[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
ISSUES IN FEDERAL GOVERNMENT FINANCIAL LIABILITIES: COMMERCIAL NUCLEAR 
                                 WASTE

=======================================================================

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

            HEARING HELD IN WASHINGTON, DC, OCTOBER 4, 2007

                               __________

                           Serial No. 110-20

                               __________

           Printed for the use of the Committee on the Budget


                       Available on the Internet:
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                        COMMITTEE ON THE BUDGET

             JOHN M. SPRATT, Jr., South Carolina, Chairman
ROSA L. DeLAURO, Connecticut,        PAUL RYAN, Wisconsin,
CHET EDWARDS, Texas                    Ranking Minority Member
JIM COOPER, Tennessee                J. GRESHAM BARRETT, South Carolina
THOMAS H. ALLEN, Maine               JO BONNER, Alabama
ALLYSON Y. SCHWARTZ, Pennsylvania    SCOTT GARRETT, New Jersey
MARCY KAPTUR, Ohio                   MARIO DIAZ-BALART, Florida
XAVIER BECERRA, California           JEB HENSARLING, Texas
LLOYD DOGGETT, Texas                 DANIEL E. LUNGREN, California
EARL BLUMENAUER, Oregon              MICHAEL K. SIMPSON, Idaho
MARION BERRY, Arkansas               PATRICK T. McHENRY, North Carolina
ALLEN BOYD, Florida                  CONNIE MACK, Florida
JAMES P. McGOVERN, Massachusetts     K. MICHAEL CONAWAY, Texas
ROBERT E. ANDREWS, New Jersey        JOHN CAMPBELL, California
ROBERT C. ``BOBBY'' SCOTT, Virginia  PATRICK J. TIBERI, Ohio
BOB ETHERIDGE, North Carolina        JON C. PORTER, Nevada
DARLENE HOOLEY, Oregon               RODNEY ALEXANDER, Louisiana
BRIAN BAIRD, Washington              ADRIAN SMITH, Nebraska
DENNIS MOORE, Kansas                 [Vacancy]
TIMOTHY H. BISHOP, New York
GWEN MOORE, Wisconsin
[Vacancy]

                           Professional Staff

            Thomas S. Kahn, Staff Director and Chief Counsel
                James T. Bates, Minority Chief of Staff


                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, October 4, 2007..................     1

Statement of:
    Hon. John M. Spratt, Jr., Chairman, House Committee on the 
      Budget.....................................................     1
    Hon. Jon C. Porter, a Representative in Congress from the 
      State of Nevada............................................     2
    Edward F. Sproat III, Director, Office of Civilian 
      Radioactive Waste Management, U.S. Department of Energy....     4
        Prepared statement of....................................     9
    Michael F. Hertz, Deputy Assistant Attorney General, Civil 
      Division, U.S. Department of Justice.......................    11
        Prepared statement of....................................    14
    Kim Cawley, Chief, Natural and Physical Resources Cost 
      Estimates Unit, Congressional Budget Office................    16
        Prepared statement of....................................    17
    Hon. J. Gresham Barrett, a Representative in Congress from 
      the State of South Carolina:
        Questions for the record and responses from Mr. Sproat...    36
        Questions for the record and responses from Mr. Cawley...    37


                      ISSUES IN FEDERAL GOVERNMENT
                         FINANCIAL LIABILITIES:
                        COMMERCIAL NUCLEAR WASTE

                              ----------                              


                       THURSDAY, OCTOBER 4, 2007

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The committee met, pursuant to call, at 10:00 a.m. in room 
210, Cannon House Office Building, Hon. John Spratt [chairman 
of the committee] presiding.
    Present: Representatives Spratt, Doggett, Berry, McGovern, 
Etheridge, Moore, Ryan, Simpson, Porter, Alexander, and Smith.
    Chairman Spratt. Good morning and welcome to the House 
Budget Committee's hearing on Federal Government Liabilities 
and in particular this morning on commercial nuclear waste.
    We have an excellent panel of government witnesses before 
us who have thought long and hard about this question and I 
want to thank them for their participation; their willing and 
enthusiastic participation in this hearing today.
    Given the fiscal challenges that we face in the years 
ahead, it is important to gain insight into the nature of the 
Federal Government's unfunded liability. As policy makers we 
express concern most audibly and consistently about liabilities 
that relate to the aging of the U.S. population and the impact 
on our Federal retirement government programs like social 
security and medicare. But there are additional liabilities, 
small in magnitude but deserving of scrutiny and understanding.
    Our goal for this hearing is to gain the insight we seek 
into the government's financial liabilities rising from DOEs 
missed 1998 deadline by which it was to begin disposing of 
spent nuclear fuel as specified in the Nuclear Waste Policy Act 
of 1982.
    As a result of this failure, there are now scores of active 
cases pending in the Federal Court of Claims and various 
appeals courts from which from affected civilian nuclear waste 
power plants all receiving recovery from DOE for breach of the 
1998 contract. Present estimates range from $7 billion to $30 
billion.
    Ultimately, while we may call spent nuclear fuel a 
liability issue, it is a taxpayer liability issue. As such, the 
Committee would like to better understand how future cash 
flows, budgets, and baselines are all affected under different 
scenarios, with particular emphasis on how we can minimize the 
cost to the taxpayer.
    In the final analysis, everyone in this room has the same 
goal of minimizing taxpayer liability associated with spent 
nuclear fuel while persevering equity across all stakeholders.
    We very much appreciate you coming today, but before 
turning to you for your testimony, let me turn to our Ranking 
Member, Mr. Ryan for any statement he cares to make to open 
this up.
    Mr. Ryan. Thank you, Chairman Spratt. I appreciate this 
opportunity to get a better understanding of our federal 
liability stemming from the nuclear utilities breach of 
contract lawsuits. I look forward to receiving this testimony 
before. I would like to yield the balance of my time to the 
gentleman from Nevada, Mr. Porter, who has a particularly 
strong home State interest in this matter.
    Mr. Porter.
    Mr. Porter. Thank you very much, and Chairman, I appreciate 
this opportunity. And as mentioned, we are here today to 
examine the Federal Government's financial liability for DOEs 
nuclear utility lawsuits. And as mentioned in the opening 
statements, we certainly appreciate the panelists that are here 
and to the Director, thank you for being very responsive. Not 
that we always agree, but I certainly appreciate your 
responsiveness to the rest of the panel.
    And as was mentioned, the aim of the hearing is to look at 
the budget impact of 56 pending civil lawsuits regarding the 
breach of the 1998 contracts. To date we have paid about $300 
million so far to 90 something, give or take. I am assuming 
that probably does not include our costs in litigation, with 
potentially paying out another $7 billion by the year 2017. You 
know we talk a lot about dollars and cents and sometimes I 
question that we make sense, but we are looking at a project 
today with a total life cost of close to $56 billion once it is 
constructed.
    What I would like to do is just take a moment, with the 
Chairman's support, and go back to 1982 when this started. And 
I do not know how many people in this room were alive in 1982, 
maybe a couple of us. But 1982, that is the year that Sony 
launched the first compact disc player. In 1982, when this 
project started, the Dow Jones average was about 1,000 points. 
It is now over or close to 13,000. Ronald Regan was President 
in 1982. Where was the cell phone? Where was the internet? Al 
Gore was a member of this House in 1982.
    Here we are 25 years later in 2007 and we are basically 
where we started in 1982. You know Brezhnev was in office half 
of that year of 1982. Korvachef and pardon me, Anderpoff that 
shared that year. Korvechef was not even in office yet when we 
started this project in 1982. We started the ground breaking 
for the Vietnam Memorial.
    And I give this as an example of in 25 years we have 
studied a whole in the ground to death. Management has changed, 
Congress has changed, I am not sure how many members of this 
body of this U.S. Congress were in office then and how many 
changes there have been. But if you look at the Department of 
Energy and how it has evolved, there has been a change in 
leadership, change in management, multiple presidents, and we 
are where we started 25 years ago.
    And I know that we think that this is just in Nevada not in 
my backyard argument, but I know what we are here today to talk 
about costs. But we are looking at a hole to nowhere and I 
encourage every member of this Congress to visit this hole to 
nowhere that is a hole in the ground that we have spent $10 or 
$11 billion on so far and we have not moved one inch on the 
playing field.
    Now, I understand that each State has its challenges of 
what to do with nuclear waste. I understand that. And I 
understand the bulk of this body, both democrats and 
republicans are looking for a place to put nuclear waste. And I 
support nuclear energy. But I don't know how much longer this 
body can look at this liability, not only from a science 
perspective of a science that is untested. We are going to have 
close to 50 years in this project before it opens. How many 
projects will this body--talk about unfunded liability. How 
many projects will this body say that we are going to take 50 
years to build? I just think that is unacceptable to the 
American people.
    It is a hole in the ground. Literally it is a tunnel where 
we have spent billions of dollars. And I don't know how, with a 
straight face, this Congress can say, ``Keep digging.'' I don't 
know how this Congress can say, ``We should throw more money at 
this project.'' Again, almost 50 years is going to pass before 
this project is up and running. If it started today, if it was 
available for storage today, it would be full.
    Mr. Chairman, I appreciate this opportunity and I am sure 
that again there are other members of this body, this Congress 
that want to find a place that is out of sight, out of mind so 
they don't have to think about it. And I am concerned for the 
safety of Nevadans and I am concerned about the science. And I 
have spent a lot of time investigating the project. I had one 
of the largest investigations of this project in the history of 
Congress. But this Congress has not met its obligation to the 
American people by throwing money at a project that is not 
going to succeed. It has proven to be unsafe. It is being built 
on an earthquake fault line. We have redone the science over 
and over again. There is proof that we are already a huge 
liability.
    So, Mr. Chairman, I understand that members may have a 
different perspective than I do. But I think as we look at a 
project that is going to cost $50 or $60 billion that we have 
been studying now for almost 30 years and still have another 20 
years to go. We have to say, ``Lets stop and take a time out 
and look at where we are going and find a new approach to 
storage nuclear waste.''
    So, Mr. Chairman, thank you and I appreciate the panelist.
    Chairman Spratt. Thank you, Mr. Porter. We are going to put 
you down as leaning no? [Laughter.]
    Let's now turn to Edward F. Sproat who is the Director of 
the Office of Civilian Radioactive Waste Management. And as 
with all of the witnesses, if you would simply submit your 
statements for the record without objection they will be made 
part of the record and you can summarize them as you see fit.
    But Mr. Sproat, the floor is yours and then we will turn to 
the other witnesses. Thank you for coming.

