Changes in the Regulation of Foreign Ownership of Nuclear Plants

Changes in the Regulation of Foreign Ownership of Nuclear Plants

By: Sydney Barron, Associate

The Nuclear Regulatory Commission (NRC) requested comments on their interpretation of foreign ownership, control, or domination given increasing globalization of energy corporations.[1] There is disagreement, however, about what changes the NRC can and should make.[2]

Section 103(d) of the Atomic Energy Act (AEA) states that “[n]o license may be issued to an alien or any corporation or other entity if the Commission knows or has reason to believe it is owned, controlled, or dominated by an alien, a foreign corporation, or a foreign government.”[3] Based on this Cold-war era law, the NRC promulgated regulations stating: “any person who is a citizen, national, or agent of a foreign country, or any corporation, or other entity which the Commission knows or has reason to believe is owned, controlled, or dominated by an alien, a foreign corporation, or a foreign government, shall be ineligible to apply for and obtain a license.”[4] Therefore, a license is required to hold even a small minority interest in a nuclear power plant, and the NRC denies such a license unless it finds an absence or sufficient negation of foreign ownership, control, or domination.[5]

The NRC established the Final Standard Review Plan on Foreign Ownership, Control, or Domination (SRP) to supplement the regulations and provide guidance for the approval of license applications.[6]  The SRP does not state a maximum percentage of foreign ownership, but the NRC denies a license “whenever a foreign interest has the ‘power,’ direct or indirect, whether or not exercised, to direct or decide matters affecting the management or operations of the applicant.”[7]  The SRP does allow applicants to present a “Negation Action Plan,” which describes positive measures taken by the applicant to ensure the foreign interest can be effectively denied control.[8]

In 2012, the NRC denied a license to UniStar Nuclear Operating Systems to construct and operate a third power reactor for the Calvert Cliffs Nuclear Project because UniStar is wholly owned by a French corporation.[9] As a direct result of the Calvert Cliffs denial, and noting that the recent increase in denials is “likely due to the increased globalization of economic activity and associated added complexity of the corporate arrangements,” The NRC requested public comment on its interpretation of the AEA and restrictions on foreign ownership.[10]  The notice requested comments on “[1] the limitation on [foreign ownership, control, or domination] as contained in Section 103[(d)] of the AEA and the potential to satisfy statutory objectives through an integrated review of foreign ownership, control, or domination issues involving up to and including 100 percent indirect foreign ownership; [2] criteria for assessing proposed plans or actions to negate direct or indirect foreign ownership or foreign financing of more than 50 percent but less than 100 percent, and the adequacy of guidance on these criteria; [3] the availability of alternative methods such as license conditions for resolving . . . foreign ownership, control, or domination; and [4] the agency’s interpretation of the statutory meaning of ‘‘ownership,’’ and how that definition applies in various contexts. . . .”[11]

Experts at the Nuclear Energy Institute (NEI) believe the NRC’s interpretation of the AEA is overly restrictive.[12]  NEI recommended that the home country of the foreign entity be “heavily weighted” in the NRC’s decision to grant or deny a license.[13]  With respect to the negation action plans, the NEI suggested that the NRC consider “whether the foreign entity is a direct or indirect owner and whether the nation is a member of the Nuclear Suppliers Group or on the NRC’s list of embargoed or restricted countries.”[14]  Additionally, NEI proposed that the NRC clarify its guidance to ensure that foreign debt financing would not result in the denial of a license, so long as the foreign entity had no control rights and was not a “country of concern.”[15]

The Nuclear Information and Resource Service (NIRS) cautioned restraint in its comments. It emphasizes that, as a regulatory agency, the NRC does not have the authority to change or undermine the law stated in the AEA, and that “100% foreign ownership of a nuclear reactor is always illegal.”[16]  As such, NIRS contends that the request for comments “‘involving up to and including 100 percent indirect foreign ownership’ is wholly inappropriate.”[17]  NIRS suggests that rather than allowing greater indirect ownership, the NRC should be focusing on ways to discover “hidden” foreign ownership as corporate structures become more complex.[18]  NIRS also contests NEI’s claim that country of ownership should be a consideration in NRC licensing determinations by reminding the NRC that the AEA does “not distinguish between friend or foe,” and that any consideration of the country of ownership by the NRC would be a direct contradiction of law.[19]  While the NRC may make requested regulatory and guidance changes, these changes will need to be reasonable interpretations of the AEA.[20]

[1] Staff Requirements—SECY–12–0168— Calvert Cliffs 3 Nuclear Project, LLC & UniStar Nuclear Operating Services, LLC (Calvert Cliffs Nuclear Power Plant, Unit 3), Petition for Review of LBP–12–19, 78 Fed. Reg. 33,121 (June 3, 2013).
[2] Nuclear Energy Inst., Industry Backs Graded Approach on Foreign Ownership, Nuclear Energy Inst. (Aug. 8, 2013); Nuclear Info. & Res. Serv., Comments on Docket ID NRC-2013-0107 on Foreign Ownership, Control or Domination of Commercial Nuclear Power Reactors (2013).
[3] Atomic Energy Act of 1954, as amended, 42 U.S.C. § 2133(d) (2006).
[4] 10 C.F.R. 50.38 (2013).
[5] James A. Glasgow & Stephen L. Markus, The NRC’s Foreign Ownership Policy: Charting a New Course for the 21st Century 2 (July 12, 2013).
[6] Final Standard Review Plan on Foreign Ownership, Control, or Domination, 64 Fed. Reg. 52,355 (Sept. 28, 1999).
[7] 64 Fed. Reg. 52,355.
[8] Id.
[9] Calvert Cliffs 3 Nuclear Project, CLI-13-04, 77 N.R.C. __ (Mar. 11, 2013).
[10] 78 Fed. Reg. 33,121.
[11] Id.
[12] Nuclear Energy Inst., supra note 2.
[13] Id.
[14] Id.
[15] Id.
[16] Nuclear Info. & Res. Serv., supra note 2.
[17] Id.
[18] Id.
[19] Id.
[20] See generally Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).

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