[Federal Register Volume 64, Number 48 (Friday, March 12, 1999)]
[Notices]
[Pages 12384-12391]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-6112]
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NUCLEAR REGULATORY COMMISSION
[Docket No. 50-443]
North Atlantic Energy Service Corp. et al. (Seabrook Station,
Unit 1); CLI-99-06, Memorandum and Order
Commissioners:
Shirley Ann Jackson, Chairman
Greta J. Dicus
Nils J. Diaz
Edward McGaffigan, Jr.
Jeffrey S. Merrifield
The Montaup Electric Company (``Montaup'') seeks to transfer its
2.9-percent ownership 1 interest in Seabrook Station, Unit
1, to the Little Bay Power Corporation (``Little Bay''). Montaup is one
of eleven co-owners of the Seabrook Station, Unit 1. Little Bay is a
wholly-owned subsidiary of BayCorp Holdings, Ltd. (``BayCorp''), which
is also the holding company for the Great Bay Power Corporation (the
holder of a 12.1-percent ownership interest in Seabrook). On Montaup's
behalf, Seabrook's licensed operator, the North Atlantic Energy Service
Corporation (``NAESCO''), submitted the transfer application to the
Commission for approval. The Atomic Energy Act (``AEA'') requires
Commission approval of transfers of ownership rights. See AEA,
Sec. 184, 42 U.S.C. Sec. 2234. Recently-promulgated NRC regulations
(``Subpart M'') govern hearing requests on transfer applications. See
Final Rule, ``Public Notification, Availability of Documents and
Records, Hearing Requests and Procedures for Hearings on License
Transfer Applications,'' 63 Fed. Reg. 66,721 (Dec. 3, 1998), to be
codified at 10 C.F.R. Secs. 2.1300 et seq.
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\1\ All ownership percentages specified in this order are
approximate.
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Pursuant to Subpart M, the New England Power Company (``NEP'')--a
10-percent co-owner of the Seabrook plant--has filed a timely
intervention petition opposing the Montaup-to-Little Bay transfer
application as well as a petition for summary relief or, in the
alternative, a request for hearing. Another co-owner, United
Illuminating Company (``United,'' with a 17.5-percent ownership
interest in the plant), has filed an untimely intervention petition. We
grant NEP's intervention petition and request for hearing, limit the
scope of that hearing, and deny United's late-filed request to
intervene.
Background
Pursuant to Section 184 of the AEA and section 50.80 of our
regulations,2 Montaup and Little Bay seek approval of the
proposed transfer as part of Montaup's efforts to divest all of its
electric generating assets pursuant to the restructuring of the
electric utility industry in Massachusetts and Rhode
Island.3 Under the transfer arrangement, Little Bay would
(among other things) assume full responsibility for Montaup's remaining
share of Seabrook's future costs, including obligations for capital
investment, operating expenses 4 and any escalation of
decommissioning obligations in excess of Montaup's pre-funded
contribution (described immediately below).
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\2\ This regulation reiterates the requirements of AEA Sec. 184,
sets forth the filing requirements for a license transfer
application and establishes the following test for approval of such
an application: (1) the proposed transferee is qualified to hold the
license and (2) the transfer is otherwise consistent with law,
regulations and Commission orders.
\3\ To achieve this divestiture, Montaup has negotiated
comprehensive settlement agreements with the regulatory authorities
in both these states--agreements approved by both states and the
Federal Energy Regulatory Commission.
\4\ For the sake of simplicity, this order will use the phrase
``operating expenses'' to include both such expenses and capital
investment.
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In their application, Montaup and Little Bay offer the following
two forms of assurance that the decommissioning and operating expenses
associated with the 2.9-percent ownership interest will be fully paid.
First, Montaup offers to provide an $11.8 million pre-funded
decommissioning payment--an amount which, assuming 4-percent inflation
plus 1.73-percent rate of real return, would purportedly grow by the
year 2026 to equal the amount required to satisfy the decommissioning
funding obligation associated with Montaup's 2.9-percent interest in
Seabrook. Montaup compares its proposed 1.73-percent rate of real
return to the 2-percent rate provided for in the NRC's Final Rule,
``Financial Assurance Requirements for Decommissioning Nuclear Power
Reactors,'' 63 F.R. 50,465 (Sept. 22, 1998), corrected, 63 F.R. 57,236
(Oct. 27, 1998), to be codified at 10 C.F.R. Sec. 50.75(e)(1)(i).
Second, Little Bay submits estimates for the total operating
expenses at Seabrook attributable to Montaup's 2.9-percent ownership
share of Seabrook for the first five years of Little Bay's ownership
and the sources of funds to cover those costs. Little Bay also proffers
favorable revenue predictions for the future, based on the assumptions
that Seabrook will operate until its current license expires in 2026
and that market revenues through the year 2026 should be sufficient to
cover Little Bay's share of the plant's decommissioning expenses and
operating expenses, even if the estimates for those costs are later
revised upward. As a further indication of the adequacy of Little Bay's
financial assurances, the application points out that Little Bay's
take-or-pay sales contract with Great Bay requires the latter to pay
for all of Little Bay's Seabrook-related costs, whether or not Great
Bay succeeds in reselling the electricity it buys from Little Bay.
Under the license transfer, NAESCO would remain the managing agent
for the facility's eleven joint owners and would continue to have
exclusive responsibility for the management, operation and maintenance
of the Seabrook Station. The license would be amended only for
administrative purposes to reflect the transfer of Montaup's ownership
interest to Little Bay.
The Commission, in its December 14, 1998, Federal Register notice
of Little Bay's and Montaup's application (63 Fed. Reg. 68,801),
indicated that the proposed transfer would involve no changes in the
rights, obligations, or interests of the other ten co-owners of the
Seabrook Station, nor would it result in any physical changes to the
plant or the manner in which it will operate.
