ML20246J036

Requests Opinion as to Whether Comments NRC Received Accurately Reflect Status of State of La Law & How NRC Can Resolve Problem of publicly-owned Utils Potentially Being Unable to Purchase Full Insurance Required

ML20246J036
Person / Time
Issue date:	08/05/1985
From:	Kerr G NRC OFFICE OF STATE PROGRAMS (OSP)
To:	Guste W LOUISIANA, STATE OF
Shared Package
ML20244E570	List: ML20244E567 ML20245A072 ML20245C215 ML20245C216 ML20246H199 ML20246H212 ML20246J030 ML20246J036
References
NUDOCS 8905160275
Download: ML20246J036 (16)

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.2 AUG 0 51985 I

f The Honorable William & Guste, Jr.

Attorney General State of Louisiana New Orleans, Louisiana 70112

Dear Mr. Attorney General:

On November 8,1984, the U.S. Nuclear Regulatory Comission published a proposed rule in the Federal Register (49 FR 44645) that would, if implemented. substantially increase the amount of on-site property damage insurance that operating power reactor licensees would be required to We understand from comments we have received on the proposed rule that Louisiana-law, in the comenter's view, may prohibit publicly-owned carry.

utilities from purchasing insurance either offered by mutual insurance companies (i.e.,companiesownedbythosebuyingtheinsurance)or

. requiring payment.of premiums retroactively after an accident has occurred.

The Commission's proposed rule would require an amount of insurance such that, to be in compliance, licensees would be required to purchase insurance offered by mutual insurers and potentially requiring payment of The NRC's legal analysis of this issue has concluded retroactive premiums.

that the Federal government cannot preempt State law that prohibits the The enclosed copy of the notice of proposed purchase of such insurance.rulemaking discusses this issue in more detail be As a further complication, it may be difficult for the Comission to find

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adequate technical, justification to exempt affected public made that a certain amount of %surance is required to protect public health and safety.

We would appreciate your opinion as to whether the comments we recei accurately reflect the status of Louisiana law. utilities be in comp proportionate share of non-mutual, advance premium insurance and the o owners purchased mutual or assessment insurance s We would coverage as required by the Nuclear Regulatory Comits problem of publicly-owned utilities potentially being unable to purchase Please the full amount of required insurance in States like Louisiana.

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omdarttand that any evi+,ents that you choose to make would become ear ulemaking.

the public record for',the property insurance r

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PDR REVGP NRCCRGR summes >

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MEETING 106 I

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@PPO@0AL RECORD COPY

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2 Thank you in advance for your cooperation in this matter.

Sincerely, 0:4 r.a1si g g G. Resne Em G. Wayne Kerr, Director Office of State Programs

Enclosure:

As stated Distribution:

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ENCLOSURE 4 PROPERTY INSURANCE COVERAGE Fjff COMMERCIAL NUCLEAR REACTORS Total Coverage Reactor (5 Million)

As of 4/1/83 As of 4/1/84 As of 4/1/85 As of 4/1/86 Arkansas Nuclear 1-2 963.9 1,020.0 1,085.0 1,135.0 983.0 1,020.0 1,085.0 1,135.0 Duane Arnold 983.0 1,003.0 1,085.0 1,135.0 Beaver Valley 500.0 500.0 500.0 500.0 Big Rock Point (a) 983.0 1,020.0 1,085.0 1,135.0 Browns Ferry 1-3 915.0 935.0 1,000.0 1,050.0 Brunswick 1-2 NA NA 1,085.0 1,085.0 NA NA 1,085.0 1,135.0 Byron 1 915.0 935.0 1,085.0 1,135.0 Callaway Calvert Cliffs 1-2 NA NA 1,085.0 1,135.0 Catawba 1-2 983.0

