Standby Support for Certain Nuclear Plant Delays, 28200-28225 [06-4398]

Agencies

• DEPARTMENT OF ENERGY

[Federal Register Volume 71, Number 93 (Monday, May 15, 2006)]
[Rules and Regulations]
[Pages 28200-28225]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-4398]



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Part V





Department of Energy





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10 CFR Part 950



Standby Support for Certain Nuclear Plant Delays; Interim Rule

Federal Register / Vol. 71, No. 93 / Monday, May 15, 2006 / Rules and 
Regulations

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DEPARTMENT OF ENERGY

10 CFR Part 950

RIN 1901-AB17


Standby Support for Certain Nuclear Plant Delays

AGENCY: Department of Energy.

ACTION: Interim final rule and request for comment.

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SUMMARY: The Department of Energy (Department) is promulgating interim 
final regulations to implement section 638 of the Energy Policy Act of 
2005, which authorizes the Secretary of Energy to enter into Standby 
Support Contracts with sponsors of advanced nuclear power facilities to 
provide risk insurance for certain delays attributed to the regulatory 
process or litigation.

DATES: Effective Date: This interim final rule is effective June 14, 
2006, except for Sec. Sec.  950.10(b), 950.12(a) and 950.23 which 
contain information collection requirements that have not been approved 
by the Office of Management and Budget (OMB). The Department of Energy 
will publish a document in the Federal Register announcing the 
effective date of those sections.
    Comment Date: Written comments must be received by June 14, 2006. 
Comments may be mailed to the address given in the ADDRESSES section 
below. Comments also may be submitted electronically by e-mailing them 
to: StandbySupport@Nuclear.Energy.gov. We note that e-mail submissions 
will avoid delay currently associated with security screening of U.S. 
Postal Service mail.

ADDRESSES: You may submit written comments, identified by RIN Number 
1901-AB17, by any of the following methods:
    1. E-mail to StandbySupport@Nuclear.Energy.gov. Include RIN 1901-
AB17 and ``Interim Final Rule Comments'' in the subject line of the e-
mail. Please include the full body of your comments in the text of the 
message or an attachment.
    2. Federal eRulemaking Portal: https://www.regulations.gov. Follow 
the instructions for submitting comments.
    3. Mail: Address the comments to Kenneth Chuck Wade, Office of 
Nuclear Energy, (NE-30) U.S. Department of Energy, Forrestal Building, 
1000 Independence Avenue, SW, Washington, DC 20585. The Department 
requires, in hard copy, a signed original and three copies of all 
comments. Due to potential delays in the Department's receipt and 
processing of mail sent through the U.S. Postal Service, we encourage 
commenters to submit comments electronically to ensure timely receipt.

FOR FURTHER INFORMATION CONTACT: Kenneth Chuck Wade, Project Manager, 
Office of Nuclear Energy, NE-30, U.S. Department of Energy, 1000 
Independence Avenue, SW., Washington, DC 20585. (301) 903-6509 or 
Marvin Shaw, Attorney-Advisor, U.S. Department of Energy, Office of the 
General Counsel, GC-52, 1000 Independence Avenue, SW., Washington, DC 
20585. (202) 586-2906.

SUPPLEMENTARY INFORMATION:

I. Section 638 of the Energy Policy Act of 2005
II. Rulemaking History
III. Interim Final Rule
    A. Overview of the Rule
    B. Section-By-Section Analysis
IV. Regulatory Review Requirements
    A. Review Under Executive Order 12866
    B. Review Under Executive Order 12988
    C. Review Under Executive Order 13132
    D. Review Under Executive Order 13175
    E. Review Under the Regulatory Flexibility Act
    F. Review Under the Paperwork Reduction Act
    G. Review Under the National Environmental Policy Act
    H. Review Under the Unfunded Mandates Reform Act
    I. Review Under Executive Order 13211
    J. Review Under the Treasury and General Government 
Appropriations Act 1999
    K. Review Under the Treasury and General Government 
Appropriations Act 2001
    L. Congressional Notification
V. Approval of the Office of Secretary

I. Section 638 of the Energy Policy Act of 2005

    On August 8, 2005, President Bush signed into law the Energy Policy 
Act of 2005 (the Act) (Pub. L. 109-58, 119 Stat. 594). Section 638 of 
the Act addresses the President's proposal to reduce uncertainty in the 
licensing of advanced nuclear facilities. (42 U.S.C. 16014). The 
purpose of section 638 is to facilitate the construction and full power 
operation of new advanced nuclear facilities by providing risk 
insurance for such projects. Such insurance is intended to reduce 
financial disincentives and uncertainties for sponsors that are beyond 
their control in order to encourage investment in the construction of 
new advanced nuclear facilities. By providing insurance to cover 
certain of these risks, the Federal government can reduce the financial 
risk to project sponsors that invest in advanced nuclear facilities 
that the Administration and Congress believe are necessary to promote a 
more diverse and secure supply of energy for the Nation.
    Section 638 contains a number of provisions to establish the 
Standby Support Program (the ``Program''). These provisions are related 
to (1) the Secretary's authority to enter into contracts and details 
related to such contracts, (2) the establishment of funding accounts, 
(3) the funding of these accounts, (4) the types of regulatory and 
litigation delays Congress determined were to be covered by the 
Program, (6) the types of delays that Congress determined were to be 
excluded from coverage, (7) the amount of coverage for up to six 
advanced nuclear facilities with a distinction made for the initial two 
reactors and the subsequent four reactors, (8) the types of costs to be 
covered by the Program, and (9) reporting requirements by the Nuclear 
Regulatory Commission (``Commission'').
    Section 638(g) provides for regulations necessary to carry out 
section 638. This section directs the Secretary to issue an interim 
final rule within 270 days after enactment of the Act and to adopt 
final regulations within one year after enactment.

II. Rulemaking History

    Prior to developing and issuing this interim final rule, the 
Department issued a Notice of Inquiry (NOI) and request for comments to 
provide an opportunity for public input. (70 FR 71107, November 25, 
2005) The NOI discussed the major topics related to section 638, 
including the types of sponsors and facilities covered, the Secretary's 
contracting authority, appropriations and funding accounts, covered and 
excluded delays, covered costs and requirements, and disagreements and 
dispute resolution. For some topics, this NOI indicated implementation 
approaches and interpretations under consideration by the Department. 
The NOI included a general request for comments and identified certain 
topics on which the Department specifically requested comments. Among 
other matters, the Department sought comment about how the statute 
could be implemented most effectively to achieve the objective of 
reducing the risks associated with certain delays in the advanced 
nuclear facility licensing process and thereby facilitating the 
expeditious construction and operation of new advanced nuclear 
facilities.
    On December 15, 2005, the Department sponsored a public workshop to 
allow the public to provide oral comments about section 638 and the 
NOI. Over 60 people attended the public workshop. A transcript of the

[[Page 28201]]

proceedings is posted at www.nuclear.gov.
    The Department received nine written comments on the NOI, including 
comments from the Commission, a nuclear energy trade association, 
several utilities and other potential sponsors, an economic consulting 
firm, and a public advocacy group. In addition to responding to the 
questions posed in the NOI, the commenters provided their general views 
on implementing section 638.

