
statement of the composition of the ending inventory with the Material 
Balance Report. An Inventory Composition Report is a report of the 
actual inventory listed by specified forms of material (e.g., 
irradiated versus unirradiated fuel at power reactors). However, a 
licensee required to submit a Material Status Report under Sec.  75.35 
is directed to submit this report only in accordance with the 
provisions of that section (i.e., at the time of a physical inventory). 
Section 75.35 applies only to those facilities that have been selected 
to report under the Agreement Between the United States and the 
International Atomic Energy Agency (IAEA) for the Application of 
Safeguards in the United States. For those facilities reporting under 
part 75, the frequency of reporting is dependent on the frequency of 
the physical inventory, which is dependent on the Category of facility 
(i.e., Category I, II, or III). The report would be required either 
once (Category III) or twice (Category I and II) per year.
    The principal purpose of the Material Status Report is the periodic 
reconciliation of licensee records with the records in the Nuclear 
Materials Management and Safeguards System (NMMSS). The NMMSS is the 
national database for tracking source and SNM. The database is 
maintained under a Department of Energy contract. The data from the 
NMMSS are then used to satisfy the requirement of the US/IAEA 
Safeguards Agreement to provide the annual Material Balance Report for 
facilities selected under the Agreement or associated Protocol.
    The proposed rule would have modified the regulations to require 
the Material Balance Report and the Physical Inventory Listing Report 
at the time of a physical inventory as is currently stated in Sec.  
75.35 for all licensees. The proposed rule would have required the 
reports to be completed within 60 days of the beginning of the physical 
inventory for independent spent fuel storage installations, reactors, 
and Category I, II, and III facilities. The modifications in the final 
rule do not affect licensees reporting under part 75. Because most 
facilities are only required to conduct a physical inventory once a 
year, the reporting frequency would be reduced from twice a year to 
once a year. For most licensees, reconciliation once a year instead of 
twice a year does not appear to be a problem because the number of 
transactions is such that

[[Page 78132]]

reconciliation is manageable. For the gaseous diffusion plants that 
have a significantly larger number of transactions, reconciliation 
could be more difficult if performed once a year. However, the gaseous 
diffusion plants, by practice, currently reconcile their records with 
the NMMSS on a bimonthly basis and can continue this practice under the 
revised regulation.
    Based on public comments, the final rule has been modified from the 
proposed rule. The reporting requirements for Category I facilities 
will remain unchanged from the current requirements. Category I 
licensees will still be required to compile the reports as of March 31 
and September 30 of each year and submit the Material Balance Reports 
and the Physical Inventory Listing Reports within 30 days after the end 
of the period covered by the report. The requirements for all other 
facilities will be revised as outlined in the proposed rule.
    As indicated, a licensee is required to submit the semiannual 
Material Balance Report and Inventory Composition Report within 30 days 
of March 31 and September 30 of each year. The preestablished timing of 
the submittal has two drawbacks. Specifically, the reports rarely 
coincide with a physical inventory, and all the reports for a given 
period are provided to the NMMSS at the same time. The data from a 
physical inventory are significantly more meaningful than the book 
values reported during the interim periods. Staggering the submittals 
would benefit the NMMSS contractor because not all licensees conduct 
inventories at the same time. Requirements for the NMMSS contractor 
would likely be spread more evenly throughout the year. Modifying the 
requirement to stipulate that the Material Balance Report and the 
Inventory Composition Report be submitted at the time of the physical 
inventory could alleviate these problems, provide more meaningful data, 
and be more efficient and effective.
    Another consideration is whether there would be an adverse impact 
on meeting IAEA safeguards requirements. Only one Material Status 
Report is required per year under the terms of the US/IAEA Safeguards 
Agreement and Sec.  75.35. Consequently, there would be no adverse 
impact on meeting IAEA safeguards requirements.
    The final rule revises the timing to complete the Material Balance 
Report and Physical Inventory Listing Report to coincide with a 
facility's physical inventory, except for Category I licensees. The 
final rule also provides additional time to complete the paperwork, 
except for Category I licensees and those licensees reporting under 
part 75. Identification of an actual loss or theft of material would 
still be reported within one hour per the current regulations.
    These changes provide most licensees with additional flexibility 
and reduce the regulatory burden. The final rule uses Physical 
Inventory Listing Report instead of Inventory Composition Reports to be 
consistent with the name of the actual form (DOE/NRC Form 742C).

Categorical Exclusion

    The categorical exclusion (Sec.  51.22(c)(12)) covers the issuance 
of an amendment to a license under 10 CFR parts 50, 60, 61, 70, 72, or 
75 relating to safeguards matters or approval of a safeguards plan. It 
does not address amendments to safeguards plans. As written, the 
categorical exclusion can be used for approval of a safeguards plan. 
However, an environmental assessment (EA) may be necessary for approval 
of an amendment to the safeguards plan. Initial approval is covered by 
the categorical exclusion, but amendments do not appear to be covered. 
This inconsistency appears to be inadvertent in that the Statement of 
Considerations for the rulemaking that included this categorical 
exclusion stated that this categorical exclusion was needed to 
implement new safeguards regulations through incorporation of 
provisions into licenses, as well as to ``permit modifications to 
licensees' safeguards programs established under existing 
requirements.'' See 49 FR 9352, at 9373 (March 12, 1984). The final 
rule adds language covering revisions to safeguards plans to rectify 
this omission. Safeguards plans include physical protection related 
plans and material control and accounting related plans. In addition, 
the categorical exclusion currently lists several parts to which it 
applies, however, part 76 is not included in the listing and should be 
included. Providing a generic reference to any part of 10 CFR chapter I 
corrects the current listing and avoids the need for revising the 
categorical exclusion when new parts need to be added to the listing.
    The NRC staff consulted with the Council on Environmental Quality 
(CEQ) concerning this amendment to the categorical exclusion in 10 CFR 
52.22(c)(12). CEQ determined that this amendment addresses the 
requirements of the CEQ regulations for agency procedures.

General and Category II MC&A Requirements

    In 1982, the NRC began an effort to move the MC&A requirements from 
part 70 to part 74 and make the requirements more performance oriented. 
Subsequent rulemakings on February 25, 1985 (50 FR 7575) and March 30, 
1987 (52 FR 10033), moved the requirements for Category I and III 
facilities. The MC&A requirements for Category II facilities and the 
general MC&A requirements are currently interspersed among the safety 
and general licensing requirements of part 70. The requirements 
regarding Category II material are also overly prescriptive as they 
include some requirements that are more stringent than the requirements 
for Category I facilities. This rule moves the remaining general MC&A 
requirements and the requirements for Category II facilities from part 
70 to part 74. The rule also makes the MC&A requirements for the 
Category II facilities more risk-informed. The risk-informed approach 
for the Category II facilities is consistent with the current MC&A 
regulations that apply to Category I and III facilities. In addition, 
the rule makes needed modifications that were missed in earlier updates 
of the MC&A regulations, corrects typographical errors, deletes old 
implementation dates, clarifies some definitions, and includes several 
new definitions.
    Specifically, the rule clarifies the definitions for ``Category IA 
material'' and ``inventory differences'' and makes them consistent with 
the current practice. The terms ``beginning inventory,'' ``plant,'' 
``removals from inventory,'' and ``removals from process,'' are newly 
defined. The definition for ``removals'' is deleted. There has been 
some confusion by licensees over the term ``removals.'' The term 
``removals'' is replaced by the terms ``removals from process'' and 
``removals from inventory.'' The definitions are consistent with the 
current practice. In addition, both the terms ``beginning inventory'' 
and ``plant'' are used in the current rule language, but were never 
defined in the rule. The definitions are consistent with the 
definitions contained in the current regulatory guides. The changes to 
the Category II requirements are discussed under the Category II 
heading.

General Requirements

    The current general MC&A requirements in part 70 require a licensee 
to keep records showing the receipt, inventory, disposal, and transfer 
of all SNM. The requirements also specify the retention period for 
those

[[Page 78133]]

records. These recordkeeping requirements are not being changed, just 
relocated. The general requirements currently in Sec. Sec.  70.51(b)(1) 
through (b)(5) are captured in new Sec. Sec.  74.19 (a)(1) through 
(a)(4). Furthermore, the reporting requirements currently in Sec.  
70.52 requiring a licensee to report loss or theft of SNM remain 
unchanged and are included in Sec.  74.11. The requirements for a 
Nuclear Material Transfer Report in Sec.  70.54 remain unchanged and 
are captured by Sec.  74.15. The existing requirement in Sec.  70.51(d) 
for all licensees authorized to possess more than 350 grams of 
contained SNM to conduct an annual physical inventory of all SNM is 
retained and is moved to new Sec.  74.19(c). The requirement currently 
in Sec.  70.51(c) for all licensees authorized to possess SNM in a 
quantity exceeding one effective kilogram of SNM to establish, 
maintain, and follow written MC&A procedures that are sufficient to 
enable the licensee to account for the SNM, is moved to new Sec.  
74.19(b). The requirements in Sec.  70.53 are moved to Sec. Sec.  74.13 
and 74.17.

Category II Requirements

    Current domestic MC&A regulations in part 70 for licensees who 
possess greater than one effective kilogram of strategic special 
nuclear material in irradiated fuel reprocessing operations or moderate 
strategic special nuclear material have been interspersed among the 
safety and general licensing requirements in part 70. These MC&A 
requirements are being moved to part 74 to avoid confusion with the 
safety requirements in part 70, to allow the requirements to be 
presented in a more orderly manner, and to make them more risk-
informed. Emphasis has been given to performance requirements rather 
than prescriptive requirements to allow licensees to select the most 
cost-effective way to satisfy NRC requirements.
    The basic MC&A requirements for Category II facilities are being 
retained in part 74 but are presented in a more organized manner. The 
performance objectives for Category II facilities are: (1) Confirmation 
of the presence and location of SNM; (2) prompt investigation and 
resolution of any anomalies indicating a possible loss of SNM; (3) 
rapid determination of whether an actual loss of a significant quantity 
of SNM has occurred; and (4) timely generation of information to aid in 
the investigation and recovery of missing SNM in the event of an actual 
loss. Implementation of these objectives is commensurate with the 
amount and type of material. The principal differences between the MC&A 
requirements in this final rule and those in the previous regulations 
are:
    (1) The revised regulations reduce the required frequencies of 
Category II physical inventories from the current frequency of every 2 
months for SSNM and every 6 months for everything else to every 9 
months. From a safeguards risk and graded approach perspective, this is 
consistent with the annual frequency for Category III facilities and 
semiannual frequency for Category I facilities;
    (2) The concept of Inventory Difference (ID) and Standard Error of 
the Inventory Difference (SEID) is used to replace the Material 
Unaccounted For (MUF) concept in the statistical program. This is 
consistent with the statistical terms and methods used in part 74 for 
Category I and III facilities and with NRC guidance and reference 
documents;
    (3) The significance testing of ID with a three SEID limit is less 
restrictive than the test level of two SEID specified in previous Sec.  
70.51(e)(5). This is consistent with Category I facilities that use a 
three-SEID limit with a constraint on SEID of 0.10 percent of active 
inventory. The measurement quality constraint for Category II remains 
at 0.125 percent of active inventory for SEID. This change results in a 
reduction of unwarranted, disruptive, and costly investigations, 
reports, or responses to ID threshold actions;
    (4) An item control program for Category II facilities that is 
consistent with Category III facilities is added. Category II item 
control requirements are less costly than the more stringent Category I 
item monitoring. The item control requirements mainly consist of 
providing current knowledge of location, identity, and quantity of 
plant-wide items existing for at least 14 days. The performance-based 
program allows a licensee to propose its item control method and 
frequency;
    (5) The combined standard error concept and a de minimus quantity 
for plutonium and uranium in the evaluation of shipper-receiver 
differences is used. This is consistent with the requirements for 
Category I and III facilities in part 74; and
    (6) The required frequency for the independent review and 
assessment of the facility's MC&A program is changed from annual to a 
minimum of 18 months. From a safeguards risk and graded approach 
perspective, this compares to the annual requirement for Category I and 
the every 2-year requirement for Category III.
    The consolidation of regulations is a significant step toward NRC's 
regulatory reform goal of providing a graded approach to MC&A 
regulation. It also reduces the regulatory burden by making it easier 
for a licensee to find the MC&A requirements that apply to its 
facility.
    The NRC has made changes to the final rule based on public comments 
(see the ``Summary of Public Comments on the Proposed Rule'' section). 
In summary the changes to the final rule include (1) retaining the 
current material status reporting requirements for Category I 
licensees; (2) retaining the current allowance for alarm resolution 
calls (Sec.  74.57(c)) to be made on the next scheduled workday when 
falling on a holiday or weekend; and (3) clarifying that the Category 
II requirements continue to apply to irradiated fuel reprocessing 
facilities as is in the current regulations.

Summary of Public Comments on the Proposed Rule

    This analysis presents a summary of the comments received on the 
proposed rule, the NRC's response to the comments, and changes made to 
the final rule as a result of these comments.
    The NRC received four comment letters on the proposed rule. Three 
were from industry (including NEI) and one from a consulting firm.
    In general, two commenters were opposed to specific aspects of the 
proposed rule (the change in material balance reporting and the change 
to the alarm resolution notification), both of these commenters are 
Category I facilities. NEI and the consulting firm generally supported 
the rulemaking, although the consulting firm was opposed to the change 
requiring alarm resolution notifications made to the NRC Operations 
Center. The consulting firm also provided specific recommendations to 
improve the final rule. The comments on the proposed rule are generally 
contained within four categories. The first category contains general 
comments, followed by comments on the material balance reporting, 
comments on the Category II requirements, and other comments.

