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Copyright 2000 Federal News Service, Inc.  
Federal News Service

September 28, 2000, Thursday


LENGTH: 3341 words


My name is Marvin Fertel. I am Senior Vice President for Business Operations at the Nuclear Energy Institute (NEI). NEI coordinates policy for the U.S. nuclear energy industry, including 275 member organizations with a broad spectrum of interests, including every U.S. utility that operates a nuclear power plant. NEI also counts among its members nuclear fuel cycle companies, suppliers, engineering and consulting firms, national research laboratories, manufacturers of radiopharmaceuticals, universities, labor unions and law firms.

On behalf of the nuclear industry, I would like to commend Chairman Murkowski, Ranking Member Bingaman and the members of this committee for focusing your attention on the potential taxpayer liability related to the Department of Energy's (DOE) failure to meet its obligation to take used nuclear fuel from nuclear power plants. This hearing is particularly important because of recent federal court decisions in favor of the industry and the looming financial burden on American taxpayers as a result of DOE's failure to accept used nuclear fuel. Due to this continuing failure, DOE has broken its contract with consumers of electricity from nuclear power plants, who have committed more than $17 billion to fund the federal used nuclear fuel management program. As a result, consumers are paying twice to manage used nuclear fuel-once into the Nuclear Waste Fund for the federal program and again for their electric utility company to build temporary storage facilities at plant sites. Given recent U.S. Court of Claims decisions, taxpayer liability for DOE's inaction could be $5 billion for 12 companies who have sued DOE for non-performance.

Consumers who use electricity generated at nuclear power plants have funded the federal program for commercial nuclear fuel disposal. However, in the long run a complete DOE default could cost taxpayers as much as $61 billion in damages.

Before I discuss the ramifications of DOE's failure to accept used nuclear fuel, I would like to tell you about the tremendous environmental benefits of nuclear energy--benefits that could be jeopardized by the federal government's delay in taking used fuel from nuclear power plant sites.

Nuclear Energy, Clean Air and the Need for Comprehensive National Energy Policy

As we move into the 21st century, the United States is facing mounting environmental and energy challenges. Growing attention on electricity reliability and increasing environmental controls on fossil-fueled electric power plants are demanding a renewed focus on a comprehensive energy policy that effectively uses all forms of electricity generation to their full potential and advantage.

Added to the policy challenges today and for future generations are new Clean Air Act standards to be imposed during the next few years and the potential for climate change due to man-made emissions of greenhouse gases. As with air quality improvements in the past, a robust, safe nuclear energy program again will be the lynchpin in efforts to avoid emissions while preserving the affordable electricity system that is the foundation for America's economic growth.

Nuclear energy is a proven baseload energy technology that generates electricity without emitting any of the pollutants associated with acid rain, smog, haze, ozone, or global climate change. Yet, nuclear energy is rarely credited with its role in emissions avoidance or cited as a source of future avoided emissions. Nuclear energy avoids 168 million metric tons of carbon dioxide each year, more than the carbon reduction level that the Administration's Global Climate Change plan sets out to accomplish. Nuclear energy also avoids 1.9 million tons of nitrogen oxide and 4 million tons of sulfur dioxide per year in the United States. Without nuclear energy, it would be impossible for the United States to successfully reduce carbon dioxide and other emissions while expanding our economy. Today, improved efficiency and production at nuclear power plants is the single largest carbon reduction technology among industry participants in the federal government's voluntary carbon dioxide (CO2) reduction program. Nuclear energy accounts for almost half of the carbon avoidance reported by all U.S. industry combined. Expanding the U.S. nuclear power program may ultimately prove to be one of our most strategic initiatives for mitigating the effects of air pollution and greenhouse gases.

