Nuclear Regulation: Challenges Confronting NRC In a Changing	 
Regulatory Environment (08-MAY-01, GAO-01-707T).		 
								 
This testimony discusses the challenges facing the Nuclear	 
Regulatory Commission (NRC) as it moves from its traditional	 
regulatory approach, to a risk-informed, performance-based	 
approach. GAO found that (1) NRC's implementation of a		 
risk-informed approach for commercial nuclear power plants is a  
complex, multiyear undertaking that requires basic changes to the
regulations and processes it uses to ensure the safe operation of
these plants, (2) NRC needs to overcome a number of inherent	 
difficulties as it seeks to apply a risk-informed regulatory	 
approach to the nuclear material licensees, particularly in light
of the large number of licensees and the diversity of activities 
they conduct, (3) NRC will have to demonstrate that it is meeting
its mandate (under the Government Performance and Results Act) of
increasing public confidence in NRC as an effective regulator,	 
and (4) NRC faces challenges in human capital management, such as
replacing a large percentage of its technical staff and senior	 
managers who are eligible to retire. NRC has developed a 5-year  
plan to identify and maintain the core competencies it needs and 
has identified legislative options to help resolve its aging	 
staff issue.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-707T					        
    ACCNO:   A00963						        
  TITLE:     Nuclear Regulation: Challenges Confronting NRC In a      
             Changing Regulatory Environment                                  
     DATE:   05/08/2001 
  SUBJECT:   Independent regulatory commissions 		 
	     Nuclear powerplant safety				 
	     Performance measures				 
	     Personnel management				 
	     Risk management					 
	     Strategic planning 				 

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GAO-01-707T
     
Testimony Before the Subcommittee on Clean Air, Wetlands, Private Property,
and Nuclear Safety, Committee on Environment and Public Works, U. S. Senate

United States General Accounting Office

GAO For Release on Delivery Expected at 9: 30 a. m., Tuesday, May 8, 2001

NUCLEAR REGULATION Challenges Confronting NRC in a Changing Regulatory
Environment

Statement of Ms. Gary L. Jones, Director Natural Resources and Environment

GAO- 01- 707T

Page 1 GAO- 01- 707T NRC Challenges

Mr. Chairman and Members of the Subcommittee: We are pleased to be here
today to discuss the challenges that the Nuclear Regulatory Commission (NRC)
faces as it moves from its traditional regulatory approach, which was
largely developed without the benefit of quantitative estimates of risk, to
a risk- informed, performance- based approach. Under this approach, NRC will
use risk assessment findings, engineering analysis, and performance history
to focus attention on the most important safety- related activities,
establish objective criteria to evaluate performance, develop measures to
assess licensee performance, and focus on results as the primary basis for
making regulatory decisions.

NRC is responsible for ensuring that those who use radioactive material- in
generating electricity, for experiments in universities, and for such
medical uses as treating cancer- do so in a manner that protects the public,
the environment, and workers. NRC has issued licenses to 103 operating
commercial nuclear power plants and 10 facilities that produce fuel for
these plants. In addition, NRC, or the 32 states that have agreements with
NRC, regulate almost 21,000 entities that use nuclear materials (nuclear
material licensees). 1 In the medical field alone, licensees annually
perform an estimated 10 to 12 million diagnostic and therapeutic procedures
involving radioactive material.

Our testimony discusses the challenges that NRC faces to (1) implement a
risk- informed regulatory approach for commercial nuclear power plants, (2)
overcome the inherent difficulties in applying a risk- informed regulatory
approach to nuclear material licensees, (3) ensure that the public is
confident that safety will be maintained under NRC?s riskinformed approach,
and (4) hire and retain staff. NRC is aware of the complexities involved and
the long- term nature of these types of challenges and has initiated a
number of activities to address them. Its performance in addressing them
will significantly shape its ability to ensure that commercial nuclear power
plants and other licensees operate safely and ultimately that workers, the
public, and the environment are adequately protected.

