Federal Support for Defense Uses of Advanced Nuclear

Pillsbury Winthrop Shaw Pittman LLP

2021 will present opportunities for the advanced nuclear and space exploration sectors, but companies should be cognizant of complex compliance standards.

TAKEAWAYS

  • The prior Administration’s January 12, 2021 Executive Order (EO) promoting advanced reactors and the use of nuclear technology for defense purposes and space exploration seeks to provide direction and initiative to other, ongoing federal efforts in these sectors. Given the bipartisan support for advanced nuclear technology and the inclusion of nuclear energy as a key solution in the Biden plan for a clean energy revolution, it is likely that the Biden Administration will continue advancing the initiatives set out in the EO.
  • While these initiatives can open opportunity for companies in these sectors, the intersection between defense, space exploration and nuclear technologies creates a complex overlap of export control and security regimes beyond the regulatory frameworks that companies normally navigate in their more focused fields.
  • Nuclear industry and other companies competing in this space will require compliance infrastructure in order to effectively classify and handle export-controlled technology, and potentially obtain any security clearances needed to access classified information.

Summary of the EO

On January 12, 2021, former President Trump issued an EO on Promoting Small Modular Reactors for National Defense and Space Exploration. The EO directs the Department of Energy (DOE), Department of Defense (DOD), and NASA to take actions to coordinate their nuclear-related activities, move forward with certain ongoing nuclear projects and promote advanced reactor and small modular reactor (SMR) technologies. The purpose of the EO is to take steps to revitalize the U.S. nuclear sector, reinvigorate the U.S. space exploration program, develop diverse energy options for national defense needs and advance U.S. technological supremacy and leadership.

The EO builds on the ongoing initiatives in the nuclear and space exploration sectors. Some earlier actions include the establishment of the U.S. Nuclear Fuel Working Group, and the 2019 Presidential Memorandum calling for development and use of space nuclear systems. While much of the EO is dedicated to a discussion of the importance of U.S. nuclear technology and space exploration, it also includes the following provisions directing federal action:

  • Establishes that it is U.S. policy to promote advanced reactor and SMR technologies to support defense installations, energy security, and for use in space exploration, based on the principles that the nuclear industry is critical to U.S. security and prosperity, that the U.S. should maintain technological supremacy in the nuclear field, and that the U.S. Government should bolster defense and space exploration while enabling private sector innovation;
  • Directs that within 180 days DOD shall establish and implement a plan for demonstration of the energy flexibility capability and cost effectiveness of an NRC-licensed micro-reactor at a military installation. If successful, DOD must then identify opportunities at other domestic military installations for use of the micro-reactor capability;
  • Directs DOD to work with the Departments of State, Commerce, DOE, and NASA, to determine whether advanced reactors can benefit future DOD space power needs, in the context of DOD’s significant energy demands and nuclear power’s potential to significantly enhance national defense power capabilities;
  • Directs DOD to work with the Departments of State, Commerce, DOE and NASA to pilot a transportable microreactor prototype and conduct related analysis;
  • Directs NASA to define requirements for utilization of nuclear energy systems for human and robotic exploration missions through 2040 and analyze the related costs and benefits. These requirements must take into account a number of technical issues such as transportability, thermal management in space and operating time prior to refueling;
  • Directs DOE to complete its ongoing high-assay low-enriched uranium (HA-LEU) demonstration project, and to develop a plan to promote successful transition of this technology to the private sector for commercial adoption;
  • Directs DOD, DOE, NASA, and the Departments of State and Commerce to jointly develop a common technology roadmap through 2030 that coordinates federal terrestrial-based advanced nuclear reactor and space-based nuclear power and propulsion efforts.