  STATEMENT OF THE HONORABLE EDWARD F. SPROAT, III, DIRECTOR, 
     OFFICE OF CIVILIAN RADIOACTIVE WASTE MANAGEMENT, U.S. 
                      DEPARTMENT OF ENERGY

    Mr. Sproat. Good morning, Mr. Chairman and Mr. Ryan and 
fellow members of the Committee. Thank you very much for this 
invitation to address the Committee this morning about this 
very important issue. I do request that my formal testimony be 
submitted for the record.
    What I would like to do is first of all let you know a 
little bit about myself. It has been 16 months since I was 
confirmed by the Senate for this position. I am bringing with 
me 29 years of senior management experience in the nuclear 
industry with me. I have been in charge of nuclear plant 
design, licensing, construction and operations. I ran an 
international joint venture in South Africa to help them 
develop an advanced nuclear reactor down there. And I am also a 
registered professional engineer.
    So the issues we are going to talk about this morning are 
of a technical nature and a project management nature. I have a 
lot of experience and I am bringing that to this job.
    My first hearing after I got confirmed was in July of 2006 
in front of the House Subcommittee on Energy and Air Quality. I 
committed to that House Committee in July of 2006 that we would 
submit our license application to the Nuclear Regulatory 
Commission no later than Monday, June 30, 2008. I am here to 
tell this Committee today we will meet or beat that date.
    That is critical because getting the license application in 
and getting the license application review by the Nuclear 
Regulatory Commission done is on the critical path to moving 
the Yucca Mountain Program forward.
    Now, DOE is almost 20 years late in meeting its obligation 
to pick up spent nuclear fuel. And as of right now and what I 
told the Committee back in July of last year was that our best 
achievable date, if everything was to go right, our best 
achievable date to be able to pick up start performing on the 
standard contracts is March of 2017. Now there are some 
provisos about that best achievable date. One of the key issues 
is that the schedule assumes unconstrained cash flow so that we 
are able to maintain critical path activities on this project 
on our best achievable schedule.
    As a result of DOE's partial breach of our standard 
contracts, in other words because we didn't start picking up 
fuel in 1998 as required, if we open the repository on our best 
achievable date of 2017 we are estimating that the total 
taxpayer liability to the commercial nuclear plant contract 
holders will total about $7 billion. Can I bring up the first 
slide, please.



    Mr. Sproat. On this chart let me just point out three 
lines. The yellow line shows what we, Department of Energy, 
projected our acceptance rate and pick up rate of spent nuclear 
fuel would be if we started picking up in 1998. And this yellow 
curve is the line we use in our settlement discussions with the 
contract holders.
    The green line is our projection of what we will be able to 
pick up if we open the repository in 2017. The red line is our 
projection of what we would be able to pick up by if we open 
the repository three years later in 2020.
    Where those red and green lines cross the yellow line is 
where we project we will have caught up with our contractual 
obligation to the utilities. And what that graph shows you is 
that if we open the repository at our best achievable date, in 
2017, we will catch up in the year 2046 and our projected total 
taxpayer liability is $7 billion. With just a three year delay, 
we won't catch up until the year 2056 and the total liability 
will have grown an additional $4 billion to about $11 billion.
    That tells you there is a real cost to the U.S. taxpayer in 
terms of projected liability year by year this program is 
delayed. And I want to remind the Committee that the 2017 date 
or quite frankly any other date after that is very dependent on 
us having a cash flow required to meet our schedule and 
maintain the shortest possible critical path activities on this 
program. And I will talk about those in a minute.
    If I can go to the next chart.

    
    
    Mr. Sproat. The next chart is the total budgetary authority 
requirements that we have projected will be needed to build and 
operate the repository through the year 2023. In other words, 
these budget authority cash flows we will need to meet that 
2017 date. These numbers were developed over the past six 
months. I presented them to the House Appropriations 
Subcommittee on Energy back in April.
    These numbers were developed by an interdisciplinary team 
of both DOE and outside experts. They were independently 
reviewed by a company that has nuclear construction experience. 
They include sufficient contingency and management reserve to 
give us an 80 percent confidence factor that the actual cost of 
building and operating this repository will come in at or below 
these numbers.
    So these are the best numbers we have and are, I believe, 
very credible numbers in terms of what it is going to take to 
build and operate the repository.
    What you will notice is the annual budgetary authority 
requirements on this cash flow starting in fiscal year 2009 are 
between one and a half to two billion dollars a year. Now that 
is to meet the 2017 date. I will compare that to our existing 
and historical budget authority on this project which is 
running between $350 and $500 million a year. And when you take 
a look at the budget targets in the out years, in 2009 and 
beyond, they are continuing in that historical range of between 
$350 to $450 million a year.
    That is a substantial, a huge gap between what is currently 
being planned for under the current budgetary authority system 
and what is needed to actually build and operate this 
repository. Bottom line is that if we are not able to achieve 
this kind of funding requirement for this program, the 
repository will not get built. You will not be able to build 
the repository, then a required rail line, do the engineering, 
do the procurements, buy the waste packages, buy the rail cars 
that are needed to execute this best achievable schedule at the 
kind of projected budgetary authority that right now the system 
is giving us.
    So basically, unless we fix this issue and are able to 
achieve these cash flows to build this repository, the 
liability of the Federal Government and the U.S. taxpayers will 
continue to grow unabated.
    One of the things I want to talk about just briefly is so 
how should we be funding this cash flow for this program? The 
Nuclear Waste Policy Act mandated that the generators of 
nuclear waste need to pay for its disposal. And they also 
determined that the program should not compete with other 
federal programs so that we could achieve these kinds of cash 
flows and build this repository on the shortest possible 
schedule.
    Therefore, what Congress did back in the 1980s was to 
establish the Nuclear Waste Fund. And they established a fee to 
be charged to the nuclear generators and the Secretary of 
Energy has the capability to set that fee, which has been at 
one mil per kilowatt hour since the mid 1980s. That generates 
$750 million of revenue for the Federal Government annually and 
any of that money that is not appropriated on an annual basis 
goes into the Nuclear Waste Fund.
    The Nuclear Waste Fund has a current balance on the books 
of about $20.5 billion. A substantial amount of money. However, 
due to the passage of Gramm-Rudman-Hollings back in the mid 
1980s, the Nuclear Waste Fund revenue fees have been classified 
as mandatory receipts and the program is classified as a 
discretionary program.
    As a result, the fees are not dedicated to offset the 
appropriations on the program, and therefore, both the fees and 
the interest generated on the fund are used as offsets against 
the total federal deficit. Essentially, we have $20.5 billion 
in the Nuclear Waste Fund, but we are not able to use it for 
its intended purpose to actually build the repository.
    Can I have the next slide, please?

    
    
    Mr. Sproat. The blue line on this graph shows you the 
civilian portion of the cash flow that I showed you on the 
previous slide. In other words, the civilian portion, which is 
about 80 percent of the total cost of the repository, what the 
civilian portion is to build and fund that cash flow that I 
just showed you.
    What the gray bar on each of those years shows you is the 
$750 million of revenue coming into the Federal Government from 
the nuclear waste generators. The yellow line is the interest 
being generated or projected to be generated on the Nuclear 
Waste Fund balance. What this chart shows you is that with the 
exception of one year, if the Department of Energy had access 
to the fees and the interest on the Nuclear Waste Fund, we 
could fund the entire construction and operation of the 
repository without even touching the corpus of the Nuclear 
Waste Fund.
    However, eventually, after all the nuclear plants shut 
down, we will need to tap the corpus of the Waste Fund. But 
because the Nuclear Waste Fund has already been used as off-
sets against the federal deficit on a per year basis, whenever 
funds are appropriated from the Nuclear Waste Fund they will 
need to be scored against the deficit.
    And so we are either going to need to score them all at one 
time; we are going to need to score them a little bit at a 
time; or we will never score them and never spend the Nuclear 
Waste Fund. A decision needs to be made on how we are going to 
do that.
    And I am here to submit to the Committee that taxpayers are 
incurring significant liability from both commercial spent 
nuclear fuel as well as government high-level nuclear waste 
that is still sitting at 121 sites around the country in 39 
different States. The rate payers have paid into the Nuclear 
Waste Fund is over $11 billion. The repository must be built 
for DOE to be able to meet its obligations under the Act and 
under our standard contracts. And that a funding mechanism to 
fund these cash flows for this repository must be put in place 
and must be fixed.
    And we are asking the help of this Committee to help craft 
a solution to do that. And I will be happy to answer any 
questions after the other statements of the other witnesses.
    [The prepared statement of Edward F. Sproat, III, follows:]

