China – Brief Comments On The Draft Atomic Energy Law Of The PRC.

 

11 October, 2018

 

 

On September 20, 2018, the Ministry of Justice issued the Law of the PRC on Atomic Energy (Draft for Comments) (hereinafter referred to as the “Draft AEL”) online, inviting public comment before October 19, 2018. The background work to prepare an Atomic Energy Law (AEL) commenced as far back as 1984, when China started to use nuclear energy, in the recognition that there was a need for a legislation to address the research, development and utilization of atomic energy and for regulations governing the nuclear industry. However, to date, a comprehensive AEL has not been enacted, with some of the delaying factors being the breadth of the required provisions, the involvement and differing stance of numerous authorities and agencies, as well as ongoing reforms and changes in the system overseeing the nuclear industry as well as in the relevant competent authorities and institutions themselves.

 

The Draft AEL has been written using as its basis the Atomic Energy Law (Draft for Examination) as submitted to the State Council by the Ministry of Industry and Information Technology in January 2015, and the subsequent revisions following consultations with relevant units by the Legislative Affairs Office of the State Council. The Draft AEL takes a systematic approach to regulating research and development of atomic energy, nuclear materials and the nuclear fuel cycle, atomic energy utilization, safety supervision and management, nuclear imports and exports, international cooperation and related legal responsibilities. We provide here a brief analysis of the key points of the Draft AEL, with reference to the pertinent current laws and regulations of the PRC .

 

I. Administration System of Atomic Energy

 

The Nuclear Safety Law, which was implemented on January 1, 2018, provides general provisions for the establishment and the allocation of responsibilities of China’s existing nuclear safety administration agencies. The Draft AEL, aiming more specifically at the development and utilization of atomic energy, supplements the responsibilities of China’s atomic energy-related administration institutions. It provides a preliminary structure for the establishment of an atomic energy administration system, which it proposes will be led by the authority in charge of the nuclear industry under the State Council and which will coordinate with multiple national ministries. It specifies the regulatory authorities and their responsibilities in various areas of nuclear energy. The Draft AEL also supplements the responsibilities of the authority in charge of nuclear industry under the State Council. If the Draft AEL is brought into law, and taking into account the other relevant current regulations, the atomic energy authorities and their responsibilities will be as follows:

 

1. State Administration of Science, Technology and Industry for National Defense

 

The State Administration of Science, Technology and Industry for National Defense (SASTIND) will be the authority in charge of nuclear industry under the State Council, and will be managed by the Ministry of Industry and Information Technology. The China Atomic Energy Authority and the National Nuclear Accident Emergency Office will fall within the SASTIND. The main responsibilities of the SASTIND will include: coordinating with financial authorities to formulate specific administration measures for atomic energy development and research; organizing the preparation of plans for the medium and long-term development of the nuclear fuel cycle; examining and approving nuclear fuel cycle construction projects (for non-major projects);  in accordance with the allocation of responsibilities with the National Energy Administration (NEA), examining and approving nuclear reactor construction projects other than nuclear power plants (for non-major projects); formulating guidance on the development of nuclear technology application industry with relevant departments; establishing, with relevant departments of the State Council and the Central Military Commission, a system of evaluation for completed missions relating to national defense applications of atomic energy; issuing opinions on the total annual salary of the state-owned enterprises that have been approved to undertake the task of national defense application of atomic energy; formulating, adjusting and publishing the Nuclear Export Control List with relevant departments; reviewing and handling government commitments for nuclear imports, including managing related safeguards and other matters involved in nuclear imports; being responsible for nuclear industry management in addition to the nuclear power plants, nuclear safety supervision of military nuclear facilities, and supervision and management of peaceful use of nuclear energy projects.

 

2. National Energy Administration

 

The NEA will be the authority responsible for energy under the State Council. The main responsibilities of NEA relating to the system for atomic energy administration will include: being responsible for organizing the formulation of the national nuclear power development plan; reviewing nuclear power plant construction projects, and reporting on these to the State Council for approval after review by the State Council investment department; in accordance with the allocation of responsibilities with SASTIND, examining and approving nuclear reactor construction projects other than nuclear power plants (for non-major projects).

 

3. Ministry of Transport

 

Within the atomic energy administration system, the Ministry of Transport shall be responsible for: establishing a sound road, sea and rail transportation system for nuclear materials and radioactive waste in collaboration with relevant national departments; strengthening the construction of transport routes and equipment; strict supervision and managing of transportation companies and transportation processes for radioactive materials.