Interaction of the EO with Ongoing Programs and Legislation

Aspects of the EO work in tandem with other provisions recently enacted into law. The Consolidated Appropriations Act, 2021 (P.L. 116-260), for example, contained several similar provisions. While the EO directs NASA to define requirements for nuclear energy systems, P.L. 116-260 appropriates $110m to NASA for the development, production and demonstration of a nuclear thermal propulsion system. Similarly, the EO directs DOE to complete its HA-LEU demonstration project and plan for transition of HA-LEU to the private sector, and P.L. 116-220 requires DOE to establish a program to support the availability of HA–LEU for civilian domestic research, development, demonstration, and commercial use. The EO therefore helps provide administrative initiative to this enabling legislation.

The EO also boosts DOD’s ongoing micro-reactor program. In 2019, DOD’s Strategic Capabilities Office (SCO) issued a request for information for development of a mobile nuclear reactor prototype under an SCO initiative called Project Pele. In March 2020, DOD announced that three teams had been awarded contracts to begin design work on the mobile reactor for Project Pele. The 2021 National Defense Authorization Act appropriated DOD $702,008,000 for development of micro nuclear reactors, although it is not clear if this is all for Project Pele. The EO boosts DOD’s micro-reactor program by affirmatively directing DOD to pilot this technology, helping ensure it expeditiously moves forward.

Biden Administration Policy on Advanced Nuclear

Over the past several years, nuclear power has been one area that has enjoyed strong bipartisan support. Recent years have seen items such as the passage of the Nuclear Energy Innovation and Modernization Act, the U.S. International Development Finance Corporation’s decision to lift its longtime prohibition on supporting nuclear energy projects abroad, support for advanced nuclear in the House Democrats’ Congressional Action Plan for a Clean Energy Economy, and, as discussed above, significant funding for advanced nuclear research and development in the Fiscal Year 2021 spending bills.

President Biden’s climate plan also includes nuclear power as a key solution for solving the climate crisis. Biden’s climate plan has pledged to make the largest-ever investment in clean energy research and innovation, and to establish ARPA-C, a new, cross-agency Advanced Research Projects Agency focused on climate. ARPA-C will target affordable, game-changing technologies to help the U.S. achieve 100% clean energy including development of “small modular nuclear reactors at half the construction cost of today’s reactors.” The climate plan also supports research to address remaining challenges facing nuclear power, such as cost, safety, or waste disposal.

Given nuclear’s role in his climate plan and the bipartisan support included in the recent spending bills, President Biden will presumably continue to push forward the initiatives established by President Trump’s January 12 Executive Order.

Export Control and Security Compliance

The appropriated funding and EO’s direction create significant opportunities for advanced nuclear companies and others active in the nuclear, defense and space exploration sectors. However, due to the intersection between defense, space exploration, and nuclear technologies, companies pursuing these opportunities should be aware of a number of export control and security implications beyond those they normally deal with in their more focused fields.

For example, in addition to compliance with the U.S. Department of Energy regulations at 10 CFR Part 810, and the U.S. Nuclear Regulatory Commission regulations at 10 CFR Part 110, companies competing for contracts related to defense and space exploration may confront technology subject to U.S. export controls, such as the International Traffic in Arms Regulations (ITAR), and may require registration and licensing with the State Department’s Directorate of Defense Trade Controls (DDTC). The ITAR, unlike its counterpart DOE and NRC regulations, provides very few exemptions, thus requiring companies to obtain prior authorization for exports (including deemed exports) even to close allies.

Further, to the extent any DOD or NASA contracts involve access to classified information, companies would be required to obtain a facility security clearance and stand-up related infrastructure in order to comply with the National Industrial Security Program.

Finally, companies seeking to pursue commercial as well as defense or space exploration opportunities should assess whether their commercial programs are sufficiently segregated from their government work to ensure that ITAR controls do not apply to products and technologies intended for commercial opportunities. This is especially important to advanced nuclear reactor vendors seeking to export their reactors overseas and/or engage with a global supply chain.

Exploring these issues in advance could well give companies both a compliance–and competitive–advantage.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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