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Happy New Year!  As we start off 2019, we want to motive the nuclear community by sharing a few legal updates and popular reports that have come out around the end of the last year.

  • Nuclear Energy Innovation and Modernization Act (S.512, NEIMA):  On December 21, Congress adopted NEIMA, legislation that addresses NRC licensing activities for current and next-generation nuclear reactors—and which the President is expected to sign in due course.  The text of the enrolled bill can be found here.  The legislation has a number of sections devoted to budget efficiency and reigning in NRC licensing fees “to the maximum extent practicable,” but also contains a number of provisions pushing the agency to develop a new regulatory approach for advanced reactors.  These include:
    • Prompting the NRC to “Develop and implement” a Staged Licensing Program (along with conceptual design assessments and licensing project plans).  The legislation also pushes the NRC to hasten research and test reactor licensing, further adopt risk-informed regulatory processes, and train staff and hire experts to support licensing activities.  The legislation requires the NRC to provide reports to Congress to monitor agency progress.  Many of these steps are things the NRC already is attempting—for example, the NRC’s advanced reactor licensing guidance, such as its “Regulatory Review Roadmap For Non-Light Water Reactors,” already speak to staged licensing, conceptual design reviews, and project plans.  However, NEIMA authorizes $14,420,000 for this effort per year, which if added beyond current allocations could help hasten all of these activities.
    • Requiring the NRC to Report on Creating a New Reactor Licensing Framework.  As opposed to the above activities, which would occur largely under the current regulatory framework, the legislation would also ask the NRC to draft a report to Congress on developing a new, technology-inclusive regulatory framework for advanced reactor licensing, to be completed by 2027.  This builds on suggestions already put forward by the NRC staff for a “10 CFR Part 53” process for licensing advanced reactors, which is also highlighted in an article recently co-authored by one of the writers of this blog.
    • Amending the Atomic Energy Act to Allow Research/Test Reactors to Sell Energy.  This interesting provision would amend 42 USC 2134(c), one of the core elements of the Atomic Energy Act, to permit licensing of a broader variety of research and test reactors under a “minimum amount of regulation”—including research and test reactors that also generate revenue from other sources, such as through sales of electricity (although such sales would be capped at a percent of annual facility ownership & operating costs).  A goal of this provision appears to be to enhance the economics for building research and test reactors, long considered a key roadblock to advanced reactor licensing.

There is much more to this legislation than described here, and we hope it will have a significant effect on advanced reactor licensing in the United States.

  • DOE to Use 2 of NuScale’s First 12 Modules:  The same time as NEIMA moved through Congress, DOE announced a memorandum of understanding (MOU) to draw on 2 of the planned 12 modules of NuScale’s first reactor project, for DOE research and facility use.  This MOU concerns NuScale’s first planned reactor project, to be procured by Utah Associated Municipal Power Systems (UAMPS) and sited at Idaho National Laboratories (INL).  According to the DOE press release, one module would “be designated strictly for research activities (referred to as the Joint Use Modular Plant or JUMP program),” focusing on development of integrated energy systems. The second module would then be used to provide power to INL under a Power Purchase Agreement (PPA).
  • National Academies Fusion Report:  In Mid-December, the  National Academies of Sciences, Engineering, and Medicine (NAS) issued a detailed new report on nuclear fusion, entitled the Final Report of the Committee on a Strategic Plan for U.S. Burning Plasma Research.  It highlights the significant progress made in fusion research, and provides guidance on a national strategy to achieve practical fusion energy.  Critically, along with supporting the multi-national International Thermonuclear Experimental Reactor (ITER) project in France, the report recommends a separate national effort “to build a compact pilot plant that produces electricity from fusion at the lowest possible capital cost.”  The report is technically focused, but also briefly discusses regulatory matters, pointing to past DOE safety guidance developed for the ITER project as a starting point.  It also posits that “[s]iting and licensing strategies for such facilities should be developed well in advance so as not to delay the progress toward the compact fusion pilot plant.”  Questions as to the final regulatory framework and regulator for commercial fusion facilities are still very much under consideration, although the report considers a transition to the NRC as the regulator for commercial fusion power facilities.

It also seems worth highlighting two other reports that came out earlier in 2018, that have been trending lately in the nuclear community.