    Prepared Statement of Edward F. Sproat III, Director, Office of 
    Civilian Radioactive Waste Management, U.S. Department of Energy

    Mr. Chairman and Members of the Committee, I am Edward F. Sproat 
III, Director of the Department of Energy's (DOE) Office of Civilian 
Radioactive Waste Management (OCRWM). I appreciate the invitation to 
appear before the Committee to discuss the funding and liability issues 
associated with the development and operation of the Yucca Mountain 
repository. Your request to address the Government's financial position 
and future cash flows that impact the budget allows me the opportunity 
to discuss the much needed funding reform for the Program. Funding 
reform is vital to the Government's ability to build the repository and 
minimize the Government's existing liability.
    I want to state my appreciation for the staff at the Department of 
Justice who have worked tirelessly on the 67 cases filed against the 
Government by the holders of the Standard Contract. I believe Mr. Hertz 
will address your questions regarding the lawsuits and payments from 
the Judgment Fund.
    Minimizing the Government's liability associated with the unmet 
contractual obligations to move spent nuclear fuel from nuclear plant 
sites is one of the four strategic objectives for the Program that I 
set when I was confirmed. In the simplest of terms, the best way to 
reduce the Government's liability is to complete the Yucca Mountain 
repository and begin the acceptance of spent nuclear fuel from the 
Nation's nuclear reactor sites. Meeting the other three strategic 
objectives and fixing the broken funding mechanism for this Program is 
how the Government is to expedite the acceptance of spent nuclear fuel. 
The other three strategic objectives are to:
     Submit a high-quality and docketable License Application 
to the Nuclear Regulatory Commission (NRC) no later than June 30, 2008;
     Design, staff, and train the OCRWM organization such that 
it has the skills and culture needed to design, license, and manage the 
construction and operation of the Yucca Mountain Project with safety, 
quality, and cost effectiveness; and
     Develop and begin implementation of a comprehensive 
national transportation plan that accommodates State, local and Tribal 
concerns and input to the greatest extent practicable.

                         STATUS OF THE PROGRAM

    In support of meeting these objectives, I am confident that in FY 
2008 we will:
     Certify the Licensing Support Network in accordance with 
NRC requirements and regulations;
     Complete the Repository Supplemental Environmental Impact 
Statement;
     Submit the License Application for construction 
authorization to NRC by June, 2008 and begin its defense;
     Design the Transportation, Aging and Disposal canisters to 
be used by the industry to package and ship spent nuclear fuel to the 
repository;
     Deliver the report to Congress required by the Nuclear 
Waste Policy Act on the need for a second repository; and
     Resolve comments and issue the final environment impact 
statement for the Nevada Rail Line which is required to transport spent 
nuclear fuel to the repository.

              FUTURE FUNDING--THE NEED FOR FUNDING REFORM

    To have confidence in any milestones after 2008, it is imperative 
that the funding process for the Program allows the Nuclear Waste Fund 
and the annual receipts from the nuclear waste generators to be used 
for their intended purpose. The Nuclear Waste Policy Act established 
the requirement that the generators of spent nuclear fuel must pay for 
its disposal costs. As a result, the Nuclear Waste Fund was created and 
is funded by a 1 mil per kilowatt-hour fee on all nuclear generation in 
this country. As of today, the Fund has a balance of approximately 
$20.7 billion which is invested in U.S. Treasury instruments. The 
Government receives approximately $750 million per year in revenues 
from on-going nuclear generation and the Fund averages about 5.5 
percent annual return on its investments. The Secretary of Energy has 
the responsibility to annually assess the adequacy of the fee and is 
authorized to adjust it as necessary.
    At the present time, due to technical scoring requirements, the 
Department cannot receive appropriations from the Nuclear Waste Fund 
equal to its annual receipts, interest, or corpus for their intended 
purpose without a significant recorded negative impact on the Federal 
budget deficit. The monies collected are counted as mandatory receipts 
in the budgetary process, and spending from the Nuclear Waste Fund is 
scored against discretionary funding caps for the appropriations 
process. The Administration proposed fixing this problem by 
reclassifying mandatory Nuclear Waste Fund fees as discretionary, in an 
amount equal to appropriations from the Fund for authorized waste 
disposal activities. Funding for the Program would still have to be 
requested by the President and appropriated by the Congress from the 
Nuclear Waste Fund.
    The projected budget authority needed through repository 
construction is well above current and historic levels, and the current 
funding levels are insufficient to build the repository and the 
transportation system. If the Program is funded at its current levels 
without fixing the current funding mechanism, the shortfall in the 
funding needed would be between $1.0 billion and $1.5 billion per year. 
This funding shortfall will not allow the placement of the design and 
construction contracts for the repository or the transportation 
systems. In short, DOE will not be able to execute its responsibilities 
under the Nuclear Waste Policy Act and will not be able to set a date 
for meeting its contractual obligations. Government liability will 
continue to grow with no apparent limit.
    In order for the Government to meet its obligations under the 
Nuclear Waste Policy Act, the funding mechanism for this Program must 
be designed to provide the following to DOE:
     Appropriations of amounts sufficient to allow funding of 
long term engineering, construction and procurement contracts; and,
     Authority to collect and utilize the fees from the nuclear 
waste generators for the management of spent fuel as required by the 
Nuclear Waste Policy Act and made available in the year they are 
received.
    Funding from the annual Nuclear Waste Fund fees alone at the 
current 1 mil per kilowatt-hour level will not be sufficient to fund 
the Program at the required levels. The Administration will address the 
Program's funding needs in the context of developing the President's 
annual budget.

                            LIABILITY COSTS

    Litigation settlements or damages are not paid from the Yucca 
Mountain Program appropriations. Rather, damages or settlement payments 
to utilities for the Department's delay are paid from the Judgment 
Fund, which is a permanent indefinite appropriation funded by taxpayer 
dollars. In 2002, the U.S Court of Appeals for the 11th Circuit ruled 
that the Department was not authorized under the Nuclear Waste Policy 
Act to spend Nuclear Waste Fund monies on settlement agreements aimed 
at compensating utilities for onsite storage costs.
    The estimated current potential liability is approximately $7.0 
billion which is predicated on the Department beginning operations at 
Yucca Mountain in 2017. Delaying the opening of the repository to 2020 
could cost taxpayers as much as an additional $4 billion from the 
Judgment Fund to pay damages.

                             PROGRAM COSTS

    The Program has spent $11 billion in 2000 constant dollars since 
1983. The 2001 total life cycle cost estimate for the Program was $57.5 
billion in 2000 constant dollars, which included costs already 
incurred. The Program is expected to release a revised total system 
life cycle cost estimate shortly. The estimate will include the costs 
for accepting approximately 30 percent more spent nuclear fuel into the 
system and will estimate costs through the repository's closing in year 
2133. Based on our recently completed Program schedule and cost 
estimate, annual funding will be needed at levels 2 to 3 times the 
current appropriations starting in FY 2009. If the requested fixes to 
the funding process are not put into place, DOE will not be able to set 
a credible opening date for the repository and Government liability 
will continue to grow.
    Therefore, I respectfully urge the Congress to consider that it is 
in the taxpayers' best interest to provide funding reform to expedite 
the procurement activities, engineering and construction of the 
repository and the associated transportation systems. It will limit the 
taxpayer's burden of billions of dollars in liability and stop the 
waste of Nuclear Waste Fund dollars by delays due to inadequate 
funding.
    Thank you for this opportunity to discuss these issues, and I would 
be pleased to answer any questions the Committee may have at this time.

    Chairman Spratt. Thank you very much, Mr. Sproat. Now lets 
turn to Mr. Hertz. And your statements, too, will be made part 
of the record.