A. General Comments on the Proposed Rule

1. Support of the Proposed Rule
    Comment: Two of the commenters provided specific comments in 
support of the proposed rule. NEI indicated that the decreased 
frequency of SNM inventory reporting for Category II and III facilities 
will reduce the regulatory burden on licensees and that the partial 
harmonization of the inventory reporting requirements of 10 CFR parts 
74 and 75 was commendable. Overall

[[Page 78134]]

NEI indicated support of the proposed amendments and believes that they 
will reduce resource demands placed on both the NRC and individual 
licensees. The consulting firm indicated that without the proposed 
changes, the MC&A requirements for SNM in amounts of moderate strategic 
significance (Category II) would remain prescriptive and irrationally 
more restrictive than those for formula quantities of strategic 
significance (Category I).
    Response: The NRC is not making any changes in the final rule that 
the NRC believes would negate the industry's general support for this 
rulemaking.
2. Elimination of MC&A Regulations for Irradiated Fuel Reprocessing 
Plants
    Comment: One commenter expressed concern that the MC&A requirements 
for irradiated fuel reprocessing plants that are located in 10 CFR 
70.51(e) were eliminated. The commenter noted that if this was the 
intent then it should have been highlighted in the Statement of 
Considerations. The commenter believes that it was prudent to keep in 
place these key regulations, which may not be easily replaced if a need 
were to arise. The commenter offered specific suggestions to move the 
reprocessing requirements to Sec.  74.41, clarify the performance 
objectives, and rename subpart D to include SNM in Irradiated Fuel 
Reprocessing Operations.
    Response: It was not the NRC's intent to eliminate the requirements 
for irradiated fuel reprocessing plants. MC&A requirements for 
reprocessing plants were originally considered in the proposed rule for 
MC&A requirements for facilities that use formula quantities of 
strategic SNM (49 FR 4091; February 2, 1984). These requirements were 
dropped from the final rule because of unresolved questions on whether 
an irradiated fuel reprocessing facility could comply with all 
regulatory requirements and the negative outlook for domestic 
reprocessing (52 FR 10033; March 30, 1987). Although a reprocessing 
facility would likely be considered a Category I facility based on 
possession limits for plutonium, language was inserted in Sec.  
70.51(e) to cover reprocessing facilities. The requirements for an 
irradiated fuel reprocessing facility were the same as for a facility 
possessing SNM of moderate significance (Category II), no changes 
specific to reprocessing were introduced. In this final rule, the 
language in Sec.  74.41 has been clarified to identify the 
applicability to irradiated fuel reprocessing facilities. However, it 
is important to note that if reprocessing in this country were to 
become viable, the NRC would likely develop MC&A requirements specific 
for reprocessing.
3. Table 1
    Comment: One commenter stated that Table 1 was incorrect for this 
rulemaking. The commenter stated the table contained authorized 
possession and use limits rather than specific information on 
possession limits for Category I, II, and III licensees. The commenter 
noted that it is incorrect to state that all such SNM is unirradiated 
as this would only be true for physical protection requirements.
    Response: The table was intended to simplify the complexities of 
the possession thresholds for Category I, II, and III facilities. The 
commenter is correct that the term unirradiated should be removed and 
the table has been revised. The table originated from appendix M of 10 
CFR part 110.

B. Material Balance Reporting

1. Tying Material Balance Reports and Physical Inventory Listing 
Reports to the Physical Inventory
    Comment: Two commenters (both Category I facilities) were opposed 
to changing the reporting dates for the Material Balance Reports and 
the Physical Inventory Listing Report. The commenters preferred that 
the set dates of March 31 and September 30 be retained. One commenter 
stated that tying the reporting dates to the physical inventory would 
place a burden on the licensee during the time period in which licensee 
efforts are placed on inventory reconciliation and that the new time 
could have an adverse impact on the quality of the inventory 
difference. The other commenter indicated that because they also have 
similar DOE reporting requirements for DOE material at their site, the 
proposed change would have the effect of forcing them to make quarterly 
reports. The commenter was concerned that different DOE and NRC 
reporting requirements would cause confusion and inconsistencies. The 
commenter also stated that the proposed 45 day limit for high enriched 
uranium would result in licensees having to complete three different 
reports simultaneously.
    Response: The proposed changes to the material balance reporting 
requirements were intended to provide more flexibility to licensees, 
while reducing the burden and providing better data to the NMMSS. This 
is accomplished for the majority of licensees impacted by the proposed 
rule change. Because Category I facilities are required to conduct a 
physical inventory semiannually, these facilities do not receive the 
major benefit of the change (i.e. less frequent reporting). Both 
Category I facilities requested that these changes not be adopted by 
NRC because it would increase their burden for making these reports. 
Imposing an increased burden on Category I facilities was not intended, 
therefore, the current requirements for Category I facilities will be 
retained. Category I facilities will continue to compile the Material 
Balance Reports and Inventory Composition Reports as of March 31 and 
September 30 of each year and submit the reports within 30 days after 
the end of the period covered by the report. The final rule reflects 
the retention of the current Category I requirements. The change will 
be retained for all other facilities. The final rule requires the 
reports to be completed within 60 days of the beginning of the physical 
inventory for all other facilities

C. Category II Requirements

1. Sealed Sources
    Comment: One commenter stated that Sec.  74.41(a) should be 
reworded to bring it into line with the current Sec.  70.51(e), which 
excluded SNM used in sealed form. The commenter stated that emphasis 
for exception should be more on the use of sealed sources rather than 
possession. The commenter further stated that strategic SNM (plutonium, 
uranium-233, and uranium highly enriched in uranium-235) should not be 
part of this exclusion and that only Category II low-enriched uranium 
quantities possessed and used as sealed sources is appropriate.
    Response: The proposed rule did include an exclusion for sealed 
sources when determining if a licensee fell under the comprehensive 
requirements for a Category II facility. This exclusion is consistent 
with the current requirements. The NRC disagrees with the remainder of 
the comment. A distinction cannot be made between possession and use of 
sealed sources. The NRC may not have knowledge if a specific sealed 
source was actually used by any given licensee versus merely possessed 
by the licensee. Trying to make this distinction would impose 
unnecessary burden on both the licensee and the NRC. Most licenses 
authorize possession and use of sealed sources. Although the sealed 
sources may not count towards the threshold for a Category II facility, 
the sealed sources are included in a facility's physical inventory. The 
current regulations include strategic SNM sealed sources in the 
exclusion and the commenter has not provided sufficient justification 
to support the change.

[[Page 78135]]

D. Information Collection

1. Burden Estimate
    Comment: NEI noted that as the NRC's Electronic Information 
Exchange system is not yet functional for parts 70 and 76 licensees and 
that both licensees and the NRC could possibly incur significant 
resources implementing electronic data submission protocols. NEI 
indicated that if the electronic data submission formats closely 
resemble those of DOE/NRC forms 742 and 742C, no change in licensee 
resources should be expected.
    Response: Licensees have been required to submit DOE/NRC forms 742 
and 742C in electronic form since 1994. Approximately 72 percent of 
licensees submitted the information electronically in 2000. 
Implementation of the Electronic Information Exchange should not impact 
the electronic submission of forms 742 and 742C.
2. Changes to Guidance Documents
    Comment: One commenter noted that no provision had been made to 
update NRC guidance documents (e.g. NUREG/BR-007) with the new 
amendments.
    Response: NRC agrees that a minor revision to NUREG/BR-007 will be 
necessary to implement the rule changes. The NUREG currently states 
that ``Reports are to be made as of March 31 and September 30 of each 
year, or alternate dates if authorized by the NRC and filed within 
thirty (30) days after the end of the period covered by the report.'' 
Although the rule changes result in an authorized alternate date for 
submission of the reports, the NUREG will be modified to reflect that 
the reports are to be filed within 60 days for facilities handling less 
than a Category I quantity, but at least 350 grams of fissile material. 
Because this is considered a minor change, the NRC staff does not plan 
to solicit public comment on this change to the NUREG. An errata sheet 
containing the change will be issued at the time the rule becomes 
effective.
3. Evaluation of Data Library
    Comment: One commenter recommended that the NRC evaluate the data 
library that is created through the NMMSS system to assure that it can 
be readily accessed and the data retrieved in various combinations.
    Response: All of the subject data submitted by a licensee is 
available and accessible to the licensee. The licensee can resolve 
technical concerns or questions about reading or accessing the 
licensee's data by directing their questions to the NMMSS operator who 
warehouses the data for the NRC. The NMMSS operator can provide 
licensees their data in electronic format that would allow the licensee 
to sort and combine the data as necessary.

E. Other Comments

1. Alarm Resolution
    Comment: Two commenters (both Category I facilities) objected to 
the elimination of the notification exception for holidays and weekends 
in Sec.  74.57(c). Currently, notification would occur on the next 
scheduled workday. The reason provided by one of the commenters is that 
the facility has a 5-day work week. Two commenters objected to 
providing the alarm resolution notifications in Sec. Sec.  74.57(c) and 
74.57(f)(2) to the Operations Center. One commenter believes that 
notification should be made to the Safety and Safeguards Support 
Branch, NMSS or to the NRC Resident Inspector due to the staff's 
knowledge of the complexity of the process and the variability 
associated with certain process monitoring units. The other commenter 
stated that notification to the Operations Center of unresolved alarms 
would be an unnecessary added burden to both licensees and the NRC. The 
commenter stated that it would not be risk-informed nor performance-
based. The commenter stated that the Operations Center would not have 
on duty, staff with the performance capability necessary to take 
meaningful action, except to notify NMSS licensing staff. These 
notifications should continue to be reported directly to NRC licensing 
staff who already would be aware of the initiation of the licensee's 
investigative procedures and following progress with the assistance of 
NRC inspectors for appropriate response. The rule should name the 
Director of NMSS, but in practice, the specific NMSS licensing unit--
with regular and emergency telephone numbers--could be listed as the 
contact and updated in each licensee's NRC-approved fundamental nuclear 
material control plan. The commenter stated that this graded, working-
level approach has proven suitable over 30 years without overaction or 
a compelling need for change.
    Response: The NRC agrees to reinsert the notification exception for 
weekends and holidays in Sec.  74.57(c). A short delay in notification 
on weekends and holidays is acceptable. Any discovery of an actual loss 
or theft of SNM requires the licensee to report within 1 hour of 
discovery under Sec.  74.11. The final rule reflects the retention of 
the exception for weekends and holidays. Notification would occur on 
the next scheduled workday.
    The NRC does not agree with the commenters' request to change the 
notification from the NRC Operations Center to either the licensing 
unit or the Resident Inspector. NRC staff members are not always 
available to take calls from licensees due to leave, training, travel, 
etc. The call could easily be routed to voice mail or to an individual 
not familiar with the facility. While the licensee may have technically 
notified the NRC by leaving a voice mail message for a staff member, 
the NRC may not have actual knowledge until the staff person returns to 
the office. Notification to the Operations Center provides a record of 
the call and ensures that the appropriate NRC staff will be notified so 
that the necessary follow-up actions can occur. The Operations Center 
is manned 24-hours-a-day, 7-days-a-week, so that the licensee can be 
sure that someone is available to take the call. The NRC does not 
believe that calling the Operations Center instead of a staff member is 
an unnecessary burden. Either way, the licensee makes a phone call and 
provides pertinent information. In both cases, NRC staff would contact 
the licensee for follow-up information. as appropriate. When the 
Operations Center receives a notification from a licensee, they will 
notify the appropriate staff in NMSS. The NMSS or regional staff will 
conduct any follow-up activities. According to the NMSS licensing 
staff, the NRC receives approximately one of these notifications per 
year.
2. Threshold Possession Limits
    Comment: One commenter stated that the threshold for SNM of low 
strategic significance would result in an overlapping in coverage 
between Category III SNM and that proposed for moderate strategic 
significance or Category II. The example provided by the commenter is 
that the comprehensive Category III measures would not be triggered 
until authorized possession and use levels reach 1001 grams of 
plutonium, uranium-233, or high enriched uranium (or some combination) 
which is far beyond the 501-gram point where Category II would begin. 
The commenter pointed out that the beginning point for Category III 
facility implementation should not be set above the floor for Category 
II. There should be no gaps or overlapping between the scopes of 
Category I, II, and III MC&A programs to have a meaningful graded 
safeguards program in terms of risk and expected performance. The 
commenter stated that the proposed Sec.  74.41 threshold is more

[[Page 78136]]

appropriate, and that the threshold used in current Sec.  70.51(e) of a 
quantity exceeding one effective kilogram of strategic special nuclear 
material is inappropriate for Category II because it would take a 
formula quantity of uranium enriched to 20 percent (5 kilograms 
uranium-235), which would be a Category I amount, to reach one 
effective kilogram. The commenter indicated that the NRC should fully 
understand the ramifications from using the concept of greater than one 
effective kilogram when grading across Categories I, II, and III.
    Response: The NRC understands the commenter's concern. The NRC did 
not propose a change to the threshold limits for Category I or III in 
the proposed rule, only for Category II. The comment concerning the 
threshold value for Category III is beyond the scope of this 
rulemaking. The commenter is correct that the comprehensive Category 
III measures would not be triggered until a licensee was authorized to 
possess and use one effective kilogram of SNM of low strategic 
significance. If a licensee were to possess 1001 grams of plutonium or 
uranium-233, the licensee would have exceeded the upper threshold for a 
Category III license and would actually be a Category II facility. The 
definition for SNM of low strategic significance very clearly states 
that the upper threshold is less than the amount of SNM of moderate 
strategic significance. Quantities over 1000 grams of high enriched 
uranium or over 500 grams of plutonium or uranium-233 would cause a 
facility to become a Category I or II facility. The effective kilogram 
of SNM of low strategic significance does not include only high 
enriched uranium, plutonium, and uranium-233, but also includes uranium 
at lower enrichments. A licensee can not possess an effective kilogram 
of only high enriched uranium, plutonium, and uranium-233 and still be 
considered a Category III facility. The beginning point for the 
comprehensive Category III measures is not set above the floor for 
Category II as stated by the commenter. Although the use of one 
effective kilogram is confusing, the definition of SNM of low strategic 
significance prevents the overlap. The one effective kilogram has been 
retained for irradiated fuel reprocessing facilities, it does not apply 
to the moderate strategic significance material. If reprocessing ever 
becomes viable in this country, the NRC would likely develop 
requirements specifically for a reprocessing facility.

Summary of Final Revisions

    This final rule makes several changes to parts 51, 61, 70, 72, 73, 
74, 75, 76, and 150, which are characterized as follows: The timing and 
frequency for submitting Material Balance Reports and Inventory 
Composition Reports in parts 72 and 74 are amended. The remaining MC&A 
requirements in part 70 are moved to part 74. The MC&A requirements for 
Category II facilities are made more risk-informed. Part 51 is amended 
to clarify that the categorical exclusion for safeguards plans also 
applies to amendments to the safeguards plan. Conforming changes are 
made to parts 61, 70, 73, 75, 76, and 150 to reflect the relocation of 
the MC&A requirements.

