[Federal Register Volume 75, Number 143 (Tuesday, July 27, 2010)]
[Notices]
[Pages 43945-43955]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-18357]
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DEPARTMENT OF ENERGY
Convention on Supplementary Compensation for Nuclear Damage
Contingent Cost Allocation
AGENCY: Department of Energy.
ACTION: Notice of inquiry and request for comment.
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SUMMARY: The Department of Energy (``Department'' or ``DOE'') is
seeking comment and information from the public to assist in its
development of regulations pertaining to section 934 of the Energy
Independence and Security Act of 2007 (``Act''). Section 934 addresses
how the United States will meet its obligations under the Convention on
Supplementary Compensation for Nuclear Damage (``Convention'' or
``CSC'') and, in particular, its obligation to contribute to an
international supplementary fund in the event of certain nuclear
incidents. Section 934 authorizes the Secretary of Energy
(``Secretary'') to issue regulations establishing a retrospective risk
pooling program by which nuclear suppliers will reimburse the United
States government for its contribution to the international
supplementary fund. The Department's regulations to implement the
retrospective risk pooling program are the subject of this notice.
DATES: Interested persons must submit written comments by September 27,
2010.
ADDRESSES: Comments may be submitted electronically by e-mailing them
to: [email protected]. We note that e-mail submissions
will avoid delay associated with security screening of U.S. Postal
Service mail.
Also, written comments should be addressed to Sophia Angelini,
Attorney-Advisor, Office of the General Counsel for Civilian Nuclear
Programs, GC-52, U.S. Department of Energy, 1000 Independence Avenue,
SW., Washington, DC 20585. The Department requires, in hard copy, a
signed original and three copies of all comments. Copies of the written
comments received and any other docket material may be reviewed on the
Web site specifically established for this proceeding. The Internet Web
site is: http://gc.doe.gov/civilian_nuclear_programs.htm.
FOR FURTHER INFORMATION CONTACT: Sophia Angelini, Attorney-Advisor,
Office of the General Counsel for Civilian Nuclear Programs, GC-52,
U.S. Department of Energy, 1000 Independence Avenue, SW., Washington,
DC 20585; Telephone (202) 586-0319.
SUPPLEMENTARY INFORMATION:
I. Background
On September 12, 1997, the Convention on Supplementary Compensation
for Nuclear Damage was adopted by a diplomatic conference convened by
the International Atomic Energy Agency (``IAEA'').\1\ The CSC provides
the basis for a global nuclear liability regime. Such a regime is an
essential element of the infrastructure necessary to support the
expanded use of nuclear power around the world to meet the challenges
of climate change, energy security, and economic growth. The CSC
provides consistent rules for dealing with legal liability resulting
from a nuclear incident and ensures prompt availability of meaningful
compensation for the nuclear damage resulting from any such incident. A
major feature of the CSC is the creation of an ``international
supplementary fund,'' which provides an additional tier of compensation
not otherwise available under a State's national law and to which each
Party to the Convention (``Contracting Party'') contributes in the
event of certain nuclear incidents.
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\1\ The full text of the Convention on Supplementary
Compensation for Nuclear Damage is available at http://www.iaea.org/Publication/Documents/Infircs/1998/infcirc567.shtml. A detailed
interpretation of the CSC and its provisions is contained in ``The
1997 Vienna Convention on Civil Liability for Nuclear Damage and the
1997 Convention on Supplementary Compensation for Nuclear Damage--
Explanatory Texts,'' International Atomic Energy Agency (IAEA)
(``Explanatory Texts''). International Law Series No. 3 (2007). The
Explanatory Texts is available at http://www-pub.iaea.org/MTCD/publications/PDF/Pub1279_web.pdf .
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In the event of a nuclear incident, the CSC provides a two-tiered
compensation system based on: (1) A Contracting Party's national law;
and (2) the international supplementary fund. The first tier is
provided by funds available under the laws of the State where the
nuclear installation involved is located, or under whose authority the
installation is operated (``Installation State''). The first tier
amount is set at a minimum of 300 million Special Drawing Rights
(``SDRs'').\2\ In the event that the first tier is inadequate to
compensate all nuclear damage, a second tier would be provided via the
international supplementary fund to which all Contracting Parties would
contribute, including the Installation
[[Page 43946]]
State that provided the first tier. This obligation arises when, and to
the extent that, second tier funds are actually required, with no
obligation to contribute if claims can be satisfied from the first
tier. The second tier amount is not preset, but instead is calculated
based on a formula that takes into account the installed capacity of
all Contracting Parties and their United Nations (``UN'') rate of
assessment at the time of the incident. If countries with most of the
current installed capacity join the Convention, the second tier will
amount to approximately 300 million SDRs, which, in conjunction with
the first tier, would guarantee a total of approximately 600 million
SDRs for compensation.
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\2\ SDR is the unit of account defined by the International
Monetary Fund (``IMF'') and used by the IMF for its own operations
and transactions. As of May 2010, 1 SDR equaled about $1.50 dollars;
therefore, 300 million SDRs would equal roughly $450 million
dollars.
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In 2007, Congress passed the Energy Independence and Security Act
of 2007 (Pub. L. 110-140), which includes section 934 (``Convention on
Supplementary Compensation for Nuclear Damage Contingent Cost
Allocation'') (42 U.S.C. 17373). Section 934 implements the Convention
in the United States. Congress found that the Convention benefits
United States nuclear suppliers by replacing their potentially open-
ended liability with a predictable liability regime, and, in effect,
insurance for nuclear damage arising from incidents not covered by the
Price-Anderson Act (``PAA'').\3\ The Department and the Nuclear
Regulatory Commission (``NRC'') are authorized to issue implementing
regulations, as necessary and appropriate. 934(l). The combined
operation of the CSC, PAA, and section 934 assures funding for victims
in a wider variety of nuclear incidents, while reducing potential
liability of United States nuclear suppliers and without increasing
potential costs to United States nuclear reactor operators. 934(a)(1).
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\3\ The Price-Anderson Act (``Price-Anderson'' or ``PAA''),
section 170 of the Atomic Energy Act of 1954, as amended (``AEA''),
42 U.S.C. 2210, is the national law governing compensation for
victims of nuclear incidents occurring within the United States. The
PAA provides that owners of commercial reactors must assume all
liability for nuclear damages awarded to the public; each licensed
reactor must carry primary financial protection in the amount of the
maximum liability insurance available, currently $375 million U.S.
dollars, and damages exceeding that amount would be assessed equally
against all commercial reactors (currently 104 reactors) covered by
the PAA under a retrospective premium requirement pooling program.
The PAA also provides indemnification for public liability in the
event of a nuclear incident resulting from activities conducted for
or on behalf of DOE, including a nuclear incident outside the United
States involving U.S.-owned nuclear material.
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Section 934 sets forth the means by which the United States will
contribute to the second tier of compensation required under the
Convention, that is, the international supplementary fund. (The first
tier of compensation would be funded pursuant to the governing United
States law for nuclear incidents, the PAA.) Funds available under the
PAA would be used to pay the United States contribution to the
international supplementary fund for nuclear incidents that are covered
by the PAA. 934(c) and (d). For nuclear incidents that are not covered
by the PAA, section 934 establishes a new risk pooling program for
nuclear suppliers to pay the United States contribution to the
international supplementary fund. The risk pooling program involves a
premium to be assessed retrospectively (i.e., a deferred payment) based
on a risk-informed formula taking into account specified risk factors
in conjunction with exclusionary criteria. 934(e). This notice of
inquiry (``NOI'') is focused only on regulations to be promulgated by
the Department to implement the new retrospective risk pooling program
for nuclear suppliers. A section by section explanation of section 934
is provided in the Appendix to this notice.
II. Discussion of Section 934 and Request for Public Comment
A. Overview
The Department is issuing this NOI to provide an opportunity for
public input as the Department develops a rule to implement a
retrospective risk pooling program for nuclear suppliers to fund the
United States contribution to the international supplementary fund
required by the Convention.
