Licensing demonstration reactors in the United States

During the joint DOE-NRC workshop on advanced non-light water reactors held last week (Sep 1-2, 2015), John Adams of the Nuclear Regulatory Commission (NRC) Office of Nuclear Reactor Regulation gave a presentation on reactor license classification terminology.

It made me squirm in my chair with the desire to interrupt. Probably because he has read and studied the regulations he is tasked to enforce with a different lens than the one I have used in my 25 year long quest to figure out how to license non-LWR reactors, he had overlooked a key provision that marks a perfectly valid, but not recently used licensing path.

Aside: I have a confession and an apology; I didn’t actually wait until Mr. Adams was finished, but I sheepishly put my hand down after being given a “look” by the man introduced to us as the master of ceremonies slash sergeant of arms. I apologize to Mr. Adams for disrupting his presentation. End Aside.

Once he finished his presentation, I stepped up to the microphone to ask Mr. Adams why he had stated that demonstration reactors were not allowed to be able to generate any electricity. I pointed out that was not what the regulations stated for a class 104(c) license.

Mr. Adams took my question for a “look-up,” and returned at the end of the workshop to report an interim answer. Based on a read from the General Counsel’s office, he agreed that the provision I cited existed and might be able to be used for reactors that have inconsequential commercial uses. He said there was more research needed to fully flesh out and understand the implications of the language.

It might help the process if I share more of the detailed thought process and research underlying my question.

Since this is a fairly complex explanation that could cause a MEGO (my eyes glaze over) response among important readers, I’m going to attempt to liven it up using some metaphors and analogy to a treasure hunt with mysterious, obscured clues and a faded, but carefully protected map. Forgive me, I’m a technically trained guy with a not-yet-realized dream of becoming a best selling author of exciting novels.

Finding an obscured path for R&D reactor licenses

The marker for the trail to the useful and valuable treasure of NRC permission to build and operate a reactor that can fully test a complete system designed to sell to commercial customers is easy to miss, especially if you are not looking carefully, knowing it must be there somewhere.

I found the marker and followed a short part of the trail a few years ago when working for B&W mPower, Inc. I was in the envious position of leading the effort to develop formal procedures needed to document our design effort and quality assurance steps. Success in that assignment required me to refine my ability to read and understand the “nuclear regulatory” language. Because of some common roots, there were similarities between the new language and one I had learned reasonably well during a 33 year long career in the US Navy and Naval Reserves.

As is often the case in developing language fluency, my understanding of “nuclear regulatory” was enhanced by studying the history and culture that have influenced the unfamiliar words and phrases found in the voluminous documents, regulations, letters, legislation and associated literature that nuclear regulators and legislative overseers have published during the 70 years since the passage of the Atomic Energy Act of 1946 and the even more important 60 years since the passage of the Atomic Energy Act of 1954.

My history and culture studies told me that the creators of The Act recognized that atomic energy was a new and powerful technology with almost boundless potential for both benefits and harm. They wanted to establish a system that would ensure adequate safety while not stopping the exciting and challenging work of continuously improving the ways we use this incredible source of power.

With wide ranging understanding of technological development and the need for aggressive learning and testing, the drafters of The Act of 1954 established provisions designed to encourage research and development. They were inspired by President Eisenhower’s “Atoms for Peace” speech. It was the basis for the massive changes between the 1946 version and the new Act. The following inspirational vision apparently led to various provisions related to the development of innovative technology.

Who can doubt, if the entire body of the world’s scientists and engineers had adequate amounts of fissionable material with which to test and develop their ideas, that this capability would rapidly be transformed into universal, efficient, and economic usage?

Unfortunately, some of the enabling paths they created have become overgrown or purposefully obscured over time. Faded blazes marking some under used trails, however, have not been completely removed. The one I discovered a few years ago might turn out to be especially valuable.

