NRC 'disappointed' in Davis-Besse insurance claim

CTY Kane Handout; not Blade photo Bill Kane is the Deputy Executive Director for Reactor and Preparedness Programs and in this capacity, is the Executive responsible for overseeing the Office of Nuclear Reactor Regulation, the four Regional Offices, the Office of New Reactors, and the Office of Nuclear Security and Incident Response. He oversees all policies and activities related to reactor safety, homeland protection and emergency preparedness. He assumed his present position on June 17, 2003.

ROCKVILLE, Md. - One of the Nuclear Regulatory Commission's top officials said yesterday he is "disappointed" with the way FirstEnergy Corp. has attempted to recoup $200 million in insurance for damage stemming from the near-rupture of the Davis-Besse nuclear reactor head in 2002.

William Kane, the NRC's deputy executive director, made his remarks to FirstEnergy executives, engineers, and attorneys at the opening of a high-profile meeting at the agency's headquarters in suburban Washington.

The three-hour meeting, attended by nearly 100 NRC and FirstEnergy officials, centered on two reports prepared by FirstEnergy consultants that the utility sat on for more than three months.

Both contradict earlier research by the government and the utility. One had the potential for nationwide safety implications, the NRC has said.

Through a process called a "demand for information," the government agency demanded to know why FirstEnergy was not forthcoming about the reports and how they might affect the utility's operations at Davis-Besse, the Perry nuclear plant east of Cleveland, and its twin-reactor Beaver Valley nuclear complex west of Pittsburgh.

"I'm disappointed by [FirstEnergy Nuclear Operating Co.'s] actions," Mr. Kane told utility officials. "The NRC expected you to understand the regulatory impact this had, and we expected to be notified sooner. This makes us question your safety culture and questioning attitude."

"Clearly, there was a breakdown in the process," said James Caldwell, the NRC's Midwest regional administrator.

The same thought was echoed by James Dyer, who presided over the NRC's Midwest region when the event occurred.

"Did anybody [at FirstEnergy] think about what this [discrepancy in reports] would mean [to workers] back at the plant?" asked Mr. Dyer, who is now in charge of licensing as the NRC's nuclear reactor regulation director.

FirstEnergy defended itself by touting its commitment to safety, and admitting it should have been more forthcoming about work prepared by outside consultants.

One of its attorneys, Jay Guitterrez of Morgan & Lewis law firm in Washington, said FirstEnergy's legal case for the insurance money from Nuclear Electric Insurance Limited is not in conflict with its engineering operations, despite their differing conclusions about what happened at Davis-Besse.

Mr. Kane said at the conclusion of the meeting that his opening remarks were "still appropriate."

He and other agency officials are expected to spend the next several weeks deciding whether to issue more fines or other sanctions against FirstEnergy.

Scott Burnell, a NRC spokesman, has said that all disciplinary actions are on the table, including license revocation.

But Mr. Kane told The Blade after the meeting that a sanction that severe is unlikely.

Cynthia Carpenter, director of the NRC's enforcement office, said the agency has its concerns, even with FirstEnergy's four nuclear reactors now operating safely.

FirstEnergy has been fined a record $33.5 million for withholding information about the dangerous condition that Davis-Besse was operating under during the fall of 2001, when its reactor head nearly blew apart because of acid that had burned through all but two-tenths of an inch of steel.

That's about the width of a pencil eraser.

Some $28 million of that fine was imposed 18 months ago to settle criminal accusations against the company by the U.S. Department of Justice.

An additional $5.45 million was assessed in 2005 for civil infractions.

Gary Leidich, FirstEnergy's senior vice president for operations and former president of the utility's nuclear division, told Mr. Kane the utility is disappointed, too, about being called to the NRC's headquarters after the effort that went into winning back the agency's confidence during Davis-Besse's record two-year outage.

"While we had our eye on the safety ball, we completely missed [the fact that] these reports were something completely different," he said.

Mr. Leidich said FirstEnergy officials "had some discussion about what this [discrepancy] would look like," but said the utility saw the insurance claim as a matter separate from engineering and operations.

One report in particular, prepared by Exponent Failure Analysis Associates, of Menlo Park, Calif., and Altran Solutions Corp., of Boston, provides a 661-page technical analysis of what happened at Davis-Besse, with a time line that contradicts earlier findings by the NRC and FirstEnergy's own investigation teams.

The "Exponent Report" claims most of the deterioration of Davis-Besse's reactor head occurred within a month of the Feb. 16, 2002, shutdown - not over years as government and utility researchers have said.

By portraying the incident as a fluke instead of neglect, the utility could help justify its insurance claim.

But doing so raised questions about whether other nuclear plants were just as prone to a near-catastrophic event.

Officials have said if the reactor head had blown, radioactive steam would have formed inside a containment building of a U.S. nuclear plant for the first time since the Three Mile Island Unit 2 accident of 1979.

The NRC, after reviewing the report, reaffirmed faith in its new nationwide inspection protocol for nuclear reactor heads.

But the agency yesterday said that does not exonerate FirstEnergy for first debating whether it should have notified the regulator about the report and then waiting to do so.

The other report is a 96-page assessment of the Davis-Besse incident by Roger Matteson, a mechanical engineer and former NRC official with more than 40 years of experience with nuclear power and nuclear weapons.

FirstEnergy characterized that report as "expert testimony" for its insurance claim.

Twelve officials sat at the roundtable during the meeting, six from the NRC and six from FirstEnergy.

Among those from the NRC was Sam Collins, the agency's nuclear reactor regulation chief who - unaware just how dangerous Davis-Besse was in the fall of 2001 - was talked into letting the plant operate six weeks longer than several of his staff members wanted once they suspected a problem was brewing.

"Is it appropriate for the engineering side of FENOC to come to one conclusion and the legal side of FENOC to come to another and for them not to be reconciled?" asked Mr. Collins, now the NRC's Northeast regional administrator.

"What message does that send?" he wondered.

FirstEnergy officials said the utility takes responsibility for what happened, and is not trying to rewrite history.

"We viewed it as a more detailed analysis, " Mr. Leidich said.

"We didn't view it as a change in 'the story' at Davis-Besse," he said.

The $200 million insurance claim is less than a third of the more than $600 million that FirstEnergy spent while the plant was idle between 2002 and 2004 between equipment upgrades, design changes, and lost power.

Contact Tom Henry at:

thenry@theblade.com

or 419-724-6079.