By Michael Mariotte

Section 103(d) of the Atomic Energy Act (42 U.S.C. § 2133) states in plain language: “No license may be issued to an alien or any corporation or other entity if the Commission knows or has reason to believe it is owned, controlled, or dominated by an alien, a foreign corporation, or a foreign government.”

Those words are the law of the land, and for decades they stood unchallenged and uncontroversial.

And then along came Electricite de France (EDF), a utility mostly owned by the French government, with major expansionist dreams.

Back in the mid-2000s, EDF wanted to jump into the promised and rosy nuclear “renaissance” in the U.S. So it teamed up with another French-government dominated company, reactor manufacturer Areva, to build at least four of its new EPR reactors in the U.S.

The first would be at Calvert Cliffs, Maryland, 50 miles from the Capitol Dome, where EDF partnered with Constellation Energy, which already operated two reactors at the site.

In the Fall of 2008, when the application for the new EPR reactor at Calvert Cliffs was finally submitted and docketed, NIRS, Public Citizen, Beyond Nuclear and Southern Maryland CARES filed a legal intervention against the application. One of the contentions was that the project violated Section 103(d) of the Atomic Energy Act, in that EDF was clearly the dominant partner in the project and had put up by far the most money to get it underway.

This isn’t the place for the full story of what happened with that issue over the next several years, but in the end, Constellation Energy had jumped ship and EDF was left owning 100% of Calvert Cliffs-3. The NRC staff finally agreed with us intervenors that the project violated the Atomic Energy Act, and the Atomic Safety and Licensing Board ruled that the project could not proceed. EDF appealed to the NRC Commissioners who, in March 2013, upheld the ruling. It was the first time intervenors of any kind, much less pro se intervenors, had successfully used the NRC’s legal intervention process to block construction of a nuclear reactor.

The NRC Commissioners, of course, were aware of that reality–that the legal process worked the way it was supposed to and still ended up stopping a new reactor. But while the process worked, it wasn’t the outcome that the process was set up to achieve. The NRC is in the business of licensing new reactors, not prohibiting them. So, in its decision, the Commissioners told the staff to conduct a “reassessment” of the NRC’s foreign ownership, control or domination (FOCD) policy established to implement that portion of the Atomic Energy Act.

During the summer of 2013, the NRC staff held a public meeting (full disclosure, I was a presenter at that meeting, power point presentation here), a webinar, and accepted public comments (65 organizations signed on to NIRS’ comments); a number of nuclear industry organizations commented as well. In summary, the nuclear industry argued that, despite the plain language of the Act, the Commission should allow 100% “indirect” foreign ownership primarily on the grounds that that the language was meant to deal only with national security issues and those wouldn’t be a factor with ownership by entities in friendly countries. Clean energy groups and Senator Markey, the only legislator to comment, argued that the NRC already has gone too far in allowing foreign ownership and that given the legislative history (which suggested 25% foreign ownership was what Congress was thinking of as a limit, in accordance with similar policies at the Federal Communications Commission and Federal Aviation Administration), the NRC should tighten its foreign ownership policy and set clearer guidelines for what constitutes control and domination.

On August 20, 2014, the NRC staff finally released its recommendations to the Commissioners.

In its memo to the Commissioners, the staff said it considered six options:

(1) maintaining the status quo;
(2) proposing a legislative amendment to the Atomic Energy Act;
– (3) revising the guidance in the staffs FOCD Standard Review Plan (SRP) and developing
an associated FOCD regulatory guide to provide a graded approach;
(4) using alternative procedures to address FOCD;
(5) redefining in guidance the statutory term “owned” to mean direct ownership only; and/or,
(6) establishing bright-line determinations and safe harbors that set specific thresholds for
acceptable levels of FOCD based on percentage of foreign ownership.

It appears the staff was trying to reach a middle ground. Unfortunately for the industry, the staff rejected entirely the idea that it could allow 100% foreign ownership of a nuclear reactor, direct or indirect. So the Calvert Cliffs-3 reactor remains just another bad idea fortunately never to become reality. And the staff also rejected the notion that it should further restrict foreign ownership. Instead, it recommended to the Commissioners that they choose Option 3, and try to set up a mechanism that could possibly allow more foreign ownership than might be allowed now.

Option 3 in some ways sidesteps the entire issue; the staff says it would develop a “graded” approach that would allow applicants with a high degree of foreign ownership to submit Negation Action Plans (such plans are currently allowed as well, but didn’t work for EDF in the Calvert Cliffs case) “that would mitigate the potential for control or domination of licensee decision-making by a foreign entity.”