III. Interim Final Rule

A. Overview of the Rule

    The interim final rule establishes a new part 950 in Title 10 of 
the Code of Federal Regulations (CFR). The rule sets forth the 
procedures, requirements and limitations for the award and 
administration of Standby Support Contracts indemnifying a project 
sponsor for certain costs that may be incurred due to a delay in full 
power operation of the sponsor's advanced nuclear facility.
    Subpart A sets forth the purpose, scope and applicability, and 
definitions of the regulation.
    Subpart B sets forth provisions addressing the Standby Support 
Contract process, including the process whereby a sponsor and the 
Program Administrator would enter into a Conditional Agreement prior to 
a Standby Support Contract, obligations of a sponsor prior to entering 
into a Conditional Agreement, the provisions of that Conditional 
Agreement, conditions precedent that a sponsor must satisfy prior to 
entering into a Standby Support Contract, funding issues related to the 
Standby Support Program, reconciliation of costs, and termination of a 
Conditional Agreement. Subpart B also addresses the provisions for each 
Standby Support Contract. These include general contracts terms, 
including the contract's purpose, the advanced nuclear facility that is 
the subject of the contract, the sponsor's contribution, the maximum 
aggregate compensation, the term of the contract, cancellation 
provisions, termination by sponsor, assignment, claims administration, 
and dispute resolution; and specific contract terms that implement 
section 638's provisions related to covered events, exclusions, covered 
delay, and covered costs.
    Subpart C sets forth the claims administration process, including 
the submission of claims and payment of covered costs under a Standby 
Support Contract. This subpart includes sections addressing 
notification by a sponsor of a covered event, covered event 
determinations made by the Department's Claims Administrator, 
certification of covered costs by the sponsor, determination of covered 
costs by the Claims Administrator, issuance of a Claim Determination of 
a covered delay and covered costs by the Claims Administrator, 
conditions for payment of covered costs, and adjustments for and 
payment of covered costs.
    Subpart D sets forth provisions related to dispute resolution, 
including disputes involving covered events and disputes involving 
covered costs. In each case, subpart D provides a two-step process, 
first requiring non-binding mediation and then binding arbitration, if 
the parties cannot reach agreement.
    Subpart E sets forth miscellaneous provisions about the 
Department's authority to monitor and audit a sponsor's activities and 
the public disclosure of information provided by a sponsor to the 
Department.

B. Section-by-Section Analysis

Subpart A--General Provisions

Section 950.1 Purpose
    The Department is adopting this interim final rule to provide risk 
insurance to facilitate the construction and full power operation of 
new advanced nuclear facilities. Section 638 provided for such 
insurance to reduce the financial disincentives that make sponsors 
reluctant to invest in construction of new advanced nuclear facilities, 
including the risk that a facility may be constructed but may not 
achieve full power operation in a timely manner.
    In response to the NOI, commenters stated that there are additional 
factors that the Department should consider in implementing the 
statute. These include having well-defined regulations that are 
sufficiently definite and realistic, protecting taxpayer funds from 
being unreasonably allocated to the nuclear industry, and ensuring that 
the regulations do not undermine the government's traditional role of 
ensuring the safe design and operation of nuclear facilities.
    The Department agrees with these general comments. Accordingly, the 
Department has implemented section 638 in a transparent manner that is 
sufficiently detailed, workable, and fair. This regulatory framework 
will provide sponsors risk insurance for certain regulatory and 
litigation delays, while protecting taxpayer funds by having sponsors 
contribute a portion of the premium for this insurance. Further, the 
Department intends that this insurance reflects the magnitude of the 
risk and the extent of the protection provided. The Department also is 
mindful that in facilitating the construction and full power operation 
of advanced nuclear facilities, its efforts should not undermine the 
responsibility of government agencies to address safety concerns during 
the permitting and licensing processes for such new facilities.
    In the NOI, the Department requested comment on whether a sponsor 
should be eligible to participate in the Standby Support Program as 
well as any loan guarantee program for which the sponsor may be 
eligible pursuant to Title XVII of the Act, or the production tax 
credits for advanced nuclear facilities in section 1306 of the Act. 
(Subsequent to the NOI, the Department has become aware of other 
Federal programs such as the Rural Utility Service that may provide 
subsidies to a sponsor. Accordingly, any consideration of multiple 
subsidies would include such additional programs). The Department 
requests comment on whether sponsors should be eligible to participate 
in multiple loan guarantee or other subsidy programs and, if so, on 
whether clarification is needed on issues such as the amounts an entity 
can receive under more than one Federal program.

Section 950.3 Definitions

    Certain definitions set forth in the Act are included in the 
interim final rule verbatim from the Act, and are repeated in the rule 
for ease of reference. In several areas, the interim final rule 
clarifies or further defines terms in the statutory definitions. In 
addition, the interim final rule defines certain terms that are either 
referenced in section 638 but not defined or are in addition to terms 
in the statute. The following provides an explanation of certain key 
definitions that may benefit from additional description and 
clarification here. Other terms are discussed in the section discussing 
subpart B.
    Advanced nuclear facility. Several commenters suggested that 
further clarification of the definition of advanced nuclear facility is 
warranted because it relates to the issue of project eligibility. 
Commenters also specifically requested further clarification of the 
phrase ``substantially similar'' in the statutory definition of the 
term advanced nuclear facility. One commenter suggested that the 
definition include the concept that no reactor design that is certified 
by the Commission after December 31, 1993 should be considered 
``substantially similar'' to a design certified by the Commission prior 
to that date, and that the rule should not include a ``no later

