Beyond the NRC: Deploying Nuclear Reactors under DOE and DOW Oversight Authority

The federal government’s renewed push to deploy advanced nuclear technologies has brought fresh attention to a long-standing but often misunderstood question: which agencies have authority to build and operate nuclear reactors, and under what legal framework?

As a general rule, the Nuclear Regulatory Commission (NRC) licenses civilian nuclear reactors under the Atomic Energy Act (AEA). But the AEA also preserves narrow, mission-specific carve-outs that allow the Department of Energy (DOE) and the Department of War (DOW) to construct and operate reactors without NRC licenses in limited circumstances. Long dormant, these authorities are now being actively exercised—by DOE through advanced reactor demonstration projects, and by DOW through defense-driven initiatives focused on energy resilience and national security.

That legal backdrop makes the U.S. Army’s fall 2025 announcement of Project Janus particularly notable. Under this program, the Army will deploy an initial series of advanced reactors on U.S. military installations in collaboration with DOE, reflecting the Administration’s broader effort to leverage all available federal authorities to accelerate nuclear deployment and advance the President’s energy and national security objectives set out in Executive Order 14299.

Because these initiatives operate outside the NRC’s traditional licensing framework, they raise important jurisdictional and statutory questions—questions we increasingly receive from clients and stakeholders. This article examines the source and limits of DOE and DOW reactor authority under the AEA, how those authorities interact with NRC jurisdiction and what this evolving framework means for future nuclear deployment in the United States.

The Context: Statutory Framework for Federal Reactor Authority

The AEA establishes NRC licensing as the default framework for civilian nuclear facilities. At the same time, Congress preserved limited exceptions for reactors constructed or operated directly in support of federal missions.

Under the AEA:

• DOE may construct and operate reactors for its own programs without NRC licensing approval, subject to strict statutory limits.
• DOW may construct and operate reactors for military or national security purposes, with broader flexibility, provided the President authorizes the activity.

These carve-outs—rarely invoked in recent decades—have taken on new significance following executive actions directing DOE and DOW to accelerate advanced nuclear deployment. Executive Order 14299 directs DOE to identify federal and AI-data-center sites suitable for reactor deployment and instructs DOW to begin operation of a reactor at a domestic military installation by September 30, 2028. Executive Order 14301 further streamlines DOE authorization and the environmental review processes for reactors deployed under DOE authority.

These DOE and DOW initiatives are being pursued outside the NRC licensing framework, relying instead on statutory self-authorization under the AEA.

Where DOE and DOW Authority Comes From

Department of Energy Authority

DOE’s authority stems from the fact that it is not a “person” under the AEA—see Section 11s—and therefore does not require an NRC license to construct or operate facilities under its own authority. Section 110a of the AEA reinforces this exemption, providing that nothing in the statute requires a license for facilities operated “under contract with and for the account of” DOE.

That authority, however, is narrowly circumscribed. Section 202 of the Energy Reorganization Act expressly reserves NRC jurisdiction over:

• reactors operated as part of an electric-utility system, and
• reactors used to demonstrate commercial suitability.

As a result, DOE may authorize reactors only for internal programs, research or mission-driven purposes. It may not use this carve-out to bypass NRC licensing for projects aimed at commercial deployment or utility-scale power generation.

In practice:

• DOE-authorized reactors must be mission-driven and operated under DOE contract and control.
• Electricity generation may occur only if incidental to the underlying programmatic purpose.
• Projects intended to demonstrate commercial viability or sell power as a primary function require NRC licensing.

DOE has historically exercised this authority sparingly, primarily for research or experimental reactors—such as EBR-II—where electricity production was incidental to the research mission.

One question involves what happens to the energy produced from DOE-authorized reactors. Section 44 of the AEA allows DOE to sell energy produced incidentally at DOE facilities. However, unresolved legal questions remain, particularly for projects structured through Other Transaction (OT) agreements, including:

• whether OT counterparties may sell power on behalf of the government;
• whether proceeds are subject to the Miscellaneous Receipts Act; and
• when incidental generation becomes a primary purpose that triggers NRC jurisdiction under the Energy Reorganization Act.

These issues will shape how DOE structures future demonstration projects that produce saleable electricity.

Department of War Authority

DOW’s authority is broader and more explicit. Under Section 91 of the AEA, the President may authorize DOW to manufacture, acquire, or operate utilization facilities for military purposes. Once authorized, Section 110b exempts those facilities from NRC licensing.

Key features of DOW authority include:

• a requirement for Presidential authorization;
• a focus on primary military or national security purpose; and
• greater tolerance for mixed-use facilities, provided civilian power sales are incidental.

If a reactor’s principal mission is military or national security—such as base-islanding for resilience, forward deployment, or classified loads—DOW may regulate the facility even if limited electricity is sold off-base. If commercial or utility service predominates, NRC licensing applies.

Historical and current examples include the Navy’s propulsion fleet, the Army’s SM-1 and SM-1A reactors, and Project Pele, which demonstrated a microreactor under DOW authority with technical coordination from DOE and NRC.

The Takeaway: Jurisdiction Turns on Mission, Not Technology

Across both agencies, jurisdictional boundaries are determined less by reactor design than by purpose.  For instance:

• DOE authority is tightly constrained to non-commercial, non-utility missions.
• DOW authority allows broader deployment where national security is the primary purpose.
• NRC jurisdiction attaches whenever a reactor’s primary purpose is commercial or utility-scale power generation.

As advanced reactors increasingly serve federal facilities, defense installations, data centers, and grids, how agencies define the primary mission of a project will often determine the applicable regulatory regime.

Looking Forward: Developer Considerations for Project Janus

The Army has announced that Project Janus will be executed under a milestone-based Other Transaction Agreement (OTA), similar to the frameworks used for DOW’s Project Pele and NASA’s Commercial Orbital Transportation Services program. For developers, this structure has several implications:

• Compensation will be tied to performance milestones rather than cost reimbursement.
• Developers will bear the risk of cost overruns.
• Federal Acquisition Regulation requirements are largely displaced by commercial-style contracting terms.

A critical issue for Project Janus will be nuclear risk indemnification. Because the project sits outside both DOE’s standard nuclear indemnification regime and the NRC’s Price-Anderson framework, developers will not automatically receive coverage under existing statutory schemes.

The Army therefore has two principal options:

1. Seek indemnification authority under Public Law 85-804, which allows the government to indemnify contractors for unusually hazardous activities; or
2. Structure the project so that DOW operates under DOE’s auspices through an interagency agreement, allowing DOE’s nuclear indemnification provisions to flow down to DOW and its contractors—an approach used for Project Pele.

Indemnification structure will be a central negotiation issue for developers bidding on Project Janus.

Conclusion

As DOE and DOW increasingly rely on their statutory authorities, developers must navigate a regulatory landscape that differs fundamentally from traditional NRC licensing. Mission definition, contracting structure, indemnification, and the characterization of power use will be determinative.

The Orrick team has extensive experience advising on nuclear agreements and is well positioned to support developers pursuing opportunities such as Project Janus and other advanced reactor deployments.