Since I did not take any of the documents I wrote with me when I departed from B&W — they were not mine to take — I’ve recreated the research work I did on this particular issue. (My 2011 vintage paper was virtually ignored by the project leaders. They decided there was too much effort and risk associated with trying to clear a path that had not been used in more than 40 years.)

The nearly forgotten trailhead marker is in 10 CFR 50.21 Class 104 licenses; for medical therapy and research and development facilities. It states:

A class 104 license will be issued, to an applicant who qualifies, for any one or more of the following: to transfer or receive in interstate commerce, manufacture, produce, transfer, acquire, possess, or use.

(c) A production or utilization facility, which is useful in the conduct of research and development activities of the types specified in section 31 of the Act, and which is not a facility of the type specified in paragraph (b) of this section or in § 50.22.

Of course, that clue doesn’t mean much without contextual knowledge, new research and the determination to tease out the meaning.

When I found the provision, I had recently finished one of my treks through the Atomic Energy Act of 1954 with some special focus on section 104. That section contains encouraging and supportive language for innovative developers. The part of section 104 that excited me was the following:

c. The Commission is authorized to issue licenses to persons applying therefor for utilization and production facilities useful in the conduct of research and development activities of the types specified in section 31 and which are not facilities of the type specified in subsection 104 b. The Commission is directed to impose only such minimum amount of regulation of the licensee as the Commission finds will permit the Commission to fulfill its obligations under this Act to promote the common defense and security and to protect the health and safety of the public and will permit the conduct of widespread and diverse research and development.
(Emphasis added.)

One of the challenges of understanding “nuclear regulatory” is that there are many concepts and phrases that are defined more by what they are NOT than by what they ARE. In this case, a research and development facility licensed under section 104(c) can be any facility that helps in the research and development activities described in Section 31 (we’ll come back to that criteria soon) but is NOT a facility of the type described in section 104(b) and is NOT a facility described in § 50.22.

Section 104(b) abuses and controversy

Many currently operating nuclear power plants were initially licensed as research and development facilities under section 104(b). At the time many of those licenses were issued, there was only one operating nuclear power plant in the US, the Shippingport reactor built under the supervision of the Naval Reactors branch of the AEC.

The organizations developing the designs and building the Section 104(b) plants were planning to use them to produce commercial quantities of electricity if they worked as planned. They were not, however, sure that they would work reliably or last as long as expected because no complete systems had been built and operated for an extended period of time.

There were an number of advantages granted licensees who chose to build and operate under Section 104(b). The projects were not subjected to anti-trust review, the operators could lease fuel under favorable terms (sometimes with no cost at all), the Atomic Energy Commission (AEC) would guarantee payment at a favorable rate for the fissile plutonium produced during operation, and the projects could qualify for certain kinds of advantageous relationships with AEC laboratories.

Not surprisingly, class 104(b) licenses were both popular with applicants — to the point of abuse — and unpopular with competitors. Those competitors, logically enough, opposed the policy of the government using their tax dollars to subsidize the commercial construction of additional sources of power that would reduce sales of their products.

There is an excellent discussion of the political struggles over class 104(b) licenses and the associated AEC encouragements in pages 202-212 of Balogh’s Chain Reaction: Expert debate & public participation in American commercial nuclear power. 1945-1975. That section of the book describes the incentives and the nature of the bandwagon market that resulted in dozens of firm orders for power plants between 1963-1968 that were, paradoxically, described by the AEC as not yet having demonstrated “practical value.” It also describes the concerted effort by politicians and lobbyists to question the AEC’s refusal to recognize that the systems must have “practical value” if companies were ordering them and investing hundreds of millions to billions of dollars into their construction.

The root of the issue was a provision in Section 102 that told the AEC that it could no longer subsidize and protect developers from outside scrutiny of anti-trust rules once the Commission had issued a document determining that specific types of nuclear power plants were sufficiently developed to be of “practical value.” Here is a sample quote:

Quick to market commercial nuclear power as economically competitive, the Atomic Energy Commission was in no hurry to rule on its “practical value.”