  • The first is a U.S. Army-commissioned Study on the Use of Mobile Nuclear Power Plants for Ground Operations.  It is a thorough report that among other things, details past use of mobile nuclear reactors by the U.S. Army, including for providing power and fresh water at the Panama Canal Zone.  It also recommends the Army pursue mobile nuclear power plant acquisition through the National Defense Authorization Act, and suggests discrete performance requirements for any such plant.
  • The second is an MIT report, The Future of Nuclear Energy in a Carbon-Constrained World.  It covers a number of topics, and has a whole chapter dedicated to nuclear licensing issues.  Stepping back, a unique contribution of the report appears to be the way it leads with a very detailed discussion of nuclear power plant construction costs (including the huge costs incurred from site-specific construction activities), and uses this analysis to then drive many of its technical and regulatory recommendations: including on the use of modularized construction methods, regulatory standardization and harmonization, and government support for rapid testing and prototyping of new reactor designs—all with a general aim to improve the economics for advanced reactors.  One of the report’s principle authors, Jacopo Buongiorno, discusses this further in his Titans of Nuclear podcast.

For more about any of the above topics, please contact the authors.

Blog author Sachin Desai, along with a member of the NRC staff, both acting in their individual capacity, recently published an article in the American Bar Association’s nuclear law publication entitled “Preparing for Advanced Reactors: Exploring Regulatory and Licensing Reform.”  The article reviews advanced reactor licensing reform efforts, discusses an NRC staff recommendation for a new, risk-informed rule for licensing new reactors (colloquially called “10 CFR Part 53”), and also explores a novel concept to adapt the NRC’s adjudicatory licensing process to reach initial licensing decisions on complex regulatory questions.

The first part of the article starts with useful background as to the NRC’s regulatory reform efforts to prepare for advanced reactors, including among other things the NRC’s Vision and Strategy statement on advanced reactor licensing, and Guidance for Developing Principal Design Criteria for Non-Light Water Reactors.  It then discusses a significant NRC staff paper to the Commission, entitled Achieving Modern Risk-Informed Regulation, which proposes creating an “optional, technology-inclusive, risk-informed, performance-based rule for reviewing the design and operation of advanced reactors.”   According to the article, the licensing path “could potentially become a new part of the NRC regulatory framework—a ‘10 CFR Part 53.’”  This is covered more in a prior blog entry here.

The second part of the article starts by describing the current NRC adjudicatory framework, which is based on a requirement in the Atomic Energy Act that “provides applicants, the public, and the NRC’s own staff an opportunity to make their safety cases before an independent adjudicatory body,” particularly the Atomic Safety & Licensing Board Panel.  Currently this hearing process is most often used by citizens’ groups to challenge license applications, but the article posits that “the NRC’s adjudicatory process and the diverse pool of expert administrative judges” within these licensing boards (consisting of both legal and technical judges working together), may be “well suited to advanced reactor licensing.”

The article asks then whether there are circumstances in which specific, reasonable disagreements by the NRC staff and an advanced reactor applicant on a regulatory interpretation or licensing question can be brought before this panel (or a modification of it) to resolve on a fast timeline.  The licensing board can then issue a “tailored, precedential, decision on that particular disagreement,” with options for review by the NRC Commission.  Implementation of this approach will raise policy questions and likely require modification of the NRC’s regulations around adjudicatory proceedings, but it is nonetheless one option to explore further as licensing of advanced reactors approaches on the horizon.

For more about this blog post, please contact Amy Roma and Sachin Desai.

Earlier this month, a leading group of Canadian power companies and government entities (although not the nuclear regulator) issued a “Canadian SMR Roadmap,” an 89 page plan for Canada to become a leader in small modular and advanced reactor development (there is also a smaller executive summary).  Although the roadmap takes a look at a number of technical, commercial, and legal issues with SMR deployment in Canada, this entry focuses on some of the regulatory reform proposals outlined in the roadmap—to better understand what Canadian stakeholders think are the biggest hurdles to licensing advanced reactors above the 49th Parallel.  We discuss four regulatory reforms suggested in the roadmap, many of which compare with efforts going on here in the United States.