Federal policymaking, especially national energy policy, must re- examine the irreplaceable value of nuclear energy, and should craft policies and programs so electricity markets recognize and reward that value. According to a September survey of college graduates who vote, 73 percent said that nuclear power plants should receive tangible benefits for avoiding emissions in the same way other power plants receive benefits for reducing emissions.1

Nuclear energy is reliable, affordable, and essential electricity technology. In 1999, nuclear power plants generated a record 728 billion kilowatt-hours of electricity, 53 billion kilowatt-hours more than the previous year and 21 percent more electricity than nuclear power plants produced in 1990. Last year's record performance also capped the best decade in the industry's history. Even with growth in overall electricity demand and production, America's nuclear power plants have kept pace. In fact, nuclear energy was vital to meet our nation's electricity supply during periods of peak electricity demand this summer.

U.S. electricity demand is expected to increase from 50 percent to 75 percent during the next decade,/2 and we will need to maintain the 30 percent of electricity production from emission-free electricity sources, such as nuclear energy, solar, hydro and wind power. Nuclear energy produces two-thirds of all emission-free electricity, and is the only expandable, large-scale electricity source that protects our air quality and meets the energy demands of a modern economy.

The dramatic increase in electricity generation by America's nuclear power plants also is one the most successful energy efficiency programs of the last decade. Nuclear power plant capacity increases and operating efficiencies during the 1990s are equivalent to adding 19 large (1,000-megawatt) power plants to the electricity grid. And, the growth in nuclear power production avoided the environmental impacts that would have occurred if new power plants had to be built to meet these needs.

Plant uprates and improved maintenance and reduced outage times are contributing to even higher operating efficiency and additional electricity output from existing power plants. But these increases are finite, limited to the maximum capacity of each reactor. To meet future demand of an electricity-hungry digital economy, especially when environmental requirements limit some options, electric companies are beginning to examine the market conditions required for new nuclear power plants.

For the near-term, the next generation of nuclear reactors has already been designed and is being built in overseas markets. The Nuclear Regulatory Commission has certified three advanced reactor designs - the Westinghouse AP600 and System 80+, and the GE Advanced Boiling Water Reactor.

If we are to protect our environment, particularly our air quality, we must do everything we can to ensure that our nation's largest source of non-emitting electricity is expanded. The construction of new nuclear power plants must not be hindered by DOE's failure to meet its obligations to manage used nuclear fuel.

The Government's Failure To Provide Storage for Used Nuclear Fuel Is a Clear Violation of its Contractual Responsibilities

The Nuclear Waste Policy Act of 1982 set our nation's current framework for the disposal of used nuclear fuel from nuclear power plants. Under that legislation, the federal government agreed to provide for the permanent disposal of nuclear waste and the utilities agreed to pay for the costs of that disposal. The act authorized the DOE to enter into contracts with utilities that owned nuclear power plants. The government agreed to dispose of used nuclear fuel not later than Jan. 31, 1998 and the utilities agreed to collect a fee from their consumers to be paid into the Nuclear Waste Fund. These contracts were for all intents and purposes a mandatory requirement and every utility owning a nuclear plant signed such an agreement.

The initial suits were filed in the U.S. Court of Appeals for the District of Columbia. That court ruled against the Department of Energy and found that the contractual obligation was not conditioned upon the availability of a repository. Indiana Michigan Power Co. v. United States, 88 F.3rd 1272 (D.C. Cir. 1996). DOE then notified the utilities that it would not begin disposing of used nuclear fuel by the 1998 deadline and that the agency was facing an "unavoidable delay," a claim intended to insulate the Energy Department from damages for its failure to perform.

In response, a group of utilities brought actions against the agency in the District of Columbia Circuit Court, seeking that DOE meet its contractual deadline. The court refused to order DOE to do so, but ruled that the agency could not claim that the looming failure to begin accepting used fuel was due to unavoidable delay, thereby exposing DOE to potential damages. Northern States Power Co. v. Department of Energy, 128 F.3rd 754 (D.C. Cir. 1997).

The path having been cleared, Maine Yankee Atomic Power Co., Connecticut Yankee Atomic Power Co., and Yankee Atomic Electric Co. filed suit in the U.S. Court of Claims. The suit sought damages from the federal government on the basis that DOE did not fulfill its obligation to remove used nuclear fuel as provided in their contract with the government. The court ruled in favor of the utilities. Maine Yankee Atomic Power Co., et. al., v. United States, U.S. Court of Appeals for the Federal Circuit, 2000 US App. Lexis 22319, August 31, 2000.

