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.

On April 4, the U.S. Nuclear Regulatory Commission (NRC) issued Regulatory Guide 1.232, Guidance for Developing Principal Design Criteria for Non-Light Water Reactors.  The regulatory guide’s generic set of Advanced Reactor Design Criteria cover most non-light-water technologies. The guide also includes technology-specific criteria for sodium-cooled fast reactors and high temperature gas-cooled reactors.

The regulatory guide describes how the general design criteria (GDC) set forth in Part 50 of the NRC’s regulations may be adapted for non-light-water reactor (non-LWR) designs. The guidance may be used by non-LWR reactor applicants to develop principal design criteria for any non-LWR designs, as required under the NRC nuclear power plant regulations. Notably, the guide can be used by advanced reactor designers to align their concepts with relevant NRC regulations for nuclear power plants, and will assist the NRC staff when reviewing future license applications.

We had previously written about the draft regulatory guide published by the NRC last year here.  As we noted then, this is an important document that deserves close attention by the advanced reactor community.  It provides one of the first detailed insights into how the NRC views advanced reactors, how far it is willing to step away from the GDC framework, and what it finds of importance from a safety perspective for advanced reactors.

For questions on the guidance, please contact one of the authors.

Nuclear power has had a busy year in 2017.  One of the most important trends for preserving the existing fleet of operating nuclear power plants has been the financial commitment  by US states to support nuclear power operating in their states and preserve their largest source of carbon-free power—and the thousands of jobs that go with it. This represents a significant reversal in state policy towards nuclear power, which traditionally has been left out of state programs promoting low or carbon free power—despite the fact that 60 percent of the carbon free power in the U.S. is generated by nuclear power. And the new state involvement has the potential to be a game-changer for next-generation reactors.

To highlight some of the key state activities from this year:

  • New York’s Clean Energy Standard and Illinois’s SB 2814, with their Zero-Emissions Credit (ZEC) programs, came into effect this year.  These programs represent among the first significant state efforts to  compensate nuclear power for its environmental benefits, and has helped keep a large number of nuclear power plants operational. Ohio has also introduced legislation to implement similar ZEC-type programs.
  • Federal district courts separately upheld both New York’s and Illinois’s ZEC programs against federal pre-emption and Constitutional challenges. Both decisions have been appealed, but nonetheless allow the state programs to continue in the interim.
  • Connecticut passed legislation that would allow nuclear power to compete directly against other zero-carbon resources in certain circumstances.
  • New Jersey introduced and advanced legislation to support nuclear power through “nuclear diversity certificates,” which would support the nuclear reactors for their environmental and fuel diversity attributes.

The core of many of these programs is valuing the benefits of nuclear power using the “social cost of carbon” framework. The social cost of carbon represents a potential measure of the harms caused by carbon emissions (and therefore, the value of carbon avoided by zero emissions generation). It was developed by a federal government interagency working group and has found itself increasingly referenced as part of state climate initiatives.

Although these programs directly benefit the current light water reactor fleet, it also signifies a larger trend by states to put nuclear power on an equal footing to other forms of low or zero-carbon generation sources.  This trend cannot be ignored by the advanced reactor industry. Just as renewable energy grew through state-level efforts to support the industry through renewable energy credit programs and portfolio standards, next generation reactor developers may want to look to states along with the federal government as potential sponsors for first-of-a-kind reactor projects.

These activities also explore the myriad different legal routes states can pursue to support the environmental and societal benefits of nuclear power. The U.S. energy grid is an ecosystem with many state, regional, and federal actors all working together to provide electricity at low cost and in accordance with legitimate policy goals. Disputes are likely to arise (and have arisen) as to where the borders between state and federal involvement. But that does not change the fact that states have always had a role in the in the promotion and regulation of nuclear power. An opportunity now exists to redefined that relationship, and for a new generation of state leaders to reengage with a new generation of reactor developers, for the benefit of all involved.

For more on state legislative activities affecting nuclear power, please contact the authors.

Hogan Lovells had the honor Monday of hosting the Washington, D.C. launch party for Ambassador Thomas Graham’s new book “Seeing the Light: The Case for Nuclear Power in the 21st Century.”  As part of the launch party, Hogan Lovells partner Amy Roma sat down with Tom and three other distinguished guests for a panel on the future of nuclear power.  The other panelists included: Senator John Warner (former Secretary of the Navy; five term Virginia Senator), Mike Wallace (current Board member for Emirates Nuclear Energy Corporation; former Constellation Energy COO and Vice-Chairman), and Jim McDonnell (Director of DHS’ Domestic Nuclear Detection Office).