   STATEMENT OF MICHAEL F. HERTZ, DEPUTY ASSISTANT ATTORNEY 
      GENERAL, CIVIL DIVISION, U.S. DEPARTMENT OF JUSTICE

    Mr. Hertz. Good morning, Mr. Chairman. I am happy to submit 
my statement for the record.
    Good morning, Mr. Chairman, other members of the Committee, 
I appreciate this invitation to the Department of Justice to 
testify this morning.
    I would like to touch on three points this morning. First, 
the origins of the litigation that we are now handling. Second, 
the current status of the litigation. And, third, some of the 
funding, the liabilities that we are facing in the litigation 
and the funding of that litigation.
    As it has been stated, after the Nuclear Waste Power Act 
was enacted in 1983, DOE entered into 76 standard contracts 
with members of the commercial and nuclear utility industry. 
The contracts required that the Department of Energy, beginning 
in January of 1998, pick up spent nuclear fuel and store it. 
Utilities, as part of that contract, agreed to make quarterly 
payments into the Nuclear Waste Fund. And they have been making 
those payments since 1983.
    In May 1995 the Department of Energy announced that it 
would be unable to begin acceptance of the spent nuclear fuel 
in January of 1998. A number of utilities went to the United 
States Court of Appeals for the District of Columbia to 
challenge that determination. The District of Columbia Court of 
Appeals determined that in fact DOE was required to pick up 
that spent nuclear fuel that the it was not conditioned on the 
opening of a repository but that was an obligation that the 
Department of Energy had to meet not withstanding the opening--
of a failure to open repository.
    Subsequent to that decision, the Department of Energy 
announced that it would still be unable to accept the waste and 
suggested that they might avoid liability pursuant to the 
unavoidable delays clause in the standard contract.
    Utilities went back to the United States Court of Appeals 
for the District of Columbia Circuit and the Court again 
determined that DOE had a responsibility to pick up this 
material. They were not going to issue a mandatory writ 
ordering that it be picked up, because the Court determined 
that the utilities had an adequate contract breach remedy that 
they could assert. But they did order that the Department of 
Energy would not be allowed to rely on the unavoidable delay 
clause in the standard contract in defending any of those 
breach of contract actions.
    With regard to the current status of the litigation, to 
date, the utility companies have filed 67 cases in the United 
States Court of Federal Claims. They seek damages largely for 
the cost that they have incurred to store spent nuclear fuel 
that they allege that the Department of Energy would of been 
obliged to pick up had they not breached the contract.
    The utility industry estimates that these claims will 
eventually total about $50 billion, which far exceeds the 
approximate $15.5 billion that the utilities have paid into the 
Nuclear Waste Fund. As you heard, DOEs most recent estimate of 
potential liability is $7 billion based on a projected start 
date of the repository of 2017.
    The United States Court of Appeals for the Federal Circuit 
to which the appeals from the Court of Claims go, has 
determined that the Department of Energy is in breach of its 
obligation to pick up this waste. They have determined that to 
date this constitutes a partial breach. Not a total breach of 
the contract. And that as such the utilities can seek damages 
only up to the point of time that they have filed their 
complaint.
    What that means of course is that the utilities will have 
to go back to Court at least once every six years to file a new 
claims to comply with the statute of limitations and seek their 
damages for the preceding six year period. And what it also 
means is it will ensure that we will continue to litigate these 
cases until after DOE begins performance of the standard 
contracts.
    Of the 67 suits filed, 56 cases remain pending either in 
the Court of Federal Claims or in the Court of Appeals for the 
Federal Circuit. Seven have been settled; two were voluntarily 
dismissed; and two have been litigated through final 
unappealable judgement.
    While we have asserted legitimate defenses to these cases 
in litigation, we have also made concerted efforts to settle 
these cases. We have had settlements resolving seven of these 
cases and those seven cases have settled for $255 million. In 
addition, there is one final unappealable judgement against the 
United States for $35 million.
    Of the 56 remaining cases, the Trial Court has entered 
judgement in eight and so far six of those have been appealed. 
The past damages in those eight cases total approximately $420 
million. Taking the judgements and the settlements together, 
although parts of the judgements are still subject to be 
challenged by the United States on appeal, the current 
government liability stands at $710 million. This reflects 
essentially cost claimed by the utilities from 1998 through 
2004 in the cases where we have nine judgements, and through 
2006 for the seven settlements. What that suggests of cost is 
that there is a lot of liability still to be incurred for the 
dates after 2004 and 2006.
    We have mentioned two significant issues that are on appeal 
in the United States of Court of Appeals for the Federal 
Circuit. The first relates to the unavoidable delay clause. 
Notwithstanding the D.C. Circuit's determination that the 
Department of Energy could not rely on that clause, which would 
be a complete defense to liability, a Court of Federal Claims 
Judge determined that his view was that the D.C. Circuit lacked 
jurisdiction to enter that writ of mandamus.
    That decision has been appealed by the utility to the 
United States Court of Federal Claims--United States Court of 
Appeals for the Federal Circuit, and the briefing has been 
completed in that case. And at some point we will have 
arguments and get a decision from the Federal Circuit about 
whether the United States can raise the unavoidable delay 
clause.
    The second significant issue in a number of the appeals 
deals with the scope of the government's obligation regarding 
the amount of spent nuclear fuel that had to be accepted under 
the standard contract. The utilities claims are uniformly 
premised upon arguments that DOE was contractually obligated to 
accept much larger amounts of spent nuclear fuel on an annual 
basis than the government believes that the obligation to be. 
And we will get, hopefully, a decision from the Court of 
Appeals for the Federal Circuit again on that issue as well.
    Finally, a word about the source of funding for the 
government's liability and the litigation cost that we are 
facing. To date, all of the settlements and all of the 
judgements have been paid from the Judgement Fund. The 
government's initial position was that in fact the Nuclear 
Waste Fund should be available to pay for these judgements and 
settlements, but the United States Court of Appeals for the 11 
Circuit interpreting the statute determined that that fund was 
not available to pay for settlements and judgements.
    This of course means that the Judgement Fund, as you know, 
is essentially a bottomless pit in terms it doesn't require 
annual appropriations. And the Department of Energy is not 
responsible, the Nuclear Waste Fund is not responsible for 
paying any of these damages not withstanding that presumably a 
large portion of those damages deal with storage costs that 
otherwise would have been borne by the Department of Energy had 
they been able to perform under the contract.
    With regard to litigation costs, to date, the Department of 
Justice has spent almost $95 million. This involves about $17 
million in attorney costs, $55 million in expert funds, and $22 
million in litigation support cost in defense of these suits. 
We are averaging about 12--the equivalent of 12 attorneys per 
year working on these cases. This is relatively lean staffing. 
We are up against large utilities. We have had to date trials 
in 13 cases. We expect over the next year to have trials in six 
cases. These trials generally last two to four weeks, one 
lasting as long as eight weeks.
    In the next year, just to give you an example, currently we 
are in trial on a case where the claimant is seeking $91 
million. Next month we go to trial on a case where the claimant 
is seeking $90 million. In January a case where the claimant is 
seeking $53 million. In April of 2008 two cases where the 
claimants are seeking $52 million in one case and $123 million 
in another case. And finally in October of 2008 this case is 
scheduled to go to trail where the claimant is seeking $96 
million. All in all in excess of a half of a billion dollars 
going to trial in the next year.
    As I said, these cases will continue to be filed, because 
these cases only deal with the partial breach up through the 
date those complaints will be filed. We are looking at 
litigation at least through 2017 and potentially beyond or at 
least liability through then and beyond. And the government 
will continue to incur liability until DOE is able to perform 
on these contracts.
    I thank you for your patience and I look forward to your 
questions.
    [The prepared statement of Michael F. Hertz follows:]

   Prepared Statement of Michael F. Hertz, Deputy Assistant Attorney 
          General, Civil Division, U.S. Department of Justice

    Mr. Chairman, and members of the Committee, I am Michael F. Hertz, 
and I am a Deputy Assistant Attorney General of the Department of 
Justice, Civil Division. I am pleased to testify today regarding the 
status of litigation concerning the Department of Energy's obligations 
under the Nuclear Waste Policy Act (NWPA) of 1982.
    Let me note at the outset that much of the litigation about which 
you have asked the Department of Justice to provide testimony is still 
pending in the Federal courts. As a result, the Department's pending 
matter policy applies to any discussion of those cases. Pursuant to 
that policy, I will be happy to discuss matters that are in the public 
record.

                               BACKGROUND

    In 1983, pursuant to the NWPA, the Department of Energy (DOE) 
entered into 76 standard contracts with entities, mostly commercial 
utilities, that were producing nuclear power. Through the standard 
contracts, DOE agreed that by January 31, 1998, it would begin 
accepting spent nuclear fuel and high-level radioactive waste 
collectively, (SNF) created by the utilities. In return, the utilities 
agreed to make quarterly payments into the Nuclear Waste Fund (NWF) 
created by the statute. The utilities began making payments into the 
NWF in 1983.
    In 1987, Congress designated Yucca Mountain in Nevada as the sole 
site for a Federal repository for disposal of the SNF. DOE has been 
unable to begin construction of the federal repository, however, and 
anticipates that it will be unable to begin SNF acceptance until at 
least 2017.
    In May 1995, DOE published a notice in the Federal Register 
advising the utilities that held standard contracts and others that DOE 
would be unable to begin acceptance of SNF on January 31, 1998. The 
notice also explained that DOE's acceptance beginning on that date was 
conditioned upon the existence of an operational repository. 60 Fed. 
Reg. 21793 (May 3, 1995).
    In response to this notice, several nuclear utilities filed suit in 
the United States Court of Appeals for the District of Columbia 
challenging DOE's understanding. The District of Columbia Circuit held 
that DOE was required to begin SNF acceptance in some type of facility 
by January 31, 1998. See Indiana Michigan Power Co. v. Department of 
Energy, 88 F.3d 1272, 1277 (D.C. Cir. 1996). After DOE continued to 
inform utilities that it would be unable to begin accepting SNF by 
January 31, 1998, the utilities again sued and requested an order 
directing that DOE perform under the Standard Contract. The District of 
Columbia Circuit denied the utilities' request and instead found that 
the utilities' remedy could be addressed through breach of contract 
claims. Northern States Power Co. v. United States, 128 F.3d 754, 759 
(D.C. Cir. 1997), cert. denied, 525 U.S. 1015 & 1016 (1998). The court 
did, however, issue an order that barred DOE from asserting that its 
delays in performing the standard contract were (unavoidable), and, 
therefore, excused pursuant to the (unavoidable delays) provision of 
the standard contracts.