A separate case filed by Northern States Power Co. in the U.S. Court of Claims also alleged a breach of contract for the government's failure to remove used fuel from the Prairie Island nuclear power plant in Minnesota. In this case, presided by a different judge, the court found that the utility had failed to exhaust its administrative remedies and held in favor of DOE. Northern States Power Company v. United States U.S. Court of Appeals for the Federal Circuit, 2000 US App. Lexis 22318, August 31, 2000.

In decisions released on Aug. 31, the U.S. Court of Appeals for the Federal Circuit held in favor of the utilities in both cases. Regarding the Yankee case, the court said, "The government does not, and could not, deny that it failed to meet the contractual requirement to begin accepting nuclear waste no later than January 31, 1998." The court concluded that, "DOE has breached the contract." In the Northern States Power case, the court overturned the decision of the Court of Claims and found that the utility could proceed with its lawsuit.

The Department of Energy may appeal these cases. Nonetheless, three separate federal courts have ruled in favor of the utilities and electricity consumers. The most likely outcome from these cases is that the Court of Claims will ultimately be determining the amount of damages that are owed to the companies whose contracts have been breached by the government.

Twelve cases have now been filed in the U.S. Court of Claims by electric utilities against DOE seeking damages for failure to dispose of used nuclear fuel. In just these 12 cases, the damages could total more than $5 billion. These cases represent a fraction of those anticipated as DOE continues to default on contracts with utilities.

Enactment of S./287 Would Have Mitigated Government Liability

The nuclear industry has advocated that the federal government could avoid significant potential damages resulting from its failure to accept used fuel by building a temporary storage facility for used nuclear fuel. The government's obligation is to take title to, transport, and dispose of used fuel. It is not necessary to have a completed permanent repository in order to fulfill that contractual obligation.

Earlier this year, Congress passed S. 1287, the Nuclear Waste Policy Amendments Act of 2000. That bill would have provided for early acceptance of used nuclear fuel at Yucca Mountain, perhaps as early as 2007, provided that the site was determined to be suitable by the President and the Nuclear Regulatory Commission issued a construction license to build the repository. Although S. 1287 would not have eliminated all of the government's damages for failure to dispose of used nuclear fuel, it would most certainly have mitigated those damages by allowing the government to fulfill its contractual responsibilities sooner.

Despite strong bipartisan support for S. 1287 in both the U.S. Senate and House of Representatives, President Clinton vetoed that measure and the Senate failed to override that veto by a single vote.

Eighty of 103 nuclear reactors in the United States will run out of existing on-site storage for used fuel by 2010. When that happens, they will be forced to build and maintain on-site storage facilities as a result of the government's failure to meet its contractual obligation to accept used fuel.

In some cases, the damages will not be limited to the utility's cost of storing the used fuel. In Minnesota, for example, the state legislature has limited the number of dry storage containers for used nuclear fuel that can be used at Xcel Energy's Prairie Island plant. Despite Prairie Island's outstanding performance and safety record, the plant could be shut down by the state in 2007 unless used fuel is removed from the site. In that case, the potential damages to be paid by the federal government may be based upon the lost revenues from the power plant or upon the investment the company has made. Continued inaction by the federal government to fulfill its contracts to manage used nuclear fuel is no longer an option. The clock is ticking and the damages will continue to increase. Continued federal inaction. could ultimately cost American taxpayers additional tens of billions of dollars.

EPA's Proposed Radiation Standard for Yucca Mountain Could Result in Total Program Failure

The nuclear industry remains concerned that a draft proposal by the Environmental Protection Agency (EPA) for radiation protection standards at Yucca Mountain may prevent the efficient management of used nuclear fuel. By including a separate groundwater standard contrary to the Nuclear Regulatory Commission, the EPA proposal could result in an unworkable standard that disqualifies the Yucca Mountain repository site.

