National Mining Association; Denial of Petition for Rulemaking

AGENCY:

Nuclear Regulatory Commission (NRC).

ACTION:

Denial of petition for rulemaking.

SUMMARY:

The U.S. Nuclear Regulatory Commission (NRC) is denying a petition for rulemaking (PRM-170-5) submitted by the National Mining Association (NMA). In its petition, NMA asked the NRC to conduct a rulemaking that would establish the basis for waiving all licensing and inspection fees and annual fees imposed on uranium recovery licensees, or alternatively, to waive the fees associated with a contemplated rulemaking that would develop requirements for licensing uranium and thorium recovery facilities. In support of its petition the NMA argues that because of adverse economic conditions, the requested fee relief is in the public interest since it would help ensure the continued viability of a domestic uranium recovery industry.

The NRC is denying the petition because the circumstances outlined by the petitioner do not qualify the uranium recovery industry for a “public interest” fee exemption. Further, with extremely limited exceptions, the NRC does not base its fees on the economic circumstances of particular licensees or classes of licensees. Moreover, the Commission does not envision instituting a rulemaking proceeding to establish a new regulation for licensing uranium and thorium recovery facilities.

ADDRESSES:

Copies of the petition for rulemaking, the public comments received, and the NRC's letter to the petitioner may be examined at the NRC Public Document Room, Room O1F23, 11555 Rockville Pike, Rockville, MD. These documents also may be viewed and downloaded electronically via the NRC's rulemaking Web site at http://ruleforum.llnl.gov.

The NRC maintains an Agencywide Document Access and Management System (ADAMS), which provides text and image files of the NRC's public documents. These documents may be accessed through the NRC's Public Electronic Reading Room on the Internet at http://www.nrc.gov/reading-rm/adams.html. The ADAMS accession number for the package containing documents related to this petition is ML021230010. If you do not have access to ADAMS or if there are problems in accessing the documents located in ADAMS, contact the NRC Public Document Room (PDR) Reference staff at 1-800-397-4209, 301-415-4737, or by e-mail to pdr@nrc.gov.

FOR FURTHER INFORMATION CONTACT:

Robert D. Carlson, Telephone 301-415-8165, Office of the Chief Financial Officer, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001.

SUPPLEMENTARY INFORMATION:

Under the Omnibus Budget Reconciliation Act of 1990 as amended (OBRA-90), for Fiscal Year (FY) 2002, the NRC is required to collect in fees approximately 96 percent of its budget authority (minus sums collected from the Nuclear Waste Fund and any sums appropriated from the General Fund).

The Petition

On November 2, 2001 (66 FR 55604), the NRC published a notice of receipt for a September 11, 2001, petition for rulemaking (PRM-170-5) filed by NMA. The NMA requested that the Commission modify its rules to waive all licensing and inspection fees (10 CFR part 170) and annual fees (10 CFR part 171) imposed on uranium recovery licensees. Alternatively, NMA asked that fees be waived for a contemplated rulemaking that would establish requirements for licensing uranium and thorium recovery facilities (10 CFR part 41).

The NMA argues that fee relief for uranium recovery licensees is in the public interest. According to the petitioner, the uranium recovery industry provides value to the United States by producing energy-generating yellowcake, thereby reducing reliance on foreign supplies, and by recycling waste products and providing additional waste disposal options. The NMA believes that the NRC has already recognized this public interest argument in discussions about extensions of time for beginning decommissioning at uranium recovery sites. The petitioner asserts that during these difficult economic times for the domestic uranium recovery industry, NRC fees could have a significantly adverse impact on the industry's viability, including its ability to maintain knowledgeable talent necessary for all the industry to develop and progress.