One unintended consequence of the AEC’s successful marketing strategy, however, was to increase pressure on the AEC to rule that reactors did have practical value. Why else, asked the coal boys, were utilities spending hundreds of millions of dollars to construct them? Thus, when head coal boy Stephen Dunn, president of the National Coal Association, wrote to Glenn Seaborg in December 1963 and insisted that the AEC perform its statutory duty by issuing a written finding as to whether commercial power had “practical value,” much of Dunn’s evidence rested on statements made by the AEC and the Joint Committee on Atomic Energy. Testifying at JCAE authorization hearings several months later, Joseph Moody, president of the National Coal Policy Conference, presented a powerful case, again built upon AEC and JCAE statements, of the competitive nature of nuclear power. To this rhetorical evidence, he added some impressive behavioral data. The utilities were investing heavily in nuclear power. Several, Moody pointed out, had publicly stated that their reactors, when completed, would compete favorably with conventional fossil fuel-burning plants. “The current sense of ‘urgency’ in expanding the commercial atomic industry,” Moody told the JCAE, “represents a new, and inexplicable, phase in the various justifications that have been used for the government’s program.”

Moody demanded an immediate halt to the subsidies.

As the National Coal Association’s general counsel, Brice O’Brien, put it, “Thermal reactors have reached the point where they should be placed in the mainstream of commerce to stand on their own feet without the artificial stimulation and artificial distortion of taxpayer-financed subsidies.”

In December 1970, legislation was passed that eliminated section 104(b) as a licensing option for any new reactor projects. Plants that had already been issued class 104(b) licenses could continue using those licenses, but their ability to lease fuel from the AEC was halted as of 1973. My guess is that delay was inserted to account for leased fuel that was already being used in operating reactor cores.

Not a facility described in § 50.22

The same legislation that eliminated class 104(b) licenses and references to a Commission finding of “practical value” established specific limitations on class 104(c) licenses. Those limitations were written into 10 CFR § 50.22 as follows:

Provided, however, That in the case of a production or utilization facility which is useful in the conduct of research and development activities of the types specified in section 31 of the Act, such facility is deemed to be for industrial or commercial purposes if the facility is to be used so that more than 50 percent of the annual cost of owning and operating the facility is devoted to the production of materials, products, or energy for sale or commercial distribution, or to the sale of services, other than research and development or education or training.
(Emphasis in original.)

That paragraph calls for a translation by someone fluent in the “nuclear regulatory” language. It says that a research and development facility can produce and sell materials, products, or energy (a term that includes electricity) and can sell services that reactors can provide — such as providing neutrons for testing materials and fuels — as long as the total revenues from these sales do not exceed 50% of the total ownership and operating costs of the facility. Those costs include financing, reserves set aside for decommissioning, land acquisition, construction, equipment, and maintenance.

This provision is important, because some of the testing that can be used to prove safety, performance and durability for a demonstration of an innovative reactor design will require the facility to operate at high power levels for sustained periods of time. Though building and operating a demonstration plant to fully test the nuclear, mechanical and electrical engineering design and the safety provisions is an expensive proposition, the activity creates useful byproducts like electricity or heat.

The drafters of the 1970 legislation recognized that it would be patently unfair, not to mention wasteful, to force plant owners and operators to throw away their products instead of trying to find a market for them. Selling inevitable byproducts could help defray some of the unavoidable expenses of developing and fully testing a product intended for sale to third parties. By inserting the 50% revenue generation provision, legislation drafters struck a balance that would prevent the kinds of section 104(b) abuses seen throughout the 1960s. There are legitimate reasons to prevent facilities that are not really innovative and are intended to be used solely for commercial production from being labeled as R&D facilities in order to qualify for special subsidies and anti-trust exemptions.