According to the staff, this approach provides two advantages, including potentially allowing a greater level of foreign ownership than exists now:

*Provides flexibility to more closely tailor NAPs to the degree of FOCD, including indirect ownership over 50 percent.
* Provides applicants with greater clarity regarding the treatment of FOCD issues, including negation action criteria and sample graded negation action criteria and plans acceptable to the NRC.

While the staff said it considered and rejected the idea of setting a “bright line” of an acceptable level of foreign ownership, it apparently never really considered the idea of reducing the acceptable level to bring the NRC into line with the legislative history and existing policy at other federal agencies, as recommended by clean energy groups and Sen. Markey.

Nearly two months after the staff released its recommendation and related discussion, the Commission has yet to act on the staff’s recommendation–although that may be because it was only recently that two new Commissioners were added to fill vacant seats.

But there may be another reason as well. Unusually for an NRC Staff Recommendations Memo (SRM), this one generated a large amount of dissent–and from unusually high-ranking officials at the agency.

In fact, the Memo states:

Staff in both the Office of Nuclear Security and Incident Response and the Office of Nuclear Reactor Regulation expressed dissenting views with respect to the lack of focus on inimicality reviews in this paper. A formal non-concurrence package, including management’s response to each of the specific concerns raised, is included as Enclosure 9 to this paper.

In addition, the Director and Deputy Director of the Office of New Reactors (NRO) have nonconcurred on this paper. This non-concurrence package is included as Enclosure 10.

Enclosures 9 and 10, however, are not available to the public. Such “non-concurrences” are only made public when the non-concurrer releases them to the public.

But in the staff’s discussion of the non-concurrences (see pages 20-22), it’s clear that these dissenters are concerned that the staff did not address national security issues at all, or “inimicality” reviews–whether a foreign-owned nuclear project might not be in the best interests of the United States. By focusing primarily on ownership, as opposed to the other two legs of the stool–control and domination–the dissenters seem to believe that the new “graded” policy could open the door to potentially hostile interests.

This is important given, for example, the interest of countries, such as China, which may not be best buddies with the U.S. but which sure wouldn’t mind selling nuclear reactors here in a relatively few years. Without addressing the “inimicality” issue, the proposed policy would seem to allow any country to make it through the FOCD review as long as it wasn’t a 100% owned project.

As the memo describes the position taken by the top officials of NRO,

[They] expressed a concern that this paper does not justify modifying the current guidance to define the circumstances under which the NRC staff would change current practices in order to approve up to 99 percent foreign ownership. Further, this non-concurrence expressed the concern that the paper did not clearly explain the degree of intersection between national security and FOCD. Finally, the non-concurrence states that any proposed changes to FOCD reviews should be thoroughly coordinated and holistically evaluated with the relevant activities of agencies responsible for national security.

And while the memo itself appears to address only nuclear reactor projects, there are other potential projects that could fall under FOCD guidelines with serious national security implications. For example, Areva (funny how that name keeps popping up) would love to start a radioactive waste reprocessing business in the U.S., which would give it access to vast amounts of plutonium. Would that really be in the best interests of the national security of the United States? France, of course, has been a U.S. ally for more than 200 years, but if history tells us anything, it’s that the international order can change in a heartbeat. After all, it wasn’t that long ago that the U.S. was trying to sell nuclear reactors to the Shah of Iran. Fortunately, that one didn’t work out. And, with some in the industry arguing for ever-longer reactor license extensions, to 80 years of operation or more, well, think about it: we were at war with three of our now-closest allies not even that far back. We’d like to think our allies are forever; history shows us that’s not necessarily true.

And, by not acting to explicitly reduce the allowable level of foreign ownership, and clearly laying out criteria for domination and control, the NRC staff has lost the opportunity to ensure that such concerns are addressed now–before they could become an issue all sides would rather not see occur.

The NRC Commissioners have the final say however. And, in this case, they should reject all of the recommendations and send the memo back for an FOCD policy that both meets the requirements of the Atomic Energy Act and protects the American people.

On this webpage you can find links to:

The Staff Requirements Memo.
A paper showing who commented, and summarizing what they said.
The NRC staff’s version of the legislative history of the FOCD provision.
An overview of relevant case law summarized by NRC staff.
A discussion of the issues the NRC staff addressed.
A discussion of the options the NRC staff considered.
Other U.S. government and foreign governments provisions on foreign ownership.
For legal eagles, a list of all case and statutory references.

Michael Mariotte

October 13, 2014


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