In support of its petition, the NMA argues that the uranium recovery industry is experiencing a significant economic downturn as a result of a low spot-market price of under $8 per pound (the industry would become profitable if prices rose to $13-16 per pound), a decrease in sector employment of 50 percent since 1996, and a low demand for and an oversupply of uranium. Thus, the petitioner argues that fee relief is needed to help ensure the continued viability of a domestic industry. The petitioner is further concerned that under the existing NRC annual fee schedule, as the number of uranium recovery licensees decrease, the annual fees for the remaining licensees increase, placing an unreasonable financial burden on the few remaining licensees. The NMA further claims that some of the fee increases which have been borne by the uranium recovery licensees have resulted from “regulatory inefficiencies” such as the loss of agency expertise resulting from the Commission's decision to close the Denver Uranium Recovery Field Office, the protracted Hydro Resources Inc. informal NRC hearing, and excessive and dual regulation. Under these circumstances, the NMA argues, fee relief is in the public interest.

In making its argument, the NMA asserts that not all licensees pay fees, noting that annual fees are not imposed on those licensees who have relinquished their authority to operate and have permanently ceased operations; that small business entities pay reduced fees; and that non-profit educational institutions are fully exempted from fees. The NMA then states that allowing the domestic uranium recovery industry to “wither to the point of virtual extinction or to disappear completely” cannot be in the national public interest because of the benefits provided by the industry.

Public Comments

The Commission solicited public comment on the rulemaking petition in the Federal Register of November 2, 2001 (66 FR 55604), and requested that comments be filed by January 16, 2002. The NRC also mailed the Federal Register notice to all NRC licensees (more than 5000 entities). In response, the Commission received 14 comments. In addition, the NRC in its proposed fee rule for FY 2002 (67 FR 14818; March 27, 2002) noted the pendency of the NMA petition and explained that if the Commission decided to grant the petition and provide immediate fee relief to the uranium recovery industry, this could result in higher fees for other NRC licensees. The NRC invited any member of the public who had arguments to place before the Commission, which had not been previously submitted in response to the November 2, 2001, Federal Register Notice, to do so during the public comment period for the FY 2002 proposed fee rule.

Although three additional comments were received on the NMA petition during the FY 2002 proposed fee rule public comment period, they did not surface any new issues. All three of these commenters disagreed with the NRC's decision to invite additional comments, stating that the initial comment period was sufficient and the NRC should not have reopened it as part of the FY 2002 proposed fee rule.

1. Comments Supporting the NMA Petition

The NRC received eight comment letters in support of the petition; six from uranium recovery licensees, and two from industry groups. The uranium recovery industry supports the petition, endorses the contentions advanced by NMA, and offers additional arguments.

One commenter stated that last year the United States relied on imports, or inventory draw-downs, for 94 percent of the fuel needed to operate the nation's reactors. The commenter asserts that with even lower domestic uranium production expected in 2001, U. S. nuclear utilities will be even more dependent on imports and inventory draw-downs to meet their needs. The commenter further states that granting the petition would be in the public interest because it would provide an immediate and tangible benefit to uranium recovery licensees, and help preserve what is left of the dwindling domestic uranium production industry.

Some commenters stated that the uranium recovery industry is vital to the U. S. energy security and national security, for example, to ensure energy independence and a stable source of domestic uranium for the U.S. Nuclear Navy. Some commenters also noted that conventional mills can offer recycling/disposal options to other generators whose waste contains recoverable uranium.

Two commenters argue that assuring the viability of the domestic uranium recovery resources and waste disposal capacity until the uranium prices recover, and until regulatory policy initiatives are in place to make these resources even more viable, will not result in an unreasonable burden shift to other licensees. In support of this argument, the commenters assert that many other classes of licensees stand to benefit from access to more cost-effective disposal options and from the stability of having viable domestic partners and customers. Further, they argue, some of the licensees who would bear the burden of the shift in fees have benefitted directly from the depressed uranium prices over the years.

Another commenter states that the NRC's current fees represent a tremendous and stifling burden on the uranium recovery industry, with no end to escalating charges in sight. Failure to provide fee relief could thus result in all domestic producers ceasing operations.

