Deferred Prosecution Agreement Between the United States of America and FirstEnergy Nuclear Operating Company
EXHIBIT
99.2
Deferred
Prosecution Agreement Between the United States of America
and
FirstEnergy
Nuclear Operating Company
The
United States
Attorney’s Office for the Northern District of Ohio and the Environmental Crimes
Section of the Environment and Natural Resources Division of the Department
of
Justice (collectively the “Department”), on behalf of the United States of
America, and the FirstEnergy Nuclear Operating Company (“FENOC”), pursuant to
authority granted by its Board of Directors in the form of a Board Resolution
(Attachment A), hereby enter into this Deferred Prosecution Agreement (the
“Agreement”). The United States acknowledges FENOC’s extensive corrective
actions at Xxxxx-Xxxxx Nuclear Power Station (“Xxxxx-Xxxxx”), FENOC’s
cooperation during investigations by the Department and the U.S. Nuclear
Regulatory Commission (“NRC”), FENOC’s pledge of continued cooperation, FENOC’s
acknowledgement of responsibility for the behavior of its employees, and its
agreement to pay a monetary penalty.
Acceptance
of Responsibility for Violation of Law
1. FENOC
admits that
the Department can prove that from September 3, 2001 through November 28, 2001,
FENOC employees, acting on its behalf, knowingly made false representations
to
the NRC in the course of attempting to persuade the NRC that Xxxxx-Xxxxx was
safe to operate beyond December 31, 2001, as set forth in detail in the
Statement of Facts attached hereto as Attachment B (the “Statement of
Facts”).
2. FENOC
agrees to pay
a monetary penalty of $28 million. A portion of this amount may be directed
to a
community service project, with the agreement of both parties. None of the
penalty shall be tax deductible, nor shall any of it be submitted as allowable
costs in a Public Utility Commission rate-making proceeding.
Deferral
of Prosecution
3. In
consideration of
FENOC’s entry into this Agreement and its commitment to (a) accept and
acknowledge responsibility for its conduct; (b) cooperate with the United States
and the NRC as set forth in Paragraph 9; (c) make the payment specified in
Paragraph 2; (d) comply with Federal criminal laws; and (e) otherwise
comply with all of the terms of this Agreement, the Department, absent a
material breach of this Agreement, will refrain from seeking an indictment
or
otherwise initiating criminal prosecution of FENOC for all conduct related
to
the conduct described in the attached Statement of Facts.
4. If
FENOC materially
breaches its obligations described herein, the Department may prosecute FENOC
for any violations known to it at that time, including the conduct described
in
the Statement of Facts. Determination of breach shall be governed by Paragraph
12 of this Agreement.
5. FENOC
agrees that
in any such prosecution the Statement of Facts shall be admissible in
evidence.
6. FENOC
agrees to
toll the running of the criminal statute of limitations during the term of
this
Agreement with respect to all conduct related to the conduct described in the
Statement of Facts. FENOC expressly intends and hereby does waive its rights
with respect to that period, including any right to make a claim premised in
the
statute of limitations. FENOC also waives any claim concerning pre-indictment
delay, including but not limited to, speedy trial rights under the Sixth
Amendment of the United Xxxxxx Xxxxxxxxxxxx, Xxxxx 00 Xxxxxx Xxxxxx Code,
Section 3161, Federal Rule of Criminal Procedure 48(b), and any applicable
Local
Rules for the period during which this Agreement is in effect.
-2-
7. FENOC
agrees to
waive its constitutional right to presentment of an indictment to a grand jury,
and to allow the United States to proceed against it by filing an Information
with regard to all conduct related to the conduct described in the Statement
of
Facts.
8. FENOC
agrees that
it shall not, through its attorneys, agents, or employees, make any statement,
including in litigation, contradicting the Statement of Facts or its
representations in this Agreement. Within 48 hours after receipt of notice
by
the Department of such contradictory statement, FENOC shall repudiate such
statement in writing, both to the recipient and to the Department. FENOC
consents to public release by the Department of such repudiation.
Cooperation
with Criminal and Administrative Proceedings
9. FENOC
has
cooperated and will continue to cooperate with the United States and the NRC
in
all criminal and administrative investigations and proceedings related to the
conduct described in the attached Statement of Facts. In any further inquiry,
FENOC agrees that its continuing cooperation shall include the
following:
9.1 FENOC
will
completely, truthfully and promptly disclose all information in its possession
related to the matters addressed in the attached Statement of Facts about which
the Department and the NRC may inquire, including all information about the
activities of FENOC, present employees, former employees, consultants, and
agents.