Intervention Petitions
Responding to the Commission's December 14th Notice, NEP and United
filed petitions to intervene pursuant to the Commission's Rules of
Practice set forth in Subpart M.5 Petitioners are concerned
that Little Bay cannot
[[Page 12385]]
provide adequate assurance that, as a licensee, it can meet its
financial obligations for the operation and eventual decommissioning of
the Seabrook plant. This concern is grounded in the fact that the
license transfer would shift the financial responsibility for Montaup's
share of the Seabrook facility from a rate-regulated electric utility
(Montaup) to an exempt wholesale generator (Little Bay). According to
petitioners, a transfer to an exempt wholesale generator (particularly
this one) would lessen the financial assurance with respect to
Montaup's current share of the plant and would commensurately increase
the financial and radiological risks of the other owners, such as
petitioners.
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\5\ In our December 14th Federal Register Notice, we also
indicated that, as an alternative to requests for hearing and
petitions to intervene, persons were permitted to submit written
comments to the Commission by January 13, 1999, regarding the
license transfer application. The Commission has received one such
comment, from co-owner Massachusetts Municipal Wholesale Electric
Company, which raises arguments similar to those of NEP and United.
We have referred this comment to the staff for its consideration. As
we indicated in the Notice, the comment does not constitute a part
of the decisional record.
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In support, petitioners explain that satisfaction of Montaup's
obligations is currently assured by both the rate recovery it is
guaranteed under its approved restructuring settlements and also the
income from its other assets. By contrast, Little Bay (like all other
exempt wholesale generators) cannot provide rate-recovery assurance, as
it is dependent solely upon unguaranteed market revenue for the
satisfaction of its financial obligations. (Little Bay purportedly
lacks other assets on which it can rely for income.)
Petitioners find scant comfort in Montaup's pre-funded
decommissioning payment and Little Bay's favorable revenue predictions.
Petitioners assert that, if the transfer were approved, Little Bay
would be obliged to sell its share of Seabrook's electric output to
Great Bay (another exempt wholesale generator) whose ability to meet
its contractual obligations to Little Bay would depend on Great Bay's
own uncertain ability to resell that same electric output in the bulk
power market at a sufficient price. Petitioners also point out that
Great Bay's assets (like those of Little Bay) consists almost
exclusively of an ownership interest in Seabrook, thereby precluding
any meaningful additional source of revenue if applicants' favorable
five-year forecasts of market revenues prove overly optimistic.
Further, although petitioners recognize that Commission regulations
accept Montaup's and Little Bay's two financial vehicles (prepayment
and revenue prediction) as mechanisms by which entities that do not
qualify as electric utilities under 10 C.F.R. 50.2 may satisfy NRC
financial assurance and financial qualifications requirements (see 10
C.F.R. 50.33(f)(2), 50.75(e)(1)), petitioners nevertheless assert that
the reality of today's electric power market in New England undermines
the financial assurances that these alternative methods might otherwise
have offered.
Petitioners allege that developers have announced plans to
construct sixty new generating units in New England with a collective
capacity of more than 30,000 MW and that, although some of this
capacity will probably never be built, a significant amount likely will
be. Based on the expected resulting glut of electricity in the New
England market, petitioners conclude that Little Bay's five-year
revenue projections depend on highly questionable assumptions regarding
Little Bay's and Great Bay's ability to sell electricity during the
next five years (and beyond) at a price sufficient to meet Little Bay's
operating and decommissioning cost obligations. Petitioners also
question two assumptions underlying Little Bay's claim of adequate
revenue--that the Seabrook plant will not experience a prolonged
shutdown and that it will remain operational until the expiration of
its current license in 2026.
Based on these market conditions, petitioner NEP seeks two
alternative forms of relief: either an evidentiary hearing on financial
assurance and financial qualifications or (preferably) a summary order
conditioning the Commission's approval of Montaup's license transfer
request on Montaup's agreement to remain contingently liable should
Little Bay prove unable to meet its financial obligations for the safe
operation and decommissioning of Seabrook.
The other petitioner, United, supports NEP's two remedial
proposals, and adds a third of its own: (1) The Commission would
require BayCorp to build up a cash reserve to sustain Great Bay's and
Little Bay's financial obligations in the event of a one-year shutdown
of the plant. (2) The Commission would also prohibit BayCorp from
withdrawing cash from Little Bay or Great Bay for any purpose other
than supporting the financial obligations associated with Seabrook
plant, until BayCorp has fully funded the reserve described above. (3)
Further, the Commission would prohibit BayCorp from acquiring
additional ownership in Seabrook until its cash reserve is sufficient
to support any incremental purchases (using the one-year criterion
described above) and until New Hampshire adopts legislation removing
other Seabrook owners' exposure that might result from a default by
Great Bay or Little Bay. (4) And finally, the Commission would require
Great Bay and Little Bay to obtain and maintain business interruption
insurance for their ownership interest in Seabrook.
Montaup and Little Bay oppose NEP's and United's petitions. NAESCO
takes no position. The NRC staff is not participating as a party in
this proceeding.
Discussion
I. NEP's Petition To Intervene and Request for Hearing
To intervene as of right in a Commission licensing proceeding, a
petitioner must demonstrate that its ``interest may be affected by the
proceeding,'' or in common parlance, it must demonstrate ``standing.''
See AEA, Sec. 189a, 42 U.S.C. Sec. 2239(a). The Commission's rules
require further that a petition for intervention raise at least one
admissible contention or issue. The standards for meeting these two
requirements in license transfer cases come both from our Subpart M
procedural regulations and from judicial cases on standing (to which we
look for guidance). Though our requirements for standing and for
admissible issues overlap somewhat (see, e.g., our discussion of Scope
of Proceeding, infra, which bears on both standing and issue
admissibility), we can summarize them as follows:
To show Standing, a petitioner must
(1) Identify an interest in the proceeding by
(a) Alleging a concrete and particularized injury (actual or
threatened) that
(b) Is fairly traceable to, and may be affected by, the challenged
action (the grant of an application), and
(c) Is likely to be redressed by a favorable decision, and
(d) Lies arguably within the ``zone of interests'' protected by the
governing statute(s).
(2) Specify the facts pertaining to that interest.