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than'' date for design certification, thereby providing sponsors the 
ability to proceed with design certification and combined licensing on 
a parallel process.
    The definition of advanced nuclear facility in the interim final 
rule is taken verbatim from the Act. After reviewing current reactor 
designs, the Department concludes that there are likely no reactor 
designs that have been approved after December 31, 1993 that are 
``substantially similar'' to designs that were certified before that 
date for which potential project sponsors have suggested interest. The 
Westinghouse System 80-plus design is the only reactor design which is 
somewhat similar to a pre-1993 design, called the System 80. However, 
there are enough differences between the two designs to indicate that 
they should not be considered substantially similar. Based on the 
Department's review, any reactor design that obtains design 
certification by the Commission after December 31, 1993 likely will not 
be considered substantially similar. In particular, appendices to 10 
CFR part 52 (Appendix A, ``Design Certification Rule for the U.S. 
Advanced Boiling Water Reactor, Appendix B, ``Design Certification Rule 
for the System 80+ Design,'' and Appendix C, ``Design Certification 
Rule for the AP600 Design'') specify reactor designs that have received 
certification by the Commission. Nevertheless, the Department reserves 
the right to make a final determination if a project sponsor chooses a 
design that the Department has not anticipated. This interpretation 
meets the statute's intent to promote advanced nuclear reactor designs 
by eliminating from eligibility a nuclear reactor design whose major 
elements had been reviewed and approved by the Commission prior to 
December 31, 1993.
    In recognition of the fact that some sponsors may pursue design 
certification in tandem with the combined license process, the 
Department has decided not to impose a ``no later than'' date for 
Commission design, review, and approval. However, at the time a sponsor 
has satisfied the other conditions precedent to enter into a Standby 
Support Contract with the Department, including obtaining a combined 
license and commences construction, a determination would then be made 
as to whether the sponsor's reactor design was approved after December 
31, 1993 and is not ``substantially similar'' to a reactor design of 
comparable capacity that was approved on or before that date.
    Commencement of construction. Several commenters also requested 
that the Department define the phrase ``commencement of construction'' 
in the regulations, and suggested an appropriate definition would 
include the pouring of safety-related concrete. It was noted that this 
action by a sponsor was an accurate and clear indicator of a ``real'' 
project, with a high likelihood of achieving commercial operation, 
thereby satisfying the Act's statutory intent. Clarity on this topic is 
particularly important since a sponsor is eligible for a Standby 
Support Contract only if, in addition to receiving a combined license, 
the sponsor has commenced construction. Commencement of construction is 
defined to mean the point in time when a sponsor initiates the pouring 
of safety-related concrete for the reactor building. This definition 
represents a clear and unambiguous event, and an event that denotes a 
firm commitment to nuclear plant construction in accord with the 
purposes of the Act.
    Combined license. One commenter suggests that the term ``combined 
license'' not be altered since it was established by the Commission and 
should therefore be identical to that in 10 CFR part 52. The definition 
of combined license in the interim final rule is taken verbatim from 
section 638 of the Act. The Department notes that the definition of 
combined license is somewhat different in the Commission's licensing 
regulations, 10 CFR part 52, although the Department believes that this 
difference is not significant. Nevertheless, to clarify, the Department 
interprets the definition of ``combined license'' in the Act and part 
950 as having the same meaning as that term is given in the Commission 
regulations at 10 CFR 52.3.
    Sponsor. The Department sought comment in the NOI on the definition 
of sponsor. Many commenters agreed a definition was necessary because 
it addresses the question of contract eligibility. In particular, 
commenters requested further clarification of the phrase ``applied 
for'' in the definition of sponsor. They suggested that an appropriate 
clarification would indicate that ``applied for'' meant that a 
sponsor's application was accepted as sufficient for docketing by the 
Commission, and not merely submitted to the Commission.
    The Department agrees that clarification of the phrase ``applied 
for'' is warranted, and the clarification suggested by the commenters 
is reasonable and appropriate. The intent of the Act is to encourage 
the development of advanced nuclear facilities. An initial and 
essential step toward that goal is the submission of a combined license 
application to the Commission. While the Department fully supports this 
goal, it is also important that the Department utilize its limited 
resources to enter into Conditional Agreements only with those entities 
that have provided the Commission with an application of sufficient 
quality to be docketed by the Commission. Under the Commission's 
regulations, any person may submit an application for a combined 
license. However, the Commission will accept such an application for 
docketing only after it has conducted a preliminary review to determine 
whether the application is complete and contains sufficient information 
to support the Commission's detailed technical review. The Department 
believes it is appropriate to clarify that a sponsor is any person that 
has ``applied for'' a combined license and such application by the 
person has been docketed by the Commission. The Department is aware of 
the possibility that one entity may be receiving payments for a covered 
event, but that the debt obligation may actually be held by an entity 
other than the sponsor. The Department emphasizes that only a sponsor 
is eligible to enter a Standby Support Contract and thus be eligible 
for covered costs under the Standby Support Program. If necessary, the 
Department may include provisions in the Standby Support Contract to 
ensure that only a sponsor is eligible for payments under the Program.

Subpart B--Standby Support Contract Process

Section 950.10 Conditional Agreement

Purpose
    Section 638(b) authorizes the Secretary to enter into Standby 
Support Contracts with sponsors of advanced nuclear facilities. That 
paragraph directs that sufficient funding be placed in designated 
Departmental accounts before the contracts are executed. In the NOI, 
the Department noted that the Secretary has considerable discretion as 
to the timing and method of entering into Standby Support Contracts. 
The NOI then stated the Department's tentative goal of permitting 
sponsors to enter into Standby Support Contracts as early as 
practicable, while recognizing that entering into a contract with a 
sponsor before the sponsor receives a combined license and commences 
construction may raise implementation issues. Consequently, the NOI 
stated that the Department should consider entering into ``binding 
agreements'' with sponsors that submit combined license

