Obama's War on Nuclear Power

The Obama administration has shown, through words and deeds, a well-publicized antipathy toward domestic energy production from coal, oil, and natural gas.  What has received lesser public awareness is the administration's concurrent war on nuclear power.  No matter Obama's 2008 campaign's lukewarm endorsement of nuclear power, the administration's actions since 2009 have been anything but helpful to the production of nuclear power in this country.

In early 2009, a suggestion appeared on this site for the then-current craze for "shovel-ready" projects -- immediately start construction on the dozen nuclear reactors nearing final regulatory approval.  The suggestion was picked up by other business-oriented media such as Fox Business Network and Investors Business Daily.  These dozen projects used technical designs either already approved by the Nuclear Regulatory Commission (NRC) or with an almost complete review process -- technically called "certification."  They were to be built on currently active nuclear plant sites with limited chances for environmental surprises and a welcoming local population.  Under the nuclear loan guarantee program rules at the time, the federal government would have backstopped the private investment only against the government going wishy-washy on prior approvals.  Commercial and technical risks would have remained with the private investors.

Yet as of this writing, only four reactors have just begun physical construction, with permit approval in the spring of 2012.  The rest have been either abandoned or suspended.  Of course, the drop in natural gas prices had something to do with it, but investing in nuclear electricity-generation is a long-term bet against fossil fuel volatility.  In other words, don't expect natural gas prices to stay this low for long.  With the rapid spread of fracking and horizontal drilling technologies, a bubble of natural gas supply has hit the market, driving prices down.  Current prices do not appear to support the long-term average cost of natural gas production causing financial difficulties for large producers like Chesapeake Energy.  With an eventual normalization of costs to prices and the opening of export markets for America's gas, we can expect prices to show an upward climb over time.  Nuclear, on the other hand, once built, is little troubled by uranium cost swings and can produce electricity at relatively stable rates.  And stable electric rates have a intrinsic value to the customers by reducing the volatility of electric bills.

But a more fundamental cause for the disappointment in nuclear construction has been obstruction by the Obama administration.  The same Department of Energy loan guarantee office that gave us Solyndra, Fisker, and other boondoggles, working with the White House-connected Office of Management and Budget (OMB), has essentially spiked additional loan guarantees, effectively killing the projects.

For a plant proposed in Maryland, the bad-faith dealings of the administration were so bad that the chairman of Constellation Energy and also the utility project owner, Michael Wallace, wrote in a public letter to OMB in October, 2010:

During the course of our discussions, Constellation Energy and our partners  identified a significant problem  in the methodology that the OMB requires for the credit cost  calculation, a problem that is  applicable beyond just our project, and therefore of  significant program and policy consequence. Yet in seeking to explore this further, we encountered significant delay and resistance in being able to even engage on the issue[.]

One needs a little understanding of the process to see what's going on.  Say our prospective builder of a new nuke (Constellation and partners in this case) seeks a $7.5-billion loan guarantee against the government changing its mind down the road -- i.e., after the necessary government approvals are in place and a bunch of private money has been sunk into the plant.  What the OMB demanded was a "credit subsidy cost" in up-front cash for the loan, in addition to the regular interest and fees.  This is supposedly to act as an insurance premium against the government having to pay out later for project default.   In this case, the OMB calculated a non-trivial amount of $880 million, or almost 12% of the guarantee amount.  In the words of Chairman Wallace, "[t]his would clearly destroy the project's economics, or the economics of any nuclear project for that matter."

In comparison, the credit subsidy cost for loan guarantees to projects like Solyndra were zero -- the Stimulus bill allocated $6 billion of taxpayer funds for such costs to "green" projects but none for nuclear.  Perhaps someone can explain the accounting logic that has Congress budget funds that will eventually return to the government.

Perhaps the logic of an applicant having to put some major cash on the table before being allowed to build is something out of the Chicago Building Inspector Department operating manual.  One can imagine the message: if you don't take out a loan guarantee, and pay our price, you'll wish you had.