Section 51.22 Criterion for Categorical Exclusion; Identification of 
Licensing and Regulatory Actions Eligible for Categorical Exclusion or 
Otherwise Not Requiring Environmental Review

    This section is revised to clarify that the categorical exclusion 
used for issuance of an approval of a safeguards plan can also be used 
for issuance of an approval for an amendment to the safeguards plan. 
Additionally, the listing of parts 50, 60, 61, 70, 72, and 75 is 
changed to a more generic reference to 10 CFR chapter I. This change 
avoids an incomplete listing (e.g., part 76 was inadvertently left 
out).

Section 61.80 Maintenance of Records, Reports, and Transfers

    This section is revised to delete the reference to Sec. Sec.  70.53 
and 70.54, and add the new reference to Sec. Sec.  74.13 and 74.15.

Section 70.8 Information Collection Requirements: OMB Approval

    This section is revised to change the OMB information collection 
requirements to reflect the sections being deleted from part 70.

Section 70.19 General License for Calibration or Reference Sources

    This section is revised to delete the reference to Sec. Sec.  70.51 
and 70.52, and add the new reference to Sec. Sec.  74.11 and 74.19.

Section 70.20a General License to Possess Special Nuclear Material for 
Transport

    This section is revised to include a reference to Sec.  74.11.

Section 70.22 Contents of Applications

    This section is revised to delete the reference to Sec.  70.58 and 
add the new reference to Sec.  74.41.

Section 70.23 Requirements for the Approval of Applications

    This section is revised to correct a reference from a nonexistent 
section to the correct section.

Section 70.32 Conditions of Licenses

    This section is revised to reflect the transfer of the MC&A 
requirements from part 70 to part 74, to correct an error in wording, 
and to clarify that changes to a licensee's MC&A program that represent 
a decrease in effectiveness must be made via an amendment application 
pursuant to Sec.  70.34, consistent with current licensing policy.

Section 70.51 Material Balance, Inventory, and Records Requirements

    This section is revised to rename the section and delete the MC&A 
requirements because they would be replaced by the requirements in part 
74. Paragraphs (b)(6), (b)(7), (i)(1), and (i)(2) would be redesignated 
as paragraphs (a), (b), (c)(1), and (c)(2) respectively.

Section 70.52 Reports of Accidental Criticality or Loss or Theft or 
Attempted Theft of Special Nuclear Material

    This section is renamed to reflect the relocation of the reporting 
of theft or loss of SNM. The section is revised to delete paragraphs 
(b) and (d) because they would be covered by the requirements found in 
Sec.  74.11. The remaining paragraphs are redesignated. Paragraph (a) 
and new paragraph (b) are revised to remove the loss of SNM.

Section 70.53 Material Status Reports

    This section is deleted in its entirety, the requirements in this 
section are covered by the requirements found in Sec. Sec.  74.13 and 
74.17.

Section 70.54 Nuclear Material Transfer Reports

    This section is deleted in its entirety. The requirements in this 
section are covered by the requirements found in Sec.  74.15.

Section 70.57 Measurement Control Program for Special Nuclear Materials 
Control and Accounting

    This section is deleted in its entirety. The requirements in this 
section are replaced by the requirements found in part 74, subpart D.

Section 70.58 Fundamental Nuclear Material Controls

    This section is deleted in its entirety. The requirements in this 
section are replaced by the requirements found in part 74, subpart D.

Section 72.76 Material Status Reports

    This section is revised to change the timing of the submittal of 
the Material Status Reports from every March 31 and September 30 to 
within 60 calendar days of the beginning of the physical inventory. The 
language is revised to

[[Page 78137]]

reflect the wording in Sec.  74.13 to avoid any confusion over the term 
``Material Status Reports.'' The language clearly states that both the 
Material Balance Report and the Physical Inventory Listing Report are 
to be submitted.

Section 73.67 Licensee Fixed Site and In-Transit Requirements for the 
Physical Protection of Special Nuclear Material of Moderate and Low 
Strategic Significance

    This section is revised to delete the reference to Sec.  70.54 and 
add a new reference to Sec.  74.15.

Section 74.1 Purpose

    This section is revised to reflect the addition to part 74 of the 
general MC&A requirements and the requirements for SNM of moderate 
strategic significance. The reference to Sec. Sec.  70.51, 70.57, and 
70.58 is deleted.

Section 74.2 Scope

    This section is revised to reflect the relocation of the general 
reporting and recordkeeping requirements, and exempt part 72 licensees 
from the general reporting and recordkeeping requirements, as they are 
currently covered under the part 72 requirements.

Section 74.4 Definitions

    This section is revised to clarify the definitions for ``Category 
IA material'' and ``inventory differences.'' The terms ``beginning 
inventory,'' ``plant,'' ``removals from inventory,'' and ``removals 
from process'' are newly defined. The definition for ``removals'' is 
deleted. There has been some confusion by licensees over the term 
``removals.'' The term ``removals'' is replaced by the terms ``removals 
from process'' and ``removals from inventory.'' The definitions are 
consistent with the current practice. In addition, both the terms 
``beginning inventory'' and ``plant'' are used in the current rule 
language, but were never defined in the regulations. The definitions 
are consistent with the definitions contained in the current regulatory 
guides.

Section 74.8 Information Collection Requirements: OMB Approval

    This section is revised to change the OMB collection requirements 
to reflect the relocation of provisions from part 70.

Section 74.13 Material Status Reports

    This section is revised to delete paragraph (b), and redesignate 
paragraphs (a)(1) and (a)(2) as (a) and (b), respectively. The new 
paragraph (a) is revised to require a Material Balance Report and 
Physical Inventory Listing Report to be submitted: (1) Within 60 
calendar days of the beginning of physical inventory as required in 
Sec. Sec.  74.19(c), 74.31(c)(5), 74.33(c)(4), or 74.43(c)(6); or (2) 
for licensees subject to the requirements of Sec.  74.51 to compile a 
report as of March 31 and September 30 of each year and file it within 
30 days after the end of the period covered by the report. The original 
paragraph (b) is deleted because the requirements would be replaced by 
the new subpart D.

Section 74.17 Special Nuclear Material Physical Inventory Summary 
Report

    This section is revised to reflect the relocation of the MC&A 
requirements and to change the address for reporting physical inventory 
results in paragraph (c). The reports are to be submitted to the 
Director, Office of Nuclear Material Safety and Safeguards, instead of 
the regions to be consistent with paragraphs (a) and (b).

Section 74.19 Recordkeeping

    A new section is added to address the general recordkeeping 
requirements for MC&A that were previously included in Sec.  70.51. 
These requirements originate from Sec. Sec.  70.51(b)(1) through 
(b)(5), 70.51(c), and 70.51(d).

Section 74.31 Nuclear Material Control and Accounting for Special 
Nuclear Material of Low Strategic Significance

    This section is revised to delete implementation dates that are no 
longer applicable. This section is also revised to change 9 kilograms 
to 9000 grams because the use of 9 kg implied that the NRC will accept 
a rounding to the nearest kg, when in fact the NRC requires rounding to 
the nearest gram.

Section 74.41 Nuclear Material Control and Accounting for Special 
Nuclear Material of Moderate Strategic Significance

    A new section is added to provide the general performance 
objectives, implementation schedule and system capabilities and 
requirements for special nuclear material of moderate strategic 
significance.

Section 74.43 Internal Controls, Inventory, and Records

    A new section is added to provide the requirements for internal 
controls, inventory, and recordkeeping for special nuclear material of 
moderate strategic significance.

Section 74.45 Measurements and Measurement Control

    A new section is added to provide the requirements for measurements 
and measurement control for special nuclear material of moderate 
strategic significance.

Section 74.51 Nuclear Material Control and Accounting for Strategic 
Special Nuclear Material

    This section is revised to delete paragraphs (c)(1) and (c)(2) to 
eliminate implementation dates that are no longer relevant. Paragraph 
(c) is revised to reflect that new Fundamental Nuclear Material Control 
plans would be implemented upon issuance of a license or amendment, or 
by the date specified in a license condition. Paragraph (d)(1) is 
deleted because it is no longer necessary to provide an 18-month 
exemption for implementation. Paragraph (d)(2) is redesignated as 
paragraph (d).

Section 74.57 Alarm Resolution

    This section is revised to reflect an NRC organizational change: 
the ``Domestic Safeguards and Regional Oversight Branch'' and the 
``Division of Safeguards and Transportation'' are no longer used as 
names of organizational units. Also, the stated phone number is no 
longer applicable. Notifications would be made to the NRC Operations 
Center.

Section 74.59 Quality Assurance and Accounting Requirements

    This section is revised to provide proper identification of 
acronyms, correct the accidental omission of the phrase ``contained in 
high enriched uranium,'' provide improved punctuation, correct 
typographical errors, and require that reports be submitted to the 
Director, Office of Nuclear Material Safety and Safeguards.

Section 75.21 General Requirements

    This section is revised to delete the reference to Sec.  70.51 and 
add the new reference to Sec.  74.15.

Section 76.113 Formula Quantities of Strategic Special Nuclear 
Material--Category I

    This section is revised to delete the reference to Sec.  70.51 and 
replace it with the new reference to Sec.  74.19.

Section 76.115 Special Nuclear Material of Moderate Strategic 
Significance--Category II

    This section is revised to delete the reference to Sec. Sec.  
70.51, 70.52, 70.53, 70.54, 70.57, and 70.58 and add the new

[[Page 78138]]

reference to Sec. Sec.  74.19, 74.41, 74.43, and 74.45.

Section 76.117 Special Nuclear Material of Low Strategic Significance--
Category III

    This section is revised to delete the reference to Sec.  70.51 and 
add the new reference to Sec.  74.19.

Section 150.20 Recognition of Agreement State Licenses

    This section is revised to delete the reference to Sec. Sec.  
70.51, 70.53, and 70.54 and add the new reference to Sec. Sec.  74.11, 
74.15, and 74.19.

Criminal Penalties

    For the purpose of section 223 of the Atomic Energy Act (AEA), the 
Commission is issuing the final rule to amend 10 CFR parts 70, 72, and 
74 under one or more of sections 161b, 161i, or 161o of the AEA. 
Willful violations of the rule are subject to criminal enforcement.

Agreement State Compatibility

    Under the ``Policy Statement on Adequacy and Compatibility of 
Agreement State Programs'' approved by the Commission on June 30, 1997, 
and published in the Federal Register on September 3, 1997 (62 FR 
46517), most of this final rule is classified as compatibility Category 
``NRC.'' However, certain parts of the final rule are a matter of 
consistency among States and Federal safety requirements. The revisions 
to part 61 and Sec. Sec.  70.19(c), 70.51(a), 70.51(b), 150.20(b), and 
new Sec.  74.19(a) would be classified as Category C. A conforming 
change to Sec.  70.8(b) would be classified as Category D. Although 
these sections are subject to various degrees of compatibility 
regarding the Agreement States, the amendments are not expected to 
impact existing Agreement States regulations. The actual requirements 
are not changing, they are only being moved to a new location. 
Therefore, it is not expected that Agreement States will need to make 
conforming changes to their regulations.
    Category C means the provisions affect a program element, the 
essential objectives of which should be adopted by the State to avoid 
conflicts, duplications, or gaps in the national program. The manner in 
which the ssential objectives are addressed need not be the same as 
NRC, provided the essential objectives are met. Category D means the 
program element does not need to be adopted by the States for purposes 
of compatibility. Compatibility is not required for Category ``NRC'' 
regulations. The NRC program elements in this category are those that 
relate directly to areas of regulation reserved to the NRC by the 
Atomic Energy Act of 1954, as amended (AEA), or the provisions of 10 
CFR chapter I. Although an Agreement State may not adopt program 
elements reserved to NRC, it may wish to inform its licensees of 
certain requirements via a mechanism that is consistent with the 
particular State's administrative procedure laws, but does not confer 
regulatory authority on the State.

Voluntary Consensus Standards

    The National Technology Transfer Act of 1995 (Pub. L. 104-113) 
requires that Federal agencies use technical standards that are 
developed or adopted by voluntary consensus standards bodies unless the 
use of such a standard is inconsistent with applicable law or otherwise 
impractical. In this final rule, the NRC would revise the MC&A 
regulations. This action does not constitute the establishment of a 
standard that establishes generally applicable requirements.

Environmental Impact: Categorical Exclusion

    The NRC has determined that the changes to part 51, the changes to 
the reporting requirements, and the movement of the MC&A requirements 
to part 74 are the types of actions described in categorical exclusion 
10 CFR 51.22(c)(2) and (3). Therefore neither an environmental impact 
statement nor an environmental assessment has been prepared for these 
portions of the final rule. An environmental assessment has been 
prepared for the remainder of the final rule.

Finding of No Significant Environmental Impact: Availability

    The Commission has determined under the National Environmental 
Policy Act of 1969, as amended, and the Commission's regulations in 
subpart A of 10 CFR part 51, not to prepare an environmental impact 
statement for this final rule because the Commission has concluded 
based on an EA that this final rule would not be a major Federal action 
significantly affecting the quality of the human environment. The EA 
prepared to support this rulemaking covers the changes to the Category 
II requirements.
    The determination of this EA is that there will be no significant 
impact to the public from this action. The NRC requested public 
comments on the environmental assessment and on any environmental 
justice considerations that may be related to this rule. No comments 
were received.
    The NRC requested the views of the States on the environmental 
assessment for this rule. No comments were received.

Paperwork Reduction Act Statement

    This final rule amends information collection requirements that are 
subject to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et 
seq.). These requirements were approved by the Office of Management and 
Budget, approval number 3150-0004, -0009, -0058, and -0123.
    Because the rule will reduce existing information collection 
requirements, the public burden for this information collection is 
expected to be decreased by approximately 7 hours per licensee for 
licensees reporting annually, instead of semiannually, on NRC forms 742 
and 742C. This reduction includes the time required for reviewing 
instructions, searching existing data sources, gathering and 
maintaining the data needed and completing and reviewing the 
information collection. There is essentially no change in overall 
burden for the requirements in 10 CFR part 70 that are being moved to 
10 CFR part 74. Send comments on any aspect of these information 
collections, including suggestions for further reducing the burden, to 
the Records Management Branch (T-6 E6), U.S. Nuclear Regulatory 
Commission, Washington, DC 20555-0001, or by Internet electronic mail 
at [email protected]; and to the Desk Officer, Office of Information 
and Regulatory Affairs, NEOB-10202, (3150-0004, -0009, -0058, and -
0123), Office of Management and Budget, Washington, DC 20503.

Public Protection Notification

    The NRC may not conduct or sponsor, and a person is not required to 
respond to, a request for an information collection requirement unless 
the requesting document displays a currently valid OMB control number.