 

4. National Nuclear Safety Administration

 

The Draft AEL identifies the National Nuclear Safety Administration (NNSA) as the department responsible for nuclear safety supervision and administration under the State Council. NNSA comprises various departments under the Ministry of Environmental Protection: the Nuclear Facilities Safety Supervision Department, the Nuclear Power Safety Supervision Department and the Radiation Source Safety Supervision Department. The name of NNSA should, at the same time, still be maintained at the Ministry of Environmental Protection. NNSA will have overall oversight and ongoing management responsibility for nuclear and radiation safety, which will include responsibility for the supervision and management of safety and radiation-related environmental protection work involving nuclear power plants, nuclear safety equipment, nuclear technology utilization projects, and radioactive waste treatment and disposal.

 

5. Ministry of Commerce

 

The Ministry of Commerce will be responsible for supervising the import and export of nuclear materials, nuclear dual-use items and related technologies, radioisotopes and their products, and radioactive sources within the atomic energy management system and for issuing relevant import and export licenses.

 

6. Nuclear Accident Emergency Coordination Committee

 

The Nuclear Accident Emergency Coordination Committee (NAECC) will be led by the SASTIND with input from Ministry of Foreign Affairs, the National Development and Reform Commission (NDRC), the Ministry of Public Security, the Ministry of Civil Affairs, the Ministry of Finance, the Ministry of Communications, the Ministry of Industry and Information Technology, the Ministry of Health, the Ministry of Environmental Protection (including the NNSA) and the State Administration of Work Safety. The NAECC will be responsible nationally for organizing and coordinating emergency management of nuclear accidents, and implementing a multi-layered management response in the case of a nuclear accident emergency. 

 

II. Nuclear Fuel Cycle System

 

The nuclear fuel cycle refers to the series of industrial processes starting from the exploration of radioactive mineral resources (mostly uranium mines), mining, purification and conversion, isotope separation, fuel element manufacturing, spent fuel reprocessing, through to the treatment and disposal of spent fuel and radioactive waste.

 

In practice, the process before the nuclear fuel enters the reactor is often referred to as the “front end” of the nuclear fuel cycle, and the treatment and disposal process after the spent fuel is discharged from the reactor is called the “back end” of the nuclear fuel cycle.

 

The Draft AEL proposes various principles for the regulation of the nuclear fuel cycle, clarifies the introduction of a national policy for the nuclear fuel cycle, and emphasizes the need to establish a nuclear fuel cycle system in China. It stipulates that the policy, which the domestic market should be based upon with an appropriate degree of opening up to foreign markets, should be held on. It requires the protection of nuclear materials and nuclear fuel supplies, the recycling of spent fuel, and the proper disposal of radioactive waste. In addition, the state encourages social capital to invest in the nuclear fuel cycle industry, to effectively use the capital market, and to gradually form a diversified investment mechanism for the nuclear fuel cycle industry. For nuclear fuel cycle facility construction projects, the Draft AEL clearly specifies that the review or approval authority shall be the authority of nuclear industry under the State Council. For major projects, the review or approval authority shall be the State Council itself.

 

According to the National Special Administrative Measures on Foreign Investment (Negative List) (2018 edition), implemented on July 28, 2018, nuclear fuel production activities are still listed as one of the areas where foreign investors are prohibited to enter. For domestic investors involved in nuclear fuel production, the China Nuclear Fuel Corporation is currently the only nuclear fuel producer, supplier and service provider in China, effectively occupying a monopoly position in the market. However, the National Special Administrative Measures on Foreign Investment (Negative List) in Free Trade Pilot Zone,  implemented on July 30, 2018 deletes the restriction that “Manufacturing, operation, importation and exportation of nuclear fuel, nuclear materials, uranium products and related nuclear technology shall be operated exclusively by qualified enterprises under administration of the Central Government.” The Draft AEL further clarifies that enterprises will be permitted to engage in nuclear material and nuclear fuel production activities following approval by the state. Accordingly, after the content of the Draft AEL is finalized and officially announced, it is expected that the opening up will bring to an end the current monopoly in domestic nuclear fuel production.

 

As for the front end exploration and exploitation of radioactive mineral resources, according to the provisions within the Mineral Resources Law of the People’s Republic of China, the Administrative Measures for Registration of the Mining of Mineral Resources, the Notice of the Ministry of Land and Resources on Matters Related to the Improvement of the Examination and Approval Management of Mineral Resources Exploitation and others, the mining department of the State Council shall approve the mining of radioactive minerals and issue mining licenses to relevant enterprises. In terms of environmental protection, according to the Law of the People’s Republic of China on Prevention and Control of Radioactive Pollution, enterprises that develop and utilize uranium ore (thorium) shall prepare an environmental impact report before applying for a mining license, and shall provide this report to the environmental protection department of the State Council for review and approval. Enterprises that develop and utilize associated radioactive minerals shall prepare an environmental impact report before applying for a mining license, and report it to the environmental protection department of the people’s government at or above the provincial level for examination and approval. The Draft AEL further proposes to strengthen the exploration and exploitation of radioactive mineral resources in accordance with the law, to reasonably determine the exploration and controlled development of radioactive mineral resources and symbiotic and associated mineral resources, and to take a protective approach to the development of mineral resources. There are currently no formal relevant regulations regarding uranium reserves. However, there is a legislative reference to natural uranium reserves in the Nuclear Power Management Regulations (Draft for Review Version) issued for public comment on September 19, 2016,  in which it is proposed that the state shall gradually establish and improve strategic reserves of natural uranium for nuclear power, and the controlling shareholder or actual controller of the nuclear power project should establish a commercially-viable reserve of natural uranium. The Draft AEL reconfirms the establishment of such natural uranium reserve system. After the relevant laws and regulations are officially issued, China is expected to obtain institutional guarantees for natural uranium reserves, though the specific policies have not  yet been formulated by competent authorities.