This NOI discusses the major topics related to the implementation
of section 934 by the Department, including: (1) Operation of the PAA
system; (2) pertinent definitions in section 934(b); (3) the
retrospective risk pooling program and deferred payment in subsection
934(e)(2); (4) the risk-informed assessment formula in subsection
934(e)(2)(C)(i) and factors for consideration in subsection
934(e)(2)(C)(ii); (5) reporting requirements in subsection 934(f); and
(6) payments to and by the United States in subsection 934(h).
B. Operation of the Price-Anderson System
Section 934 is clear in its findings and purpose that the existing
legal and operational framework of the PAA is not affected by the
compensation system established by the Convention. Subsection 934(a)
specifies that contributions under the Convention cannot ``(i) upset
settled expectations based on the liability regime established under
the Price-Anderson Act; or (ii) shift to Federal taxpayers liability
risks for nuclear incidents at foreign installations.'' 934(a)(1)(H)(i)
and (ii). With respect to a nuclear incident covered by the PAA
(``Price-Anderson incident''), ``funds already available under the
[PAA] should be used'' for contributions due under the Convention.
934(a)(1)(I). With respect to a nuclear incident outside the United
States not covered by the PAA, ``a retrospective premium should be
prorated among nuclear suppliers'' with contingent costs allocated
equitably, on the basis of risk. 934(a)(1)(J) and 934(a)(2)(B). In sum,
the United States contribution under the Convention will be funded
either from existing PAA funds or the new retrospective risk pooling
program for nuclear suppliers. In no case would a nuclear reactor
operator that contributes to the PAA pooling program be required also
to contribute to the new retrospective pooling program. Because section
934 is clear on this point, and imposes no requirements on nuclear
reactor operators covered by the PAA, the statute preserves the
existing compensation system under the PAA. Accordingly, it is not
necessary for either the Department or the NRC to issue implementing
regulations to effectuate how and when PAA funds will be used to cover
a contribution under the Convention.
The Department believes that, on this point, the operation of the
PAA under the Convention is clear and self-executing; however, the
Department invites comments if there is any question in this regard.
C. Definitions
Subsection 934(b) provides definitions for certain terms used in
the Act. In its regulation, the Department intends to include the terms
defined in the statute, as well as other key terms necessary to
implement the statute. The Department views some of the terms defined
in subsection 934(b) as being clear and to not require additional
clarification. Those terms include: ``Commission'' at subsection
934(b)(1); ``Convention'' at subsection 934(b)(3); and ``Secretary'' at
subsection 934(b)(9). Other terms in section 934, although defined, are
less clear in their application or interpretation such that
clarification may be necessary. For example, while the term ``nuclear
supplier'' is defined at subsection 934(b)(7),\4\ that term is
potentially very
[[Page 43947]]
broad in scope, complex, and subject to interpretation. As to this
definition and others below, the Department requests comments on how
implementation of section 934 would be facilitated by further
clarification and consideration in the regulation. If a commenter
believes that clarifications should be provided in the Secretary's
regulation as to the terms below, or any other terms, the commenter is
requested to explain why and, if possible, provide suggested language.
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\4\ The term ``nuclear supplier'' means a covered person (or a
successor in interest of a covered person) that--
(A) Supplies facilities, equipment, fuel, services, or
technology pertaining to the design, construction, operation, or
decommissioning of a covered installation; or
(B) Transports nuclear materials that could result in a covered
incident.
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The term ``contingent cost,'' defined at subsection 934(b)(2),\5\
means the cost to the United States in the event of a covered incident,
which is equal to the amount the United States is obligated to make
available under paragraph 1(b) of Article III of the Convention (i.e.,
the international supplementary fund) pursuant to Article VII. As the
definition implies, the cost to the United States in the event of a
covered incident (a nuclear incident within the scope of the
Convention) is contingent, and thus only paid under specified
circumstances. Those circumstances and the amount of the payment are
governed by the Convention, primarily Articles IV, VI and VII.
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\5\ The term ``contingent cost'' means the cost to the United
States in the event of a covered incident the amount of which is
equal to the amount of funds the United States is obligated to make
available under paragraph 1(b) of Article III of the Convention.
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The formula for calculating the amount of the international
supplementary fund is contained in Article IV, and is based upon: (1)
Nuclear generating capacity (thermal power shown at the date of the
nuclear incident in a list of nuclear installations established under
Article VIII); and (2) UN assessment rate. Article IV.1(c) establishes
a cap on contributions by any Contracting Party, other than the
Installation State, per nuclear incident equal to the Contracting
Party's UN rate of assessment plus 8 percentage points of the fund as a
whole. For the United States, the contribution is capped initially at
28% (UN rate of assessment of 20%, plus 8%) or less than one-third of
the international supplementary fund. As more generating States become
Contracting Parties, the cap will increase, while the United States
contribution percentage will decrease.
The Department believes that the definition of ``contingent cost''
is exact both as to when the cost is triggered and as to the required
methodology for calculation of such costs. Therefore, the current
approach is to define this term consistent with the Act and the
Convention. Nonetheless, the Department invites comments as to related
clarifications that should be incorporated in its regulation.
The term ``covered incident,'' defined at subsection 934(b)(4),
means a nuclear incident ``the occurrence of which results in a request
for funds pursuant to Article VII.'' Funds may be requested under
Article VII when a nuclear incident results in nuclear damage that
exceeds the first-tier contribution amount. Generally, a covered
incident is a nuclear incident occurring in the territory of a
Contracting Party or during transportation to or from a Contracting
Party.
Because section 934 defines neither ``nuclear incident'' nor
``nuclear damage,'' terms which are essential to an understanding of
what constitutes a covered incident, DOE believes that it is necessary
to look to the Convention and existing law to determine the proper
interpretation and meaning of a covered incident under the Act. The
Convention defines both nuclear incident and nuclear damage; the AEA
defines nuclear incident.
The Convention, Article I.(i), defines ``nuclear incident'' as
``any occurrence or series of occurrences having the same origin which
causes nuclear damage or, but only with respect to preventive measures,
creates a grave and imminent threat of causing such damage.'' This
definition of nuclear incident includes incidents of actual nuclear
damage, and, in the absence of an actual release of radiation, damages
incident to preventive measures taken only in response to a grave and
imminent threat of a release of radiation that could cause other types
of nuclear damage. Under the AEA, subsection 11q. (42 U.S.C. 2014q.), a
``nuclear incident'' is defined as, in pertinent part, ``any
occurrence, including an extraordinary nuclear occurrence, within the
United States causing, within or outside the United States, bodily
injury, sickness, disease, or death, or loss of or damage to property,
or loss of use of property, arising out of or resulting from the
radioactive, toxic, explosive, or other hazardous properties of source,
special nuclear, or byproduct material.'' Like the Convention, the PAA
definition of nuclear incident centers on the occurrence of injury or
damage to persons or property directly caused by the incident. Unlike
the Convention, the definition of nuclear incident in the PAA does not
expressly include damage incident to preventive measures. However, the
PAA provides for indemnification in the case of ``public liability,''
where public liability is defined as, in pertinent part, ``any legal
liability arising out of or resulting from a nuclear incident or
precautionary evacuation * * * '' (AEA subsection 11w. (42 U.S.C.
2014w.)), and ``precautionary evacuation'' is defined as, in pertinent
part, a government ordered ``evacuation of the public within a specific
area near a nuclear facility, or the transportation route in the case
of an accident involving transportation of source material, special
nuclear material, byproduct material, high-level radioactive waste,
spent nuclear fuel, or transuranic waste * * * if the evacuation is--
(1) the result of any event that is not classified as a nuclear
incident but poses imminent danger of bodily injury or property damage
* * *.'' AEA subsection 11gg. (42 U.S.C. 2014gg.). The definitions of
``preventive measures'' under the Convention and ``precautionary
evacuation'' under the PAA are similar in scope and effect. Thus, when
the AEA definitions of nuclear incident, public liability, and
precautionary evacuation are read together the net effect is that a
nuclear incident under the Convention is comparable to a nuclear
incident under the PAA. Notwithstanding this comparability, in
accordance with Article 2.2 of the Annex to the Convention (``Annex''),
which permits the United States to use its existing domestic framework
for dealing with liability for nuclear damage, the United States
expects to use the PAA definition of a nuclear incident in connection
with Price-Anderson incidents and the CSC definition of nuclear
incident in connection with incidents that are not Price-Anderson
incidents when implementing the Act.