  • Environmental Reviews:  A key issue in the Canadian SMR Roadmap was reform of environmental impact reviews.  The roadmap strongly advocates for Canada to pass a revised Impact Assessment Act, legislation before the Canadian Parliament to modernize the national environmental review process.  In addition, the roadmap authors appear to advocate for additional tweaks to the environmental review process—including potentially exempting “applications to construct, operate, and decommission SMRs equal to or below an electric capacity of 300 MWe” from environmental reviews, on the grounds that such reactors have low environmental risk.  While there are numerous efforts ongoing in the US to reform US federal environmental review policies, exempting SMRs from US National Environmental Policy Act reviews has not been widely advocated for (although it is something the authors have explored).
  • Security:  The Canadian SMR Roadmap pays special attention to security at SMRs, noting that “the current regulations would require SMRs to incorporate security infrastructure comparable to today’s operating full scale nuclear power plants.”   The roadmap advocates for reform in this area to remove prescriptive requirements in favor of risk-based regulation.  Interestingly, the US Nuclear Regulatory Commission (NRC) may be ahead of the curve on this issue, with the NRC staff earlier this year sending to the NRC Commission an options paper on tailoring physical security requirements for SMRs and advanced reactors.  On November 19, the NRC Commission  approved the NRC staff moving forward with a limited-scope rulemaking to generally reduce excess physical security requirements for small modular and advanced reactors, given their inherent safety features.
  • Risk-Informed Rulemaking:  Apart from its specific focus on the security regulations, the Canadian SMR Roadmap advocates for the Canadian nuclear regulator, the Canadian Nuclear Safety Commission (CNSC), to take a more risk-informed view to regulation, particularly on issues “such as staff training and emergency response.”  In regards to emergency response, the roadmap argues that the CNSC should adopt regulations “based on risk-informed criteria, not an arbitrary low [10MWt] limit on reactor thermal power.”   This seems to align with the NRC’s efforts to adopt risk-informed regulation for emergency planning for next-generation reactors, with the US regulator already moving forward with a rulemaking in this area.
  • Nuclear Energy Advisory Council:  The roadmap advocates for the creation of a Nuclear Energy Advisory Council (NEAC) to give direction to Canadian SMR nuclear policy.  The NEAC would be “composed of senior executives and ministers” and meet annually to focus on implementation of the SMR roadmap and related action plans.  This strikes a chord with a policy proposal previously put forward by the blog authors in the paper Back from the Brink: A Threatened Nuclear Energy Industry Compromises National Security.  This paper advocates for the US to adopt its own Nuclear Energy Advisory Council, also comprised of business leaders and government officers—although with more of a strategic advisory versus implementation role.  Compared to the Canadian version, the US NEAC would “advise the President and National Security Council on the commercial nuclear industry, mirrored after the National Infrastructure Council.”

The Canadian SMR Roadmap is a promising document that helps highlight Canada’s growing potential role in SMR and advanced reactor development.

And on the nuclear strategy front in the US, the Senate on Thursday November 29 is holding a hearing that will cover in part the Nuclear Energy Leadership Act (S 3422),, a significant piece of legislation that can help close many gaps in advanced reactor development (including testing and fuel cycle development).  We wrote about this important piece of legislation in a past blog entry available here.  The Nuclear Energy Leadership Act is designed to help the United States return to the lead in nuclear energy technology leadership.  The bill sponsors explain that the US has yielded this position to Russia and China–weakening our energy security, economic competitiveness, and national security.  The bill covers a range of activities, including funding research and development, and accelerating the deployment of advanced nuclear energy technologies.

Notably, both the Canadian and US activities show that advanced reactor developments warrant strategic government support at a national level.

For more about the issues discussed in this entry, please contact the authors.

The U.S. Nuclear Regulatory Commission (NRC) recently released a staff paper-SECY-18-0096-seeking Commission approval of a new proposed methodology for establishing “functional containment” performance criteria for non-light water reactors (non-LWRs).  This methodology would step away from deterministic containment design parameters and embrace a concept of “‘functional containment’ as a barrier, or a set of barriers taken together, that effectively limits the physical transport of radioactive material to the environment.”  If approved, the proposed methodology would be a critical step in developing a framework for licensing non-LWR designs.

Many current NRC regulations and guidance documents are prescriptive in nature and focus on problems unique to LWR technology—that is, the regulations tell you squarely what you need to do, providing limited opportunity to meet the end objective of the regulation in a different way.  For example, NRC guidance in NUREG-800 Chapter 3 provides detailed requirements for the strength and thickness of barrier concrete.  As the NRC has started to grapple with non-LWR designs, it has shifted its focus to more risk-based and performance-based methodologies—that is, the NRC would define the objective, and an applicant would have more flexibility in showing the NRC how its design meets the objective.  Under the performance-based methodology proposed in the SECY paper, the requirements imposed on physical barriers would be determined based on the risk of migration of radioactive materials and the other safety measures being used for containment.

