NRC Issues Direct Final Rule Implementing ADVANCE Act FOCD Exceptions

The rule represents a significant, targeted expansion of the regulatory framework governing foreign investment in U.S. nuclear facilities.

Background
Section 103(d) of the Atomic Energy Act (AEA) prohibits the NRC from issuing licenses for utilization facilities (e.g. nuclear power plants and research reactors) to entities that are owned, controlled or dominated by foreign persons or governments. Historically, the NRC applied this provision conservatively, treating any level of foreign ownership above 49.9% as strictly prohibited, even where foreign investors lacked meaningful control. In some cases, the NRC found that substantial minority foreign ownership could raise FOCD concerns, and Section 103(d) requires the NRC to determine that issuance of any license, even where there is only minority foreign ownership, is not inimical to the common defense and security or to the health and safety of the public (an “inimicality” determination).

In practice, this interpretation has effectively required foreign investors to identify and partner with a U.S. entity that would hold majority ownership and control of licensed facilities, creating challenges for foreign investment and project planning. This constraint has had impacts on project viability, such as in 2010 when the NRC denied a license to the proposed Calvert Cliffs Unit 3 project based on a failure to satisfy FOCD requirements.

In 2013, the Commission directed the NRC staff to undertake a “fresh assessment” of the FOCD framework and evaluate whether Section 103(d) could be satisfied through a more integrated FOCD analysis, including scenarios involving up to 100% indirect foreign ownership, and to consider alternative approaches for addressing FOCD concerns such as license conditions.

In response, the NRC staff developed a draft revision to its Standard Review Plan (SRP) for FOCD which articulated a “totality of the facts” approach. Under this proposal, ownership percentage would only be one factor and majority foreign ownership may be acceptable where control is effectively negated, typically through governance structures, contractual limitations and Negation Action Plans. However, the draft SRP was never adopted.

Section 301 of the ADVANCE Act marked the first statutory change to this framework, creating a statutory exception to the Atomic Energy Act’s FOCD prohibition for certain foreign-owned entities. As discussed in our prior analysis of the Act, Section 301 provides that the FOCD prohibition does not apply to licensees associated with OECD member countries or India, provided the NRC still makes an inimicality determination.

What the Rule Does
The NRC’s new FOCD rule amends 10 CFR § 50.38 and related provisions in Part 54 to implement the ADVANCE Act’s exception to FOCD restrictions for utilization facilities, permitting potentially up to 100% ownership by entities associated with OECD member countries and India. Although this rule establishes a new pathway for foreign investment in licensed facilities, NRC must still determine that foreign ownership is not inimical to the common defense and security or public health and safety. We note that this non-inimicality determination is one that NRC already makes in its licensing reviews.

The rule also defines the scope of eligible jurisdictions by listing the 37 excepted countries rather than referencing OECD membership. This means that applying the exception to future OECD members would require an amendment to the NRC’s regulations.

What the Rule Does Not Do
The rule does not resolve several key issues that will continue to affect transaction structuring and NRC review.

Most notably, it does not address how the NRC will evaluate ownership structures involving investors from non-OECD jurisdictions, leaving open how such arrangements will be assessed under existing FOCD requirements. The rule does not codify the earlier proposed “totality of the facts” framework, leaving uncertainty as to how broadly that approach will be applied going forward.

Furthermore, the rule only affects applicants and licensees of utilization facilities and does not apply to production facilities, a distinction imposed upon the NRC by the ADVANCE Act. This means that recycling facilities, plutonium production reactors and other facilities subject to Section 104 of the AEA are still subject to the FOCD prohibition.

Implications for M&A and Project Development
Although the rule provides additional flexibility, it does not eliminate regulatory complexity, FOCD risk or the need for careful transaction structuring, particularly as the NRC must still make an inimicality determination. Key considerations for transaction parties will continue to include:

• Control and Governance: The NRC will remain focused on who exercises decision-making authority over the licensee, including board composition and management control.
• Investor Rights: Consent, veto, removal and information rights held by foreign investors may still raise FOCD concerns, depending on their scope and practical effect.
• Ownership Composition: The presence and proportion of non-OECD investors, as well as aggregate foreign ownership, will continue to be relevant to the NRC’s analysis.

These issues are particularly complex in transactions involving private equity funds, infrastructure funds and other multi-investor vehicles. In those structures, ownership may be widely dispersed across multiple limited partners (LPs), including sovereign wealth funds and state-affiliated investors. Passive investors may be scrutinized depending on their rights and information access, and aggregate ownership from non-OECD jurisdictions may exceed thresholds and present FOCD concerns, even where no single investor exercises control or has a significant ownership stake.

Even where a structure may ultimately be approvable, these factors can affect the timing, scope and outcome of NRC review. As a result, FOCD analysis in fund-driven transactions is often highly fact-specific and may require a detailed evaluation of governance arrangements, investor rights and upstream ownership.

In addition to NRC FOCD considerations, companies engaged in M&A transactions should also be mindful of Foreign Ownership Control and Influence (FOCI) restrictions that apply to companies subject to U.S. Department of Energy (DOE) contracts and/or handling restricted data or classified information.

Looking Ahead
The NRC has indicated that it will update its FOCD guidance to reflect the new rule. A key open question is whether the agency will formally incorporate elements of the draft SRP’s “totality of the facts” approach into updated guidance.

If adopted, that approach could provide greater flexibility, particularly for structures involving non-OECD investors, by allowing the NRC to focus more explicitly on control and influence, rather than ownership percentages alone. Until such guidance is issued, however, uncertainty will remain.

Bottom Line
The rule expands access for OECD-aligned capital into the U.S. nuclear sector, but it is a targeted exception—not a wholesale revision of FOCD policy. Transactions involving NRC licensees—particularly those involving private equity and fund structures—will continue to require careful structuring and early, detailed regulatory analysis.