More than a quarter century after those contracts were signed, and more than a decade after the 1998 deadline passed, nuclear utilities have provided the DOE nearly $30 billion
– By Kimberly R. Reome and Krista M. Haley, The Kenrich Group
In the context of recent federal bailouts of the financial services and auto industries that number in the trillions of dollars, $30 billion may seem like little more than a drop in the bucket.
But to millions of utilities ratepayers in the thousands of communities serviced by the commercial nuclear power industry — who have paid the bulk of the costs associated with delays in answering the question of what to do with the nation’s spent nuclear fuel (SNF) — this amount is nothing to scoff at.
Since 1982, when Congress passed the Nuclear Waste Policy Act in response to nuclear proliferation concerns, nuclear power plant owners and operators have been funding the development and construction of a national SNF storage facility that may never materialize.
Under the terms of the legislation, nuclear utilities entered into mandatory contracts with the U.S. Department of Energy under which they pay the federal government one mill (one tenth of a cent) for every kilowatt hour of nuclear-generated electricity sold to their customers.
In return, the government assumed responsibility for the development, construction, and maintenance of a facility that would be ready to accept the nation’s SNF no later than Jan. 31, 1998.
More than a quarter century after those contracts were signed, and more than a decade after the 1998 deadline passed, nuclear utilities have provided the DOE nearly $30 billion — and counting — in fees and interest.
Meanwhile, development of the proposed SNF permanent storage site at Yucca Mountain (in Nevada) is stalled amid political debate as to whether or not long-term SNF storage at Yucca Mountain is indeed the best course of action for handling our nation’s SNF.
To date, not one spent fuel assembly has been transferred to DOE control for permanent disposal under the contracts. And the additional costs that nuclear utilities must bear to store SNF on their plant sites are mounting for plant owners and their ratepayers, who all still await a single, permanent federal facility to begin accepting their SNF.
With the SNF contracts in place, nuclear utilities did not anticipate having to add storage capacity for SNF generated after 1998.
Thus, they are incurring, and will continue to incur, billions of dollars in costs related to the installation and expansion of highly technical on-site storage technologies — primarily, dry fuel storage facilities and casks that house the highly radioactive waste.
Now, these costs are the central focus of a legal battle that has been underway since the DOE first reported that it would miss the 1998 deadline.
When litigation first began, the DOE initially argued that it was only obligated to perform if the repository in question (Yucca Mountain) was actually in existence and ready to accept SNF.
That argument was rejected by the U.S. Court of Appeals for the District of Columbia Circuit, which held that the DOE’s duty to perform was not subject to condition.
The DOE then turned to the contention that its performance delay was unavoidable — pointing to legal, political and scientific obstacles that the agency claimed kept it from adhering to the Nuclear Waste Policy Act’s readiness date.
That argument was rejected early on as well. But in 2007, a Court of Federal Claims trial judge challenged that ruling, and thus, the “unavoidable delay” issue currently remains under appeal in the U.S. Court of Appeals for the Federal Circuit.
Nonetheless, nuclear utilities that have obtained trial decisions in their partial breach cases against the DOE are being awarded the vast majority of their claimed costs incurred for increasing and maintaining on-site SNF storage capacity.
And furthermore, the utilities are permitted to periodically return to the Court of Federal Claims to recover continuing damages associated with future on-site SNF storage.
Of course, the approximately $750 million that the industry has been awarded to date (but that has yet to be paid) only covers on-site storage costs incurred to date — as do a number of settlement agreements that have been reached and to-date total more than half that amount.
However, the SNF still remains on the sites of the various nuclear plants that produce it — with no real expectation that it will be shipped off-site to a permanent storage facility any time soon.
And while the “unavoidable delay” issue remains unresolved, nuclear utilities and their ratepayers will have to continue to wait for final rulings related to their claims for on-site SNF storage costs, as well as incur the very significant financing costs required to build and maintain the necessary incremental SNF storage capacity.
In 2007, the U.S. Department of Justice reported to Congress that it had already spent nearly $100 million defending against the industry’s SNF claims to address the utilities’ additional on-site storage costs.
For those keeping score, that’s nearly $1 billion on the taxpayers’ tab (once the damages already awarded are paid) and some 30 times that amount shouldered by nuclear utilities and their ratepayers through their contributions to the Nuclear Waste Fund under the contracts with DOE.
And the longer it takes to develop a comprehensive, permanent solution to the question of what to do with America’s SNF, the higher those costs are going to be.
But even with all of the dollars that are being incurred, that comprehensive solution seems unlikely to emerge anytime soon.
A February 2009 public memo issued by the Office of Management and Budget — entitled “A New Era of Responsibility; Renewing America’s Promise” — states that “The Yucca Mountain program will be scaled back to those costs necessary to answer inquiries from the Nuclear Regulatory Commission, while the administration devises a new strategy toward nuclear waste disposal.”
Sen. John McCain, R–Ariz., has announced his intentions to amend an upcoming energy bill with measures that would refund utility ratepayers the monies they have paid into the Nuclear Waste Fund to date.
Whether the ultimate solution is long-term DOE storage and disposal or continued on-site storage at the 104 active nuclear power plants in the United States and eventual reprocessing (or recycling) of SNF (a potential solution that has re-emerged even though the nuclear proliferation concerns of the early 1980s continue to be debated), the need for swift action on the part of the federal government is crucial to resolving the problem cost-effectively.
At the very least, President Obama, Congress and Secretary Chu could work to establish a framework for settling existing lawsuits and moving past the adversarial posture that currently exists between the DOE and industry leaders on the SNF disposal issue.
Building on this framework, industry decision-makers and government regulators could begin to work together to resolve this nuclear waste issue.
The Kenrich Group LLC is a business and litigation consulting firm with offices in Chicago, Ill., Dallas, Texas, Minneapolis, Minn., Washington, D.C., and New York. The firm’s professionals are among the most sought-after experts in the field of forensic accounting and scheduling, specializing in litigation matters involving construction, utilities, intellectual property, government contracts and commercial damages. They are known for providing clear, effective communication of findings, including expert testimony. For more information about The Kenrich Group and its personnel, please see www.kenrichgroup.com.
Kimberly Reome is a vice president in the firm's Chicago office. Krista Haley is a principal with the firm in the Chicago office.