Rachel's Democracy & Health News #926, September 27, 2007
WHY IS UNCLE SAM SO COMMITTED TO REVIVING NUCLEAR POWER?
[Rachel's introduction: The long-advertised "nuclear renaissance" got under way this week when NRG Energy applied for a federal license to build two nuclear power plants in Texas, enticed by an offer of free money from Uncle Sam. "The whole reason we started down this path was the benefits written into the Energy Policy Act of 2005," says NRG's chief executive, David Crame.]
By Peter Montague
The long-awaited and much-advertised "nuclear renaissance" actually got under way this week. NRG Energy, a New Jersey company recently emerged from bankruptcy, applied for a license to build two new nuclear power plants at an existing facility in Bay City, Texas -- the first formal application for such a license in 30 years.
NRG Energy has no experience building nuclear power plants but they are confident the U.S. government will assure their success. "The whole reason we started down this path was the benefits written into the [Energy Policy Act] of 2005," NRG's chief executive, David Crame, told the Washington Post. In other words, the whole reason NRG Energy wants to build nuclear power plants is to get bundles of free money from Uncle Sam. Who could blame them?
Other energy corporations are nuzzling up to the same trough. The federal Nuclear Regulatory Commission (NRC) is expecting to receive applications for an additional 29 nuclear power reactors at 20 sites. The NRC has already hired more than 400 new staff to deal with the expected flood of applications.
But the question remains, Can investors be fooled twice? Financially, the nuclear power industry has never stood on its own two feet without a crutch from Uncle Sam. Indeed, the nuclear power industry is entirely a creature of the federal government; it was created out of whole cloth by the feds in the 1950s. At that time, investors were enticed by offers of free money -- multi-billion-dollar subsidies, rapid write-offs, special limits on liability, and federal loan guarantees. Despite all this special help, by the 1970s the industry was in a shambles. The British magazine, the Economist, recently described it this way: "Billions were spent bailing out lossmaking nuclear-power companies. The industry became a byword for mendacity, secrecy and profligacy with taxpayers' money. For two decades neither governments nor bankers wanted to touch it."
Now the U.S. federal government is once again doing everything in its power to entice investors, trying to revive atomic power.
First, Uncle Sam is trying hard to remove the financial risk for investors. The Energy Policy Act, which Congress approved in 2005, provides four different kinds of subsidies for atomic power plants:
1. It grants $2 billion in insurance against regulatory delays and lawsuits to the first six reactors that get licenses and begin construction. Energy corporations borrow money to build plants and they must start paying interest on those loans immediately, even though it take years for a plant to start generating income. The longer the licensing and construction delays, the greater the losses. Historically, lawsuits or other interventions by citizens have extended the licensing timeline, sometimes by years, costing energy corporations large sums. Now Uncle Sam will provide free insurance against any such losses.
2. Second, the 2005 law extends the older Price-Anderson Act, which limits a utility's liability to $10 billion in the event of a nuclear accident. A serious accident at a nuclear plant near a major city could create hundreds of billions of dollars in liabilities. Uncle Sam has agreed to relieve investors of that very real fear.
3. The 2005 law provides a tax credit of 1.8 cents per kilowatt-hour for the first 6,000 megawatts generated by new plants. Free money, plain and simple.
4. Most important, the law offers guarantees loans to fund new atomic power reactors and other power plants using "innovative" technology. Investors need no longer fear bad loans.
One obvious conclusion from all this is that, more than 50 years into the nuclear enterprise, atomic power still cannot attract investors and compete successfully in a "free market." This industry still requires an unprecedented level of subsidy and other government support just to survive.
An energy corporation's motives for buying into this system are clear: enormous subsidies improve the chance of substantial gain. However, the federal government's reasons for wanting to revive a moribund nuclear industry are not so clear. If the "free market" won't support the revival of nuclear power, why would the federal government want to pay billions upon billions of dollars to allay investor fears?
It certainly has little to do with global warming. At the time the 2005 energy bill was passed by a Republic-dominated Congress the official position of the Republican leadership was that global warming was a hoax. Even now when some Republicans have begun to acknowledge that perhaps we may have a carbon dioxide problem, science tells us that nuclear power plants are not the best way to reduce our carbon dioxide emissions. They're not even close to being the best way. (Lazy journalists are in the habit it repeating the industry mantra that nuclear power produces no greenhouse gases. This is nonsense. Read on.)
Substantial carbon dioxide emissions accompany every stage of nuclear power production, from the manufacture and eventual dismantling of nuclear plants, to the mining, processing, transport, and enrichment of uranium fuel, plus the eventual processing, transport, and burial of nuclear wastes.
A careful life-cycle analysis by the Institute for Applied Ecology in Darmstadt, Germany, concludes that a 1250 megaWatt nuclear power plant, operating 6500 hours per year in Germany, produces greenhouse gases equivalent to 250,000 metric tonnes of carbon dioxide per year. In other (unspecified) countries besides Germany, the same power plant could produce as much as 750,000 metric tonnes of carbon dioxide equivalents, the Institute study shows. (See Figure 3, pg. 5)
The study concludes that, in the emission of global warming gases (measured per kilowatt-hour of electricity made available), nuclear power compares unfavorably to...