1 Currently, NRC has agreements with 32 states that they, rather than NRC,
regulate such entities as universities and hospitals that handle nuclear
material.

Page 2 GAO- 01- 707T NRC Challenges

In summary, we found the following:

 NRC?s implementation of a risk- informed approach for commercial nuclear
power plants is a complex, multiyear undertaking that requires basic changes
to the regulations and processes it uses to ensure the safe operation of
these plants. NRC faces a number of challenges to develop and implement this
new approach. For example, just developing a

?roadmap? to guide the agency through this complex process is a challenge.
We recommended such a ?roadmap? in March 1999. We suggested that a clearly
defined strategy that would describe the regulatory activities NRC planned
to change to a risk- informed approach, the actions needed to accomplish
this transformation, and the schedule and resources needed to make these
changes would help guide the regulatory transformation. While NRC developed
the Risk- Informed Regulation Implementation Plan to address our
recommendation, we believe the plan could be more comprehensive to cover
such areas as activities that cut across the agency, resources, performance
measures, or how various activities are interrelated.

 NRC needs to overcome a number of inherent difficulties as it seeks to
apply a risk- informed regulatory approach to nuclear material licensees. Of
most importance, the sheer number of licensees- almost 21, 000- and the
diversity of activities they conduct- converting uranium, transporting
radioactive material, and using radioactive material for industrial,
medical, or academic purposes- increase the complexity of developing a
riskinformed regulatory approach for material licensees. In addition, NRC
will be challenged to define its role as an increasing number of states
assume responsibility for regulating nuclear material users within their
borders. The decisions that NRC ultimately makes on these fronts could have
budgetary and other implications for the agency.

 Another challenge for NRC will be to demonstrate that it is meeting one of
its performance goals under the Government Performance and Results Act-
increasing public confidence in NRC as an effective regulator. This is
because NRC has not defined the ?public? that it is targeting and does not
have a baseline by which to measure the ?increase?. To address this
performance goal, NRC instituted an 18- month pilot effort to use feedback
forms at the conclusion of public meetings. The feedback forms will provide
information on the extent that the public was aware of the meeting and the
clarity, completeness, and thoroughness of the information that NRC provided
at the meetings. It is not clear, however, how NRC will use this type of
information to demonstrate that public confidence in NRC as a regulator has
increased.

 Like other federal agencies, NRC faces challenges in human capital
management, such as replacing a large percentage of its technical staff and

Page 3 GAO- 01- 707T NRC Challenges

senior managers who are eligible to retire. The loss of its staff is
compounded by the tight labor market for experienced professionals, the
workload projected by the industry to extend the operating licenses of
existing plants and transfer the ownership of others, and the declining
university enrollment in nuclear engineering studies and other fields
related to nuclear safety. NRC has developed a 5- year plan to identify and
maintain the core competencies it needs and has identified legislative
options, such as allowing the rehire of retired staff without jeopardizing
their pension payments, to help resolve its aging staff issue. To assess how
existing human capital approaches support an agency?s mission, goals, and
other organizational needs, we developed a human capital framework, which
identified a number of elements and underlying values that are common to
high- performing organizations. 2 NRC?s 5- year plan generally includes the
human capital elements that we suggested.

NRC?s implementation of a risk- informed, performance- based regulatory
approach for commercial nuclear power plants is complex and will require
many years to fully implement. It requires basic changes to the regulations
and NRC?s processes to ensure the safe operation of these plants. NRC faces
a number of challenges to develop and to implement this process. For
example, because of the complexity of this change, the agency needs a
strategy to guide its development and implementation. We recommended such a
strategy in March 1999. We suggested that a clearly defined strategy would
help guide the regulatory transformation if it described the regulatory
activities NRC planned to change to a risk- informed approach, the actions
needed to accomplish this transformation, and the schedule and resources
needed to make these changes. 3 NRC initially agreed that it needed a
comprehensive strategy, but it has not developed one. As one NRC
Commissioner said in March 2000, ?we really are . . . inventing this as we
go along [and] given how much things are changing, it?s very hard to plan
even 4 months from now, let alone years from now.? NRC did develop the Risk-
Informed Regulation Implementation Plan, which includes guidelines to
identify, set priorities for, and implement risk- informed changes to
regulatory processes. The plan also identifies specific tasks and projected
milestones.