The new methodology proposed by the NRC staff, therefore, does not prescribe the traditional structures, systems, and components (SSCs) required for functional containment, but rather focuses on performance requirements.  This methodology will give non-LWR designers more flexibility and provide a more integrated approach for developing a regulatory framework for non-LWRs.

A key component of the methodology is the “identification and categorization of licensing-basis events.”  The NRC staff recommends using the set of event categories initially developed under the Next Generation Nuclear Plant Project and used in the Licensing Modernization Project as the baseline for developing performance criteria.  Based on these event categories, the performance criteria will be developed to meet fundamental safety requirements.  Once the performance criteria have been determined, it appears the developers of non-LWRs would consider the potential consequences associated with the identified events and assess the cost and benefits of potential SSC options to prevent or mitigate the migration of radioactive material.  The NRC staff is calling this approach the “Barrier Assessment” or “Bow Tie” method, as depicted in the figure below:

If approved, the prosed methodology for functional containment performance criteria will be incorporated into the draft guidance the NRC staff is currently compiling for non-LWR licensing.

If you would like more information please contact the authors.

In a development that could cause every advanced reactor startup to reexamine its growth strategy, the US government (USG) yesterday afternoon issued a new framework concerning exports to China, which largely closes the export market to advanced reactor companies.

The framework document, which is available here and was described to a limited audience in a briefing yesterday that we attended, sets forth the following policy regarding exports of technology or technical data subject to the US Department of Energy (DOE) nuclear export control regulations in 10 CFR Part 810, and exports of equipment and materials under the NRC’s nuclear export control regulations in 10 CFR Part 110.

The DOE Part 810 export controls framework is likely of most interest to advanced reactor companies, and is summarized below:

  • Presumption of Denial for the Following Export Authorization Requests:
    • Any exports related of advanced reactor technologies (i.e., light water SMRs and non-light water reactors), and related fuel cycle exports.  It appears that fuel cycle exports that could benefit advanced reactors, even if designed primarily for traditional light water reactors, could get caught up in this “presumption of denial.”
    • Any export of codes or software.
    • Any exports at all to the company China General Nuclear (CGN) or its affiliates.  DOE will not provide a public list of affiliates, but applicants can go check with DOE beforehand.
    • Any “new technology transfers after January 1, 2018” are also presumed to be denied export authorization.  It is unclear exactly what this means, but it is potentially a catch-all to make clear the limited nature of those exports still permissible.
  • Exports for Which Approvals May Still be Attainable (Presumption of Approval, But After Heightened End User Review):
    • Amendments or extensions for existing authorizations “for technology transferred prior to January 1, 2018.”  This does not apply to advanced reactors.  It will also likely be an area of confusion going forward as to how the USG position against “new” technology transfers above will apply to these existing authorizations.
    • Certain technology transfers for operational safety purposes, with a clear operational safety benefit and after heightened review of the end user.
    • Transfers of technology required to support sale of an item that is “commercially available.”  This is likely to be limited in scope.

In case of a conflict, the presumption of denial appears to defeat the presumption of approval—e.g., exports to CGN appear off-limits no matter what.  A few other key points to relate:

  • NRC Export Control Policy Changes:  The changes to NRC export controls mimic those impacting DOE controls.  The key point is that any exports related to “direct economic competition with the United States” are presumed to be denied an NRC license.  Examples provided include sales to support the Hualong One and unique U.S. components for the CAP-1400 reactors.  Likely this would also catch any effort to support a Chinese advanced reactor.  Exports to support the AP-1000, or related projects in China that rely on current-gen technology, can potentially move forward, but will be heavily scrutinized.   In theory, sales of light water SMR or advanced reactors themselves are permitted too, but with no technology transfer above and beyond installation and operation.
  • Implications on Department of Commerce (DOC) Export Controls: Today’s action appears largely limited to 10 CFR Parts 110/810 nuclear export controls, and does not directly impact exports regulated by DOC.  However, we understand that DOC is currently considering potential new restrictions with regarding China.   These may involve changes in licensing policy, including adding licensing requirements for items that previously could be exported without a license.  Considering that DOC hosted this event, it would appear the agency staff at least agree in principle with the strong action taken there.
  • End User Reviews: There will be new, “case-by-case” heightened reviews for exports to non-CGN end users that assess risk of diversion, risk to parties in the deal, and risk to US national and economic security—and balance these risks against the economic and strategic benefits of the exchange.  DOE and the NRC may be able to place conditions on exports to mitigate the above-listed risks.    Exactly how these reviews will be conducted is likely still to be determined, including if DOE and NRC will want to go as far as what some other agencies (such as DOC) do with end user reviews.
  • Application to Chinese Nationals/Partially-Owned Businesses: To also make clear, this policy applies to hiring of Chinese foreign nationals in the United States, and can impact deals with entities that are just partially owned by Chinese nationals or businesses.  The authors asked the USG at the briefing as to whether this policy applied to deemed exports, and the USG panelists confirmed that it did.  They directed that questions related to partial ownership be directed to DOE for review.
  • Other Related Actions:  This policy change also highlights the recent CFIUS and DOC export controls legislation passed by Congress, which was again geared towards China.  To add, USG has started to implement parts of this legislation, including a CFIUS pilot program to implement the sections of that legislation concerning investments in critical technologies, likely including a broad scope of nuclear technologies.