Besides blocking loan guarantees, the NRC chairman, Gregory Jaczko, blocked a major, long-overdue project to safely deal with 70,000 tons of civilian-spent nuclear fuel and military wastes by refusing to proceed with the congressionally mandated NRC review of the Yucca Mountain waste repository application.  Jaczko had earlier served on Ed Markey (D-MA)'s staff -- Markey being one of the most strident anti-nuclear congressmen -- before moving over to Senator Harry Reid (D-NV)'s office.  At Reid's insistence, he was appointed by George Bush to a commissioner's seat on the NRC.  As a commissioner, he would have simply been on the losing side of 4-1 votes before the commission.  However, Obama removed the earlier chairman and promoted Jaczko in his stead.  As chairman, Jaczko assumed substantial executive power over the other commissioners and the staff.

Jaczko's dictatorial antics as chairman of the NRC eventually led to his forced resignation.  Besides illegally refusing the review of the Yucca Mountain project, he used travel budgets as a political bludgeon and blocked internal information flows.  The other commissioners eventually revolted in a truly bipartisan manner and wrote a very public letter to the White House -- which was ignored.  But the carbon copy to Congress was not.  With the appointment of Jaczko's successor, geologist Dr. Allison MacFarlane, the air has cleared a bit, but MacFarlane is a well-known nuclear critic.  We can expect more subtlety from her, at least, if she's learned anything from the experience of her predecessor.

But since the Yucca Mountain project is effectively either dead or in deep suspended animation, after billions of dollars of investment and decades of delay, the NRC, upon petition from multiple anti-nuclear groups, was instructed by court order to stop reviews of any and all new nuclear applications pending what they are calling a "waste confidence rule making."  With no permanent solution to spent fuel in the works, the Court found that earlier reviews by the NRC of temporary storage methods (and 60 years of experience) were now inadequate.  A more pro-nuclear administration might have fought harder and appealed, but this one just rolled over.  In effect, nothing will happen on new nuclear projects or expansions until we hear from the bureaucracy  after two to three years of further studies and reports.  The regulatory inventiveness of anti-nuclear forces never ceases to amaze -- proof that in the U.S. system of governance, if someone with money for lawyers doesn't want you to do something, you're not likely to get it done.

Existing nuclear reactors need uranium to make electricity.  In 2011, U.S. nuclear plants needed about 55 million pounds of "yellowcake," as uranium ore concentrates (largely U3O8) are known in the trade.  Ninety-one percent of our yellowcake needs are imported, with domestic production of only 4 million pounds.  However, don't expect the Obama administration to do anything positive for our energy independence re: uranium.  In fact, last January, Secretary of the Interior Ken Salazar declared a million acres of the Colorado Plateau around the Grand Canyon as off-limits to new production permits for twenty years.  This contains some of the richest uranium prospects in the country and is a traditional uranium mining district within the U.S., with eleven mines already in production.  An earlier study suggested that the ban would prevent as many as thirty new uranium mines from being developed in the area.  Of course, industry groups representing both the mining industry and the nuclear power business are teaming up to sue to overturn the dictate by cabinet member Salazar.

One bright spot was to be the DoE's continued support for the development of what are called "small modular reactors."  These are to be much smaller than current reactors and passively safe.  Supposedly, these features will allow easier, quicker construction and an opening into markets too small for traditional designs.  Some think government interest is focused on independent power supply for military bases, for which these reactors would be well-suited.  However, the applications for developmental cost-sharing are languishing, awaiting DoE's overdue approval.  Cynical observers would predict that no announcement will occur until after the election.  The Obama administration has more to lose politically from approval from its environmentalist base than it could possibly gain from nuclear supporters.

