.4;Cameco

ATTACHMENT B

MANAGEMENT RESPONSE TO THE ROOT CAUSEINVESTIGATION REPORT FOR THE BUILDING 50 SUBSURFACE

CONTAMINATION

Andy Thorne

October 15, 2007

Management Response to the Root Cause Investigation Report for the Building 50Subsurface Contamination, October 15,2007

The Port Hope Conversion Facility senior management team initiated a root causeinvestigation related to the Building 50 subsurface contamination that wasidentified on July 13, 2007. A third party, Mr. Brian Locker of KnoW ProblemInc, was utilized to lead the investigation using the TapRooT@investigationprocess.

Management accepts the findings of the root cause investigation, finding themsufficiently broad in scope to develop meaningful improvement plans, and ispleased to provide the following responses to address the corrective actionsrecommendations. These responses were developed and reviewed by themanagement groups at the Port Hope conversion facility and at the Fuel ServicesDivisional level. The responses were also reviewed with the Safety, Health,Environment and Quality (SHEQ) management group at the corporate office.

Cameco's management is confident that when the corrective actions areimplemented the likelihood of recurrence will be significantly reduced and, ifsuch an incident were to occur, the impacts would be significantly lessened.Further, management is also committed to ensure that, where applicable, thecorrective actions developed for this incident are applied to other processes andequipment at the facility and shared within the Cameco organization.

An action plan has been developed for the corrective actions and is included inthis document as Table 1. The Table includes a more detailed breakdown of thetasks associated with each corrective action than is provided in the text ofthisdocument. The action plan lists each corrective action and the correspondingcompletion date.

Responses to Recommended Corrective Actions

For ease of review the Corrective Action Recommendations from the TapRooT@investigation report are reproduced below together with Cameco' s responses.Due to the significant overlap of Corrective Action Recommendations 1 and 2,Cameco has addressed these two recommendations together below.

Corrective Action 1: Cameco Port Hope needs to identifY "floors, trenches &sumps" as a safety related system because of the potential leak paths. This aspectmust be reflected in the Safety Report and application of the quality assuranceprogram. Appropriate design, construction and operating standard(s) andmanagement change controls must be established and maintained. As a minimum,these must ensure that:

b)

"floors, trenches & sumps" have chemical resistant surfaces whereappropriate;"floors, trenches & sumps" have double barriers, and monitoring betweenbarriers for any chronically wet locations such as sumps or pits;

a)

Management Response to the Root Cause Investigation Report for the Building 50Subsurface Contamination, October 15, 2007

Response

c) any spills to "floors, trenches & sumps" are promptly cleaned and/orneutralized;"floors, trenches & sumps ", and associated monitoring systems, areappropriately inspected and maintained; andprocedures are written and implemented to ensure that no contaminatedor corrosive liquids are deliberately discharged to "floors, trenches &sumps" except where they have a chemical resistant liner.

d)

e)

CorrectiveAction 2: CamecoPort Hope needs to carry out a design relatedassessment of credible acute and chronic challenges to 'floors, sumps &trenches' and then ensure containment surfaces are appropriately designed. Thedesigns must be developed asper an approved design standard to ensurerequirements (e.g. PMs and maintaining as-built drawings) are clearlydocumented, communicated and implemented.

Cameco acknowledges that floors, trenches and sumps have not been considered asufficiently high priority safety significant aspect of the operation up to this point.While there has been limited acknowledgment of the safety significance of somesumps, the trenches and floors were not viewed as barriers to the environment.

To ensure that the risks associated with floors, trenches and sumps have been andwill continue to be assessed, Cameco will initiate a three-tiered approach asfollows:

1) Short Term. Cameco will update the operations quality assuranceprogram to identify floors, trenches and sumps as safety related items.This is only a short-term measure to ensure that floors, trenches and sumpsare recognized as safety significant structures until a more thoroughassessment of risk can be conducted for the facility, as outlined in item 3below. This task will be completed by November 30,2007.

2) Medium Term. Cameco will conduct process hazard assessments (PHAs)for all floor, trenches and sumps within the facility. The PHAs for thefloors, trenches and sumps within the facility will utilize the design criteriadeveloped by the task force, as described later in this document. ThesePHAs will be completed on a building-by-building basis and will beprioritized on a risk basis (i.e., higher risk operations being completedfirst). Cameco will develop action plans to address any unacceptable (D)or not desirable (N) risk rankings and will submit the action plans to theCNSC for review as they are prepared. Cameco is committed tocompleting the PHAs for all floors, trenches and sumps at the Port HopeConversion Facility not later than the second quarter of 2008. ThesePHAs will be integrated into the Safety Report during the next scheduledupdate of the Safety Report in 2011.

Management Response to the Root Cause Investigation Report for the Building 50Subsurface Contamination, October 15, 2007

It should be noted that Cameco has completed a Phase II environmentalassessment of buildings and associated lands at the facility. Theassessment identified areas of contaminated soil and these areas are beingaddressed through the Vision 2010 project.

