Nuclear Subsidies: $7.1 billion a year

excerpted from the book

Take the Rich Off Welfare

by Mark Zepezauer and Arthur Naiman

Odonian Press, 1996


Nuclear Subsidies: $7.1 billion a year

As Noam Chomsky points out, most successful US industries wouldn't be competitive internationally if the federal government hadn't developed their basic technology with your tax dollars, then given it away to private companies. Computers, biotech and commercial aviation are examples, and so-preeminently-is nuclear power. Nuclear power still can't stand on its own two feet, but with a sugar daddy like the federal government, it doesn't need to.

The feds still provide the industry with most of its fuel and waste disposal, and much of its research. Between 1948 and 1995, the government spent more than $61 billion (in 1995 dollars) on nuclear power research- almost two-thirds of all federal support for energy research and development. The 1996 figure was $468 million.

The insurance subsidy

Since 1959, the government has also limited the liability of nuclear utilities for damage caused by accidents. Until 1988, the utilities were only responsible for the first $560 million per accident; then the limit was raised to $7 billion.

But $7 billion wouldn't begin to cover the costs of a core meltdown, or even a near meltdown like Chernobyl. That accident's total costs are estimated at $358 billion-not to mention the 125,000 deaths the Ukrainian government figures it has caused.

The Energy Information Administration calculates that if nuclear utilities were required to buy insurance coverage above that $7 billion on the open market, it would cost almost $28 million per reactor, for a total annual subsidy of $3 billion. (Even if it could pay its own way, the risks of nuclear power far outweigh its benefits. But that's the subject for another book.)

Enriched uranium fuel

Before 1993, the DOE (Department of Energy) was responsible for all domestic production of enriched uranium fuel for nuclear power plants. Since then, that's been the job of a government corporation called the US Enrichment Corporation (USEC). The USEC has been a financial disaster, even for a government program; taking into account lingering liabilities like environmental cleanups, it's more than $10 billion in the hole.

Having made a fine mess of things, the government plans to privatize the USEC. Naturally, they'll try to give the private company buying USEC as many assets as possible, and keep as many liabilities as they can, so that we and our children can pay for them. For example, the DOE plans to take large amounts of radioactive waste from the eventually privatized corporation, even though it has no place to safely store them. These liabilities will cost taxpayers an estimated $ 1.1 billion.

But wait-there's more. We lose on the selling price too, which the GAO (Government Accounting Office) estimates at $1.7 to $2.2 billion. Since the net present value of USEC cash flows is $2.8 to $3.5 billion, taxpayers would be out between $600 million and $1.8 billion on the deal. So the total we'll pay for privatizing the USEC will fall between $1.7 and $2.9 billion.

Reprocessing fuel rods

Nuclear power plants create radioactive waste. Naturally, the government feels that it's our responsibility as taxpayers to take this waste and either reprocess it into new fuel rods or find some place to store it for the next 10,000 years or so. Let's talk about reprocessing first.

Argonne National Laboratory (outside of Chicago) used to operate an enormously expensive facility for separating plutonium, uranium and the like from spent nuclear fuel rods, so that these elements could be used in new fuel rods or nuclear weapons. In 1994, Congress killed funding for that, but the same sort of reprocessing is still taking place in Idaho, at an annual cost to us of $25 million. And Argonne is still getting $25 million a year to terminate its program.

The Savannah River site in South Carolina was originally used for weapons production. As a result of that activity, several square miles of land are so badly contaminated that human beings will probably never be able to use them again. This site is now used for reprocessing spent and corroded fuel rods, and may reprocess foreign fuel rods as well. This new business is going to cost us $340 million a year.

Their waste-our responsibility

A place like Savannah River naturally brings the subject of waste to mind. Nobody wants nuclear waste stored in their state, so Congress picked a place in Nevada, a state with little congressional clout. Called Yucca Mountain, it's the least stable site of any considered to date, with 33 known earthquake faults in the area.

Work on Yucca Mountain can't proceed until the Supreme Court rules on a law Nevada passed that prohibits the storage of nuclear waste in the state. Yucca Mountain's planned opening has been moved back from 1998 to 2015, but we're still being charged $250 million a year just to study the situation.

If Yucca Mountain does go ahead, it will cost us $33 billion-some say $40 or $50 billion-to build the facility, transport radioactive waste to it from all over the country, and seal the waste into thousands of containers. Meanwhile, there are no long-term storage sites for nuclear waste (and Yucca may never be one either).

The nuclear industry is lobbying hard to build a vastly inadequate short-term storage facility above ground at Yucca Mountain. Their eagerness is explained by the fact that once they turn the waste over to Uncle Sam, it's our problem, not theirs. The Public Interest Research Group (PIRG) says that this whole boondoggle has the potential to turn into "the S&L bailout of the Nineties."

Yucca Mountain is supposed to be financed by the Nuclear Waste Fund, which is generated by charging utility customers a fee of 1/10 ¢ per kilowatt hour for nuclear-generated power. But in its thirteen years of existence, the fund has never been adjusted for inflation, which has cut its purchasing power by 45%.

There's another catch: The funds come from existing reactors, and no new ones are on order in the US. As the old reactors are retired, the fund's revenues will decline and ultimately disappear, leaving taxpayers holding the bag.

And there's another problem: Money in the fund is currently being used to pay for interim storage, which depletes the amount available for Yucca Mountain (or whatever long-term storage site is eventually decided on). If everything remains unchanged, the Nuclear Waste Fund will fall $4-$8 billion (in 1995 dollars) short of the money it needs, according to the DOE and the State of Nevada.