The book has drawn strong critical acclaim. Richard Rhodes, the Pulitzer Prize recipient for The Making of the Atomic Bomb, calls this publication “the best book” written on the subject of commercial nuclear power. The book makes clear that “[n]uclear power is not an option for the future but an absolute necessity.” It also explains that:

Fortunately, a new era of growth in this energy source is underway in developing nations, though not yet in the West. Seeing the Light is the first book to clarify these realities and discuss their implications for coming decades. Readers will learn how, why, and where the new nuclear era is happening, what new technologies are involved, and what this means for preventing the proliferation of weapons. This book is the best work available for becoming fully informed about this key subject, for students, the general public, and anyone interested in the future of energy production, and, thus, the future of humanity on planet Earth.

The panel provided an exciting opportunity to marry the research and conclusions from Seeing the Light with the experiences and insights of those working to make the future of nuclear power—including next generation nuclear power—a reality. Some of the many insights from the panel included the following:

  • National Security Should Be Considered, as well as Climate Change: Seeing the Light clearly explains that the urgent threat of climate change requires nuclear power to work alongside renewables. In addition, the panel discussed at length that national security is also an important concern, and one that national leaders may also readily get behind. From an inability to power the nuclear navy to losing our seat on the table with regards to non-proliferation, the panelists repeatedly brought home the importance of having a robust commercial nuclear industrial base to keep the country at the cutting edge. The panelists expressed grave concern that a downward spiral in nuclear investment and talent threatens the U.S. on multiple fronts.
  • Effective Non-Proliferation Requires Peaceful Nuclear Power: While the book argues that the global nuclear non-proliferation treaties of the 20th century were not just giveaways from non-weapons states to the nuclear weapons states. Instead, they were agreements that in exchange for not engaging in nuclear weapons, non-weapons states would have assistance to develop a robust commercial, peaceful nuclear industry. And the U.S. has an obligation to these parties to assist them with their programs.  Moreover, the lack of a U.S. presence in foreign nuclear programs, weakens the U.S. voice on non-proliferation issues.
  • Ensuring New Nuclear Meets Top Safety and Security Standards. The panelists also all agreed that the use of U.S. technology abroad means that U.S. standards for safety and security, which are the highest in the World, will be incorporated into foreign reactor programs.
  • Top-Level Government Support Needs To Complement Private Action: All the panelists also agreed that the development of nuclear power in the 20th century was a true public-private partnership, with both Congress and the Executive Branch offering support. And this partnership delivered dividends countless times over back to the government and taxpayers. With a new wave of reactors moving forward around the world and the next generation of nuclear power on the horizon, the panelists agree that this needs to happen again, and that circumstances are right to make real progress towards this in the near future.

For more on the book, the panel, or on the potential role nuclear power can play in our future, please contact the authors.

Small modular reactors (SMRs) have seen some positive legal and policy developments recently.

A bill to provide tax exemptions for manufacturers of small modular reactors was introduced in the Washington state legislature.  Although in the early stages, this bill provides a new and potentially useful model for other states to follow to boost their advanced nuclear and SMR industries.  At a recent conference at Argonne National Laboratory, NuScale, the first SMR reactor to submit a design certification application to the U.S. Nuclear Regulatory Commission, highlighted the potential SMRs hold for creating U.S. manufacturing jobs. Washington state’s legislation is a timely effort to court NuScale and other SMR designers, with a mission to increase “the number of jobs in the small modular reactor industry in Washington.”

Public efforts to boost private-sector progress in developing next-generation nuclear reactors are essential to the growth of this societally important industry.  Recently, the U.S. Department of Energy’s (DOE’s) Gateway for Accelerated Innovation in Nuclear (GAIN) initiative, which seeks to leverage DOE laboratory facilities to benefit private reactor startups, was specifically called out by Secretary of Energy Perry in his confirmation hearing as an example of a successful public-private partnership.  In this vein, a recently launched organization, SMR Start, seeks to provide an additional targeted boost to policy reform efforts, with an aim towards “the successful commercialization of SMRs by enabling the establishment of supportive policies.”

Third Way, a strong promoter of policies to support the advanced nuclear industry, will likely discuss methods to provide public support for advanced reactors at its upcoming Advanced Nuclear Summit & Showcase being held this Tuesday, February 21 (and which can be livestreamed here).

For questions on encouraging public policy support for next-generation nuclear technologies, please contact the authors.

 

On February 9, 2017, Amy Roma, a partner in the firm’s nuclear practice, delivered a keynote address at the 13th annual Platts Nuclear Energy Conference, in Washington, D.C.

Her address highlighted a number of promising developments for the nuclear industry, from the debut of state incentive programs that reward nuclear energy for its zero-emissions attributes, to the growth of the advanced reactor community.  Not only have we seen advancements in the United States regarding government support and licensing of advanced reactors, but as identified in her comments, five advanced reactor designs have been submitted to the Canadian nuclear regulator for initial design approval.  Her address also discussed updates regarding spent fuel storage and took notice of international growth in the nuclear industry.