The Department requests comments on whether and how it may need to
further clarify those terms in its regulation.
In a similar vein, although the term ``nuclear damage'' is defined
in the Convention, the Annex provides a mechanism for the United States
to apply a definition of nuclear damage consistent with both the
Convention and the PAA. For incidents outside the United States not
covered by the PAA, the United States expects to apply the definition
of nuclear damage under the Convention, Article I.(f). For incidents
inside the United States covered by the PAA, the United States expects
to apply the definition of nuclear damage in Annex Article 2.2(a).
The Department requests comments on whether or how it may need to
further clarify those terms in its regulation.
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Nuclear damage is defined in the Convention, Article I.(f), as loss
of life or personal injury, loss of or damage to property and, to the
extent determined by the law of a competent court, five categories of
damages relating to impairment of the environment such as costs of
measures of reinstatement, loss of income, costs of preventive
measures, and other economic loss that must be treated as nuclear
damage. The types of nuclear damage covered by the Convention are thus
divided into two categories: Those which must be compensated (loss of
life, personal injury, and property loss or damage) and those that are
to be compensated ``to the extent determined by the law of the
competent court.'' Article I.(f)(ii). This provides the competent court
flexibility in determining under national law how to compensate
economic loss that does not fall into the category of ``loss or damage
to property.''
Under Annex Article 2.2, the United States (the only country able
to meet the conditions of Annex Article 2.2) may define nuclear damage
as set forth in Article I.(f) of the Convention, or as set forth in
Annex Article 2.2(a). Annex Article 2.2(a) defines nuclear damage as
including, in addition to that identified in Article I.(f) of the
Convention, ``any other loss or damage to the extent that the loss or
damage arises out of or results from the radioactive properties, or a
combination of radioactive properties with toxic, explosive or other
hazardous properties of nuclear fuel or radioactive products or waste
in, or of nuclear material coming from, originating in, or sent to, a
nuclear installation; or other ionizing radiation emitted by any source
of radiation inside a nuclear installation, provided that such
application does not affect the undertaking by that Contracting Party
pursuant to Article III of this Convention.'' The latter definition of
nuclear damage (i.e., at Annex Article 2.2(a)) is consistent with the
PAA approach of compensating victims for ``bodily injury, sickness,
disease or death, or loss of or damage to property, or loss of use of
property, arising out of or resulting from the radioactive, toxic,
explosive, or other hazardous properties of source, special nuclear, or
byproduct material.'' AEA subsection 11q. (42 U.S.C. 2014q.).
Accordingly, the United States would use this broader definition for
Price-Anderson incidents within the United States when implementing the
Act.
The Department requests comments on whether or how it may need to
further clarify those terms in its regulation.
The term ``covered installation,'' defined at subsection 934(b)(5),
means a nuclear installation at which the occurrence of a nuclear
incident could result in a request for funds under Article VII of the
Convention and thus trigger the obligation to contribute to the
international supplementary fund. The Department views this definition
as clear, except that it is dependent upon an understanding of the term
``nuclear installation.'' The term ``nuclear installation'' is not
defined in section 934 or the AEA. The CSC generally uses the
definition set forth in the Paris Convention on Third Party Liability
in the Field of Nuclear Energy of 29 July 1960 (``Paris Convention''),
the Vienna Convention on Civil Liability for Nuclear Damage of 21 May
1963 (``Vienna Convention'') or Article 1(b) of the Annex, depending on
which instrument is applicable to a particular nuclear incident.
Article 2.2(b) of the Annex, however, permits the United States to
apply the definition of ``nuclear installation'' set forth at Article
2.3 of the Annex to the exclusion of the definition at Article 1.1(b)
of the Annex. Thus, for covered incidents within the United States,
``nuclear installation'' is defined at Annex Article 2.3 to mean: a)
Any civil nuclear reactor other than one with which a means of sea or
air transport is equipped for use as a source of power, whether for
propulsion thereof or any other purpose; and b) any civil facility for
processing, reprocessing or storing: (i) Irradiated nuclear fuel; or
(ii) radioactive products or waste that: (1) Result from the
reprocessing of irradiated nuclear fuel and contain significant amounts
of fission products; or (2) contain elements that have an atomic number
greater than 92 in concentrations greater than 10 nano-curies per gram;
or (c) any other civil facility for processing, reprocessing, or
storing nuclear material unless the Contracting Party determines the
small extent of the risks involved with such an installation warrants
the exclusion of such facility from the definition. In the context of
the CSC, the United States interprets this definition of ``nuclear
installation'' to cover reactors and facilities for which the primary
purpose is processing, reprocessing, or storing spent fuel, high-level
radioactive waste, or highly radioactive TRU waste. The United States
further interprets this definition of ``nuclear installation'' as
excluding all non-DOE nuclear facilities to which the NRC has decided
not to extend Price-Anderson indemnification. For covered incidents
within the United States, the Department's current approach would be to
define the term ``covered installation'' consistent with the PAA and
the definition of nuclear installation found in the Annex Article 2.
For covered incidents outside the United States not covered by the PAA,
the Department's current approach would be to use the definition of
nuclear installation applicable under the CSC to determine a covered
installation. The Department requests comments on whether or how it may
need to further clarify those terms in its regulation.
The term ``covered person,'' is defined at subsection 934(b)(6) as:
(i) A United States person; and (ii) an individual or entity (including
an agency or instrumentality of a foreign country) that--(I) is located
in the United States; or (II) carries out an activity in the United
States. The term does not include--(i) the United States; or (ii) any
agency or instrumentality of the United States. The definition of
``covered person'' incorporates another defined term, ``United States
person,'' which is defined at subsection 934(b)(11) as: (1) Any
individual who is a United States resident, national or citizen (other
than an individual residing outside the United States and not employed
by a United States person); and (2) any entity that is organized under
the laws of the United States.
Read together, these definitions provide a frame of reference for
the type of individual or entity that would constitute a ``covered
person'' under the Act and the DOE's regulation. The Department's
current approach would be to interpret ``covered person,'' to be
either: (1) Any individual who is a United States resident, national,
or citizen (other than the non-resident who is not employed by a United
States person); or (2) any entity organized under the laws of the
United States; or (3) any individual or entity--including an agency or
instrumentality of a foreign country--to the extent that it is either
located in or carries out an activity in the United States. The
Department currently expects to define a covered person in the broadest
manner as including, for example, any individual or entity, whether of
foreign origin or domestic, that carries out any activity in the United
States that is determined to provide an appropriate basis for
allocating the contingent costs. However, a covered person would not be
the United States itself or any agency or instrumentality of the United
States. The Department believes these definitions, although broad in
scope, are clear and that there is a common understanding of how they
are to be interpreted and applied. Nevertheless,
[[Page 43949]]
the Department requests public comment on whether additional
clarification may be necessary in its regulation.
