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EA-03-142 - Nuclear Fuel Services, Inc.

SENSITIVE (2.790) INFORMATION REMOVED

October 17, 2003

EA-03-124

Nuclear Fuel Services, Inc.
ATTN: Mr. Dwight Ferguson
President
P. O. Box 337, MS 123
Erwin, TN 37650

SUBJECT: NOTICE OF VIOLATION AND PROPOSED IMPOSITION OF CIVIL PENALTY - $60,000 (NRC INSPECTION REPORT NOS. 70-143/2002-10 AND 70-143/2003-201)

Dear Mr. Ferguson:

This letter refers to the inspections conducted on August 26-27, 2002, and January 6-15, 2003, at your Erwin facility as well as four investigations which were completed during November 2002, March 2003, and April 2003. The purpose of the inspections was to review the circumstances and your followup activities in response to a material control and accounting (MC&A) event that occurred on June 21, 2001. The preliminary results of the inspections were documented in the subject inspection reports and forwarded to you by letters dated September 26, 2002, and February 26, 2003. By letter dated July 2, 2003, Nuclear Fuel Services, Inc., (NFS) was informed of the NRC's intent to conduct a closed, predecisional, enforcement conference to discuss 10 apparent violations involving various aspects of the event.

On July 21, 2003, a closed, predecisional, enforcement conference was conducted in the NRC's headquarters office with you and members of your staff to discuss the apparent violations, their significance, root causes, and your corrective actions. The list of conference attendees and information presented at the conference are included as Enclosures 4, 5, and 6 to this letter. Enclosures 5 and 6 contain sensitive information associated with the physical protection and MC&A programs at NFS's Erwin facility, and therefore, in accordance with 10 CFR 2.790(d), they will not be made publicly available.

Based on the information developed during the inspection and the information you provided during the conference, the NRC has determined that 10 violations of NRC requirements occurred. The violations are cited in the enclosed Notice of Violation and Proposed Imposition of Civil Penalty (Notice) and the circumstances surrounding them are described in detail in the subject inspection reports. Seven violations are identified in Part I of the Notice and involve a substantial amount of Category 1A Strategic Special Nuclear Material (SSNM) that went unaccounted for at your Erwin facility for a period of approximately 6 weeks beginning in June of 2001.

The NRC considers the violations in Part I of the Notice a significant breakdown in NFS's implementation of its MC&A system. Because the SSNM was located in a secure storage vault during the time in question, although unknown at the time, no actual consequences occurred as a result of this event. Because there were no actual consequences, the NRC did not determine this event to be significant from the standpoint of public health and safety. However, the NRC considers the potential consequences of this matter to be significant. In this case, NFS was unaware and had no record that the material had been placed in the secure storage vault for a period of 6 weeks. Notwithstanding the facts that the material remained in a secure area and that security and safeguards measures were in place to preclude the removal of the SSNM from the site, the NRC places considerable importance on the implementation of an effective MC&A program that is capable of accounting for SSNM at all times. Given the interrelationship of the violations contained in Part I of the Notice, the NRC has concluded that these violations should be characterized together as a Severity Level III problem in accordance with the "General Statement of Policy and Procedures for NRC Enforcement Actions" (Enforcement Policy), NUREG-1600.

The Notice (Enclosure 1) contains sensitive information associated with the physical protection and MC&A programs at NFS's Erwin facility, and therefore, in accordance with 10 CFR 2.790(d), the Notice will not be made publicly available. In addition, NFS provided supplemental information by letters dated July 29 and August 1, 2003, regarding the violations and NRC's application of the Enforcement Policy in this case. The NRC's review of this supplemental information is included as Enclosure 2 and is also being withheld from public disclosure in accordance with 10 CFR 2.790(d).

In accordance with the Enforcement Policy, a base civil penalty in the amount of $30,000 is considered for a Severity Level III problem. Because your facility has been the subject of escalated enforcement action within the last 2 years,(1) the NRC considered whether credit was warranted for Identification and Corrective Action in accordance with the civil penalty assessment process in Section VI.C.2 of the Enforcement Policy.

Regarding the factor of Identification, the NRC concluded that NFS's initial review of the event was less than adequate in terms of identifying the magnitude and scope of MC&A deficiencies, and the subsequent issues were not identified as a result of a self-monitoring effort. As such, the NRC concluded that credit was not warranted for the factor of Identification.

