[Federal Register Volume 67, Number 247 (Tuesday, December 24, 2002)]
[Rules and Regulations]
[Pages 78332-78352]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-32403]


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NUCLEAR REGULATORY COMMISSION

10 CFR Parts 50 and 72

RIN 3150-AG52


Decommissioning Trust Provisions

AGENCY: Nuclear Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Nuclear Regulatory Commission (NRC) is amending its 
regulations relating to decommissioning trust provisions for nuclear 
power plants. For licensees that are no longer rate-regulated, or no 
longer have access to a non-bypassable charge for decommissioning, the 
NRC is requiring that decommissioning trust agreements be in a form 
acceptable to the NRC in order to increase assurance that an adequate 
amount of decommissioning funds will be available for their intended 
purpose. Until recently, direct NRC oversight of the terms and 
conditions of the decommissioning trusts was not necessary because rate 
regulators typically exercised this type of oversight authority. With 
deregulation, this oversight may cease and the NRC needs to take a more 
active oversight role.

EFFECTIVE DATE: December 24, 2003.

FOR FURTHER INFORMATION CONTACT: Brian J. Richter, Office of Nuclear 
Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 
20555-0001; telephone (301) 415-1978; e-mail [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    In a staff requirements memorandum (SRM) dated August 10, 1999, the 
Commission directed the NRC staff to initiate a rulemaking to require 
that decommissioning trust agreements be in a form acceptable to the 
NRC in order to increase assurance that an adequate amount of 
decommissioning funds will be available for their intended purpose. 
This SRM was in response to SECY-99-170 (July 1, 1999), ``Summary of 
Decommissioning Fund Status Reports,'' in which the NRC staff noted 
that it intended to continue to review decommissioning trust agreements 
in license transfers on a case-by-case basis and impose appropriate 
conditions in the orders approving these transfers. In response to the 
SRM, the NRC staff issued a rulemaking plan for Decommissioning Trust 
Provisions, SECY-00-0002, on December 30, 1999. The plan called for 
amending 10 CFR 50.75 and revising Regulatory Guide

[[Page 78333]]

1.159, ``Assuring the Availability of Funds for Decommissioning Nuclear 
Reactors.'' The Commission approved the plan on February 9, 2000, and 
directed the NRC staff to include specific trust fund terms and 
conditions necessary to protect funds fully in the rule itself. The 
Commission also suggested that sample language for trust agreements 
consistent with the terms and conditions within the rule be provided in 
the associated regulatory guide.
    The NRC published a proposed rule for Decommissioning Trust 
Provisions on May 30, 2001 (66 FR 29244). That proposed rule required 
that the trust provisions be in a form acceptable to the NRC and 
contain general terms and conditions that the NRC believes are required 
to ensure that funds in the trusts will be available for their intended 
purpose. To accomplish this objective, the NRC proposed to modify 
paragraphs 10 CFR 50.75(e)(1)(i) and (ii), and to add a new paragraph, 
10 CFR 50.75(h) to its regulations. The changes in Sec.  50.75(e) 
specify that the trust should be an external trust fund in the United 
States, established under a written agreement and with an entity that 
is a State or Federal government agency or an entity whose operations 
are regulated by a State or Federal agency. Paragraph 50.75(h) 
discusses the terms and conditions that the NRC believes are necessary 
to ensure that funds in the trusts will be available for their intended 
purpose.
    In response to a comment, paragraph 72.30(c)(5) has been modified 
for consistency with Sec.  50.75(e) and (h), as a conforming change. As 
an accompaniment to this rulemaking, the NRC has updated Regulatory 
Guide 1.159, to include sample trust fund language containing these 
terms and conditions. Draft Regulatory Guide DG-1106, the proposed 
revision 1 of Regulatory Guide 1.159, was published for comment along 
with the proposed rule.

II. Comments on the Proposed Rule

    The Commission received 36 letters, from 34 commenters, containing 
approximately 280 comments on the proposed rule and draft regulatory 
guide. Seventeen of the commenters were licensees, 11 were 
representatives of utility groups (many of whose members are 
licensees), three were State agencies or commissions, one was the 
National Association of State Regulatory Utility Commissioners (NARUC), 
and two were investment management companies. Copies of the letters are 
available for public inspection and copying for a fee at the 
Commission's Public Document Room, located at 11555 Rockville Pike, 
Room O-1 F23, Rockville, Maryland 20852.
    Documents created or received at the NRC after November 1, 1999, 
are also available electronically at the NRC's Public Electronic 
Reading Room on the Internet at http://www.nrc.gov/reading-rm.html. 
From this site, the public can gain entry into the NRC's Agencywide 
Document Access and Management System (ADAMS), which provides text and 
image files of NRC's public documents. These same documents also may be 
viewed and downloaded electronically via the interactive rulemaking 
website established by NRC for this rulemaking at http://ruleforum.llnl.gov.

1. General Comments on the Proposed Action

    Comments: Several of the commenters supported the NRC's goal to 
maintain regulatory oversight over nuclear decommissioning trust funds, 
where necessary, and agreed that the NRC may need to take a more active 
oversight role regarding decommissioning trust agreements. Two other 
commenters commended the NRC for undertaking this rulemaking and fully 
supported the NRC's efforts to ensure that a utility industry made more 
efficient through competition remains a safe and reliable industry. 
Similarly, one commenter said it understands and agrees with the NRC's 
concern that the decommissioning trust corpus be safeguarded from 
investment risks. The Nuclear Energy Institute (NEI) stated that 
``[u]pon taking into account the comments and suggestions for 
improvement * * *, NRC's proposed rulemaking and proposed guidance 
likely will enhance the assurance for decommissioning funding already 
provided by the industry and should improve public confidence that all 
nuclear power reactors will be properly decommissioned.'' Ten 
commenters endorsed NEI's comments. One of those commenters also 
endorsed the comments submitted by Winston & Strawn on behalf of the 
Utility Decommissioning Group and the Tennessee Valley Authority. 
However, one licensee stated that the NRC should withdraw the notice of 
proposed rulemaking because existing regulations from the NRC, the 
Internal Revenue Service (IRS), and the State regulatory agencies are 
more than adequate to protect the public health and safety. In their 
view, the proposed rulemaking is duplicative of existing requirements 
and would add unnecessary regulatory burden without a corresponding 
safety benefit.
    This licensee also believes that the proposed rule is inconsistent 
with the NRC's regulatory burden reduction initiative. Another 
commenter expressed similar views and stated that the proposed rule may 
eliminate some of the flexibility of the existing rule. Yet another 
commenter opposing the rule said that if the NRC intends to continue to 
impose decommissioning funding conditions in individual licenses, there 
is no need for the rule.
    Five commenters noted that given the wide variety of trust 
instruments in effect, it is fitting that the NRC not develop a uniform 
trust fund agreement that would be mandatory for all licensees. Another 
commenter stated that the NRC's proposed approach in adopting standard 
rules regarding decommissioning trust funds is superior to the existing 
NRC practice of applying specific license conditions on a case-by-case 
basis.
    A commenter stated that NRC's discussion of Test 4 in the statement 
of considerations for the proposed rule describes that licensees 
``generally'' prepare annual reports, etc. and does not specifically 
list annual calculation of the estimated cost as required by 10 CFR 
50.75(b)(2). Further, the Test 4 description specifies that ``* * * 
these reports can be supplied to the NRC upon request * * *.'' This 
availability upon request and the biennial reporting appear sufficient. 
The Test 4 discussion should justify removing 10 CFR 50.75(b)(2), or an 
explanation of the benefit of annual adjustments to the calculation vs. 
the biennial frequency of the funding status should be provided.
    Response: With respect to the comments calling for the NRC to 
withdraw the rule, the Commission does not intend to do so. The 
Commission's position, as stated in the proposed rule (66 FR 29244) is 
that, ``[u]ntil recently, direct NRC oversight of the terms and 
conditions of the decommissioning trusts was not necessary because rate 
regulators typically exercised such authority. With deregulation, this 
oversight may cease and the NRC may need to take a more active 
oversight role.'' Given that the NRC will not require (except in the 
one instance where all power reactor licensees, both rate regulated and 
otherwise, will be required to notify the NRC in advance of 
decommissioning trust withdrawals if these withdrawals are made before 
to permanent cessation of operations) the trust provisions of this 
rulemaking to be imposed on those licensees remaining under State or 
Federal Energy Regulatory Commission (FERC) regulation, the NRC does 
not interpret this action as being duplicative of

[[Page 78334]]

existing requirements and adding unnecessary regulatory burden.
    With respect to the comment stating that there would be no need for 
the rule if the NRC continues to impose decommissioning funding 
conditions in individual licenses, the NRC has always believed that it 
is preferable and more efficient to adopt standard rules, as opposed to 
applying specific license conditions on a case-by-case basis.
    As for the comment on the discussion of Test 4 in the statement of 
considerations for the proposed rule and the commenter's request to 
remove 10 CFR 50.75(b)(2), the NRC was not proposing any change to that 
section by this action and no change is presently under consideration. 
The NRC still intends to require licensees to calculate their estimated 
decommissioning costs annually, even if these values are not required 
to be submitted to the NRC annually.
    Following is a listing of the specific comments on the proposed 
rule and the NRC's response to them. The comments on the draft 
regulatory guide are then listed and discussed.

2. Applicability of the Rule

    Comments: One of the most often repeated comments dealt with the 
proposed rule's requirement to be applicable to all licensees, even if 
they are under FERC or State regulation. The commenters said that the 
NRC should more clearly explain its conclusion that the proposed rule 
is necessary to ensure that decommissioning funds will be available 
when needed. There is no evidence that any reactor licensee has lacked 
adequate funds to safely complete the decommissioning process. In 
effect, licensees would have to expend resources to address a problem 
that has yet to occur. Because licensees are required to report on 
their funding levels to the NRC every two years (10 CFR 50.75(f)(1)), 
the reports already allow the NRC time to fashion an appropriate 
remedy, should one be necessary, to protect public health and safety. 
The NRC has not reviewed current practices by State or Federal rate 
regulators to establish a baseline for evaluating any possible changes 
in the management of decommissioning trust funds in response to 
deregulation. Another layer of regulatory oversight should not be added 
where adequate regulatory safeguards exist, such as FERC and/or State 
oversight. One commenter stated that its State Public Utility 
Commission (PUC) approved the commenter's decommissioning funding 
collections and permits funding of items not included in the NRC's 
definition of ``decommissioning.'' Therefore, additional NRC 
requirements regarding the use of these funds would hinder the 
commenter's ability to access and use the funds as approved by the PUC 
and would unnecessarily intrude on local ratemaking functions that are 
an exclusive province of State governments.
    Two commenters stated that the NRC should include a way for 
licensees to ascertain whether a conflict of applicable standards 
between the NRC's proposed rule and existing State and Federal 
regulations requires the execution of an entirely new trust agreement. 
Also, the NRC should convene a conference with FERC and NARUC to 
explore conflicts between existing standards and the NRC's rule.
    One commenter stated that licensees who are State entities and who 
have additional safeguards under State law should be exempt from the 
proposed rule because it is based on the premise that deregulation will 
remove existing accounting and financial controls on owners of nuclear 
power plants. These commenters argued that this rule is not applicable 
to California Municipal Utilities Association (CMUA) members, who 
operate under the same regulatory and legal restrictions that applied 
before the changes to the electric utility industry in California. CMUA 
members are public agencies bound by the same stringent investment 
restrictions after deregulation as before.
    Two commenters stated that the proposed rule is duplicative of 
Internal Revenue Code requirements and IRS implementing regulations, 
that place additional restrictions on the use of qualified nuclear 
decommissioning trusts. The commenters assert that existing IRS 
requirements are sufficient to protect the NRC's interest in the proper 
use of decommissioning funds. Under the IRS regime, licensees may 
experience tax advantages under the Internal Revenue Code section 468A 
by commingling funds for all decommissioning purposes and depositing 
them in a tax ``qualified'' fund. The NRC should explicitly permit the 
use of funds for all decommissioning purposes and eliminate barriers in 
its regulations to the full collection of funds authorized by rate-
setting authorities.
    Two other commenters asserted that the final rule should 
acknowledge the potential of transfers from non-qualified portions of 
the trust to the qualified portions without the NRC's notice or 
approval. Similarly, the scope of the proposed rule is not clear 
because it does not articulate whether the amendments are applicable to 
all nuclear decommissioning trusts (qualified and unqualified), or 
whether the amendments are intended to apply to trusts that accumulate 
funds for expenses not within the NRC definition of 
``decommissioning.''
    An organization representing the nuclear power industry stated that 
because there are a variety of ways for licensees to comply with the 
rule that are equally as binding as the terms of the underlying trust 
agreement, 10 CFR 50.75(h)(1) should be revised to allow licensees 
alternatives for achieving rule compliance by inserting the words 
``investment guidelines for, or other binding arrangements governing'' 
so that it would read: ``Licensees using prepayment or an external 
sinking fund to provide financial assurance shall provide in the terms 
of, investment guidelines for, or other binding arrangements governing, 
the trust, escrow account, Government fund, or other account used to 
segregate and manage the funds * * *.''
    Another commenter stated that it is not clear whether provisions in 
the proposed rule will supersede license conditions previously imposed 
in license transfer proceedings, or whether licensees with existing 
license conditions governing decommissioning trusts must apply to amend 
their licenses and whether these amendment applications would then be 
subject to hearings. The inference is that the proposed rule would be 
applicable to all existing and future reactors, as the rule is silent 
on the matter.
    Response: The NRC acknowledges that the proposed rule could be 
burdensome for licensees still regulated by PUCs and FERC, with no 
significant improvement in the public health and safety. Therefore, the 
final rule will only apply to licensees that are no longer regulated by 
State PUCs or FERC, with the exception that all power reactor 
licensees, both rate regulated and otherwise, will be required to 
notify the NRC in advance of decommissioning trust withdrawals if these 
withdrawals are made before permanent cessation of operations. The 
reason for this is that some licensees, even though continuing to be 
rate regulated, may make withdrawals without their rate regulator's 
knowledge. Given that any such withdrawals before permanent cessation 
of operations are likely to be very rare, the NRC believes that this 
requirement should not be burdensome. The NRC also excludes from this 
requirement any withdrawals from one decommissioning fund that are 
immediately deposited in another decommissioning trust fund either for 
one unit or between units (e.g., from a non-qualified to a qualified 
trust fund).