 

The operating cost of nuclear power is to be calculated at “full cost”. Specifically, the power generation cost of nuclear power should include fuel costs, operation and maintenance fees, depreciation expenses, financial expenses, and so on, as well as the disposal costs for decommissioning of power stations and post-processing costs for any spent fuel. With regard to the decommissioning costs of nuclear facilities in the back end of the nuclear fuel cycle, the Law of the People’s Republic of China on Prevention and Control of Radioactive Pollution and the Nuclear Safety Law already stipulate, in principle, that nuclear facility operating units shall accrue the decommissioning costs of nuclear facilities and include them in their investment estimates and production costs. Specific measures are to be formulated by the State Council’s financial and pricing departments in conjunction with the State Council’s nuclear safety supervision and administration department, the authority in charge of nuclear industry and the authority in charge of energy. The Draft AEL further clarifies that where nuclear fuel cycle facilities involve not-for-profit activities, the relevant decommissioning expenses will be borne by the central government.

 

However, the precise scope of the “not-for-profit activities” is still to be stipulated and explained by the competent authorities. Regarding the post-processing costs for spent fuel, according to the current Interim Measures Funds for the Administration, Collection and Use of Spent Fuel Treatment and Disposal of Nuclear Power Plants (Cai Zong [2010] No. 58), a fund for spent fuel treatment and disposal will be levied according to actual net sales of nuclear power plants that have been in commercial operation for more than five years. The levy will be imposed at 0.026 yuan/kWh. After the fund is turned over, the state will be responsible for arranging the storage, transportation and post-treatment of spent fuel from the nuclear power plant, and the nuclear power plant itself will no longer bear such expenses. The Draft AEL stipulates that the collection and use of the fund for spent fuel treatment and disposal for nuclear power plants shall be carried out in accordance with relevant regulations, with specific measures to be formulated by the competent financial department of the State Council in conjunction with the competent investment department, the competent authority of the nuclear industry and the energy authority.

 

III. Atomic Energy Utilization

 

The Draft AEL clearly states that the state shall encourage and support the application of nuclear reactors and nuclear technology in the fields of industry, agriculture, national defense, biology, medical care, and environmental protection. To date, nuclear power plant projects have reached a more advanced stage of development than other nuclear reactor construction projects. The Draft AEL reaffirms that nuclear power plant projects shall be submitted to the NEA for review and approval opinions, and, after reviewing of such NEA opinions by the NDRC, shall be submitted to the State Council for approval. For nuclear reactor construction projects other than nuclear power plants, including nuclear reactor projects for heating, hydrogen production, seawater desalination, and production of radioisotopes, the Draft AEL proposes for the first time that such projects shall be examined or approved by the authority of nuclear industry and the energy department according to their allocated responsibilities. Major construction projects should be submitted to the State Council directly for examination or approval. However, the specific allocation of responsibilities between the two departments and the scope of major projects are not clear in the Draft AEL or in the current legal system. After the official release of the Draft AEL, it is recommended that the relevant departments promptly promulgate the supporting regulations and rules for such matters.

 

It is noteworthy that the Draft AEL proposes the use of legislation to implement a policy of safeguarding the consumption of nuclear power. As an asset-intensive industry, nuclear power has high construction and operation costs. Therefore, only by ensuring sufficient power generation hours and a minimum price for electricity can a nuclear power plant operate safely and without loss-making. However, the market-oriented reform of China’s power system and a gradual decline in the demand for power have resulted in drop in consumption, meaning that the nuclear power industry is currently facing load-downs and even shut-downs of their operations. In addition, the drop in demand due to economic factors means that the price at which nuclear power is traded through the electricity market is far lower than the national benchmarking on-grid price for nuclear power. In order to address the problems of slowing consumption of nuclear power, in March 2017 the NDRC and the NEA issued the Interim Measures for Safeguarding the Safe Consumption of Nuclear Power (Interim Measures) stipulating that nuclear power projects will have a guarantee of price and use in the electricity grid, that nuclear power consumption will be ensured across provinces and regions, requiring local authorities to actively cooperate with this matter. The Interim Measures state that, where market conditions permit, the provincial government power authority shall determine the priority power generation plan of nuclear power units in the region in accordance with the laws and regulations.