The term ``nuclear supplier,'' defined at subsection 934(b)(7),
means a covered person (or its successor in interest) that (A) supplies
facilities, equipment, fuel, services, or technology pertaining to the
design, construction, operation, or decommissioning of a covered
installation, or (B) transports nuclear materials that could result in
a covered incident. The definition of ``nuclear supplier'' refers to a
covered person or its successor that either: (1) Provides goods or
services to a covered installation (where a nuclear incident could
trigger an Article VII request for funds); or (2) engages in a shipment
of nuclear materials that could result in a covered incident (which
could trigger an Article VII request for funds). Under the Act, a
nuclear supplier is the individual or entity responsible for a pro-rata
share based on the risk-informed assessment formula at subsection
934(e)(2)(C) of any contingent costs the United States may bear in the
event of a covered incident outside the United States that is not
covered by the PAA. While the statutory definition of ``nuclear
supplier'' is broad in scope and may require further clarification in
the regulation, the criteria related to the risk-informed assessment
formula at subsection 934(e)(2)(C)(i) and factors for consideration in
determining the formula at subsection 934(e)(2)(C)(ii) (whereby certain
nuclear suppliers could be excluded) are directly relevant to
determining which nuclear suppliers are contemplated within the Act. In
this regard, the Department is considering whether it may be
appropriate to include in its regulation additional criteria and
requirements which, if met, would exclude certain nuclear suppliers
from participation in the retrospective risk pooling program. The
Department requests comment on whether the definition of ``nuclear
supplier'' requires further clarification, or whether clarification can
be appropriately addressed in regulations pertaining to the
retrospective risk pooling program and formula at subsection 934(e).
The term ``Price-Anderson incident,'' defined at subsection
934(b)(8), means a covered incident for which section 170 of the AEA
makes funds available to compensate for public liability, as defined in
section 11w. of the AEA (42 U.S.C. 2014w.). This definition reflects
the distinction between covered incidents within the scope of the PAA
(where contingent costs would be covered by the PAA) and covered
incidents outside the scope of the PAA (where contingent costs would be
covered by United States nuclear suppliers). For covered incidents that
are also PAA incidents (e.g., either a nuclear incident in the United
States, or a nuclear incident outside the United States involving a DOE
contractor and U.S.-owned nuclear material), the PAA would be used to
fund the United States contribution to the international supplementary
fund. For a covered incident that does not constitute a PAA incident,
such as a nuclear incident occurring in the territory of a Contracting
Party that does not involve U.S.-owned nuclear material, the United
States contribution would be provided by the United States nuclear
suppliers that must participate in the retrospective risk pooling
program described at subsection 934(e).
The Department requests comments on whether or how it may need to
further clarify those terms in its regulation.
The term ``United States,'' defined at subsection 934(b)(10), means
the same geographic area as the definition of ``United States'' in
section 11bb. of the AEA (42 U.S.C. 2014bb.). The AEA definition of
United States provides that, when used in a geographical sense, the
United States ``includes all territories and possessions of the United
States, the Canal Zone and Puerto Rico.'' (Although the AEA definition
includes ``the Canal Zone,'' DOE notes that, pursuant to the Panama
Canal Treaty, the ``Canal Zone'' is no longer so included.) For
purposes of the AEA definition and section 934, the geographic scope of
the United States includes its territorial sea, but not its exclusive
economic zone (``EEZ''),\6\ even though the CSC grants a member country
jurisdiction over nuclear incidents in or above the EEZ of a
Contracting Party under specified circumstances, as well as in or above
other maritime areas beyond the territorial sea and EEZ of a
Contracting Party under specified circumstances. The broader geographic
scope of the Convention from that of the AEA (and thus PAA) recognizes
the right of a Contracting Party, including the United States, to
exercise its jurisdiction in the case of a covered incident that occurs
during transport of nuclear material within its EEZ or in maritime
areas beyond the territorial seas under the conditions specified in
Article V of the Convention. The Department believes this definition is
clear; however, the Department requests public comment on whether
additional clarification may be necessary.
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\6\ The EEZ of the United States is ``a zone contiguous to the
territorial sea, including zones contiguous to the territorial sea
of the United States, the Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana Islands (to the extent
consistent with the Covenant and the United Nations Trusteeship
Agreement), and United States overseas territories and possessions.
The EEZ extends to a distance 200 nautical miles from the baseline
from which the breadth of the territorial sea is measured.''
Presidential Proclamation 5030, March 10, 1983, 3 CFR 1983 Comp., p.
22.
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In sum, the Department requests comment as to whether
implementation of section 934 would be facilitated by the Department
further clarifying any of the foregoing terms or any other terms in its
regulations.
D. Retrospective Risk Pooling Program
Subsection 934(e) sets forth the requirements and risk-informed
assessment formula to be used in establishing the retrospective risk
pooling program that is central to United States participation in the
Convention and supports its goal of ensuring prompt and equitable
compensation in the event of a nuclear incident. PAA funding cannot be
used for the United States contribution to the international
supplementary fund in the event of a covered incident outside the
United States that is not a Price-Anderson incident. 934(a)(1)(H)(i).
Likewise, Federal taxpayers cannot be burdened with the liability risks
associated with nuclear incidents at foreign installations.
934(a)(1)(H)(ii). Accordingly, subsection 934(e) provides for a
retrospective risk pooling program, with participation by nuclear
suppliers, as the funding mechanism to cover contingent costs resulting
from a covered incident outside the United States that is not a Price-
Anderson incident. This retrospective risk pooling program for nuclear
suppliers (which provides nuclear suppliers with insurance for their
potentially unlimited liability in the event of a nuclear incident) is
similar in certain respects to the PAA retrospective pooling
arrangement (which provides United States nuclear reactor operators
with insurance for their potential liability in the event of a nuclear
incident) wherein the premium is assessed retrospectively, i.e., after
a nuclear incident, by allocating the aggregate legal liability (in
excess of the required liability insurance constituting primary
financial responsibility) that actually resulted from such incident
among all operators without regard to fault or liability.
Subsection 934(e)(2) provides the basic structure of the
retrospective risk pooling program and criteria for determining the
prorated deferred payment. The program is ``retrospective''
[[Page 43950]]
in the sense that a nuclear supplier's obligation to pay does not arise
(i.e., it is deferred) unless and until a covered incident that is not
a Price-Anderson incident occurs and the United States is called on to
provide its contribution to the international supplementary fund (i.e.,
resulting in contingent costs). 934(e)(2)(A). This deferred payment
will be allocated among the ``pool'' of nuclear suppliers on the basis
of a risk-informed assessment formula. 943(e)(2)(B). The formula cannot
be applied by the Secretary to any covered installation or
transportation for which funds are available under the PAA.
943(e)(2)(iii). The amounts of the deferred payments will basically
reflect the risk from which each nuclear supplier is relieved, relative
to other nuclear suppliers, by reason of the United States
participation in the international nuclear liability compensation
system.
Subsection 934(e)(2)(C) requires that the Secretary determine by
rulemaking the risk-informed assessment formula and specifies certain
risk factors that the Secretary must take into account. These risk
factors focus on the extent of the potential liability of each nuclear
supplier resulting from its activities relative to other nuclear
suppliers and are comparable to factors currently used by private
insurers to allocate risk. While subsection 934(e)(2)(C) contains
specific risk factors to be accounted for in arriving at the risk-
informed assessment formula, the Secretary has broad discretion to
interpret and implement this provision. The Department believes that
the public, and in particular the nuclear insurance industry, can
provide valuable information to DOE regarding how each of the following
six (6) risk factors enumerated in subsection 934(e)(2)(C)(i) should be
taken into account (particularly in light of other factors, such as the
exclusionary criteria in subsection 934(e)(2)(C)(ii) and the period on
which risk is assessed in subsection 934(e)(2)(C)(ii)(II)):
(I) The nature and intended purpose of the goods and services
supplied by each nuclear supplier to each covered installation outside
the United States;
(II) The quantity of the goods and services supplied by each
nuclear supplier to each covered installation outside the United
States;
(III) The hazards associated with the supplied goods and services
if the goods and services fail to achieve the intended purposes;
(IV) The hazards associated with the covered installation outside
the United States to which the goods and services are supplied;
(V) The legal, regulatory, and financial infrastructure associated
with the covered installation outside the United States to which the
goods and services are supplied; and
(VI) The hazards associated with particular forms of
transportation.