To show Admissible Issues, a petitioner must
(1) Set forth the issues (factual and/or legal) that petitioner
seeks to raise.
(2) Demonstrate that those issues fall within the scope of the
proceeding.
(3) Demonstrate that those issues are relevant and material to the
findings necessary to a grant of the license transfer application.
(4) Show that a genuine dispute exists with the applicant regarding
the issues.
(5) Provide a concise statement of the alleged facts or expert
opinions supporting petitioner's position on such issues, together with
references to the sources and documents on which petitioner intends to
rely.
See 10 C.F.R. Sec. 2.1308. See generally Yankee Atomic Electric Co.
(Yankee Nuclear Power Station), CLI-98-21, 48
[[Page 12386]]
NRC 185, 194-96 (1998) (standing); Baltimore Gas & Elec. Co. (Calvert
Cliffs Nuclear Power Plant, Units 1 and 2), CLI-98-25, 48 NRC 325, 348-
49 (1998) (admissible contentions).
A. Standing
NEP satisfies the standing test. It advances a plausible claim of
injury: the potential that NRC approval of the license transfer would
put in place a financially incapable co-licensee, thereby increasing
NEP's risk of radiological harm to its property and its risk of being
forced to assume a greater-than-expected share of Seabrook's operating
and decommissioning costs. See, e.g., NEP's Intervention Petition at 3;
NEP's Response at 2. Indeed, it is hard to conceive of an entity more
entitled to claim standing in a license transfer case than a co-
licensee whose costs may rise, and whose property may be put at
radiological risk, as a result of an ill-funded license transfer. This
kind of situation justifies standing based on ``real-world consequences
that conceivably could harm petitioners and entitle them to a
hearing.'' Yankee Atomic Elec. Co. (Yankee Nuclear Power Station), CLI-
98-21, 48 NRC 185, 205 (1998).
NEP's allegations regarding its increased risk are sufficiently
concrete and particularized to pass muster for standing. They are
supported by two detailed affidavits and other evidentiary exhibits.
The threatened injury is fairly traceable to the challenged action
(here, the grant of the license transfer application) because the
alleged increase in risk associated with Little Bay taking over
Montaup's interest could not occur without Commission approval of the
application. Similarly, the threatened injury can be redressed by a
favorable decision because the Commission's denial of the application
would prevent the transfer of interest.
The risk to NEP's interest in the Seabrook plant lies within the
``zone of interests'' protected by the AEA. We held several years ago
in another case where a reactor co-owner contested a change in
ownership, the AEA protects not only human health and safety from
radiologically-caused injury, but also the owners' property interests
in their facility. Gulf States Util. Co. (River Bend Station, Unit 1),
CLI-94-10, 40 NRC 43, 48 (1994), citing AEA, Secs. 103b, 161b, 42
U.S.C. Secs. 2133(b), 2201(b). Persons or entities who own (or co-own)
an NRC-licensed facility plainly have an AEA-protected interest in
licensing proceedings involving their facility.
One further matter bears discussion. Little Bay argues that NEP's
claim of injury directly contravenes the statement in the Federal
Register Notice of this application that ``[t]he proposed transfer does
not involve a change in the rights, obligations, or interests of the
other co-owners of the Seabrook Station.'' See Little Bay's Answer to
NEP's Intervention Petition, dated Jan. 13, 1999, at 11, citing 63 Fed.
Reg. at 68,802. In our view, however, Little Bay is taking too
literally the language of the Notice, which was intended only to
indicate that the terms of the transfer on their face do not change
rights, obligations or interests. We do not regard the Notice as (in
effect) barring intervention by co-owners or as precluding all argument
that the effects of the transfer may have adverse effects on co-owners'
interest.
Little Bay maintains that NEP is under no risk whatever of
suffering financial harm because, under the Joint Ownership Agreement,
neither NEP nor any other co-owner can be held liable for Little Bay's
share of any expenses.6 According to Little Bay, that
Agreement undermines NEP's claim of heightened risk of liability for
operating and decommissioning-fund expenses. We cannot agree with
Little Bay that NEP has no legitimate concern whatsoever. The
Commission itself has stated in a policy statement that, under ``highly
unusual situations,'' it might hold co-owners financially liable for
the share of such expenses attributable to a defaulting co-owner. See
``Final Policy Statement on the Restructuring and Economic Deregulation
of the Electric Utility Industry,'' 62 Fed. Reg. 44,071, 44,074, 44,077
(Aug. 19, 1997). 7 And the State of New Hampshire has
apparently imposed similar joint and several liability on all Seabrook
co-owners. See N.H. Senate Bill 140, signed by the Governor on June 11,
1998.
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\6\ See Little Bay's Answer to NEP's Intervention Petition,
dated Jan. 13, 1999, at 11 (``As set forth in the Seabrook Joint
Ownership Agreement, the obligations of the joint owners are
``several and not joint,'' so NEP[CO] cannot incur any liability
from Little Bay as a result of this transaction''), citing Agreement
for Joint Ownership, Construction and Operation of New Hampshire
Nuclear Units (May 1, 1973), para. 6.1.
\7\ The quoted language from our Policy Statement is currently
the subject of a pending Request for Rulemaking (64 Fed. Reg. 432
(Jan. 5, 1999)) in which co-owners of another nuclear power reactor
raise questions about the Commission's views on joint liability.
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Under these circumstances, we cannot fairly find NEP's concerns
implausible or that its claims of potential injury are insufficient for
a threshold showing of standing.
B. Admissible Issues
NEP proffers two issues for Commission consideration: (1) whether
the Montaup-to-Little Bay license transfer application contains
sufficient assurance of adequate decommissioning funding, and (2)
whether the license transfer application likewise contains sufficient
assurance of adequate funding for operations. We reject the first issue
for failure to present a genuine issue of material fact or law, but we
conclude that the second issue is admissible and requires a hearing.