              STATUS OF COURT OF FEDERAL CLAIMS LITIGATION

    To date, utility companies have filed 67 cases in the United States 
Court of Federal Claims, alleging that DOE's delay in beginning SNF 
acceptance constituted a breach of contract. The Court of Appeals for 
the Federal Circuit, in Maine Yankee Atomic Power Co. v. United States, 
225 F.3d 1336 (Fed. Cir. 2000), has ruled that the delay constitutes 
such a breach.
    The utilities' damages claims largely are for the costs incurred to 
store SNF that they allege DOE would have accepted from them absent the 
breach. Specifically, storage costs that utilities allege they would 
not have expended had DOE begun timely performance under the Standard 
Contract. In addition, several utilities have alleged damages arising 
from the (diminution-in-value) of their plants as the result of DOE's 
delay, claiming that they realized these damages when they sold their 
plants to other utilities as part of the sale.
    Utility industry reports estimate that the claims will total about 
$50 billion, which far exceeds the amount the utilities have paid into 
the NWF pursuant to the Standard Contract. DOE's most recent estimate 
of potential liability is $7 billion, based upon a projected start date 
of 2017. These estimates do not fully take into account the 
Government's defenses or the possibility that plaintiffs will be able 
to prove the full extent of their claims.
    In the first case to proceed to trial on the merits in March 2004, 
the trial court found that the utility had not incurred any damages as 
a result of the partial breach of contract through the date of trial 
and denied any monetary recovery, although it ruled that the utility 
may return to court if and when it incurs damage because of the delay 
in spent fuel acceptance. Indiana Michigan Power Co. v. United States, 
60 Fed. Cl. 639 (2004). In affirming this ruling on appeal, the 
appellate court held that all claims for breach of the standard 
contracts may only be through the date of the complaint and that 
utilities must file new complaints with the trial court seeking damages 
as they are incurred. Indiana Michigan Power Co. v. United States, 422 
F.3d 1369 (Fed. Cir. 2005).
    As a result of this ruling, utilities must file new cases with the 
trial court at least every six years to recover any costs incurred as 
the result of DOE's delay, and we will continue to litigate these 
claims until after DOE begins performance of the standard contracts. We 
recently received our first new complaint implementing this ruling, 
filed by Northern States Power Company, which was filed shortly before 
the trial court issued a decision on the first claim filed by Northern 
States in 1998.
    Of the 67 lawsuits filed, 56 cases remain pending either in the 
Court of Federal Claims or in the Court of Appeals for the Federal 
Circuit, seven have settled, two were voluntarily withdrawn, and only 
two have been litigated through final unappealable judgment.
    While asserting legitimate defenses to plaintiffs' claims in 
litigation, we also have made concerted efforts to settle claims. The 
settlements resolving seven of the cases involve four companies: Exelon 
Generation, LLC, South Carolina Electric & Gas Company, Omaha Public 
Power District and Duke Power Company. These settlements provide for 
the periodic submission of claims to the contracting officer for costs 
incurred since the date of the last submission. In total, the 
Government has paid $290 million pursuant to these settlements and one 
trial court judgment that was not appealed.
    Of those 56 pending cases, the trial court has entered judgment in 
eight, and so far six of those have been appealed. The past damages 
awarded in these eight judgments total approximately $420 million, with 
the trial court holding that the plaintiffs could return to court after 
they had incurred additional damages as a result of DOE's delay. 
Between judgments and settlements, the Government's liability currently 
stands at $710 million. This reflects costs claimed by utilities from 
1998 through 2004 for the nine judgments, and through 2006 for the 
seven settlements.
    The following chart summarizes the status of the 67 cases that have 
been filed:


----------------------------------------------------------------------------------------------------------------
               Number of cases                                          Status/Comments
----------------------------------------------------------------------------------------------------------------
 2..........................................  Voluntarily withdrawn
 7..........................................  Settled (settlements cover 1998 through 2006)
 2..........................................  Final unappealable judgments (judgments cover 1998 through 2004)
 6..........................................  Final judgments on appeal (judgments cover 1998 through 2004)
 2..........................................  Final judgments/time to appeal has not yet run (judgments cover
                                               1998 through 2004)
48..........................................  Pending/no judgment (includes new complaint filed August 2007)
----------------------------------------------------------------------------------------------------------------
67..........................................  Total
----------------------------------------------------------------------------------------------------------------

                      SIGNIFICANT ISSUES ON APPEAL

    There are two major issues that should be decided in the pending 
appeals which will have a significant effect upon the Government's 
continuing liability in these cases. The first issue concerns the 
Government's ability to present a defense based upon the (unavoidable 
delays) clause in the contracts. As noted, the District of Columbia 
Circuit, in Northern States, mandated that the Government could not 
rely upon such a defense in its litigation of delay claims arising from 
its breach. One of the trial court judges at the Court of Federal 
Claims found the District of Columbia Circuit's writ of mandamus to be 
void and that DOE is entitled to raise the (unavoidable delays) 
defense. Nebraska Public Power District v. United States, 73 Fed. Cl. 
650 (2006). That ruling is on appeal to the Federal Circuit and, if 
affirmed, the Government may be able to pursue an absolute defense to 
the utilities' damages claims.
    The second major issue to be decided in the cases on appeal is the 
scope of the Government's obligation to utilities regarding the amount 
of SNF to be accepted. The utilities' claims are uniformly premised 
upon arguments that DOE was contractually obligated to accept much 
larger amounts of SNF on an annual basis than the Government believes 
that obligation to be. This issue is squarely presented in several of 
the pending appeals and, depending upon how the appellate court decides 
the issue, will significantly inform the size of the damages awards 
that utilities receive in these cases.

                  PAYMENT OF JUDGMENTS AND SETTLEMENTS

    To date, all payments to the utilities have come from the Judgment 
Fund. In Alabama Power Co. v. United States Department of Energy, 307 
F.3d 1300 (11th Cir. 2002), the Court of Appeals for the Eleventh 
Circuit ruled that the Government could not use the NWF to pay for any 
of the damages that the utilities incur as a result of DOE's delay. The 
only other available funding source that has been identified to date is 
the Judgment Fund. We are also unaware of any statutory requirement 
that DOE be required to reimburse the Judgment Fund for judgments paid, 
unlike other statutory schemes that govern the adjudication of contract 
and other monetary disputes with the Government.

                            LITIGATION COSTS

    The costs to the Government to litigate these cases are 
significant. The Department of Justice has expended approximately $17 
million in attorney costs, $55 million in expert funds and $22 million 
in litigation support costs in defense of these suits. These costs 
represent nearly a third of the expenditures since 1998, for the 
component within the Civil Division responsible for litigating these 
suits. In addition, DOE and the Nuclear Regulatory Commission have 
expended many manhours to support this effort. Given that these cases 
will continue to be filed and litigated into the foreseeable future, 
these costs will continue to be incurred.
    Although these cases are similar in dollar amount to other cases 
defended by the Commercial Litigation Branch of the Department of 
Justice, these cases are distinct in two key aspects. First, the 
standardized contract at issue requires the Government to provide the 
services at issue and the utilities pay the costs for those services, 
rather than the reverse. Second, the Government will continue to incur 
liability for its inability to perform these contracts until after DOE 
begins to accept SNF waste--either at Yucca Mountain or some other 
facility--in amounts that DOE would have accepted if performance had 
begun in January 1998.
    In summary, the SNF litigation has already cost the Government 
significant sums in terms of liability and litigation costs and will 
most likely continue to do so into the foreseeable future.

    The Chairman. Lets turn to Kim Cawley who is the Chief of 
the Natural and Physical Resources Cost Estimates Unit at the 
Congressional Budget Office.
    Mr. Cawley, welcome this morning. We will put your 
statement in full in the record and you can summarize it as you 
see fit. Thank you for coming.

 STATEMENT OF KIM P. CAWLEY, UNIT CHIEF, NATURAL AND PHYSICAL 
   RESOURCES COST ESTIMATES UNIT, CONGRESSIONAL BUDGET OFFICE