 

The Draft AEL clearly stipulates that “The State shall establish a policy of safeguarding the consumption of nuclear power.”  If the legislation passes, this effectively means that the quantity and price of electricity of nuclear power will be guaranteed at the highest legal level.

 

IV.Responsibility for Nuclear Damage

 

China’s current regulations on nuclear damage liability are mainly distributed in the Tort Liability Law, the Nuclear Safety Law, the Approval Reply of the State Council to Ministry of Nuclear Industry, National Nuclear Safety Administration and State Council Leading Group Concerning the Handling of Third-Party Nuclear Liability numbered as Guo Han (1986) No. 44 (No. 44 Letter) and the Approval Response of the State Council Concerning Issues of Compensation Against Nuclear Accident Damages numbered as Guo Han (2007) No. 64 (No. 64 Letter). Among them, the Tort Liability Law and the Nuclear Safety Law only provide stipulations in principle on the liability for nuclear damage, while the No. 44 and No. 64 Letters include the most extensive and important provisions of the current nuclear damage liability system, and contain many of the basic elements of international nuclear conventions, such as the strict liability of nuclear power plant operators, the liability limit, insurance and other financial guarantee arrangements, details of national subsidies and the exclusive jurisdiction of Chinese courts.

 

However, given that the No. 44 and No. 64 Letters are just documents issued by the State Council in the form of replies, they therefore do not comply with the Legislative Law or the Regulations on the Procedures for the Formulation of Administrative Regulations. Although it is generally accepted in practice that No. 44 and No. 66 Letters should have the same effect as administrative regulations, at a legal level, the application of the No. 44 and No. 64 Letters remains unclear. Further, while there are similarities between the two Letters, there are also differences in some of the content, which could lead to confusion in their application. 

 

It is fair to say that China has not to date established a systematic approach national nuclear damage liability. Those working at both theoretical and practical levels had hoped that there might be some unification through the AEL of the legal liability for nuclear damages, and the establishment of a sound national liability system for nuclear damages. Unfortunately, the Draft AEL only provides for compensation “If a person’s personal injury or death, property damage or environmental damage is caused by a nuclear accident, compensation.”  In summary, the Draft AEL does not serve to integrate or improve current nuclear damage liability provisions, meaning there is still a reliance on the current piecemeal provisions on the liability for nuclear damage.

 

V.Relationship Between the Draft AEL and the Nuclear Safety Law

 

Among those countries dealing with the relationship between the nuclear safety law and the atomic energy law, there are three main legislative models: (1) A parallel legislative model of the nuclear safety law and the atomic energy law, such as is implemented in Canada and Australia. In this approach, nuclear safety law and atomic energy law work together to determine the top level policy framework for nuclear technology utilization and nuclear energy safety; (2) A model with a single atomic energy law, as in the United States, Russia, and the United Kingdom, in which the atomic energy law acts as the single highest level of legislation and regulation. The nuclear safety law and other relevant laws only appear in the form of various separate laws. This model is more common in countries and regions that were early developers of nuclear power; (3) A legislative model based on the nuclear safety law such as in France and Spain, where the only nuclear law is a nuclear safety law, and there is no concept of any atomic energy law.

 

Taking an overview of the China’s two main laws in this area, from a legislative perspective, the Nuclear Safety Law has been developed to guarantee nuclear safety, prevent and respond to nuclear accidents, ensure safely using nuclear energy, protect the safety and health of the general public and workers, protect the environment, and promote sustainable economic and social development. For the Draft AEL, the purpose is to regulate and strengthen the research, development and utilization of atomic energy, promote scientific and technological progress and industrial development, safeguard national security, and promote national economic and social development. While there are some common areas between the two pieces of legislation, on the basis of the purpose and content, they would appear to most closely follow the first of the three legislative models outlined above, namely the parallel legislative model. They act independently of one another, but in their common ground and co-existence, together constitute a top-level policy framework governing China’s nuclear laws and regulations.

 

In summary, the Draft AEL integrates existing nuclear-related regulations through its regulation of the research, development and utilization of atomic energy, its improvement of China’s atomic energy administration system and its systematic approach to defining the nuclear fuel cycle system and encouragement of the use of nuclear power. Moreover, by addressing elements including atomic energy science research and technology development, nuclear imports and exports and international cooperation, the Draft AEL serves to fill some gaps in China’s existing legislation. We hope that through soliciting opinions, there will be further improvements to the Draft AEL, particularly by supplementing the pertinent provisions of the nuclear damage liability system, and that it will be formally promulgated as soon as is practical, together with the Nuclear Safety Law. These two fundamental laws relating to nuclear power can act to promote the health, safety and sustainable development of China’s atomic energy industry.