By Christopher F. Tierney & Patrick M. Jensen, The Kenrich Group LLC
At nearly 20 percent of our current electricity production, U.S. energy policy must include commercial nuclear power to satisfy our increasing demand for electricity over the next century, yet certain political and technological barriers remain for an otherwise promising source of clean energy.
New technologies are being explored for constructing the next generation of commercial nuclear power plants, but some of the same issues that have plagued the country’s older legacy reactors for the past three decades will continue to affect the industry for the foreseeable futurein particular, what to do with spent (or more correctly, used) nuclear fuel.
A tunnel boring machine reaching daylight in April 1997 at Yucca Mountain. In 1987, Congress directed DOE to study Yucca Mountain, choosing that site from three under consideration. Photo, U.S. DOE.
For years, the policy set forth by the U.S. government, through the Department of Energy (DOE), was to establish a permanent geologic repository in which to store spent fuel from the nation’s commercial nuclear reactors. Only very recently, under the Obama administration, has that course of action been called into question, if not potentially dismissed entirely as an option. But whatever goals the administration may have in mind for setting a new course in nuclear waste management, it may ultimately find that the most prudent approach may be what has been the aim all alonga central repository to dispose of spent nuclear fuel.
Certainly, much of the appeal for new nuclear generation is explained by concerns over man-made carbon-emissions and the potential impact on climate change, since nuclear generation is a source of power with near-zero carbon emissions. Nevertheless, electricity produced by nuclear power does result in a relatively small but highly consequential amount of waste product, spent nuclear fuel. Two predominant approaches to managing spent nuclear fuel waste, reprocessing and permanent storage, have been part of the worldwide commercial nuclear power industry for many years, but even after decades of consideration, the U.S. has apparently not been able to definitively make up its mind as to which approach it should take.
U.S. Waste Policy History
Though reprocessing was intended when commercial nuclear plants were first built, President Jimmy Carter eliminated that option in the late 1970s. The decision effectively kept reprocessing off the table as an option and led to the Nuclear Waste Policy Act of 1982, which required each utility to sign a standard contract with the U.S. DOE, whereby the government would remove spent fuel from nuclear plant sites beginning in 1998. The Nuclear Waste Policy Act established that the method for handling spent nuclear fuel in the U.S. was to ship it to a centralized repository. To fund DOE’s efforts, each utility would pay quarterly fees to DOE based on the amount of electricity generated, about $8 million per year for a typical 1,000 MW plant.
What happened, though, was something entirely different. DOE never completed the repository and no spent fuel has been removed from the nuclear plant sites under the contract. Confronted with mounting inventories in onsite wet storage pools, utilities had to find another way of safely holding their spent fuel until DOE would perform. While some utilities have been able to expand the capacity of their storage pools, in most cases, doing so provided only a temporary solution due to continual growth in inventories of spent fuel as the plants continue to operate. The next step was “dry storage” technology, which entails the transfer of sufficiently cooled spent fuel from the pools into vaults or dry casks. Stored in a protected area on the site of the nuclear power plant, the dry casks provide safe, contained storage for decades.
But implementing a dry storage system is very costly. The Nuclear Energy Institute states that it costs approximately $10 million to $20 million to build a dry storage facility and related modifications add another $5 million to $7 million annually for the operations and maintenance of dry storage. Such costs add up quickly, considering that there are 104 commercial nuclear power reactors in the U.S. In fact, DOE estimates the costs incurred by the industry to date at $11 billion as a result of its non-performance under the standard contracts with utilities, assuming DOE begins picking up spent fuel in 2020. According to DOE estimates, that liability will increase an additional $500 million each year that DOE continues to not take spent fuel. It is not surprising that more than 70 utilities have filed suit against DOE since the time the 1998 contractual deadline passed.