The U.S. government's response to the nuclear problems at Fukushima, if well-meaning, have not been particularly cogent or stellar.  First, the U.S. industry has been substantially better-prepared than its Japanese counterpart, so some of the rather obvious problems at Fukushima have already been addressed here.  After the 9/11 terrorist attacks flying large aircraft into buildings, the U.S. industry embarked on an internal program to prepare for such extreme plant damage.  Still, there was a clearly political rush to get something done by the first anniversary of the event last March. 

One of the three orders issued by the NRC to U.S. industry last March was for additional spent fuel pool monitoring instruments.  One can sense that this was required to save face for the aforementioned Chairman Jaczko, who infamously acted like a chicken with its head cut off during the Fukushima event, publicly worrying about their spent fuel racks being uncovered and the spent fuel "burning" in free air.  The smell of leadership panic was in the air.  Fifty years of professional consideration and practice have previously shown no basis for these additional instruments.  At least they will be cheap and not get in the way -- we hope.

Other orders from the NRC remain "quick fixes" without a comprehensive technical acknowledgement yet of the complexity of the situation and the eventual required integration of the technical solutions required.  In other words, I'll bet we have to eventually go back and backfit the backfits.

While it remains an essentially political decision as to the allocation of resources for public safety, as an engineer and a citizen, one could hope for a more efficient process.  Few of us want to waste resourcesm, but if the public wants to spend money on making nuclear power plants safer yet, so be it.  Perhaps this is not a complaint one can squarely lay on the doorstep of President Obama, but a more professional and sober appointee to the chairmanship of the NRC could have made the process of responding to the Fukushima event more rational and productive.

From one end of the nuclear power process (uranium mining) to the other (waste disposal), and throughout the sensitive stages in between (financing, licensing, and upgrading), the Obama administration has made decisions that retard the production of nuclear power, hurt our balance of payments, and increase the cost of electricity.  Like the administration's war on coal and their opposition to fracking, their disdain for cheap, plentiful energy for the American economy ultimately hurts the American people.

Joseph Somsel is a nuclear engineer with 35 years in the commercial nuclear power business.  The opinions here are solely his own and do not represent those of his employer.

The Obama administration has shown, through words and deeds, a well-publicized antipathy toward domestic energy production from coal, oil, and natural gas.  What has received lesser public awareness is the administration's concurrent war on nuclear power.  No matter Obama's 2008 campaign's lukewarm endorsement of nuclear power, the administration's actions since 2009 have been anything but helpful to the production of nuclear power in this country.

In early 2009, a suggestion appeared on this site for the then-current craze for "shovel-ready" projects -- immediately start construction on the dozen nuclear reactors nearing final regulatory approval.  The suggestion was picked up by other business-oriented media such as Fox Business Network and Investors Business Daily.  These dozen projects used technical designs either already approved by the Nuclear Regulatory Commission (NRC) or with an almost complete review process -- technically called "certification."  They were to be built on currently active nuclear plant sites with limited chances for environmental surprises and a welcoming local population.  Under the nuclear loan guarantee program rules at the time, the federal government would have backstopped the private investment only against the government going wishy-washy on prior approvals.  Commercial and technical risks would have remained with the private investors.

Yet as of this writing, only four reactors have just begun physical construction, with permit approval in the spring of 2012.  The rest have been either abandoned or suspended.  Of course, the drop in natural gas prices had something to do with it, but investing in nuclear electricity-generation is a long-term bet against fossil fuel volatility.  In other words, don't expect natural gas prices to stay this low for long.  With the rapid spread of fracking and horizontal drilling technologies, a bubble of natural gas supply has hit the market, driving prices down.  Current prices do not appear to support the long-term average cost of natural gas production causing financial difficulties for large producers like Chesapeake Energy.  With an eventual normalization of costs to prices and the opening of export markets for America's gas, we can expect prices to show an upward climb over time.  Nuclear, on the other hand, once built, is little troubled by uranium cost swings and can produce electricity at relatively stable rates.  And stable electric rates have a intrinsic value to the customers by reducing the volatility of electric bills.