[[Page 78335]]

This change would essentially eliminate the potential for conflicts of 
standards between NRC, and State and Federal regulations. These 
modifications also eliminate the need for a conference on this subject.
    However, the NRC does not agree with the comments that IRS 
requirements are sufficient to protect the NRC's interest in the proper 
use of decommissioning funds because these requirements relate 
primarily to tax treatment of decommissioning funds and may not be 
sufficient to satisfy the NRC's public health and safety concerns.
    As to the comment on the suggested revision to 10 CFR 50.75(h)(1), 
the change has been made because the NRC recognizes the benefit of 
allowing alternatives for achieving rule compliance that do not have 
any adverse impact on the public health and safety.
    With respect to the comment seeking clarification about whether the 
proposed rule supersedes license conditions, the NRC's position is that 
licensees will have the option of maintaining their existing license 
conditions or submitting to the new requirements.
    Lastly, in response to the same commenter's second question, the 
rule is to be applicable to all present and future licensees that are 
or will no longer be under FERC or State rate regulation or that 
otherwise meet the NRC's definition of ``electric utility,'' with the 
same exception as noted above. All licensees will be required to notify 
the NRC in advance of decommissioning trust withdrawals if these 
withdrawals are made before permanent cessation of operations or if 
they are not made under a post-shutdown decommissioning activities 
report or license termination plan.

3. Notifications and Disbursements

    Comments: The section of the proposed rule that generated the 
greatest number of responses (fourteen) from commenters related to 
notification of disbursements from the trust. Some commenters claim the 
30-day notification is not needed because there is no basis for 
presuming that an independent trustee will disburse amounts held in the 
decommissioning trust fund for purposes other than those specified. The 
notification requirement would impose a significant regulatory burden 
on both the licensees and the NRC by creating a process for 
disbursement approvals for decommissioning funds without a public 
health and safety justification. There are no standards to guide 
licensees and the NRC staff on whether a disbursement would be 
permissible. The 30-day disbursement notification would be a major 
burden on licensees during decommissioning and even during 
decommissioning planning because notifications would be required 
frequently.
    The commenter stated that at most, the rule should require a one-
time notification before initial withdrawals for decommissioning or 
planning. Also, licensees may incur charges waiting for NRC approval 
while labor and resources have been staged and ready to work. Trust 
vendors or service providers would not appreciate having to wait 30 
days for payment with the added risk of possibly having the payment 
disallowed by the NRC. Further, there may be cases where relatively 
minor day-to-day expenses are incurred or where expenses must be paid 
promptly and NRC review is not required to meet the agency's regulatory 
concerns. If so, the NRC could add a de minimis exception. These 
commenters suggested that the NRC could prohibit funds from making two 
or more simultaneous disbursements of 0.99 percent of trust principal 
in order to avoid the notification requirement of the proposed rule. 
The NRC has not identified any case where improper disbursements have 
been made from a decommissioning trust and does not have enough staff 
to review invoices from decommissioning contractors that would only 
increase paperwork.
    With respect to the 30 day disbursement notice under proposed 10 
CFR 50.75(h), another commenter stated that ``Licensees that have 
complied with the requirements of 10 CFR 50.82(a)(4) regarding 
submittal of a Post Shutdown Decommissioning Activities Report (PSDAR) 
and control trust fund disbursements in accordance with the provisions 
of 10 CFR 50.82(a)(6), (a)(7), and (a)(8), should be exempt from any 
further restrictions on disbursements.'' This commenter suggested that 
its modification to the proposed rule is particularly appropriate 
because it allows licensees to use the 3 percent of decommissioning 
trust fund monies for planning activities before plant retirement as 
provided at 10 CFR 50.82(a)(8)(ii). There is little need for the NRC to 
require a 30-day advance notice from those facilities utilizing the 
trusts for pre-planning decommissioning activities. Also, the 
clarifying wording in Section 2.2.2.4 of DG-1106 needs to be included 
in 10 CFR 50.75(h)(1)(iii).
    The commenter then suggested modifying proposed 10 CFR 
50.75(h)(1)(iii) to allow plants in the process of being decommissioned 
to be grandfathered because the proposed requirement would not add any 
assurances that funding is available and would duplicate other 
notifications. Similarly, another commenter stated that 10 CFR 50.75 
(h)(1)(iii) proposes to restrict disbursements or payments until final 
decommissioning has been completed. It is possible that State PUCs 
could require overfunded trusts to rebate money to ratepayers (rather 
than merely adjust the future collection rate). This commenter 
suggested that the rule should allow the NRC to approve such a 
disbursement following adequate review.
    One commenter stated that NRC should revise the proposed 10 CFR 
50.75(h)(1)(iii) to indicate the inclusion of nuclear decommissioning 
trusts (NDTs) in license transfers. In DG-1106, the NRC recognized that 
the 30-day notice should be provided to the NRC before disbursing 
funds, but should not apply to plants withdrawing funds under 10 CFR 
50.82(a)(8)(i). This exception is not noted in the proposed rule. 
Another commenter stated that the proposed rule would duplicate reports 
for those plants active in decommissioning and that the rule should 
exempt those facilities involved in decommissioning under 10 CFR 50.82. 
Similarly, 10 CFR 50.75(h)(4) should be modified so that subsection (h) 
would not apply to any plant which already has an NRC-approved 
decommissioning plan. Another commenter stated that licensees who have 
docketed a PSDAR and a site-specific cost estimate under 10 CFR 50.82 
should be exempt from the reporting requirements and adjustments to 
cost estimates of 10 CFR 50.75.
    Several commenters noted that ``ordinary expenses'' or ``ordinary 
administrative expenses'' should be defined, and that those paid 
periodically from the trust should be exempt from the 30-day 
disbursement notification. Or, as a commenter noted, the NRC should 
clarify which specific expenses paid from a fund would require NRC 
notification. One commenter stated the definition should be consistent 
with Internal Revenue Code section 468A(e)(4)(B) where expenses are 
defined as ``administrative costs (including taxes) and other 
incidental expenses of the fund (including legal, accounting, 
actuarial, and trustee expenses) in connection with the operation of 
the fund.''
    Response: With respect to the comments on the 30-day notification 
for disbursements, the NRC needs to have this information in a timely 
fashion in order to effectively monitor licensees,

[[Page 78336]]

especially when a licensee is not in decommissioning under the PSDAR or 
an approved license termination plan under 10 CFR 50.82.
    One concern with the 30-day disbursement notice was the problems it 
would potentially cause for licensees during the process of 
decommissioning or decommissioning planning. The proposed rule did not 
explicitly indicate that licensees who have complied with 10 CFR 
50.82(a)(4) would be exempt from restrictions on disbursements. The NRC 
agrees with this comment and this change has been made in the final 
rule because, as a commenter noted, the proposed requirement would not 
add any assurances that funding is available and would duplicate 
notification requirements at Sec.  50.82.
    Other comments focused on the need for definitions of ``ordinary 
expenses'' and ``ordinary administrative expenses.'' The NRC, as a 
matter of consistency and expediency, decided to make use of the IRS 
Code section 468A(e)(4)(B) definition of expenses where they are 
defined as ``administrative costs (including taxes) and other 
incidental expenses of the fund (including legal, accounting, 
actuarial, and trustee expenses) in connection with the operation of 
the fund.''
    For clarification and consistency, the final rule includes the 
words of Section 2.2.2.4 of DG-1106 in 10 CFR 50.75(h)(1)(iii), as 
suggested by one commenter. Further, the rule language has been changed 
throughout from ``30 days'' to ``30 working days.''

4. Restrictions on Funds

A. ``Investment Grade''
    Comments: Another major area of concern for twelve commenters in 
the proposed 10 CFR 50.75(h)(1)(i)(B) was the requirement that the 
trust hold only ``investment grade'' securities. As one commenter 
noted, a requirement of ``investment grade'' investments in the trust 
is unnecessary because of applicable standards under State law, the 
proposed 10 CFR 50.75(h)(1)(i)(C), and the ``prudent investor'' 
standard used and defined by the FERC. Adoption of a different standard 
by another regulatory agency would be problematic. The ``prudent 
investor'' standard should apply in situations where other regulators 
have not mandated an investment standard or specific investment 
restrictions to eliminate the possibility of conflicts between NRC and 
other requirements. Also, this requirement goes beyond conditions 
imposed in license transfer orders. Another commenter suggests that the 
``investment grade'' standard apply at the time of purchase and not 
require immediate sale of the investment at the time of downgrade. This 
commenter stated that the use of the term ``investment grade'' in the 
proposed rule is not necessary and that the ``prudent investor'' 
standard, as defined in FERC regulations should be used. ``Investment 
grade'' is not clearly defined in the regulation, would be subject to 
the vagaries of future regulatory interpretation, and is unnecessarily 
restrictive.
    Response: The NRC agrees that the term ``investment grade'' is 
redundant because the ``prudent investor'' standard is an appropriate 
standard defined by the FERC. (Equivalent standards established under 
State law would also be acceptable.) Therefore, ``investment grade'' 
was deleted from the final rule and ``prudent investor'' is used in its 
place.
B. Investment in Nuclear Power Reactor Licensees
    Comments: Five commenters called for the elimination of the 
prohibition of a trust ownership of securities of other nuclear power 
reactor licensees, or for the NRC to set a limit on the amount of 
assets in entities owning one or more nuclear power plants. These 
commenters argued that the NRC has not provided a clear basis for 
categorically excluding investments in any entity with an ownership 
interest in a nuclear power plant. According to another commenter, the 
proposed prohibition in a trust's ownership interest in ``one or more 
nuclear power plants'' should be deferred to applicable investment 
guidelines under State law. One commenter stated that, by prohibiting 
investment in securities of other nuclear power plant licensees, NRC is 
implying the ownership of a nuclear power reactor is a risky 
investment. The commenter also stated that such a prohibition was 
possibly out of the NRC's jurisdiction. Further, placing these 
restrictions on fund managers is not practical and has no clear 
connection to protection of the public health and safety. Any final 
rule should permit a de minimis investment in otherwise prohibited 
securities.
    The proposed ``nuclear securities'' restriction is very ambiguous 
as it would apply to fixed income investments. Investment opportunities 
that are limited by ambiguous regulations will unnecessarily result in 
lower investment returns than otherwise would be the case. Still 
another commenter pointed out that the proposed restriction on 
ownership of securities with nuclear exposure is inconsistent with use 
of the ``prudent investor standard.''
    One commenter noted that public systems are concerned that the 
proposed rule not be used to prevent a municipal licensee from 
investing in securities issued by the State government, another 
municipality, or other instruments of the State in which the municipal 
licensee is located. If the NRC rejects this proposal, the commenters 
request that debt securities and like instruments already held in 
decommissioning trust accounts be exempted from this restriction.
    Seven commenters opined that 10 CFR 50.75(h)(1)(i)(A) should be 
modified to clarify the term ``non-nuclear sector mutual funds'' and to 
permit investments in bank-maintained nonnuclear sector collective or 
commingled funds, such as ``Common Trust Funds.'' One commenter did not 
find the proposed 10 CFR 50.75(h)(1)(i)(A) clear with respect to ``any 
other entity owning one or more nuclear power plants'' and asked: Is 
the rule intending to allow investment in securities of an entity that 
is part owner of a nuclear power plant? Is the rule intending to 
disallow investment in a mutual fund in which 2 percent of the fund is 
invested in securities of a parent company whose subsidiary is a 
minority owner of a foreign or domestic nuclear power plant? Is the 
term ``nuclear power plant'' inclusive of those being decommissioned 
and those licensed to operate?
    One final related comment was that licensees, and trustees in the 
absence of directions from licensees, should be authorized to prudently 
allocate trust assets across the entire risk/return spectrum. Prudent 
diversification can be beneficial for all stakeholders.
    Response: The proposed prohibition of ownership in securities of 
other nuclear power reactor licensees was instituted to forestall 
members of the nuclear industry from solely investing their nuclear 
decommissioning funds in each other's securities. Contrary to one 
commenter's assertion that the prohibition implies that nuclear power 
is a risky investment and possibly out of the NRC's jurisdiction, the 
NRC believes that this requirement is consistent with fund 
diversification.
    The NRC agrees with the suggestion that the requirement permit a de 
minimis investment in otherwise prohibited mutual fund investments. The 
final rule sets the de minimis level at 10 percent of the total value 
of a decommissioning trust account, at or below which investments in 
securities of companies owning nuclear power plants would be allowed.

[[Page 78337]]