Without the six risk factors at subsection 934(e)(2)(C)(i) above,
the retrospective risk pooling program could conceivably require the
participation of any nuclear supplier involved in activities such as
supplying facilities, equipment, fuel, services, technology, or
transport of nuclear materials related to any step within the nuclear
fuel cycle--from activities such as mining, milling, enrichment, and
fabrication through reprocessing--no matter its size or contribution
relative to the nuclear installation. However, application of the risk
formula provides a basis for the Department to assess a deferred
premium according to the relative risk a nuclear supplier's goods or
services contribute to a nuclear incident.
Further, subsection 934(e)(2)(C)(ii) lists factors for
consideration whereby the Secretary may exclude certain nuclear
suppliers. The Department believes that its interpretation of the risk
factors enumerated above will be influenced significantly by the
following factors in subsection 934(e)(C)(ii) that the Secretary may
consider:
(ii) Factors for Consideration.--In determining the formula, the
Secretary may--
(I) exclude
(aa) Goods and services with negligible risk;
(bb) Classes of goods and services not intended specifically for
use in a nuclear installation;
(cc) A nuclear supplier with a de minimis share of the contingent
cost; and
(dd) A nuclear supplier no longer in existence for which there is
no identifiable successor; and
(II) Establish the period on which the risk assessment is based.
The Department believes the intent of this provision is to exclude
from participation in the risk pooling program those nuclear suppliers
that provide goods or services that are the least likely to result in a
nuclear incident for which requests under the Convention for
contributions to the international supplementary fund would be invoked.
Stated otherwise, the contingent costs should be allocated among those
suppliers that provide goods or services most likely to result in
significant potential liability in the event of a covered incident.
Accordingly, only nuclear suppliers of goods and services that are
likely to cause a covered incident with significant damage should be
contributors to the risk pooling program. The exclusionary
considerations are indicative of the type of nuclear supplier unlikely
to contribute to the risk of such an incident, that is, a nuclear
supplier that does not provide goods or services specifically for
nuclear facilities; that does not engage in activities likely to result
in significant potential nuclear liability, or that engages in such
activities to a minor extent; or is no longer in existence and
therefore cannot be expected to contribute to the pooling program.
If the United States is called upon to contribute to the
international supplementary fund, the risk-informed formula would be
applied to calculate the amount that each ``nuclear supplier'' within
the definition of the Act would be obligated to pay. The Department
believes that, reading both subsections 934(e)(2)(C)(i) and (ii)
together, the formula is expected to include nuclear suppliers based on
the relative risk of their goods or services causing a covered incident
resulting in a request for contributions under the international
supplementary fund, and to exclude nuclear suppliers with little or no
risk of being determined legally liable for a covered incident
resulting in nuclear damage in excess of 300 million SDRs.
Because of the importance of each risk factor and the exclusionary
considerations in establishing the formula, the Department seeks public
comment on all of these criteria and how they should be interpreted and
applied. Each risk factor, and the corresponding exclusionary
considerations, will be discussed below.
1. The first risk factor to be used as a basis for the formula is
the nature and intended purpose of the goods and services supplied by
each nuclear supplier to each covered installation outside the United
States. 934(e)(2)(C)(i)(I). The Department's current approach would be
to interpret this risk factor, in light of the presence of other
statutory criteria that could exclude nuclear suppliers providing goods
and services with negligible risk and in classes not intended
specifically for use in a nuclear installation (subsections
934(e)(2)(C)(ii)(I)(aa) and (bb)), to mean that, as a general matter,
only nuclear suppliers that provide goods or services specifically
intended for use in structures, systems, and components (``SSCs'') that
are important to safety at a nuclear installation should be included.
This concept of SSCs important to safety is utilized in NRC
[[Page 43951]]
licensing of nuclear installations (e.g., nuclear reactors, fuel
storage facilities) as a means to evaluate items based on their
relative risk and importance to the safe operation of the nuclear
installation. As such, this concept can provide a useful tool to
identify those goods and services that have a greater potential for
causing a nuclear incident that might result in significant nuclear
damage. Focusing on SSCs important to safety would eliminate many
nuclear suppliers of goods or services that do not contribute
significantly to the risk of a nuclear incident, as well as suppliers
of goods or services not intended specifically for use in a nuclear
installation. For example, the Department believes that, under this
interpretation, suppliers of such items as laboratory equipment,
cleaning services, routine operational and technical reporting
services, and computers not intended for control of the installation
would be excluded from the formula. In contrast, the Department
believes that suppliers such as designers and builders of nuclear
islands (involving nuclear steam supply systems, reactors, etc.), and
designers, manufacturers, and sellers of nuclear fuel assemblies or on-
line nuclear measurement devices would be included in the formula. The
Department seeks public comment on this interpretation, and in
particular as to whether it has too narrowly or broadly interpreted
this risk factor.
2. The second risk factor to be used as a basis for the formula is
the quantity of the goods and services supplied by each nuclear
supplier to each covered installation outside the United States.
934(e)(2)(C)(i)(II). The Department's current approach would be to
interpret this risk factor to mean that the formula should take into
account the amount of goods and services provided by a nuclear supplier
as an indicator of the extent to which a nuclear supplier contributes
to overall risk. The Department seeks public comment on whether this
factor should be assessed on the basis of the value of the goods or
services supplied, the volume of the goods or services supplied, or
some other criteria.
3. The third risk factor to be used as a basis for the formula is
the hazards associated with the supplied goods and services if they
fail to achieve the intended purposes. 934(e)(2)(C)(i)(III). The
Department's current approach would be to interpret this risk factor,
in light of the presence of other statutory criteria that could exclude
nuclear suppliers providing goods and services with negligible risk or
in classes not intended specifically for use in a nuclear installation
(subsections 934(e)(2)(C)(ii)(aa) and (bb)), in a manner analogous to
the first risk factor. That is, only nuclear suppliers of safety-
related goods or services would be included in the formula. Among those
goods and services, risk would then be determined based on the relative
radiological hazard or harm that may be caused if a particular good or
service failed to achieve its intended function. For example, the
supplier of a reactor vessel would be weighted with greater risk than
the supplier of the safety-related concrete forming the foundation of
the reactor building. Both goods are safety-related, but the
malfunction of the former presents a greater risk of radiological
hazard than the latter. Further, the Department expects that the
relative hazard of a good or service may be evaluated in terms of
whether it is a likely contributor to a covered incident resulting in a
request for contributions under the international supplementary fund
(i.e., is it so hazardous as to likely cause a covered incident of a
magnitude that first-tier compensation is inadequate). The Department
seeks public comment on these issues and as to how it should further
define the term ``hazard'' in light of various factors, such as whether
hazard should be differentiated on the basis of harm to persons or
property, or on the basis of its hazard standing alone or as part of a
redundant system of protection.
4. The fourth risk factor to be used as a basis for the formula is
the hazards associated with the covered installation outside the United
States to which the goods and services are supplied.
934(e)(2)(C)(i)(IV). The Department's current approach would be to
interpret this risk factor to mean that risk should be determined based
on the hazard associated with the nuclear installation itself, because
some nuclear installations bear more risk or hazard of a nuclear
incident than others. These differences in risk stem from a variety of
factors. For example, the risk of a nuclear incident causing
significant nuclear damage may be greater at a nuclear reactor facility
than at a spent fuel storage facility, or it may be greater for a
facility located in a densely populated area as opposed to a facility
in a remote area. Further, there may be distinctions within a class of
nuclear installations that would make the risk posed by some classes
more or less than others. For example, among nuclear reactors, research
reactors having a thermal power rating of 20 Megawatts or less may have
less hazard associated with them than power reactors having a thermal
power rating of over 300 Megawatts. Also, nuclear facilities other than
reactors may be distinguished based on common nuclear industry
standards for hazard categorization and accident analysis techniques.