Regulatory Analysis

Statement of the Problem and Objective

    The Commission is amending an aspect of the MC&A requirements to 
reduce the regulatory burden and provide additional flexibility to 
licensees required to submit Material Balance Reports and Inventory 
Composition Reports. The current regulations require a licensee 
authorized to possess, at any one time or location, SNM in a quantity 
totaling more than 350 grams of contained uranium-235, uranium-233, or 
plutonium, or any combination thereof, to complete and

[[Page 78139]]

submit in a computer-readable format Material Balance Reports 
concerning SNM received, produced, possessed, transferred, consumed, 
disposed of, or lost. These reports are to be compiled as of March 31 
and September 30 of each year and filed within 30 days after the end of 
the period. Each licensee is also required to file a statement of the 
composition of the ending inventory (also called the Physical Inventory 
Listing Report) along with the Material Balance Report. These twice 
yearly reports are typically based on book values as opposed to 
physical inventory results because the dates do not always coincide 
with the timeframe for a facility's physical inventory. Physical 
inventories for Category III facilities are conducted on an annual 
basis, semiannually for Category I facilities, and every 2 to 6 months 
for Category II facilities. By revising the timeframe to complete their 
Material Balance Reports and Physical Inventory Listing reports to 
coincide with the physical inventory and providing additional time to 
complete the paperwork, the regulatory burden on most licensees will be 
reduced. At this time, the NRC is not changing the reporting period for 
Category I facilities.
    The categorical exclusion (Sec.  51.22(c)(12)) covers the issuance 
of an amendment to a license under 10 CFR parts 50, 60, 61, 70, 72, or 
75, relating to safeguards matters or approval of a safeguards plan. 
However, an EA would be necessary for approval of an amendment to the 
safeguards plan. This inadvertent omission of a categorical exclusion 
for amendments is rectified in the final rule by adding language 
covering revisions to safeguards plans. In addition, the categorical 
exclusion currently lists several parts. Part 76 is not included in the 
listing but should be included. Providing a generic reference to any 
part of 10 CFR chapter I corrects the current listing and avoids the 
need for changes due to new parts being added. These changes will 
enhance the NRC's efficiency and reduce potential burden on its staff.
    In 1982, the NRC initiated an effort to move the MC&A requirements 
from 10 CFR part 70, ``Domestic Licensing of Special Nuclear 
Material,'' to 10 CFR part 74, ``Material Control and Accounting of 
Special Nuclear Material.'' The initiative also included efforts to 
make the requirements more performance oriented. In 1985, the MC&A 
requirements for Category III facilities were made more performance 
oriented and moved to part 74 (50 FR 7575; February 25, 1985). The 
requirements for Category I facilities were similarly moved in 1987 (52 
FR 10033; March 30, 1987). The MC&A requirements for Category II 
facilities and some of the general MC&A requirements are still 
interspersed among the safety and general licensing requirements of 
part 70. The requirements regarding Category II material are also 
overly prescriptive, in some cases having more stringent requirements 
than those for a Category l facility. Although there are no current 
operating Category II licensed facilities (the only Category II 
facility has a possession only license and is undergoing 
decommissioning), it is still beneficial to move the requirements and 
make them less prescriptive. These modifications will enhance the 
regulatory process by providing any future Category II licensee with a 
better understanding of the procedures and requirements for MC&A, and 
will complete consolidation of the MC&A requirements in part 74. 
Conforming changes are also being made to parts 61, 73, 75, 76, and 150 
to reflect the relocations of the MC&A requirements.
    In addition, the final rule corrects several typos, old 
implementation dates, and some terminology that is being updated to 
reflect current practice and for consistency with the regulatory 
guides.

Identification and Analysis of Alternative Approaches to the Problem

Option 1--Conduct a Rulemaking That Would Address the Regulatory 
Problems Described Above
    The final rule will revise the timing to complete the Material 
Balance Reports and Physical Inventory Listing Reports to coincide with 
a facility's physical inventory, except for Category I licensees. The 
final rule will also provide additional time to complete the reports, 
except for a licensee who is reporting under part 75. These changes 
will provide most licensees with additional flexibility and reduce the 
regulatory burden. The final rule will require that the Material 
Balance Reports and Physical Inventory Listing Reports be filed within 
60 days of the beginning of the physical inventory. The majority of 
licensees are only required to conduct an annual physical inventory 
(the exceptions being Category I and II facilities) and will, 
therefore, file the reports once a year instead of twice a year. This 
will reduce the burden on industry in preparing the reports by about 
half. Category I licensees will continue to submit reports within 30 
days of the end of the reporting period (March 31 and September 30 of 
each year).
    This final rule will also revise the categorical exclusion covering 
approval of safeguards plans, move the MC&A requirements to part 74, 
and make the Category II requirements more risk-informed. The final 
rule represents the final stage of an effort that started in 1982, and 
will result in the movement of the remaining general MC&A requirements 
and the requirements for Category II facilities. The risk-informed 
approach is consistent with the existing MC&A regulations that apply to 
Category I and III facilities. In addition, the final rule will make 
modifications that were missed in earlier updates of the MC&A 
regulations, correct typographical errors, delete outdated 
implementation dates, clarify some definitions, and include several new 
definitions.
Option 2--No Action
    One alternative to amending the regulations is to maintain the 
current regulations without change. The advantages of the no action 
alternative is that the resources expended on the rulemaking would be 
conserved. Further, there is no urgency to make the changes to the 
Category II requirements because there are currently no active Category 
II licensees. The current system has worked reasonably well, and the 
changes to consolidate the MC&A requirements in part 74 may be 
desirable, but not necessary. The disadvantages of the no action 
alternative is that the identified regulatory problems would not be 
addressed. The regulatory burden reductions to be gained for most 
licensees by changing the timing and frequency for submittal of the 
Material Balance Reports and the Physical Inventory Listing Reports 
would not be achieved. In addition, the location of the MC&A 
requirements in both part 70 and part 74 can cause confusion, 
particularly for a licensee who refers to the general requirements in 
part 70. Consolidation of domestic MC&A requirements would not occur. 
The requirements for Category II facilities would remain more stringent 
than the requirements for Category I facilities.

Estimation and Evaluation of Values and Impacts

    The principal purpose of the Material Balance Report and the 
Physical Inventory Listing Report is the periodic reconciliation of 
licensee records with the records in the NMMSS. A secondary purpose is 
the use of these records to satisfy the requirement of the US/IAEA 
Safeguards Agreement to provide an annual Material Balance Report for

[[Page 78140]]

facilities selected under the Agreement or associated Protocol.
    The final rule modifies the regulations to require the Material 
Balance Report and the Physical Inventory Listing Report at the time of 
a physical inventory, except for Category I licensees. The final rule 
will require the reports to be completed within 60 days of the 
beginning of the physical inventory for independent spent fuel storage 
installations, reactors, and Category II and III facilities. This 
modification does not affect licensees reporting under part 75. Because 
most licensees conduct annual inventories, the reporting burden will be 
reduced. Reconciliation once a year instead of twice a year does not 
appear to be a problem for most licensees because the number of 
transactions is such that reconciliation of records would be 
manageable. In the case of the gaseous diffusion plants (GDPs) and 
their large number of transactions, reconciliation could be more 
difficult. This change does not preclude the GDPs from continuing to 
request monthly summaries from the NMMSS and reconciling its records 
with the NMMSS on a bimonthly basis, which is the current practice. One 
Material Balance Report and Physical Inventory Listing Report per year 
at the time of the physical inventory still provides for adequate 
safeguards for Category III facilities. In addition to reducing the 
regulatory burden on a licensee, the change will enhance the efficiency 
of the NMMSS.
    Licensees are currently required to submit the semiannual Material 
Balance Reports and Physical Inventory Listing Reports within 30 days 
of March 31 and September 30 of each year. The preestablished timing of 
the submittals has two drawbacks. Specifically, the reports rarely 
coincide with a physical inventory, and the NMMSS contractor receives 
all of the reports for a given period simultaneously. The data from a 
physical inventory is significantly more meaningful than the book 
values reported during the interim periods. Staggering the submittals 
should benefit the NMMSS contractor, as not all licensees conduct 
inventories at the same time. Requirements for the NMMSS contractor 
would likely be spread more evenly throughout the year. By modifying 
the requirement to stipulate that the Material Balance Report and 
Physical Inventory Listing Report shall be submitted at the time of the 
physical inventory, these problems could be alleviated, and the data 
from the reports would be more meaningful.
    Another consideration is whether there would be an adverse impact 
on meeting IAEA safeguards requirements. Under the terms of the US/IAEA 
Safeguards Agreement and Sec.  75.35, only one Material Balance Report 
and Physical Inventory Listing Report is required per year. 
Consequently, there would be no adverse impact.
    As the final rule will tie submittal of the reports to the physical 
inventory, the majority of licensees will only need to submit the 
reports once a year instead of twice a year. This will result in 
reducing the industry burden for preparing and filing the Material 
Balance Report and the Physical Inventory Listing Reports by about 
half. The Material Balance Reports are filed using DOE/NRC form 742. 
The burden for preparation and submission of each DOE/NRC form 742 is 
estimated to be 45 minutes. There are currently about 200 licensees who 
submit two forms per year. With the submittal of only one report per 
year for 198 licensees, the burden is reduced by about 149 hours. The 
Physical Inventory Listing Reports are filed on DOE/NRC form 742C. The 
burden for preparing this form is 6 hours. With about 178 licensees 
submitting the form annually, the total burden reduction is 1068 hours 
per year. Because some licensees are also required to submit DOE/NRC 
form 742 to cover foreign origin source material, the number of 
licensees required to submit NRC form 742 is higher than the number 
submitting DOE/NRC form 742C.
    The burden on the NRC staff will also be reduced because there will 
be fewer reports to review. NRC review time is approximately 5 minutes 
per report. With a reduction of 376 reports per year, NRC staff would 
save about 31 hours per year. In addition, the NRC staff receives five 
to eight requests per year from licensees who are asking for more time 
to file the reports. With the additional time being provided for filing 
the reports, the NRC staff does not expect to receive any requests in 
the future. The applicant will save the effort necessary in preparing 
the request, and the staff will save time in reviewing and approving 
the request.
    The rulemaking will also result in the consolidation of the MC&A 
requirements in part 74 and adoption of more risk-informed regulations 
for Category ll facilities. These modifications will enhance the 
regulatory process by providing any future Category II licensees a 
better understanding of the procedures and requirements for MC&A. The 
principal cost for this action would be the modest expenditure of NRC 
staff resources to issue this rulemaking. However, there are no 
currently active Category II licensees that would benefit from the 
revised regulations for Category II facilities. Another advantage is 
that domestic MC&A requirements would be consolidated and would provide 
a graded, risk-informed approach to MC&A regulation. In addition, the 
existing typographical errors, outdated terminology, and old 
implementation dates would be corrected.

Presentation of Results

    The recommended action is to adopt the first option because it will 
reduce the burden on licensees in preparing and filing their Material 
Balance Reports and Physical Inventory Listing Reports. The process 
will become more efficient, and the industry burden of producing the 
reports will be reduced by approximately 1,217 staff-hours. In addition 
to reducing unnecessary regulatory burden on licensees, the changes 
will enhance the operational efficiency of the NMMSS contractor by 
spreading the report submittals evenly throughout the year. This change 
will not preclude the gaseous diffusion plants with their large number 
of transactions from continuing to request monthly summaries from the 
NMMSS to reconcile their records. The final rule will also consolidate 
the MC&A requirements in part 74 and adopt more risk-informed 
regulations for Category II facilities. These modifications should 
enhance the regulatory process by providing any future Category II 
licensee a better understanding of the procedures and requirements for 
MC&A. The principal cost for this action would be the modest 
expenditure of NRC staff resources to issue this rulemaking. The total 
cost of this rulemaking to the NRC is estimated at 1.2 FTE. The total 
savings to the industry is about 1,217 hours per year. The action is 
considered to be cost beneficial to licensees and will improve the 
operational efficiency of the NMMSS contractor. Adequate safeguards 
would be maintained. Consequently, the Commission believes public 
confidence would not be adversely affected by this rulemaking.

Decision Rationale

    Based on the discussion of the benefits and impacts of the 
alternatives, the NRC concludes that the requirements of the final rule 
are commensurate with the NRC's responsibilities for public health and 
safety and the common defense and security. This rulemaking will save 
both NRC staff and licensee resources. No other available alternative 
is believed to be as satisfactory. Thus, this action is recommended.

[[Page 78141]]

Regulatory Flexibility Certification

    In accordance with the Regulatory Flexibility Act of 1980, (5 
U.S.C. 605(b)), the Commission certifies that this rule does not have a 
significant economic impact on a substantial number of small entities. 
The majority of companies that own these plants do not fall within the 
scope of the definition of ``small entities'' set forth in the 
Regulatory Flexibility Act or the size standards adopted by the NRC (10 
CFR 2.810).

Backfit Analysis

    The NRC has determined that the backfit rule (Sec. Sec.  50.109, 
70.76, 72.62, or 76.76) does not apply to this final rule because these 
amendments do not involve any provisions that would impose backfits as 
defined in the backfit rule. Therefore, a backfit analysis is not 
required.

Small Business Regulatory Enforcement Fairness Act

    In accordance with the Small Business Regulatory Enforcement 
Fairness Act of 1996, the NRC has determined that this action is not a 
major rule and has verified this determination with the Office of 
Information and Regulatory Affairs of OMB.

List of Subjects

10 CFR Part 51

    Administrative practice and procedure, Environmental impact 
statement, Nuclear materials, Nuclear power plants and reactors, 
Reporting and recordkeeping requirements.

10 CFR Part 61

    Criminal penalties, Low-level waste, Nuclear materials, Reporting 
and recordkeeping requirements, Waste treatment and disposal.

10 CFR Part 70

    Criminal penalties, Hazardous materials transportation, Material 
control and accounting, Nuclear materials, Packaging and containers, 
Radiation protection, Reporting and recordkeeping requirements, 
Scientific equipment, Security measures, Special nuclear material.

10 CFR Part 72

    Administrative practice and procedures, Criminal penalties, 
Manpower training programs, Nuclear materials, Occupational safety and 
health, Penalties, Radiationprotection, Reporting and recordkeeping 
requirements, Security measures, Spent fuel, Whistleblowing.

10 CFR Part 73

    Criminal penalties, Export, Hazardous materials transportation, 
Import, Nuclear materials, Nuclear power plants and reactors, Reporting 
and recordkeeping requirements, Security measures.