    With respect to the comment referring to the ambiguity of the 
proposed restriction as it would apply to fixed income investments, the 
Commission continues to believe that such a restriction should apply. 
However, because the rule will not apply to licensees that meet the 
definition of ``electric utility'' and that a de minimis level of 
investment is now permitted, any effect of such a restriction should be 
substantially mitigated.
    As to the comment suggesting that the proposed prohibition in the 
trust's ownership of municipal or State-owned nuclear power plants be 
deferred to applicable State law, by having the rule apply to only 
those licensees not meeting the NRC's definition of ``electric 
utility'' that includes cooperatives and public power entities, this 
issue is rendered moot. The concern relating to the proposed rule not 
allowing a municipal licensee from investing in securities issued by a 
State government is likewise rendered moot. The NRC notes that even if 
the proposed rule were adopted as written, it would not have prevented 
municipal licensees from investing in State instruments as long as 
those instruments were not specifically tied to the nuclear plants.
    Some commenters wanted clarification of the term ``non-nuclear 
sector mutual funds.'' This term can be understood in the context of 
the NRC's definition of ``nuclear sector mutual funds.'' The NRC 
interprets these funds as being ones in which the fund invests 
primarily in entities owning nuclear power plants. Funds that invest in 
electric utilities would be nuclear sector mutual funds if the majority 
of the value of securities were from NRC licensees. As stated 
previously, a licensee may invest in nuclear sector mutual funds as 
long as its share of the licensee's portfolio is less than 10 percent.
    In response to some of the specific questions asked, the NRC 
considers partial owners of a nuclear power plant to be the same as 
full owners and thus should be counted within the 10 percent de minimis 
restriction for their respective shares of decommissioning trust 
assets. The rule will disallow investment in a mutual fund in which at 
least 50 percent of the fund is invested in securities of a parent 
company whose subsidiary is an owner of a domestic nuclear power plant 
either fully or partially. Similarly, the term ``nuclear power plant'' 
is inclusive of those being decommissioned and those licensed to 
operate.
C. Fund Management
    Comments: One commenter stated that the proposed 10 CFR 
50.75(h)(1)(i)(D) should be deleted. The commenter's position is that 
the ``prudent investor standard'' implies that if the trusts may be 
more broadly diversified to include alternative investments such as 
private equity, then the company should be able to select funds and 
managers it considers the best qualified. This is not ``day-to-day'' 
management of the funds, but strategic management of the funds. 
Virginia Electric and Power Company suggested that day-to-day 
investment decisions should be defined as ``the hands on management of 
a stock or bond portfolio, which includes making decisions to buy and 
sell individual stocks and bonds.'' It should not include formation of 
the trust's investment policy and the selection of investment advisors, 
mutual funds, pooled funds, collective funds, and limited partnerships. 
Licensees should be empowered to make strategic decisions to ensure 
that the best strategies and advisors are employed for the trust. 
Licensees' interests are aligned with those of the trust, they have 
superior knowledge of the decommissioning liability, and they have a 
broad base of financial and investment expertise. Requiring a third 
party manager to administer strategic investment decisions when the 
utility is well qualified to do so is fiscally inefficient and 
increases the cost of managing the funds.
    Similarly, several commenters stated that the NRC should more 
specifically define the ``day-to-day management'' activities that would 
be prohibited by the rule. Alternatively, these commenters suggested 
that the NRC eliminate this prohibition entirely and allow licensees to 
prudently determine the level of their involvement necessary to 
adequately administer their decommissioning trust. Also, under the 
proposed 10 CFR 50.75(h) the NRC could interpret a trust investment 
direction as being ``day-to-day investment management control'' and 
cause the trust to pay for external investment management services to 
direct the trusts investment. This prohibition is overly broad. 
Licensees should be allowed to give some direction to fund managers 
when it comes to the licensee's decommissioning fund. A commenter 
suggested that this prohibition be eliminated, or, if the NRC has 
examples where licensees who have outside managers have engaged in 
``day-to-day management'' of the fund in a detrimental way, this 
prohibition should be better defined. Another stated that the proposal 
is overly burdensome in that it would increase costs without providing 
any added protection of the public health and safety.
    Several commenters stated that the NRC's proposed limitation on 
licensee involvement in investment decisions in 10 CFR 
50.75(h)(1)(i)(D) should be changed to restrict licensees from engaging 
in this activity, rather than trustees who do not ordinarily engage in 
this type of activity. Also, it would require licensees to spend more 
money to use commercial investment management services without an 
adequate explanation from the NRC as to whether the benefits to be 
derived from this requirement, if any, would outweigh the added 
regulatory burden that would result. These commenters also stated that 
governmental agencies should be granted an exception from 10 CFR 
50.75(h)(1)(i)(D) when decommissioning trust fund investments, as 
directed by the governmental agency, are limited to investments 
permitted for the investment of public funds under applicable State 
law. Further, the selling of the investments could conflict with an 
existing contract or require a licensee to suffer additional compliance 
costs. The NRC must recognize and accommodate circumstances when 
current State law already provides sufficient safeguards. These 
commenters concluded that 10 CFR 50.75(h)(1)(i)(D) would add costs, 
reduce accountability, and is unnecessary to achieve the stated 
purposes of the proposed amendments.
    Similarly, another commenter stated that the proposed rule is 
flawed because it limits the right of public power owners to direct 
trust fund assets to investments that are permitted and regulated under 
State and local law, (e.g., investments in securities issued by the 
State government of a municipal licensee or other State or local 
municipality) the selling of which would conflict with an existing 
contract or require a licensee to suffer additional compliance costs 
without Federal compensation, or that might affect the rights of public 
power minority owners upon license transfers of owner-operators. Two 
commenters said that an exception should be made to 10 CFR 
50.75(h)(1)(i) for political subdivisions of States when investment 
management is addressed by State statute and meets ``prudent man'' 
standards.
    One commenter representing several licensees suggested adding the 
following to the proposed 10 CFR 50.75(h)(1)(i)(D): ``* * *, except in 
the case of passive fund management of trust funds where such 
management is limited to investments tracking market indices.'' The 
commenter stated that

[[Page 78338]]

this would permit passive index fund management by a licensee, its 
affiliates or subsidiaries, but would not constitute ``day-to-day 
management.'' Passive index funds replicate the performance of 
established index funds and do not require active or day to day stock 
or security selection. Commenter asserted that these funds also satisfy 
the ``prudent investor standard.'' Further, this activity could provide 
substantial cost savings to licensees, because the licensee, rather 
than an outside fund manager, can perform the mechanics necessary to 
participate in the index fund at a savings to the decommissioning trust 
fund. The commenter stated that the bottom line is that it is cheaper 
to run large amounts of index funds in-house by the sponsor than pay an 
investment manager several basis points to perform the same function.
    Response: The Commission agrees with many of the comments raised in 
this section. For example, the limitation on fund management in the 
final rule was modified to state that licensees may provide day-to-day 
direction to the trustee for buying and selling index funds, such as 
``Standard and Poors 500.'' The final rule was further modified as the 
result of another comment by restricting licensee involvement in 
investment decisions as opposed to trustee involvement as was 
originally proposed. The comments calling for an exception for 
licensees that are governmental agencies or for licensees located in 
States in which State statutes mandate investment management were 
addressed in the final rule by specifying that Sec.  50.75(h)(1) 
applies to those licensees that are not ``electric utilities.'' 
Governmental agencies, by the NRC's definition in Sec.  50.2 are 
considered electric utilities as are those licensees still under State 
regulation. The NRC agrees with the last comment that suggested a 
modification which would permit passive index fund management by a 
licensee, its affiliates or subsidiaries, and the final rule was 
changed accordingly. The proposed solutions have no negative impact on 
public health and safety, but they provide savings and efficiencies, 
and clarity compared to the proposed rule. Changes have been made in 
the regulatory guide to reflect these modifications.
D. Credit for Decommissioning Trust Earnings
    Comments: Five commenters stated that NRC should allow licensees to 
take credit for decommissioning trust earnings through the entire 
projected decommissioning period. Other commenters stated that, even if 
a plant is dismantled and decommissioned after shutdown, the credit 
should be allowed during the dismantlement period because 
decommissioning activities will not be completed immediately after the 
termination of operation. Also, licensees should be allowed to assume 
up to a maximum of ten years of earnings credit through the 
decommissioning period. One commenter suggested modifying the proposed 
10 CFR 50.75(h)(1)(iii) because in DG-1106, the NRC recognized that the 
30 day notice should be provided to the NRC before disbursing funds but 
should not apply to plants withdrawing funds under 10 CFR 
50.82(a)(8)(i). This exception is not noted in the proposed rule. The 
commenter also noted that their modification to the proposed rule is 
particularly appropriate because it allows licensees to use the 3 
percent of decommissioning trust fund monies for planning activities 
before plant retirement as provided at 10 CFR 50.82(a)(8)(ii). There is 
little need for the NRC to require a 30-day advance notice from those 
facilities utilizing the trusts for pre-planning decommissioning 
activities. Another commenter noted that NRC should permit all 
licensees to take credit for expected earnings during operation using 
the 2 percent figure during the decommissioning period, at least for 
the period coincident with DECON (i.e., approximately 7 years). This 
interpretation should also apply for a greater period if the licensee 
submits appropriate preliminary site-specific cost estimates and/or 
decommissioning planning information to the NRC.
    Two commenters stated that 10 CFR 50.75(e)(1)(i) and (ii) should be 
modified to allow credit for decommissioning trust earnings during 
periods of safe storage, final dismantlement, and license termination, 
regardless of whether a licensee uses a site-specific cost estimate or 
the NRC ``formula amount.''
    Lastly, a commenter noted that one possible interpretation of the 
regulations does not take into account the actual process by which 
decommissioning will occur. As a consequence, a licensee could end up 
collecting substantially more money than would be necessary for 
decommissioning funding simply because of unrealistic assumptions 
concerning the timing of decommissioning and expenditures for 
decommissioning shutdown. However, a licensee is not going to expend 
all decommissioning funds immediately after shutdown. Even when the 
licensee adopts an immediate dismantlement option for decommissioning, 
that process will still require several years to complete 
decommissioning. Although the withdrawals from the fund would be made 
on an ongoing basis, the assets retained would continue to grow. The 
commenter asserted that given the NRC's interpretation, licensees are 
being compelled to collect millions of dollars more during plant 
operation than will be necessary, even under the most conservative 
assumptions regarding the timing of decommissioning. The commenter 
suggested that clarification is needed regarding credit for projected 
earnings during periods of safe storage, final dismantlement, and 
license termination in the rule because the regulatory guidance is 
creating a requirement not directed by the rule.
    Response: First, it should be noted that Sec.  50.75(e)(1) and (2) 
also require full funding of decommissioning ``at the time termination 
of operation is expected.'' Thus, the commenters have not provided a 
complete picture of the situation. Second, the generic formulas are 
based on immediate dismantlement as the assumed method of 
decommissioning. Therefore, those licensees certifying to formulas can 
not take a 2-percent credit into a SAFSTOR period. However, a 2-percent 
credit can be used when a site-specific estimate is explicitly based on 
deferred dismantlement. Third, credits may be timed for outlays for 
decommissioning expenses. Licensees certifying only to the formula 
amounts (i.e., not a site-specific estimate) can take credit into the 
dismantlement period (e.g., the first 7 years after shutdown.) The 
final rule has been revised to reflect these points.
E. Modifications to Trusts
    Comments: Eight commenters stated that the NRC should define what 
is meant by a ``material'' modification to a trust that would require a 
30-day advance notification to the NRC in more detail. If the proposed 
rule is adopted as written, the redundant reporting requirements should 
be deleted. The commenter further stated that the 30-day notification 
for licensees making material changes to trust agreements should not 
apply to those changes caused by State or Federal mandated changes. 
Lastly, the NRC should be required to notify licensees if there were no 
objections to proposed amendments.
    Two commenters noted that the NRC should be aware that certain 
amendments to trust agreements in the proposed rule may require PUC 
approval. As an example, two other commenters noted that their PUCs 
approved the way the different types of decommissioning funds are 
handled in a single external trust, and any

[[Page 78339]]

significant change in this handling would require PUC notification and 
review. Therefore, the commenters wish to be able to continue with this 
commingling of funds through the completion of the commenters' plant 
decommissioning. The proposed 10 CFR 50.75(h)(1)(iii) would preclude 
such a commingling of funds in a single external trust account, because 
withdrawals from the fund under the proposed rule would be allowed only 
for radiological decommissioning costs. The commenter is concerned that 
the withdrawals it has been able to make would not be possible under 
the proposed rule, even though NRC has pre-approved: (1) The 
construction and associated costs of a dry storage facility; (2) the 
schedule for this construction and for incurring these costs; and (3) 
the schedule for and manner of (commingling) accumulating funds to 
cover these costs.
    Two commenters suggested an addition to the rule that ``* * * any 
amendment to the license of a utilization facility which does no more 
than delete specific conditions relating to terms and conditions of 
decommissioning trust agreements involves `no significant hazards 
consideration.' '' The commenters stated that licensees should be 
provided relief from any conflicts or inconsistencies between the final 
rule and specific license conditions. Licensees that currently have 
separate license conditions in this area should have the option to 
amend their licenses to remove those conditions. The commenters also 
stated that a generic finding of no significant hazards consideration 
would facilitate the review and approval of these administrative 
amendments.
    Response: The NRC's definition of ``material'' modifications 
includes actions such as a change of a trustee, changes of provisions 
relating to withdrawals from the trust, changes relating to the 
beneficiary, changes relating to the duration or term of the trust, or 
other changes potentially affecting the ability of the trust agreement 
to provide reasonable assurance of decommissioning funds. Modifications 
that are not material would include, for example, changes in fee 
structures paid to a trustee, changes in arbitration provisions between 
the trustee and the licensee, changes in the investment advisor, if 
applicable, or investments, provided the changes comply with other 
aspects of this rule.
    As to the second comment in this section relating to PUC approval, 
it has been noted that much of this rule will not apply to licensees 
under PUC regulation. Further, with respect to commingling of funds, 
the Commission does not object to that practice as long as the 
licensees are able to provide a separate accounting showing the amount 
of funds earmarked for radiological decommissioning versus utilities 
not subsumed under the NRC's definition of decommissioning in 10 CFR 
50.2.
    The last comment suggested an addition to the rule to provide 
relief from any conflicts or inconsistencies between the final rule and 
specific license conditions. Licensees will be able to decide for 
themselves whether they prefer to keep or eliminate their specific 
license conditions. Because these changes would be to conditions that 
resulted from license amendments (i.e., license transfers) that already 
generically involve ``no significant hazards'' considerations, any 
amendments to conform or eliminate these conditions would likewise 
involve ``no significant hazards.''
F. Foreign Trustees
    Comments: Two commenters stated that the rule should not preclude 
foreign financial institutions from serving as trustees (proposed 10 
CFR 50.75(e)(1)(ii)) if a licensee can demonstrate that there would be 
an equivalent level of assurance. The proposed amendment to Sec.  
50.75(e) would require the trust to be overseen by an entity that is an 
appropriate State or Federal government agency or whose operations are 
regulated by a State or Federal agency. The commenters also stated that 
clarification is needed as to what this amendment would actually 
require, who would qualify as an appropriate agency, and what role that 
agency would have in the administration of the decommissioning trust. 
The amendment would also preclude the use of an insurance product, 
which the NRC presently allows, to satisfy decommissioning funding 
requirements. Many of the presently used insurance companies are 
domiciled outside of the U.S. The commenters further stated that it is 
not clear why there should be a requirement that only companies 
regulated by State or Federal agencies can be trustees for 
decommissioning purposes, when such a requirement does not apply to 
insurers used to satisfy financial assurance requirements for operating 
reactors.
    Response: A licensee may have a foreign financial institution 
serving as trustee if the licensee can demonstrate to the NRC that 
there would be an equivalent level of assurance as there would be under 
a U.S. trustee. At a minimum, the foreign trustee would need to have a 
business branch in the U.S. that is regulated by a State or Federal 
entity. Also, the amendments in these regulations only apply to trust 
agreements, not insurance coverage. Thus, licensees who choose to use 
insurance for decommissioning assurance may use foreign insurers.
G. Non-radiological Decommissioning Funds
    Comments: Seven commenters stated that the proposed 10 CFR 
50.75(h)(1)(iii) fails to acknowledge the possible accumulation of 
trust funds for purposes of funding spent fuel management and non-
radiological decommissioning costs, but that such an accumulation 
should be encouraged by the NRC. Several of the commenters suggested 
that restrictions should not apply to funds held in trust for purposes 
other than radiological decommissioning, e.g., spent fuel storage or 
non-radiological decommissioning costs. The commenters asserted that a 
licensee cannot completely fulfill its NRC regulatory decommissioning 
obligation while fuel resides in the spent fuel pool and in keeping 
with the principle that the beneficiaries of the plant's production 
should pay the full life-cycle costs, respectively. Collection of these 
funds is usually encouraged or required by PUCs. Also, complete 
``greenfield'' decommissioning is usually required if the property is 
not owned by the licensee. The commenters stated that if the NRC 
determines that these funds should be placed in separate trusts or sub-
accounts to avoid the proposed restrictions, the NRC should provide 
licensees an opportunity to move these funds into separate trusts or 
accounts before the implementation of the new rule.
    Alternatively, a commenter noted that NRC should clarify that the 
proposed 10 CFR 50.75(h)(1)(iii) disbursement restrictions apply only 
to funds held in trust for radiological decommissioning, not non-
radiological decommissioning. Some decommissioning trust funds are 
required by non-NRC regulatory agencies to include decommissioning 
activities that NRC does not require and their estimates would then 
exceed those of the NRC. The commenter wishes to ensure its continued 
ability to protect ratepayers from any financial risks associated with 
nuclear decommissioning. However, the proposed 10 CFR 50.75(h)(1)(iii) 
would restrict disbursements from the trust, escrow account, Government 
fund, or other account to ordinary administrative expenses, 
decommissioning expenses, or transfer to another financial