All in all, this is just one more example of a renewed government focus on the national security implications of losing the US civil nuclear industry to foreign competitors, as highlighted in our Back from the Brink paper (which was featured in an event last week at the Center for Strategic and International Studies on Nuclear Energy, Naval Propulsion, and National Security).

Specific to China, since 2017 the USG has been looking at this issue, following a spate of IP theft and diversion cases that have not seemed to stem in recent years.  While the Allen Ho/CGN litigation was certainly a driver, USG panelists noted in their briefing many other examples of China allegedly diverting civilian nuclear resources and technology to military end uses, using a “whole nation” strategy.  This included forcing civilian institutions to do military nuclear work, comingling civil and military nuclear efforts (for example, in the area of floating reactors), diverting IP provided for civilian nuclear use to military end uses, and repurposing US civilian nuclear IP and codes for military end use.  The FBI representative appeared to indicate that there were other, classified examples.

For more information, please feel free to contact the authors.

Recently, the Hill has been taking a flurry of legislative actions that impact the advanced reactor community across all spectra.  We provide a summary of some of the major bills going through Congress below, including a couple which have recently become law or may become so soon.

Nuclear Energy Innovation Capabilities Act (NEICA) (S. 97). This bill, which has a long history before Congress, finally passed both the House and Senate on September 24, and was signed by the President into law Friday September 28.  The text of the enrolled bill (the bill that has passed both chambers of Congress in identical form and sent to be signed) can be found here.

NEICA tackles a number of issues, but as a theme largely directs the US Department of Energy (DOE) to move forward on a number of actions long advocated for by the advanced reactor community—including opening up the labs more for private sector use, advancing a test reactor plan, and increasing collaboration with the US Nuclear Regulatory Commission (NRC).  As provided in the bill summary, DOE is instructed to:

  • Determine the need for a versatile reactor-based fast neutron source, which shall operate as a national user facility, and put forward a plan to construct and operate such a facility by the end of 2025.
  • Enhance its high-performance computation modeling and simulation techniques for advanced reactors.
  • Lead a program for testing of advanced reactor concepts (including physical testing), with a focus on removing licensing and technical uncertainty.  As part of this, the DOE is to work closely with the NRC to share technical expertise developed from this testing program and grant NRC staff access to the program and related sites to learn from any testing.  The goal of this is to help ensure the NRC has sufficient resources to license any reactor designs being tested.
  • Submit a budget proposal to Congress to perform the above activities.
  • Submit a report to Congress on fusion technologies under development (fusion is included within the bill’s broad definition of “advanced reactor”), with a focus on those technologies that can provide net energy production within 15 years after the start of construction of test or prototype facilities.
  • Develop an “Advanced Nuclear Energy Cost-Share Grant Program” to assist in paying NRC licensing fees for new reactor designs, including early stage activities such as development of a licensing plan.

NEICA was signed Friday along with H.R. 589, the DOE Research and Innovation Act, which also aims to shape DOE’s research agenda and use of the national laboratories to improve research collaboration and technology commercialization.

Energy-Related Appropriations Legislation (H.R. 5895). The President signed a broad appropriations bill on September 21, which covered funding for DOE.  The text of the enrolled bill can be found here, but summaries of the bill’s core DOE funding provisions can be found in a conference report, and a summary provided by the American Institute of Physics (AIP) here.  As represented in the AIP summary, the bill is largely a victory for DOE, with funding increases seemingly across the board, including a 10% increase in funding to the Office of Nuclear Energy and $65 million set aside for the versatile fast-neutron test reactor described above.