The National Academy of Sciences has harshly criticized the separate groundwater standard. In a letter written to the EPA on Nov. 26, 1999, the NAS concluded that the "EPA's proposal to include a separate ground-water standard lacks a sound scientific basis and will do little, if any, additional protection to individuals or the general public from radiation releases from the repository." The NAS also wrote that the standard is not, but should be, based on the "best available science," not "40-year old dosimetry" as EPA has proposed. In the face of staunch opposition from the scientific community, other government agencies and the nuclear industry, EPA persists in promoting scientifically indefensible standards that, at a minimum, will cost consumers billions of additional dollars with no commensurate improvement in safety or public health.

Evidence in the Department of Energy's draft environmental impact statement on Yucca Mountain indicates that a separate groundwater standard will lead to less protection of public health and safety while adding unnecessarily high costs for the Yucca Mountain project.

At worst, the proposed EPA standard could needlessly disqualify Yucca Mountain--and perhaps all locations in the United States--as a potential repository site. This could mean a total failure of DOE's used fuel management program and massive potential financial liability for the American taxpayers of up to $61 billion. Ironically, EPA's proposed Yucca Mountain radiation protection standards also could significantly hamper America's ability to meet its clean air goals by needlessly jeopardizing the future of the nation's largest source of emission-free electricity--nuclear energy.

NEI Estimates That Damages Could Total $61 billion

Under the worst case scenario, costs for used fuel management could range from $38 billion to $61 billion. Continued federal inaction, in which the Energy Department does not accept fuel until 2030 or later, could result in the following economic effects: -- Nuclear power plants would be forced to store used fuel in stainless steel and concrete-reinforced containers at plant sites in 34 states. Building and operating such on-site storage systems through 2030 would cost $1.3 billion, or an average of $80,000 per metric ton of uranium fuel. This cost includes: design, engineering, quality assurance, licensing, construction and operation of the on- site facility.

-- Even after nuclear power plants stop generating electricity, utilities must continue to safely manage used nuclear fuel at the site until DOE accepts it for disposal. The potential cost to manage fuel after plant shutdown ranges from $10.3 billion to $20.6 billion. For an individual plant, the annual cost could range from $4 million to $8 million. These potential added costs, however, would not take effect until six years after a plant is decommissioned.

-- In addition to capital and storage costs, utilities should be entitled to recover payments to the Nuclear Waste Fund, which is intended to finance the siting, construction and operation of a permanent repository. Those commitments-- consumer payments of more than $660 million each year plus interest, total $17 billion.

Despite approximately a $10-billion balance in the Nuclear Waste Fund, the Energy Department is two years and eight months past due on its commitment to begin moving fuel for disposal at a federal repository. That delay will continue until at least 2010, even if Yucca Mountain is approved. Each delay in this program means that the legal liability of the federal government, and ultimately, the taxpayers grows larger. Had the program worked according to plan, taxpayers would have been completely insulated from the cost of managing the nation's used nuclear fuel. Instead, the potential enormous liability to taxpayers continues to rise. The fiscally responsible course of action would have been for President Clinton to sign the Nuclear Waste Policy Amendments Act of 2000 into law. That law would have moved the safe, sensible federal program to manage used nuclear fuel forward and would have helped save American taxpayers billions of dollars in potential liability payments.


Mr. Chairman, the path forward is clear. The Energy Department clearly has a legal and statutory obligation to take used nuclear fuel from 40 states. But because of DOE's inaction, taxpayers could be liable for at least $5 billion in damages; potentially 10 times that amount. Rather than subjecting taxpayers to this billiondollar liability, the Administration and Congress should support a safe, scientifically sound approach to used nuclear fuel management as embodied in S. 1287. After decades of delay, we have an opportunity to set this program on a sensible course that benefits consumers and the environment, and preserves our largest source of emission-free electricity for generations to come.


1 Public Opinion Survey conducted in October 2000 by Bisconti Research, Inc.

2 Electricity Supply: A Module of the Electricity Technology Roadmap: 2000 Executive Overview, Electric Power Research Institute (EPRI), Inc.


LOAD-DATE: September 30, 2000

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