[[Page 78340]]

assurance method until final decommissioning has been completed. The 
commenter suggested that even though separate trust funds could 
theoretically be established for NRC radiological decommissioning and 
other decommissioning activities, it would not necessarily be practical 
or cost-effective to require the physical demolition and waste 
disposition work activities to institute artificial accounting to 
ensure which fund pays for which activities. Likewise, if demolition 
funds were estimated assuming an area might be radiologically 
contaminated, those funds would have to be transferred to a different 
trust fund in order to pay for demolition if the area was determined to 
not be contaminated during the actual decommissioning.
    Two commenters noted that the proposed rule and draft guidance 
restrict the use of the trust funds for specified purposes including 
``decommissioning expenses.'' The NRC's definition of 
``decommissioning'' excludes a range of public benefit activities that 
rate-setting authorities often find necessary and appropriate for 
public funding, e.g., returning a site to ``greenfield'' condition. The 
commenters stated that the proposed rule and guidance must clearly 
state that a nuclear decommissioning trust may disburse funds for these 
other purposes as long as funds have been authorized by a public rate-
setting authority, such as a PUC, and have been collected for these 
purposes.
    Additional commenters also noted that the NRC's rules on the use of 
decommissioning trust funds should permit cleanup of non-radiological 
substances and structures. Dual jurisdiction over the nuclear power 
industry gives States the authority over the economics of nuclear 
generation costs. New York State has exercised this authority by 
allowing utilities to place collected monies from ratepayers in the 
decommissioning trust funds to pay for both the radiological and non-
radiological segments of the decommissioning process. These commenters 
suggested that the NRC should clarify that the funds may be used to 
remove non-radiological substances and structures, and restore the 
sites back to greenfield conditions. Also, the NRC should allow 
licensees to withdraw funds for non-radiological purposes before the 
completion of the radiological decommissioning activities.
    For about 8 years, another commenter has been withdrawing monies 
from its trust fund under 10 CFR 50.82(a)(8)(i), as necessary to 
accomplish radiological decommissioning activities, spent fuel 
management activities, and some non-radiological decommissioning 
activities according to the expenditure schedule detailed in the plant-
approved cost estimate and funding plan. This commenter stated that 
combining radiological decommissioning, non-radiological, and spent 
fuel funds has been economically and functionally advantageous.
    Response: The first comment in this section calls on the NRC to 
encourage the accumulation of trust funds for the purposes of spent 
fuel management and non-radiological decommissioning costs. The 
collection of funds for spent fuel management is already addressed in 
10 CFR 50.54(bb) where it indicates that licensees need to have a plan, 
including financing, for spent fuel management. Any NRC requirements 
with respect to the accumulation of funds for non-radiological 
decommissioning costs would be beyond the range of the NRC's legal 
authority. The NRC does not object to licensees mingling funds for 
decommissioning activities as defined by the NRC and for other 
activities outside the NRC's definition. However, if funds are mingled 
in this way, licensees need to ensure that separate sub-accounts are 
established so funds for each type of activity are appropriately 
identified.
    As to the statement made by commenters that restrictions should not 
apply to funds held in trust for purposes other than radiological 
decommissioning, the Commission's position is that withdrawals for non-
radioactive decommissioning expenses that do not affect the amount of 
funds remaining for radiation decommissioning costs are not covered by 
this rule. However, the Commission is not proposing that licensees 
institute separate trusts to account for the different types of 
activity. The Commission appreciates the benefits that some licensees 
may derive from their use of a single trust fund for all of their 
decommissioning costs, both radiological and not; but, as stated above, 
a licensee must be able to identify the individual amounts contained 
within its single trust.
    The remainder of the comments relating to State jurisdiction and 
licensees already in decommissioning become moot because this rule will 
not apply to licensees under State or FERC regulation or to licensees 
withdrawing monies under 10 CFR 50.82.
H. Implementation of the New Rule
    Comments: Eleven commenters noted that the proposed rule does not 
contain any plans for transition from the existing provisions to the 
new requirements. The rule provides neither a period for an effective 
date nor any plans for transition from existing trust agreements to the 
requirements of the proposed rule. These commenters stated that it is 
also not clear if the new rule only applies to licenses in a 
deregulated environment or licensees who are pursuing renewal or 
license transfer of all licenses. The NRC should clarify what actions 
licensees must take with regard to existing trust agreements and when 
these actions must be completed if the proposed rule becomes final. The 
NRC should allow licensees sufficient time to review and conform trust 
documents to comply with the final rule to avoid, or at least minimize, 
adverse financial impact on decommissioning funds resulting from 
compliance with the proposed rule. These commenters suggested that 
grandfathering or a reasonable transition period should be allowed for 
existing decommissioning funding arrangements that cannot be amended or 
terminated without substantial penalties.
    One commenter stated that the implementation period should be no 
shorter than 90 days and that the rule should permit case-by-case 
extensions where there is good cause. A second commenter stated that a 
transition period of at least six months before the new requirements 
are made effective is needed. Another commenter suggested that the 
implementation period should be extended to a period of ``not less than 
one year'' because a small number of trustees act for a large number of 
licensees and their trusts. Still another commenter stated that the NRC 
needs to clearly state its expectations regarding when licensees are 
expected to modify their trust documents to conform to the proposed 
rule. The commenter proposed that for plants not undergoing license 
transfer or license renewal, a two-year period should be specified to 
allow for a smooth transition to the rule, following its effective 
date.
    Another commenter pointed out that changes may require other non-
NRC regulatory approvals. Still another commenter stated that the NRC 
should make it clear that its silence as to a proposed disbursement, or 
its approval after objection, will have no effect upon parties' rights 
under contracts or other regulations governing the expenditure of 
decommissioning funds. Lastly, another commenter suggested that the 
proposed investment limitations should be implemented to all new 
investments 90 days following the implementation of the rule. This 
commenter noted that requiring changes to the existing portfolios would 
result in increased

[[Page 78341]]

costs because of the fees and there are potential tax consequences. The 
last comment on this point stated that the implementation statement 
could include a clause requiring implementation of the rule if 
ownership will be changing or before elimination of State and FERC 
oversight of decommissioning funding during the implementation period.
    Response: The Commission has decided that the implementation of 
this rule will be one year from its date of publication in the Federal 
Register. This should be sufficient to help licensees avoid negative 
financial impacts on the decommissioning funds. With respect to the 
point on parties' rights under contracts, the NRC does not believe that 
this rule will interpose the NRC in contractual disputes that do not 
affect protection of public health and safety. The last comment in this 
section is rendered moot because the rule will not, in general, apply 
to licensees under FERC or PUC regulation, or who otherwise meet the 
NRC's definition of ``electric utility.''
I. Backfit
    Comments: A few commenters stated that the proposed action was, in 
fact, a backfit, contrary to the NRC's stated position. Therefore, a 
backfit analysis is required because the NRC already requires a 
decommissioning fund to be segregated from a licensee's assets and 
outside its administrative control, and permits withdrawals only for 
legitimate decommissioning expenditures. These commenters further 
stated that because the NRC is capable of imposing additional 
conditions when necessary in license transfer proceedings, the proposed 
rule does not appear necessary to protect the public health and safety. 
These commenters asserted that the NRC should not seek to invoke the 
``adequate protection'' exception to the Backfit Rule in this case, but 
should perform the requisite analysis of costs and benefits under the 
standards of 10 CFR 50.109(a)(3).
    Another commenter stated that an adequate backfit analysis has not 
been performed because the analysis does not mention how this 30-day 
notice before fund use during actual decommissioning activities will 
adversely affect licensees. This commenter asserted that the reliance 
on the effect of the loss of PUC/FERC jurisdiction and oversight due to 
deregulation fails to acknowledge or consider that many licensees are 
not deregulated and may never be fully deregulated. The NRC has not 
articulated why existing rules fail to ensure adequate protection and 
no example is given of a licensee who lacked financial assurance to 
complete decommissioning in a safe and timely manner. This commenter 
further stated that the NRC has not provided any analysis of how the 
NRC could more effectively ensure the availability of adequate funds 
for decommissioning in a more efficient and less restrictive manner.
    Response: The NRC believes that by eliminating most of the 
requirements that ``electric utility'' licensees comply with the rule 
and by explicitly eliminating the requirement to provide advance 
notification of decommissioning fund expenditures when Sec.  50.82 
applies, the backfit concern is eliminated. Most of the comments 
related to the possibility of dual regulation, which is not the case 
under this final rule. Further, the rule language has been changed from 
``30 days'' to ``30 working days.''

5. Other Comments

    The following comments were submitted by one commenter each and do 
not fit into one of the major categories listed above.
    Comment: The proposed rule does not correspond to the 
``Discussion'' and ``Section-by-Section Analysis'' in the Federal 
Register notice. The rule's ``Discussion'' section focuses entirely on 
decommissioning trusts, but this focus is not reflected in the proposed 
rule. It is particularly unclear if the use of decommissioning trust 
funds is mandatory under 10 CFR 50.75(e) or if other less formal 
arrangements are also acceptable. The commenter recommends that use of 
the trust funds be mandatory unless there are compelling reasons that 
less formal arrangements can provide equivalent protection. The rule's 
``Discussion'' section focuses entirely on decommissioning trusts, but 
this focus is not reflected in the proposed rule.
    Response: After 1988 and as amended in 1998, the NRC, under 10 CFR 
50.75 has allowed a variety of financial assurance mechanisms. However, 
virtually all nuclear power reactor licensees have decided to make use 
of decommissioning trusts; hence, the focus and emphasis on trusts in 
this rule.
    Comment: ``* * * (T)he proposed rule itself would not require 
decommissioning trusts. An arrangement that is not a trust will not 
have a trust instrument and may not entrust decommissioning funds to 
someone with the fiduciary obligations of a trustee.''
    Response: As stated above, virtually all nuclear power reactor 
licensees have decided to make use of decommissioning trusts; hence, 
the focus and emphasis on trusts in this rule.
    Comment: Proposed 10 CFR 50.75 (e)(1)(i), states that ``Prepayment 
is the deposit * * * of cash or liquid assets * * *'' It then goes on 
to state that ``Prepayment may be in the form of a trust, escrow 
account, Government fund, certificate of deposit, deposit of government 
securities, or other payment acceptable to the NRC.'' This commenter 
claims that ``Trusts,'' ``escrow accounts,'' and ``Government funds'' 
are not forms of prepayment.
    Response: ``Trusts,'' ``escrow accounts,'' and ``Government funds'' 
may be used as forms of prepayment as long as they are established in 
accounts that are independent from the licensee. Further, certificates 
of deposit and deposits of Government securities are among those 
securities that could be deposited in a prepayment account.
    Comment: A commenter claimed an inconsistency on several bases 
between the words of the proposed Sec.  50.75 (e)(1)(i) `` * * * trust, 
escrow account, Government fund, certificate of deposit, deposit of 
Government securities, or other payment shall be established pursuant 
to a written agreement * * *'' versus the following words in the 
``Section-by Section Analysis:'' ``The sentence would call for the 
trust to be an external trust fund held in the United States, 
established pursuant to a written agreement * * *''. First, the 
commenter noted that ``the apparent intent of the rule is to require 
decommissioning trusts for both prepayments and external sinking funds. 
Escrow accounts and certificates of deposit are not the same as trusts, 
although a certificate of deposit could be held within a trust.'' Next 
the commenter stated that the language is ``confusing'' in that 
``government funds, certificates of deposit, government securities and 
other payments are not `established pursuant to a written agreement' 
but rather are types of funding.'' The commenter was not aware of 
licensees using Government funds for their decommissioning funding. The 
commenter stated that if these arrangements do not exist and are not 
expected to be created, the rule should be modified to delete any 
reference to them. However, if that is not the case and these 
arrangements do exist, the rule should be written to allow use of 
Government funds if they ensure the same level of certainty as 
decommissioning trusts.
    Response: A major portion of the response to this comment is 
contained in the previous response. The intent of