9.2 FENOC
will provide
the Department and NRC any information and documents of which it becomes aware
that may be relevant to further criminal and administrative investigations
and
proceedings related to the conduct described in the Statement of
Facts.
-3-
9.3 FENOC
agrees to
waive claims of attorney work-product protection by providing copies of witness
interview summaries previously disclosed to the United States for inspection
in
the event that the United States brings prosecutions of individuals. By
producing materials pursuant to this paragraph, FENOC does not waive the
attorney-client privilege or the work-product protection, or other applicable
privileges as to third parties.
10. FENOC
agrees to
endorse any motions filed by the United States seeking disclosure of grand
jury
materials to the NRC pursuant to Rule 6(e)(3)(E) for the use of administrative
proceedings.
Term
of
the Agreement
11. The
term of the
Agreement shall commence on the date of execution and run through December
31,
2006.
Breach
of the Agreement
12. Should
the
Department determine that FENOC has violated this Agreement, the Department
shall provide notice to FENOC of the basis for that determination and allow
FENOC 30 days to demonstrate that no breach occurred, that the breach has been
cured, or that the breach does not merit further action by the Department.
If
the Department determines that FENOC has materially breached its obligations
under the terms of this Agreement, the Department may file an Information
without prior judicial approval. FENOC will have no right to seek judicial
action to enjoin or otherwise prevent the filing of an Information. If criminal
prosecution is initiated by the Department on the basis of a claimed material
breach of this Agreement, FENOC shall not be barred from moving to dismiss
the
action on the ground that it has not materially breached this
Agreement.
-4-
Limits
of this Agreement
13. It
is understood
that this Agreement is binding on the Department, but specifically does not
bind
other Federal agencies, state or local law enforcement agencies, licensing
authorities, or regulatory authorities. If requested by FENOC, the Department
will bring to the attention of any such agencies the cooperation of FENOC and
its compliance with its obligations under this Agreement.
Integration
Clause
14. This
Agreement sets
forth all the terms of the Deferred Prosecution Agreement between FENOC and
the
United States. No modifications or additions to this Agreement shall be valid
unless they are in writing and signed by the parties to this
Agreement.
Xxxx
Xxxxx
United
States
Attorney
Northern
District
of Ohio
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By:
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_____________________________________
|
Xxxxxxxxx
Xxxxxxx
Assistant
United
States Attorney
_____________________________________
Xxxxxxx
Xxxxx
Senior
Trial
Attorney
Environmental
Crimes Section
Environment
and
Natural Resources Division
_____________________________________
Xxxxxx
X.
Xxxxxxxxxx
Trial
Attorney
Environmental
Crimes Section
Environment
and
Natural Resources Division
On
behalf of the United States of America
-5-
By:
_________________________________
Xxxx
X.
Xxxxxxx
President
and Chief
Nuclear Officer
FirstEnergy
Nuclear
Operating Company
00
Xxxxx Xxxx Xxxxxx
Xxxxx,
XX
00000
_________________________________
Xxxxxxx
X.
Xxxxxxx
Xxxxxx,
Xxxxx &
Xxxxxxx
0000
Xxxxxxxxxxxx
Xxxxxx, XX
Xxxxxxxxxx,
X.X.
00000
On
behalf of FENOC
Date
of
Execution: _________________________
Attachments:
Resolution
(Attachment A)
Statement
of Facts
(Attachment B)
-6-
Attachment A
Resolution
of the
Board of Directors of FirstEnergy Nuclear Operating Company, Inc.
(FENOC)
Upon
motion duly
made, seconded and unanimously carried by the affirmative vote of all the
Directors present, the following resolutions were adopted on November 9, 2005:
WHEREAS,
FENOC has
been engaged in discussions with the United States Attorney’s Office for the
Northern District of Ohio and the Environmental Crimes Section of the Department
of Justice (the “United States”) in connection with an investigation being
conducted by the United States into activities of FENOC employees and managers
who prepared responses to an inquiry by the Nuclear Regulatory
Commission;
WHEREAS,
the Board
of Directors of FENOC has determined that it is in the best interests of FENOC
to enter into the Deferred Prosecution Agreement that the Board of Directors
has
reviewed with counsel representing FENOC;
NOW,
THEREFORE, BE
IT RESOLVED that the Board of Directors of FENOC consents to the resolution
of
the discussions with the United States by entering into the Deferred Prosecution
Agreement in substantially the same form as reviewed by the Board of Directors
and as attached hereto as Exhibit A; and
BE
IT FURTHER RESOLVED that the Board of Directors of FENOC authorizes management
and counsel representing FENOC to execute the Deferred Prosecution Agreement
on
behalf of FENOC and to take any and all other actions as may be necessary or
appropriate, and to approve the forms, terms, or provisions of any agreements
or
other documents as may be necessary or appropriate to carry out and effectuate
the purpose and intent of the foregoing.
