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i executive offices suite 90C . three park central .1515 arapahoo . denver, colorado 8 4 | qg,

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Q c, S. Nuclear Regulatory CommidslonJgy 21 W81 > -9

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I7915 Eastern Avenue |-

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Silver Springs, Maryland 2091'0,?, aw LS:CHaqk'm

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Re: License SUA - 1358 ""84 U

Dear Mr. Scarano: N_.6

During the last several days, we have had several dis-cussiens with Mr. Gillen regarding the surety for the recla-mation and decommissioning of the Energy Fuels' White MesaMill. As you are aware, before the commencement of theoperations of the Mill in May, 1980, Energy Fuels posted aLetter of Credit in the amount of $6,200,000.00 to insurereclamation and decommissioning. This Letter of Credit had aterm of one year to expire on May 16, 1981. Posting the Letterof Credit was the alternative of last resort since it wasexpensive and carried with it onerous security requirements.

Energy Fuels had originally negotiated a surety arrange-ment through the State of Utah, Division of Oil, Cas andMining, which arrangement was subsequently determined to beunacceptable to the NRC. Because of the NRC rejection, theState of Utah declined any further involvement in the suretyprocess. Therefore, Energy Fuels attempted to obtain thesurety from corporate entities, i .e . insurance companies.Through its insurance agents, Energy F Jels contacted The NorthRiver Insurance Company, U.S. Fire Insurance Co., Fidelity andDeposit Company of Maryland, Continentcl Casualty InsuranceCo. (CNA) and the American International Group Insurancc(AIG). All of these efforts were without success and led tothe interim solution of a Letter of Credit.

As explained to the NRC staff, we have, during the pastyear, bcan diligently attempt'79 to obtain a corporate suretybond to replace the Letter of Credit. In addition to resub-mitting our proposals to the insurance companies contactedduring the first effort, we al 7 contacted European sureties.One of these, the Winterthur I urance Company of Winterthur,Switzerland, remains intereste i in posting the bond throughits U.S. affiliate, CNA. Alth agh no firm commitment to bondhas been made, at present it appears that Winterthur would

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." Mr. RoJ3 A. ScOrcn3

June 4, 1981-

Page Two.c

| accept 100% of the reinsurance risk. It should be mentionedthat the continued ' interest of Winterthur is a specialsituation related to the interest of two Swiss utilities inproduction from the White Mesa Mill, All of the remaininginsurance. companies except AIG have again declined to post the

; surety bond. AIG has yet to.give us a final answer.

|- Although the insurance companies are reluctant to discuss'

their reasons for denial of the bond, we have been told,' without much~ explanation, that the uncertainties of the mill

decommissioning and reclamation regulations are a major con-| sideration. This is difficult for us to understand since we,

in conjunction with your staff, offered to make certain theobligations during the tecm of the present license. Theuncertainty of License Conditions No. 24 and 27, as. theyrelate to the Generic Environmental Impact Statement, have

I also been identified as serious concerns of the sureties. If,as you suggest, the reference to the Generic EnvironmentalImpact Statement in these conditions could be removed, the

; surety companies may be more receptive. At least we are! willing to take another run at them on such a basis.. An! example of the rationale of the insurance companies is con-

tained in the letter of.the U.S. Insurance Group representing| both the Norch River Insurance Company and the U .S . Fire

Inaurance Company to our agent, a copy of which is attachedfor your information as Exhibit A.

Energy Fuels also has been in contact with other licen-sees of the NRC in an effort to determine what these companieshais done to provide surety. It appears that the problem ofobtaining a corporate surety bond is not unique to EnergyFuels but is faced by a number of companies and especiallythose companies which are in Non-Agreement States and thus|

i required to bond directly to the NRC. Companies which bonddirectly to the Agreement States such as Wyoming seem to havehad more success. We are not sure why this is so but are doingour best to look into the matter. Obviously, NRC assistancehere could be of value.

Alternative methoda of providing surety for the reclama-tion and decommissioning obligations such as Letters of Credit ,

are now equally difficult to obtain. The uranium market, asyou know, is in a severe state of depression. Thus, as Mr.Charles Brown, Vice President of Finance of Energy Fuels,explained to Mr. Gillen, financial institutions are notinclined to issue Letters of Credic without cash or cashequivalents posted as collateral. With borrowing ratesexceeding 20% and cash in short supply because of thedepressed condition of the uranium market, providing a cash orcash equivalent as collateral is not feasible in today'seconomic climate.

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Mr. Ross A. Scarano-.

June 4, 1981'

Page Three

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L Energy Fuels is not approaching the bonding' requirement|~ cavalierly. We will continue to pursue diligently all methods

| of posting, surety for the' reclamation and decommissioning| obligations. In this. regard we invite the active participa- -

! tion and assistance of the NRC. Moreover, we would urge,that| the NRC, revisit its regulations, as other federal agencies! such as the_ Office of Surface Mining have done, to recognize

the impact of the present bonding regulations on the industryi

and,-in particular,,on independent operators, to the end that| "self bonding" is allowed as a reasonable alternative to the! present requirements. We would certainly appreciate your

comments and thoughts on this difficult matter.

' - Sin rely,

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> Gerald W. GrandeyVice President-Legal ffairs

I - GWG/kcEnclosure

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| VIA FEDERAL EXPRDM|

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EXHIBIT A. c. . e . c . 524 West swptman si,ce,i Frecies, Imeos 61032-' '

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December 9, 19R< -

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Mr. paul Smith'

Coltunbine Agency,

P. 0. Box 997 .Steamboat Springs, Colorado 80477* *

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-Dear paul:.

: Re: Energy Fuels Huclear, Inc.,Hanksville/Blanding Mill-

Uc have annlyzed all information furniched and feel that wearn still beir.g asked to_ bond an obligation with very few.certainities and many uncertainties. The key uncertainitiesare as follows:

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1 The obligation is basically an~ Engineers Report! rathe'r than rules and regulations established by the ,

| H.R.C. Eventually the Nuclear Regulatory Commission must| establish specifications. Once that happens we could be;- on a bond based on an engineers report, but drastically| changed'as to its guarantees because of N.R.C. requirements.| As :/ou of course know, various states have established -

| specific requirements on reclamation activities and the'

N.it.C. should do the same.

| 2. The-band, although cancellable or non-renewable,'

will be in effect for approximately 15 years. We are<

concerned that the mill could be sold, but we would stillbe liable for decommissioning. The costs may be much

: greater than anticipated and the-operating firm may be ofj much less stature than Energy Fucls.

3. There are apparently appeals pending which could _

have an adverse effect on the trailings cells reclamation.

4 There arc.some regulations in the Uranium MillTailings Radiation Control act of 1978 ' hich may effectw

ic the bond. ,!

5 We are concerned that requirements of the H.R.C.may be subordinate to various state and other federalagencies enacted regulation.in the future. j

6. --We feel the forfeiture provision could be extremely . ',

: derogatory to a good relationship between us and Energy Fuels.

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u e sw n f.e*sm.m.c m ar it. No m n . ens,.we comew , wniowsm t,e mis..me emo, mmwen. ins,.xecmay.n,- ,,p 6 p, . <-- . -1

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, , - Page 21.D o Paul Smith~

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, December 9, 1980,

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Even with the above items clearly defined ue feel 100,4collateral vould he required. This would not be advantageousto the principal cinee that collateral can be pledged asperconal curety and a bond premium unnecessary.

Paul, I realize everyone concerned has cpent an awfully lotof time on this matter and I regret we could not get the jobdone.

Very truly yours,-

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U"J. D. llamlet

Wectern ReCional Office: x,

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