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I appreciated the opportunity to present my views on nuclear licensing reform at the Committee's March 5 hearing on Titles XII and XIII of S.341, the National Energy Security Act of 1991. The quality of the hearing matched the importance of the subject.

Your letter of March 18 enclosed follow-up questions from Senator Wallop for inclusion in the printed hearing record. The Attachment to this letter contains my answers to those questions. If any further elaboration would be helpful, your staff should feel free to contact me (202-639-7070).

Your licensing reform initiative is welcomed by those who see nuclear power as a substantial contributor to the nation's energy future. If I can assist in furthering this legislative effort please let me know.

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ATTACHMENT

Question

"In your opinion, if a portion of NRC's new Part 52 regulations had not been overturned in court, would Part 52 have provided the requisite assurance to the investment community for a new plant order"?

ANSWER

Part 52, while a welcome and constructive administrative

reforn initiative, does not, in my view, provide the requisite

assurance for those who would be expected to shoulder financial

risk in future nuclear power plant projects.

As a contexting

comment for my view, I would include within the term "investment

community" both prospective utility license applicants and third

parties in the financial or industrial communities who might be

called upon to support project financing.

The position of the utility industry is most

authoritatively expressed in communications to the NRC by industry leaders preceding adoption by the agency of a proposed Part 52 which included the opportunity for a preoperational hearing. Speaking for the Nuclear Power Oversight Committee

(NPOC), James J. O'Connor, the Chairman and Chief Executive

Officer of the Commonwealth Edison Company, stated as follows in

regard to the potential for a hearing following completion of

facility construction:

"It is our firm belief that utilities will not
order additional plants unless all issues are
resolved before construction begins. Once the
combined license is issued, we believe the plant
should be handled no differently than a plant with
an operating license the NRC has the
responsibility to see that the plant conforms to

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all the conditions of that license. .. Without a
process which would preclude opportunity for
hearing after issuance of a combined license, the
usefulness of the rule would be seriously
impaired." (NPOC letter to NRC Chairman Kenneth
Carr dated March 17, 1989.)

Reflecting a like position, the comments on proposed Part

52 submitted by the Nuclear Management and Resources Council

(NUMARC), the organization responsible for nuclear power

industry interface with the NRC on generic regulatory issues,

took critical note of:

"[t]he declared intention of the Commission in the
proposed rule to provide the opportunity for a
second hearing after a facility for which a
combined license was issued has been constructed.
We wish to make it clear that we believe a
hearing at that point is not warranted [and] we
would urge elimination of this second hearing, by
legislation if necessary. (Letter to NRC from
Byron Lee, Jr., President of NUMARC, dated November
7, 1988.)

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Widespread industry and financial community concern as respects the preoperational hearing is reflected in two

survey/studies, conducted under the auspices of the U.S.

Department of Energy, analyzing NRC'S Part 52 licensing reforms

from the standpoint of utilities and the financial markets,

respectively.

As here pertinent, the utility industry survey

concluded:

"One major licensing issue that serves as a barrier
to nuclear plants is the possibility of a post-
construction public hearing. Seventy percent of
the (utility] respondents said they would not order
a plant, or it is unlikely that a plant would be
ordered, if the possibility of such a hearing
exists, even if the scope of issues which could be
raised is very limited. Two responses are
indicative of the feelings of the majority.

One

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Western utility stated: 'This is a major barrier.
While the concept of a limited scope is valid, the
NRC and the federal courts have not shown the
discipline to enforce a limited scope but tend to
rule in favor of the intervenors.' Another said,
'Even a hearing with only one issue in question is
a major barrier.'" ("Analysis of Nuclear Licensing
Reform Proposals from the Perspective of Utility
Chief Executive Officers", prepared for U.S. DOE by
the Southern States Energy Board, March 1989, p. 2.)

The analysis of Part 52 reforms from the perspective of the financial markets contains the following pertinent assessment:

"Investors must be assured that a permit to
construct a nuclear power plant is also a license
to operate it. Obtaining such a combined
license (CP/OL) may require some additional
up-front expense to prepare a complete design with
performance standards, including specification of
the tests and criteria which the completed plant
must meet to commence operation. But that expense
is less onerous than is the possibility that
regulators will impose unforeseen delays in the
form of additional requirements or reopen public
hearings. Any procedural change which moves
licensing and operating decisions to the beginning
of the process, and assures investors that those
decisions are final, is a welcome and necessary
change. Conversely, any significant possibility,
or uncertainty about, future hearings, new
construction or operating requirements, or any
other change in the CP/OL, will discourage
investors from undertaking the project." ("Nuclear
Licensing Reform and the Financial Markets",
prepared by Touche Ross & co., et al., for u.s.
DOE, May 1989, p. 15.)

Thus, as further indicated in my responses below, remedial

legislation dealing with preoperational proceedings is clearly necessary irrespective of the outcome of the pending Part 52 litigation.

Question

"What changes are required to Part 52 to instill investor confidence?"

ANSWER

As stated in my March 5 testimony, I question the wisdom

of reguiring a licensing hearing after a facility has been

constructed.

I believe that construction conformance

the

only matter not resolved by prior regulatory approvals under Part 52 can best be dealt with by the NRC's inspection and

compliance process.

That belief is grounded on the fact that,

under Part 52, there will have been definitive resolution

after comprehensive public hearings

of all design and site

safety issues in the site permit, design certification and/or

combined license proceedings and the further fact that the

combined license will contain the inspections, tests, analyses and acceptance criteria that will measure conformance of the

constructed facility with the requirements of that license.

At a minimum, any hearing held at the preoperational stage

should be limited to substantiated contentions of

non-conformance with the acceptance criteria in the combined

license. Moreover, any such hearing should not be permitted to delay facility operation absent a Commission determination that

there is a sound safety reason therefor.

I also believe that

providing express legislative authorization for conducting such preoperational hearings with informal procedures rather than the trial-type procedures the Commission has historically used

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