_l,020.0 1,085.0 1,135.0 Donald C. Cook 1-2 568.0 585.0 585.0 585.0 982.0 1,003.0 1,070.0 1,120.0 Cooper 983.0 1,020.0 1,085.0 1,135.0 Crystal River 915.0 935.0 1,000.0 1,050.0 Davis-Besse Diablo Canyon 1-2 983.0 1,020.0 1,085.0 1,085.0 Joseph M. Farley 1-2 1,028.0 1,020.0 1,085.0 1,135.0 Dresden 1-3 NA NA 1,085.0 1,135.0 568.0 585.0 585.0 585.0 Fermi 2 Janes A. Fitzpa_t_ rick 568.0 585.0 585.0 585.0 500.0 585.0 585.0 1,020.0 Fort Calhoun Fort St. Vrain (b) 983.0 1,020.0 1,085.0 1,135.0 983.0 935.0 1,085.0 1,135.0 R. E. Ginna Haddam Neck (Conn. Yankee) 983.0 1,020.0 1,060.0 1,135.0 Grand Gulf 983.0 1,020.0 1,085.0 1,135.0 Edwin 1. Hatch 1-2 103.7 106.2 120.2 113.4 983.0 1,020.0 1,085.0 1,135.0 Humboldt Bay (c) 568.0 585.0 585.0 585.0 Indian Point 1-2 528.0 585.0 585.0 585.0 Indian Point 3 61.8 500.0 500.0 500.0 Kewaunee 983.0 1,020.0 1,085.0 1,085.0 La Crosse (a)

NA NA 1,085.0 1,135.0 La Salle 915.0 935.0 975.0 1,05076 Limerick 983.0 1,020.0 1,085.0 1,135.0 Maine Yankee 983.0 1,020.0 1,060.0 1,135.0 McGuire 1-2 983.0 1,000.0 1,000.0 1,000.0 Millstone 1-3 568.0 1,020.0 1,085.0 1,135.0 Monticello North Anna 1-2 1,064.0 1,030.0 1,088.0 1,135.0 Nine Mile Point 983.0 1,020.0 1,085.0 1,135.0 983.0 1,020.0 1,085.0 1,135.0 Oconee 1-3 983.0 1,003.0 1,050.0 1,100.0 l

Oyster Creek NA NA 585.0 1,135.0 Palisades 983.0 1,020.0 1,085.0 1,l35.0 Palo Verde 1-2 Peach Bottom 2-3

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. - _ _ _ _ _ _ _ NA 1,135.0 NA NA Perry 1 983.0 1,0Z0.0 1,085.0 1.135.0 Pilgrim Point Beach I-2 983.0 1,003.0 1,085.0 1,135.0 Prairie Island 1-2 983.0 1,000.0 1,000.0 1,000.0 983.0 1,020.0 1,085.0 1,085.0 Quad-Cities 1-2 568.0 585.0 585.0 585.0 Rancho Seco NA NA NA 1,135.0 River Bend 1 915.0 935,0 1,000.0 1,050.0 l

H. 8. Robinson 983.0 1,0Z0.0 1,085.0 1,135.0 St. Lucie 1-2 983.0 1,020.0 1,085.0 1.135.0 Salem 1-2 San Onofre 1-3 1,028.0 1,0Z0.0 1,085.0 1,135.0 983.0 1,0Z0.0 1,085.0 1,135.0 Sequoyah 1-2 NA NA 585.0 5B5.0 Shoreham 982.0 993.0 1,085.0 1.110.0 Sunner 1,064.0 1,030.0 1,085.0 1,135.0 Surry 1-2 983.0 1,0Z0.0 1,085.0 1,135.0 Susquehanna 1-2 Three Mile Island 1-2 983.0 1,020.0 1,085.0 1,135.0 983.0 1,020.0

' 085.0 1,135.0 983.0 1,020.0 l'UB5.0 1,135.0 Trojan Turkey Point 3-4 983.0 1,020.0 1,085.0 1.135.0 Vermont Yankee NA NA 1.085.0 1,135.0 Waterford NA NA 1,085.0 1,135.0 Wolf Greek NA 585.0 1,020.0 1,135.0 WPP55 500.0 500.0 500.0 500.0 Yankee Atomic (a) 983.0 1,020.0 1,085.0 1,085.0 Zion 1-2 Notes (a) exempt from excess layer request for exemption from excess layer (b) exempt from insurance exceeding $100 million (c)

(d) Blanks indicate responses not yet received. Responses have been solicited from licensees.