    Mr. Cawley. Thank you, Mr. Chairman, Congressman Ryan, 
members of the Committee. Happy to be here this morning to 
discuss the Nuclear Waste Program. I would like to emphasize 
just a couple points from my written statement.
    It is likely that the Nuclear Waste Program will add to the 
size of the federal deficit in future years for two reasons. 
First, that the Department obtains regulatory approvals to 
proceed with building the facility of plans for Yucca Mountain. 
Projected spending for that construction will exceed the annual 
fees of $800 million--$700 million that are paid each year by 
utilities for the disposal service.
    And second the Courts have held that taxpayers, not nuclear 
power customers, must bear the cost of the delay in the 
disposal program that has occurred since 1998. So far the 
Judgement Fund has paid about $300 million in compensation to 
utilities.
    On my first point, since 1993 when the Waste Fund was 
established on the budget, utilities have paid about $15 
billion in fees towards their share of a permanent waste 
repository. Spending form the fund over that same period has 
been less than the fees collected by about seven billion 
dollars. Because nearly all the receipts and spending in the 
federal budget are recorded on a cash basis, we could say that 
so far the Waste Fund has contributed to reducing the size of 
past deficits. But that situation can be reversed if the 
Department is able to proceed with construction and it receives 
annual appropriations in the future that are larger than the 
Fund's annual income. At that point the Programs operations 
would be adding to the size of deficits or reducing the size of 
surpluses in the future.
    Just on my second point about payments from the Judgement 
Fund. The Judgement Fund is a permanent appropriation, 
permanent authority to pay for all kinds of judgements and 
settlements against the government. For example, in 2006 the 
Fund paid over 8,000 individual claims of all kinds ranging 
from traffic accidents to medical malpractice and contract 
disputes. Over the past ten years payments from the Fund have 
averaged about $1.2 billion a year. How much the Fund will pay 
in future nuclear waste settlements is uncertain.
    DOE has estimated those damage claims could amount to $7 
billion to $11 billion depending on when the waste site could 
begin operating. Those estimates are for the sum of total 
claims that might be paid over 30 years or more. Ultimately, 
the size of the claims will depend on the types of damages that 
the courts allow and how long it takes DOE to move the waste 
from individual utility storage sites.
    Finally, I wanted to mention the legal capacity of the 
Yucca Mountain site. Under the Waste Policy Act 70,000 metric 
tons of waste could be sent to that facility, but commercial 
plants and the governments own waste from it's Defense Programs 
have already generated about 65,000 tons. The industry now 
produces around 2,000 tons a year so all of that legal capacity 
will be spoken for soon, years before the site could open. 
Without a solution to that capacity limit, taxpayer liabilities 
for waste disposal could grow for the waste expected from 
current plants that are operating today as well as for many new 
power plants that might be built.
    Thanks again for the opportunity to be here. And I would be 
happy to answer any questions about my written statement.
    [The prepared statement of Kim P. Cawley follows:]

Prepared Statement of Kim Cawley, Chief, Natural and Physical Resources 
            Cost Estimates Unit, Congressional Budget Office

    Mr. Chairman, Congressman Ryan, and Members of the Committee, I am 
pleased to appear before you today to discuss issues related to the 
Federal Government's liability under the Nuclear Waste Policy Act of 
1982 (NWPA).
    My testimony today makes the following points:
     By law, the Federal Government is responsible for 
permanently disposing of spent nuclear fuel generated by civilian 
facilities, which pay fees for that waste disposal service. Regardless 
of how the government meets that responsibility, discharging those 
liabilities will require significant federal spending over many 
decades.
     The Nuclear Waste Policy Act authorized a system to manage 
radioactive waste, including an underground repository to permanently 
dispose of spent nuclear fuel from civilian facilities. Currently, the 
Federal Government is 10 years behind schedule in its contractual 
obligations to remove and dispose of such waste; by the time the 
repository might be opened, it is likely to face at least a 20-year 
waste backlog.
     In the absence of a federal underground repository to 
accept nuclear waste for storage, taxpayers are now starting to pay--in 
the form of legal settlements with utilities--for a decentralized waste 
storage system at sites around the country. (Those payments are being 
made from the Department of the Treasury's Judgment Fund.) The 
Department of Energy (DOE) currently estimates that payments to 
utilities pursuant to such settlements will total at least $7 billion, 
and possibly much more if the program's schedule continues to slip. 
Regardless of whether or when the government opens the planned 
repository, those payments are likely to continue for several decades.
     Ultimately, the repository that is now authorized under 
NWPA will not provide sufficient capacity to store all of the waste for 
which the Federal Government is responsible. The statutory cap on the 
amount of waste that can be stored there is significantly lower than 
the volume of waste that DOE expects will be generated during the 
lifetimes of existing nuclear facilities, let alone the additional 
volume from any new facilities that may be built. Without a change in 
law to allow construction of disposal facilities with sufficient 
capacity to accommodate all of the waste that will be generated, 
taxpayers will need to pay utilities to dispose of a substantial amount 
of additional waste in the future.
     Contractual liabilities associated with nuclear waste from 
civilian power plants are one component of the government's broader 
liabilities for remedying environmental contamination, much of which 
results from operating the nation's nuclear weapons complex.

   THE FEDERAL GOVERNMENT'S RESPONSIBILITIES UNDER THE NUCLEAR WASTE 
                               POLICY ACT

    The Nuclear Waste Policy Act gave the Federal Government statutory 
responsibility for permanently disposing of spent nuclear fuel 
generated at civilian nuclear reactors and for disposing of radioactive 
waste generated as a result of federal activities related to the 
manufacturing of nuclear weapons. Under the law, the Federal 
Government, through the Department of Energy, faces substantial costs 
to establish a federal repository for the nation's nuclear waste. It 
has also incurred contractual obligations to remove waste from civilian 
nuclear facilities.
    Under NWPA, the Federal Government will have to spend tens of 
billions of dollars over many decades to fulfill its obligations to 
dispose of waste from the current generation of civilian nuclear 
reactors. The government will also be responsible for waste from any 
new facilities that may be brought online in the future. However, the 
waste from those new facilities cannot be accommodated in the 
repository envisioned under NWPA because of statutory constraints on 
the amount of waste the repository can store.

          THE FEDERAL REPOSITORY AUTHORIZED FOR YUCCA MOUNTAIN

    The Nuclear Waste Policy Act authorized DOE to build a geologic 
repository to permanently store up to 70,000 metric tons of spent 
nuclear fuel generated by civilian nuclear power plants and high-level 
radioactive waste generated by federal facilities. Under current law, 
Yucca Mountain in Nevada is the only place where such a repository may 
be located. To proceed with construction and operation of the facility, 
DOE must apply for and receive a license from the Nuclear Regulatory 
Commission (NRC). DOE expects to submit that application for authority 
to begin constructing the repository in 2008. (To date, many of DOE's 
activities have focused on analyses required to support the license 
application.) If the NRC approves the application within three years 
and if other key regulatory requirements are subsequently met, DOE 
expects the planned repository at Yucca Mountain to begin accepting 
waste in 2017, although the department has recently indicated that this 
planned schedule could slip further.\1\
    The law also addressed how the disposal of spent nuclear fuel and 
defense-related waste was to be paid for. Under NWPA, the costs for 
disposing of the waste are to be borne by the parties that generate it, 
and the law authorizes DOE to levy fees on the nuclear power industry 
to cover those costs. The law also authorizes appropriations from the 
Treasury's general fund to pay for disposing of high-level radioactive 
waste generated by the nation's defense programs.



    The cash flows since 1983 for major components of the nuclear waste 
disposal program (summarized in Table 1) are described in the following 
sections.

       FINANCING THE COST OF DISPOSING OF CIVILIAN NUCLEAR WASTE

    Starting in 1983, NWPA authorized DOE to charge electric utilities 
fees to cover the cost of disposing of the nuclear waste they generate. 
Utilities today pay annual fees at a rate of 1 mil (0.1 cent) per 
kilowatt-hour of electricity generated and sold by nuclear power 
plants. The fees, which are recorded in the budget as mandatory 
offsetting receipts (a credit against direct spending), are deposited 
into the Nuclear Waste Fund, or NWF (a special fund in the Treasury 
that records cash flows associated with the civilian nuclear waste 
program). Amounts in that fund are available for spending only to the 
extent provided in annual appropriation acts. Under NWPA, DOE is 
required to periodically review and, if necessary, adjust those fees to 
ensure that the fund has sufficient resources to pay for disposing of 
the utility industry's nuclear waste. DOE has not increased that annual 
charge since 1983.
    In addition to the ongoing yearly fees, NWPA established one-time 
fees to cover the cost of disposing of waste that was generated before 
the law was enacted. DOE provided utilities with several options for 
paying that one-time charge, but several utilities have not yet paid 
the fee, and a significant amount remains uncollected.
    The Nuclear Waste Policy Act authorized appropriations from the 
Nuclear Waste Fund to cover the costs of the civilian nuclear waste 
program and also permitted DOE to borrow from the Treasury (subject to 
approval in appropriation acts) if balances in the fund were 
insufficient to cover the program's immediate costs. (The law 
stipulates that amounts borrowed from the Treasury must be repaid from 
future fee collections.) In addition, the law authorized the Secretary 
of the Treasury to invest the fund's unspent balances in nonmarketable 
Treasury securities, which are credited with interest.
    As shown in Table 1, $25.7 billion has been credited to the NWF 
from its inception in 1983 through the end of fiscal year 2006. That 
amount includes fees paid by the nuclear industry totaling $14.8 
billion as well as $10.9 billion from intragovernmental transfers of 
interest earnings. Cumulative expenditures from the fund during that 
period totaled about $6.7 billion, mostly for analyses related to the 
waste disposal program and for appropriations to DOE for initial design 
work on the Yucca Mountain facility. The NRC and other federal entities 
also received modest appropriations from the fund for work related to 
the program, leaving an unspent balance of about $19.0 billion at the 
end of 2006. The Congressional Budget Office (CBO) estimates that in 
2007, another $1.6 billion was credited to the fund--half of which came 
from fees and half from interest. Expenditures in 2007 totaled $0.2 
billion, bringing the fund's current balance to $20.4 billion, in CBO's 
estimation.
    If all of today's 104 licensed nuclear reactors continue to 
generate electricity, future annual receipts from industry fees are 
likely to average between $750 million and $800 million. Most U.S. 
nuclear power plants began operating in the mid-1970s or during the 
1980s under 40-year licenses. The NRC has approved 20-year extensions 
to the licenses of nearly half of the plants in operation today, and it 
anticipates that many of the others will apply for such licenses. When 
those plants reach the end of their license extensions (or their 
economically useful lives) and cease operations--probably in the 2030s 
and 2040s--they will pay no additional fees to the Nuclear Waste Fund 
to cover long-term costs related to their waste.
    Receipts from the one-time fees that remain unpaid and become due 
once the federal repository is opened currently amount to about $3 
billion, DOE estimates.\2\ Interest accrues on the balances due from 
those one-time fees until the utilities pay them to the government. 
Also accruing and adding significantly to the fund's balances are 
credits of interest on the fund's unspent dollars. Those amounts are 
intragovernmental transfers and do not create net receipts to the 
Federal Government. However, they do add to the resources that are 
authorized to be used for the waste disposal program.