[[Page 78342]]

the rule is not to require decommissioning trusts for prepayments and 
sinking funds, but to focus on making these trusts stronger. As 
indicated, the rule focuses on external trusts because almost all 
licensees use them. However, the final rule has been modified to state 
that similar provisions are to be included in escrow accounts and 
Government funds. Although the commenter apparently was not aware of 
licensees using Government funds for their decommissioning funding, one 
State has essentially established a Government fund for the nuclear 
plant located in its State.
    Comment: The same commenter stated that ``Government funds are, 
however, typically within the control of government bodies and may be 
used for the purposes allowed by law. Judicial enforcement of amended 
statutory provisions could be much more problematic than judicial 
enforcement of a trust agreement.''
    Response: NRC has traditionally granted deference to State 
ratemaking mechanisms. However, case law has long established Federal 
preeminence with respect to protection of public health and safety 
under the Atomic Energy Act of 1954, as amended.
    Comment: A commenter stated that ``If sinking fund payments and 
prepayments into external decommissioning trusts are used by virtually 
all nuclear power plant licensees * * * there would appear to be no 
good reason for confusing language that would allow less certain 
arrangements to maintain decommissioning funds.''
    Response: After 1988 and as amended in 1998, the NRC, under 10 CFR 
50.75, has allowed a variety of financial assurance mechanisms. 
However, virtually all nuclear power reactor licensees have decided to 
make use of decommissioning trusts; hence, the focus of this rule on 
trusts. The NRC sees no need to limit the licensees' available options 
that the NRC has determined provide equivalent levels of assurance.
    Comment: The Commission should clarify that replenishment of a 
decommissioning working capital fund would be a permissible 
disbursement from the decommissioning trust fund.
    Response: Because the rule will not apply to those licensees 
operating under 10 CFR 50.82, the point is moot.
    Comment: The disbursement process should provide an option for a 
licensee to be the party presenting the request for disbursements and 
the party to disburse the funds, rather than the fund trustee. 
Compliance with the regulations may result in significant cost for a 
licensee. Along these lines, the commenter believes that the NRC's 
estimate of 40-80 hours being required for a licensee to revise its 
trust agreement to comply with the proposed regulations is ``unduly 
low.'' If the rule would result in a loss in the value of the fund, the 
existing trust arrangement should be ``grandfathered'' or the licensee 
should be able to seek a waiver from NRC on this requirement.
    Response: The NRC agrees with the proposed option for a licensee to 
be the party presenting the request for disbursement and the party to 
disburse the funds. The change has been made to the rule to reflect 
this option. Even though there was only one commenter who questioned 
the 40 to 80 staff-hour estimate to revise a trust agreement and the 
Commission believes that its estimate was within the range anticipated 
by the other commenters, it has increased the estimated range up to 60 
to 120 hours. The last comment referred to a potential loss in fund 
value because of the rule. The Commission does not see this as being a 
problem because of the allowance of de minimis levels of certain types 
of investments and the one-year implementation of the rule.
    Comment: The proposed rule does not make clear if the transfer of 
nuclear plant ownership interests would be facilitated by more uniform 
decommissioning trust agreements, or if the NRC's intends to require 
uniform agreements. If the trustee is the sole entity authorized to 
submit requests for disbursements, this needlessly adds cost and delay 
to the process and provides no greater assurance of the availability of 
funds for decommissioning. The NRC should give licensees the option of 
being the party that submits the disbursement requests and that 
transmits payments to decommissioning contractors.
    Response: The Commission is not advocating uniform agreements and 
is only seeking provisions that enhance public health and safety. 
Further, as indicated above, the Commission will allow disbursement 
requests to be submitted by a licensee.
    Comment: In order to facilitate license transfers, the NRC should 
clarify that its regulation will have no effect on the allocation of 
rights, obligations, or liabilities established by contract or directly 
applicable orders. If uniform trust agreement provisions were required, 
they may create an unintended impediment to plant transfers in the 
future. The rule should state that the regulation would not affect in 
any manner the rights, obligations, and liabilities of the parties 
involved in the sale of a nuclear power plant ownership interest.
    Response: The Commission agrees with the first comment that the 
``regulation will have no effect on the allocation of rights, 
obligations, or liabilities established by contract or directly 
applicable orders.'' With regard to uniform trust provisions, the NRC 
is not requiring uniform trust provisions except in specified areas, so 
the point is moot. Finally, the Commission disagrees with the last 
statement that ``the regulation would not affect in any manner the 
rights, obligations, and liabilities of the parties involved in the 
sale of a nuclear power plant ownership interest.'' As stated earlier, 
the NRC is not mandating uniform trusts but will require certain 
provisions to protect public health and safety.
    Comment: The NRC should convene a public technical conference to 
explore issues relating to the proposed regulation. Also, the NRC 
should gather more information and issue a revised notice of proposed 
rulemaking before proceeding.
    Response: The NRC believes the final rule, which is not applicable 
to licensees still under State or FERC regulation, except as noted for 
the reporting requirement, clears much of the confusion apparently 
caused by the proposed rule. Therefore, the Commission does not believe 
a conference or the collection of additional information is necessary.
    Comment: One commenter suggested that the NRC should provide 
guidance as to what its expectations are with respect to arbitration 
provisions often contained in trust agreements governing disputes 
between a trustee and grantor.
    Response: The NRC has no position on arbitration positions 
contained in trust agreements because those provisions are beyond the 
NRC's legal authority.
    Comment: The NRC should provide a list of the public and private 
companies that own or operate power reactors within the meaning of the 
rule.
    Response: A complete list of licensees/owners of nuclear power 
plants may be found in ``Owners of Nuclear Power Plants,'' NUREG/CR-
6500, Rev. 2, (March 2002). The NRC intends to revise this publication 
approximately every 2 years.
    Comment: One commenter stated that the rule should be revised to 
eliminate the unnecessary requirement for power reactor licensees that 
maintain an NRC-approved, site-specific decommissioning cost estimate 
and funding plan to also meet the minimum certification amount under 10 
CFR

[[Page 78343]]

50.75(c). The rule should be revised to specify that for power reactor 
licensees that maintain NRC-approved site-specific decommissioning cost 
estimates and funding plans, the requirements of 10 CFR 50.75(c) do not 
apply. If such a rule revision is not made, then the subject statement 
in DG-1106 should be reworded or eliminated.
    Response: The commenter is incorrect in indicating the rule should 
be revised. The Commission's position remains that the site-specific 
estimates may be used as a basis for a funding plan if the amount to be 
provided is ``* * * at least equal to that stated in paragraph (c)(2) 
of * * *'' (Sec.  50.75). The Commission does not intend to allow use 
of site-specific amounts lower than the formula values. The subject 
statement in DG-1106 has been addressed.
    Comment: The NRC should consider conforming changes to 10 CFR 
72.30, ``Financial assurance and recordkeeping for decommissioning.'' 
10 CFR 72.30(c) and (d) apply to Part 50 power plant licensees who 
store spent fuel in an Independent Spent Fuel Storage Installation 
under either a Part 72 specific license or a general license. 
Compliance between Parts 50 and 72 would be beneficial to both the NRC 
for enforcement purposes and licensees for compliance purposes.
    Response: For the sake of consistency, 10 CFR 72.30(c)(5) is being 
modified to reflect the suggested compliance.
    Comment: The commenter urged the NRC to continue to recognize the 
separate and cooperative roles State commissions and the NRC play in 
regulating nuclear utilities and to work with States on developing 
mechanisms to protect decommissioning funds.
    Response: The NRC agrees with the comment. The rule will not be 
applicable to those licensees under State or FERC rate regulation, 
except as noted for the reporting requirement. Further, the NRC 
continues to work with the States through regular periodic contact with 
State regulatory authorities. Lastly, as the following comment 
indicates, the NRC believes that the rule continues to give State 
commissions the flexibility that they need to ensure the adequacy of 
decommissioning funds while protecting consumers within their 
jurisdiction.
    Comment: A commenter stated that in specifying ``that the trust 
should be an external trust fund in the United States, established 
pursuant to a written agreement and with an entity that is a State or 
Federal government agency or an entity whose operations are regulated 
by a State or Federal agency'' the proposed rule continues to give 
State commissions the flexibility that they need to ensure the adequacy 
of decommissioning funds while protecting consumers within their 
jurisdiction.
    Response: The NRC agrees with the comment.
    Comment: The NRC should be careful to assure that State commission 
authority to achieve these goals is not inadvertently undermined. As 
proposed, the NRC's rulemaking appears to provide enough 
standardization to achieve the goal of ensuring the security of 
decommissioning funds while allowing enough generality to achieve the 
goal of maximizing after-tax yields.
    Response: The Commission agrees with the comment. As indicated 
throughout this document, the NRC will not impose this rule on 
licensees remaining under State regulation, except as noted for the 
reporting requirement.
    Comment: The NRC should clarify that nothing in its final rule will 
preempt any State authority from reviewing the transfer of a nuclear 
facility's assets out of rate base and the impact on ratepayers.
    Response: The NRC will not do anything in this rule to preempt any 
State authority from reviewing the transfer of a nuclear facility's 
assets out of rate base and the impact on ratepayers. This is also 
consistent with the response to the preceding comment.
    Comment: An investment management firm claimed the proposed rule 
would ``unfairly damage'' their business and also deprive nuclear power 
plant owners of ``a significant investment area for diversification of 
nuclear decommissioning trust funds.''
    Response: The Commission believes the 10-percent de minimis limit 
on nuclear sector investments adequately addresses this concern.
    Comment: Finally, several commenters stated that modifications 
should be made to the Draft Regulatory Guide to make it consistent with 
the changes made to the final rule.
    Response: The Regulatory Guide has been modified to reflect the 
changes made to the final rule.

6. Comments on the Draft Regulatory Guide

    Comments were also received on the draft regulatory guide DG-1106. 
The comments were grouped by section and responded to by the NRC.
I. Comments on Section 1
    Comment: Section 1.1 should be modified to provide guidance for 
applying existing rules to potential new reactor designs that are not 
covered by the existing 10 CFR 50.75(c).
    Response: The generic formulas can not apply if licensee is not a 
boiling water reactor or a pressurized water reactor, so any potential 
new reactor designs must be site specific. The guidance will be 
modified to highlight this fact.
    Comment: Section 1.1.1 should recognize that the certification 
amounts in 10 CFR 50.75 are specific for BWRs and PWRs. Other reactor 
licensees need to certify they will have adequate funds for 
decommissioning; however, an exemption is not needed if the amount 
differs from the BWR and PWR specified formulas. This comment also 
applies to Section 2.6.1.
    Response: As noted above, site-specific estimates would need to be 
developed.
    Comment: The last sentence of Section 1.1.2 should read ``The level 
of detail necessary to support the cost estimate is discussed in 
Regulatory Position 1.3.''
    Response: This change has been made.
    Comment: The NRC's discussion of Test 4 describes that licensees 
``generally'' prepare annual reports, etc., and does not specifically 
list annual calculation of the estimated cost as required by 10 CFR 
50.75(b)(2). Further, the Test 4 description specifies that ``* * * 
these reports can be supplied to the NRC upon request * * *'' This 
availability upon request and the biennial reporting appears 
sufficient. The Test 4 discussion should justify removing DG Sections 
2.2.8 and 1.2 or an explanation of the benefit of annual adjustments to 
the calculation versus the biennial frequency of the funding status 
should be provided.
    Response: Section 50.75(f)(1) states that ``Each power reactor 
licensee shall report, on a calendar-year basis, to the NRC by March 
31, 1999, and at least once every 2 years thereafter on the status of 
its decommissioning funding for each reactor or part of a reactor that 
it owns.'' Further, the NRC regulations (10 CFR 50.75(c)) provide the 
tables for the minimum amounts for reasonable decommissioning financial 
assurance for PWRs and BWRs. Therefore, the Commission sees no need for 
removing Sections 1.2 and 2.2.8 of the regulatory guide (which refer to 
these parts) as the commenter requested. The Commission believes that 
the required biennial reports, along with the right to request more 
frequent reports because of certain circumstances to protect the public 
health and safety are the best vehicles to provide this necessary 
information.

[[Page 78344]]

    Comment: The second and third paragraphs of Section 1.2 are 
confusing.
    Response: The NRC believes that the comment and response 
immediately following adequately address this issue and clarify this 
Section.
    Comment: In Section 1.2, the reader should be referred to the 
guidance provided in the most current revision of NUREG-1307 and then 
expressly state that the example given in the text is an example of a 
calculation for a specific year only. As written, there may be 
conflicting guidance between the NUREG and the Regulatory Guide in 
future years if each is not revised at the same time.
    Response: This change has been made.
    Comment: The last sentence of the last paragraph in Section 1.2 
should be separated into a new paragraph because it applies to more 
than non-electric utility applicants and licensees.
    Response: This change has been made.
    Comment: The last paragraph in Section 1.2 should refer to 
Regulatory Position 1.4, not 1.5.
    Response: This change has been made.
    Comment: Section 1.3 also should be modified to provide guidance 
for applying existing rules to potential new reactor designs that are 
not covered by the existing 10 CFR 50.75(c).
    The section needs to be further modified to clarify that licensees 
may provide for the funding of spent fuel management and non-
radiological decommissioning costs.
    Response: As noted above, any new reactor design application will 
need to contain site specific decommissioning cost estimates. In the 
responses to comments on the proposed rule, the Commission has 
indicated that licensees may provide for the funding of non-
radiological decommissioning costs, that are not under the Commission's 
legal authority. Also, as indicated in those responses, 10 CFR 
50.54(bb) addresses the funding of spent fuel management.
    Comment: The commenter does not see a need for DG-1085, the draft 
regulatory guide discussing cost estimates, to be referenced in Section 
1.3.
    Response: The Commission sees nothing wrong in providing 
information on resources that will be available to assist licensees in 
this area.
    Comment: Regulatory position 1.4.1 of DG-1106, states that ``For 
licensees using site-specific cost estimates (i.e., research and test 
reactor licensees, power reactor licensees not covered by 10 CFR 
50.75(c), or * * *)'' The commenter stated that it is not clear what is 
meant by ``power reactor licensees not covered by 10 CFR 50.75(c),'' 
since even licensees who are maintaining site-specific cost estimates 
are required to meet the minimum certification amount specified in 10 
CFR 50.75(c). The commenter strongly supported this statement provided 
it accompanies an associated revision to the rule to eliminate the 
unnecessary requirement for power reactor licensees that maintain an 
NRC-approved, site-specific decommissioning cost estimate and funding 
plan to also meet the minimum certification amount in 10 CFR 50.75(c).
    The rule should be revised to specify that for power reactor 
licensees that maintain NRC-approved, site-specific decommissioning 
cost estimates and funding plans, the requirements of 10 CFR 50.75(c) 
do not apply. If such a rule revision is not made, then the subject 
statement in DG-1106 should be reworded or eliminated.
    Response: Licensees not covered by 10 CFR 50.75(c) would include 
non-PWR and non-BWR reactor designs or those undergoing decommissioning 
under Sec.  50.82. With regard to the commenter's second comment 
requesting the elimination of the minimum certification amount in 10 
CFR 50.75(c), the Commission has previously considered and rejected the 
option of allowing licensees to use site-specific estimates less than 
the minimum amounts. Licensees continue to have the option of 
submitting an exemption request to the Commission for a lower amount.
    Comment: Two commenters noted that the last sentence of Regulatory 
Position 1.4.3 should be revised to replace the reference to 
``Regulatory Position 2.2.5.'' to ``Regulatory Position 2.1.5.''
    Response: This change has been made.
    Comment: Regulatory Position 1.5, which is referenced in several 
places of the draft regulatory guide, does not exist. It is not clear 
if Regulatory Position 1.2, 1.4, 2.2.8 or some other section was the 
intended reference.
    Response: The intended reference is Regulatory Position 1.4 and 
this change has been made.