3) Long Term. Cameco recognizes that the existing Safety Reportmethodology did not adequately identify the safety significance of thefloors, trenches and sumps. In light of this event, Cameco acknowledgesthat the safety significance of other infrastructure at the facility shouldalso be reviewed. To address this concern, Cameco will review theadequacy and appropriateness of the methodology used to develop thecurrent Safety Report with an ultimate goal of enhancing or replacing theexisting Safety Report methodology. This review will take the form of adetailed risk assessment of the processes, equipment and infrastructureused at the facility. Cameco will assess existing methodologies used byother similar industries to determine best practices and select anappropriate method or methods. An action plan will be developed for theimplementation of the risk assessment, including completion dates, andwill be submitted to the CNSC by the end ofthe first quarter of 2008.

Specific to floors, trenches and sumps, the detailed risk assessment willensure that credible acute and chronic challenges (risks) to the liquidbarriers are fully identified and appropriate design standards for thesebarriers are developed. Cameco will also ensure that the new or revisedrisk assessment process will include a mechanism to ensure that newdesign specifications identified through the risk assessment process will bepermanently captured as Cameco specifications. The administrativecontrols developed by the Process Liquids Management Task Force (theTask Force) will be incorporated into facility operating and maintenanceprocedures. These actions will be completed by the end of the secondquarter of2008.

Cameco also acknowledges that the existing standards for floors, trenches andsumps require improvement. To address this concern Cameco has established aTask Force to develop design criteria for inground structures and liquidmanagement practices. The Task Force's mandate was to evaluate currentlyaccepted industry standards for liquid management and for the design andmaintenance of inground liquid containment structures. The Task Force was leadby a third party consultant recognized for their expertise in this field anddeveloped the Design Criteria for liquid management inground liquid containmentstructures based on currently accepted industry standards. The Task Forceacknowledged the importance of these structures for environmental protection andthe Design Criteria was developed accordingly. The Design Criteria meet orexceed the five criteria listed in Corrective Action #1.

Management Response to the Root Cause Investigation Report for the Building 50Subsurface Contamination, October 15, 2007

The Design Criteria were based upon accepted industry standards and did notinclude an assessment of specific credible acute and chronic challenges to thecontainment ofliquids at the Port Hope conversion facility. Cameco will conductthis assessment as outlined in Section 3 above. Cameco will add any additionaldesign criteria identified during this risk assessment to the design specificationsfor the facility. The planned upgrades and improvements to the UF6liquidmanagement and containment will be assessed against both the Design Criteriaand any additional criteria to ensure the barriers are adequate.

CorrectiveAction 3: CamecoPort Hope needs to implement an effectivecorrective action program so thatproblems are routinely identified andappropriate corrective action taken.

Response

Cameco has recently implemented a computer-based incident reporting systemCameco Incident Reporting System (CIRS). This system allows employees torecord incidents and ensures that corrective actions are developed andimplemented. Presently, CIRS is only available to Cameco salaried employeesbut it is intended to be used by all employees for reporting of incidents. Onceexpanded to include all employees, CIRS should provide a more effective methodof capturing incidents identified any employee working at the facility. Onceentered into the CIRS database, the incident is forwarded to the area owner fordispositioning. Ifwarranted, corrective actions are developed and entered into theCIRS database, which tracks their progress and issues notifications for overdueactions. The CIRS database also allows for trending of incidents so that repeatevents can be assessed and prioritized on the basis of ftequency as well assignificance.

Cameco recognizes the need to increase the awareness of all employees toidentify and log all incidents so that appropriate corrective actions can begenerated. Cameco is also aware that employees have identified incidents in thepast but their concerns may not have been recorded or dispositionedappropriately. This has likely contributed to an "accepting attitude" among someemployees. In order to ensure that employees are aware of the expectation thatthey log incidents and management's commitment to respond to their concerns,all employees who are not currently using the system will receive training. Thistraining will focus on the need to identify and log incidents, management'scommitment to respond the incidents and how to use CIRS for logging incidents.Cameco will roll out CIRS to all employees at the Port Hope Conversion Facilityby the end of 2007.

CorrectiveAction 4: CamecoPort Hope needs to assess the adequacy of thegroundwater monitoringprogram for early leak detection and implement anynecessary improvements.

Management Response to the Root Cause Investigation Report for the Building 50Subsurface Contamination, October 15, 2007

Response

Cameco acknowledges the need to improve the groundwater monitoring systemso that it is more effective in the early detection ofleaks from the UF6plant.

Cameco has requested its consultant to develop a new groundwater monitoringsystem that will provide (1) early detection ofleaks from the UF6plant and (2) theability to assess the effectiveness of the ground water control measuresimplemented by Cameco. The details of the new ground water monitoring systemwill be submitted to the CNSC by the end of 2007.

