The Gang of 10 (now Gang of 20) offshore oil drilling bill, as it has been characterized, appears headed for a Senate vote late next week. While the bill apparently isn’t damaging enough to our environment and future for the "Drill, Baby, Drill" crowd, who are going to try to expand areas allowed for drilling, I won’t go into the oil drilling issues here—they’ve been covered extensively on DK—except perhaps to borrow a phrase about how you can put lipstick on an offshore oil pig and, well, you get the idea....
But what most people—and certainly the mainstream media—haven’t yet realized is that the Gang of 20 bill would do much more than open up some of America’s coastlines to oil drilling. In fact, it is a major energy bill—the draft runs 233 pages—and delves into energy efficiency and conservation, renewables, coal-to-liquid, and so forth. And 18 of these pages would provide the most significant taxpayer-backed boost to nuclear power ever.
Late last Fall, Congress approved $20.5 Billion in taxpayer-backed loan guarantees for the nuclear power industry ($18.5 billion for new reactors, $2 billion for a new uranium enrichment plant in Ohio). While none of that money has yet been spent, and won’t be for years, the industry is already back at the taxpayer-supplied trough for more. The Gang of 20 bill—"The New Energy Reform Act of 2008" promises unlimited taxpayer loan guarantees for new reactor construction.
That’s right: unlimited money for the nuclear power industry. As much as they want, when they want it and as long as they want it. At no risk to them, but plenty of risk to us: back in 2003, the Congressional Budget office predicted a 50% failure rate for new nuclear loan guarantees. But that was back in the day when CBO was thinking the guarantees would cover about 50% of the cost of a new reactor—now the guarantees have to cover 80% of the cost, unless the utilities want less (when pigs fly... to continue the borrowed phrase motif....). CBO hasn’t updated its prediction.
As Bloomberg News notes in an article yesterday:
Taxpayers are on the hook only if borrowers default. A 2003 Congressional Budget Office report said the default rate on nuclear construction debts might be as high as 50 percent, in part because of the projects' high costs....
The Energy Information Administration estimated last year that adding nuclear power capacity would cost $2,143 a kilowatt before financing and inflation. That compared with $1,434 to $2,302 for clean-coal technologies.
Over the past year, the expense has more than doubled to $5,000 a kilowatt, or $7 billion for a typical reactor, utility filings and company statements show. The increase in part reflects rising prices for commodities such as steel and cement.
Other analysts, like Moody’s Investor Service, predict costs above $7,000/kw, which puts most reactors into the 11-figure range.
Here are a few more goodies in the Gang of 20 bill, courtesy of an analysis from Physicians for Social Responsibility (the full text of their analysis can be found here):
• Builds a Reprocessing Facility (Sec. 424): Authorizes "such sums as necessary" for DOE to construct a reprocessing research and development facility within one year. DOE decided in August that it is not ready to choose a site for any reprocessing facilities (including R&D) in its Global Nuclear Energy Partnership Programmatic Environmental Impact Statement currently in process. According to DOE estimates from March 2006, such a facility would cost $1.5 billion.
• Authorizes DOE to Enter into MORE Risk Insurance Contracts with MORE Risk to Taxpayers (Sec. 425): EPACT 2005 authorized "standby support" (i.e. "risk insurance") to pay the industry for any delays in construction and operation licensing, including delays due to the Nuclear Regulatory Commission or litigation. This provision would greatly expand the scope and financial risk to taxpayers of this subsidy. EPACT authorized $2 billion, but this provision increases the taxpayer risk to $6 billion.
o Increases the number of contracts for "standby support" to twelve at a given time, covering 2 to 4 different designs. EPACT 2005 authorized this subsidy for six new reactors.
o Authorizes DOE to enter into a new contract if a contract terminates without a claim being paid. Therefore, DOE would be able to continue to enter into these contracts until $6 billion is spent.
o Increases taxpayer risk by insuring 100% of the covered costs of delay after 30 days, up to $500 million. EPACT 2005 authorized contracts for the first two reactors for 100% of covered costs up to $500 million and the other four for 50% after 180-day period up to $250 million.
So how much could the nuclear industry actually borrow using the taxpayers’ credit? Right now there are 34 new reactor proposals from about 20 utilities out there in varying stages of completeness. So far, only UniStar, Dominion Resources and NRG Energy have applied for loan guarantee funds, but Exelon isn’t far behind and says it will do so before the end of September. But on a conference call I sat in on in July, the head of DOE’s loan guarantee program says he expects that all new reactors will end up applying for the guarantees.
Let’s do round numbers: say each reactor costs $10 billion and each one gets 80% of the costs. That comes out to $272 Billion in taxpayer-backed guarantees. If CBO is right and ½ those projects fail, we could be looking at more than a $140 Billion raid on the U.S.Treasury. CBO’s analysis isn’t as unrealistic as it might seem: as many reactors were ordered and cancelled--many after hundreds of millions to billions had been spent on them--during the first nuclear construction spree of the 1960s and 1970s as ever were built.
And even if CBO is wrong and only one-quarter of the projects fail, that’s still $70 Billion or so in federal funds at very clear risk. Maybe that doesn’t sound like so much compared to what we’re spending in Iraq every year, but compare that to the $2 billion or so annual budget for renewables (and $10 billion in loan guarantees available for renewables and new transmission, not that most renewable projects need it, financing isn’t hard to come by for them), and you can quickly see how skewed Congress’ energy priorities are.
Fortunately, it’s not too late to stop the prospect of unlimited loan guarantees. NIRS, PSR and other organizations are organizing a National Call-Congress Day next Wednesday, September 17, 2008. Most DKers surely have their Senators’ numbers already programmed into their phones...; for those who don’t, you can call the Capitol Switchboard at 202-224-3121 and ask for the Senator of your choice. Join us in telling the Senate: no loan guarantees for nuclear power; yes to production tax credits (which nuclear already has) for renewables.
Michael Mariotte
Nuclear Information and Resource Service
nirsnet@nirs.org; www.nirs.org
Join thousands of Americans and sign a simple statement: We do not support construction of new nuclear reactors as a means of addressing the climate crisis. Available renewable energy and energy efficiency technologies are faster, cheaper, safer and cleaner strategies for reducing greenhouse emissions than nuclear power."