For plants that are roughly analogous to the Navy’s prototype facilities, owners and operators might be able to operate them at close to a break even situation because they don’t have to count revenues associated with education and training as part of the 50% limitation. With a well-thought out business strategy that mimics portions of the highly successful Naval Reactors training program, a developer can use a prototype to fully test designs and improvements before selling them to customers, to generate and sell power and/or heat, provide irradiation services, produce isotopes and other materials, train operators, and even participate as a resource for university education programs.

Section 31 of The Act

The final step in recognizing that Section 104(c) marks a valid and potentially useful path to the goal of an operating facility licensed by the NRC for research, development and complete design testing required a careful reading and rereading of Section 31 of the Atomic Energy Act. Section 31 is referenced in both 10 CFR 50.21 and 10 CFR 50.22 and in Section 104 of the Act. The most pertinent provision of Section 31 is quoted below:

a. The Commission is directed to exercise its powers in such manner as to insure the continued conduct of research and development and training activities in the fields specified below, by private or public institutions or persons, and to assist in the acquisition of an ever-expanding fund of theoretical and practical knowledge in such fields. To this end the Commission is authorized and directed to make arrangements (including contracts, agreements, and loans) for the conduct of research and development activities relating to—
(1) nuclear processes;
(2) the theory and production of atomic energy, including processes, materials, and devices related to such production;
(3) utilization of special nuclear material and radioactive material for medical, biological, agricultural, health, or military purposes;
(4) utilization of special nuclear material, atomic energy, and radioactive material and processes entailed in the utilization or production of atomic energy or such material for all other purposes, including industrial or commercial uses, the generation of usable energy, and the demonstration of advances in the commercial or industrial application of atomic energy; and
(5) the protection of health and the promotion of safety during research and production activities.
(Emphasis added.)

There is no doubt that developing and testing non-LWR reactors and associated power plants fits into the above categories of research and development. Though an unfamiliar concept to many nuclear plant developers, most commercial product developers recognize the vital importance of building complete prototypes that can fully test all components of a design in an integrated fashion before selling the product to customers. That is especially true if the target market is not experienced in operating similar products or if the product is so new and innovative that no one is experienced in operating it.

Need for a Class 104(c) process

Finding the trailhead marker that allows the NRC to issue licenses under class 104(c) and directs the commission to “impose only such minimum amount of regulation of the licensee” as necessary to ensure adequate protection of public health and safety is only the first step in a grueling effort to clear a path that can be traversed successfully to reach the goal of a licensed, built and operating facility. The NRC needs resources and direction to establish the processes and requirements. It will take more time than some would prefer, but the task does not get any shorter or easier by indefinitely putting off the start.

It is important to understand that building complete, fully integrated demonstration or prototype plants should be a part of the strategy for any truly innovative design effort.

The complete design provides the opportunity to develop and test operating procedures by people who have the responsibility and experience of hands on operation. It provides maintenance personnel the experience of fixing equipment, predicting failure modes, and working with designers to refine access strategies and identify weaknesses that can be addressed. It gives customers confidence similar to that provided to people who walk through model homes, watch test pilots fly near-commercial aircraft, or test drive automobiles.

This concept may seem foreign to nuclear plant developers and regulators because nukes have been seeking economies of scale for so long that they have forgotten that it’s possible to build and approve equipment that is small and simple enough to build, operate and test all the way to the breaking point if necessary.

Not only is it possible, but when developing and introducing innovative solutions, it’s almost a required step to enable successful commercialization.

Update: (Posted September 8, 2015 1:45 pm EDT) After rereading the above, I recognized the need to make it clear that creating a licensing path for research and development reactors under section 104(c) is absolutely within the NRC’s area of responsibility. It has nothing to do with promoting or marketing nuclear energy or pushing products into the market. It has everything to do with enabling the development and adequate product testing for innovative, valuable, emission-free atomic energy and radioactive material products that can contribute to the common defense and security of the nation, protect public health and safety, and protect the environment.

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