Nuclear Utilization of Keynote Energy Act (H.R. 1320). This bill passed the House on September 25.  The text of the bill can be found here.  It is targeted at NRC reform, and seeks among other things to:

  • Codify that up to $10.3M of the NRC’s work for advanced reactor readiness is to be removed from fee recovery (it also puts a cap on many other licensees’ annual fees).
  • Study the effect of removing the Atomic Energy Act’s restriction on foreign ownership, control, or domination of nuclear licenses (primarily affecting reactor licenses).
  • Study the elimination of the mandatory hearing requirement for uncontested reactor license applications.
  • Allow for the adoption of more informal hearing requirements for licensing proceedings.
  • Instruct the NRC as to more efficiently processing license applications, with a 42 month timeline for issuing safety and environmental reports after docketing of the application.
  • Establish community advisory boards in areas where plants are undergoing decommissioning.

Nuclear Energy Leadership Act (S. 3422). This bill was introduced into the Senate earlier this month, with 9  The text of the bill can be found here, and we provide a thorough summary in our past blog entry.  This bill would build on the Nuclear Energy Innovation Capabilities Act to, among other things:

  • Direct the U.S. government to enter into long-term power purchase agreements with nuclear reactors.
  • Promote the development of advanced reactors and fuel by strategically aligning U.S. government and industry interests, which is intended to enable U.S. developers to compete with their state-sponsored competitors from Russia and China.
  • Further push DOE to construct a fast neutron-capable research facility, which is crucial to test important new nuclear technologies and demonstrate their safe and reliable operation. Currently the only two facilities in the world like this are in Russia and China.
  • Develop a source of high-assay low-enriched uranium, which is the intended fuel for many advanced reactor designs, from U.S. government stockpiles. Again, both China and Russia have these capabilities domestically, but the U.S. does not.

This bill recognizes the national security implications that come with the long-term neglect of our nuclear industry, which is outlined in our recent paper published by Center for Strategic and International Studies, entitled  “Back from the Brink: A Threatened Nuclear Energy Industry Compromises National Security.”

* * *

This review only highlights some of the nuclear-related bills currently before Congress—others of which also touch on reform to, e.g., our national nuclear export controls regime.  For further information on the bills described above or on other nuclear legislation, please contact the authors.

This month, the NRC published an early draft regulatory guide on the content of license applications for non-LWRs.  The document is designed to help license applicants apply the NRC’s movement towards a risk-informed/performance-based regulatory approach towards the drafting of an actual license application.

The document is in part the result of the Southern Company-led Licensing Modernization Project, which has resulted in the issuance of a number of informal reports discussing licensing reform for non-LWR reactors.  This draft regulatory guide is designed to more formally capture the results of those reports and follow-on discussions.   It addresses the designation of licensing basis events; safety classification and performance criteria for structures, systems, and components; and evaluation of defense in depth adequacy.  importantly, it largely adopts detailed draft industry guidance set forth in March of this year, although with certain clarifications.  One area of particular NRC focus concerns probabilistic risk analyses (“PRA”), where the agency appears to show a little hesitancy with the broad use of PRA proposed in the industry guidance.

The draft guidance is being issued to support future discussions, in particular an Advisory Committee on Reactor Safeguards meeting tentatively scheduled for October 30, 2018.  For more about the Licensing Modernization project, or recent NRC and industry guidance on contents for non-LWR license applications, please contact the authors.

In today’s international nuclear marketplace, foreign investment is a significant source of capital for U.S. next-generation nuclear ventures. However, about-to-be signed legislation has the potential to broadly expand the ability of the Committee on Foreign Investment in the United States (“CFIUS”) to review foreign investment into the United States directed towards the nuclear industry, as well as the ability of the U.S. government to control exports of emerging nuclear technologies.

The new legislation, expected to be signed today, will among other things: (1) increase the number of transactions falling under CFIUS jurisdiction, (2) make some CFIUS reviews mandatory, (3) and give CFIUS the ability to suspend pending investments.  The legislation will also (4) expand export controls for “emerging and foundational technologies.”  The advanced reactor community should be aware of the legislation as it could impact future investment plans.  The community may also want to involve itself in expected rulemakings that will clarify important parts of the legislation.