We want to share her remarks with you, click here to download. If there any questions as to her address or its contents, do not hesitate to contact the authors.

The U.S. Department of Energy’s (DOE’s) Gateway for Accelerated Innovation in Nuclear (GAIN) initiative recently launched a funding opportunity to support development of advanced nuclear energy technologies.  The funding comes in the form of “small business vouchers to assist applicants seeking access to the world class expertise and capabilities available across the United States (U.S.) DOE complex.”

According to the voucher program notice, “DOE anticipates awarding as many as 20 vouchers, each with value of approximately $50K – $500K contingent upon Congressional appropriation …. Requests for awards larger than $500K may be considered in cases where there is a clear need involving a truly exceptional innovation or technology.”  The notice indicates that applications should focus on the following topic areas:

  • Analysis and evaluation of, and for, advanced reactor concepts and associated designs, including development of licensing information or strategies;
  • Structural material and component development, testing, and qualification;
  • Advanced nuclear fuel development, fabrication, and testing (includes fuel materials and cladding);
  • Development, testing, and qualification of instrumentation, controls, and sensor technologies that are hardened for harsh environments and secured against cyber intrusion;
  • Modeling and simulation, high-performance computing, codes, and methods; and
  • Technical assistance from subject matter experts and/or data/information to support technology development and/or confirm key technical or licensing issues.

Detailed eligibility requirements are discussed in the program notice.  Among other things, the FOA requires that the applicants be small businesses that are U.S. based or have majority U.S. citizen or permanent resident ownership, and that operate primarily in the U.S.  In addition, as is customary, the program notice states that “[p]roducts embodying intellectual property developed under the assistance must be substantially manufactured in the U.S.”

Letters of intent are not required but strongly encouraged, and are due by March 9, 2017.  The requests for assistance themselves can be submitted between March 13 and April 10, 2017, and awards should be announced around mid-May.  At a recent advanced reactor conference held at Argonne National Laboratories, and at the Platts Nuclear Energy conference in Washington, DC, the DOE made specific mention of this opportunity and emphasized its interest in making DOE facilities available to advanced reactor startups through the GAIN initiative.

If there are any questions on this funding opportunity or on the GAIN initiative generally, please reach out to the authors.

The U.S. Department of Energy (“DOE”) has published today on FederalRegister.Gov a request for information regarding private initiatives to create consolidated interim storage sites for the nation’s spent nuclear fuel and other high-level waste (“private storage”).  The request for information itself can be found here on the DOE website, as well as through FederalRegister.Gov here.  Responses can be submitted on FederalRegister.Gov, and are due January 27, 2017.

The request for information recognizes that while DOE is planning an integrated solution to dispose of spent nuclear fuel from the nation’s nuclear power plants, private initiatives to store this spent fuel in single, consolidations locations before a final disposal solution can be developed presents a new and potentially attractive opportunity.  Currently the spent nuclear fuel produced by nuclear power plants sits on site at plants across the country, incurring maintenance costs and preventing those sites from being returned to greenfield after operation ceases.

The DOE request sets forth a number of questions it is seeking input on.  In particular, the DOE is asking:

  • What factors should be considered as to whether private storage can provide a “workable solution” to our nation’s spent fuel storage needs?
  • How can private storage benefit local communities?  Why are they better than government-owned sites?
  • What type of involvement should the federal government have with the private storage community?
  • What state, local, and tribal approvals and supporting agreements would be required?
  • How can the government help implement private storage options in a fair and transparent manner?

While recognizing the need for a final repository or reprocessing solution for the nation’s spent nuclear fuel, consolidated private storage sites, such as that proposed by Waste Control Specialists in Texas, present a way to safely bring together the spent fuel created across the country to one location.  This will lower costs on the public, increase safety, and allow nuclear power operators to return their sites to greenfield after decommissioning.

If there are any questions on the DOE request for information, or on nuclear technology matters in general, please contact the authors.

The NRC staff recently made public plans to move ahead with early preparations for an Environmental Impact Statement for Waste Control Specialists’ interim storage facility for spent nuclear fuel.  The staff took the position that starting this review early would benefit the purposes of the National Environmental Policy Act by providing additional time for analysis and stakeholder involvement.  Although not explicitly noted, this move likely reflects the importance of and strong public interest in the facility, given that Waste Control Specialists’ application for the interim storage facility has not yet completed its “acceptance review,” a process which usually precedes any significant environmental review efforts by the agency.

For more on interim storage of nuclear fuel, nuclear decommissioning, or nuclear power in general, please contact the authors.