But a more fundamental cause for the disappointment in nuclear construction has been obstruction by the Obama administration.  The same Department of Energy loan guarantee office that gave us Solyndra, Fisker, and other boondoggles, working with the White House-connected Office of Management and Budget (OMB), has essentially spiked additional loan guarantees, effectively killing the projects.

For a plant proposed in Maryland, the bad-faith dealings of the administration were so bad that the chairman of Constellation Energy and also the utility project owner, Michael Wallace, wrote in a public letter to OMB in October, 2010:

During the course of our discussions, Constellation Energy and our partners  identified a significant problem  in the methodology that the OMB requires for the credit cost  calculation, a problem that is  applicable beyond just our project, and therefore of  significant program and policy consequence. Yet in seeking to explore this further, we encountered significant delay and resistance in being able to even engage on the issue[.]

One needs a little understanding of the process to see what's going on.  Say our prospective builder of a new nuke (Constellation and partners in this case) seeks a $7.5-billion loan guarantee against the government changing its mind down the road -- i.e., after the necessary government approvals are in place and a bunch of private money has been sunk into the plant.  What the OMB demanded was a "credit subsidy cost" in up-front cash for the loan, in addition to the regular interest and fees.  This is supposedly to act as an insurance premium against the government having to pay out later for project default.   In this case, the OMB calculated a non-trivial amount of $880 million, or almost 12% of the guarantee amount.  In the words of Chairman Wallace, "[t]his would clearly destroy the project's economics, or the economics of any nuclear project for that matter."

In comparison, the credit subsidy cost for loan guarantees to projects like Solyndra were zero -- the Stimulus bill allocated $6 billion of taxpayer funds for such costs to "green" projects but none for nuclear.  Perhaps someone can explain the accounting logic that has Congress budget funds that will eventually return to the government.

Perhaps the logic of an applicant having to put some major cash on the table before being allowed to build is something out of the Chicago Building Inspector Department operating manual.  One can imagine the message: if you don't take out a loan guarantee, and pay our price, you'll wish you had.

Besides blocking loan guarantees, the NRC chairman, Gregory Jaczko, blocked a major, long-overdue project to safely deal with 70,000 tons of civilian-spent nuclear fuel and military wastes by refusing to proceed with the congressionally mandated NRC review of the Yucca Mountain waste repository application.  Jaczko had earlier served on Ed Markey (D-MA)'s staff -- Markey being one of the most strident anti-nuclear congressmen -- before moving over to Senator Harry Reid (D-NV)'s office.  At Reid's insistence, he was appointed by George Bush to a commissioner's seat on the NRC.  As a commissioner, he would have simply been on the losing side of 4-1 votes before the commission.  However, Obama removed the earlier chairman and promoted Jaczko in his stead.  As chairman, Jaczko assumed substantial executive power over the other commissioners and the staff.

Jaczko's dictatorial antics as chairman of the NRC eventually led to his forced resignation.  Besides illegally refusing the review of the Yucca Mountain project, he used travel budgets as a political bludgeon and blocked internal information flows.  The other commissioners eventually revolted in a truly bipartisan manner and wrote a very public letter to the White House -- which was ignored.  But the carbon copy to Congress was not.  With the appointment of Jaczko's successor, geologist Dr. Allison MacFarlane, the air has cleared a bit, but MacFarlane is a well-known nuclear critic.  We can expect more subtlety from her, at least, if she's learned anything from the experience of her predecessor.

But since the Yucca Mountain project is effectively either dead or in deep suspended animation, after billions of dollars of investment and decades of delay, the NRC, upon petition from multiple anti-nuclear groups, was instructed by court order to stop reviews of any and all new nuclear applications pending what they are calling a "waste confidence rule making."  With no permanent solution to spent fuel in the works, the Court found that earlier reviews by the NRC of temporary storage methods (and 60 years of experience) were now inadequate.  A more pro-nuclear administration might have fought harder and appealed, but this one just rolled over.  In effect, nothing will happen on new nuclear projects or expansions until we hear from the bureaucracy  after two to three years of further studies and reports.  The regulatory inventiveness of anti-nuclear forces never ceases to amaze -- proof that in the U.S. system of governance, if someone with money for lawyers doesn't want you to do something, you're not likely to get it done.