** conservation through efficiency improvements
** run-of-river hydro plants (which use river water power but require no dams)
** offshore wind generators
** onshore wind generators
** power plants run by gas-fired internal combustion engines, especially plants that use both the electricity and the heat generated by the engine
** power plants run by bio-fuel-powered internal combustion engines
Of eleven ways to generate electricity (or avoid the need to generate electricity through efficiency and conservation) analyzed by the Institute, four are worse than nuclear from the viewpoint of greenhouse gas emissions, and six are better.
[For a great deal of additional solid information showing that nuclear power is no answer to global warming, check in with the Nuclear Information and Resource Service (NIRS)].
A study completed this summer by the Institute for Energy and Environmental Research (IEER) in Takoma Park, Maryland concluded that it is feasible, within 35 to 60 years, to evolve an energy system to power the U.S. economy without the use of any nuclear power plants or any coal plants. See the IEER study, Carbon-Free and Nuclear-Free; A Roadmap for U.S. Energy Policy.
So the rationale for the U.S. government's Herculean efforts to revive a decrepit nuclear power industry cannot be based on concern for global warming or energy independence. The facts simply don't support such a rationale.
Whatever its motivation, the U.S. federal government is doing everything in its power to revive atomic power. In addition to removing most of the financial risk for investors, Uncle Sam has removed other obstacles like democratic participation in siting and licensing decisions.
Throughout the 1970s, energy corporations complained that getting a license took too long. In response, the Nuclear Regulatory Commission (NRC) has spent more than a decade "streamlining" the process for building nuclear plants. Most of the "streamlining" consists of new ways to exclude the public from information and decisions. For example, members of the public used to be able to question witnesses during licensing hearings. No more. There used to be two sets of hearings -- one for siting the plant, and another for constructing the plant. No more. These two set of issues have been rolled into a single license and a single hearing. The purpose is to accommodate the needs of the nuclear industry, to help it survive. As attorney Tony Roisman observed recently, "The nuclear industry has come to the agency [the NRC] and said, 'If you don't make it easy for us to get a license, we are not going to apply for one.'" So the agency is making it easy.
Perhaps it is natural for NRC commissioners to justify a strong bias in favor of keeping the nuclear industry alive even if safety and democracy have to be compromised. After all, if there were no corporations willing to build new nuclear power plants, soon there would be no need for a Nuclear Regulatory Commission. So NRC commissioners know in their bones that their first priority must be to keep the nuclear industry alive. Every bureaucracy's first priority is self-perpetuation. Furthermore, historically a position as an NRC commissioner can lead directly to a high-paying job, often in the nuclear industry itself.
To grease the skids for a nuclear revival, the most important change the NRC has made has been to creatively redefine the meaning of the word "construction." This change was enacted in April, 2007, with lightning speed -- six months from initial proposal to final adoption. By way of comparison, it took the NRC eleven years to adopt regulations requiring drug testing for nuclear plant operators.
"Construction" has traditionally included all the activities undertaken to build a nuclear power plant, starting with site selection, evaluation, testing and preparation, construction of peripheral facilities like cooling towers, and so on. Even the earliest stages of siting are crucially important with a facility as complex and dangerous as a nuclear power plant.
In April of this year, the NRC officially redefined "construction" to include only construction of the reactor itself -- excluding site selection, evaluation, testing and preparation, construction of peripheral facilities and all the rest. At the time, one senior environmental manager inside NRC complained in an email that NRC's redefinition of "construction" would exclude from NRC regulation "probably 90 percent of the true environmental impacts of construction." Under the new rules, by the time the NRC gets involved, a company will have invested perhaps a hundred million dollars. Will NRC commissioners have the backbone to toss that investment into the toilet if they eventually find something wrong with the site? Or will they roll over for the industry and compromise safety?
The lawyer who dreamed up the redefinition of "construction" is James Curtiss, himself a former NRC commissioner who now sits on the board of directors of the nuclear power giant, Constellation Energy Group. This revolving door pathway from NRC to industry is well-worn.
One NRC commissioner who voted in April to change the definition of construction is Jeffrey Merrifield. Before he left the NRC in July, Mr. Merrifield's last assignment as an NRC commissioner was to chair an agency task force on ways to accelerate licensing.
In April, while he was urging his colleagues at NRC to redefine "construction," Mr. Merrifield was actively seeking a top management position within the nuclear industry. In July he became senior vice president for Shaw Group, a nuclear builder that has worked on 95% of all existing U.S. nuclear plants. Mr. Merrifield's salary at NRC was $154,600. Bloomberg reports that, "In Shaw Group's industry peer group, $705,409 is the median compensation for a senior vice president."
No one in government or the industry seems the least bit embarrassed by any of this. It's just the way it is. Indeed, Mr. Merrifield points out that, while he was an NRC commissioner providing very substantial benefits to the nuclear industry by his decisions, his concurrent search for a job within the regulated industry was approved by the NRC's Office of General Counsel and its Inspector General. From this, one might conclude that Mr. Merrifield played by all the rules and did nothing wrong. Or one might conclude that venality and corruption reach into the highest levels of the NRC. Or one might conclude that after NRC commissioners have completed their assignment inside government, everyone in the agency just naturally feels they are entitled to a lifetime of lavish reward from the industry on whose behalf they have labored so diligently.