The Wyoming Congressional delegation jointly sent in a comment supporting the petition. The members of the delegation argue that the grant of the petition is in the nation's interest because this action would provide assistance to a vital domestic industry that is struggling to maintain viability in the face of depressed worldwide uranium markets. The delegation recognizes that this would ultimately shift the burden of fees to other licensees, but notes that many of these licensees had benefitted from depressed uranium prices. These commenters stress the importance of reducing U.S. dependence on foreign supply sources, especially in light of the events of September 11. The commenters also report that the State of Wyoming has granted some tax relief to the uranium recovery industry in Wyoming.

The Governor of Wyoming submitted comments arguing that maintenance of a viable uranium recovery industry not only is in the public interest, but also would further President Bush's national energy policies. The Governor of Wyoming suggests that when, and if, the price for uranium increases to acceptable levels, and there is a sufficient number of licensees, then fees should be reinstated.

2. Comments Against the NMA Petition

The NRC received six comment letters opposing the petition. One person holding a license for a nuclear gauge argues that granting NMA members a waiver is unfair to other licensees, who would then be required to bear NRC costs associated with regulation of the uranium recovery industry. Increased fees would thus constitute an “additional tax” that would result in further financial hardships for others. This commenter stated that forcing other companies and industries to pay more so the mining industry can stay in business is not in the public interest. This same commenter argued that if the petitioner's members only need temporary relief, then they should seek loans.

A state employee involved with licensing and inspection, commenting in his private capacity, states that granting the petition would set a bad precedent that could carry over to Agreement States. This commenter further asserts that Canada or Australia can provide the U.S. plentiful supplies of uranium, that there is no reason to expect the domestic market to turn around in the near future, and that most of the uranium recovery licensees are owned by larger companies able to afford annual fees. Finally, the commenter expresses the concern that waiving uranium recovery licensees' fees would result in additional pressure to reduce the amount of funding to be allocated for NRC licensing and inspection of uranium recovery sites.

The U.S. Environmental Protection Agency (EPA), while not taking a position on whether the petition should be granted, said that any use of uranium recovery facilities for disposal of high-volume, low-level radioactive waste, as suggested by the petitioner, “deserve[d] a thorough review. * * *” EPA believes that further discussion regarding the petitioner's suggestion of additional uses for uranium mill tailings impoundments warrants further discussion between EPA, the affected States, and the NRC.

A private company, Envirocare, argues that grant of the waiver would not be in the public interest because other licensees would be required to bear an inequitable and unfair fee burden. Envirocare further asserts that waiving fees for uranium recovery licensees would provide them with an unfair competitive advantage over companies such as Envirocare, which compete with those licensees for contracts to dispose of 11e.(2) waste material. In effect, Envirocare argues, grant of the petition would result in a government-furnished subsidy that would place companies like Envirocare, who pay full fees, at a competitive disadvantage. Envirocare also claims there remains a viable uranium recovery industry that does not need a subsidy.

Representing power reactor licensees, the Nuclear Energy Institute (NEI) argues that the NRC lacks the authority to grant the petition; specifically, the NRC lacks the authority to decide whether maintenance of a domestic uranium recovery industry is in the public interest. Moreover, NEI says, granting fee relief to the uranium recovery industry would be unfair and inequitable to other NRC licensees. The NEI advocates that the NRC should not base its fees on economics and market factors, the economic health of a licensee, or the ability of a licensee to pass along fees to its customers. As an alternative means of reducing uranium recovery fees, NEI supports various regulatory and legislative initiatives to reduce unnecessary regulatory burden, to place greater onus on individual licensees for self-monitoring and regulatory compliance assessment, to make regulations more risk-informed and performance-based, and to end dual regulation. NEI further indicates that there is merit in granting fee relief to uranium recovery facilities that are not operating and are in standby status. However, NEI expresses concern that the grant of the petition would establish a poor public policy precedent of regulating for-profit licensees by exception.