Andy ThomeGeneral ManagerPort Hope Conversion Facility

~Signature: ~

Date: 15th OCToBER 2C)o+

Table 1: Action Plan to Address the Root Causes ofCorrective Action Recommendation

CAR 1: Cameco Port Hope needs to identify floors,trenches and sumps as a safety related system becauseof the potential leak paths. This aspect must bereflected in the Safety Report and application of theOperations Quality Assurance Program. Appropriatedesign and operating standard(s) and managementchange controls must be established and maintained.As a minimum, these must ensure that:a) floors, trenches and sumps have corrosion resistantsurfaces where appropriate;b) floors, trenches and sumps have double barriers andmonitoring between barriers for any chronically wetlocations such as sumps or pitsc) any spills to floors, trenches and sumps arepromptly cleaned and/or neutralized;d) floors, trenches and sumps and associatedmonitoring systems are appropriately inspected andmaintained; ande) procedures are written and implemented to ensurethat no contamination/corrosive liquids aredeliberately discharged to floors, trenches and sumpsexcept where they have a corrosion resistant liner.

the Subsurface Contamination Discovered at BuildingAction(1) A task force was established and has developeddesign criteria that meet or exceed the criteria listed inCAR 1.

(2) Ensure that the criteria developed by the task forceare applied to any changes or modifications to floors,trenches and sumps, including the remedial work beingplanned for the UF6plant.

(3) Update operating and maintenance procedures forthe facility to include new administrative controls (e.g.,operation and inspection of liquid conveyance systemsand response to spills). Updating of proceduresincludes training of employees, where applicable.(4) Update the Operations Quality Assurance Programmanual to identify floors, trenches and sumps as safetyrelated infrastructure.

50 on July 13,2007Completion DateCompleted.

Completed for UF6plant upgrades.

New designcriteria to becommunicated to

all employees byNovember 30,2007.

By end of secondquarter 2008.

November 30,2007.

Corrective Action Recommendation Action Completion Date(5) Conduct process hazard assessments (PHAs) for all All PHAs to be

AND floors, trenches and sumps at the conversion facility. completed not laterWhen conducting these PHAs, ensure the following is than the second

CAR 2: Cameco Port Hope needs to carry out a performed: quarter of2008.design related assessment of credible acute and i) existing floors, trenches and sumps must be assessedchronic challenges to the containment and then ensure against the design criteria developed by the task force Integrate the PHAsthat containment surfaces are appropriately designed. ii) conduct the PHAs on a building-by-building basis into the nextThe designs must be developed as per an approved iii) conduct PHAs on a priority basis (i.e., high risk scheduled revisiondesign standard to ensure the requirements (e.g., PM's building/processes done first) of the safetyand maintaining as-built drawings) are clearly iv) develop action plans to address any unacceptable report.documented, communicated and implemented. (D) or not desirable (N) findings

v) submit the action plans, including completion dates,to the CNSC as they are developedvi) integrate these PHAs into the next scheduledrevision of the safety report.(6) Assess existing methodologies used by other Before end of firstsimilar industries to determine best practices and select quarter 2008.a risk assessment method or methods that is/areappropriate for the Port Hope Conversion Facility.Develop an action plan, including completion dates, forconducting the risk assessment(s) and submit to theCNSC.

Corrective Action Recommendation Action Completion Date(7) Conduct risk assessment(s) for the Port Hope To be determinedConversion Facility ensuring that the following is when the actionperformed: plan referenced ini) credible acute and chronic challenges (risks) to the Action 6 isliquid barriers are fully identified developed.ii) appropriate design standards for these barriers aredevelopediii) new design specification developed through thisprocess are permanently captured as Camecospecificationsiv) assess the upgrades to the floors, trenches andsumps in the UF6plant against any new designspecifications developed through this risk assessmentand create an action plan to complete any additionalimprovements requiredv) administrative controls developed through thisprocess are incorporated into area operating andmaintenance procedures at the facility.

CAR 3: Cameco Port Hope needs to implement an (8) Expand the Cameco Incident Reporting System Not later than firsteffective corrective action program so that problems (CIRS) to include all employees and provide training quarter of2008.are routinely identified and appropriate corrective on incident reporting. The training must cover theaction is taken. following:

i) the importance of reporting and recording incidentsand near misses

ii) management's commitment to follow up on allincidentsiii) how to record incidentsiv) how to follow up on incidents that have beenrecorded.

Corrective Action Recommendation Action Completion DateCAR 4: Cameco Port Hope needs to assess the (9) Develop an action plan for the implementation of a As soon asadequacy of groundwater monitoring for early leak new groundwater monitoring system capable of: possible and notdetection and implement any necessary improvements. i) early detection ofleaks from the UF6plant later than the end

ii) the ability to assess the effectiveness of the of 2007.groundwater control measures implemented byCameco.(10) Conduct an ecological risk assessment to ensure February 29, 2008that the groundwater control measures prevent adverseenvironmental impacts.(11) Install the monitoring wells necessary to meet the As soon ascriteria listed in corrective action 9. possible and not

later than secondquarter of2008.

(12) Update the Facility Licensing Manual, As soon asEnvironmental Monitoring Plan and CAP:ENV:17 to possible and notreflect the changes to the groundwater monitoring later than secondprogram that result from the implementation of quarter of 2008.corrective action 11 and submit the CNSC.