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applications that are docketed by the Commission. Although the 
Conditional Agreements between the Department and project sponsors 
would not themselves be Standby Support Contracts, they would commit 
the Department to enter into Standby Support Contracts with the first 6 
project sponsors who have met the requirements of the conditional 
agreements and section 638 (including the provision of adequate 
budgetary resources) have been satisfied.
    Commenters generally agreed with the Department's discussion of the 
benefits of a two-step approach in which an agreement could be 
converted into a Standby Support Contract when a combined license is 
issued by the Commission and construction commences, and the 
requirements of the statute, including adequate budgetary resources, 
are otherwise satisfied. Industry commenters noted that long before 
construction, a project developer would need to obtain approval from 
its Board of Directors and obtain construction financing. In contrast, 
one commenter stated that the Department should not enter into binding 
agreements, which it stated was inconsistent with section 638's 
provision that the Secretary ``shall not enter into a contract unless 
sufficient funds are already in the Standby Support Program Account to 
cover the facility's debt costs.'' In addition to these general 
comments about a two-step implementation process, commenters provided 
additional detailed comments which will be addressed below.
    The Department concludes that it is consistent with the provisions 
in section 638 and the statutory goal of facilitating the construction 
and operation of advanced nuclear facilities to implement a two-step 
process involving a Conditional Agreement, which then can, for the 
first six qualifying sponsors, be converted into a Standby Support 
Contract at a later date, if the sponsor meets certain conditions and 
budgeting resources are provided. Specifically, the Department has 
significant discretion to establish the procedures needed to manage the 
Standby Support Program, provided that they are consistent with section 
638. Such a two-step implementation process allows the Department and 
potential sponsors to manage the difficult timing issues inherent in 
both the federal appropriations process and business concerns in 
planning and financing a multi-billion dollar advanced nuclear 
facility. In making this determination to require a Conditional 
Agreement, the Department reviewed other similar federal programs, 
including the Department of Transportation's Transportation 
Infrastructure Finance and Innovation Act (TIFIA) program, which 
provides loans for surface transportation projects. (See 64 FR 29742, 
June 2, 1999.) The TIFIA program first requires a potential recipient 
to enter into a ``conditional term sheet,'' which commits the 
Department of Transportation to provide federal assistance to a project 
at a future point in time upon satisfaction of specified conditions. 
The Conditional Agreement is similar in concept to the TIFIA program. 
Unlike TIFIA (under which funds are obligated at this ``commitment'' 
point), no funds would be obligated when the Conditional Agreement is 
signed. Rather, a Standby Support Contract would be executed only after 
sufficient budgetary resources are available.
Eligibility
    In the NOI, the Department discussed tying the implementation of 
the Standby Support Program to the Commission's process for issuing a 
combined license set forth in 10 CFR part 52. Specifically, the NOI 
stated that the Department should be able to enter into an initial 
agreement with a sponsor that submits a combined license application at 
any time on or after such application is submitted. Commenters, 
including the Commission, generally agreed with tying the initial 
agreement to the Commission's analysis of combined license 
applications. Accordingly, the Department in Sec.  950.10(b) of the 
interim final rule specifies that a sponsor is eligible to enter into a 
Conditional Agreement with the Program Administrator after the sponsor 
has submitted a combined license application and the Commission has 
docketed the combined license application, and after the sponsor has 
submitted information to the Department and the Program Administrator 
has determined that information to be complete, accurate and the 
Conditional Agreement is consistent with applicable statutes and 
regulations. (The Department notes that in today's interim final rule, 
the notice distinguishes the terms ``Program Administrator'' and 
``Department.'' ``Program Administrator'' is used to identify 
situations involving the execution of a Conditional Agreement or a 
Standby Support Contract; whereas, ``Department'' is used to identify 
general statements of policy and situations involving more general 
matters such as funding and appropriations). The Department notes that 
it costs millions of dollars to prepare an application for a combined 
license and that the Commission has the discretion to reject any such 
application that is incomplete. The Department further notes that 
section 638 provides the Secretary with broad discretion to issue 
regulations implementing the Standby Support Program. Accordingly, the 
Department has determined that it is appropriate to allow a sponsor to 
enter into a Conditional Agreement at any time on or after the 
Commission dockets a combined license application, because the sponsor 
has shown sufficient seriousness and its combined license application 
is of sufficient quality.
    Section 950.10(b) further indicates that a sponsor may enter into a 
Conditional Agreement from the time the Commission dockets its combined 
license application but before the Commission has issued the license. 
The Department notes that it will likely take several years for the 
Commission to issue the combined license, a time period which the 
Department has determined is sufficient for a sponsor to decide whether 
it wants to participate in the Standby Support Program.
    In section 950.10(b), the Department further requires a sponsor 
that plans to enter into a Conditional Agreement to provide certain 
information including: (1) An electronic copy of the combined license 
application docketed by the Commission pursuant to 10 CFR part 52; and 
if applicable, an electronic copy of the early site permit or 
environmental report referenced or included with the sponsor's combined 
license application; (2) a summary schedule identifying the projected 
dates of construction, testing and full power operation; (3) a detailed 
plan of intended financing for the project including the credit 
structure and all sources and uses of funds for the project, and the 
projected cash flows for all debt obligations of the advanced nuclear 
facility which would be covered under the Standby Support Contract; (4) 
the sponsor's estimate of the amount and timing of the Standby Support 
payments for debt service under covered delays; and (5) the estimated 
dollar amount to be allocated to the sponsor's covered costs for 
principal or interest on the debt obligation of the advanced nuclear 
facility and for incremental costs, including whether these amounts 
would be different if the advanced nuclear facility is one of the 
initial two reactors or one of the subsequent four reactors.
    The Department notes that this information is needed to determine 
the score under the Federal Credit Reform Act of 1990 (FCRA). This 
documentation requirement should pose only a nominal burden on a 
sponsor

[[Page 28204]]

because the sponsor likely has this information readily available in 
the normal course of obtaining financing for the advanced nuclear 
facility and Commission approval for a combined license. The Department 
will not use this documentation to select among potential sponsors. 
Rather, the actual awarding of a Standby Support Contract is based on 
fulfillment of the requirements and conditions in the Conditional 
Agreement, including the Commission's issuing of a combined license and 
the sponsor's commencement of construction (i.e., the pouring of 
safety-related concrete for the reactor building). This documentation 
will allow the Department's representative, the Program Administrator, 
to enter into a Conditional Agreement and to monitor the progress of 
various competing sponsors, prior to entering into Standby Support 
Contracts. This relatively modest information requirement is in lieu of 
an application process similar to those required by the Department of 
Transportation's Transportation Infrastructure Finance and Innovation 
Act (TIFIA) program or the Overseas Private Investment Corporation 
(OPIC). For these reasons, the Department generally agrees with the 
commenters who, in response to the NOI, noted that it would be 
appropriate for the Department to request the combined license 
application in lieu of a separate application to the Department to be 
eligible for a Standby Support Contract.
    In section 950.10(c), the Department sets forth the bases upon 
which it will determine whether to enter into a Conditional Agreement. 
This determination will be based on a review of the information 
provided by the sponsor under Sec.  950.10(b) to determine eligibility 
for a Conditional Agreement, and the accuracy and completeness of the 
information provided. The Department also will determine whether the 
Conditional Agreement may be executed consistent with applicable 
statutes or regulations, including the National Environmental Policy 
Act (NEPA). The Department anticipates that its environmental review 
under NEPA for the Conditional Agreement or Standby Support Contract 
would acknowledge or be based upon the NEPA review conducted by the 
Commission in relation to its review and approval of the sponsor's 
combined license application.