Industry observers heightened their expectations that DOE would eventually open a repository after the location at Yucca Mountain, Nev., was formally approved by President George W. Bush in 2002 and a design certification application was submitted to the Nuclear Regulatory Commission (NRC) in 2008. Despite these signs that the federal government might yet take responsibility for the industry’s spent fuel according to contracts with utilities (albeit untimely), President Barack Obama has all but reversed course on U.S. national spent fuel policy. In early 2009, the funding for the Yucca Mountain repository was eliminated from the federal budget but for a relatively miniscule amount needed to keep the design review process active at the NRC. At the same time, Obama announced plans to form a “blue ribbon panel” to study what to do with commercial spent nuclear fuel and recommend a course of action.
It seems a foregone conclusion that the panel will consider reprocessing as an option for spent fuel. Current and expected future technologies point to new efficiencies from reprocessing. And, of course, other countries around the world have been recycling spent fuel for decades. But there are drawbacks. Reprocessing is expensive and currently not economical compared to mining new uranium. Countries currently reprocessing might not be doing so if their reprocessing plants were not already a “sunk cost” and their decommissioning not so expensive. Of course, reprocessing also does not eliminate the need for permanent waste storage for the remaining wasteeven smaller in amount but more radiologically active. France, the country with by far the most extensive reprocessing operations, is pursuing its own deep geologic repository for remaining wastes, estimated to be in service by 2025.
It is apparent that the U.S. is at a crossroads on the question of spent nuclear fuel. Any solution that is chosen today, whether permanent storage in a repository or pursuing reprocessing, will still require years of development and implementation. And DOE’s current breach of its contracts to take possession of commercially produced spent fuel further complicates matters. The government appears reluctant to pursue reasonable settlement terms with many utilities in the nuclear industry, presumably because of the substantial liability owed. At this point, the government is using every means possible in federal court to postpone reimbursing these utilities for their onsite spent fuel storage costs.
The first lawsuits addressing DOE’s liability date back to the mid-1990s, with most of the recent group of suits on economic damages beginning in 1998the latest date by which DOE was contractually obligated to begin taking spent fuel. More than 10 years later, only a dozen or so cases have reached trial and even fewer have court-issued decisions. Even with the court decisions in favor of the utilities, virtually no damages have been paid to date due to continuing appeals by the government to higher courts. In fact, one case currently under appellate review is subject to a jurisdictional dispute, the outcome of which could have industry-wide implications.
The ongoing litigation has been costly to the industry and taxpayers. Overall, about 10 cases have settled, with about 50 cases still active. According to Deputy Assistant Attorney General Michael Hertz in House Budget Committee testimony earlier this year, these efforts have cost the Department of Justice more than $150 million in attorney, expert and litigation support fees to defend. For utilities, it costs several million dollars from filing a complaint through trial, excluding expert witness fees and other litigation support costs. (Marcia Coyle, “Billions in Damages on the Line in Federal Circuit’s Nuclear Fuel Case,” National Law Journal, Sept. 14, 2009.) In addition, because of potential legal barriers to the recovery of interest in damages claims against the federal government, until the utilities are reimbursed for the expenditures they have made to date for storing spent fuel onsite, the financing costs alone for the industry run as much as $200 million to $300 million a year.
The Future For Waste Policy
Ultimately, although existing processes of storing spent fuel in dry casks have become a safe and routine operation at nuclear plants, the concern by the utilities is a result of broken promises and uncertain guidance on national waste policy. Once reprocessing was eliminated as an option decades ago, the utilities relied on DOE to take the spent fuel as it contractually stated it would. Now the utilities are in a situation where the federal government is in a holding pattern, very possibly having abandoned the direction the government said it would be taking since the early 1980s.