2 Human Capital: A Self- Assessment Checklist for Agency Leaders (GAO/ OCG-
00- 14G, Sept. 2000). 3 Nuclear Regulation: Strategy Needed to Regulate
Safety Using Information on Risk

(GAO/ RCED- 99- 95, Mar. 19, 1999). NRC Faces

Challenges to Implement a Risk- Informed Regulatory Approach for Commercial
Nuclear Power Plants

Page 4 GAO- 01- 707T NRC Challenges

The Risk- Informed Regulation Implementation Plan is not as comprehensive as
it needs to be, because it does not identify performance measures, the items
that are critical to achieving its objectives, activities that cut across
its major offices, resources, or the relationships among the more than 40
separate activities (25 of which pertain to nuclear plants). For example,
risk- informing NRC?s regulations will be a formidable task because they are
interrelated. Amending one regulation can potentially affect other
regulations governing other aspects of nuclear plant operations. NRC found
this to be the case when it identified over 20 regulations that would need
to be made consistent as it developed a riskinformed approach for one
regulation. NRC expects that its efforts to change its regulations
applicable to nuclear power plants to focus more on relative risk will take
5 to 8 years.

NRC has compounded the complexity of moving to a new regulatory approach by
deciding that compliance with such an approach will be voluntary. As a
result, NRC will be regulating with two different systems- one for those
utilities that choose to comply with a risk- informed approach and another
for those that choose to stay with the existing regulatory approach. It is
not clear how this dual system will be implemented.

One part of the new risk- informed approach that has been implemented is a
new safety oversight process for nuclear power plants. It was implemented in
April 2000; and since then, NRC?s challenge has been to demonstrate that the
new approach meets its goal of maintaining the same level of safety as the
old approach, while being more predictable and consistent. The nuclear
industry, states, public interest groups, and NRC staff have raised
questions about various aspects of the process. For example, the industry
has expressed concern about some of the performance indicators selected.
Some NRC staff are concerned that that the process does not track all
inspections issues and NRC will not have the information available, should
the public later demand accountability from the agency. Furthermore, it is
very difficult under the new process to assess those activities that cut
across all aspects of plant operations- problem identification and
resolution, human performance, and safety conscious work environment. In
June 2001, NRC staff expect to report to the Commission on the first year of
implementation of the new process and recommend changes, where warranted.

Page 5 GAO- 01- 707T NRC Challenges

NRC is facing a number of difficulties inherent in applying a risk- informed
regulatory approach for nuclear material licensees. The sheer number of
licensees- almost 21,000- and the diversity of the activities they conduct-
converting uranium, decommissioning nuclear plants, transporting radioactive
materials, and using radioactive material for industrial, medical, or
academic purposes- increase the complexity of developing a risk- informed
approach that would adequately cover all types of licensees. For example,
the diversity of licensees results in varying levels of analytical
sophistication; different experience in using riskinformed methods, such as
risk assessments and other methods; and uneven knowledge about the
analytical methods that would be useful to them. Because material licensees
will be using different risk- informed methods, NRC has grouped them by the
type of material used and the regulatory requirements for that material. For
example, licensees that manufacture casks to store spent reactor fuel could
be required to use formal analytical methods, such as a risk assessment.
Other licensees, such as those that use nuclear material in industrial and
medical applications, would not be expected to conduct risk assessments. In
these cases, NRC staff said that they would use other methods to determine
those aspects of the licensees? operations that have significant risk, using
an approach that considers the hazards (type, form, and quantity of
material) and the barriers or physical and administrative controls that
prevent or reduce exposure to these hazards.