The Colorado Department of Public Health and Environment opposes the grant of the petition noting that uranium recovery licensees may ask for similar fee reductions in Agreement States. The State is concerned that this could serve as a precedent for other industries to petition both the NRC and the Agreement States for fee reductions, and if a state sets its fees by charging a percentage of NRC fees, the reduction in fees for the uranium recovery licensees may translate to an increase for all other licensees in that state, including small gauge holders. The State indicates that the Commission's answers to the questions of fairness and public interest must be suitable to be used for any other petition, regardless of the fee category or industry. The State further comments that since states have direct regulatory responsibility for low-activity radioactive waste disposition and experience in regulating diffuse uranium, thorium and their decay products, the Commission may wish to reconsider the states' offer to take the lead on developing a new 10 CFR part 41.

Intervening NRC Actions

In its FY 2002 proposed fee rule, which the Commission published for public comment on March 27, 2002 (67 FR 14818), the NRC stated that the costs of generic activities for the uranium recovery class of licensees should be distributed among the licensees under both the Uranium Mill Tailings Radiation Control Act ( UMTRCA) Title I (sites closed prior to enactment of UMTRCA, for which the U.S. Department of Energy (DOE) is responsible for cleanup) and Title ll (sites holding active NRC licenses at the time Congress enacted UMTRCA) programs. In the past, DOE has not been assessed any portion of these generic costs as the sole licensee for all Title I sites. The NRC has adopted this change in the final FY 2002 fee rule, resulting in a decrease of the annual fees assessed to the commercial uranium recovery licensees. This represents an approximately 18 percent decrease in annual fees since FY 2001, and is the second straight year of significant fee reductions for the uranium recovery class of licensees. In FY 2001, the uranium recovery class received an approximately 29 percent reduction in annual fees from FY 2000. The FY 2002 final fee rule, including the current fee schedule for uranium recovery licensees, is scheduled to be published in the Federal Register on June 24, 2002.

Denial of the Petition

The NRC is denying the petition for the following reasons:

1. The Commission does not believe that Congress, in establishing user fee requirements, expected the NRC fee structure for a given class of licensee to be based primarily on licensees' economic circumstances, rather than on the NRC's budgeted costs for regulating that class of licensees. OBRA-90 requires that the Commission's annual fees “shall have a reasonable relationship to the cost of providing regulatory services.” Granting the fee waiver requested would be inconsistent with that mandate. Therefore, absent specific legislation from Congress, including appropriations from the general fund, the NRC cannot provide the relief sought by the petitioner.

2. The Commission recognizes the national policy interest in maintaining a domestic source of uranium that has been previously expressed by Congress in the Energy Policy Act of 1992 and the U.S. Energy Corporation Privatization Act. However, there is nothing in this legislation that supercedes the law requiring the NRC to collect appropriate fees from its licensees and applicants. The Commission further notes that many of the uranium recovery licensees are large corporations, with sales in the millions or billions of dollars, or they are subsidiaries of very large corporations. If the Commission were to grant the petition, other licensees would be required to subsidize the uranium recovery industry through increased fees in order for the Commission to meet the requirements of OBRA-90.

Many other industries regulated by the NRC could also argue that they provide valuable public services, such as power reactors, nonprofit service organizations and medical facilities, and many of these entities may also be experiencing financial difficulties. However, in order for the NRC to meet the requirements of OBRA-90, the NRC is not able to base its fees on the public services these entities provide, nor is it able to base its fees on their economic conditions.