Section 950.11 Terms and Conditions of the Conditional Agreement

General
    Section 950.11(a) requires that the Conditional Agreement include a 
provision requiring the Program Administrator and the sponsor to enter 
into a Standby Support Contract, provided that a sponsor is one of the 
first six sponsors to fulfill the conditions precedent to a contract, 
and subject to certain statutory funding requirements and limitations, 
which are set forth in Sec.  950.12, and any other applicable 
contractual, statutory and regulatory requirements. Upon a satisfaction 
of these conditions precedent, the Program Administrator will enter 
into a Standby Support Contract with the first six sponsors. Imposing 
such requirements is consistent with the goal of section 638 which is 
for the Department to enter into such a contract to facilitate the 
construction and full power operation of advanced nuclear facilities.
    This approach strikes a balance between two different concerns 
expressed by commenters. Most industry commenters stated that the 
``binding'' agreement should be binding on the Department without 
conditions, not be contingent on subsequent appropriations, and be 
subject to specific performance. Other commenters stated that it was 
inappropriate for the Department to needlessly commit itself to such 
contracts. The Department believes that given the statutory 
constraints, a sponsor has as much certainty as possible that it can 
rely on the Conditional Agreement in which the Program Administrator 
agrees to enter into a Standby Support Contract, provided the critical 
regulatory and statutory conditions precedent are met. The Department 
further believes that it would be imprudent to commit the Secretary and 
future Secretaries to enter into a Standby Support Contract, absent any 
of these conditions precedent. This commitment, of course, remains 
subject to the normal budgetary process and does not (and could not) 
obligate the President to seek, nor the Congress to provide, budget 
authority for a Standby Support Contract.
    In both the public workshop and in comments to the NOI, several 
potential sponsors stated that it was critical to understand the 
pricing of the loan costs related to the Program Account, prior to a 
sponsor entering into such a Standby Support Contract. They noted that 
the key to an effective Standby Support Program would be the premium 
charged to cover the principal or interest of a loan. If the sponsor's 
portion of the premium were too high, project sponsors likely would 
elect not to use the coverage. Industry commenters recommended that the 
loan costs be priced similarly to other insurance coverage provided by 
OPIC and other private and public insurers against sovereign political 
risk. These commenters stated that OPIC risk insurance carries an 
annual premium of 40-70 basis points of the face value of coverage and 
that the commercial insurance market carries an annual premium of 100 
basis points. Accordingly, a $500 million Standby Support Contract 
would cost a sponsor $5 million per year.
    The Department agrees with the general proposition that a sponsor 
should know its funding needs prior to execution of the Standby Support 
Contract, and has included Sec.  950.11(b), (c) and (d) in the 
regulations to reflect the need for specificity, transparency and 
accuracy on funding of Standby Support Contracts prior to execution. 
Nevertheless, the Department emphasizes that the sponsor's contribution 
is based on the amount of appropriated funds, and that the cost 
estimate for the Program Account will be calculated consistent with 
FCRA.
    The Department notes that there are significant differences between 
the risks being covered by the Standby Support Program and those 
covered by OPIC. OPIC and the traditional commercial insurance market 
pool the risk faced by potential insured entities. For instance, OPIC 
typically provides insurance coverage for scores of different projects 
at a given time. Accordingly, by distributing the risk among many 
projects, the insurer--whether OPIC or a commercial insurer--spreads 
the risk among many projects. OPIC uses a risk management strategy that 
diversifies risk based on sector and geographic location. Such risk 
diversification is not possible in the Standby Support Program. 
Moreover, the average size of an individual liability is smaller for an 
OPIC insured policy than for Standby Support, allowing OPIC to have 
greater risk diversification for an equal amount of underwritten 
policy.
    In response to the NOI and at the public workshop, several 
potential sponsors indicated little interest in obtaining coverage for 
incremental costs. Given the differences between the Program Account 
and the Grant Account, the Department believes that it is reasonable to 
expect that the amount of funding a sponsor would be willing to provide 
for the Grant Account, if it decides to obtain coverage for incremental 
costs, would be less than for the Program Account. As with the

[[Page 28205]]