Category 1 facilities pose the most hazardous risk as they have
postulated accidents that could result in significant offsite
consequences. Category 2 facilities have postulated accidents that
could result in significant on-site consequences. Category 3 facilities
have postulated accidents that could result in only localized
consequences. Accordingly, the risk formula would include consideration
of not only the type of good or service provided by the nuclear
supplier, but also the type of nuclear installation that will utilize
such good or service. DOE seeks public comment on this approach.
5. The fifth risk factor to be used as a basis for the formula is
the legal, regulatory, and financial infrastructure associated with the
covered installation outside the United States to which the goods and
services are supplied. 934(e)(2)(C)(i)(V). The Department's current
approach would be to interpret this risk factor to refer to the
relative risk of a nuclear incident arising from a nuclear installation
based upon the legal, regulatory, or financial environment in which the
installation operates. For example, a nuclear installation situated in
a country with little regulatory oversight of public health and safety,
or inadequate financial requirements for the nuclear operator, or
without the availability of judicial recourse, may lead to a relative
risk factor greater than the supply of goods or services to a nuclear
installation in a country with rigorous regulatory oversight, robust
financial requirements, and an efficient judicial system. Thus, for
example, the presence of independent regulatory inspectors onsite at a
nuclear installation of a more hazardous classification (such as a
Category 1 facility) could constitute a favorable risk factor. The
Department recognizes that this type of risk factor may be difficult to
assess in a quantitative fashion, nevertheless, the statutory language
must be given a good-faith reading, and the Department seeks public
comment on how to interpret and implement this factor in its risk-based
formula.
6. The sixth risk factor to be used as a basis for the formula
concerns the hazards associated with particular forms of
transportation. 934(e)(2)(C)(i)(VI). The Department's current approach
would be to interpret this risk factor to require consideration of how
contingent costs should be allocated between suppliers of goods and
services to
[[Page 43952]]
nuclear installations and suppliers of transportation services, as well
as an assessment of the various forms of transportation and the
relative risks of that transportation. The Department seeks public
comment on the extent, if any, to which the assessment of
transportation services should be different than the assessment of
other goods and services, especially with respect to the application of
the first risk factor on nature and intended purpose. The Department
also seeks public comment on the means to differentiate the hazards
between particular forms of transportation, and the nuclear suppliers
involved in such transportation. For example, how should the Department
assess the relative risks among the various forms of radiological
transportation such as truck, ship or rail and the contribution of a
nuclear supplier to that risk? Should the hazard be assessed solely on
the safety record within each type of transportation, or other factors
such as the risks associated with the transportation routes used for a
particular form of transportation? For example, transportation by truck
may entail greater potential exposure to population centers than
transportation by ship.
Further, should certain nuclear suppliers be excluded regardless of
the form of transportation in which the good or services is utilized?
For example, suppliers that provide navigational systems might be
excluded from the formula, as the purpose of the navigational system is
not specific to nuclear transport or any one form of transport, and
would constitute a negligible risk for causing a nuclear incident. On
the other hand, suppliers of transportation casks designed for nuclear
material would be included and risk assessed based on the relative
contribution of the cask to a nuclear incident while in transport. The
Department seeks public comment on these questions or other means to
differentiate the hazards associated with particular forms of
transportation as well as identifying mitigating factors to
appropriately rank risk in its formula.
Subsection 934(e)(2)(ii)(I)(cc) states that the Secretary may
exclude ``a nuclear supplier with a de minimis share of the contingent
cost.'' As commonly used, the term ``de minimis'' means lacking
significance or importance, or so minor in importance as to be
disregarded.\7\ The Department's current approach would be to interpret
this ``de minimis'' criteria to mean that nuclear suppliers likely to
contribute only a small percentage of the overall contingent costs
should be excluded from the formula because they (1) Do not contribute
in any meaningful manner to the risks intended to be covered by the
Convention, (2) are unlikely to be sued in the event of a nuclear
incident, and (3) are even more unlikely to be determined legally
liable for significant amounts of nuclear damages. The Department
believes this provision is intended to keep the risk pooling program
from becoming unmanageable because of the number of potential
contributors and to focus operation of the program on the major
beneficiaries of the Convention. The Department could incorporate these
criteria into its regulations by excluding those suppliers that would
contribute less than a specified percentage (e.g., .5%) of the
contingent costs.
---------------------------------------------------------------------------
\7\ Webster's Third New Dictionary (2002)
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This approach, however, would result in uncertainty as to which
suppliers would be included in the program prior to the actual
implementation of the formula. Accordingly, the Department is
considering alternative approaches that would implement the ``de
minimis'' criteria in a manner that provides upfront certainty as to
which suppliers would be included in the program. For example, the
Department might exclude suppliers on the basis of the dollar value of
the goods or services (e.g., nuclear suppliers that provide less than
$50,000 per year in goods or services may be excluded from the
formula), the volume of goods or services (e.g., nuclear suppliers of
less than 10 cooling pumps), or the percentage of annual business
attributable to nuclear goods or services (e.g., nuclear suppliers for
which the nuclear equipment or services provided per year are less than
10% of such entities' overall annual sales). The Department seeks
comments on these alternatives, as well as other fair and equitable
approaches for excluding ``de minimis'' suppliers.
Finally, subsection 934(e)(2)(C)(ii)(II) permits the Secretary to
``establish the period on which the risk assessment is based.'' By so
doing, the Department could exclude certain nuclear suppliers by virtue
of the time period established. The Department interprets this
provision to give the Department discretion to determine the time
period to use in the risk-informed formula. That time period may be set
based on several relevant factors, including when the majority of
domestic nuclear suppliers provided supplies in the global market and
how many of those suppliers continue in existence today, or based on
what suppliers are currently in existence for which the goods or
services they supplied are likely to contribute to a future nuclear
incident. The Department invites comments on how and what an
appropriate and equitable time period should be used in order to
determine the risk-informed formula.
E. Reporting
In addition to the information obtained through this NOI and the
subsequent rulemaking process, subsection 934(f)(1) expressly
authorizes the Secretary to collect information and data from nuclear
suppliers ``necessary for developing and implementing the formula for
calculating the deferred payment of a nuclear supplier under subsection
(e)(2).'' The Department requests comment on whether it should include
in its regulations provision for collection of such information and, if
so, what form of information collection requirements should be imposed.
For example, what type of information and data should be collected, at
what level of specificity, and how often (e.g., one-time or periodic
updates)?
While the Department may require that certain information be
provided by nuclear suppliers and other appropriate persons (including
insurers) as necessary or appropriate to assist in formulating and
implementing the risk formula, the Department is required to provide
certain information to nuclear suppliers and insurers of nuclear
suppliers. Thus, subsection 934(f)(2) directs that the Secretary make
available to ``nuclear suppliers, and insurers of nuclear suppliers,
information to support the voluntary establishment and maintenance of
private insurance against any risk for which nuclear suppliers may be
required to pay deferred payments under this section.'' Such
information would facilitate the creation of a voluntary private
insurance system to cover potential payments by nuclear suppliers under
the retrospective risk pooling program. The Department anticipates its
regulations will include a provision to address this requirement;
however, the Department requests comment on what type of information
would be necessary to assist the nuclear suppliers and insurers of
nuclear suppliers in the establishment of private insurance for the
deferred payment. The Department is especially interested in obtaining
specific and detailed comments on the type of information necessary to
develop and implement such a private insurance system from nuclear
suppliers and insurers of nuclear suppliers as such commentary would be
most relevant to an appropriate formulation and implementation of this
requirement. In
[[Page 43953]]
this regard, the Department is especially interested in descriptions of
prior and existing insurance systems that allocate risks among nuclear
suppliers, as well as systems that allocate risks among participants in
comparable situations.