II. Comments on Section 2

    Comment: In Section 2.1.5, the reference to ``Regulatory Position 
1.5'' should read 1.4.
    Response: This change has been made.
    Comment: The last sentence in Section 2.1.5 should have ``as 
needed'' added to it.
    Response: This change has been made.
    Comment: The annual adjustment frequency in Section 2.1.5 for 
licensees that are no longer rate regulated or do not have access to a 
non-bypassable charge is too frequent. Short-term market fluctuations 
could lead to more frequent adjustments than truly necessary and result 
in greater administrative costs. Because, decommissioning is normally a 
long-term investment, frequent changes could lead to losses and 
increased investment costs. Although the fund's adequacy should be 
evaluated annually, annual adjustments may not be prudent.
    Response: The last sentence of Section 2.1.5 has been revised to 
indicate that adjustments, as needed, to the amount of funds set aside 
should be made at least once every 2 years, in conjunction with the 
biennial reporting requirement by licensees that are no longer rate-
regulated or do not have access to a non-bypassable charge. Licensees 
who remain rate regulated should make these adjustments at least every 
6 years, in conjunction with rate cases.
    Comment: Regulatory Position 2.2.1 of DG-1106 should be revised to 
``An applicant or licensee using an escrow account, certificate of 
deposit, or trust agreement * * * may use the sample wording for these 
methods contained in Appendices B.1, B.2, and B.3, respectively.'' This 
change is consistent with similar wording in Regulatory Position 2.3.1 
of DG-1106.
    Response: This change has been made.
    Comment: The funding mechanism will not ensure that adequate 
information concerning funds is provided to the NRC. It is the 
licensee's responsibility to do so under the rule. Even the sample 
instruments in the appendices do not include NRC reporting 
requirements, nor should they (Section 2.2.1). Also, Section 2.2.2.5 
should be revised to delete ``terms relating to the provision of 
information to the NRC'' from the description of key provisions of a 
trust.
    Response: The Commission has deleted what was item (e), ``it will 
ensure that adequate information concerning the funds is provided to 
NRC,'' from Draft Regulatory Guide Section 2.2.1. Also, the words ``key 
terms relating to the provision of information to NRC'' has been 
deleted from Section 2.2.2.5 of the Draft Regulatory Guide.
    Comment: Replace the word ``indicia'' in Section 2.2.1 with another 
word.
    Response: The word ``indicia'' was replaced with the word 
``indicators.''

[[Page 78345]]

    Comment: The methods listed in Section 2.2.1 should be identified 
in the same order as they are listed in the appendices (i.e., the 
escrow account should be listed first because it is B-1, and the trust 
agreement should be listed last because it is B-3.)
    Response: This change has been made for the sake of consistency.
    Comment: The first sentence of Section 2.2.1 references Appendices 
B.1, B.2, and B.3. The appendices are labeled as B-1, B-2, and B-3. The 
titles should be consistent.
    Response: This change has been made.
    Comment: Section 2.2.2.1 should not indicate the need for 
identification of a license number and NRC docket number. This minor 
change would reduce the burden of nuclear decommissioning trust 
agreement amendments necessary to conform to the new NRC rule and 
guidance.
    Response: The words ``by license or NRC docket number'' were 
deleted from the draft regulatory guide. As long as licensees use a 
plant name or other specific identifier, no specific use of docket or 
license number is necessary.
    Comment: Section 2.2.2.2 should have reference to Section 468A 
eliminated because it is unnecessary. Also, the section should have an 
addition to indicate that there are existing nuclear decommissioning 
trust agreements that govern multiple trusts for multiple licensed 
facilities, an existing practice acceptable to the NRC.
    Response: The second and last sentences at Section 2.2.2.2 have 
been modified to now read: ``A single trust agreement may establish two 
or more Nuclear Decommissioning Funds when a nuclear power plant is 
owned by two or more licensees. Similarly, a trust agreement may 
contain both ``qualified'' and ``non-qualified'' decommissioning funds 
pursuant to Internal Revenue Code 468A.'' Trusts should be segregated 
by sub-accounts or some other means to clearly identify NRC-defined 
decommissioning costs for each unit.
    Comment: Several commenters suggested a reconciliation of a 30-day 
notice for disbursements with DG-1106. They stated that the rule does 
not provide for the notice exception contained in the draft regulatory 
guide Section 2.2.2.4 and that no NRC notification should be required 
for any expenditure specifically permitted under any of the provisions 
of 10 CFR 50.82(a)(8), i.e., the exception from notice requirements 
should include not only 10 CFR 50.82(a)(8)(i), but also 10 CFR 
50.82(a)(8)(ii). Lastly, Section 2.2.2.4 should be revised to 
specifically describe the acceptable forms that a written notice of 
intent may take to begin expending funds for such purpose. Acceptable 
forms should include an NRC approval of a site-specific decommissioning 
cost estimate and funding plan that includes activity costs and 
schedules related to spent fuel management and non-radiological 
decommissioning.
    Response: These comments are all addressed by the fact that 
decommissioning trust requirements of the final rule do not apply to 
licensees that are in decommissioning and thus subject to Part 
50.82(a)(8). The regulatory guide was modified to address the comment.
    Comment: The last sentence of Regulatory Position 2.2.2.5 does not 
contribute to the intent of this revision to the Regulatory Guide to 
provide more detailed guidance to assist in implementing the changes in 
the NRC's regulations. Some examples and/or characteristics of changes 
to trust agreements that would not be considered ``material'' would be 
of more assistance to licensees wishing to implement the new rule.
    Response: As previously mentioned, in response to comments received 
on modifications to trusts, the NRC defines ``material'' modifications 
to include actions such as change of trustee, change of provisions 
relating to withdrawals from the trust, changes relating to the 
beneficiary, changes relating to the duration or term of the trust, or 
other changes potentially affecting the ability of the trust agreement 
to provide reasonable assurance of decommissioning funds. Modifications 
that are not material would include, for example, changes in fee 
structures paid to a trustee, changes in arbitration provisions between 
the trustee and the licensee, changes in investment advisor, if 
applicable, or investments, provided the changes comply with other 
aspects of this rule.
    Comment: One commenter suggested that Section 2.2.3 be modified to 
reflect their comments relating to dual regulation regarding investment 
standards, re-phrasing the limitations on licensee involvement in 
investment decisions, and clarification regarding non-nuclear sector 
collective or commingled funds and pre-existing investments. Another 
revision in the section is suggested to conform the guidance to the 
explicit terms of proposed 10 CFR 50.75(h)(1)(i)(A).
    Response: The Commission considers the proposed revision consistent 
with its position on dual regulation. The revision clarifies the 
Commission's intent and the change has been made.
    Comment: This commenter referred only to paragraph C.2.2.3.3 of 
Draft Regulatory Guide DG-1106. The commenter urged NRC to drop its 
prohibition of trust agreements investing ``in securities of other 
power reactor licensees or any entity owning or operating one or more 
nuclear power plants'' and suggested that the direct investment be 
limited ``to 10% or less of trust assets.'' The commenter also claimed 
that the proposed rule would ``unfairly damage'' their business and 
also deprive nuclear power plant owners of ``a significant investment 
area for diversification of nuclear decommissioning trust funds.''
    Response: The final rule has been modified to allow licensees to 
own securities of other nuclear power plants, but to limit them to 10 
percent or less of trust assets. As a result, Section 2.2.3.3 of the 
revised regulatory guide has also been modified.
    Comment: A commenter proposed that the Commission delete Section 
2.2.3.5 which recommends that those licensees not under FERC or PUC 
jurisdiction limit investments to ``investment grade,'' as defined in 
that section. The commenter noted that use of the generally accepted 
term ``prudent investor'' standard, as defined by FERC negates the need 
for the NRC to make use of the term ``investment grade.''
    Response: The Commission has modified the rule and the guidance so 
that only the term ``prudent investor'' standard is used. Section 
2.2.3.5 has been deleted.
    Comment: A commenter proposed that the NRC revise Section 2.2.8 to 
clarify how licensees may take credit for earnings during the 
decommissioning period. This is problematic for licensees that operate 
multiple, modular reactors at a single site.
    Response: With respect to the modular reactors, the assumptions of 
earnings credit should track the estimated cash flows for 
decommissioning expenses for each module.
    Comment: A few commenters noted that the draft regulatory guide 
contains guidance that is inconsistent with the rule. The 2-percent 
rate of return credit beyond the period of operation into the safe-
storage period is not allowed in Section 2.2.8 of the regulatory guide, 
but allowed in proposed 10 CFR 50.75(e)(1)(i) and (ii). There are also 
inconsistencies with the handling of credit for periods of final 
dismantlement and license termination.
    Response: As noted in response to a similar comment on the rule, 
the 2-percent credit can only be used for the period up to shutdown if 
the amount is

[[Page 78346]]

based on the formulas in Sec.  50.75(c). If the amount is based on a 
site-specific study that explicitly includes SAFSTOR, the licensee can 
then take the 2-percent credit into the storage period.
    Comment: In Section 2.3.1, the first sentence references Appendices 
B.4, B.5, and B.6. The appendices are labeled as B-4, B-5, and B-6. The 
titles should be consistent.
    Response: This change has been made.
    Comment: The third bullet in Section 2.3.2 is confusing.
    Response: The bulleted item has been modified to read ``For 
insurance, an original or conformed copy of the insurance policy.''
    Comment: The appendix in Section 2.4.2 is incorrectly identified in 
this section. The appendix referred to should be B-3.2.
    Response: This change has been made.
    Comment: The regulatory position referred to in Section 2.4.3 
should be 2.2.5, not 2.2.2.
    Response: This change has been made.
    Comment: In Section 2.6.1, the information which the report must 
include incorrectly states that ``any contracts upon which the licensee 
is relying pursuant to 10 CFR 50.75(e)(1)(ii)(C).'' The commenter 
believed that 10 CFR 50.75(e)(1)(v) is the more appropriate reference. 
Further, the commenter suggested that this appears to be an ideal 
location to reiterate the guidance provided in Regulatory Issue Summary 
(RIS) 2001-07 for the biennial reports.
    Response: The commenter is correct in noting that 10 CFR 
50.75(e)(1)(v) is the more appropriate reference in this section and 
the change has been made. Reference to RIS 2001-07 was also added to 
Section 2.6.1.
    Comment: The content of the periodic report on decommissioning 
funding as described in Section 2.6.2 appears excessive. If more 
detailed information is desired for a specific trust, the information 
can be looked at on a case-by-case basis.
    Response: The second sentence of Section 2.6.2 has been modified to 
read `` * * * although it would be helpful if they indicate broad 
categories of investments as a percent of the total trust portfolio * * 
*.''
    Comment: The next to the last sentence in Section 2.6.2 should read 
`` * * * as provided in 10 CFR 50.75(e)(1)(i) or (ii).''
    Response: This change has been made.
    Comment: Regulatory Position 2.7 is redundant and would be more 
pertinent and focused if it were replaced with ``In 10 CFR 50.82(a)(9), 
submittal of a license termination plan is required at the time a 
licensee applies for termination of license. The license termination 
plan must include an updated site-specific estimate of remaining 
decommissioning costs, as described in detail in NUREG-1700, ``Standard 
Review Plan for Evaluating Nuclear Plant Reactor License Termination 
Plans,'' and RG 1.179, ``Standard Format and Content of License 
Termination Plans for Nuclear Power Reactors.'''
    Response: The point raised by the commenter is valid and the change 
has been made.

III. Comments on the Appendices

    Comment: The definitions of ``qualified decommissioning funds'' and 
``non-qualified decommissioning funds'' should be added to the glossary 
of financial terms provided in DG-1106, Appendix A.
    Response: The NRC uses the terms in reference to Section 468A of 
the Internal Revenue Code. A footnote has been added to Section 2.1.5 
to clarify this reference.
    Comment: The methods of financial assurance contained in DG-1106, 
Appendix B appear to contradict the requirements and allowances in 10 
CFR 50.75(e).
    Response: Appendix B was modified to note that the examples 
provided in the appendix are for some of the mechanisms allowed in NRC 
regulations.
    Comment: Appendix B-1, paragraph 4 should include that remaining 
funds should be returned to the licensee or other specified party upon 
receipt of documentation of license termination.
    Response: This requested change was not made. Although the 
Commission has no objection to those words being contained in a trust 
fund provision it is beyond NRC's jurisdiction.
    Comment: Section 5 of Appendix B-3 ``Sample Trust Fund'' should be 
revised to reflect the obligations imposed by proposed 10 CFR 
50.75(h)(1)(ii) and a commenter's proposed 10 CFR 50.75(h)(1)(iii).
    Response: This comment reflects the Commission's position that 
withdrawals made under Sec.  50.82(a)(8) will not be subject to the 30-
working day notification requirement. Section 5 of Appendix B-3 was 
revised.
    Comment: Section 6 of Appendix B-3 ``Sample Trust Fund'' should be 
revised to reflect a commenter's statement regarding non-nuclear sector 
collective or commingled funds and pre-existing investments. Section 
6(b) should be deleted because it is an issue that should be addressed 
in negotiations between the licensees and trustees. Other changes are 
also proposed to account for a commenter's proposed dual regulation 
regarding investment standards, the proposed 10 CFR 50.75(h)(1)(i)(D), 
and the proposed modification on the limitations on licensee 
involvement in investment decisions.
    Response: Section 6 has been modified to reflect the Commission's 
clarification on non-nuclear sector collective or commingled funds and 
pre-existing investments. Section 6(b) has not been modified because 
this language has been included only as part of a sample of a trust 
agreement and does not reflect any NRC requirement that this language 
be included. Other modifications have been made to reflect the 
Commission's position on dual regulation, day-to-day investment 
decisions and licensee involvement in investment decisions.
    Comment: Section 8 of Appendix B-3 ``Sample Trust Fund'' 
subsections should be renumbered to correct a typographical error.
    Response: This change has been made.
    Comment: Section 15 of Appendix B-3 ``Sample Trust Fund'' should be 
modified to reflect the requirements of the proposed 10 CFR 
50.75(h)(1)(ii).
    Response: This section has been modified to reflect the 30-working 
day notification of amendments to the trust agreement.
    Comment: Appendices B.3.2.2 and B.3.3 should be changed to B-3.2.2 
and B-3.3 to be consistent with titles of other appendices.
    Response: These changes have been made.
    Comment: In Appendix B-6.5, Item 9, the 120-day time frame should 
be changed to 180 days to allow sufficient time for action, because the 
period also included notification and the NRC's review time. Also, in 
Item 10, the 30 days should be changed to 90 days to allow sufficient 
time to prepare, review, and approve an alternative financial assurance 
mechanism.
    Response: These changes have been made.

IV. Comments Referring to No Specific Section of the Regulatory Guide

    Comment: Appropriate changes should be made to Regulatory Guide 
1.159 to correspond to the final rule.
    Response: The necessary changes were made.