1. Financial Assurance regarding Satisfaction of Decommissioning
Funding Obligation. On the facts and allegations of this case, we see
no conceivable violation of our regulation, 10 C.F.R. Sec. 50.75,
requiring licensees to show sufficient assurance of adequate
decommissioning funding.8 When Little Bay and Montaup filed
their license transfer application in September 1998, they calculated
an $11.8 million prepayment amount based on the assumption that the
plant's total decommissioning costs would total $489 million (in
current dollars), and that, by 2026, the $11.8 million would grow into
the $14.2 million (again, in current dollars) necessary to meet
Montaup's 2.9-percent share of Seabrook's decommissioning costs. That
assumption derived from the cost formula set forth in section 50.75(c),
using NUREG-1307 (Rev. 7, Nov. 1997). Although the applicants'
calculations were based on then-current information
[[Page 12387]]
when submitted in September 1998, the Commission staff in December
created an an alternate method for calculating expected costs of low-
level waste disposal, with the result that the estimated
decommissioning cost for plants of Seabrook's type now can be decreased
considerably, from $489 million to $289 million.9
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\8\ For this reason, we do not decide the question, raised by
both Montaup and Little Bay, whether NEP's decommissioning funding
argument amounts in its entirety to an impermissible collateral
attack on sections 50.75(c) and 50.75(e)(1). We wish to make clear,
however, that a petitioner in an individual adjudication cannot
challenge generic decisions made by the Commission in rulemakings.
See, e.g., Commonwealth of Massachusetts v. NRC, 924 F.2d 311, 330
(D.C. Cir. 1991), cert. denied, 502 U.S. 899 (1991). Accord,
Curators of the University of Missouri, CLI-95-1, 41 NRC 71, 170-71
(1995); American Nuclear Corp. (Revision of Orders to Modify Source
Materials Licenses), CLI-86-23, 24 NRC 704, 708-10 (1986);
Philadelphia Elec. Co. (Peach Bottom Atomic Power Station, Units 2
and 3), ALAB-216, 8 AEC 13, 21 n.33 (1974); Carolina Power & Light
Co. (Shearon Harris Nuclear Power Plant, Units 1 and 2), LBP-82-
119A, 16 NRC 2069, 2073 (1982).
For example, no one would be free to argue in a license transfer
case that site-specific conditions at a particular nuclear power
reactor render unusable the generic projected costs calculated under
our rule's cost formula. In our decommissioning rulemakings, we
deliberately decided to avoid a requirement for site-specific cost
estimates to show financial assurance. See, e.g., Final Rule,
``General Requirements for Decommissioning Nuclear Facilities,'' 53
Fed. Reg. 24,018, 24,030-31 (June 27, 1988) (discussing 1988 rule).
Nor could anyone argue that prepayment is not an acceptable means of
providing financial assurance for decommissioning. Our rules
expressly say that it is. Subpart M allows participants to
``petition that a Commission rule or regulation be waived'' in
particular cases upon a showing that because of ``special
circumstances * * * application of a rule or regulation would not
serve the purpose for which it was adopted.'' See 10 C.F.R. 2.1329.
\9\ See NUREG 1307 at page 6, example 3 (Rev. 8, Dec. 1998).
Despite the $200 million downward revision, the applicants have not
sought to reduce Montaup's prepayment amount. Sometimes, in response
to site-specific circumstances, utilities prudently set aside more
funds than the NRC requires. The NRC focuses its requirements on the
amount of money required to reduce residual radioactivity to levels
that permit release of the property (see 10 C.F.R. 50.2). However,
release can also involve activities other than those falling within
the NRC's definition of ``decommissioning''--activities such as
removal and disposal of spent fuel or of non-radioactive structures
and materials beyond what is necessary to reduce residual
radioactivity to required levels (see 10 C.F.R. 70.75(c), footnote
1). The costs of these activities can amount to a large fraction of
the NRC's required funding figure. Moreover, decommissioning funding
is also subject to regulation by agencies having jurisdiction over
rates--agencies such as the Federal Energy Regulatory Commission and
state Public Utilities Commissions, and these agencies can set
funding requirements that are in addition to funding requirements
set by the NRC (see 10 C.F.R. 50.75(a)).
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As a result of the recent revision, the $11.8 million committed by
Montaup already exceeds, by a healthy margin, the minimum amount
required to fully fund its 2.9-percent share of Seabrook's
decommissioning costs, as calculated under section 50.75(c) and the new
decommissioning cost alternative--an amount of less than $8.4 million.
This renders NEP's concerns, including Seabrook's allegedly high risk
of early closure, inconsequential for our financial assurance
determination.10
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\10\ Since we find as a matter of law that the proposed payment
by Little Bay provides adequate assurance for decommissioning, we
need not reach the question whether NEP's decommissioning funding
issue would otherwise be admissible for litigation. However, we note
that there is substantial doubt whether an argument based on a
theoretical early shutdown of a facility is within the scope of this
proceeding. There is nothing about the transfer to a new owner that
changes the expected life span or cost of decommissioning a
facility. As a general matter, license transfer proceedings are not
the appropriate place for considering changes to requirements
applicable to the facility and all its owners, as opposed to
requirements directed at the proposed transferee. Indeed, if NEP's
premise were correct, it would be more appropriate to consider
generically whether to impose a change in the decommissioning
funding process for all owners of the plant. The financial nature of
these issues does not necessarily make them relevant to the
financial questions presented in this particular transfer
proceeding. As with technical requirements for operation of the
plant, the transferee takes the plant as it exists, including the
projected costs and associated assumptions used to establish the
amount of decommissioning funding required.
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Montaup's promise to prepay considerably more than the minimum
amount currently prescribed by the NRC financial assurance formula
leaves NEP without any plausible decommissioning funding grievance, and
(particularly in view of Montaup's minuscule share of the plant) gives
us no reason to think that the public health and safety might in any
respect be left unprotected. Prepayment is in fact the strongest and
most reliable of the various decommissioning funding devices set out in
section 50.75(e)(1). We conclude here, as a matter of law, that
Montaup's prepayment provides sufficient assurance for its share of
decommissioning costs and that there exists no genuine issue of
material fact or law necessitating a hearing on decommissioning funding
assurance. See 10 C.F.R. 2.1306(b)(2)(iv).