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Backfit Analysis Property Insurance Requirements for NRC Licensed Nuclear Power Plants This final rule increasing the minimum amount of property damage insurance that power reactor licensees are required to maintain does not require "the 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." Accordingly, this action is not a backfit as defined in 10 CFR 650.109(a)(1) and no.backfit analysis is required pursuant to 6 50.109(a)(2).

However, the rule does modify a licensee's financial responsibilities and the CRGR Charter, Revision 2, requires an analysis in accordance with 5 50.109 unless a rationale for not doing such an analysis is included in the rulemaking package.

For this reason, the staff has used the nine factors listed in 10 CFR 6 50.109(c) to analyze the impacts of this final rule.

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(1) Statement of the specific objectives that the proposed backfit is designed to achieve.

Currently 10 CFR 50.54 (w) requires power reactor licensees to carry substantial amounts of property insurance (no less than $585 million based on existing insurance capacity) to pay for the cost of cleanup following an accident at a commercial nuclear power plant. However, a report by Pacific Northwest Laboratory (PNL), Technology, Safety and Costs of Decommissioning Reference Light Water Reactors Following Postulated Accidents (N'JREG/CR-2601) indicated that the cost to clean up l

_ _ _ _ after a severe accident could amount to $1.06 billion.

The Commission has expressed the view that additional property insurance should be required so that the financing and pace of cleanup following an accident do n'at increase the risk of further radiation exposure to workers and the public.

(2) General descripi:en of the activity that would be required by the licensee or applicant in order to comolete the backfit.

Revised 10 CFR 50.54(w) would require power reactor licensees to purchase additional onsite property damage insurance so as to provide a minimum coverage amount of $1.06 billion for their reactor facilities.

It is intended that proceeds from this insurance would be used to pay for the cost of cleanup following an accident at the facility.

(3) Potential change in the risk to the public from the accidental off-site reley e of radioactive material.

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Foi"owing the TMI-2 accident there was no thorough quantitative evaluation of the impact on the public health and safety of not cleaning up TMI-2 because the decision was made that such an approach was not a viable alternative. The primary reasons were that the radioactive wastes were not in forms which had been designed for long-term storage or disposal, the facility had not been designed for long-tenn storage or disposal, and the site had not been selected for long-term storage or disposal. Given another accident, it is likely that similar considerations would apply; i.e., that it would be considered

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unacceptable to leave the facility in a condition in whi'ch it might. pose

'a threat to the public health and safety. The final property insurance rule provides a means of assuring that funds will be available'for 1

cleanup.

(4) Potential impact on radiological exposure of facility employees.

As with-factor (3) above, the longer a damaged facility is required, because of lack of adequate financial resources, to exist in a situation for which it'was not designed, the greater the risk of radiological

. exposure to facility employees.

(5)

Installation and continuing costs associated with the backfit, including the cost of facility downtime or the cost of construction delay.

Costs assnciated with the imposition of additional property insurance

. requirements ' result almost exclusively from additional insurance premiums paid by those licensees who would not otherwise purchase $1.06 billion in insurance. Based on licensee reports submitted by April 1, 1986 as required under existing 10 CFR 50.54(w), approximately 13 licensees would be affected. Of these 13. several are not buying at least $1.06 billion because they are precluded by state law from buying insurance using retroactive assessments. Although the NRC is not privy to the premiums charged for most property insurance, it is estimated that the total additional cost per year, not including potential retroactive assessments, to each of these 13 licensees would likely range from $0.3 million to $1.5 million.

For this cost, newly-covered licensees, their stockholders and customers would be protected from the potentially much larger costs that could result from an accident.

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A potential additional cost, difficult to. estimate, is the possibility that the provision for a decontamination priority could increase capital costs to some utilities.

(6) The potential' safety impact of changes in plant or operational complexity, including the relationship to proposed and existing regulatory requirements.

Not applicable.