The cost of closing them down

Nuclear reactors are licensed to operate for 40 years, but only one has survived past 30. Of the 110 reactors in the US, only three have begun to be "decommissioned" (closed down), but 25 others will need to be soon.

The Yankee Rowe plant in Massachusetts, the nation's first commercial reactor, was the first to begin the process (except for the Shoreham plant on Long Island, which only operated for 300 hours). How much will decommissioning Yankee Rowe cost? The figure continues to rise; the owner's latest guess is $375 million- ten times what it cost to build the plant. Other estimates go as high as $500 million.

Let's say it costs about $400 million, on average, to decommission a nuclear reactor. That means that closing down 25 plants will cost about $10 billion, which is more than the nuclear industry has set aside for all 107 remaining plants. Decommissioning all the plants will cost almost $42 billion.

The utilities are supposed to maintain a trust fund for decommissioning each plant. Chicago's Commonwealth Edison owns six elderly nukes, which will cost close to $2 billion to decommission; it has about $542 million set aside in trust funds for this purpose. Assuming this 73% shortfall is typical of the industry, the public's eventual share of the cost of closing all nuclear power plants will run more than $30 billion.

To help bail the industry out, Congress dropped the corporate tax rate on the industry's decommissioning trust funds from 34% to 20%. This has cost taxpayers $76 million for the five years from 1992 through 1996, and it's projected to rise to "several hundred million more" in the future. The nuclear industry is lobbying for relaxed restrictions on what they can put the trust funds' money into, obviously hoping that riskier investments will make up some of the shortfall.

A sympathetic federal appeals court has ruled that instead of decommissioning them, the utilities could turn their nuclear power plants into "sealed waste sites" for some unspecified period of time. This will probably make the eventual decommissioning even more expensive, since these reactors weren't designed to be used as storage facilities.

There's another problem with that plan. Because nuclear power plants need some place to discharge the water that cools the reactor, they're all situated near large bodies of water-usually rivers. Rivers flood at least every hundred years, which is a fraction of a second compared to the half-life of radioactive waste. Lakes can flood too, given enough rainfall. And if ocean levels rise significantly over the next century-as is predicted-seaside plants would also be threatened by high tides.

One way or another, the decommissioning of all these reactors will have to be paid for. It's not likely the utilities will cover the costs themselves. They'll probably leave the government to pick up the tab, along the lines of the S&L bailout.

Fusion research

Compared to fission (the process used by all commercial nuclear reactors to date), fusion-the way the sun makes power-is much cleaner, safer and cheaper. Theoretically, that is. A few practical design problems crop up when you try to build a fusion reactor smaller than the sun.

Fusion research has been going on for more than 40 years, but even its most optimistic proponents admit that commercial applications can't be expected until the middle of the next century. While commercially viable reactors would theoretically-there's that word again-generate no waste, the currently existing experimental ones use radioactive tritium as a fuel and generate large amounts of waste.

A 1991 DOE memo that evaluated energy options in terms of economics and environmental risk ranked fusion 22nd out of 23. Despite that, the DOE spent $244 million on fusion research in fiscal 1996.

(Here's a little insight into how Congress works. The House originally approved $229 million and the Senate $225 million. When they got together to work out a compromise, they came up with $244 million!)

The "next generation" of nuclear plants

There hasn't been a nuclear power plant built in this country since 1973, and 89% of all utilities say they would never order one. So, naturally, our government is busy funding development of "the next generation of nuclear plants." For fiscal 1996, the DOE contributed $40 million to a consortium of companies-including GE (which recently became the world's largest company) and Westinghouse. The DOE even helps consortium members deal with the Nuclear Regulatory Commission's approval process for new technology.

Since there's no market for nuclear reactors in the US, any new reactors built here will probably be sold to East Asian countries. In fact, reactors based on the consortium's designs are already being built in Japan and have been offered to Taiwan-which shows that they're commercially viable and don't need continuing government support.

Adding it all up

* The government spent $468 million on nuclear research in 1996.

* The nuclear industry's insurance subsidy runs $3 billion a year.

* Privatizing uranium fuel enrichment will end up costing us between $1.7 and $2.9 billion. Let's take an average ($2.3 billion) and say the government issues 7% bonds to pay for it. The interest on those bonds will cost us $161 million a year.

* Reprocessing spent fuel rods costs us $390 million a year ($340 million in South Carolina, $25 million in Illinois, $25 million in Idaho).

* Just planning for long-term storage of nuclear waste currently costs us $250 million a year.

* Estimates of the shortfall in the Nuclear Waste Fund range from $4 billion to $8 billion, and will go on virtually forever. Let's take an average ($6 billion) and issue 7% bonds; interest on them will run $420 million a year.

* Closing nuclear power plants is already costing us $15 million a year in lost taxes (a figure that's projected to rise substantially).

* But the real cost will come when the utilities admit they haven't set enough money aside to do the job. If we have to pay for the estimated $30+ billion shortfall with 7% bonds, the yearly interest will run about $2.1 billion.

* Fusion research cost us $244 million in fiscal 1996.

* Development of the "next generation" of nuclear plants cost us $40 million in fiscal 1996.

Put all these numbers together and you get a total subsidy for nuclear power of almost $7.1 billion a year.

Take the Rich Off Welfare