3. While the Commission understands that the uranium recovery industry is operating in adverse economic conditions, historically the Commission has not taken licensees' economic conditions into account when establishing fees, with the exception of licensees who qualify as small entities under NRC size standards. The NRC has established reduced annual fees for qualifying small entities pursuant to the statutory requirement in the Regulatory Flexibility Act, 5 U.S.C. 601 et. seq., such that in rulemaking proceedings, the Commission consider the impact of its actions on small entities and consider alternatives to those impacts. In accordance with the Small Business Administration's guidelines, in determining whether a licensee qualifies as a small entity under the NRC's revenue-based size standards, receipts from all sources, not solely receipts from licensed activities, are considered. Further, a licensee that is a subsidiary of a large entity does not qualify as a small entity. Those uranium recovery licensees that qualify as small businesses under NRC's size standards are eligible to pay the reduced annual fees the NRC has established for such entities in § 171.16(c).

Previously, in very limited circumstances, the Commission also granted partial annual fee exemptions to certain reactor licensees when it concluded that, as a result of certain economic factors, the NRC's regulatory costs for those licensees were substantially lower than for other reactors. There are no such entities presently operating. The current annual fee exemption provision for reactors (10 CFR 171.11(c)) lists age and size of the reactor, number of customers in the rate base, and the net increase in KWh costs for each customer directly related to the annual fee as factors the Commission may consider in granting an exemption for reactors. In establishing this provision, the Commission stated it may grant such relief only if it is persuaded by the licensee that these factors “substantially reduce the NRC's regulatory costs for that plant and the benefits bestowed on that licensee below that of the other power reactors” (51 FR 33224; September 18, 1986). Thus, the reactor exemption provision is not based on the economic factors per se, but rather on any reduction in NRC costs that are the result of these factors.

4. In a 1993 decision, the U.S. Court of Appeals for the District of Columbia Circuit made clear that the Commission cannot take into account the ability of one class of licensees to “pass through” their costs to others, while refusing to consider similar economic considerations for other classes. In Allied Signal v. NRC, 988 F. 2d 146 (D.C. Cir. 1993), the court remanded for reconsideration parts of the NRC's FY 1991 annual fee rule. The court questioned the Commission's decision to exempt non-profit educational institutions from NRC fees on the grounds (in part) that they could not “pass through” the costs of those fees to their customers, without attempting a similar “pass through” analysis for other licensees. The court indicated that while Congress had not mandated that the NRC consider the ability of a licensee to “pass through” its fees, if this could be done with reasonable accuracy and cost, there appeared no reason why the Commission should not do so. In response to this decision, the Commission issued a final rule which revoked the prior non-profit educational institution fee exemption. The Commission found the ability to “pass through” costs to be an unworkable standard for setting fees.

The university community petitioned the Commission to reconsider its rule. The Commission solicited public comment on the petition for reconsideration and ultimately restored the exemption, but not by taking into account the ability of these non-profit educational institutions to “pass through” their costs. Instead, the Commission based the exemption on the theory that these institutions, unlike commercial entities, provide a “public good.” This term is used in economic theory to describe goods or services that are non-depletable (one can acquire the goods without reducing the amount available) and acquirable by anyone (it is impossible to prevent others from acquiring the good). In practice, this term encompasses the non-proprietary research that non-profit educational institutions make available at no cost.

The services provided by NMA members are not a “public good” in the same sense. Uranium is depletable and its owners can prevent its cost-free acquisition by others. Hence, the “public good” based exemption for non-profit educational institutions' research cannot plausibly be extended to the uranium recovery industry.

5. The Commission has consistently taken the position that it will not take licensees' special economic circumstances into account in establishing fees. In 1995, it denied a petition by the uranium recovery industry seeking reduced annual fees for uranium mills in standby status, because these licensees have the authority to operate and have made a business decision to remain in standby status rather than terminate their licenses (60 FR 20918; April 28, 1995). Similarly, the Commission does not base its fees on how much material is possessed by a licensee or how often a licensed device is used.