10 CFR Part 74

    Accounting, Criminal penalties, Hazardous materials transportation, 
Material control and accounting, Nuclear materials, Packaging and 
containers, Radiation protection, Reporting and recordkeeping 
requirements, Scientific equipment, Special nuclear material.

10 CFR Part 75

    Criminal penalties, Intergovernmental relations, Nuclear materials, 
Nuclear power plants and reactors, Reporting and recordkeeping 
requirements, Security measures.

10 CFR Part 76

    Certification, Criminal penalties, Radiation protection, Reporting 
and recordkeeping requirements, Security measures, Special nuclear 
material, Uranium enrichment by gaseous diffusion.

10 CFR Part 150

    Criminal penalties, Hazardous materials transportation, 
Intergovernmental relations, Nuclear materials, Reporting and 
recordkeeping requirements, Security measures, Source material, Special 
nuclear material.

    For the reasons set out in the preamble and under the authority of 
the Atomic Energy Act of 1954, as amended, the Energy Reorganization 
Act of 1974, as amended, and 5 U.S.C. 552 and 553, the NRC is adopting 
the following amendments to 10 CFR parts 51, 61, 70, 72, 73, 74, 75, 
76, and 150.

PART 51--ENVIRONMENTAL PROTECTION REGULATIONS FOR DOMESTIC 
LICENSING AND RELATED REGULATORY FUNCTIONS

    1. The authority citation for part 51 continues to read as follows:

    Authority: Sec. 161, 68 Stat. 948, as amended, sec. 1701, 106 
Stat. 2951, 2952, 2953 (42 U.S.C. 2201, 2297f); secs. 201, as 
amended, 202, 88 Stat. 1242, as amended, 1244 (42 U.S.C. 5841, 
5842). Subpart A also issued under National Environmental Policy Act 
of 1969, secs. 102, 104, 105, 83 Stat. 853-854, as amended (42 
U.S.C. 4332, 4334, 4335); and Pub. L. 95-604, title II, 92 Stat. 
3033-3041; and sec. 193, Pub. L. 101-575, 104 Stat. 2835, (42 U.S.C. 
2243). Sections 51.20, 51.30, 51.60, 51.80, and 51.97 also issued 
under secs. 135, 141, Pub. L. 97-425, 96 Stat. 2232, 2241, and sec. 
148, Pub. L. 100-203, 101 Stat. 1330-223 (42 U.S.C. 10155, 10161, 
10168). Section 51.22 also issued under sec. 274, 73 Stat. 688, as 
amended by 92 Stat. 3036-3038 (42 U.S.C. 2021) and under Nuclear 
Waste Policy Act of 1982, sec. 121, 96 Stat. 2228 (42 U.S.C. 10141). 
Sections 51.43, 51.67, and 51.109 also under Nuclear Waste Policy 
Act of 1982, sec. 114(f), 96 Stat. 2216, as amended (42 U.S.C. 
10134(f)).

    2. In Sec.  51.22, paragraph (c)(12) is revised to read as follows:


Sec.  51.22  Criterion for categorical exclusion; identification of 
licensing and regulatory actions eligible for categorical exclusion or 
otherwise not requiring environmental review.

* * * * *
    (c) * * *
    (12) Issuance of an amendment to a license implementing any 
requirement of this chapter relating solely to safeguards matters 
(i.e., protection against sabotage or loss or diversion of special 
nuclear material), or issuance of an approval of a safeguards plan (or 
a revision of a safeguards plan) submitted pursuant to a requirement of 
any part of this chapter, provided that the amendment or approval does 
not involve any significant construction impacts. These amendments and 
approvals are confined to:
    (i) Organizational and procedural matters;
    (ii) Modifications to systems used for security and/or materials 
accountability;
    (iii) Administrative changes; and
    (iv) Review and approval of transportation routes pursuant to 10 
CFR 73.37.
* * * * *

PART 61--LICENSING REQUIREMENTS FOR LAND DISPOSAL OF RADIOACTIVE 
WASTE

    3. The authority citation for part 61 continues to read as follows:

    Authority: Secs. 53, 57, 62, 63, 65, 81, 161, 182, 183, 68 Stat. 
930, 932, 933, 935, 948, 953, 954, as amended (42 U.S.C. 2073, 2077, 
2092, 2093, 2095, 2111, 2201, 2232, 2233); secs. 202, 206, 88 Stat. 
1244, 1246 (42 U.S.C. 5842, 5846); secs. 10 and 14, Pub. L. 95-601, 
92 Stat. 2951 (42 U.S.C. 2021a and 5851) and Pub. L. 102-486, sec. 
2902, 106 Stat. 3123 (42 U.S.C. 5851).

    4. In Sec.  61.80, paragraph (g) is revised to read as follows:


Sec.  61.80  Maintenance of records, reports, and transfers.

* * * * *
    (g) Each licensee shall comply with the safeguards reporting 
requirements of Sec. Sec.  30.55, 40.64, 74.13, and 74.15 of this 
chapter if the quantities or activities of materials received or 
transferred exceed

[[Page 78142]]

the limits of these sections. Inventory reports required by these 
sections are not required for materials after disposal.
* * * * *

PART 70--DOMESTIC LICENSING OF SPECIAL NUCLEAR MATERIAL

    5. The authority citation for part 70 continues to read as follows:

    Authority: Secs. 51, 53, 161, 182, 183, 68 Stat. 929, 930, 948, 
953, 954, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 
2071, 2073, 2201, 2232, 2233, 2282, 2297f); secs. 201, as amended, 
202, 204, 206, 88 Stat. 1242, as amended, 1244, 1245, 1246 (42 
U.S.C. 5841, 5842, 5845, 5846). Sec. 193, 104 Stat. 2835 as amended 
by Pub. L. 104-134, 110 Stat. 1321, 1321-349 (42 U.S.C. 2243).
    Sections 70.1(c) and 70.20a(b) also issued under secs. 135, 141, 
Pub. L. 97-425, 96 Stat. 2232, 2241 (42 U.S.C. 10155, 10161). Section 
70.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 2951 (42 
U.S.C. 5851). Section 70.21(g) also issued under sec. 122, 68 Stat. 939 
(42 U.S.C. 2152). Section 70.31 also issued under sec. 57d, Pub. L. 93-
377, 88 Stat. 475 (42 U.S.C. 2077). Sections 70.36 and 70.44 also 
issued under sec. 184, 68 Stat. 954, as amended (42 U.S.C. 2234). 
Section 70.81 also issued under secs. 186, 187, 68 Stat. 955 (42 U.S.C. 
2236, 2237). Section 70.82 also issued under sec. 108, 68 Stat. 939, as 
amended (42 U.S.C. 2138).


    6. In Sec.  70.8, paragraphs (b) and (c) are revised to read as 
follows:


Sec.  70.8  Information collection requirements: OMB approval.

* * * * *
    (b) The approved information collection requirements contained in 
this part appear in Sec. Sec.  70.9, 70.17, 70.19, 70.20a, 70.20b, 
70.21, 70.22, 70.24, 70.25, 70.32, 70.33, 70.34, 70.38, 70.39, 70.42, 
70.50, 70.51, 70.52, 70.59, 70.61, 70.62, 70.64, 70.65, 70.72, 70.73, 
70.74, and Appendix A.
    (c) This part contains information collection requirements in 
addition to those approved under the control number specified in 
paragraph (a) of this section. These information collection 
requirements and the control numbers under which they are approved are 
as follows:
    (1) In Sec.  70.21, form N-71 is approved under control number 
3150-0056.
    (2) In Sec.  70.38, NRC form 314 is approved under control number 
3150-0028.

    7. In Sec.  70.19, the introductory text of paragraph (c) is 
revised to read as follows:


Sec.  70.19  General license for calibration or reference sources.

* * * * *
    (c) The general license in paragraph (a) of this section is subject 
to the provisions of Sec. Sec.  70.32, 70.50, 70.55, 70.56, 70.61, 
70.62, and 70.71; the provisions of Sec. Sec.  74.11, and 74.19 of this 
chapter; and to the provisions of parts 19, 20, and 21 of this chapter. 
In addition, persons who receive title to, own, acquire, deliver, 
receive, possess, use or transfer one or more calibration or reference 
sources pursuant to this general license:
* * * * *
    8. In Sec.  70.20a, paragraph (a) is revised to read as follows:


Sec.  70.20a  General license to possess special nuclear material for 
transport.

    (a) A general license is hereby issued to any person to possess 
formula quantities of strategic special nuclear material of the types 
and quantities subject to the requirements of Sec. Sec.  73.20, 73.25, 
73.26, and 73.27 of this chapter, and irradiated reactor fuel 
containing material of the types and quantities subject to the 
requirements of Sec.  73.37 of this chapter, in the regular course of 
carriage for another or storage incident thereto. Carriers generally 
licensed under Sec.  70.20b are exempt from the requirements of this 
section. Carriers of irradiated reactor fuel for the United States 
Department of Energy are also exempt from the requirements of this 
section. The general license is subject to the applicable provisions of 
Sec. Sec.  70.7(a) through (e), 70.32(a) and (b), and Sec. Sec.  70.42, 
70.52, 70.55, 70.61, 70.62, 70.71, and 10 CFR 74.11.
* * * * *

    9. In Sec.  70.22, paragraph (b) is revised to read as follows:


Sec.  70.22  Contents of applications.

* * * * *
    (b) Each application for a license to possess special nuclear 
material, to possess equipment capable of enriching uranium, to operate 
an uranium enrichment facility, to possess and use at any one time and 
location special nuclear material in a quantity exceeding one effective 
kilogram, except for applications for use as sealed sources and for 
those uses involved in the operation of a nuclear reactor licensed 
pursuant to part 50 of this chapter and those involved in a waste 
disposal operation, must contain a full description of the applicant's 
program for control and accounting of such special nuclear material or 
enrichment equipment that will be in the applicant's possession under 
license to show how compliance with the requirements of Sec. Sec.  
74.31, 74.33, 74.41, or 74.51 of this chapter, as applicable, will be 
accomplished.
* * * * *

    10. In Sec.  70.23, paragraph (a)(6) is revised to read as follows:


Sec.  70.23  Requirements for the approval of applications.

    (a) * * *
    (6) Where the applicant is required to submit a summary description 
of the fundamental material controls provided in his procedures for the 
control of and accounting for special nuclear material pursuant to 
Sec.  70.22 (b), the applicant's proposed controls are adequate;
* * * * *

    11. In Sec.  70.32, paragraphs (c)(1)(i), (ii), and (iii) are 
revised to read as follows:


Sec.  70.32  Conditions of licenses.

* * * * *
    (c) * * *
    (1) * * *
    (i) The program for control and accounting of uranium source 
material at an uranium enrichment facility and special nuclear material 
at all applicable facilities as implemented pursuant to Sec.  70.22(b), 
or Sec. Sec.  74.31(b), 74.33(b), 74.41(b), or 74.51(c) of this 
chapter, as appropriate;
    (ii) The measurement control program for uranium source material at 
an uranium enrichment facility and for special nuclear material at all 
applicable facilities as implemented pursuant to Sec. Sec.  74.31(b), 
74.33(b), 74.45(c), or 74.59(e) of this chapter, as appropriate; and
    (iii) Other material control procedures as the Commission 
determines to be essential for the safeguarding of uranium source 
material at an uranium enrichment facility or of special nuclear 
material and providing that the licensee shall make no change that 
would decrease the effectiveness of the material control and accounting 
program implemented pursuant to Sec.  70.22(b), or Sec. Sec.  74.31(b), 
74.33(b), 74.41(b), or 74.51(c) of this chapter, and the measurement 
control program implemented pursuant to Sec. Sec.  74.31(b), 74.33(b), 
74.41(b), or 74.59(e) of this chapter without the prior approval of the 
Commission. A licensee desiring to make changes that would decrease the 
effectiveness of its material control and accounting program or its 
measurement control program shall submit an application for amendment 
to its license pursuant to Sec.  70.34.
* * * * *

    12. Section 70.51 is revised to read as follows:

[[Page 78143]]

Sec.  70.51  Records requirements.

    (a) Before license termination, licensees shall forward the 
following records to the appropriate NRC Regional Office:
    (1) Records of disposal of licensed material made under 10 CFR 
20.2002 (including burials authorized before January 28, 1981\1\), 
20.2003, 20.2004, 20.2005;
    (2) Records required by 10 CFR 20.2103(b)(4); and
    (3) Records required by Sec.  70.25(g).
    (b) If licensed activities are transferred or assigned in 
accordance with Sec.  70.32(a)(3), the licensee shall transfer the 
following records to the new licensee and the new licensee will be 
responsible for maintaining these records until the license is 
terminated:
    (1) Records of disposal of licensed material made under 10 CFR 
20.2002 (including burials authorized before January 28, 1981\1\), 
20.2003, 20.2004, 20.2005;
---------------------------------------------------------------------------

    \1\ A previous Sec.  20.304 permitted burial of small quantities 
of licensed materials in soil before January 28, 1981, without 
specific Commission authorization. See Sec.  20.304 contained in the 
10 CFR, parts 0 to 199, edition revised as of January 1, 1981.
---------------------------------------------------------------------------

    (2) Records required by 10 CFR 20.2103(b)(4); and
    (3) Records required by Sec.  70.25(g).
    (c)(1) Records which must be maintained pursuant to this part may 
be the original or a reproduced copy, or microform if the reproduced 
copy or microform is duly authenticated by authorized personnel, and 
the microform is capable of producing a clear and legible copy after 
storage for the period specified by Commission regulations. The record 
may also be stored in electronic media with the capability for 
producing legible, accurate, and complete records during the required 
retention period. Records such as letters, drawings, and 
specifications, must include all pertinent information such as stamps, 
initials, and signatures. The licensee shall maintain adequate 
safeguards against tampering with and loss of records.
    (2) If there is a conflict between the Commission's regulations in 
this part, license condition, or other written Commission approval or 
authorization pertaining to the retention period for the same type of 
record, the retention period specified in the regulations in this part 
for these records shall apply unless the Commission, pursuant to Sec.  
70.14, has granted a specific exemption from the record retention 
requirements specified in the regulations in this part.

    13. Section 70.52 is revised to read as follows:


Sec.  70.52  Reports of accidental criticality.

