Are NRC Fees Limiting Innovation in the Nuclear Industry?

As multiple advanced reactor vendors enter the licensing process to build first-of-a-kind demonstration projects, the Nuclear Innovation Alliance (NIA)—a nonprofit “think-and-do tank” that supports the nuclear power industry—has said issues with the Nuclear Regulatory Commission’s (NRC’s) current user fee cost-recovery model could slow innovation.

In a report released on May 19, the NIA identified how the NRC’s fee model can inhibit advanced nuclear innovation, compared the current model to structures used in other industries and countries, and recommended changes to improve the system. Importantly, the group says reliance on applicant fees limits the ability of the NRC to hire and train staff ahead of expected applications, reducing regulatory efficiency.

Smaller Firms with Less Resources

“We’re at an inflection point with the nuclear industry in the U.S., as well as nuclear regulation,” Alex Gilbert, project manager with NIA, said during an online panel session held to roll out the report. “We’re really moving away from the large, conventional light-water reactors that dominated our initial 40, 50 years of the nuclear industry in the U.S. We’re looking at advanced reactor technologies. We’re looking at new advanced light-water technologies—other non-light-water technologies, and we have a regulatory framework that we’re currently in the process of transforming to adapt to these new technologies.”

According to Gilbert, nuclear reactor development has historically been dominated by a handful of large, multinational corporations. For them, the cost of regulatory fees may not have been a significant financial barrier. But today, many smaller, less-established companies are working to develop new designs, and money is sometimes scarce.

“When we’re looking at the industry that we’re trying to develop, we’re trying to look towards a very vibrant, very competitive future. And so, we need to think about how our regulatory system is impacting new entrants,” Gilbert said.

Current NRC Fee Structure

Gilbert explained that there are basically two elements to the NRC’s current fee structure. The first is 10 CFR (Code of Federal Regulations) Part 170 fees. These are hourly fees that are charged to applicants when they’re getting a specific item or regulatory engagement of value.

“The easiest way to think about that—and the thing that we focused on—is if you’re trying to get a license at the NRC to build and operate a nuclear facility, that’s something that there’s a discrete value and you’re charged hourly fees. Those hourly fees are actually just under $300 per hour, so that can add up pretty quickly,” said Gilbert.

The second element of the current fee structure is 10 CFR Part 171 fees. These are annual fees paid by existing licensees. These fees actually provide the majority of the funding for the NRC. Although these fees are obviously very important, Gilbert said NIA focused on the Part 170 fees because the group was most interested in understanding how fees affect innovation.

Notably, the report says the NRC’s budget has declined by more than 30% since the mid-2010s due to plant retirements and reduced application activity. This has been accompanied by a 25% reduction in NRC staff. While the existing fleet may be shrinking, indicating a lesser need for NRC staff, the growing pipeline of advanced reactors and the potential obligation for NRC design reviews would signal more staff may be required.

“What we’re concerned about with that kind of efficiency question is getting the right resources for the right project at the right time,” Gilbert said.

How Other Agencies Are Funded

The NIA reviewed fee structures for the Federal Aviation Administration (FAA), Food and Drug Administration (FDA), and Environmental Protection Agency (EPA) to better understand how they were funded. Gilbert felt the FAA and FDA were particularly noteworthy. “These are really interesting regulatory agencies, because they’re very similar to the NRC in that they’re regulating innovative activities,” he said.

In the case of the FAA, even though most of the agency is funded by user fees, those user fees are collected exclusively from economic activities, such as ticket sales. “They’re not charging fees for their review of what’s called a type certification, which is similar to what the NRC does for a reactor license. So, you’re not having that disincentive to innovation,” said Gilbert.

The FDA operates a little bit differently. “They’ve had to actually substantially grow their overall budget over time,” Gilbert explained. “In implementing user fees there, it was really effective when combined with public investment by being able to balance both public and private interests in the funding of the agency. And that’s one of the reasons, among several others, that FDA is considered to have a relatively efficient and effective regulatory review system.”

Meanwhile, the EPA, which regulates many of the nuclear power industry’s competitors, such as coal, gas, and biomass power plants, only requires a small portion of its costs to be covered by fees. “They’re really minor compared to nuclear license fees,” said Gilbert. “So, the way that this fee system has worked out across the federal agency is actually disincentivizing the nuclear industry and kind of raising a roadblock that our competitors are not facing.”

A Possible Path Forward That Promotes Innovation

In its report, the NIA recommended a number of changes to the NRC fee structure, which it felt would spur innovation. For example, it proposed excluding or substantially reducing fees for new license applicants. The report says: “Multiple aspects of U.S. nuclear regulation bring benefits to the public and entities rather than just the applicant. Reduced fees, especially for new designs and innovative technologies, can reflect these broad benefits. Increasing the fraction of the NRC’s budget that is funded from general revenues can incentivize more innovation, improve regulatory efficiency, and ensure the American regulatory environment remains competitive.” Alternatively, NIA said if licensing fees could not be completely replaced, then excluding fees for items such as pre-application, topical reports, and environmental reviews could still bring substantial benefits.

Furthermore, Gilbert said there are a number of options to provide funding from the Department of Energy (DOE). He specifically mentioned “licensing prizes” and a previously authorized program for DOE funding that might be appropriate for cost-share recovery of advanced reactor licensing. “Between these options, we think there’s a number of things that Congress should consider,” said Gilbert.

Yet, not everyone thinks fees should be eliminated. “You certainly can’t lower fees to the point where people are submitting things for PR points or in a disingenuous way or floods [the NRC] with a lot of potentially frivolous work,” said Caroline Cochran, co-founder and COO of Oklo, an advanced reactor developer that in December 2019 received a site use permit from the DOE to build its Aurora plant at the Idaho National Laboratory site. “I think you should have skin in the game,” she said.

Peter Hastings, vice president of Regulatory Affairs and Quality with Kairos Power, agreed. “I think some amount of fee could be an effective barrier to that kind of frivolity. She used the term ‘skin in the game,’ and that certainly makes sense—to not necessarily reduce the hourly fee to nothing, but perhaps put in some sort of cost-share that would reduce the overall cost but still require the applicant to demonstrate that they’re serious, even if it’s only through a financial obligation,” he said.

“Any time that you put a cost on something, like a carbon tax, you discourage it,” said Gilbert. “In the case of these hourly fees, you’re essentially charging for innovation. And so, if we’re trying to build a new generation of safer, more economic reactors that can really help restore American competitiveness, we’re kind of creating a regulatory barrier right now to that innovation.”

Aaron Larson is POWER’s executive editor (@AaronL_Power, @POWERmagazine).

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