As recently as this summer, Uncle Sam was still devising new ways to revive nuclear power. In July the U.S. Senate allowed the nuclear industry to add a one-sentence provision to the energy bill, which the Senate then passed. The one sentence greatly expanded the loan guarantee provisions of the Energy Policy Act of 2005. The 2005 Act had specified that Uncle Sam could guarantee loans for new nuclear power plants up to a limit set each year by Congress. In 2007 the limit was set at a paltry $4 billion. The one-sentence revision adopted by the Senate removed all limits on loan guarantees. The nuclear industry says it needs at least $50 billion in the next two years. Michael J. Wallace, the co-chief executive of UniStar Nuclear, a partnership seeking to build nuclear reactors, and executive vice president of Constellation Energy, said: "Without loan guarantees we will not build nuclear power plants."
The Senate and the House of Representatives are presently arm- wrestling over the proposed expansion of loan guarantees. In June, the White House budget office said that the Senate's proposed changes to the loan-guarantee program could "significantly increase potential taxpayer liability" and "eliminate any incentive for due diligence by private lenders." On Wall Street this is known as a "moral hazard" -- conditions under which waste, fraud and abuse can flourish.
All these subsidies to revive a dead duck run directly counter to free market ideals and capitalism's credo of unfettered competition. So the intriguing question remains, Why? Why wouldn't the nation go whole-hog for alternative energy sources and avoid all the problems that accompany nuclear power -- routine radioactive releases, the constant fear of a serious accidents, the unsolved problem of radioactive waste that must be stored somewhere reliably for a million years, and -- the greatest danger of all -- the inevitable reality that anyone who can build a nuclear power plant can build an atomic bomb if they set their minds to it. The recent experience of Israel, India, North Korea and Pakistan in this regard is completely convincing and undeniable.
So why is Uncle Sam hell-bent on reviving nuclear power? I don't have a firm answer and can only speculate. Perhaps from the viewpoint of both Washington and Wall Street, nuclear power is preferable to renewable-energy alternatives because it is extremely capital-intensive and the people who provide the capital get to control the machine and the energy it provides. It provide a rationale for a large centralized bureaucracy and tight military and police security to thwart terrorists. This kind of central control can act as a powerful counterweight to excessive democratic tendencies in any country that buys into nuclear power. Particularly if they sign a contract with the U.S. or one of its close allies for delivery of fuel and removal of radioactive wastes, political control becomes a powerful (though unstated) part of the bargain. If you are dependent on nuclear power for electricity and you are dependent on us for reactor fuel, you are in our pocket. On the other hand, solar, wind and other renewable energy alternatives lend themselves to small- scale, independent installations under the control of local communities or even households. Who knows where that could lead?
Then I think of the present situation in the Middle East. Saddam Hussein started down the road to nuclear power until the Israelis bombed to smithereens the Osirak nuclear plant he was building in 1981. That ended his dalliance with nuclear power and nuclear weapons -- but that didn't stop Don Rumsfeld and Dick Cheney from using Saddam's nuclear history as an excuse to invade his country and string him up.
And now something similar is unfolding in Iran. Iran wants nuclear power plants partly to show how sophisticated and capable it has become, and partly to thumb its nose at the likes of Don Rumsfeld and Dick Cheney -- and perhaps to try to draw us into another war that would indelibly mark us for the next hundred years as enemies of Islam, serving to further unite much of the Arab world against us.
Is this kind of thinking totally nuts? I don't think so. Newsweek reported in its October 1, 2007 issue that Dick Cheney has been mulling a plan to convince the Israeli's to bomb the Iranian nuclear power plant at Natanz, hoping to provoke the Iranians into striking back so that the U.S. would then have an excuse to bomb Iran. I'm not making this up.
So clearly there are more important uses for nuclear power than just making electricity. Arguably, nuclear reactors have become essential tools of U.S. foreign policy -- being offered, withheld, and bargained over. They have a special appeal around the world because they have become double-edged symbols of modernity, like shiny toy guns that can be loaded with real bullets. Because of this special characteristic, they have enormous appeal and can provide enormous bargaining power. Witness North Korea. And, as we have seen, nuclear reactors can provide excuses to invade and bomb when no other excuses exist.
So perhaps Uncle Sam considers it worth investing a few hundred billion dollars of taxpayer funds to keep this all-purpose Swiss army knife of U.S. foreign policy available in our back pocket. In the past five years, we've already devoted $800 billion to splendid little wars in Afghanistan and Iraq, at least partly to secure U.S. oil supplies. Uncle Sam's desperate attempts to revive nuclear power can perhaps best be understood as part of that ongoing effort at oil recovery.
Meanwhile, investors should think twice before buying into the "nuclear renaissance" because there's another "renaissance" under way as well: A powerful anti-nuclear movement is growing again and they will toss your billions into the toilet without hesitation. Indeed, with glee.