02-32696. In the Matter of PermaGrain Products, Incorporated, 4789 West Chester Pike, Newtown Square, Pennsylvania, 19073; License Nos. 37-17860-01, EA-02-260; Demand for Information

I

PermaGrain Products, Inc. (the Licensee) is the holder of Byproduct Material License No. 37-17860-01 issued by the Nuclear Regulatory Commission (NRC or Commission) pursuant to 10 CFR part 30. The license authorizes the possession and use of 2,000,000 curies of cobalt 60 for the irradiation of materials other than explosives or corrosive materials. The license further authorizes an additional 5,000 curies of cobalt 60 for use in a NUMEC Model NRI-300A self-shielded irradiator for irradiation of materials. The license, originally issued on December 21, 1977, was last renewed on March 7, 1997, and is due to expire on March 31, 2007. The license permits use of material at the Licensee's facilities at Reactor Road, Karthaus, Pennsylvania. PermaGrain Products, Inc., leases the location from the Commonwealth of Pennsylvania, the owner of the site.

II

On November 12, 2002, Dr. A. E. Witt, President of PermaGrain Products, Inc. informed the NRC that the Licensee was having financial difficulty and that it might declare bankruptcy. On November 13, 2002, Dr. Witt provided a letter to NRC Region I which made certain staffing and security commitments for the Karthaus facility that would continue until NRC was notified otherwise. Since that notification, PermaGrain was engaged in negotiations with a potential buyer which, if they had been successful, could have alleviated the Licensee's financial difficulties.

On December 6, 2002, Jeffrey Kurtzman, counsel to PermaGrain Products, Inc. notified the NRC that the negotiations had not been successful. He also notified the NRC that the Licensee intended to file a voluntary petition pursuant to chapter 7 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court of the Eastern District of Pennsylvania. On December 16, 2002, Mr. Kurtzman notified NRC of the Licensee's intention to file for bankruptcy on or about December 17, 2002.

The NRC is concerned that PermaGrain's financial situation will not allow continued funding of activities that are essential to ensure radiological safety and security of licensed material present at the site. Therefore, further information is needed to determine whether the Commission can have reasonable assurance that in the future the Licensee will maintain security of licensed material as well as continued maintenance of the required safety features, including the security alarm system, ventilation system, appropriate water level in the pool, the demineralizer system, the heating system, electric and water supply in the facility, all of which are essential to ensure radiological safety at the premises.

III

Accordingly, pursuant to sections 161c, 161o, 182 and 186 of the Atomic Energy Act of 1954, as amended, and the Commission's regulations in 10 CFR 2.204 and 10 CFR part 30, in order for the Commission to determine whether your licenses should be modified, suspended or revoked, or other enforcement action taken to ensure compliance with NRC regulatory requirements, the Licensee is required to submit to the Director, Office of Enforcement, U.S. Nuclear Regulatory Commission, Washington, DC 20555, within 48 hours of the date of this Demand for Information, in writing and under oath or affirmation:

A. 1. A written description of its plan to continue to provide security over and control access to the Karthaus site, in accordance with 10 CFR parts 20 and 36;

2. A list of the essential services necessary to maintain radiation safety and security of the radioactive material on the site, and the Licensee's plan for continuation of these services. The list should include utilities, periodic maintenance and contract services, such as a security alarm monitoring service. If the Licensee is unable to provide any of the essential services, the plan should include provisions for a third party to provide for the service(s), including providing the training necessary to adequately provide the service(s).

B. In light of the findings set forth in section II of this demand for information, the Licensee shall provide to NRC a written plan for disposition of the cobalt 60 sources (including those in the self contained irradiator) in compliance with 10 CFR 30.36. The plan shall contain:

1. A description of how the sources will be removed, packaged, transported and disposed of; and,

2. A timetable for the transfer of all licensed material from the site to an authorized recipient.

Copies also shall be sent to the Assistant General Counsel for Materials Litigation and Enforcement at the same address, and to the Regional Administrator, NRC Region I, 475 Allendale Road, King of Prussia, Pennsylvania, 19406-1415.

After reviewing your response, the NRC will determine whether further action is necessary to ensure compliance with regulatory requirements.

Dated this 17th day of December, 2002.

For the Nuclear Regulatory Commission.

Frank J. Congel,

Director, Office of Enforcement.