A
- 1
In
support of a deferred prosecution agreement, the FirstEnergy Nuclear Operating
Company (FENOC), through its board of directors, admits that, for all times
relevant to the agreement, the following facts are true:
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1.
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FENOC
operated the Xxxxx-Xxxxx Nuclear Power Station on the southwestern
shore
of Lake Erie in Ohio. FENOC held a license, issued by the Nuclear
Regulatory Commission (NRC) to operate this pressurized water reactor
(PWR). The Xxxxx-Xxxxx plant used nuclear fission to heat water to
approximately six hundred degrees Fahrenheit. At that temperature,
the
reactor coolant water, which was sealed inside a reactor pressure
vessel,
reached a pressure of approximately two thousand pounds per square
inch.
The reactor coolant was then used to super-heat steam to drive
electricity-generating turbines.
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2.
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At
Xxxxx-Xxxxx, reactor operators used two systems to control the rate
of
fission. For coarse control, they raised or lowered vertical control
rods
in the reactor core to absorb the neutrons that drive the fission
reaction
and reactor power. When the rods were fully inserted, the fission
reaction
became non-self-sustaining. For fine fission and reactor power control,
operators also added (or removed) boric acid from the reactor coolant
water. Like the control rods, the boric acid also absorbed neutrons.
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3.
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The
machinery
that raised and lowered the control rods was attached to the reactor
vessel head, which was removed when the reactor was being refueled.
Control rod drive mechanism nozzles penetrated the dome-shaped head
and
the control rods were raised and lowered through those nozzles. The
Xxxxx-Xxxxx reactor vessel head had sixty-nine nozzles. These nozzles
were
surrounded by a large cylindrical service structure, which was welded
to
the head. Because of this configuration, the only way to inspect
the
nozzles at Xxxxx-Xxxxx was by inserting a camera through inspection
ports
located around the bottom of the service structure.
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4.
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After
many
years of service, the control rod drive mechanism nozzles could develop
cracks. Although several PWR licensees had found axial nozzle cracks
in
the early 1990s, they were of less concern than circumferential cracks.
In
2001 several PWR licensees found circumferential cracks in their
reactor
vessel head nozzles. Circumferential cracks also could grow around
a
nozzle over time. If they were not detected and repaired first, a
crack
could reach a critical size and allow the complete break of a nozzle.
A
broken nozzle could eject from the reactor head, leaving a hole through
which reactor coolant could escape into the containment building.
PWRs
were designed to withstand such a “loss of coolant accident” and to
prevent off-site radiological consequences. Nevertheless, such an
event
would stress a plant’s safety systems.
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5.
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For
several
years prior to the summer of 2001, Xxxxx-Xxxxx employees had failed
to
properly implement the plant’s Boric Acid Corrosion Control and Corrective
Action programs. These programs were designed to ensure that Xxxxx-Xxxxx
employees discovered boric acid leaks, identified their sources,
documented their extent, and dealt with any corrosion properly. Since
1996, some Xxxxx-Xxxxx employees knew that boric acid deposits were
left
on the reactor pressure vessel head from outage to outage. Some
Xxxxx-Xxxxx employees also knew that the service structure surrounding
the
reactor pressure vessel head impeded inspection of some of the nozzles.
Inspection and cleaning steps under the Boric Acid Corrosion Control
program were not performed properly during the refueling outages
in 1996,
1998, and 2000. Instead, Xxxxx-Xxxxx engineers prepared analyses
justifying operation without removing all of the boric acid.
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B
-1
Attachment
B
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6.
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In
August
2001, following reports of circumferential nozzle cracks at several
PWRs
in the United States, the NRC issued Bulletin 2001-01. This Bulletin
required the operators of PWRs, including FENOC, to provide information
concerning how the potential circumferential cracking of reactor
vessel
head nozzles was addressed at their plants. The information each
PWR
operator was required to provide depended upon several factors discussed
in the Bulletin, including whether there was a prior history of nozzle
cracking or leaking at the plant and whether the plant’s design and
operating history made it more or less susceptible to nozzle cracking.