    (a) Each licensee shall notify the NRC Operations Center \1\ within 
one hour after discovery of any case of accidental criticality.
---------------------------------------------------------------------------

    \1\ Commercial telephone number of the NRC Operations Center is 
(301) 816-5100.
---------------------------------------------------------------------------

    (b) This notification must be made to the NRC Operations Center via 
the Emergency Notification System if the licensee is party to that 
system. If the Emergency Notification System is inoperative or 
unavailable, the licensee shall make the required notification via 
commercial telephonic service or other dedicated telephonic system or 
any other method that will ensure that a report is received by the NRC 
Operations Center within one hour.


Sec.  70.53  [Removed]

    14. Section 70.53 is removed.


Sec.  70.54  [Removed]

    15. Section 70.54 is removed.


Sec.  70.57  [Removed]

    16. Section 70.57 is removed.


Sec.  70.58  [Removed]

    17. Section 70.58 is removed.

PART 72--LICENSING REQUIREMENTS FOR THE INDEPENDENT STORAGE OF 
SPENT NUCLEAR FUEL AND HIGH-LEVEL RADIOACTIVE WASTE

    18. The authority citation for part 72 continues to read as 
follows:

    Authority: Secs. 51, 53, 57, 62, 63, 65, 69, 81, 161, 182, 183, 
184, 186, 187, 189, 68 Stat. 929, 930, 932, 933, 934, 935, 948, 953, 
954, 955, as amended, sec. 234, 83 Stat. 444, as amended (42 U.S.C. 
2071, 2073, 2077, 2092, 2093, 2095, 2099, 2111, 2201, 2232, 2233, 
2234, 2236, 2237, 2238, 2282); sec. 274, Pub. L. 86-373, 73 Stat. 
688, as amended (42 U.S.C. 2021); sec. 201, as amended, 202, 206, 88 
Stat. 1242, as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846); 
Pub. L. 95-601, sec. 10, 92 Stat. 2951 as amended by Pub. L. 102--
486, sec. 7902, 106 Stat. 3123 (42 U.S.C. 5851); sec. 102, Pub. L. 
91-190, 83 Stat. 853 (42 U.S.C. 4332); secs. 131, 132, 133, 135, 
137, 141, Pub. L. 97-425, 96 Stat. 2229, 2230, 2232, 2241, sec. 148, 
Pub. L. 100-203, 101 Stat. 1330-235 (42 U.S.C. 10151, 10152, 10153, 
10155, 10157, 10161, 10168).
    Section 72.44(g) also issued under secs. 142(b) and 148(c), (d), 
Pub. L. 100-203, 101 Stat. 1330-232, 1330-236 (42 U.S.C. 10162(b), 
10168(c),(d)). Section 72.46 also issued under sec. 189, 68 Stat. 
955 (42 U.S.C. 2239); sec. 134, Pub. L. 97-425, 96 Stat. 2230 (42 
U.S.C. 10154). Section 72.96(d) also issued under sec. 145(g), Pub. 
L. 100-203, 101 Stat. 1330-235 (42 U.S.C. 10165(g)). Subpart J also 
issued under secs. 2(2), 2(15), 2(19), 117(a), 141(h), Pub. L. 97-
425, 96 Stat. 2202, 2203, 2204, 2222, 2244, (42 U.S.C. 10101, 
10137(a), 10161(h)). Subparts K and L are also issued under sec. 
133, 98 Stat. 2230 (42 U.S.C. 10153) and sec. 218(a), 96 Stat. 2252 
(42 U.S.C. 10198).


    19. In Sec.  72.76, paragraph (a) is revised to read as follows:


Sec.  72.76  Material status reports.

    (a) Except as provided in paragraph (b) of this section, each 
licensee shall complete in computer-readable format and submit to the 
Commission a Material Balance Report and a Physical Inventory Listing 
Report in accordance with instructions (NUREG/BR-0007 and NMMSS Report 
D--24 ``Personal Computer Data Input for NRC Licensees''). Copies of 
these instructions may be obtained from the U.S. Nuclear Regulatory 
Commission, Division of Nuclear Security, Washington, DC 20555-0001. 
These reports provide information concerning the special nuclear 
material possessed, received, transferred, disposed of, or lost by the 
licensee. Each report must be submitted within 60 days of the beginning 
of the physical inventory required by Sec.  72.72(b). The Commission 
may, when good cause is shown, permit a licensee to submit Material 
Balance Reports and Physical Inventory Listing Reports at other times. 
The Commission's copy of this report must be submitted to the address 
specified in the instructions. These prescribed computer-readable forms 
replace the DOE/NRC forms 742 and 742C which have been previously 
submitted in paper form.
* * * * *

PART 73--PHYSICAL PROTECTION OF PLANTS AND MATERIALS

    20. The authority citation for part 73 continues to read as 
follows:

    Authority: Secs. 53, 161, 68 Stat. 930, 948, as amended, sec. 
147, 94 Stat. 780 (42 U.S.C. 2073, 2167, 2201); sec. 201, as 
amended, 204, 88 Stat. 1242, as amended, 1245, sec. 1701, 106 Stat. 
2951, 2952, 2953 (42 U.S.C. 5841, 5844, 2297f).
    Section 73.1 also issued under secs. 135, 141, Pub. L. 97-425, 
96 Stat. 2232, 2241 (42 U.S.C. 10155, 10161). Section 73.37(f) also 
issued under sec. 301, Pub. L. 96--295, 94 Stat. 789 (42 U.S.C. 5841 
note). Section 73.57 is issued under sec. 606, Pub. L. 99--399, 100 
Stat. 876 (42 U.S.C. 2169).


    21. In Sec.  73.67, paragraph (e)(2)(ii) is revised to read as 
follows:

[[Page 78144]]

Sec.  73.67  Licensee fixed site and in-transit requirements for the 
physical protection of special nuclear material of moderate and low 
strategic significance.

* * * * *
    (e) * * *
    (2) * * *
    (ii) Notify the shipper of receipt of the material as required in 
Sec.  74.15 of this chapter, and
* * * * *

PART 74--MATERIAL CONTROL AND ACCOUNTING OF SPECIAL NUCLEAR 
MATERIAL

    22. The authority citation for part 74 continues to read as 
follows:

    Authority: Secs. 53, 57, 161, 182, 183, 68 Stat. 930, 932, 948, 
953, 954, as amended, sec. 234, 83 Stat. 444, as amended, sec. 1701, 
106 Stat. 2951, 2952, 2953 (42 U.S.C. 2073, 2077, 2201, 2232, 2233, 
2282, 2297f); secs. 201, as amended, 202, 206, 88 Stat. 1242, as 
amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846).

    23. In Sec.  74.1, paragraph (a) is revised to read as follows:


Sec.  74.1  Purpose.

    (a) This part has been established to contain the requirements for 
the control and accounting of special nuclear material at fixed sites 
and for documenting the transfer of special nuclear material. General 
reporting requirements as well as specific requirements for certain 
licensees possessing special nuclear material of low strategic 
significance, special nuclear material of moderate strategic 
significance, and formula quantities of strategic special nuclear 
material are included. Requirements for the control and accounting of 
source material at enrichment facilities are also included.
* * * * *

    24. Section 74.2 is revised to read as follows:


Sec.  74.2  Scope.

    (a) The general reporting and recordkeeping requirements of subpart 
B of this part apply to each person licensed pursuant to this chapter 
who possess special nuclear material in a quantity greater than 350 
grams of contained uranium-235, uranium-233, or plutonium, or any 
combination thereof; or who transfers or receives a quantity of special 
nuclear material of 1 gram or more of contained uranium-235, uranium-
233, or plutonium. The general reporting and recordkeeping requirements 
of subpart B of this part do not apply to licensees whose MC&A 
reporting and recordkeeping requirements are covered by Sec. Sec.  
72.72, 72.76, and 72.78 of this chapter.
    (b) In addition, specific control and accounting requirements are 
included in subparts C, D, and E for certain licensees who:
    (1) Possess and use formula quantities of strategic special nuclear 
material;
    (2) Possess and use special nuclear material of moderate strategic 
significance;
    (3) Possess and use special nuclear material of low strategic 
significance; or
    (4) Possess uranium source material and equipment capable of 
producing enriched uranium.
    (c) As provided in part 76 of this chapter, the regulations of this 
part establish procedures and criteria for material control and 
accounting for the issuance of a certificate of compliance or the 
approval of a compliance plan.

    25. In Sec.  74.4, definition for ``Removals'' is removed; the 
definitions of ``Category IA material'' and ``Inventory difference 
(ID)'' are revised; and the definitions for ``Beginning inventory 
(BI),'' ``Plant,'' ``Removals from inventory,'' and ``Removals of 
material from process'' are added in alphabetical order to read as 
follows:


Sec.  74.4  Definitions.

* * * * *
    Beginning inventory (BI) means the book inventory quantity at the 
beginning of an inventory period, and is the reconciled physical 
inventory entered into the books as an adjusted inventory at the 
completion of the prior inventory period.
* * * * *
    Category IA material means SSNM directly useable in the manufacture 
of a nuclear explosive device, except if:
    (1) The dimensions are large enough (at least two meters in one 
dimension, greater than one meter in each of two dimensions, or greater 
than 25cm in each of three dimensions) to preclude hiding the item on 
an individual;
    (2) The total weight of an encapsulated item of SSNM is such that 
it cannot be carried inconspicuously by one person (i.e., at least 50 
kilograms gross weight); or
    (3) The quantity of SSNM (less than 0.05 formula kilograms) in each 
container requires protracted diversions to accumulate five formula 
kilograms.
* * * * *
    Inventory difference (ID) means the arithmetic difference obtained 
by subtracting the quantity of SNM tabulated from a physical inventory 
from the book inventory quantity. Book inventory quantity is equivalent 
to the beginning inventory (BI) plus additions to inventory (A) minus 
removals from inventory (R), while the physical inventory quantity is 
the ending inventory (EI) for the material balance period in question 
(as physically determined). Thus mathematically, ID = (BI + A-R) -EI or 
ID = BI + A-R-EI
* * * * *
    Plant means a set of processes or operations (on the same site, but 
not necessarily all in the same building) coordinated into a single 
manufacturing, R&D, or testing effort. A scrap recovery operation, or 
an analytical laboratory, serving both onsite and offsite customers (or 
more than one onsite manufacturing effort) should be treated as a 
separate plant.
* * * * *
    Removals from inventory means measured quantities of special 
nuclear material contained in:
    (1) Shipments;
    (2) Waste materials transferred to an onsite holding account via a 
DOE/NRC Form 741 transaction;
    (3) Measured discards transported offsite; and
    (4) Effluents released to the environment.
    Removals of material from process (or removals from process) means 
measured quantities of special nuclear material contained in:
    (1) Effluents released to the environment;
    (2) Previously unencapsulated materials that have been encapsulated 
as sealed sources;
    (3) Waste materials that will not be subject to further onsite 
processing and which are under tamper-safing;
    (4) Ultimate product placed under tamper-safing; and
    (5) Any materials (not previously designated as removals from 
process) shipped offsite.
* * * * *

    26. In Sec.  74.8, paragraph (b) is revised to read as follows:


Sec.  74.8  Information collection requirements: OMB approval.

* * * * *
    (b) The approved information collection requirements contained in 
this part appear in Sec. Sec.  74.11, 74.13, 74.15, 74.17, 74.19, 
74.31, 74.33, 74.41, 74.43, 74.45, 74.51, 74.57, and 74.59.
* * * * *

    27. The heading of subpart B is revised to read as follows:

Subpart B--General Reporting and Recordkeeping Requirements

    28. Section 74.13 is revised to read as follows:

[[Page 78145]]

Sec.  74.13  Material status reports.

    (a) Each licensee, including nuclear reactor licensees as defined 
in Sec. Sec.  50.21 and 50.22 of this chapter, authorized to possess at 
any one time and location special nuclear material in a quantity 
totaling more than 350 grams of contained uranium-235, uranium-233, or 
plutonium, or any combination thereof, shall complete and submit, in 
computer-readable format Material Balance Reports concerning special 
nuclear material that the licensee has received, produced, possessed, 
transferred, consumed, disposed of, or lost. This prescribed computer-
readable report replaces the DOE/NRC form 742 which has been previously 
submitted in paper form. The Physical Inventory Listing Report must be 
submitted with each Material Balance Report. This prescribed computer-
readable report replaces the DOE/NRC form 742C which has been 
previously submitted in paper form. Each licensee shall prepare and 
submit the reports described in this paragraph in accordance with 
instructions (NUREG/BR-0007 and NMMSS Report D-24 ``Personal Computer 
Data Input for NRC Licensees''). Copies of these instructions may be 
obtained from the U.S. Nuclear Regulatory Commission, Division of 
Nuclear Security, Washington, DC 20555-0001. Each licensee subject to 
the requirements of Sec.  74.51 shall compile a report as of March 31 
and September 30 of each year and file it within 30 days after the end 
of the period covered by the report. All other licensees subject to 
this requirement shall submit a report within 60 calendar days of the 
beginning of the physical inventory required by Sec. Sec.  74.19(c), 
74.31(c)(5), 74.33(c)(4), or 74.43(c)(6). The Commission may permit a 
licensee to submit the reports at other times for good cause.
    (b) Any licensee who is required to submit routine Material Status 
Reports pursuant to Sec.  75.35 of this chapter (pertaining to 
implementation of the US/IAEA Safeguards Agreement) shall prepare and 
submit these reports only as provided in that section (instead of as 
provided in paragraph (a) of this section).

    29. Section 74.17 is revised to read as follows:


Sec.  74.17  Special nuclear material physical inventory summary 
report.

    (a) Each licensee subject to the requirements of Sec. Sec.  74.31 
or 74.33 of this part shall submit a completed Special Nuclear Material 
Physical Inventory Summary Report on NRC Form 327 not later than 60 
calendar days from the start of each physical inventory required by 
Sec. Sec.  74.31(c)(5) or 74.33(c)(4). The licensee shall report the 
physical inventory results by plant and total facility to the Director, 
Office of Nuclear Material Safety and Safeguards, U.S. Nuclear 
Regulatory Commission, Washington, DC 20555-0001.
    (b) Each licensee subject to the requirements of Sec.  74.41(a) of 
this part shall submit a completed Special Nuclear Material Physical 
Inventory Summary Report on NRC form 327 not later than 60 calendar 
days from the start of each physical inventory required by Sec.  
74.43(c)(7). The licensee shall report the physical inventory results 
by plant and total facility to the Director, Office of Nuclear Material 
Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington, 
DC 20555-0001.
    (c) Each licensee subject to the requirements of Sec.  74.51 shall 
submit a completed Special Nuclear Material Physical Inventory Summary 
Report on NRC form 327 not later than 45 calendar days from the start 
of each physical inventory required by Sec.  74.59(f). The licensee 
shall report the physical inventory results by plant and total facility 
to the Director, Office of Nuclear Material Safety and Safeguards, U.S. 
Nuclear Regulatory Commission, Washington, DC 20555-0001.