F. Payments to and by the United States
Subsection 934(h) sets forth the procedure for the Secretary and
nuclear suppliers to follow in the event of a call for funds under the
Convention so that the deferred payments are made to the Treasury of
the United States and conveyed from the Treasury to the appropriate
entity in fulfillment of the obligation of the United States to
contribute to the international supplementary fund. Subsection
934(h)(1) prescribes the method by which the Secretary will collect the
deferred payment from nuclear suppliers in the event the United States
is called upon under Article VII to contribute to the international
supplementary fund for a covered incident that is not a Price-Anderson
incident. The nuclear suppliers are only required to make a deferred
payment when and if the United States is required to make a payment
under the Convention upon the occurrence of a covered incident. When
notified by the Secretary of the amount of the deferred payment that is
due, each nuclear supplier must either deposit the required payment
into the general fund of the Treasury within 60 days after receipt of
notification (subsection 934(h)(1)(B)(i)), or elect to prorate payment
in that amount in 5 equal annual payments (including interest on the
unpaid balance at the prime rate prevailing at the time the first
payment is due) (subsection 934(h)(1)(B)(ii)). In making the payment,
each nuclear supplier must submit a payment certification voucher to
the Secretary of the Treasury in accordance with 31 U.S.C. 3325.
934(h)(1)(C).
The Department believes the statutory scheme for making the
deferred payment is clear and in effect self-executing. Therefore, it
does not anticipate significant commentary on the meaning or
interpretation of this statutory provision. The Department's
implementing regulations will specify when and how a nuclear supplier
will make the lump-sum deferred payment, as well as the method of
calculating and depositing the prorated annual payments with interest.
The Department requests comments on how its regulations may provide
clear direction to nuclear suppliers on how, when, and where to make
the required deferred payments.
Subsection 934(h)(3) addresses the consequences of a nuclear
supplier's failure to pay the deferred payment. In the event a nuclear
supplier defaults on its obligation to make the required deferred
payment, subsection 934(h)(3) authorizes the Secretary to take
appropriate action to recover from the nuclear supplier ``(A) the
amount of the payment due from the nuclear supplier; (B) any applicable
interest on the payment; and (C) a penalty of not more than twice the
amount of the deferred payment due from the nuclear supplier.'' The
Department is authorized to take appropriate action to ensure each
nuclear supplier makes the deferred payment and to impose a penalty for
noncompliance; however, the means by which the Department exercises
this authority is not prescribed in the Act. The Department's
implementing regulations will clarify what actions it deems appropriate
to take to ensure the payment is made, how it will calculate the
interest due on the payment, and the method and criteria for
determining the penalty amount. The Department solicits comment from
the public on how this statutory provision should be implemented and,
in particular, what criteria may be appropriate for calculating the
penalty amount.
G. General Questions
In addition to comment on the particular matters discussed in the
preceding paragraphs, DOE solicits general comments on how best to
implement section 934, including comments that are based on existing
systems or prior experience in regard to insurance programs, regulatory
controls, reporting requirements, or other mechanisms pertaining to the
supply of goods and services for nuclear projects. For example, DOE
would be interested in whether there are any existing systems that
control or collect information on the export of goods and services for
nuclear projects that could be useful in implementing section 934.
Likewise, DOE would be interested in prior experience with how risk is
allocated when there are multiple participants in a nuclear project.
III. Public Participation
A. Submission of Comments
The Department requests written comments from interested persons on
all aspects of implementing the Convention on Supplementary
Compensation for Nuclear Damage. All information provided by commenters
will be available for public inspection at the Department of Energy,
Freedom of Information Reading Room, Room 1G-033, 1000 Independence
Avenue, SW., Washington, DC 20585 between the hours of 9 a.m. and 4
p.m. Monday through Friday, except for Federal holidays.
The Department also intends to enter all written comments on a Web
site specifically established for this proceeding. The Internet Web
site is: http://gc.doe.gov/. To assist the Department in making public
comments available on a Web site, interested persons are encouraged to
submit an electronic version of their written comments in accordance
with the instructions in the ADDRESSES section of this notice.
Issued in Washington, DC, on July 21, 2010.
Scott Blake Harris,
General Counsel.
Appendix--Overview of Section 934
The Energy Independence and Security Act of 2007, Section 934
The Energy Independence and Security Act of 2007 (Pub. L. 110-
140) was enacted in 2007. Section 934 of the Act (``Convention on
Supplementary Compensation for Nuclear Damage Contingent Cost
Allocation'') (42 U.S.C. 17373) implements the Convention in the
United States. Congress found that the Convention establishes a
global system to: provide a predictable legal framework necessary
for nuclear energy projects; ensure prompt and equitable
compensation in the event of a nuclear incident; provide benefits to
United States nuclear suppliers from a predictable liability regime
and, in effect, insurance for nuclear damage arising from incidents
not covered by the Price-Anderson Act (PAA); and assure funding is
available for victims of a wider variety of nuclear incidents,
without increasing potential liability of United States nuclear
suppliers or costs to United States nuclear operators or Federal
taxpayers. 934(a)(1).
Section 934 implements the Convention by enacting into law
provisions that enable the United States to carry out its
obligations as a Contracting Party. Specifically, section 934
provides for the allocation of costs associated with the United
States' participation in the Convention's compensation system and
affirms the right to seek relief in United States courts for covered
nuclear incidents. The purpose of section 934 is to ensure that the
allocation of costs is fair and equitable and does not burden
Federal taxpayers with liability risks for nuclear incidents at
foreign installations or adversely impact obligations under the
existing system of indemnification under the PAA for nuclear
incidents in the United States.
The Secretary and the Nuclear Regulatory Commission are both
authorized to issue rules to implement section 934, as appropriate.
934(l). The Department's implementing regulations will be focused on
allocating contingent costs equitably, on the basis of risk, among
nuclear suppliers for a covered incident outside the United States
that is not a Price-Anderson incident. This
[[Page 43954]]
cost allocation system will be structured consistent with provisions
of the Act that mandate the use of existing PAA funding for a Price-
Anderson incident.
For an incident covered by the Convention (``covered incident'')
that is also covered by the PAA (``Price-Anderson incident''), the
Act would use existing PAA funding mechanisms to cover the United
States contribution to the international supplementary fund. 934(b)
and (c). For a covered incident outside the United States that is
not a Price-Anderson incident, the Act would allocate contingent
costs owed by the United States among United States nuclear
suppliers on the basis of risk. 934(a)(2). In this regard, the Act
establishes a retrospective risk pooling program involving a premium
assessed retrospectively (i.e., a deferred payment) on nuclear
suppliers based on a risk-informed formula taking into account
specified risk factors in conjunction with exclusionary criteria.
934(e).
In developing the formula, the Secretary is authorized to
collect information necessary for calculating the deferred payment.
Each nuclear supplier and other-appropriate persons are required to
make available information, reports, records, documents, and other
data that the Secretary determines, by regulation, to be necessary
or appropriate. 934(f)(1). In turn, the Secretary must make
available to nuclear suppliers and their insurers information to
support the voluntary establishment and maintenance of private
insurance to cover any deferred payments nuclear suppliers may be
subject to pay under the retrospective risk pooling program.
934(f)(2).
When the United States is called upon to contribute, the
Secretary must notify the nuclear suppliers of the amount of their
deferred payment. The nuclear suppliers may either: (1) Pay within
60 days of notification to the general fund of the Treasury; or (2)
elect to prorate payment in five equal annual payments (including
interest). 934(h)(1). Amounts paid must be available, without
further appropriation or fiscal year limitation, for contribution by
the Secretary of the Treasury to the international supplementary
fund. 934(h)(2)(A). Such contribution will be to the court of
competent jurisdiction under Article XIII of the Convention.
934(h)(2)(B). If a nuclear supplier fails to pay, the Secretary of
Energy may take appropriate action to recover the amount due with
any applicable interest and penalty. 934(h)(3).