The Commission is also unable to use factors such as the revenue earned by a licensee or the licensee's profit from the use of licensed material in developing its fees because the governing statute requires that annual charges must, to the maximum extent practicable, have a reasonable relationship to the costs of providing regulatory services (60 FR 20918; April 28, 1995). To grant fee waivers to a particular class of licensees based on economic duress would, under the teachings of Allied Signal, result in the Commission's having to take economic conditions into effect in establishing fees for each of its classes of licensees. Further, as the Commission has stated in numerous fee rules since 1991, and most recently in the FY 2001 final fee rule (66 FR 32452; June 14, 2001), a reduction in fees for one class of licensees would require a corresponding increase in fees for other classes. For these reasons the NRC does not base its fees on market conditions, or a licensee's economic status, or a licensee's inability to “pass through” the costs to its customers.

Inevitably, were the Commission to exempt uranium recovery licensees from NRC fees, other licensees—both those forced to subsidize the NRC's regulation of the uranium recovery industry and those claiming economic hardship of their own—would also demand fee relief. Widespread and frequent reevaluation of fee schedules based on licensees' various economic situations and indeterminate market conditions has the potential to entangle the Commission's statutorily-required user fee program in constant controversy, and ultimately to unravel the program altogether. This is one reason why, in connection with the Allied-Signal remand, the Commission refused to establish a system to consider each licensee's ability to “pass through” NRC fees to customers.

Developing fee schedules based on licensees' current economic circumstances, in any case, is not workable as a practical matter. An economics-driven approach would make NRC fee schedules overly complex and difficult to establish. On July 20, 1993, the Commission implemented the Allied Signal remand of the FY 1991 and 1992 final fee rules by addressing the remanded issues in the statement of considerations accompanying its FY 1993 fee rule (58 FR 38666). In this document, the Commission explained that the NRC “is not a financial regulatory agency, and does not possess the knowledge or resources necessary to continuously evaluate purely business factors” (58 FR 38667; July 20, 1993). The Commission further explained that it recognizes licensees dislike paying user fees; however, such fees must be taken into account in running a business. The Commission then noted that it has neither the expertise nor the information needed to undertake the complex inquiry into whether, in a market economy, particular licensees are able to recoup their user fee payments. The Commission expressed concern that if this sort of inquiry became part of its mission, the agency would have to hire financial specialists which could lead to higher fees charged to pay for an expanded NRC. The Commission further noted as part of any such review it would have to examine tax returns, financial statements, and commercial data that some licensees might be reluctant to provide. See a more detailed discussion of this issue in the subject final rule (58 FR 38665, 38667-69; July 20, 1993). In addition, the Commission might have to look at the overall corporate structures of licensees to see, for example, if a corporate parent or subsidiary could equitably pay the fees imposed on a temporarily distressed enterprise.

The Commission is further concerned that a detailed examination of economic factors would destabilize the NRC's fee schedules because changing economic circumstances and inevitable shifts in economic cycles could result in significant, unexpected fee increases for some classes of licensees. Thus, consideration of economic factors would not bring greater fairness and equity to the NRC's fee schedules because some classes of licensees would unexpectedly, and on short notice, be required to subsidize other classes of licensees based on indeterminate shifts in industry markets.

6. The Commission does not intend to conduct a 10 CFR part 41 rulemaking, which would be a comprehensive set of regulations governing the uranium recovery industry. The Commission has concluded that its current regulations are adequate, but has directed the NRC staff to issue revised guidance to its uranium recovery licensees. Thus, the Commission need not address the issue of whether the uranium recovery industry should bear the costs of developing a new 10 CFR part 41.

The Commission notes that Congress, in the Energy and Water Development Appropriations Act for FY 2001, has given NRC licensees fee relief in the requirement that the NRC collect approximately 100 percent of its budget authority (minus funds appropriated from the Nuclear Waste Fund and General Fund). That percentage is being annually reduced by two percent for five years, so that only 90 percent of the agency's budget authority will have to be collected in fees in FY 2005. Additionally, the NRC staff is reexamining the issue of fee assessment to uranium recovery facilities in standby status.

For the reasons cited in this document, the NRC denies this petition.