2. Financial Qualifications for Meeting Operating Expenses. NEP
meets the requirements set out in Subpart M regarding the admissibility
of the ``operating expenses'' issue. See 10 C.F.R. Secs. 2.1306,
2.1308. Its petition and reply clearly set out the claim that Little
Bay will lack sufficient financial resources to fulfill its obligations
for operating expenses. NEP's pleadings, and the applicants' own
vigorous responses, demonstrate that a genuine dispute exists regarding
this issue. NEP's arguments are certainly relevant and material.
Indeed, they go to the very heart of the question whether applicants'
financial qualifications are adequate to pass statutory and regulatory
muster. When promulgating Subpart M a few months ago, we expressly
recognized that NRC review of license transfer applications ``consists
largely of assuring that the ultimately licensed entity has the
capability to meet financial qualification and decommissioning funding
aspects of NRC regulations.'' See 63 FR at 66,724. NEP's claims, in
short, lie at the core of the NRC's license transfer inquiry.
The applicants argue that NEP's proposed issue lacks the
specificity and factual support demanded by NRC rules. Our recently-
issued Subpart M, like its counterparts applicable to other types of
Commission proceedings (e.g., 10 C.F.R. 2.714), does not permit ``the
filing of a vague, unparticularized contention,'' unsupported by
affidavit, expert, or documentary support. Calvert Cliffs, 48 NRC at
349. See 10 C.F.R. 2.1306. Nor does our practice permit ``notice
pleading,'' with details to be filled in later. Instead, we require
parties to come forward at the outset with sufficiently detailed
grievances to allow the adjudicator to conclude that genuine disputes
exist justifying a commitment of adjudicatory resources to resolve
them. See Yankee Atomic Electric Co (Yankee Nuclear Power Station),
CLI-96-7, 43 NRC 235, 248 n.7 (1996).
In our view, NEP's initial pleadings in this case provide
sufficient allegations and information to trigger further inquiry under
Subpart M on the financial qualification issue. NEP maintains that
Little Bay will prove incapable of meeting its financial obligations to
Seabrook, and supports its view with ample references to the NRC
decisions and other documents on which it intends to rely, with
excerpts from filings by affiliates of Little Bay with the Securities
and Exchange Commission, and with two affidavits from a senior NEP
corporate officer who is clearly familiar with the electricity market
in New England. While applicants are correct that NEP bases much of its
argument on speculation that future electric market conditions in New
England and at Seabrook may preclude Little Bay from meeting its
revenue projections, NEP rests its speculation on factual assertions
regarding the current electricity market in New England, on proposed
expansions in electricity production capacity in New England, on
premature closure rate of nuclear plants in the region, and on Little
Bay's own financial condition. ``Speculation'' of some sort is
unavoidable when the issue at stake concerns predictive judgments about
an applicant's future financial capabilities.
Little Bay maintains that NEP impermissibly attacks NRC regulations
when it contends that Little Bay is too thinly financed to meet its
obligations to Seabrook. As NEP acknowledges, an NRC rule, 10 C.F.R.
50.33(f)(2), specifies what information a license applicant must submit
to show its financial qualification for operating expenses, and Little
Bay has submitted what the rule contemplates, a five-year cost-and-
revenue projection. See NEP's Intervention Petition at 2, 6, 7. NEP,
however, argues that it will suffer harm despite Little Bay's
satisfaction of the methodological requirements of the regulation--both
because current market conditions in New England undermine the
effectiveness of section 50.33(f)(2) (id. at 2-3, 7-8) and because
assumptions underlying applicants' cost-and-revenue estimates are
flawed (id. at 3, 7, 8).
As we noted above (note 8), participants in individual
adjudications are precluded from collaterally attacking our generic
regulations. Little Bay asks us to reject NEP's ``operating expenses''
argument as a collateral attack on section 50.33(f)(2). Little Bay
essentially argues that the NRC in section 50.33 found generically that
five-year cost-and-revenue projections suffice, without
[[Page 12388]]
more, to satisfy NRC financial qualification rules. Therefore, the
argument goes, NEP's demand for additional protection amounts to an
impermissible challenge to the adequacy of NRC rules.
Little Bay's argument founders on the text of the rule itself.
Section 50.33(f)(2) nowhere declares that the proffering of five-year
projections will, per se, prove adequate in any and all cases. To the
contrary, the rule contains a ``safety-valve'' provision explicitly
reserving the possibility that, in particular circumstances, and on a
case-by-case basis, additional protections may be necessary. See 010
C.F.R. 50.33(f)(4) (to ensure adequate funds for safe operation, NRC
may require ``more detailed or additional information'' if
appropriate). As we detail below, NEP is entitled to argue that this
case calls for additional financial qualification measures beyond five-
year projections and that the applicants therefore have not met their
burden under section 50.33(f)(2) to satisfy Commission financial
qualification requirements.
The burden of proof under section 50.33(f)(2) is to ``demonstrate
[that] the applicant possesses or has reasonable assurance of obtaining
the funds necessary to cover estimated operation costs for the period
of the license.'' In addition, section 50.33(f)(2) imposes certain
filing requirements on the applicant--that it submit operating cost
estimates for the next five years and indicate the source of funds to
cover these costs. Little Bay's ``collateral attack'' argument
conflates these two portions of section 50.33(f)(2) by assuming that
the applicants have met their burden of proof merely by complying with
the filing requirements. Although satisfaction of those requirements is
necessary to the grant of a license transfer application, such
satisfaction cannot be deemed always sufficient to satisfy the
applicant's burden of proof, else the NRC be irrevocably bound by
applicants' own estimates and left without authority to look behind
them.
Always in question under section 50.33(f)(2) is whether the
applicant's cost and revenue estimates are reasonable. The adequacy of
those estimates is challengeable (as here) by a petition for
intervention under 10 C.F.R. 2.1306 or by an NRC request for more
detailed information. See 10 C.F.R. 50.33(f)(4) (the Commission ``may
request an * * * entity * * * to submit additional or more detailed
information respecting its financial arrangements and status of funds
if [we] consider[] this information appropriate''). Accord 10 C.F.R.