Earlier this year, in an attempt to help solve the political and logistical issues surrounding a national policy for spent fuel storage, a consortium of Midwestern universities professors released a white paper, ‘Plan D’ for Spent Nuclear Fuel. The white paper explored several options: send spent fuel to a long-term underground repository, pursue reprocessing, maintain spent fuel in dry storage at nuclear plant sites for an extended period while alternative solutions are further evaluated, or simply phase out commercial nuclear power altogether and abandon further consideration of reprocessing. Of these options, the conclusion the professors reached was to continue to pursue at-plant dry storage, allowing time to evaluate other options in the coming decades, if not centuriesan approach they labeled “Plan D.” Plan D would also entail a radical change to the existing policies between federal and state governments and the individual utilities regarding spent fuel management.
Plan D, in part, seeks a practical approach to spent fuel management and storage. Plan D acknowledges that most utilities have already implemented dry storage to store spent fuel that will no longer fit in their storage pools. Dry storage has been demonstrated to be safe and there is vast experience for implementing, maintaining and operating dry storage installations. While recognizing the limitations of dry storage as a long-term solution, Plan D embraces dry storage as a means to buy time while other technologies emerge and a coordinated, viable national policy can be developed and executed.
But the authors of Plan D go a step further and propose a complete overhaul of the current arrangement between the federal government and the utilitiesthat is, transfer responsibility for the long-term management and storage of spent fuel from the federal government to the states and the commercial utilities that produce spent fuel. Given the dismay over the more than $25 billion that has been paid by the utilities to DOE into the Nuclear Waste Fund with no commensurate performance to date, Plan D proposes that the federal government remove itself entirely from a management role and relegate itself to a regulatory role through NRC oversight. Instead of paying a generation fee to DOE, the utilities would be required to set aside an equivalent sum into an escrow fund, similar to the required arrangement for utilities to set aside funds for decommissioning nuclear plants. The existing balance of the Nuclear Waste Fund would also be transferred to the escrow fund and a new government corporation would administer the fund, tracking individual accounts for each utility. To the extent that a permanent storage solution turned out to be less expensive than the monies collected, utilities would be reimbursed depending on how much they paid in.
This arrangement would allow greater assurance that the funds would be readily accessible without the need to go through an annual Congressional approval process. In addition, rather than having the federal government designate an area for national waste storage in a state where residents are opposed to spent fuel storage, the escrow fund could be used as a source of compensation for states willing to host a spent fuel facility, whether a central repository or a reprocessing plant. The escrow fund would also introduce a cooperative arrangement between the commercial nuclear industry and host states, one which would avoid potentially costly litigation from locals not keen on nuclear waste, no matter how safely it is stored in their proverbial backyards.
The conclusions reached in Plan D represent some common sense options that could satisfy many in the commercial nuclear power industry. It would remove uncertainty in national policy by relegating the federal government’s involvement to that of a regulatory body only and establish incentives for states to cooperate in the effort to manage spent fuel. The utilities would also gain confidence through the establishment of an escrow fund where the fees they would pay in based on generation would actually be available and used for developing and implementing a long-term storage solution. Such a situation would likely be especially welcome given that DOE recently rejected requests made by several utilities to suspend collection of the generation fee even though the utilities are receiving no commensurate benefit in return.
What the commercial nuclear power industry needs right now is a comprehensive approach to spent fuel management and storage that has straightforward and achievable results. While new technologies may make reprocessing a more economical and achievable option, the fact is that even after reprocessing, there will ultimately be some smaller amount of nuclear waste that will have to be addressed. Though at a significant cost, onsite dry storage can continue to serve as an intermediate solution that will buy the industry many years that can be used for research and development of workable longer-term solutions. But the political and legal tangles regarding spent fuel need to be resolved for the focus to be placed back on a paramount concern for the nation’s energy policyproviding safe, clean energy solutions for the next century, of which nuclear power must play a significant part.
Authors: Christopher F. Tierney is vice president and treasurer of The Kenrich Group. Patrick M. Jensen is a managing consultant of The Kenrich Group. Both are based in Washington, D.C. Their consulting work is focused on financial, accounting, economic and damages matters in areas including the electric power industry.