Program Account, the sponsor and the Department will be required to 
indicate the anticipated amounts each would expect to contribute to the 
Grant Account. For each account, the Department has no obligation to 
make contributions in excess of any amounts appropriated for that 
purpose.
Allocation of Coverage and Funding
    Section 950.11(b) and (c) address the issues related to section 
638(b)(2), which establishes a funding requirement that must be met 
before the Program Administrator can enter into a Standby Support 
Contract. To carry out these statutory provisions and depending on 
whether the coverage is for one of the initial two or for the 
subsequent four reactors, the Department requires in Sec.  950.11(b) 
that the Conditional Agreement include a provision addressing how to 
allocate the $500 million or the $250 million between the accounts. The 
Department notes that there is a certain degree of uncertainty inherent 
at the Conditional Agreement stage, given that this step precedes 
entering into a Standby Support Contract possibly by several years and 
that funding and appropriations issues likely will have not yet been 
decided. Accordingly, the Department believes that it is sufficient at 
the time of the Conditional Agreement to have the parties agree upon 
the anticipated amounts for each account.
    Section 950.11(c) specifically addresses the issue of how the 
Standby Support Contracts will be funded. Section 638 mandates that 
before entering into a Standby Support Contract, the Department 
establish two separate accounts and have a specified amount of funds in 
the relevant accounts before entering into a contract. The first 
account is a ``Standby Support Program Account'' (``Program Account''), 
and the second account is a ``Standby Support Grant Account'' (``Grant 
Account''). Section 638 treats the funding requirements differently for 
each account. Section 638(b)(2) specifies that consistent with the cost 
of a loan guarantee under FCRA, the Program Account receives 
appropriations or loan guarantee fees in an amount sufficient to cover 
the loan costs in advance of the Standby Support contract; this may be 
a combination of appropriated funds and loan guarantee fees from the 
sponsor or other non-Federal source. The funds in the Program Account 
must be in an amount sufficient to cover the loan costs for the 
principal or interest on the debt obligation of the advanced nuclear 
facility covered by a Standby Support Contract for the time period of 
covered delay in full power operation, as described in section 
638(d)(5)(A). Section 638(b)(2)(C)(ii) specifies that the Grant Account 
must receive funds appropriated to the Secretary, funds paid to the 
Secretary by the sponsor, or a combination of both appropriated funds 
and sponsor payments. The funds in the Grant Account must be sufficient 
to cover the incremental cost of replacement power the sponsor may need 
to purchase to fulfill power supply contracts for the time period of 
covered delay in full power operation, as described in section 
638(d)(5)(B). (Section 638(c)(ii) refers to three different paragraphs 
in paragraph (d)(5); however, only one of those referenced paragraphs, 
(d)(5)(B), was enacted into law.) With respect to the Grant Account, 
the Secretary's responsibility to pay covered costs is expressly 
limited in section 638(d)(4) to the payment of those costs for which 
the Secretary has received appropriations or payments from a non-
federal source in an amount sufficient to pay the covered costs. 
Section 638 does not contain such a limitation with respect to the 
Program Account. For either account, section 638(d)(4)(B) permits the 
Secretary to receive and accept payments from any non-federal source.
    With respect to the question of which party is responsible for 
funding the Standby Support Contracts, Congress provided a flexible 
mechanism for the parties to consider in structuring the contracts. In 
general, section 638 allows for the Program Account and Grant Account 
to be funded by contributions from government appropriations, the 
sponsor, or a non-federal source; or a combination of these sources. 
The Department has structured its regulations to reflect this statutory 
intent. An explanation of the funding requirements for each account is 
described below.
    Pursuant to section 638, Sec.  950.11(c) requires that each 
Conditional Agreement contain a provision that the Program Account or 
the Grant Account be funded in advance of the Standby Support Contract. 
The Program Account is required to be funded by appropriated funds that 
are received by the Department, or a combination of appropriated funds 
and loan guarantee fees that are in an amount equal to the loan costs 
associated with the amount of principal or interest covered by the 
available indemnification. Section 950.11(c)(1) further requires the 
parties to specify in the Conditional Agreement the anticipated amount 
or anticipated percentage of the total funding in the Program Account 
to be contributed by appropriated funds to the Department, by the 
sponsor or by a non-federal source. The purpose of this provision is to 
obtain some specificity as to the anticipated funding responsibilities 
of the Department and the sponsor, and thereby aid both the Department 
and the sponsor in preparing for a Standby Support Contract in the 
future.
    Section 950.11(c)(2) requires each Conditional Agreement contain a 
provision that the Grant Account be funded in an amount equal to the 
amount of coverage allocated to cover incremental costs. Section 
950.11(c)(2) further requires the parties to specify in the Conditional 
Agreement the anticipated amount or anticipated percentage of the total 
funding in the Grant Account to be contributed by appropriated funds to 
the Department, by the sponsor, or by a non-federal source.
    The similar language in Sec.  950.11(c)(1) and (2) reflects the 
Department's understanding that funding for each account may come from 
a combination of Department appropriations and contributions by the 
sponsor or other non-federal source, and that these options should be 
available for the parties to consider. The Department believes it is 
reasonable and consistent with Congressional intent to maintain the 
option that some or all of the funding may be provided by the sponsor, 
while recognizing that the same option holds true for Congressional 
appropriations.
    For the Department, the actual funding contribution anticipated 
under the Conditional Agreement is dependent on the extent to which 
Congress appropriates funds for a particular Standby Support Contract. 
For the sponsor, the actual funding contribution under the Conditional 
Agreement is dependent upon how much the sponsor anticipates 
contributing--which could be all, some or nothing--taking into account 
the fact that the Department's contribution is subject to Congressional 
appropriations. The Department believes such an approach is reasonable 
since, while there is no guarantee as to what amount of funds, if any, 
will be appropriated for funding either the Program or Grant Accounts 
for a particular Standby Support Contract, it is likely that one of the 
factors that will be considered in deciding whether to appropriate 
funds will be the extent to which the sponsor provided funds. In that 
regard, the Department would expect that sponsors would view funding 
the Program Account similar to an insurance contract. That is, like an 
insurance contract, the sponsor (insured) is responsible for paying the 
insurance premium and the Department

[[Page 28206]]