With regard to Xxxxx-Xxxxx, FENOC was required to report on (1) the
susceptibility of the plant to nozzle cracking, (2) the steps FENOC
had
taken to detect it, and (3) FENOC’s plans for inspecting the reactor
vessel head nozzles in the future. Because FENOC did not plan to
inspect
the Xxxxx-Xxxxx reactor vessel head for signs of cracking by December
31,
2001, the Bulletin required FENOC to explain how it would still meet
specified regulatory requirements during the period of continued
operation
until the inspections were to be performed. Pursuant to section 50.9
of
Title 10 of the Code of Federal Regulations, all submissions of
information to the NRC, including responses to bulletins, were required
to
be “complete and accurate in all material respects.”
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7.
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At
the time
the Bulletin was issued, the next refueling outage at Xxxxx-Xxxxx
was
scheduled to begin in late March 2002. Rescheduling of the refueling
outage was dependent on many factors, including delivery date of
the new
nuclear fuel, energy remaining in the used nuclear fuel within the
reactor, replacement power costs, and availability of needed contractors
and equipment. In the fall of 2001, Xxxxx-Xxxxx personnel had estimated
that if the Company had to perform a nozzle inspection and refueling
outage beginning in January 2002, then that outage would last 45
days and
the Company would incur additional expenditures as compared to the
scheduled 34-day refueling outage beginning at the end of March 2002.
The
primary contributor to the additional expenditure was higher replacement
power costs during the 45-day outage starting in January.
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8.
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In
September
2001, FENOC employees at Xxxxx-Xxxxx responded to the Bulletin. Over
the
three months that followed, Xxxxx-Xxxxx employees submitted five
“Serial
Letters” to the NRC, responding to the Bulletin. These letters were
numbered 2731, 2735, 2741, 2744, and 2745. In these letters, Xxxxx-Xxxxx
employees provided technical arguments to support FENOC’s position that it
could continue to operate safely and in compliance with NRC regulations
until March of 2002.
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9.
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The
Serial
Letters included the following false statements:
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9.1.
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A
statement
in Serial Letter 2731 that “inspections of the [reactor pressure vessel
head] are performed … in accordance with [Xxxxx-Xxxxx Nuclear Power
Station] procedure NG-EN-00324, ‘Boric Acid Corrosion Control Program.’”
This statement was false. An inspection to determine whether boric
acid
was causing corrosion was one of the steps of the Boric Acid Corrosion
Control Program. An engineer who inspected the reactor pressure vessel
head in 1996 noted that “steps outlined in NG-EN-00324 Rev. 1 (Boric Acid
Corrosion Control Program) cannot be fully implemented.” The same engineer
reviewed and approved Serial Letter 2731 in the Fall of 2001.
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B
-2
Attachment
B
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9.2.
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A
statement
in Serial Letter 2735 that “in 1996, during [the 10th refueling outage],
the entire [reactor pressure vessel] head was inspected.” This statement
was false. In 1996, this same engineer conducted a videotaped inspection
of the reactor vessel head which demonstrated that restrictions imposed
by
the location and size of the inspection ports prevented an inspection
of
the entire reactor pressure vessel head. In 2001, another engineer
reviewed that 1996 videotape. Both engineers reviewed and approved
Serial
Letter 2735.
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9.3.
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A
statement
in Serial Letter 2741 that in the spring of 2000, Xxxxx-Xxxxx personnel
had “performed a head cleaning to allow for a quality [Reactor Pressure
Vessel Head] bare metal visual inspection in April 2002.” This statement
was false in that the entire head had not been cleaned. The engineer
who
performed the head inspection in 2000 knew that substantial deposits
of
boric acid had been left on the head at the end of the 2000 outage.
Other
Xxxxx-Xxxxx employees received a consultant’s letter in September 2001
that described substantial deposits of boric acid on the center top
area
of the head of the reactor. Some of these employees reviewed and
approved
Serial Letter 2741.
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9.4
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A
statement
in Serial Letter 2745 that, “during 10 RFO, in spring of 1996, the entire
head was visible so 100% of the [control rod drive mechanism] nozzles
were
inspected with the exception of four nozzles in the center of the
head.”
This statement was false for the reasons stated above, at 9.2. Serial
Letter 2745 contained a probabilistic risk assessment purporting
to show
that Xxxxx-Xxxxx’x core damage frequency was acceptably low, such that an
immediate inspection was unnecessary. The risk assessment was based,
in
part, on the assumption that the 1996 inspection was as described.