As background, CFIUS is a multi-agency committee, led by the Treasury Department, which has the ability to review foreign investments into the United States that pose a threat to national security. Under the current law, CFIUS is able to review transactions that allow a foreign entity to gain “control” over a US business that poses a national security risk—including U.S. businesses holding or involved in critical infrastructure and critical technologies, which includes nuclear power.  CFIUS works aside a separate, complex nuclear export control regime to police efforts by foreign powers to infiltrate critical infrastructure and technologies in a manner harmful to U.S. national interests.

The about-to-be-signed legislation, entitled the Foreign Investment Risk Review Modernization Act of 2018 and the Export Controls Act of 2018, have both been inserted into the John S. McCain National Defense Authorization Act for Fiscal Year 2019.  Hogan Lovells’ International Trade Practice has summarized key elements of the legislation in two client alerts (here and here).  The legislation has many components, but a few of which are worth calling out in more detail:

(1) Increasing the Scope of CFIUS Jurisdiction: Currently, the touchstone of CFIUS jurisdiction is whether any transaction would give a foreign entity control of a US business.   However, CFIUS will now be able to review many other types of transactions, including “any other investment[s]” (to be clarified by CFIUS by rulemaking) that concern critical infrastructure, critical technologies, or sensitive personal data of U.S. citizens.

Depending on how future CFIUS rulemaking efforts proceed, this could capture many types of investments in advanced reactor start-ups or fusion ventures, regardless if control is at stake—potentially even if the transaction just results in the foreign entity gaining access to material non-public technical information. CFIUS will also now be able to review changes to existing investor rights that could lead to the same result, as well as certain investments designed to get around CFIUS review.  Certain limited carve-outs exist for private equity and venture investments, but these are still to be clarified further.

(2)Making CFIUS Submissions Mandatory: Currently, while CFIUS can itself seek review of a transaction, generally no entity is required to submit a transaction to CFIUS for review (i.e., submissions are voluntary). However, businesses seeking investment involving foreign government backing will now have to submit “declarations” to CFIUS, and CFIUS would have 30 days to take a number of potential actions (again, to be clarified further by rulemaking). This piece of the legislation, like many others parts, is in response to increasing concerns around Chinese state-owned investment into sensitive US businesses.

(3) Allowing CFIUS to Suspend Transactions:  Currently, CFIUS can only recommend to the President that a transaction be blocked, making it in practice very hard and rare for a transaction actually to be blocked.  However, now CFIUS can suspend a proposed/pending transaction that appears to pose a threat to national security while it conducts its review.  This gives the committee a strong new tool to effectively kill transactions it does not favour.

(4)Intensifying U.S. Government Export Controls:  Alongside CFIUS reform, new legislation will allow the U.S. government to intensify how it controls exports of “emerging and foundational technologies.”  Currently such exports are controlled by a variety of regulators, including the U.S. Departments of Commerce and State, and in the case of nuclear power, also the U.S. Department of Energy and the U.S. Nuclear Regulatory Commission, under well-defined but also sometimes slow-to-change regimes.

This broad, new legislation appears designed to gives the Executive Branch important new mechanisms to quickly apply export controls to emergent fields that concern U.S. economic interests.  Within the nuclear space, this could impact both novel fission and fusion technologies that are either not covered or loosely regulated under current export control regimes—although its actual impact will follow only after this legislation is applied in practice.

While certain parts of this legislation may come into effect immediately, both CFIUS and the Executive Branch will have to undertake rulemakings and additional actions to fully implement its new powers.  This will provide opportunities for potentially affected parties to get their voice known, especially as the role of (and concern with) foreign investment in U.S. nuclear innovation is only expected to grow.

For more about CFIUS and nuclear export controls, as well as the above-described legislation, please contact the authors.

The U.S. commercial nuclear energy industry helps our government meet several key national security objectives, but it faces severe challenges.  Hogan Lovells, in collaboration with the Center for Strategic and International Studies, has authored “Back from the Brink: A Threatened Nuclear Energy Industry Compromises National Security” to bring attention this issue and suggest a path forward.

Among other things, the paper evaluates the current state of the industry (including with a “forcefield analysis” out to 2050), explains why U.S. government action is critical at this moment, and proposes how we can move forward in a manner that best protects our country’s national security.  Key proposals set forth in the paper include:

1. Form a Nuclear Leadership Program as a central government resource to kick-start a new public-private partnership to grow the U.S. nuclear power industry. This new U.S. body should centralize the multitude of U.S. agencies that work with the nuclear industry. While working with private-sector support, the program should be U.S. government led.