(insurer) is responsible for paying the cost of any valid claims 
covered by the insurance.
    The most significant difference between funding the Program Account 
and Grant Account is that only the Program Account is subject to the 
FCRA. In section 638, Congress clearly directed that the funding in the 
Program Account is to be the ``loan cost'' associated with the covered 
costs for principal or interest on the debt obligation of the sponsor's 
advanced nuclear facility, where loan cost has the same meaning as 
``cost of a loan guarantee'' under FCRA. FCRA is a federal law designed 
to improve the cost structure and budgetary basis of federal credit 
programs. Under FCRA, the cost to the federal government of a loan 
guarantee made to a private entity is generally equal to the net 
present value of the estimated costs to cover defaults and 
delinquencies, interest, or other payments under the loan. In other 
words, the amount of the loan cost is not the same as the loan amount 
itself, but a lesser amount that represents the net present value of 
anticipated long-term costs to the Government of providing the loan 
guarantee.
    In accordance with section 638, the Department defines the loan 
costs for a Standby Support Contract consistent with FCRA. In so doing, 
the Department necessarily adopts the method for calculating the amount 
of funding for the account, that is, the loan cost, consistent with 
FCRA. Further, the Department interprets section 638, and the specific 
requirement in section 638(b)(2) that the Program Account need only 
contain amounts sufficient to cover the loan costs, to mean that the 
Program Account does not need to be funded in an amount equal to the 
costs for which coverage is provided and that are specified in section 
638(b)(5)(A). This method of funding the Program Account is consistent 
with FCRA, and is a logical outgrowth of the Congressional directive in 
section 638(b)(2) to define loan costs consistent with the cost of a 
loan guarantee under FCRA. Similarly, the Department's responsibilities 
under section 638 to pay covered costs out of the Program Account are 
consistent with loan guarantee programs under FCRA. (See 2 U.S.C. 
661a(3)). That is, the Department is required to pay any claims for 
covered costs under the Program Account, up to the available 
indemnification, without further appropriations to the Secretary for 
such payments. (See 2 U.S.C. 661d(c)).
    Although section 638 does not contain an express directive 
regarding this obligation of the Department, such as a provision that 
the contract is backed by the full faith and credit of the United 
States, it is within the Department's discretion to interpret statutory 
intent where Congress is silent or unclear, and implement the statute 
according to its interpretation. The Department's interpretation of its 
need to pay covered costs under the Program Account is consistent with 
FCRA and the obligations of the federal government under other credit 
programs. Moreover, it is not necessary for Congress to include a 
provision specifying that the Department's obligation for such costs is 
backed by the full faith and credit of the United States. Though it 
would have been desirable had such language been included in section 
638, its absence does not negate the Department's obligation to pay the 
covered costs under section 638 and FCRA, nor does its absence prevent 
the Department from entering into a contract backed by the full faith 
and credit of the United States. Accordingly, the Secretary of the 
Treasury would be required to fund future obligations arising from the 
payment of covered costs under section 505(c) of FCRA, even though 
section 638 does not expressly use the term ``full faith and credit.''
    The applicability of FCRA to the Program Account contrasts with the 
Secretary's obligation to pay covered costs under the Grant Account. 
Section 638(d)(4) specifies conditions on the Secretary's obligation to 
pay certain covered costs. That provision limits the Secretary's 
obligation to pay covered costs under section 638(d)(5)(B) (i.e., 
incremental costs) to the receipt of funds sufficient to pay those 
covered costs. Congress did not place a similar restriction on the 
Department's obligation to pay covered costs under section 638(d)(5)(A) 
(i.e., principal or interest on debt obligation).
    Reconciliation. Given the potentially lengthy period of time 
between execution of a Conditional Agreement and execution of a Standby 
Support Contract, the Department believes it is necessary to re-assess 
the amount of funds necessary prior to execution of the Standby Support 
Contract. Accordingly, in Sec.  950.11(d), each Conditional Agreement 
is required to include a provision that the sponsor provide no later 
than 90 days prior to execution of a Standby Support Contract 
sufficient information for the Program Administrator to recalculate the 
loan costs and the incremental costs associated with the advanced 
nuclear facility, taking into consideration whether the sponsor's 
advanced nuclear facility is one of the initial two reactors or the 
subsequent four reactors. The Department believes that having the 
reconciliation process within 90 days of executing the Standby Support 
Contract provides the sponsor and Department additional certainty that 
the pricing will realistically reflect the risks associated with the 
Standby Support Contract.
Limitations
    Section 950.11(e) addresses limitations related to the Department 
entering into a Standby Support Contract. In particular, each 
Conditional Agreement is required to include a provision limiting the 
Department's obligations to contribute federal funding to the Program 
Account or the Grant Account to only those amounts, if any, that are 
appropriated to the Department in advance of the Standby Support 
Contract for the purpose of funding the Program Account or Grant 
Account. The purpose of this provision is to recognize and clarify that 
the Department's contribution is contingent upon Congressional 
appropriations.
    Section 950.11(e) further provides that if the amount of 
appropriated funds is not sufficient to fund the Department's 
anticipated contribution under the Conditional Agreement, the sponsor 
has the option to either (1) not execute a Standby Support Contract or 
(2) provide additional contributions to fund the total amount of 
coverage in either the Program Account, Grant Account, or both accounts 
as specified in the Conditional Agreement. The Department believes that 
these provisions take into account the change in circumstances that may 
occur between the time of the Conditional Agreement and the Standby 
Support Contract. The provision also provides a sponsor the option 
either to enter into a contract or forego that opportunity. 
Nevertheless, if the sponsor elects to execute the Standby Support 
Contract, it is required to make up the difference attributable to the 
Department and fully fund the total amount of costs as specified in the 
Conditional Agreement. Moreover, the sponsor may not elect to change 
the allocation of coverage for either account based on the Department's 
lowered contribution level and thereby potentially negate its 
additional contribution. This provision is reasonable and consistent 
with the purposes of section 638 to provide more coverage to those 
sponsors that are first in line in the construction and operation of 
advanced nuclear facilities.
Termination of Conditional Agreements
    The Department has determined that it is appropriate to specify 
situations in which the Conditional Agreement should no longer remain 
in effect. These

[[Page 28207]]

situations, specified in Sec.  950.11(f), include when a sponsor enters 
into a Standby Support Contract with the Program Administrator, when 
the sponsor has commenced construction of an advanced nuclear facility 
but declines to enter into a Standby Support Contract within 30 days 
after commencement of construction, when the sponsor notifies the 
Program Administrator that it wishes to terminate the Conditional 
Agreement, when contracts for three different reactor designs have been 
executed and the Conditional Agreement is for another reactor design 
(thereby implementing section 638(b)(1)), and when the Department has 
reached the statutory limit and entered into six Standby Support 
Contracts. In addition to being the logical outgrowth of administering 
a regulatory program, this provision allows other sponsors to take 
advantage of the Standby Support Program when a different sponsor 
wishes to terminate coverage. Such flexibility anticipates evolving 
circumstances and is consistent with the Department's goal to 
facilitate the full power operation of advanced nuclear facilities. 
Further, it is consistent with several commenters' concern that this 
risk insurance might be tied up by a sponsor but not be used.

Sections 950.12, 950.13 and 950.14 Standby Support Contract

    Section 950.12 sets forth the conditions and limitations associated 
with the execution of a Standby Support Contract. Section 950.13 
addresses the contract's purpose, identification of the advanced 
nuclear facility covered under the contract, amount of sponsor 
contribution, maximum aggregate compensation, term, cancellation, 
termination by sponsor, assignment, claims administration, and dispute 
resolution. In addition, Sec.  950.14 sets forth provisions addressing 
the interrelated issues of covered events, exclusions, covered delay, 
and covered costs. Each of these provisions will be discussed below.
    In the NOI, the Department addressed whether to include various 
terms and conditions via regulation or in a sample contract. A few 
commenters recommended that the Department provide a standard contract 
format, which they believed would allow them to evaluate its effect on 
risk allocation and the resulting impact on financing.
    The Department has determined that it is sufficient to include the 
critical contract terms in this regulation rather than provide a sample 
contract at this time. The Department believes that a sponsor can 
appropriately evaluate the potential contract's effect on risk 
allocation and financing during the pre-contract discussions set forth 
in Sec. Sec.  950.10 and 950.11. Accordingly, including a sample 
contract is not necessary.