(7) The estimated resource burden on the NRC associated with the proposed

.backfit and the availability of such resources, k

No additional burden beyond that contained in the existing rule is anticipated unless additional licensees seek exemption from property insurance requirements pursuant to 10 CFR 50.12, as discussed under factor 8, below.

(8) The potential impact of differences in facility type, design or age on the relevancy and practicality of the proposed backfit.

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t After the initial property insurance rule was promulgated, five licensees with smaller plants or unique design requested partial exemption from property insurance requirements pursuant to 10 CFR 50.12.

It is possible that by increasing the amount of insurance required, other licensees may seek exemption from the additional requirements.

The NRC has determined

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that it would not be feasible to establish required property insurance

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limits on a plant-by-plant basis.

The burden to NRC of processing

' additional exemption requests is addressed in the Regulatory Analysis for the' final rule.

A noted therein, it would not exceed 26 staff-weeks.

(9) Whether the proposed backfit is interim or final and, if interim, the justification for imposing the proposed backfit on an interim basis.

The increase in property insurance required is final.

Con'clusion The. Commission has concluded that this final rule should be promulgated because additional property insurance is required to ensure adequate protection of the public health and safety. Over the years since 10 CFR 550.54(w) was originally promulgated, the minimum amount of property damage insurance needed to ensure adequate protection of the public health and safety has increased.

Based on the PNL report noted above, the Comission has 1

determined that $1.06 billion is the minimum coverage needed to ensure adequate cleanup following a severe accident.

i As noted at the outset, this action is not a backfit as defined in 10 CFR 650.109(a)(1),althoughananalysisinaccordancewith 6 50.109 was nevertheless prepared. The CRGR Charter does not specify whether generic requirements otherwise analyzed pursuant to 6 50.109 must be determined to meet the " substantial increase" standard of 6 50.109(a)(3).

In this instance, application of that standard is not required in any event because the action

. is taken to establish the minimum health and safety standards required by law.

Footnote 3.to 5 50.109(a)(4) does require a balancing of various acceptable y

alternatives where. costs contribute.to selecting.the solution. No reasonable:

alternatives to insurance were identified. -Consequently, the Commission has concluded that this final rule should be promulgated.

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. Scheduling

.Because of.the minor impact on most licensees, the rule is scheduled-to become effective 60 days.after publication in the Federal. Register. However, because

.of the cycle of renewal of insurance policies existing in the nuclear insurance industry, the rule allows one year from the effective date before

- such policies are required to-reflect a priority for decontamination.

Because-we do 'not' anticipate any ' conflict between this final rule and other Conmission requirements, no priority has been established.

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ENCLOSURE 6 j

'1 Alternative Approaches to a Decontamination Priority q

z Commenters have raised a variety of issues in responding to the decontamination priority in.the proposed rule. Most utilities and their representatives have serious misgivings concerning such a priority, and although some suggested-

. wording changes to make it more acceptable, most would much prefer to see the priority eliminated. While the NRC cannot accept some of the reasoning behind commenters,'; opposition to a priority, i' acknowledges that there are potential' problems with a priority that could increase capital costs to utilities without necessarily assuring the timely release of funds for decontamination. Because so many of utilities'. objections to the priority rest on speculatio'n about both what may happen 'to the investment community and in the NRC hearing process, the NRC cannot confirm the validity of their objections.

In view of this, the following four alternatives have been given consic'eration.

Alternative 1 Issue a final rule with a decontamination priority further modified to make it less objectionable to most commenters.

Thus, a revised rule could: (1)allowa priority to be imposed as current policies expire; (2) provide that the priority applies uniformly to all insurance up to $1.06 billion; (3) provide l

for a decontamination priority tied to stabilization of the reactor after an l

accident and, subsequently, to Part 20 radiation protection standards and based l

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,.4 onLa; timely su!3 mission by thel licensee of a decontamination and cleanup plan 4 t

.e N ' La'nd (4) provide' that the. priority be implemented without hearing if the licenseeLehose not'lto contest.the order of'the Director of NRR.

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.A. decontamination priority would be;

,. Pros:

1 instituted.

2.-

Many utility and insurer objections would be T'

met.

, te Cons:

1.