The
engineer who performed the incomplete inspection in 1996 (described
above,
at 9.2) reassured the author of the probabilistic risk assessment
that
this assumption was correct.
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B
-3
U.S. Department of Justice
Environment
and Natural Resources Division
January
13,
2006
Xxxxxxx
X.
Xxxxxxx
Xxxxxx,
Xxxxx &
Xxxxxxx
0000
Xxxxxxxxxxxx
Xxx., XX
Washington,
D. C.
20004
Re:
Administration
of Deferred Prosecution Agreement penalty
Dear
Xx.
Xxxxxxx:
Paragraph
number two
of the Deferred Prosecution Agreement that FENOC and the Department will execute
is a monetary penalty provision:
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FENOC
agrees
to pay a monetary penalty of $28 million. A portion of this amount
may be
directed to a community service project, with the agreement of both
parties. None of the penalty shall be tax deductible, nor shall any
of it
be submitted as allowable costs in a Public Utility Commission rate-making
proceeding.
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This
letter
describes the procedure for paying the penalty and memorializes the agreement
between FENOC and the Department regarding community service
projects.
We
have agreed that
$4,350,000 of the $28,000,000 penalty is to be directed to community service
projects. Therefore, $23,650,000 should be transferred to the United States
treasury upon execution of the deferred prosecution agreement, but not before
January 20, 2006. The Justice Management Division of the U.S. Department of
Justice has made arrangements for that payment, by wire transfer. The
instructions for completing the transfer are set out in Attachment
A.
The
remaining
$4,350,000 is to be paid to the organizations set forth in Attachment B. FENOC
and the Department agree that the payments for these projects are community
service by FENOC, as contemplated in the Deferred Prosecution Agreement. FENOC
agrees that, whenever it makes or publishes statements concerning the projects
set forth in Attachment B, it shall include a statement explaining that the
payments were made pursuant to a Deferred Prosecution Agreement entered into
with the Department of Justice.
Upon
making the
payments set forth in Attachment B, FENOC shall provide the Department with
receipts for those payments. If, for whatever reason, FENOC is unable to make
any of the payments set forth in Attachment B within sixty days of the execution
of the Deferred Prosecution Agreement, then all unpaid amounts shall be paid
to
the United States treasury, by wire transfer, as set out in Attachment
A.
B
-4
The
parties to the
Deferred Prosecution Agreement agree that this letter will be attached to,
and
be a part of, the Deferred Prosecution Agreement and their representatives
have
initialed this letter to so indicate. Please do not hesitate to call me if
you
have any questions regarding these procedures.
Very
truly
yours,
Xxxxxx
X.
Xxxxxxxxxx
Trial
Attorney
Xxxxxxx
X. Xxxxx
_____
Xxxxxx
X. Xxxxxxxxxx
_____
Xxxxxxxxx
X. Xxxxxxx
_____
Xxxx
X. Xxxxxxx
_____
Xxxxxxx
X. Xxxxxxx
_____
B
-5
Attachment
B
For
Ottawa County
local endeavors:
Ottawa
National
Wildlife Refuge, through the affiliated not-for-profit, the Ottawa National
Wildlife Refuge Association, which is chartered for support of the refuge,
for
wetlands preservation ($800,000) and toward the construction of a Visitors
Center ($550,000).
Ottawa
County
Emergency Management Association, in support of communications systems upgrade
and related needs, to better equip local responders ($500,000).
For
Northwest
Ohio Regional Initiatives:
University
of Toledo
Foundation, for the College of Engineering ($500,000), to be used as directed
by
the College of Engineering, for the purpose of developing energy efficient
technologies and training engineering students in advanced
technologies.
For
Northern Ohio
benefit:
Cuyahoga
Valley
National Park ($1,000,000), to further the extension of the Towpath Trail in
Cleveland from Harvard Road to the proposed Canal Basin Park in the Flats,
with
the funds being paid to the Cuyahoga Valley National Park and to be deposited
into a “restricted fund” account for this purpose. The Cuyahoga Valley National
Park would exercise fiduciary responsibility for the expenditure of these funds
by appropriate public entities through contractual instruments including grants
and/or cooperative agreements administered per federal guidelines.
Habitat
for Humanity
International ($1,000,000), for the benefit of Northern Ohio Chapters to build
environmentally responsible U.S. EPA Energy Star certified homes.
B
-6