Part 50, Appendix C, section IV.
In sum, NEP does not claim that five-year cost-and-revenue
projections are per se inadequate to meet financial qualification
requirements--such a claim would be precluded as a collateral attack on
NRC rules. Rather, NEP simply contends that, as NRC rules themselves
contemplate, the circumstances of this particular transfer call for
more detailed or extensive financial protection. We thus conclude that
NEP's petition for a hearing does not constitute an impermissible
collateral attack on section 50.33(f)(2) but instead raises an
admissible issue for a hearing under Subpart M.
C. Scope of Proceeding
For the reasons set forth above, we grant NEP's intervention
petition and hearing request. The scope of the hearing will be limited
to the following issue: whether the Montaup-to-Little Bay license
transfer application meets NRC rules for financial qualification
regarding Seabrook's operating expenses (10 C.F.R. 50.33(f)). Given the
early stage of the proceeding and the existence of outstanding factual
questions, however, we will hold in abeyance NEP's alternative request
for the imposition of conditions.
Our grant of NEP's hearing request by no means suggests that NEP
necessarily will succeed in its challenge to the transfer application.
It faces a formidable task in persuading us that factors peculiar to
Seabrook call for modification or rejection of what NEP acknowledges
are financial qualification plans of the type ordinarily found
acceptable by the Commission. See, e.g., NEP's Intervention Petition at
2. Some aspects of NEP's position seem to us particularly troublesome.
We will set out our concerns to guide the parties as they proceed to a
hearing in this case.
First, as a general matter, NEP cannot insist that applicants
provide the impossible: absolutely certain predictions of future
economic conditions. To be sure, safe operation of a nuclear plant
requires adequate funding, but the potential safety impacts of a
shortfall in funding are not so direct or immediate as the safety
impacts of significant technical deficiencies. Generally speaking,
then, the level of assurance the Commission finds it reasonable to
require regarding a licensee's ability to meet financial obligations is
less than the extremely high assurance the Commission requires
regarding the safety of reactor design, construction, and operation.
The Commission will accept financial assurances based on plausible
assumptions and forecasts, even though the possibility is not
insignificant that things will turn out less favorably than expected.
Thus, the mere casting of doubt on some aspects of proposed funding
plans is not by itself sufficient to defeat a finding of reasonable
assurance.
At the same time, though, funding plans that rely on assumptions
seriously at odds with governing realities will not be deemed
acceptable simply because their form matches plans described in the
regulations. Relying on affidavits and various forms of financial data,
NEP asserts that Little Bay's cost-and-revenue estimates fail to
provide the required assurance because they do not reflect a realistic
outlook for Little Bay itself or for the nuclear power industry in New
England. As in other cases (e.g., River Bend, 40 NRC at 51-53), we
cannot brush aside such economically-based safety concerns without
giving the intervenor a chance to substantiate its concerns at a
hearing, but we note that NEP's arguments ultimately will prevail only
if it can demonstrate relevant uncertainties significantly greater than
those that usually cloud business outlooks.
Finally, we cannot accede to NEP's seeming view that Little Bay
inherently cannot meet our financial qualification rules because its
rates are not regulated by a state utilities commission. This view runs
counter to the premise underlying the entire restructuring and economic
deregulation of the electric utility industry, i.e., that the
marketplace will replace cost-of-service ratemaking. In our view,
unregulated electricity rates are not incompatible with maintaining
sufficient financial resources to operate a nuclear power reactor.
II. United's Late-Filed Petition To Intervene
United filed its petition for a hearing seven days after the
deadline for filing such petitions. Section 2.1308(b) of our Subpart M
regulations provides that untimely intervention petitions may be
granted if the petitioner proffers good cause for the tardiness of its
filing. The regulation further provides that the Commission will
consider both the availability of other means by which petitioner's
interest could be protected or represented by other participants and
the extent to which the admission of the late-filing petitioner would
broaden the issues or delay final action on the license transfer
application.
As good cause, United claims it was under a misimpression that its
intervention petition would be due thirty rather than twenty days after
[[Page 12389]]
publication of the December 14th Federal Register notice. It further
argues that its different recommendations as to remedy and its
different view of the New England electricity market preclude NEP from
effectively protecting or representing United's interests. Finally, it
asserts that its issues are ultimately the same as those already raised
by NEP and that its seven-day tardiness will therefore not delay the
ultimate resolution of the proceeding.
We cannot agree that United's failure to read carefully the
governing procedural regulations constitutes good cause for accepting
its late-filed petition. This failure appears especially egregious in
light of the receipt by two senior corporate officials on December 16th
of faxes from NAESCO notifying United that it had until January 4th to
seek intervention and a hearing. The faxes even provided a copy of the
Federal Register Notice that set the filing deadline. See Attachment
``A'' to Montaup's Answer to United's Intervention Petition, dated Jan.
21, 1999. United thus had both constructive notice (through the Federal
Register Notice) and actual notice (through the two faxes) of the due
date for its intervention petition.
We likewise disagree that United's participation would cause no
delay in the resolution of this proceeding. United has offered an
entirely new suggestion for relief. See p. 6, supra. Consequently,
United's participation would have the effect of broadening this
proceeding. We also disagree that United's interest cannot be protected
or represented by another party. United's interest as a co-owner of
Seabrook are, by United's own description, identical to those of its
fellow co-owner NEP. This identity of interests is further reflected in
the fact that, with the exception of the new suggestion for relief,
United presents no merits arguments not already proffered by NEP.
(Although United asserts in conclusory fashion that its view of the New
England electricity market differs from NEP's, its pleadings nowhere
identify these alleged differences.)