[[Page 78347]]

    Comment: Even though neither insurance nor long term contracts are 
used by many licensees, it would be useful for the NRC to provide 
guidance for each as it does for the other methods of financial 
assurance.
    Response: First, the guide was written to address the standard, 
most widely used industry financial assurance methods, which includes 
trust agreement and guarantees but not insurance and long term 
contracts. Second, long-term contracts and insurance policies are 
likely to vary so much that it would be difficult to develop sample 
language that could encompass all uses of these mechanisms. However, 
the NRC will consider adding sample language for these mechanisms after 
it has gained more experience with their use by licensees.
    Comment: DG-1106 should include guidance for the application of the 
self-guarantee as allowed by 10 CFR 50.75(e)(1)(iii)(C).
    Response: When using the self-guarantee mechanism, a licensee needs 
to pass the financial tests as discussed in 10 CFR part 30, Appendix 
C--Criteria Relating to Use of Financial Tests and Self Guarantees for 
Providing Reasonable Assurance of Funds for Decommissioning.
    Comment: The commenter suggested modifications to DG-1106 to 
clarify the NRC's guidance for applying the existing rules to potential 
new reactor designs that are not covered by the current formula amount 
in 10 CFR 50.75(c).
    Response: As indicated above, new reactor designs will be required 
to use site-specific decommissioning cost estimates.
    Comment: The guide is inconsistent in the use of recommendations 
and requirements.
    Response: The NRC staff reviewed the guide and made changes where 
necessary. Of course, requirements should only be used in reference to 
being in compliance with regulations and recommendations in reference 
to approved ways of meeting requirements, often contained in guidance.
    Comment: The notification for disbursements and material changes 
ought to apply to the licensee, rather than the trustee. The proposed 
rule would require the licensee to notify the NRC of material changes 
to the trust, while the guide states the trustee is responsible.
    Response: Sections 2.2.2.4 and 2.2.2.5 of the guide has been 
changed to indicate that the licensee is responsible for notifying the 
NRC of material changes to the trust.
    Comment: Estimated tax deductions should be allowed to be assumed 
to cover taxes on earnings that will be due when investments are sold 
to meet decommissioning expenses.
    Response: The NRC has a long standing policy of not allowing 
estimated future tax deductions as part of a means to provide 
decommissioning funding assurance.
    Comment: The sample agreements in the appendices do not reflect 
that the rule permits use of funds for decommissioning planning. They 
would not allow disbursements until decommissioning is in progress. 
Spending money on planning before starting decommissioning is a prudent 
use of funds, when possible.
    Response: Spending funds on planning for decommissioning before 
permanent shutdown is not precluded by this rulemaking and guidance. 
The NRC will consider clarifying the timing of the use of trust funds 
for planning in the future.
    Comment: For power reactors, a Post Shutdown Decommissioning 
Activities Report (PSDAR) is submitted rather than a plan until the 
License Termination Plan is submitted later in the decommissioning. The 
sample agreements refer to plans and procedures.
    Response: The guidance has been reviewed to check for consistency. 
Changes in the words ``plans,'' ``procedures,'' and ``reports'' were 
made for clarity where necessary.
    Comment: Some of the samples include certification that the 
licensee is required to commence decommissioning. For most power 
reactors, the licensee has decided to commence decommissioning rather 
than being required to do so.
    Response: Changes were made to the sample trust fund agreements to 
indicate that decommissioning ``has commenced,'' not that it was 
``required.''
    Comment: Ongoing activities may give rise to a need for additional 
work not anticipated at the time of the last ``request.'' Also, 
guidance does not appear to exist regarding specificity requirements 
associated with the required fund use requests. Overly broad requests 
may defeat the purpose of the rule while more specific requests may 
exclude emergent work activities for 30 days. The proposed rule and the 
draft guidance are inconsistent with respect to expectations relative 
to the new 30-day disbursement requirement.
    Response: The Commission believes that it has addressed this 
concern by noting that this rule will not be applicable to those 
licensees in decommissioning under Sec.  50.82.
    Comment: One commenter concurred that the trust wording in DG-1106 
is not expected to be adopted by the licensees, but believes that the 
NRC should clarify that directions in the proposed rule that certain 
trust provisions should be included by power reactor licensees in their 
trusts does not imply that the general language in the regulatory guide 
sample trust should be used by power reactor licensees.
    Response: This position has been included in the statement of 
considerations of the final rule.

The Final Rule

    The final rule clarifies the Commission's position that these new 
requirements are applicable only to those licensees that are no longer 
regulated by a State Public Utility Commission (PUC) or the Federal 
Energy Regulatory Commission (FERC), with the exception that all power 
reactor licensees, both rate regulated and otherwise, will be required 
to notify the NRC in advance of decommissioning trust withdrawals if 
these withdrawals are made before permanent cessation of operations. 
Further, any nuclear power plant that is no longer operating and under 
Sec.  50.82 requirements is not affected by this rule. Also, this rule 
makes a conforming change to Sec.  72.30.

Section-by-Section Analysis

Section 50.75(e)

    This section is amended by the addition of information to both 
paragraphs 50.75(e)(1)(i), which describes the prepayment method of 
financial assurance, and 50.75(e)(1)(ii), which describes the external 
sinking fund method of financial assurance. The modifications clarify 
that the trust must be an external trust fund held in the United 
States, established under a written agreement with an entity that is a 
State or Federal government agency or whose operations are regulated by 
a State or Federal agency. Additional information is also included 
about a licensee's taking credit for projected earnings on 
decommissioning funds.

Section 50.75(h)

    This is a new section that implements the following conditions 
applicable to certain power reactor licensees. The trust agreement must 
prohibit trust investments in securities or other obligations of the 
reactor owner or its affiliates, successors, or assigns, or in a mutual 
fund in which at least 50 percent of the fund is invested in securities 
of a licensee or parent

[[Page 78348]]

company whose subsidiary is an owner of a foreign or domestic nuclear 
power plant. The trust agreement must limit investments to no more than 
10 percent of their trust assets in any entity owning one or more 
nuclear power plants. The trust agreement must stipulate that the 
agreement cannot be amended in any material respect without 30 working-
days prior written notice to the NRC, and that no amendment to the 
trust may be made if the trustee receives written notice of objection 
from the NRC within that notice period. The trust agreement must 
stipulate that the trustee, investment advisor, or anyone else 
directing investments made by the trust should adhere to a ``prudent 
investor'' standard. The trust agreement must provide that no 
disbursements or payments from the trust (other than for payment of 
routine administrative expenses or for withdrawals being made pursuant 
to 10 CFR 50.82(a)(8)) may be made by the trustee until the trustee has 
first given the NRC 30 working-days prior written notice, and that no 
disbursements or payments from the trust may be made if the trustee 
receives written notice of objection from the NRC within that notice 
period. The person directing the investment of the funds may not use 
the licensee or its affiliates or subsidiaries as the investment 
manager for the funds or accept day-to-day management direction of the 
funds' investments or direction on individual investments by the funds, 
except in the case of passive fund management of trust funds when this 
management is limited to investments tracking indices.

Section 72.30(c)(5)

    This section has been modified to make it consistent with the 
requirements contained in 10 CFR 50.75(e) and (h).

Availability of Documents

    The NRC is making the documents identified below available to 
interested persons through one or more of the following methods as 
indicated.
    Public Document Room (PDR). The NRC Public Document Room is located 
at 11555 Rockville Pike, Room O-1 F23, Rockville, Maryland.
    Rulemaking Web Site (Web). The NRC's interactive rulemaking Website 
is located at http://ruleforum.llnl.gov. These documents may be viewed 
and downloaded electronically via this Web site.
    NRC's Public Electronic Reading Room (PERR). The NRC's public 
electronic reading room is located at http://www.nrc.gov/reading-rm.html.
    The NRC staff contact (NRC Staff). Brian J. Richter, Office of 
Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, 
Washington, DC 20555-0001; telephone (301) 415-1978; e-mail 
[email protected].

----------------------------------------------------------------------------------------------------------------
                         Document                              PDR          Web           PERR        NRC Staff
----------------------------------------------------------------------------------------------------------------
Comments received........................................            X  ...........               X  ...........
Regulatory Analysis......................................            X            X     ML020910259            X
Regulatory Guide, 1.159, Rev. 1..........................            X            X     ML020910282  ...........
----------------------------------------------------------------------------------------------------------------

    A free single copy of Draft Regulatory Guide DG-1106 may be 
obtained by writing to the Office of the Chief Information Officer, 
Reproduction and Distribution Services Section, U.S. Nuclear Regulatory 
Commission, Washington, DC 20555-0001, or E-mail: [email protected], 
or Facsimile: (301) 415-2289.
    Copies of NUREGS may be purchased from The Superintendent of 
Documents, U.S. Government Printing Office, Mail Stop SSOP, Washington, 
DC 20302-0001; Internet: bookstore.gpo.gov; (202)512-1800. Copies are 
also available from the National Technical Information Service, 
Springfield, VA 22161-0002; http://www.ntis.gov; 1-800-533-6847 or, 
locally, (703) 605-6000. Some publications in the NUREG series are 
posted at NRC's technical document Web site http://www.nrc.gov/NRC/NUREGS/indexnum.html.

Voluntary Consensus Standards

    The National Technology Transfer and Advancement Act of 1995, Pub. 
L. 104-113, requires that Federal agencies use technical standards 
developed or adopted by voluntary consensus standards bodies unless 
using such a standard is inconsistent with applicable law or otherwise 
impractical. In this final rule, the NRC is amending its regulations 
relating to decommissioning trust provisions for nuclear power plants. 
This action does not constitute the establishment of a standard that 
contains generally applicable requirements.

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 that this rule is not a major Federal 
action significantly affecting the quality of the human environment 
and, therefore, an environmental impact statement is not required. This 
revision to the NRC's regulations provides licensees with a 
codification of requirements and guidance that will specify more fully 
the provisions of the decommissioning trust agreements. These changes 
would not result in any increased impact on the environment from 
decommissioning activities as analyzed in the Final Generic 
Environmental Impact Statement on Decommissioning of Nuclear Facilities 
(NUREG-0586, August 1988) and Draft Supplement 1 (NUREG-0586, Draft 
Supplement 1, October 2001).\1\ Therefore, promulgation of this rule 
would not introduce any impacts on the environment not previously 
considered by the NRC.
---------------------------------------------------------------------------

    \1\ Copies of NUREG-0586 and Draft Supplement 1 to NUREG-0586 
are available for inspection or copying for a fee from the NRC's 
Public Document Room, located at One White Flint North, 11555 
Rockville Pike, Room O-1 F23, Rockville, Maryland 20555-0001. Copies 
may be purchased at current rates from the U.S. Government Printing 
Office, P.O. Box 37082, Washington, DC 20402-9328 (telephone (202) 
512-1800); or from the National Technical Information Service (NTIS) 
by writing NTIS at 5285 Port Royal Road, Springfield, VA 22161.
---------------------------------------------------------------------------

    The NRC requested public comments on any environmental justice 
considerations that may be related to this issue. No comments were 
received on this issue.
    The NRC requested the views of the States on the environmental 
assessment for this rule. No comments were received from the States on 
this issue.

Paperwork Reduction Act Statement

    This final rule amends information collection requirements that are 
subject to the Paper Work Reduction Act of 1995 (44 U.S.C. 3501 et 
seq.). This rule has been submitted to the Office of Management and 
Budget for review and approval of the information collection 
requirements.
    The burden to the public for this information collection is 
estimated to average 6600 to 13,200 hours, including the time for 
reviewing instructions, searching existing data sources,

[[Page 78349]]

gathering and maintaining the data needed, and completing and reviewing 
the information collection. Send comments on any aspect of this 
information collection, including suggestions for 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 (3150-0011), Office of Management and 
Budget, Washington, DC 20503.

Public Protection Notification

    If a means used to impose an information collection does not 
display a currently valid OMB control number, the NRC may not collect 
or sponsor, and a person is not required to respond to, the information 
collection.

Regulatory Analysis

    The Commission has prepared a regulatory analysis on this 
regulation. The analysis examines the costs and benefits of the 
alternatives considered by the Commission. The regulatory analysis is 
available as indicated under the Availability of Documents heading of 
the Supplementary Information section.

Regulatory Flexibility Analysis

    In accordance with the Regulatory Flexibility Act (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. 
This final rule affects only the licensing and operation of nuclear 
power plants.
    The 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 established by the NRC (10 CFR 
2.810).

Backfit Analysis

    The Regulatory Analysis for the final rule also constitutes the 
documentation for the evaluation of backfit requirements. No separate 
backfit analysis has been prepared. As defined in 10 CFR 50.109, the 
backfit rule applies to

    * * * modification of or addition to systems, structures, 
components, or design of a facility; or the design approval or 
manufacturing license for a facility; or the procedures or 
organization required to design, construct or operate a facility; 
any of which may result from a new or amended provision in the 
Commission rules or the imposition of a regulatory staff position 
interpreting the Commission rules that is either new or different 
from a previously applicable staff position * * *.

    The amendments to NRC's requirements for decommissioning trust 
provisions of nuclear power plants require that decommissioning trust 
agreements be in a form acceptable to the NRC in order to increase 
assurance that an adequate amount of decommissioning funds will be 
available for their intended purpose. Also, as nuclear power reactors 
have been sold, the NRC has stipulated in connection with license 
transfers that certain terms and conditions be added to decommissioning 
trusts. These sales may involve transfers of nuclear power reactors 
from regulated public utilities to firms that are not regulated as 
public utilities. Because rate regulators may, as a consequence of 
utility deregulation, cease to exercise direct oversight over 
decommissioning trusts, the Commission directed the NRC staff to 
initiate a rulemaking to require that decommissioning trust agreements 
are in a form acceptable to the NRC.
    Although some of the changes to the regulations are reporting 
requirements that are not covered by the backfit rule, other elements 
in the changes are considered backfits because they would modify, 
supplement, or clarify the regulations with respect to: (1) The fact 
that the NRC will need to exercise greater oversight of decommissioning 
trust funds as State Public Utility Commissions reduce their oversight 
as a result of deregulation within the electric power generation 
industry, and (2) the NRC exercising more oversight of decommissioning 
trusts in evaluating license transfer applications. The NRC has 
concluded on the basis of the documented evaluation required by 10 CFR 
50.109(a)(4) and set forth in the regulatory analysis, that the new or 
modified requirements are necessary to ensure that nuclear power 
reactor licensees provide for adequate protection of the public health 
and safety in the face of a changing competitive and regulatory 
environment not envisioned when the reactor decommissioning funding 
regulations were promulgated, and that the changes to the regulations 
are in accord with the common defense and security. Therefore, the NRC 
has determined to treat this action as an adequate protection backfit 
under 10 CFR 50.109(a)(4)(ii). Consequently, a backfit analysis is not 
required and the cost-benefit standards of 10 CFR 50.109(a)(3) do not 
apply. Further, these changes to the regulations are required to 
satisfy 10 CFR 50.109(a)(5).
    This is not to say that any non-compliance with this rule would 
place the public health and safety or the common defense and security 
in immediate jeopardy. Instead, the NRC views these requirements to be 
necessary to ensure that in the future, at the conclusion of plant 
operation, adequate funds will be available for decommissioning.

