Copyright 2000 Federal News Service, Inc.
Federal News Service
September 28, 2000, Thursday
SECTION: PREPARED TESTIMONY
LENGTH: 3341 words
HEADLINE:
PREPARED STATEMENT OF MARVIN FERTEL SENIOR VICE PRESIDENT, BUSINESS OPERATIONS,
NUCLEAR ENERGY INSTITUTE
BEFORE THE SENATE
COMMITTEE ON ENERGY AND NATURAL RESOURCES
BODY:
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.
Conclusion
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.
FOOTNOTES
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.
END
LOAD-DATE: September 30, 2000