NFS presented the details of its corrective actions at the predecisional enforcement conference conducted on July 21, 2003. The specifics of NFS's corrective actions are being withheld from public disclosure because of the sensitive nature of the information. However, these actions included those previously documented in NRC Confirmatory Action Letter (CAL) No. 2-02-004 dated October 15, 2002, those documented in NFS's response to the CAL dated October 29, 2002, and those discussed at the conference. The NRC has concluded that the corrective actions implemented and planned prior to the predecisional enforcement conference were comprehensive. However, the promptness of the corrective actions was not commensurate with the significance of the violations that are the subject of this enforcement action nor with the information available to the licensee. The details associated with the NRC's determination regarding the comprehensiveness and promptness of corrective actions are included in Enclosures 2 and 3. Based on the above, the NRC concluded that credit was not warranted for the factor of Corrective Action.

Therefore, to emphasize the importance of controlling licensed material, in recognition of your previous escalated enforcement action, and to emphasize the importance of both prompt identification and prompt correction of violations, I have been authorized, after consultation with the Director, Office of Enforcement, to issue the enclosed Notice with a civil penalty assessed at twice the base amount, for a total of $60,000, for the Severity Level III problem. You should also be aware that similar violations in the future could result in further escalated enforcement action. Issuance of this Notice constitutes escalated enforcement action which may subject you to increased inspection effort.

The three violations identified in Part II of the Notice are of lesser significance and are each categorized at Severity Level IV in accordance with the Enforcement Policy.

The NRC has concluded that information regarding the reason for the violations, the corrective actions taken and planned to correct the violations and prevent recurrence, and the date when full compliance was achieved is adequately addressed in the NRC's CAL No. 2-02-004 dated October 15, 2002, in NFS's response to the CAL dated October 29, 2002, in NRC Inspection Report Nos. 70-143/2002-10 and 70-143/2003-201, in the information NFS presented at the enforcement conference, and in this letter. Therefore, you are not required to respond to the violations documented in this letter unless the description herein does not accurately reflect your corrective actions or your position. In that case, or if you choose to provide additional information, you should follow the instructions specified in the enclosed Notice.

In accordance with 10 CFR 2.790 of the NRC's "Rules of Practice," a copy of this letter and Enclosures 4 and 7 will be available electronically for public inspection in the NRC Public Document Room or from the Publicly Available Records (PARS) component of NRC's document system (ADAMS). ADAMS is accessible from the NRC Web site at the Public NRC Library. As previously stated, Enclosures 1, 2, 3, 5, and 6 contain sensitive information associated with the physical protection and MC&A programs at NFS's Erwin facility, and therefore, in accordance with 10 CFR 2.790(d), they will not be made publicly available. The NRC also includes Issued Significant Enforcement Actions on its Web site.

If you have any questions regarding this matter, please contact Douglas M. Collins, Director, Division of Fuel Facility Inspection, Region II, at 404-562-4700.

    Sincerely,
    /RA/
    Luis A. Reyes
Regional Administrator

Docket No. 70-143
License No. SNM-124

Enclosures:
1. Notice of Violation and Proposed Imposition of Civil Penalty -10 CFR 2.790 Information
2. NRC Review of Supplemental NFS Information and Comments NFS Raised at the Enforcement Conference -10 CFR 2.790 Information
3. NRC Determination Regarding Promptness and Comprehensiveness of Corrective Actions -10 CFR 2.790 Information
4. List of Attendees
5. Material Presented by NFS - 10 CFR 2.790 Information
6. Material Presented by NRC - 10 CFR 2.790 Information
7. NUREG/BR-0254, Payment Methods

cc w/encls:
B. Marie Moore
Vice President
Safety and Regulatory Management
Nuclear Fuel Services, Inc.
P. O. Box 337, MS 123
Erwin, TN 37650

cc w/o encl. 1, 2, 3, 5, and 6:
Debra Shults, Manager
Technical Services
Division of Radiological Health
Electronic Mail Distribution

SENSITIVE (2.790) INFORMATION REMOVED

1. A Severity Level III violation was issued on September 24, 2001 (EA-01-098).

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