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 50

    Antitrust, Classified information, Criminal Penalties, Fire 
protection, Intergovernmental relations, Nuclear power plants and 
reactors, Radiation protection, Reactor siting criteria, and Reporting 
and recordkeeping requirements.

10 CFR Part 72

    Administrative practice and procedure, Criminal penalties, Manpower 
training programs, Nuclear materials, Occupational safety and health, 
Penalties, Radiation protection, Reporting and recordkeeping 
requirements, Security measures, Spent fuel, and Whistleblowing.
    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 part 50 and part 72.

PART 50--DOMESTIC LICENSING OF PRODUCTION AND UTILIZATION 
FACILITIES

    1. The authority citation for Part 50 continues to read as follows:

    Authority: Secs. 102, 103, 104, 105, 161, 182, 183, 186, 189, 68 
Stat. 936, 938, 948, 953, 954, 955, 956, as amended, sec. 234, 83 
Stat. 444, as amended (42 U.S.C. 2132, 2133, 2134, 2135, 2201, 2232, 
2233, 2239, 2282); secs. 201, as amended, 202, 206, 88 Stat. 1242, 
as amended, 1244, 1246 (42 U.S.C. 5841, 5842, 5846).
    Section 50.7 also issued under Pub. L. 95-601, sec. 10, 92 Stat. 
2951, as amended by Pub. L. 102-486, sec. 2902, 106 Stat. 3123 (42 
U.S.C. 5851). Section 50.10 also issued under secs. 101, 185, 68 
Stat. 936, 955, as amended (42 U.S.C. 2131, 2235); sec. 102, Pub. L. 
91-

[[Page 78350]]

190, 83 Stat. 853 (42 U.S.C. 4332). Sections 50.13, 50.54(dd), and 
50.103 also issued under sec. 108, 68 Stat. 939, as amended (42 
U.S.C. 2138). Sections 50.23, 50.35, 50.55, and 50.56 also issued 
under sec. 185, 68 Stat. 955 (42 U.S.C. 2235). Sections 50.33a, 
50.55a and Appendix Q also issued under sec. 102, Pub. L. 91-190, 83 
Stat. 853 (42 U.S.C. 4332). Sections 50.34 and 50.54 also issued 
under Pub. L. 97-415, 96 Stat. 2073 (42 U.S.C. 2239). Section 50.78 
also issued under sec. 122, 68 Stat. 939 (42 U.S.C. 2152). Sections 
50.80-50.81 also issued under sec. 184, 68 Stat. 954, as amended (42 
U.S.C. 2234). Appendix F also issued under sec. 187, 68 Stat. 955 
(42 U.S.C. 2237).


    2. In Sec.  50.75, the introductory text of paragraph (e)(1) and 
paragraphs (e)(1)(i) and (e)(1)(ii) are revised, and a new paragraph 
(h) is added to read as follows:


Sec.  50.75  Reporting and recordkeeping for decommissioning planning.

* * * * *
    (e)(1) Financial assurance is to be provided by the following 
methods.
    (i) Prepayment. Prepayment is the deposit made preceding the start 
of operation or the transfer of a license under Sec.  50.80 into an 
account segregated from licensee assets and outside the administrative 
control of the licensee and its subsidiaries or affiliates of cash or 
liquid assets such that the amount of funds would be sufficient to pay 
decommissioning costs at the time permanent termination of operations 
is expected. Prepayment may be in the form of a trust, escrow account, 
or Government fund with payment by, certificate of deposit, deposit of 
government or other securities or other method acceptable to the NRC. 
This trust, escrow account, Government fund, or other type of agreement 
shall be established in writing and maintained at all times in the 
United States with an entity that is an appropriate State or Federal 
government agency, or an entity whose operations in which the 
prepayment deposit is managed are regulated and examined by a Federal 
or State agency. A licensee that has prepaid funds based on a site-
specific estimate under Sec.  50.75(b)(1) of this section may take 
credit for projected earnings on the prepaid decommissioning trust 
funds, using up to a 2 percent annual real rate of return from the time 
of future funds' collection through the projected decommissioning 
period, provided that the site-specific estimate is based on a period 
of safe storage that is specifically described in the estimate. This 
includes the periods of safe storage, final dismantlement, and license 
termination. A licensee that has prepaid funds based on the formulas in 
Sec.  50.75(c) of this section may take credit for projected earnings 
on the prepaid decommissioning funds using up to 2 percent annual real 
rate of return up to the time of permanent termination. A licensee may 
use a credit of greater than 2 percent if the licensee's rate-setting 
authority has specifically authorized a higher rate. However, licensees 
certifying only to the formula amounts (i.e., not a site-specific 
estimate) can take a pro-rata credit during the immediate dismantlement 
period (i.e., recognizing both cash expenditures and earnings the first 
7 years after shutdown). Actual earnings on existing funds may be used 
to calculate future fund needs.
    (ii) External sinking fund. An external sinking fund is a fund 
established and maintained by setting funds aside periodically in an 
account segregated from licensee assets and outside the administrative 
control of the licensee and its subsidiaries or affiliates in which the 
total amount of funds would be sufficient to pay decommissioning costs 
at the time permanent termination of operations is expected. An 
external sinking fund may be in the form of a trust, escrow account, or 
Government fund, with payment by certificate of deposit, deposit of 
Government or other securities, or other method acceptable to the NRC. 
This trust, escrow account, Government fund, or other type of agreement 
shall be established in writing and maintained at all times in the 
United States with an entity that is an appropriate State or Federal 
government agency, or an entity whose operations in which the external 
sinking fund is managed are regulated and examined by a Federal or 
State agency. A licensee that has collected funds based on a site-
specific estimate under Sec.  50.75(b)(1) of this section may take 
credit for projected earnings on the external sinking funds using up to 
a 2 percent annual real rate of return from the time of future funds' 
collection through the decommissioning period, provided that the site-
specific estimate is based on a period of safe storage that is 
specifically described in the estimate. This includes the periods of 
safe storage, final dismantlement, and license termination. A licensee 
that has collected funds based on the formulas in Sec.  50.75(c) of 
this section may take credit for collected earnings on the 
decommissioning funds using up to 2 percent annual real rate of return 
up to the time of permanent termination. A licensee may use a credit of 
greater than 2 percent if the licensee's rate-setting authority has 
specifically authorized a higher rate. However, licensees certifying 
only to the formula amounts (i.e., not a site-specific estimate) can 
take a pro-rata credit during the dismantlement period (i.e., 
recognizing both cash expenditures and earnings the first 7 years after 
shutdown). Actual earnings on existing funds may be used to calculate 
future fund needs. A licensee, whose rates for decommissioning costs 
cover only a portion of these costs, may make use of this method only 
for the portion of these costs that are collected in one of the manners 
described in this paragraph, (e)(1)(ii). This method may be used as the 
exclusive mechanism relied upon for providing financial assurance for 
decommissioning in the following circumstances:
* * * * *
    (h)(1) Licensees that are not ``electric utilities'' as defined in 
Sec.  50.2 that use prepayment or an external sinking fund to provide 
financial assurance shall provide in the terms of the arrangements 
governing the trust, escrow account, or Government fund, used to 
segregate and manage the funds that--
    (i) The trustee, manager, investment advisor, or other person 
directing investment of the funds:
    (A) Is prohibited from investing the funds in securities or other 
obligations of the licensee or any other owner or operator of the power 
reactor or their affiliates, subsidiaries, successors or assigns, or in 
a mutual fund in which at least 50 percent of the fund is invested in 
the securities of a licensee or parent company whose subsidiary is an 
owner of a foreign or domestic nuclear power plant. However, the funds 
may be invested in securities tied to market indices or other non-
nuclear sector collective, commingled, or mutual funds, provided that 
this subsection shall not operate in such a way as to require the sale 
or transfer either in whole or in part, or other disposition of any 
such prohibited investment that was made before the publication date of 
this rule, provided further that these restrictions do not apply to 10 
percent or less of their trust assets in securities of any other entity 
owning one or more nuclear power plants.
    (B) Is obligated at all times to adhere to a standard of care set 
forth in the trust, which either shall be the standard of care, whether 
in investing or otherwise, required by State or Federal law or one or 
more State or Federal regulatory agencies with jurisdiction over the 
trust funds, or, in the absence of any such care, whether in investing 
or otherwise, that a prudent investor would use in the same 
circumstances. The term ``prudent investor,'' shall have the same 
meaning as set forth in the

[[Page 78351]]

Federal Energy Regulatory Commission's ``Regulations Governing Nuclear 
Plant Decommissioning Trust Funds'' at 18 CFR 35.32(a)(3), or any 
successor regulation.
    (ii) The licensee, its affiliates, and its subsidiaries are 
prohibited from being engaged as investment manager for the funds or 
from giving day-to-day management direction of the funds' investments 
or direction on individual investments by the funds, except in the case 
of passive fund management of trust funds where management is limited 
to investments tracking market indices.
    (iii) The trust, escrow account, Government fund, or other account 
used to segregate and manage the funds may not be amended in any 
material respect without written notification to the Director, Office 
of Nuclear Reactor Regulation, or the Director, Office of Nuclear 
Material Safety and Safeguards, as applicable, at least 30 working days 
before the proposed effective date of the amendment. The licensee shall 
provide the text of the proposed amendment and a statement of the 
reason for the proposed amendment. The trust, escrow account, 
Government fund, or other account may not be amended if the person 
responsible for managing the trust, escrow account, Government fund, or 
other account receives written notice of objection from the Director, 
Office of Nuclear Reactor Regulation, or the Director, Office of 
Nuclear Material Safety and Safeguards, as applicable, within the 
notice period; and
    (iv) Except for withdrawals being made under 10 CFR 50.82(a)(8), no 
disbursement or payment may be made from the trust, escrow account, 
Government fund, or other account used to segregate and manage the 
funds until written notice of the intention to make a disbursement or 
payment has been given to the Director, Office of Nuclear Reactor 
Regulation, or the Director, Office of Nuclear Material Safety and 
Safeguards, as applicable, at least 30 working days before the date of 
the intended disbursement or payment. The disbursement or payment from 
the trust, escrow account, Government fund or other account may be made 
following the 30-working day notice period if the person responsible 
for managing the trust, escrow account, Government fund, or other 
account does not receive written notice of objection from the Director, 
Office of Nuclear Reactor Regulation, or the Director, Office of 
Nuclear Material Safety and Safeguards, as applicable, within the 
notice period. Disbursements or payments from the trust, escrow 
account, Government fund, or other account used to segregate and manage 
the funds, other than for payment of ordinary administrative costs 
(including taxes) and other incidental expenses of the fund (including 
legal, accounting, actuarial, and trustee expenses) in connection with 
the operation of the fund, are restricted to decommissioning expenses 
or transfer to another financial assurance method acceptable under 
paragraph (e) of this section until final decommissioning has been 
completed. After decommissioning has begun and withdrawals from the 
decommissioning fund are made under 10 CFR 50.82(a)(8), no further 
notification need be made to the NRC.
    (2) Licensees that are ``electric utilities'' under Sec.  50.2 that 
use prepayment or an external sinking fund to provide financial 
assurance shall provide in the terms of the trust, escrow account, 
Government fund, or other account used to segregate and manage funds 
that except for withdrawals being made under 10 CFR 50.82(a)(8), no 
disbursement or payment may be made from the trust, escrow account, 
Government fund, or other account used to segregate and manage the 
funds until written notice of the intention to make a disbursement or 
payment has been given the Director, Office of Nuclear Reactor 
Regulation, or the Director, Office of Nuclear Material Safety and 
Safeguards, as applicable, at least 30 working days before the date of 
the intended disbursement or payment. The disbursement or payment from 
the trust, escrow account, Government fund or other account may be made 
following the 30-working day notice period if the person responsible 
for managing the trust, escrow account, Government fund, or other 
account does not receive written notice of objection from the Director, 
Office of Nuclear Reactor Regulation, or the Director, Office of 
Nuclear Material Safety and Safeguards, as applicable, within the 
notice period. Disbursements or payments from the trust, escrow 
account, Government fund, or other account used to segregate and manage 
the funds, other than for payment of ordinary administrative costs 
(including taxes) and other incidental expenses of the fund (including 
legal, accounting, actuarial, and trustee expenses) in connection with 
the operation of the fund, are restricted to decommissioning expenses 
or transfer to another financial assurance method acceptable under 
paragraph (e) of this section until final decommissioning has been 
completed. After decommissioning has begun and withdrawals from the 
decommissioning fund are made under 10 CFR 50.82(a)(8), no further 
notification need be made to the NRC.
    (3) A licensee that is not an ``electric utility'' under Sec.  50.2 
and using a surety method, insurance, or other guarantee method to 
provide financial assurance shall provide that the trust established 
for decommissioning costs to which the surety or insurance is payable 
contains in its terms the requirements in paragraphs (h)(1)(i), (ii), 
(iii), and (iv) of this section.
    (4) Unless otherwise determined by the Commission with regard to a 
specific application, the Commission has determined that any amendment 
to the license of a utilization facility that does no more than delete 
specific license conditions relating to the terms and conditions of 
decommissioning trust agreements involves ``no significant hazards 
consideration.''

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

    3. 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, 2224 (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).

    4. In Sec.  72.30, paragraph (c)(5) is revised to read as follows:

[[Page 78352]]

Sec.  72.30  Financial assurance and recordkeeping for decommissioning.

* * * * *
    (c) * * *
    (5) In the case of licensees who are issued a power reactor license 
under Part 50 of this chapter, the methods of 10 CFR 50.75(b), (e), and 
(h), as applicable.
* * * * *

    Dated at Rockville, Maryland, this 18th day of December, 2002.

    For the Nuclear Regulatory Commission.
Annette Vietti-Cook,
Secretary of the Commission.
[FR Doc. 02-32403 Filed 12-23-02; 8:45 am]
BILLING CODE 7590-01-P