   FINANCING THE COSTS ASSOCIATED WITH DEFENSE-RELATED NUCLEAR WASTE

    In addition to the amounts appropriated from the fees and interest 
credited to the NWF, the Congress has made annual appropriations to the 
nuclear waste program to cover the costs that DOE estimates are related 
to the disposal of nuclear waste generated by federal defense programs. 
In 2001, DOE determined that just over one-fourth of the total costs of 
the waste disposal program are attributable to the disposal of defense-
related nuclear waste and that this share of the program's total costs 
should be paid for with appropriations from the general fund of the 
Treasury.\3\ Since 1993, the Congress has provided nearly $3.4 billion 
from the general fund for such costs.

                  ESTIMATES OF TOTAL LIFE-CYCLE COSTS

    In 2001, DOE published an estimate of the total costs--including 
transportation and project management--associated with the planned 
underground nuclear waste disposal facility. In DOE's estimation, the 
project would cost $57.5 billion in 2000 dollars (with an associated 
range of accuracy of plus or minus 40 percent) over an operating period 
of more than 100 years.\4\ DOE estimated that nearly three-fourths of 
the facility's total life-cycle costs would be attributable to waste 
generated by civilian facilities; the remaining portion would be 
attributable to defense-related waste.
    DOE also published a study in 2001 reporting on whether the annual 
fee charged for nuclear waste disposal would generate enough money in 
the Nuclear Waste Fund--including the interest anticipated on unspent 
fees--to pay for the estimated life-cycle costs associated with 
disposing of civilian waste.\5\ In that study, key findings of which 
are summarized in Figure 1, DOE estimated that fees paid by commercial 
nuclear power plants would cover 44 percent of the program's total 
costs, and interest credited to unspent NWF balances of fees would 
cover 27 percent. DOE assumed that appropriations for costs 
attributable to defense-related waste would cover the remaining 29 
percent of total costs.
    Using its 2001 program design as a reference case, DOE determined 
that the annual fee (plus accrued interest) was likely to generate 
sufficient balances to cover the estimated costs of civilian waste 
disposal. The agency reaffirmed that determination in 2002 but has not 
completed an updated study of fee adequacy since that time.\6\



    Judgments about whether the fee is adequate are highly sensitive to 
estimates of certain key variables, such as project costs and 
inflation. Determinations of adequacy are also sensitive to estimates 
of the interest credited to the fund--estimates that are a function of 
interest rates and fund balances, which in turn depend on projections 
of appropriated spending from the fund. In CBO's view, DOE's 2001 and 
2002 analyses used reasonable economic assumptions, but it is unclear 
whether other assumptions--particularly those related to the program's 
scope and costs--are still an appropriate basis for determining the 
adequacy of utilities' annual fees. For example, because many plants 
have received 20-year license extensions, the total volume of waste 
that those plants are expected to generate--and thus the scope of a 
federal program necessary to manage it--have increased significantly 
since 2001. An updated analysis would need to take that factor into 
account, as well as the impact of escalating construction costs and 
delays in the scheduled opening of a federal repository. The Government 
Accountability Office, looking back, found that many DOE construction 
projects involving complex technologies had exceeded their original 
estimates of costs and experienced delays in their schedules.\7\

   FEDERAL CONTRACTUAL OBLIGATIONS AND LIABILITIES FOR NUCLEAR WASTE

    Under contracts signed with electric utilities pursuant to NWPA, 
DOE was scheduled to start removing waste from storage sites at 
individual power plants for transport to a federal storage or disposal 
facility by 1998. DOE documents suggest that the planned underground 
nuclear waste disposal site at Yucca Mountain will not be ready to 
accept waste before 2017--or nearly 20 years late.\8\ Moreover, that 
schedule assumes that legislation, which has not been enacted, will 
make changes to the nuclear waste program--in particular, to simplify 
key regulatory procedures. Without those changes, according to DOE, the 
actual date that the agency begins to accept waste is likely to be even 
later.
    After the Federal Government missed its 1998 contractual deadline 
to start collecting waste, electric utilities began--successfully--to 
sue the government for damages incurred as a result of the agency's 
failure to meet that deadline. In seeking to resolve the initial 
lawsuits, DOE anticipated that it would pay court-awarded damages to 
individual utilities from amounts appropriated from the Nuclear Waste 
Fund or by issuing credits to those utilities (to reduce their future 
fee payments to the fund) in the amount of the damages that had been 
awarded.
    In 2002, however, the U.S. Court of Appeals for the Eleventh 
Circuit held that DOE could not use the Nuclear Waste Fund to pay the 
damages resulting from the government's breach of its contracts.\9\ 
According to the court, the costs of interim storage incurred by the 
utilities because of the breach were not within the uses of the fund 
that were permitted under NWPA. Also, the court pointed out, the 
department would inevitably raise future fees to compensate for any 
such payments--so that the injured utilities would ultimately bear the 
costs of the contract breach if they were paid from the fund. In 
addition, utilities that did not litigate their claims would end up 
paying larger fees to cover the cost of damage claims made by other 
utilities. Agreeing with the parties that brought the lawsuit, the 
court stated that making utilities contribute to a fund that 
disproportionately paid the storage costs of other utilities would 
raise a serious constitutional ``takings'' question. Following the 
court's decision, the government subsequently paid damages to the 
utilities from the Treasury's Judgment Fund.

                           THE JUDGMENT FUND

    The Judgment Fund is a permanent, indefinite appropriation from the 
Treasury that is available to pay final judgments and awards against 
the United States that cannot legally be paid from any other existing 
appropriation.\10\ (The fund has no fiscal year limitations, and there 
is no need for the Congress to appropriate money to replenish it.) The 
fund provides the authority for the government to pay for most court 
judgments and settlement agreements entered into by the Department of 
Justice to resolve actual or imminent lawsuits against the Federal 
Government. Generally, agencies are not required to reimburse the 
Judgment Fund for payments made on their behalf unless the Congress 
appropriates money specifically for that purpose.

JUDGMENTS AWARDED AND PAID TO UTILITIES UNDER THE NUCLEAR WASTE POLICY 
                                  ACT

    Under the Department of Justice's settlements with electric 
utilities, utilities have been reimbursed for the actual costs they 
incurred because of DOE's partial breach of its contracts. Such costs 
are unique to each nuclear power plant and depend partly on the age and 
operating status of the plant and the size and configuration of the 
plant's available space for nuclear waste storage.
    The Judgment Fund has paid $290 million to four electric utilities 
as compensation for the costs they incurred because the Federal 
Government could not begin to accept nuclear waste for disposal in 
1998. That amount includes a payment of $35 million to the federally 
owned Tennessee Valley Authority. The government has appealed (or may 
appeal) judgments worth another $337 million. Five additional trials 
for damages have been completed and are awaiting judgments, and 44 
other cases have not yet been tried. Because judicial claims for 
damages are made retrospectively, many more cases can be expected in 
the coming decades as utilities seek to recover their ongoing costs for 
storing nuclear waste long after they expected it to be removed to a 
permanent disposal site.

         FUTURE SETTLEMENTS UNDER THE NUCLEAR WASTE POLICY ACT

    Litigation is ongoing regarding how to calculate damages for DOE's 
partial breach of its contractual commitments. DOE currently estimates 
that if the agency begins to accept waste in 2017, taxpayers' total 
liabilities to electric utilities will total roughly $7 billion (in 
today's dollars). Further, it anticipates that payments from the 
Judgment Fund will span a number of decades after 2017.\11\
    DOE's estimate of future damages is uncertain and is predicated on 
the department's views of the types of additional business and waste 
storage expenses that the courts will determine are appropriate and 
reasonable and should be paid by DOE. Those determinations will depend 
on such factors as the estimated rate at which DOE would have removed 
waste from a particular facility if the agency had been able to accept 
waste in 1998. If utilities successfully argue that the waste-
acceptance rate used for the purpose of calculating damages should 
exceed the rate used in DOE's projections of liabilities, costs would 
probably surpass $7 billion.
    Similarly, costs may be greater if the courts take a broader view 
of the types of expenses for which utilities should be compensated. 
Although the Federal Government is responsible for the permanent 
disposal of nuclear waste, individual utilities are responsible for 
storing the waste until it can be delivered to a permanent storage 
facility. Because the site characteristics of individual utilities 
vary, the determination of incremental expenses incurred at particular 
sites must be made on a case-by-case basis and will ultimately depend 
on the courts' views, which could differ from DOE's.
    Estimates of liabilities will increase if the schedule for 
completing the planned repository slips further and waste continues to 
accumulate at utilities' storage sites. For example, according to DOE, 
estimated liabilities will increase from $7 billion to $11 billion if 
the agency starts accepting waste in 2020.\12\ And even then, it will 
face a backlog that, at best, will take more than 20 years to 
eliminate. As long as the agency remains behind schedule, taxpayers 
will continue to incur liabilities.