    30. A new Sec.  74.19 is added to read as follows:


Sec.  74.19  Recordkeeping

    (a) Licensees subject to the recordkeeping requirements of 
Sec. Sec.  74.31, 74.33, 74.43, or 74.59 of this part are exempt from 
the requirements of paragraphs (a)(1) through (4) of this section. 
Otherwise:
    (1) Each licensee shall keep records showing the receipt, inventory 
(including location and unique identity), acquisition, transfer, and 
disposal of all special nuclear material in its possession regardless 
of its origin or method of acquisition.
    (2) Each record relating to material control or material accounting 
that is required by the regulations in this chapter or by license 
condition must be maintained and retained for the period specified by 
the appropriate regulation or license condition. If a retention period 
is not otherwise specified by regulation or license condition, the 
licensee shall retain the record until the Commission terminates the 
license that authorizes the activity that is subject to the 
recordkeeping requirement.
    (3) Each record of receipt, acquisition, or physical inventory of 
special nuclear material that must be maintained pursuant to paragraph 
(a)(1) of this section must be retained as long as the licensee retains 
possession of the material and for 3 years following transfer or 
disposal of the material.
    (4) Each record of transfer of special nuclear material to other 
persons must be retained by the licensee who transferred the material 
until the Commission terminates the license authorizing the licensee's 
possession of the material.
    (b) Each licensee that is authorized to possess special nuclear 
material in a quantity exceeding one effective kilogram at any one time 
shall establish, maintain, and follow written material control and 
accounting procedures that are sufficient to enable the licensee to 
account for the special nuclear material in its possession under 
license. The licensee shall retain these procedures until the 
Commission terminates the license that authorizes possession of the 
material and retain any superseded portion of the procedures for 3 
years after the portion is superseded.
    (c) Other than licensees subject to Sec. Sec.  74.31, 74.33, 74.41, 
or 74.51, each licensee who is authorized to possess special nuclear 
material, at any one time and site location, in a quantity greater than 
350 grams of contained uranium-235, uranium-233, or plutonium, or any 
combination thereof, shall conduct a physical inventory of all special 
nuclear material in its possession under license at intervals not to 
exceed 12 months. The results of these physical inventories need not be 
reported to the Commission, but the licensee shall retain the records 
associated with each physical inventory until the Commission terminates 
the license that authorized the possession of special nuclear material.
    (d) Records that must be maintained pursuant to this part may be 
the original or a reproduced copy or a microform if the reproduced copy 
or microform is duly authenticated by authorized personnel and the 
microform is capable of producing a clear and legible copy after 
storage for the period specified by Commission regulations. The record 
may also be stored in electronic media with the capability for 
producing legible, accurate, and complete records during the required 
retention period. Records such as letters, drawings, or specifications 
must include all pertinent information such as stamps, initials, and 
signatures. The licensee shall maintain adequate safeguards against 
tampering with and loss of records.

    31. In Sec.  74.31, paragraphs (b) and (c)(4) are revised as 
follows:


Sec.  74.31  Nuclear material control and accounting for special 
nuclear material of low strategic significance.

* * * * *

[[Page 78146]]

    (b) Implementation: Each applicant for a license, and each licensee 
that, upon application for modification of its license, would become 
newly subject to the performance objectives of paragraph (a) of this 
section, shall submit a fundamental nuclear material control (FNMC) 
plan describing how the requirements of paragraph (c) of this section 
will be met. The FNMC plan shall be implemented when a license is 
issued or modified to authorize the activities being addressed in 
paragraph (a) of this section, or by the date specified in a license 
condition.
    (c) * * *
    (4) In each inventory period, control total material control and 
accounting measurement uncertainty so that twice its standard error is 
less than the greater of 9,000 grams of U-235 or 0.25 percent of the 
active inventory, and assure that any measurement performed under 
contract is controlled so that the licensee can satisfy this 
requirement;
* * * * *

Subpart D--Special Nuclear Material of Moderate Strategic 
Significance

    32. Sections 74.41, 74.43, and 74.45 are added to subpart D to read 
as follows:


Sec.  74.41  Nuclear material control and accounting for special 
nuclear material of moderate strategic significance.

    (a) General performance objectives. Each licensee who is authorized 
to possess special nuclear material (SNM) of moderate strategic 
significance or SNM in a quantity exceeding one effective kilogram of 
strategic special nuclear material in irradiated fuel reprocessing 
operations other than as sealed sources and to use this material at any 
site other than a nuclear reactor licensed pursuant to part 50 of this 
chapter; or as reactor irradiated fuels involved in research, 
development, and evaluation programs in facilities other than 
irradiated fuel reprocessing plants; or an operation involved with 
waste disposal, shall establish, implement, and maintain a Commission-
approved material control and accounting (MC&A) system that will 
achieve the following performance objectives:
    (1) Maintain accurate, current, and reliable information on, and 
confirm, the quantities and locations of SNM in the licensee's 
possession;
    (2) Conduct investigations and resolve any anomalies indicating a 
possible loss of special nuclear material;
    (3) Permit rapid determination of whether an actual loss of a 
significant quantity of SNM has occurred, with significant quantity 
being either:
    (i) More than one formula kilogram of strategic SNM; or
    (ii) 10,000 grams or more of uranium-235 contained in uranium 
enriched up to 20.00 percent.
    (4) Generate information to aid in the investigation and recovery 
of missing SNM in the event of an actual loss.
    (b) Implementation schedule. Each applicant for a license, and each 
licensee that, upon application for modification of its license, would 
become newly subject to the requirements of paragraph (a) of this 
section shall:
    (1) Submit a fundamental nuclear material control (FNMC) plan 
describing how the performance objectives of Sec.  74.41(a) will be 
achieved, and how the system capabilities required by Sec.  74.41(c) 
will be met; and
    (2) Implement the NRC-approved FNMC plan submitted pursuant to 
paragraph (b)(1) of this section upon the Commission's issuance or 
modification of a license or by the date specified in a license 
condition.
    (c) System capabilities. To achieve the performance objectives 
specified in Sec.  74.41(a), the MC&A system must include the 
capabilities described in Sec. Sec.  74.43 and 74.45, and must 
incorporate checks and balances that are sufficient to detect 
falsification of data and reports that could conceal diversion of SNM 
by:
    (1) A single individual, including an employee in any position; or
    (2) Collusion between two individuals, one or both of whom have 
authorized access to SNM.


Sec.  74.43  Internal controls, inventory, and records.

    (a) General. Licensees subject to Sec.  74.41 shall maintain the 
internal control, inventory, and recordkeeping capabilities required in 
paragraphs (b), (c), and (d) of this section.
    (b) Internal controls.
    (1) A management structure shall be established, documented, and 
maintained that assures:
    (i) Clear overall responsibility for material control and 
accounting (MC&A) functions;
    (ii) Independence from production and manufacturing 
responsibilities; and
    (iii) Separation of key responsibilities.
    (2) The overall planning, coordination, and administration of the 
MC&A functions for special nuclear material (SNM) shall be vested in a 
single individual at an organizational level sufficient to assure 
independence of action and objectiveness of decisions.
    (3) The licensee shall provide for the adequate review, approval, 
and use of written MC&A procedures that are identified in the approved 
FNMC plan as being critical to the effectiveness of the described 
system.
    (4) The licensee shall assure that personnel who work in key 
positions where mistakes could degrade the effectiveness of the MC&A 
system are trained to maintain a high level of safeguards awareness and 
are qualified to perform their duties and/or responsibilities.
    (5) The licensee shall establish, document, and maintain an item 
control program that:
    (i) Provides current knowledge of SNM items with respect to 
identity, element and isotope content, and stored location; and
    (ii) Assures that SNM items are stored and handled, or subsequently 
measured, in a manner such that unauthorized removal of 200 grams or 
more of plutonium or uranium-233 or 300 grams or more of uranium-235, 
as one or more whole items and/or as SNM removed from containers, will 
be detected.
    (6) Exempted from the requirements of paragraph (b)(5) of this 
section are items that exist for less than 14 calendar days and 
licensee-identified items each containing less than 200 grams of 
plutonium or uranium-233 or 300 grams or more of uranium-235 up to a 
cumulative total of one formula kilogram of strategic SNM or 17 
kilograms of uranium-235 contained in uranium enriched to 10.00 percent 
or more but less than 20.00 percent in the uranium-235 isotope.
    (7) Conduct and document shipper-receiver comparisons for all SNM 
receipts, both on an individual batch basis and a total shipment basis, 
and ensure that any shipper-receiver difference that is statistically 
significant and exceeds twice the estimated standard deviation of the 
difference estimator and 200 grams of plutonium or uranium-233 or 300 
grams of uranium-235 is investigated and resolved; and
    (8) Perform independent assessments of the total MC&A system, at 
intervals not to exceed 18 months, that assess the performance of the 
system, review its effectiveness, and document management's action on 
prior assessment recommendations and identified deficiencies. These 
assessments must include a review and evaluation of any contractor who 
performs SNM accountability measurements for the licensee.
    (c) Inventory control and physical inventories. The licensee shall:
    (1) Provide unique identification for each item on inventory and 
maintain inventory records showing the identity,

[[Page 78147]]

location, and quantity of SNM for these items;
    (2) Document all transfers of SNM between designated internal 
control areas within the licensee's site;
    (3) Maintain and follow procedures for tamper-safing of containers 
or vaults containing SNM, if tamper-safe seals are to be used for 
assuring the validity of prior measurements, which include control of 
access to, and distribution of, unused seals and to records showing the 
date and time of seal application;
    (4) Maintain and follow procedures for confirming the validity of 
prior measurements associated with unencapsulated and unsealed items on 
ending inventory;
    (5) Maintain and follow physical inventory procedures to assure 
that:
    (i) The quantity of SNM associated with each item on ending 
inventory is a measured value;
    (ii) Each item on ending inventory is listed and identified to 
assure that all items are listed and no item is listed more than once;
    (iii) Cutoff procedures for transfers and processing are 
established so that all quantities are inventoried and none are 
inventoried more than once;
    (iv) Cutoff procedures for records and reports are established so 
that only transfers for the inventory and material balance interval are 
included in the records for the material balance period in question;
    (v) Upon completion of the physical inventory, all book and 
inventory records, for total plant and individual internal control 
areas, are reconciled with and adjusted to the results of the physical 
inventory; and
    (vi) Measurements will be performed for element and isotope content 
on all quantities of SNM not previously measured.
    (6) Conduct physical inventories according to written instructions 
for each physical inventory which:
    (i) Assign inventory duties and responsibilities;
    (ii) Specify the extent to which each internal control area and 
process is to be shut down, cleaned out, and/or remain static;
    (iii) Identify the basis for accepting previously made measurements 
and their limits of error; and
    (iv) Designate measurements to be made for physical inventory 
purposes and the procedures for making these measurements.
    (7) Conduct physical inventories of all possessed SNM for each 
plant at intervals not to exceed 9 calendar months; and
    (8) Within 60 calendar days after the start of each physical 
inventory required by paragraph (c)(7) of this section:
    (i) Calculate, for the material balance period terminated by the 
physical inventory, the inventory difference (ID) and its associated 
standard error of inventory difference (SEID) for both element and 
isotope;
    (ii) Reconcile and adjust the book record of quantity of element 
and isotope content, as appropriate, to the results of the physical 
inventory; and
    (iii) Investigate and report to the Director, Office of Nuclear 
Material Safety and Safeguards, any occurrence of SEID exceeding 0.125 
percent of active inventory, and any occurrence of ID exceeding both 
three times SEID and 200 grams of plutonium or uranium-233 or 300 grams 
of uranium-235 contained in high enriched uranium, or 9000 grams of 
uranium-235 contained in low enriched uranium. The report shall include 
a statement of the probable reasons for the excessive inventory 
difference and the corrective actions taken or planned.
    (d) Recordkeeping. The licensee shall:
    (1) Maintain records of the receipt, shipment, disposal, and 
current inventory associated with all possessed SNM;
    (2) Maintain records of the quantities of SNM added to and removed 
from process;
    (3) Maintain records of all shipper-receiver evaluations associated 
with SNM receipts;
    (4) Retain each record pertaining to receipt and disposal of SNM 
until the Commission terminates the license; and
    (5) Establish records that will demonstrate that the performance 
objectives of Sec.  74.41(a)(1) through (4), the system capabilities of 
paragraphs (b) and (c) of this section and Sec.  74.45(b) and (c) have 
been met, and maintain these records in an auditable form, available 
for inspection, for at least 3 years, unless a longer retention time is 
specified by Sec.  74.19(b), part 75 of this chapter, or by a specific 
license condition.


Sec.  74.45  Measurements and measurement control.