In analogous situations in the past, our hearing tribunals have
regularly rejected late-filed petitions submitted without good cause
for the lateness and without strong countervailing reasons that
override the lack of good cause. See, e.g., Private Fuels Storage,
L.L.C. (Independent Spent Fuel Storage Installation), LBP-98-7, 47 NRC
142, 172-75 (1998) (collecting cases). We similarly reject United's
effort to enter this case late. United is free, however, to monitor the
proceeding and to file a post-hearing amicus curiae brief at the same
time the parties to the proceeding file their post-hearing submissions.
See 10 C.F.R. Sec. 2.1322(c) (written ``post-hearing statements of
position'' due twenty days after close of the oral hearing).
III. NAESCO's Status in This Proceeding
NAESCO assumes a peculiar posture in this proceeding. It asserts,
on the one hand, to be one of the applicants for the license transfer
(as Seabrook's licensed operator, it forwarded the Montaup-to-Little
Bay license transfer application to the Commission) and therefore
entitled to participate in this proceeding. Yet, on the other hand, it
expressly claims neutrality regarding Little Bay's financial
qualifications, the adequacy of Montaup's decommissioning funding
assurance, the standing and interest of NEP, and the nature of any
Subpart M proceedings; it even dissociates itself from the other two
applicants. It is therefore difficult to understand what exactly NAESCO
intends to contribute as a party to this proceeding.
Although we are sympathetic to NAESCO's apparently awkward
situation of being caught in the middle of a disagreement among various
of the owners of the plant it operates, NAESCO cannot have its cake and
eat it too by claiming applicant status yet not supporting its own
application. At most, its party status appears to be nominal. We
therefore instruct NAESCO to inform us within seven calendar days of
the date of this order whether it indeed supports the application which
it has co-submitted. If it does, we will consider it an applicant with
full rights to participate in this proceeding. If not, we will not
consider NAESCO a party. However, under the latter circumstances,
NAESCO would still be free (like United) to submit a post-hearing
amicus curiae brief.
Procedural Matters
I. Designation of Issues
As noted above, the hearing will be limited to the following issue:
whether the Montaup-to-Little Bay license transfer application meets
NRC rules for financial qualification under 10 CFR Sec. 50.33(f). NEP
should be prepared to offer pre-filed testimony and exhibits containing
specific facts and/or expert opinions in support of its view that
Little Bay's five-year cost-and-revenue projections are inadequate
under NRC rules. All parties should keep their pleadings as short, and
as focused on the admitted issue, as possible. Redundant, duplicative,
unreliable or irrelevant submissions are not acceptable and will be
stricken from the record. See 10 CFR Sec. 2.1320(a)(9). We also direct
NEP to state explicitly what remedial measures (if any) it believes the
Commission should take in addition to those specified in NEP's
intervention petition.
II. Designation of Presiding Officer
The Commission designates Judge Thomas S. Moore as the Presiding
Officer in this license transfer proceeding under Subpart M.
III. Notices of Appearance
To the extent that they have not already done so, each counsel or
representative for each party shall, not later than 4:30 p.m. on March
15, 1999 (within ten days from the issuance date of this order), file a
notice of appearance complying with the requirements of 10 CFR
2.713(b). In each such notice of appearance, the counsel or
representative should specify his or her business address, telephone
number, facsimile number, and Internet e-mail address. Any counsel or
representative who has already entered an appearance but who has not
provided one or more of these pieces of information should do so not
later than the date and time specified above.
IV. Filing Schedule
If the parties unanimously agree to a non-oral hearing, they must
file their joint motion for a ``hearing consisting of written
comments'' no later than 4:30 p.m. on March 22, 1999, (i.e., within
seventeen days of the date of this order).11 No later than
that same date, the parties should complete any necessary negotiations
on a protective order regarding the proprietary data which accompanied
the license transfer request and should submit a joint protective order
to the presiding officer. If the parties are unsuccessful in
negotiating such an order, they should inform the presiding officer by
that date and indicate any areas in which they were able to agree. We
also direct the parties to confer promptly on whether their dispute
might be settled amicably without conducting a hearing.
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\11\ See 10 CFR 2.1308(d)(2), providing for a fifteen-day filing
period. However, here the fifteenth day falls on Saturday, March
20th, so the deadline is postponed until Monday, March 22nd,
pursuant to 10 CFR 2.1314(a).
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All initial written statements of position and written direct
testimony (with any supporting affidavits) must be filed no later than
4:30 p.m. on April 5, 1999 (31 days from the issuance date of this
order).12 All written responses to
[[Page 12390]]
direct testimony, all rebuttal testimony (with any supporting
affidavits) and all proposed questions directed to written direct
testimony must be filed no later than 4:30 p.m. on April 26, 1999 (52
days from the issuance date of this order).13 All proposed
questions directed to written rebuttal testimony must be submitted to
the Presiding Officer no later than 4:30 p.m. on May 5, 1999 (61 days
from the issuance date of this order).14
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\12\ See 10 CFR 2.1309(a)(4), 2.1310(c), 2.1321(a),
2.1322(a)(1), providing for filings within thirty days of the
issuance date of this order. However, here the thirtieth day falls
on Sunday, April 4th, so the deadline is postponed until Monday,
April 5th, pursuant to 10 CFR Sec. 2.1314(a).
\13\ See 10 CFR 2.1309(a)(4), 2.1310(c), 2.1321(b),
2.1322(a)(2)-(3), the last two of which regulations provide for
filings within 20 days of the filing of initial written statements
of position and written testimony with supporting affidavits.
However, here the twentieth day falls on Sunday, April 25th, so the
deadline is postponed until Monday, April 26th, pursuant to 10 CFR
Sec. 2.1314(a).
\14\ See 10 CFR 2.1309(a)(4), 2.1310(c), 2.1321(b),
2.1322(a)(4). The seven-day filing period specified in the last two
of these regulations is, pursuant to 10 CFR Sec. 2.1314(b), extended
by two days, because the period includes a Saturday and Sunday.