Another challenge associated with applying a risk- informed approach to
material licensees is how NRC will implement a new risk- informed safety and
safeguards oversight process for fuel cycle facilities. Unlike commercial
nuclear power plants, which have a number of design similarities, most of
the 10 facilities that prepare fuel for nuclear reactors perform separate
and unique functions. For example, one facility converts uranium to a gas
for use in the enrichment process, two facilities enrich or increase the
amount of uranium- 235 in the gas, and five facilities fabricate the uranium
into fuel for commercial nuclear power plants. These facilities possess
large quantities of materials that are potentially hazardous (i. e.,
explosive, radioactive, toxic, and/ or combustible) to workers. The
facilities? diverse activities makes it particularly challenging for NRC to
design a ?one size fits all? safety oversight process and to develop
indicators and thresholds of performance. In its recently proposed new risk-
informed safety oversight process for material licensees, NRC has yet to
resolve such issues as the structure of the problem identification,
resolution, and corrective action program; the mechanics of the
risksignificance determination process; and the regulatory responses that
NRC would take when changes in performance occur. NRC had planned to pilot
NRC Needs to

Overcome Inherent Difficulties to Apply a Risk- Informed Approach to Nuclear
Material Licensees

Page 6 GAO- 01- 707T NRC Challenges

test the new fuel cycle facility safety oversight process in fiscal year
2001, but staff told us that this schedule could slip.

NRC also faces challenges in redefining its role in a changing regulatory
environment. As the number of agreement states increases beyond the existing
32, NRC must continue to ensure the adequacy and consistency of the states?
programs as well as its own effectiveness and efficiency in overseeing
licensees that are not regulated by the agreement states. NRC has been
working with the Conference of Radiation Control Program Directors
(primarily state officials) and the Organization of Agreement States to
address these challenges. However, NRC has yet to address the following
questions: (1) Would NRC continue to need staff in all four of its regional
offices as the number of agreement states increases? (2) What are the
appropriate number, type, and skills for headquarters staff? and (3) What
should NRC?s role be in the future? Later this month, a NRC/ state working
group expects to provide the Commission with its recommended options for the
materials program of the future. NRC wants to be in a position to plan for
needed changes because in 2003, it anticipates that 35 states will have
agreements with NRC and that the states will oversee more than 85 percent of
all material licensees.

Another challenge NRC faces is to demonstrate that it is meeting one of its
performance goals under the Government Performance and Results Act-
increasing public confidence in NRC as an effective regulator. 4 There are
three reasons why this will be difficult. First, to ensure its independence,
NRC cannot promote nuclear power, and it must walk a fine line when
communicating with the public. Second, NRC has not defined the ?public?

that it wants to target in achieving this goal. Third, NRC has not
established a baseline to measure the ?increase? in its performance goal. In
March 2000, the Commission rejected a staff proposal to conduct a survey to
establish a baseline. Instead, in October 2000, NRC began an 18- month pilot
effort to use feedback forms at the conclusion of public meetings. Twice a
year, NRC expects to evaluate the information received on the forms to
enhance its public outreach efforts. The feedback forms that NRC currently
plans to use will provide information on the extent to which the public was
aware of the meeting and the clarity, completeness, and

4 NRC?s four performance goals are to maintain safety, increase public
confidence, reduce unnecessary regulatory burden, and enhance the
effectiveness and efficiency of its activities and decisions. NRC Faces

Challenges in Demonstrating Increased Levels of Public Confidence- One of
Its Goals Under the Government Performance and Results Act

Page 7 GAO- 01- 707T NRC Challenges

thoroughness of the information provided by NRC at the meetings. Over time,
the information from the forms may show that the public better understands
the issues of concern or interest for a particular plant. It is not clear,
however, how this information will show that public confidence in NRC as a
regulator has increased. This performance measure is particularly important
to bolster public confidence as the industry decides whether to submit a
license application for one or more new nuclear power plants. The public has
a long history with the traditional regulatory approach and may not fully
understand the reasons for implementing a risk- informed approach and the
relationship of that approach to maintaining plant safety.