2. Form a Nuclear Energy Advisory Council, generally composed of current and former business and engineering executives, and U.S. government leaders, to advise the president and National Security Council on the commercial nuclear industry, mirrored after the National Infrastructure Advisory Council (NIAC).

3. Use the Nuclear Leadership Program and the Nuclear Energy Advisory Council to Drive Forward Critical Domestic Nuclear Energy Industry Policy Changes: These include (i) supporting the completion of our present nuclear projects under construction, (ii) readying the next wave of U.S.-origin advanced reactors, and (iii) developing a “ready reserve” option for some U.S. stressed nuclear plants.

4. Use the Nuclear Leadership Program and the Nuclear Energy Advisory Council to Drive Forward Important International Nuclear Energy Industry Policy Changes: These include (i) creating a framework for a joint “USA, Inc.” public-private partnership for international new-build nuclear projects, and (ii) marketing the benefits of the U.S. regulatory framework and nonproliferation regime abroad.

5. Look at the Saudi Nuclear New-Build RFP as a Potential Turnaround Opportunity and Test Case. The U.S. industry has an opportunity to regain some of its lost ground with one of the biggest potential nuclear new-build opportunities in the world—a 16-reactor project currently contemplated in Saudi Arabia.

This paper was prepared by Michael Wallace, Amy, and Sachin, with valuable input from our Hogan Lovells colleague Steven Miller.  Mr. Wallace is a Senior Advisor at the Center for Strategic and International Studies.  He is also a member of the President’s National Infrastructure Advisory Council, and a Board Member of the Emirates Nuclear Energy Corporation’s Board of Directors.  Prior to this, Mr. Wallace was the former Chief Operating Officer of Constellation Energy and Chairman of Constellation Energy Nuclear Group.

If you have any questions about the paper, or about the national security implications of the commercial nuclear industry, please contact the blog authors.

The NRC staff recently publicly released a major new paper embracing regulatory reform to advance risk-informed regulation for advanced reactors.  Included in this paper is a concept of a “10 CFR Part 53”—a potentially entirely new process for licensing advanced reactors.

SECY-18-0060, “Achieving Modern Risk-Informed Regulation,” proposes “several significant and specific revisions” to the NRC regulatory framework.  The staff introduced these proposals by first discussing the results from an outreach program, which found a “need for systematic and expanded use of risk and safety insights in decisionmaking.”  The review team also found recommendations for a more open and efficient decisionmaking process for licensing new technologies.  Of significance, the NRC staff explained in this paper that some of its proposals, reflecting feedback from its outreach, will require cultural change at the NRC—in fact, that “[a] shift in NRC culture will be key to the success of the transformation initiative.”

The paper then builds from this, to discuss ways to “transform” the NRC’s licensing process.  The first part of this discussion focuses on changes that can be made through guidance, in particular to adopt “approaches that use qualitative and quantitative safety and risk insights to scale the level of review needed to make a finding of reasonable assurance.”  As part of this initial reform, the NRC staff discusses use of “(1) expert panels to guide reviews of incoming submittals for new technologies and major licensing actions; (2) internal small groups of NRC staff and management to guide the licensing process (called ‘guiding coalitions’); and (3) ‘tiger teams’ consisting of small groups of NRC staff who are empowered to identify alternative solutions to resolve licensing challenges, without being unnecessarily constrained by current processes or past practice.”

However, then the NRC staff paper moves on to discuss much more significant regulatory reform—to essentially create a new licensing path for advanced reactors that focuses on “meeting high-level risk-informed, performance-based criteria.”  Enclosure 5 to the paper, which lays out “Additional Detail on Areas of Transformation,” delves into more detail, and also advocates for a “10 CFR Part 53” licensing process: “[A] new optional framework [that] would provide greater applicability for non-LWR applicants and minimize the need for exemptions.”  Although recognizing the challenges with a new rulemaking, the paper advocates for the approach and notes that “[t]he timing for a new rule is ideal right now, in that it will signal to the rising non-LWR community and other stakeholders that the NRC is committed to reviewing and licensing new reactor technology in a timely manner and in a way that relates directly to tomorrow’s technology.”

SECY-18-0060 represents the product of a great deal of work and research by the NRC staff, and promises significant, if not fundamental, reforms to the NRC’s licensing process at this critical juncture for the “New Nuclear” economy.  Expect to see significantly more analysis and attention to this effort as it moves forward.  For more information on the NRC’s regulatory reform initiative, please contact the authors.