NRC and Regulatory Capture

My blog last week got some interesting reactions regarding the larger picture of regulatory issues. I chose to look at quality as it is an area where significant changes in the broader context of quality control have occurred since those regulations were written and an update is overdue. This is also completely within the control of the NRC.

However, it brings up another question. Many have looked at what happened at Fukushima and concluded that the regulator was “captured” by the industry and was no longer an effective independent regulator. Some have accused the NRC of the same problem. Regulatory capture is a real and legitimate concern for all regulators and industry. What are the causes of such “capture”?

Let’s look at each scenario and determine whether the NRC might be affected.

The regulator is also responsible for promotion.

That was the direct cause for demise of the Atomic Energy Commission in the 1970’s. In the original design of the Atomic Energy Act, the Atomic Energy Commission was responsible for both regulation of nuclear power and its promotion. Interestingly, that was the model for the regulation of oil drilling until after the Deepwater Horizon oil spill in 2010.

Today, the NRC has NO role in promoting nuclear power in anyway. They communicate about the technology and their role in oversight. They prefer to present themselves as a competent regulator, which has sometimes been interpreted as promoting the industry.

The regulator and industry are providing jobs for each other

In essence, the regulator is either from industry directly, or guaranteed a position within the industry after departing the regulator. In Japan, TEPCO and NISA, a position on TEPCO’s board of directors was known as “the chair of heaven” and was guaranteed to be given to departing senior members of NISA.

In general, the NRC rarely hires from industry in any place other than entry level review positions. Commissioners also very rarely come from industry. The current five commissioners have virtually NO experience in the nuclear industry. They come from government (DOE, military, or congressional aides) or academia. Former commissioners have frequently gone back to academia or retired. Occasionally, they have become consultants, but with rare exception, NRC commissioners, or other high level staff, have not ended up in high level industry positions. Those exceptions have been looked at quite carefully (Richard Meserve, for example) and, to date, allegations of inappropriate ties have not been borne out by the Justice Department.

Expertise in the regulation can be powerful in assuring compliance within the industry. Putting former regulators in positions of authority can be helpful in enforcing compliance. In reverse, industry expertise in how a technology really works in practice can allow more effective regulation. However, guaranteed positions of employment going either way is clearly problematic.

Payment by industry to Regulator

The industry pays fees and review costs and funds a large fraction of the NRC’s operating budget. From the NRC’s website in response to a question about the oversight of NFS:

Do NRC fees to the licensee create a conflict of interest in regards to fair regulation? Ninety percent of the NRC’s funding is recovered from the plants that it regulates

No. The NRC operates with funds approved by the U.S. Congress that come directly from the U.S. Treasury. The fees collected have no affect [sic] on the approved NRC budget. The fees paid by licensees go directly to the U.S. Treasury …

While the NRC does not benefit directly from the fees paid by industry, clearly its budget is tied to receiving those fees. The separation of fee payment and service rendered (license maintained, or inspections passed) does prevent the NRC from seeing any one licensee as more important or more valuable than another. In fact, some of the fees assessed are directly related to having issues with the licensees. The more issues a facility is having, the more hours of inspection the NRC requires, which results in more fees.

More problematic is the area of new technology. The NRC has so little funding from the government that isn’t tied to income from industry that the efforts to develop regulation for new technologies (like SMR, or Gen IV) will have to come from industry itself. This process is definitely fraught with risk that the NRC may be overly influenced by the industry itself. While the funds do not flow directly to the NRC, they are clearly aware of their own funding sources.

Fundamentally, the problem with this arrangement is the APPEARANCE of regulatory capture. The question is – Do other oversight agencies operate the same way? And do they have any issues?

Conclusion

There is no direct evidence of industry capture by the NRC. They consult with industry on new regulation, but they also encourage the public to weigh in on these regulations. However, inherently, the NRC is parasitic on the industry. If the nuclear industry were to be abandoned entirely, much of the purpose for the NRC would immediately end and the commission’s role would be significantly reduced.

Two areas that should be monitored and considered are the potential for cross hiring to contaminate the independence of the commission and the issue of funding for specific areas of responsibility within the NRC.

How do other agencies get funding and hire and maintained a qualified, yet independent staff?