In a highly technical and complex industry, NRC is facing the loss of a
significant percentage of its senior managers and technical staff. For
example, in fiscal year 2001, about 16 percent of NRC staff are eligible to
retire, and by the end of fiscal year 2005, about 33 percent will be
eligible. The problem is more acute at the individual office level. For
example, within the Office of Nuclear Reactor Regulation, about 42 percent
of the technical staff and 77 percent of senior executive service staff are
eligible for retirement. 5 During this period of potentially very high
attrition, NRC will need to rely on that staff to address the nuclear
industry?s increasing demands to extend the operating licenses of existing
plants and transfer the ownership of others. Likewise, in the Office of
Nuclear Regulatory Research, 49 percent of the staff are eligible to retire
at the same time that the nuclear industry is considering building new
plants. Since that Office plays a key role in reviewing any new plants, if
that Office looses some of its highly- skilled, well- recognized research
specialists to retirement, NRC will be challenged to make decisions about
new plants in a timely way, particularly if the plant is an untested design.

In its fiscal year 2000 performance plan, NRC identified the need to
maintain core competencies and staff as an issue that could affect its
ability to achieve its performance goals. NRC noted that maintaining the
correct balance of knowledge, skills, and abilities is critical to
accomplishing its mission and is affected by various factors. These factors
include the tight labor market for experienced professionals, the workload
as projected by the nuclear industry to transfer and extend the licenses of

5 The Office of Nuclear Reactor Regulation is responsible for ensuring that
commercial nuclear power plants operate safely and do not endanger the
public or the environment. NRC Faces Human

Capital Difficulties

Page 8 GAO- 01- 707T NRC Challenges

existing plants, and the declining university enrollment in nuclear
engineering studies and other fields related to nuclear safety. In October
2000, NRC?s Chairman requested the staff to develop a plan to assess the
scientific, engineering, and technical core competencies that NRC needs and
propose specific strategies to ensure that the agency maintains that
competency. The Chairman noted that maintaining technical competency may be
the biggest challenge confronting NRC.

In January 2001, NRC staff provided a suggested action plan for maintaining
core competencies to the Commission. The staff proposed to begin the 5- year
effort in February 2001 at an estimated cost of $2.4 million, including the
costs to purchase software that will be used to identify the knowledge and
skills needed by NRC. To assess how existing human capital approaches
support an agency?s mission, goals, and other organizational needs, we
developed a human capital framework, which identified a number of elements
and underlying values that are common to high- performing organizations.
NRC?s 5- year plan appears to generally include the human capital elements
that we suggested. In this regard, NRC has taken the initiative and
identified options to attract new employees with critical skills, developed
training programs to meets its changing needs, and identified legislative
options to help resolve its aging staff issue. The options include allowing
NRC to rehire retired staff without jeopardizing their pension payments and
to provide salaries comparable to those paid in the private sector. In
addition, for nuclear reactor and nuclear material safety, NRC expects to
implement an intern program in fiscal year 2002 to attract and retain
individuals with scientific, engineering, and other technical competencies.
It has established a tuition assistance program, relocation bonuses, and
other inducements to encourage qualified individuals not only to accept but
also to continue their employment with the agency. NRC staff say that the
agency is doing the best that it can with the tools available to hire and
retain staff. Continued oversight of NRC?s multiyear effort is needed to
ensure that it is being properly implemented and is effective in achieving
its goals.

Mr. Chairman and Members of the Subcommittee, this concludes our statement.
We would be pleased to respond to any questions you may have.

Page 9 GAO- 01- 707T NRC Challenges Contacts and Acknowledgements

For further information regarding this testimony, please contact Ms. Gary L.
Jones, Director, Natural Resources and Environment, at (202) 512- 3841.
Individuals making a key contribution to this testimony include Mary Ann
Kruslicky and Philip Olson.

(360083)
*** End of document. ***