Section 950.12 Standby Support Contract Conditions

Conditions Precedent
    In Sec.  950.12(a), the Department sets forth nine conditions 
precedent that a sponsor must fulfill to be eligible to enter into a 
Standby Support Contract. These provisions must be included in the 
Standby Support Contract. By requiring satisfaction of the conditions 
precedent prior to obtaining a Standby Support Contract, the Department 
intends to ensure that the sponsor will be able to construct an 
advanced nuclear facility. Accordingly, such protections are consistent 
with some commenters' concerns that the Standby Support Contracts only 
be awarded to viable entities. The Department has undertaken to require 
practicable and necessary conditions precedent that should not impose 
an unreasonable burden on a sponsor. The conditions precedent are the 
logical outgrowth of the provisions of section 638 of the Act and the 
Commission's licensing process. Some of these conditions precedent 
relate to the regulatory process, while others closely correlate to the 
actual construction of the advanced nuclear facility. Among those tied 
to the regulatory process are the need for the sponsor to have: (1) A 
Conditional Agreement with the Department, (2) a combined license 
issued by the Commission, (3) the payment of any required fees into the 
Program Account and the Grant Account, (4) a detailed schedule for the 
completion of the sponsor's performance of inspections, tests, analyses 
and acceptance criteria (ITAAC) and for informing the Commission of 
such completion, and (5) a detailed system-level construction schedule 
identifying projected dates of construction, testing and full power 
operation of the advanced nuclear facility. The regulation requires the 
sponsor to provide the detailed schedule for completing ITAAC and 
informing the Commission of ITAAC completion, and the systems-level 
construction schedule no later than ninety days prior to execution of 
the Standby Support Contract. This timing requirement will facilitate 
the contracting process so it is done in an orderly fashion. Among 
those tied to any construction project include documentation that the 
sponsor has: (1) Obtained all Federal, State or local permits required 
by law to commence construction, (2) commenced construction, and (3) 
obtained coverage of required insurance for the project. Further, no 
later than ninety days prior to execution of the Standby Support 
Contract, the sponsor must provide to the Program Administrator, a 
detailed and up-to-date plan of financing for the project including the 
credit structure and all sources and uses of funds for the project, 
including the projected cash flows for all debt obligations of the 
advanced nuclear facility.
    The Department will review the foregoing information, as well as 
any applicable statutes and regulations, and enter into a Standby 
Support Contract upon satisfaction that the conditions precedent have 
been met, the contract is consistent with applicable statutes and 
regulations, and the necessary funding is in place.
Funding and Limitations
    In Sec.  950.12(b), the Department requires that no later than 
thirty days prior to execution of the Standby Support Contract, funds 
in an amount sufficient to fully cover the loan costs or incremental 
costs as specified in the Conditional Agreement shall be deposited in 
the Program Account or the Grant Account. The purpose of this provision 
is to ensure that the administration and funding of the Standby Support 
Program occurs in an efficient and orderly manner.
    In Sec.  950.12(c), the Department provides limitations about 
entering into a Standby Support Contract, based on statutory direction 
in section 638, that sufficient funding for a contract must be 
deposited in either the Program Account of Grant Account prior to 
execution of the contract.

Section 950.13 Standby Support Contract: General Provisions

General Contract Provisions
    In Sec.  950.13, the Department specifies that each Standby Support 
Contract include provisions addressing basic contract terms, including 
the contract's purpose, covered facility, sponsor contribution, maximum 
aggregate compensation, the term, cancellation, termination by a 
sponsor, assignment, claims administration, and dispute resolution.
    Covered Facility. Section 950.13(b) requires each Standby Support 
Contract to include a provision specifying that the Secretary provide 
coverage only for an advanced nuclear facility, which must be owned by 
a non-federal entity, pursuant to section 638. In addition, this 
section requires the contract to

[[Page 28208]]

include the specific advanced nuclear facility to be covered, the 
reactor design, and its location. Inclusion of the facility's location 
is standard for any property insurance contract. Inclusion of the 
reactor type is necessary to implement section 638(b)(1).
    Sponsor Contribution. Section 950.13(c) requires each Standby 
Support Contract to include a provision specifying the amount that a 
sponsor has contributed to fund each type of account. This is necessary 
to implement the funding and appropriations considerations in section 
638(b), which distinguish between the Program Account and the Grant 
Account.
    Maximum Aggregate Compensation. Section 950.13(d) requires each 
Standby Support Contract to include a provision specifying the maximum 
amount of coverage permitted by section 638(d). Specifically, the 
provision states that the Department is prohibited from paying 
compensation under the contract in an aggregate amount that exceeds the 
amount of coverage up to $500 million each for the initial two reactors 
or up to $250 million each for the subsequent four reactors. In 
addition, the Secretary may include a provision setting a minimum 
amount of coverage, given that the Department will incur significant 
costs in implementing and administering the program. These potential 
costs include evaluating the funding for coverage, contract 
negotiations, monitoring, claims administration, and dispute 
resolution.
    Term. Section 950.13(e) requires each Standby Support Contract to 
include a provision specifying the date at which the contract commences 
as well as the term of the contract. The Department notes that the 
contract's effective date will be the date at which it has been signed 
by both the sponsor and the Program Administrator. Subject to the 
cancellation provisions in paragraph (f), the contract terminates when 
full power operation is achieved, and when all claims have been paid or 
any disputes involving claims under the contract have been resolved in 
accordance with the claims administration process in subpart C and the 
dispute resolution process in subpart D.
    Cancellation Provisions. Section 950.13(f) requires each Standby 
Support Contract to include a provision specifying that the parties may 
cancel the contract under certain conditions. First, the Program 
Administrator may cancel the contract if the sponsor abandons the 
project, provided that the abandonment is not caused by a covered event 
or force majeure. Second, the sponsor may cancel the contract if the 
sponsor determines that it no longer requires continued coverage. In 
either case, this provision requires the party canceling the contract 
to provide written notification to the other party. Third, the parties 
may cancel the contract for other causes as agreed upon. Such 
cancellation provisions are consistent with requests by commenters that 
the Department should have the right to cancel a contract where a 
project has been abandoned. However, the Department decided not to 
require a fixed timeframe for determining that a sponsor is 
experiencing an unexcused, extended suspension of construction, because 
the Department believes mandating cancellation based on a fixed 
timeframe would inappropriately reduce the Department's flexibility in 
assessing a particular situation. Nevertheless, the Department's 
general decision to include cancellation provisions is consistent with 
the Department's goal of facilitating the construction and operation of 
advanced nuclear facilities.
    Section 950.13(g) contains a limitation that if a sponsor elects to 
terminate a Standby Support Contract, then the sponsor or any related 
party is prohibited from entering into another Standby Support 
Contract. Such a provision is necessary to prohibit potential sponsors 
from ``gaming'' the Standby Support Program. Specifically, a sponsor 
could be on the verge of full power operation of an advanced nuclear 
facility, without the need to make any claims on the Standby Support 
Program. Absent this provision, the sponsor could terminate its initial 
Standby Support Contract and then enter into a new contract for a 
different facility.
    Assignment. Several commenters stated that it is necessary to 
permit a sponsor to transfer its rights and obligations under the 
contract. This would allow project lenders or other entities to 
complete a project. These commenters requested that the sponsor have 
full discretion to assign its rights under the contract.
    The Department generally agrees that it may be appropriate to allow 
a sponsor to assign its rights under the Standby Support Contract. 
Accordingly, Sec.  950.13(h) requires each Standby Support Contract to 
include a provision specifying the assignment of a sponsor's rights and 
obligations under the contract. Specifically, this provision states 
that the sponsor is permitted to assign the rights under the contract 
with the Secretary's prior approval. The spons