Existing nuclear reactors need uranium to make electricity.  In 2011, U.S. nuclear plants needed about 55 million pounds of "yellowcake," as uranium ore concentrates (largely U3O8) are known in the trade.  Ninety-one percent of our yellowcake needs are imported, with domestic production of only 4 million pounds.  However, don't expect the Obama administration to do anything positive for our energy independence re: uranium.  In fact, last January, Secretary of the Interior Ken Salazar declared a million acres of the Colorado Plateau around the Grand Canyon as off-limits to new production permits for twenty years.  This contains some of the richest uranium prospects in the country and is a traditional uranium mining district within the U.S., with eleven mines already in production.  An earlier study suggested that the ban would prevent as many as thirty new uranium mines from being developed in the area.  Of course, industry groups representing both the mining industry and the nuclear power business are teaming up to sue to overturn the dictate by cabinet member Salazar.

One bright spot was to be the DoE's continued support for the development of what are called "small modular reactors."  These are to be much smaller than current reactors and passively safe.  Supposedly, these features will allow easier, quicker construction and an opening into markets too small for traditional designs.  Some think government interest is focused on independent power supply for military bases, for which these reactors would be well-suited.  However, the applications for developmental cost-sharing are languishing, awaiting DoE's overdue approval.  Cynical observers would predict that no announcement will occur until after the election.  The Obama administration has more to lose politically from approval from its environmentalist base than it could possibly gain from nuclear supporters.

The U.S. government's response to the nuclear problems at Fukushima, if well-meaning, have not been particularly cogent or stellar.  First, the U.S. industry has been substantially better-prepared than its Japanese counterpart, so some of the rather obvious problems at Fukushima have already been addressed here.  After the 9/11 terrorist attacks flying large aircraft into buildings, the U.S. industry embarked on an internal program to prepare for such extreme plant damage.  Still, there was a clearly political rush to get something done by the first anniversary of the event last March. 

One of the three orders issued by the NRC to U.S. industry last March was for additional spent fuel pool monitoring instruments.  One can sense that this was required to save face for the aforementioned Chairman Jaczko, who infamously acted like a chicken with its head cut off during the Fukushima event, publicly worrying about their spent fuel racks being uncovered and the spent fuel "burning" in free air.  The smell of leadership panic was in the air.  Fifty years of professional consideration and practice have previously shown no basis for these additional instruments.  At least they will be cheap and not get in the way -- we hope.

Other orders from the NRC remain "quick fixes" without a comprehensive technical acknowledgement yet of the complexity of the situation and the eventual required integration of the technical solutions required.  In other words, I'll bet we have to eventually go back and backfit the backfits.

While it remains an essentially political decision as to the allocation of resources for public safety, as an engineer and a citizen, one could hope for a more efficient process.  Few of us want to waste resourcesm, but if the public wants to spend money on making nuclear power plants safer yet, so be it.  Perhaps this is not a complaint one can squarely lay on the doorstep of President Obama, but a more professional and sober appointee to the chairmanship of the NRC could have made the process of responding to the Fukushima event more rational and productive.

From one end of the nuclear power process (uranium mining) to the other (waste disposal), and throughout the sensitive stages in between (financing, licensing, and upgrading), the Obama administration has made decisions that retard the production of nuclear power, hurt our balance of payments, and increase the cost of electricity.  Like the administration's war on coal and their opposition to fracking, their disdain for cheap, plentiful energy for the American economy ultimately hurts the American people.

Joseph Somsel is a nuclear engineer with 35 years in the commercial nuclear power business.  The opinions here are solely his own and do not represent those of his employer.

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