Would not satisfy objection that capital costs might be. increased.

2.

Does not meet the New York' City Bar Association G'

L. objections that funds could be tied up as a-result of a deadlock between the bondholders' e

trustee and NRC.

3.

Sunset provisions may not-have any practical effect and may. complicate the decision process.

Alternative 2.

Issue a final rule without an explicit decontamination priority, using instead NRC authority under the Atomic Erargy Act to order decontamination to protect public health and safety after an accident has occurred.

Pros:

1.

Utility and insurer objections would be met.

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. Controversy over-the meaning of an explicit-decontamination; priority would be avoided, as

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. 7 would any explicit conflict with bond indenture I..

language.

Cons:

1.

The wrong ' signal might :be sent that the.NRC 'is relatively unconcerned about the availability f

of-funds for accident' decontamination.

2.

Does not meet the New York City Bar Association-objections that funds could be tied up as a result of a deadlock between the bondholders' trustee and NRC.-

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' Alternative'3.A Issue a revised proposed rule for comment-that would require proceeds from all property insurance up to $1.06 billion to be deposited with an impartial L

trustee for use first to clean up and decontaminate after an accident.

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Pros:

1.

Would provide high assurance that funds for cleanup would be available.

2.

Would prove acceptable to the New York City Bar Association.

Cons:

1.

Would be unacceptable to utility and insurance a

interests.

Irsurers could choose not to offer insurance implementing changes to the language in their policies.

2.

Could engender legal conflict with bond indenture trustee.

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3.

Administrative costs'would be increased'

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-by some indeterminate' amount (probably several l

thousand per licensee).

4.

Could have a negative'effect on investors.

5.

Could become too rigid if trustee questioned L

whether funds ~to be used were actually going for decontamination. Might also cause delays in decontamination process.

6.

Would be inconsistent with the approach taken' for decommissioning nuclear reactors whereby utilities would be allowed to use an internal reserve to accumulate funds, notwithstanding the possibility that a reactor might'have to be decommissioned prematurely.

7.

Might adversely affect operation of non-nuclear portion of insurance.

Alternative 3.8 a

Issue a revised proposed rule for comment that would require proceeds only from the NEIL II excess layer, currently 5550 million, to be deposited with an impartial trustee and to be used first to clean up and decontaminate after an accident.

Primary insurance from ANI/MAERP or NML and excess insurance from 1

ANI/MAERP would not be subject to a decontamination priority.

An upper limit could be established so that any NEIL-II capacity exceeding, say, the $1.06 j

billion necessary for cleanup would not be subject to the decontamination priority.

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Pros:

1.

Should be.acce'ptable' to utility and insurance.-

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-l iinterests because NEIL-II already has a

' decontamination priority.

..Should prove' partially acceptable to the

2.

i New York City Bar Association 3.

Would provide a.significant and presumably.

increasing amount of funds for decontamination and cleanup.

j Cons:

1.

Not all funds that might be needed for.

decontamination, at least in the short-run, would be reserved.

In some situations,

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f proceeds from non-NEIL-II insurance could go

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to bondholders even if needed for cleanup.

h (However, the.most substantial and immediate 1

threat to public health and safety would be covered by funds reserved solely for that

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L purpose. Also, the Commission could invoke its authority under the Atomic Energy Act to i

l require use of other proceeds for decontamination.)

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2.

Administrative costs would be increased that would l

deplete the amount that could be applied to j

j decontamination,

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i Alternative 4 j.

i Separately, or in conjunction with one of the other options, the Comission could study the possibility of seeking congressional legislation that would j

give priority to cleanup expenses over other creditor claims in bankruptcy j

proceedings, i

Pros:

(If feasible)

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1.

Would provide substantial assurance that funds would i

I be available for cleanup before any other purpose.

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Should prove acceptable to the New York City Bar

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Association.

f Cons:

(If feasible) 1.

May not be acceptable to utility industry.

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No assurance that legislation will ever be y

enacted.

3.

May enger. der delay in obtaining funds for cleanup by increasing likelihood of going through bankruptcy

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proceedings.

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