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Assuming that the parties do not unanimously seek a hearing
consisting of written comments, the Presiding Officer will hold an oral
hearing beginning at 9:30 a.m on May 20, 1999 (15 days from the
submittal of rebuttal testimony and 76 days from the issuance date of
this order), in the Hearing Room of the Commission's Atomic Safety and
Licensing Board, Room 3-B-45 of the Commission's ``Two White Flint''
building, 11545 Rockville Pike, Rockville, MD. The subject of the
hearing will be the issue designated above. Any party submitting pre-
filed direct testimony should make the sponsor of that testimony
available for questioning at the hearing. Each party will be allotted
30 minutes for its oral argument on the issues specified above and 15
minutes for any rebuttal argument it wishes to offer. See 10 CFR
2.1309, 2.1310(a), 2.1322(b). The hearing will not include
opportunities for cross-examination, although the Presiding Officer may
question any witness proffered by any party.
Finally, all written concluding statements of position must be
filed no later than 4:30 p.m. on June 9, 1999 (20 days from the date of
the oral hearing and 96 days from the issuance date of this order). See
10 C.F.R. 2.1322(c). The Commission expects to issue a final memorandum
and order on the merits of this proceeding by August 13th, 65 days
after the record closes.
The Commission is confident that the proceeding can be resolved
fairly and efficiently within the prescribed time schedule. If Judge
Moore anticipates any delay in the schedule, he should promptly notify
the Commission of the reason for the delay and his anticipated new
schedule.
V. Participants in the Hearing and the Proceeding; Service List
The three participants at the hearing will be:
New England Power Company
c/o Edward Berlin, Esq.
Swidler Berlin Shereff Friedman, LLP
3000 K Street, N.W. Suite 300
Washington, DC 20007-5116
phone: (202) 424-7504
fax: (202) 424-7643
e-mail: eberlin@swidlaw.com
John F. Sherman, Esq.
Associate General Counsel
(508) 389-2971 and
James S. Robinson
Vice President and Director of Generation Investments
(508) 389-2643
New England Power Company
25 Research Drive
Westborough, Mass. 01582
fax: (508) 389-2463
e-mail:
Little Bay Power Corporation
c/o Gerald Charnoff, Esq.
Shaw Pittman Potts & Trowbridge
2300 N Street, N.W.
Washington, DC 20037
phone: (202) 663-8000
fax: (202) 663-8007
e-mail:
Montaup Electric Company
c/o Thomas G. Dignan, Jr., Esq.
Ropes & Gray
One International Place
Boston, MA 02110-2624
phone: (617) 951-7511
fax: (617) 951-7050
e-mail: [email protected]
In addition, the following two entities are currently neither
parties to this case nor participants in the hearing but are
nevertheless entitled to submit amicus curiae briefs in this
proceeding, and should therefore be included on the service list for
this proceeding:
North Atlantic Energy Service Corporation
c/o David A. Repka, Esq.
Winston & Strawn
1400 L Street, N.W.
Washington, DC 20005
phone: (202) 371-5726
fax: (202 371-5950
e-mail: drepka@winston.com
Also: P.O. Box 300, Seabrook, NH 03874
The United Illuminating Company
c/o Barton Z. Cowan, Esq.
Eckert Seamans Cherin & Mellott, LLC
600 Grant Street, 44th Floor
Pittsburgh, PA 15219
phone: (412) 566-6029
fax: (412) 566-6099
e-mail:
Also: c/o James F. Crowe
157 Church Street
P.O. Box 1564
New Haven, CT 06506-0901
fax: (203) 499-3664
e-mail:
Pursuant to 10 C.F.R. 2.1316(b)-(c), the NRC staff has indicated
that it will not be a party to this proceeding. Notwithstanding this
fact, the staff is still expected both to offer into evidence its
Safety Evaluation Report (``SER'') and to proffer one or more
sponsoring witnesses for that document. See 10 C.F.R. 2.1316(b).
VI. Service Requirements
Although the parties have a number of options under 10 C.F.R.
2.1313(c) by which to serve their filings, the preferred method of
filing in this proceeding is electronic (i.e., by e-mail). Electronic
copies should be in WordPerfect format (in a version at least as recent
as 6.0). Service will be considered timely if sent not later than 11:59
p.m. of the due date under our Subpart M rules. However, the
Commission's electronic filing system is not yet operational and will
probably not be until October 1999. Therefore, until the system is
operational, we will also require the parties to submit a single signed
hard copy of any such filings 15 to the Rulemakings and
Adjudications Branch, Office of the Secretary, U.S. Nuclear Regulatory
Commission, 11555 Rockville Pike, Room O-16-H-15, Rockville, MD 20852.
The fax number for this office is (301) 415-1101 and the e-mail address
is secy@nrc.gov.
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\15\ We draw the attention to the difference between this
requirement and that of Subpart G, which provides that any service
whether by fax or e-mail on the Secretary should be followed with an
original and two conforming copies of the service by regular mail in
accordance with 10 C.F.R. 2.708(d).
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Finally, we share Montaup's confusion regarding the service list
used during much of this proceeding. The service list should include
only the entities specified in Section V above, together with the
Office of the Secretary, the Presiding Officer, the Commission's
General Counsel--all of whom are listed in the service list attached to
this order--and also any counsel who enter their appearances pursuant
to Section III above. To the extent that any of those wish service to
be made upon people other than those listed above, they should notify
the Commission's Office of the Secretary and all others currently on
the service list no later than 4:30
[[Page 12391]]
p.m. on March 15, 1999 (ten days of the issuance date of this order).
Conclusion
For all the reasons set forth above, NEP's intervention petition
and hearing request are granted and its alternative petition for
summary relief is deferred. United's untimely intervention petition is
denied. The hearing process shall move forward under the terms set out
above.
It is so ordered.
For the Commission.16
\16\ Commissioner McGaffigan would have preferred that the
Commission, or a part thereof, be the presiding officer in this
transfer proceeding.
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Dated at Rockville, Maryland, this 5th day of March, 1999.
Annette L. Vietti-Cook,
Secretary of the Commission.
[FR Doc. 99-6112 Filed 3-11-99; 8:45 am]
BILLING CODE 7590-01-P