    (a) General. Licensees subject to Sec.  74.41 of this part shall 
establish and maintain the measurement and measurement control 
capabilities required by paragraphs (b) and (c) of this section.
    (b) Measurements. The licensee shall:
    (1) Establish, maintain, and use a program for the measurement of 
all SNM received, produced, transferred between internal control areas, 
on inventory, or shipped, discarded, or otherwise removed from 
inventory, except for:
    (i) Sealed sources that have been determined by other means to 
contain less than 10 grams of uranium-235, uranium-233, or plutonium 
each;
    (ii) Samples received, transferred between internal control areas, 
or on inventory that have been determined by other means to contain 
less than 10 grams of uranium-235, uranium-233, or plutonium each;
    (iii) Receipt of sealed sources, of any quantity, previously 
manufactured and shipped by the licensee and which are returned to the 
licensee, provided the unique identity and encapsulation integrity have 
not been compromised, and the booked receipt quantity equals the 
previously shipped quantity for the involved sealed sources; and
    (iv) Heterogeneous scrap that cannot be accurately measured in its 
as received form, provided this scrap is measured after dissolution 
within 18 months of receipt. The after dissolution measurement must 
include measurement of both the resulting solution and any undissolved 
residues, before any co-mingling with other scrap solutions or 
residues.
    (2) Maintain and follow a program for the development and use of 
written procedures that includes documented review and approval of 
these procedures, and any revisions thereof, before use, for:
    (i) Preparing or acquiring, maintaining, storing, and using 
reference standards;
    (ii) Calibrating measurement systems, performing bulk mass and 
volume measurements, conducting nondestructive assay measurements, 
obtaining samples, and performing laboratory analyses for element 
concentration and isotope abundance; and
    (iii) Recording, reviewing, and reporting measurements.
    (c) Measurement control. To maintain measurement quality and to 
estimate measurement uncertainty values, the licensee shall:
    (1) Assign responsibility for planning, developing, coordinating, 
and administering a measurement control program to an individual who 
has no direct responsibility for performing measurements or for SNM 
processing or handling, and who holds a position at an organizational 
level which permits independence of action and has adequate authority 
to obtain all the information required to monitor and evaluate 
measurement quality as required by this section.
    (2) Ensure that any contractor who performs MC&A measurements 
services conforms with applicable requirements in paragraphs (c)(5), 
(6), (7), (10) and (11) of this section. Conformance must include 
reporting by the contractor of

[[Page 78148]]

sufficient measurement control data to allow the licensee to calculate 
bias corrections and measurement limits of error.
    (3) Ensure that potential sources of sampling error are identified 
and that samples are representative by performing process sampling 
tests using well characterized materials to establish or verify the 
applicability of utilized procedures for sampling SNM and for 
maintaining sample integrity during transport and storage. These 
sampling tests or sample integrity tests, as appropriate, shall be 
conducted whenever:
    (i) A new sampling procedure or technique is used, or new sampling 
equipment is installed;
    (ii) A sampling procedure, technique, or sampling equipment is 
modified to the extent that a systematic sampling error could be 
introduced; and
    (iii) Sample containers, sample transport methods, or sample 
storage conditions are changed or modified to the extent that a 
systematic sampling error could be introduced.
    (4) Establish and maintain a measurement control program so that 
for each inventory period the SEID is less than 0.125 percent of the 
active inventory, and assure that any MC&A measurements performed under 
contract are controlled so that the licensee can satisfy this 
requirement.
    (5) Generate current data on the performance of each measurement 
system used during each material balance period for the establishment 
of measured values and estimated measurement uncertainties, including 
estimates of bias, variance components for calibration, sampling, and 
repeat measurements. The program data must reflect the current process 
and measurement conditions existing at the time the control 
measurements are made.
    (6) Use standards on an ongoing basis for the calibration and 
control of all measurement systems used for SNM accountability. 
Calibrations shall be repeated whenever any significant change occurs 
in a measurement system or when program data indicate a need for 
recalibration. Calibrations and control standard measurements shall be 
based on standards whose assigned values are traceable to certified 
reference standards or certified standard reference materials. 
Additionally, control standards shall be representative of the process 
material or items being measured by the measurement system in question.
    (7) Conduct control measurements to provide current data for the 
determination of random error behavior. On a predetermined schedule, 
the program shall include, as appropriate:
    (i) Replicate analyses of individual samples;
    (ii) Analysis of replicate process samples;
    (iii) Replicate volume measurements of bulk process batches;
    (iv) Replicate weight measurements of process items and bulk 
batches, or alternatively, the use of data generated from the replicate 
weighings of control standard weights as derived from the control 
standard program; and
    (v) Replicate NDA measurements of individual process containers 
(items), or alternatively, the use of data generated from the replicate 
measurements of NDA control standards as derived from the control 
standard program.
    (8) Use all measurements and measurement controls generated during 
the current material balance period for the estimation of the SEID.
    (9) Evaluate with appropriate statistical methods all measurement 
system data generated in paragraph (c)(5) of this section to determine 
significant contributors to the measurement uncertainties associated 
with inventory differences and shipper-receiver differences, so that if 
SEID exceeds the limits established in paragraph (c)(4) of this 
section, the cause of the excessive SEID can be identified for 
corrective action with respect to controlling the standard error within 
applicable limits.
    (10) Establish and maintain a statistical control system, including 
control charts and formal statistical procedures, designed to monitor 
the quality of each measurement device or system. Control chart limits 
must be established to be equivalent to levels of significance of 0.05 
and 0.001.
    (11) Promptly investigate and take any appropriate corrective 
action whenever a control datum exceeds an 0.05 control limit, and 
whenever a control datum exceeds an 0.001 control limit, the 
measurement system that generated the datum shall immediately be placed 
out-of-service with respect to MC&A measurements until the deficiency 
has been corrected and the system brought into control within the 0.05 
control limits.

    33. In Sec.  74.51, paragraphs (c) and (d) are revised to read as 
follows:


Sec.  74.51  Nuclear material control and accounting for strategic 
special nuclear material.

* * * * *
    (c) Implementation dates. Each applicant for a license, and each 
licensee that, upon application for modification of a license, would 
become newly subject to paragraph (a) of this section, shall submit a 
fundamental nuclear material control (FNMC) plan describing how the 
MC&A system shall satisfy the requirement of paragraph (b) of this 
section. The FNMC plan shall be implemented when a license is issued or 
modified to authorize the activities being addressed in paragraph (a) 
of this section, or by the date specified in a license condition.
    (d) Inventories. Notwithstanding Sec.  74.59(f)(1), licensees shall 
perform at least three bimonthly physical inventories after 
implementation of the NRC approved FNMC Plan and shall continue to 
perform bimonthly inventories until performance acceptable to the NRC 
has been demonstrated and the Commission has issued formal approval to 
perform semiannual inventories. Licensees who have prior experience 
with process monitoring and/or can demonstrate acceptable performance 
against all Plan commitments may request authorization to perform 
semiannual inventories at an earlier date.

    34. In Sec.  74.57, the introductory text of paragraph (c) and 
paragraph (f)(2) are revised to read as follows:


Sec.  74.57  Alarm resolution.

* * * * *
    (c) Each licensee shall notify the NRC Operations Center by 
telephone of any MC&A alarm that remains unresolved beyond the time 
period specified for its resolution in the licensee's fundamental 
nuclear material control plan. Notification must occur within 24 hours 
except when a holiday or weekend intervenes in which case the 
notification must occur on the next scheduled workday. The licensee may 
consider an alarm to be resolved if:
* * * * *
    (f) * * *
    (2) Within 24 hours, the licensee shall notify the NRC Operations 
Center by telephone that an MC&A alarm resolution procedure has been 
initiated.

    35. In Sec.  74.59, paragraphs (d)(1),(f)(1)(i) and (iii), and 
(h)(2)(ii) are revised to read as follows:


Sec.  74.59  Quality assurance and accounting requirements.

* * * * *
    (d) * * *
    (1) Substantiate the plutonium element and uranium element and 
isotope content of all SSNM received, produced, transferred between 
areas of custodial responsibility, on inventory, or shipped, discarded, 
or otherwise removed from inventory;
* * * * *

[[Page 78149]]

    (f) * * *
    (1) * * *
    (i) Calculate the inventory difference (ID); estimate the standard 
error of the inventory difference (SEID); and investigate and report 
any SEID estimate of 0.1 percent or more of active inventory, and any 
ID that exceeds both three times SEID and 200 grams of plutonium or 
uranium-233, or 300 grams of uranium-235 contained in high enriched 
uranium.
* * * * *
    (iii) Investigate and report to the Director, Office of Nuclear 
Material Safety and Safeguards, any difference that exceeds three times 
the standard deviation determined from the sequential analysis;
* * * * *
    (h) * * *
    (2) * * *
    (ii) Any scrap measured with a standard deviation greater than five 
percent of the measured amount is recovered so that the results are 
segregated by inventory period and recovered within six months of the 
end of the inventory period in which the scrap was generated except 
where it can be demonstrated that the scrap measurement uncertainty 
will not cause noncompliance with Sec.  74.59(e)(5).
* * * * *

PART 75--SAFEGUARDS ON NUCLEAR MATERIAL--IMPLEMENTATION OF US/IAEA 
AGREEMENT

    36. The authority citation for part 75 continues to read as 
follows:

    Authority: Secs. 53, 63, 103, 104, 122, 161, 68 Stat. 930, 932, 
936, 937, 939, 948, as amended (42 U.S.C. 2073, 2093, 2133, 2134, 
2152, 2201); sec. 201, 88 Stat. 1242, as amended (42 U.S.C. 5841).
    Section 75.4 also issued under secs. 135, 141, Pub. L. 97-425, 
96 Stat. 2232, 2241 (42 U.S.C. 10155, 10161).

    37. In Sec.  75.21, paragraph (c)(2) is revised to read as follows:


Sec.  75.21  General requirements.

* * * * *
    (c) * * *
    (2) Until installation information has been submitted by the 
licensee, the procedures shall be sufficient to document changes in the 
quantity of nuclear material in or at its installation. Observance of 
the procedures described in Sec. Sec.  40.61 or 74.15 of this chapter 
(or the corresponding provisions of the regulations of an Agreement 
State) by any licensee subject thereto shall constitute compliance with 
this paragraph.
* * * * *

PART 76--CERTIFICATION OF GASEOUS DIFFUSION PLANTS

    38. The authority citation for part 76 continues to read as 
follows:

    Authority: Secs. 161, 68 Stat. 948, as amended, secs. 1312, 
1701, as amended, 106 Stat. 2932, 2951, 2952, 2953, 110 Stat. 1321-
349 (42 U.S.C. 2201, 2297b-11, 2297f); secs. 201, as amended, 204, 
206, 88 Stat. 1244, 1245, 1246 (42 U.S.C. 5841, 5842, 5845, 5846). 
Sec. 234(a), 83 Stat. 444, as amended by Pub. L. 104-134, 110 Stat. 
1321, 1321-349 (42 U.S.C. 2243(a)).
    Sec. 76.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 
2951 (42 U.S.C. 5851). Sec. 76.22 is also issued under sec. 193(f), 
as amended, 104 Stat. 2835, as amended by Pub. L. 104-134, 110 Stat. 
1321, 1321-349 (42 U.S.C. 2243(f)). Sec. 76.35(j) also issued under 
sec. 122, 68 Stat. 939 (42 U.S.C. 2152).

    39. In Sec.  76.113, paragraph (a) is revised to read as follows:


Sec.  76.113  Formula quantities of strategic special nuclear 
material--Category I.

    (a) The requirements for material control and accounting for 
formula quantities of strategic special nuclear material (Category I) 
are contained in Sec. Sec.  74.11, 74.13, 74.15, 74.17, 74.19, 74.51, 
74.53, 74.55, 74.57, 74.59, 74.81, and 74.82 of this chapter.
* * * * *

    40. In Sec.  76.115, paragraph (a) is revised to read as follows:


Sec.  76.115  Special nuclear material of moderate strategic 
significance--Category II.

    (a) The requirements for material control and accounting for 
special nuclear material of moderate strategic significance (Category 
II) are contained in Sec. Sec.  74.11. 74.13, 74.15, 74.17, 74.19, 
74.41, 74.43, 74.45, 74.81, and 74.82 of this chapter.
* * * * *
    41. In Sec.  76.117, paragraph (a) is revised to read as follows:


Sec.  76.117  Special nuclear material of low strategic significance--
Category III.

    (a) The requirements for material control and accounting for 
special nuclear material of low strategic significance (Category III) 
are contained in Sec. Sec.  74.11, 74.13, 74.15, 74.17, 74.19, 74.33, 
74.81, and 74.82 of this chapter. However, inventories of uranium 
outside of the enrichment processing equipment conducted at least every 
370 days are deemed to satisfy the requirements of Sec.  74.19(c).
* * * * *

PART 150--EXEMPTIONS AND CONTINUED REGULATORY AUTHORITY IN 
AGREEMENT STATES AND IN OFFSHORE WATERS UNDER SECTION 274

    42. The authority citation for part 150 continues to read as 
follows:

    Authority: Sec. 161, 68 Stat. 948, as amended, sec. 274, 73 
Stat. 688 (42 U.S.C. 2201, 2021); sec. 201, 88 Stat. 1242, as 
amended (42 U.S.C. 5841).
    Sections 150.3, 150.15, 150.15a, 150.31, 150.32 also issued 
under secs. 11e(2), 81, 68 Stat. 923, 935, as amended, secs. 83, 84, 
92 Stat. 3033, 3039 (42 U.S.C. 2014e(2), 2111, 2113, 2114). Section 
150.14 also issued under sec. 53, 68 Stat. 930, as amended (42 
U.S.C. 2073). Section 150.15 also issued under secs. 135, 141, Pub. 
L. 97-425, 96 Stat. 2232, 2241 (42 U.S.C. 10155, 10161). Section 
150.17a also issued under sec. 122, 68 Stat. 939 (42 U.S.C. 2152). 
Section 150.30 also issued under sec. 234, 83 Stat. 444 (42 U.S.C. 
2282).


    43. In Sec.  150.20, the introductory text of paragraph (b) is 
revised to read as follows:


Sec.  150.20  Recognition of Agreement State licenses.

* * * * *
    (b) Notwithstanding any provision to the contrary in any specific 
license issued by an Agreement State to a person engaging in activities 
in a non-Agreement State, in an area of exclusive Federal jurisdiction 
within an Agreement State, or in offshore waters under the general 
licenses provided in this section, the general licenses provided in 
this section are subject to all the provisions of the Act, now or 
hereafter in effect, and to all applicable rules, regulations, and 
orders of the Commission including the provisions of Sec. Sec.  30.7 
(a) through (f), 30.9, 30.10, 30.14(d), 30.34, 30.41, and 30.51 to 
30.63, inclusive, of part 30 of this chapter; Sec. Sec.  40.7 (a) 
through (f), 40.9, 40.10, 40.41, 40.51, 40.61, 40.63 inclusive, 40.71 
and 40.81 of part 40 of this chapter; Sec. Sec.  70.7 (a) through (f), 
70.9, 70.10, 70.32, 70.42, 70.52, 70.55, 70.56, 70.60 to 70.62 of part 
70 of this chapter; Sec. Sec.  74.11, 74.15, and 74.19 of part 74 of 
this chapter; and to the provisions of 10 CFR parts 19, 20 and 71 and 
subparts C through H of part 34, Sec. Sec.  39.15 and 39.31 through 
39.77, inclusive, of part 39 of this chapter. In addition, any person 
engaging in activities in non-Agreement States, in areas of exclusive 
Federal jurisdiction within Agreement States, or in offshore waters 
under the general licenses provided in this section:
* * * * *

    Dated in Rockville, Maryland, this 17th day of December, 2002.


[[Page 78150]]


    For the Nuclear Regulatory Commission.
Annette Vietti-Cook,
Secretary of the Commission.
[FR Doc. 02-32247 Filed 12-20-02; 8:45 am]
BILLING CODE 7590-01-P