Section 934(i) addresses where and what type of actions may be
brought in United States courts arising from participation in the
Convention. All causes of action arising from a nuclear incident
that is not a Price-Anderson incident and for which the United
States has been granted jurisdiction under the Convention will be
adjudicated on appeal or review in the United States Court of
Appeals for the District of Columbia Circuit. 934(i)(1)(A). In
addition to any existing cause of action, section 934(i)(2)(A)
creates a Federal cause of action for an individual or entity
against an operator to recover for nuclear damage suffered in
connection with a nuclear incident covered by the Convention. This
provision ensures that a cause of action will be available in all
situations where United States courts have jurisdiction over a
nuclear incident covered by the Convention, such as a nuclear
incident during transportation beyond State boundaries in the
territorial sea, or the exclusive economic zone (EEZ), or the high
seas, for which Federal or State law may not currently provide a
cause of action. This provision does not apply to causes of action
arising from a nuclear incident covered by the Convention that is a
Price-Anderson incident, as the PAA already provides for a cause of
action and assignment of jurisdiction in such cases. While
subsection 934(i) creates a cause of action for individuals or
entities suffering nuclear damage against an operator of a covered
installation under certain circumstances, subsection 934(j) makes
clear that the Act does not provide to the operator of a covered
installation a right of recourse against a nuclear supplier or any
other person for any liability it may incur as a result of the
nuclear incident. Also, participation in the Convention does not
require disclosure of sensitive United States information. 934(k).
The following provides additional information regarding the
allocation of contingent costs under section 934 between the PAA and
nuclear suppliers.
Costs Allocated to PAA. One of the purposes of the statute, to
ensure that contingent costs associated with a Price-Anderson
incident are paid with PAA funds, is met primarily through the
requirements of subsections 934(c) (``Use of Price-Anderson Funds'')
and (d) (``Effect on Amount of Public Liability''). These provisions
are self-implementing and establish how funding under the PAA is to
be used to cover contingent costs resulting from a Price-Anderson
incident. As defined in subsection 934(b)(8), a Price-Anderson
incident is a covered incident within the scope of the PAA for which
PAA funding would be available to compensate for ``public
liability'' defined in section 11w. of the AEA (42 U.S.C. 2014w.).
Under subsection 934(b)(2), contingent costs represent the funds
that the United States is obligated to make available to the
international supplementary fund.
Subsection 934(c)(1) states the requirement that PAA funds be
used to cover contingent costs resulting from any Price-Anderson
incident. Subsection 934(c)(2) directs that any PAA funds used to
pay contingent costs shall not reduce the public liability
limitation set by the PAA. These funding requirements serve to
maintain the status quo of the PAA liability regime such that
payment of contingent costs neither increases the burden on reactor
operators nor decreases the benefits of the PAA since any contingent
costs resulting from the United States contribution would come from
funding otherwise required under the PAA. Using PAA funds to pay the
contingent costs will not decrease funds available under the PAA
because the contribution by the United States to the international
supplementary fund and the distribution from the international
supplementary fund of a corresponding amount will offset each other
and result in a wash for accounting purposes. As described in the
following paragraph, the remaining distribution amount will be used
to compensate damage in lieu of using PAA funds. Thus, the benefits
of the PAA indemnification system will be increased slightly with no
additional burden imposed on reactor operators.
Subsection 934(d) addresses the situation involving a Price-
Anderson incident, where funds are made available to the United
States under Article VII of the Convention and sets out the effect
thereof on the amount of public liability allowable under the PAA.
Subsection 934(d)(1) provides that, for an incident covered by the
PAA, funds made available to the United States from the
international supplementary fund will be used to pay persons
indemnified under the PAA. In addition, subsection 934(d)(2)
provides that the PAA limitation on public liability will be
increased by the net amount of funds that the United States receives
from the international supplementary fund (i.e., the increase is
equal to the difference between the amount the United States
receives from the international supplementary fund and the amount
which it contributed to the international supplementary fund). Thus,
the United States must use any funds made available to it under the
Convention to satisfy any public liability resulting from a Price-
Anderson incident and will increase the amount payable under the PAA
based upon the net increased amount of funding available pursuant to
the Convention.\8\
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\8\ The following illustrates the combined operation of the
Convention, the PAA, and section 934 in the case of a Price-Anderson
incident. For this example, assume: (1) The limitation on public
liability under the PAA is $10 billion\8\; (2) there are 100
reactors covered by the PAA system; (3) the operator of each reactor
must contribute a maximum of $100 million to the PAA system if legal
liability reaches $10 billion dollars; (4) 1 SDR equals $1.50
dollars; (5) the United States contribution to the international
supplementary fund is $100 million dollars; (6) the payment to the
United States from the international supplementary fund is $300
million; and (7) there is an a nuclear incident at a domestic
reactor resulting in damage that exceeds $10 billion dollars. Within
these parameters, the PAA would use funds from operators to
indemnify legal liability resulting from the nuclear incident until
legal liability reached $450 million dollars (Article III. 1(a)(i)
first tier compensation minimum of 300 million SDRs multiplied by
$1.50 dollars). At this point, the United States would use the next
$100 million dollars from operators under the PAA to cover the
United States contribution to the international supplementary fund.
At the same time the United States would receive a payment of $300
million dollars from the international supplementary fund. This
payment from the international supplementary fund would be used to
indemnify legal liability between $450 million dollars and $750
million dollars. In addition, the limitations on the PAA public
liability would be increased by the net $200 million dollars from
Contracting Parties other than the United States ($300 million from
the international supplementary fund minus the $100 million dollars
provided by the United States to that fund). When legal liability
reached $750 million dollars, operators would resume making funds
available through the PAA system to cover legal liability and
continue to do so until such liability reached the $10.2 billion
dollar limit. In this scenario, the additional $200 million dollars
from the international supplementary fund is available to indemnify
legal liability resulting from a nuclear incident covered by the
PAA, at no additional cost to reactor operators. (The numbers used
in this example were selected to facilitate understanding of how the
mechanism operates, and do not reflect the actual numbers that would
result from application of the PAA.)
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[[Page 43955]]
Costs Allocated to Nuclear Suppliers. Another purpose of the
statute, to ensure that nuclear suppliers pay the contingent costs
for a covered incident outside the United States that is not a
Price-Anderson incident, is met primarily by subsections 934(e)
(``Retrospective Risk Pooling Program'') and (f) (``Reporting'').
These provisions: (1) Require participation in a retrospective risk
pooling program to cover contingent costs for which nuclear
suppliers would be responsible; and (2) authorize the Secretary to
collect information necessary for developing and implementing the
formula to calculate the deferred payments. For such an incident
outside the United States, subsection 934(e) requires that nuclear
suppliers that supply certain nuclear equipment and technology and
transport of nuclear materials contribute to a pool of money used to
reimburse the United States for its contribution to the
international supplementary fund. In an arrangement known as
retrospective pooling, the obligation to pay into the pool will be
deferred until the United States' is called upon to contribute with
respect to an actual nuclear incident that has occurred. Article
VII.1; 934(e)(1).
The following illustrates the combined operation of the
Convention and section 934 in the case of a covered incident that is
not a Price-Anderson incident. For a covered incident that takes
place in the territory of another Contracting Party, the responsible
operator (alone or in combination with available public funds) would
provide the first tier of compensation pursuant to the national law
of the Installation State. If nuclear damage exceeds the first tier,
all Contracting Parties, including the Installation State, would
contribute to the international supplementary fund according to the
Article IV formula.
As a Contracting Party, the United States would contribute an
amount determined by application of the formula in Article IV. Under
section 934, the amount of the contribution required of the United
States would be funded through payments of United States nuclear
suppliers under the retrospective risk pooling program. As
previously noted, the formula depends upon the installed capacity of
the Contracting Parties at the time of the incident and the UN
assessment rate assigned to each State. The exact amount owed by the
United States would depend upon the number and generating capacity
of the States that participate in the Convention at the time of a
nuclear incident. For additional information, the IAEA Web site for
the Office of Legal Affairs contains a calculator that can be used
to run scenarios and estimate the contribution amount from various
States. (http://ola.iaea.org/CSCND/calculate.asp).
[FR Doc. 2010-18357 Filed 7-26-10; 8:45 am]
BILLING CODE 6450-01-P