          THE OUTLOOK FOR THE FEDERAL GOVERNMENT'S LIABILITIES

    The Nuclear Waste Policy Act sets the storage capacity of the Yucca 
Mountain site at no more than 70,000 metric tons. DOE estimates that 
roughly 65,000 metric tons of existing spent nuclear fuel and high-
level defense waste are currently slated for disposal there. The 
nation's existing nuclear power plants generate another 2,000 metric 
tons of waste per year. If they continue to produce waste at that rate, 
the total volume will exceed Yucca Mountain's statutory capacity within 
a few years, well before the repository is scheduled to open.
    As a result, without a change in law to expand the Yucca Mountain 
facility or designate another site for disposal, there will be 
insufficient capacity to dispose of wastes generated over the lifetimes 
of the nuclear power plants that are operating today. The resulting 
waste storage compensation payments to utilities from the Judgment Fund 
for waste that cannot be permanently disposed of would add 
significantly to federal liabilities.
    Moreover, the NRC has announced that it expects to receive 
applications for licenses to build 32 new nuclear power plants in the 
next few years. If constructed, each of those plants would produce 
around 20 metric tons of waste per year, or about 1,000 metric tons 
over a 40- to 60-year period of operations. Such plants would also pay 
fees to the Nuclear Waste Fund, and their waste would become a federal 
liability because under NWPA, nuclear plants are required to sign waste 
disposal agreements with DOE. Without additional storage capacity, that 
waste could become an additional liability of the Judgment Fund.

            ACCOUNTING AND BUDGETING FOR FEDERAL LIABILITIES

    The Federal Government issues two different reports on its fiscal 
performance: the budget and The Financial Report of the United States 
Government. The budget largely measures cash flows in and out of the 
Treasury. The financial report, by contrast, primarily uses an accrual 
basis of accounting to measure assets, liabilities, revenues, and 
expenses. The principal difference between accrual and cash accounting 
is the timing of the recognition of transactions: An accrual system 
generally recognizes them when an economic event occurs rather than 
when the resulting cash flows take place.\13\
    On the federal balance sheet, liabilities reflect obligations of 
the Federal Government that result from prior actions but that will 
require financial resources in the future. Regardless of whether or how 
particular liabilities are captured on the federal balance sheet, the 
budget records cash flows related to those liabilities when the flows 
occur.

       RECORDING NUCLEAR WASTE DISPOSAL CASH FLOWS IN THE BUDGET

    Over the 1983--2006 period, the fees paid by nuclear utilities 
under NWPA totaled $14.8 billion, whereas expenditures totaled only 
$6.7 billion. As a result, the nuclear waste disposal program has 
reduced the cumulative net deficit (and thus the need for federal 
borrowing) by about $8 billion.
    Because receipts to the Nuclear Waste Fund have exceeded spending, 
balances have grown significantly since the fund's inception, and 
significant amounts of interest have been credited to the fund. 
Intragovernmental interest is not a budgetary receipt and does not 
affect the size of annual deficits; however, it does add to the total 
amount of resources authorized to be made available for nuclear waste 
disposal.
    Going forward, any future expenditures from the Nuclear Waste Fund 
in excess of annual receipts from industry fees--that is, drawing down 
the balances in the fund or spending the interest being credited to the 
fund--will increase annual deficits or reduce future surpluses. Under 
current budgetary procedures, all spending from the fund is considered 
discretionary and counts against the appropriation committees' spending 
allocations. Income from fees, by contrast, is recorded on the 
mandatory side of the budget.

  ENVIRONMENTAL AND DISPOSAL LIABILITIES ON THE FEDERAL BALANCE SHEET

    Along with DOE's liability for the costs of disposing of civilian 
nuclear waste, the Federal Government has substantial liabilities 
related to the costs of mitigating hazardous and radioactive waste that 
the government generated (or is required, by law or regulation, to 
remediate). Most of those liabilities involve the contamination of 
soil, water, and facilities at thousands of sites, contamination that 
arose from operating the nation's nuclear weapons complex. Federal 
financial statements prepared by the Department of the Treasury 
indicate that over the next 75 years, the government faces more than 
$300 billion in costs to clean up, dispose of, and monitor that 
contamination.\14\

                                ENDNOTES

    \1\ Statement of Edward F. Sproat III, Director, Office of Civilian 
Radioactive Waste Management, Department of Energy, before the 
Subcommittee on Energy and Water Development of the House Committee on 
Appropriations, March 28, 2007.
    \2\ Data supplied to the Congressional Budget Office in September 
2007 by the Department of Energy's Office of Civilian Radioactive Waste 
Management.
    \3\ Department of Energy, Office of Civilian Radioactive Waste 
Management, Analysis of the Total System Life Cycle Cost of the 
Civilian Radioactive Waste Management Program, DOE/RW-0533 (May 2001).
    \4\ Ibid.
    \5\ Department of Energy, Office of Civilian Radioactive Waste 
Management, Nuclear Waste Fund Fee Adequacy: An Assessment, DOE-RW-0534 
(May 2001).
    \6\ Bechtel SAIC Company, L.L.C., Total System Life Cycle Cost for 
Site Recommendation: Letter Report, TDR-CRW-AD-000001 REV 00 (prepared 
for the Department of Energy, Office of Civilian Radioactive Waste 
Management, February 2002).
    \7\ Government Accountability Office, Department of Energy: Major 
Construction Projects Need a Consistent Approach for Assessing 
Technology Readiness to Help Avoid Cost Increases and Delays, GAO-07-
336 (March 2007).
    \8\ Statement of Edward F. Sproat III, March 28, 2007.
    \9\ Alabama Power Co. v. United States, 307 F.3d 1300 (2002).
    \10\ In 2006, more than 8,000 individual payments from the Judgment 
Fund amounted to nearly $0.7 billion; over the past 10 years, such 
payments have averaged around $1.2 billion annually. Most of the 
payments are made to settle claims related to federal employment, 
torts, property loss, discrimination, medical malpractice, and contract 
disputes.
    \11\ Statement of Edward F. Sproat III, March 28, 2007.
    \12\ Ibid.
    \13\ For more discussion, see Congressional Budget Office, 
Comparing Budget and Accounting Measures of the Federal Government's 
Fiscal Condition (December 2006).
    \14\ See Department of the Treasury, Financial Management Service, 
2006 Financial Report of the United States Government, available at 
www.fms.treas.gov/fr/06frusg/06frusg.pdf.

    Chairman Spratt. Thank you very much. Mr. Sproat, I think 
it would help us if you went back and explained a bit more 
deliberately the fiscal situation we have now with respect to 
classification of receipts on the one hand, and expenditures on 
the other. And why there is a mismatch that dooms your program 
to being under funded on into the future.
    Mr. Sproat. Okay. Thank you, Mr. Chairman. This is 
certainly not my area of expertise and I suspect the 
Committee's staff is much more well versed in this than I am, 
but I will give it an attempt.
    When the Nuclear Waste Policy Act was passed and the basic 
premise of requiring that waste generators to pay for the cost 
of disposal was set, the concept that the Congress set up was a 
one mill per kilo-watt hour fee paid for by the utilities based 
on their generation. The Secretary of Energy had the 
responsibility on an annual basis to assess the adequacy of 
that fee to allow the Department to fully carry out its 
responsibilities under the Nuclear Waste Policy Act, with the 
idea being that on an annualized basis any of that amount of 
fee that was not appropriated in that year of receipt would be 
placed into the Nuclear Waste Fund. And that the Nuclear Waste 
Fund would be used to pay for the actual construction and 
operation of the repository well into the future until it was 
eventually closed.
    When Gramm-Rudman-Hollings--when the bills were passed in 
the mid 1980s that set up the concept of mandatory and 
discretionary receipts and expenditures, the fees coming into 
the Nuclear Waste Fund were classified as mandatory receipts. 
And the Program was treated as a discretionary Program. And as 
I think I understand how this works, basically you can't use 
mandatory receipts to offset the appropriations for 
discretionary programs.
    And so as a result we ended up with this mismatch between 
what the fees were to be used for versus how they were actually 
being used. But the surplus of fees coming in on an annual 
basis continued to be positive, and as a result, the Nuclear 
Waste Fund has continued to grow. My organization, my office 
has the responsibility to manage that fund. We have a laddered 
portfolio of treasury instrument, zero coupon bonds, and T-
Bills. And we manage that to return between 5.3 and 5.5 percent 
a year, which sounds very good. And that is how we got to a 
$20.5 billion balance in the Nuclear Waste Fund.
    Unfortunately, because those revenues come in on an annual 
basis, that $750 million a year is generating interest, which 
is basically an interagency transfer on the books within the 
Treasury. The interest being generated on the funds those two 
revenue streams or I should say those dollars are treated as 
offsets in the current year they are booked. And as a result 
that $20.5 billion in the Waste Fund, while it is there on the 
books, if and when that money is needed to actually build the 
repository it will be scored as deficit spending, because it is 
already been accounted for in the books in the year the revenue 
was booked.
    Chairman Spratt. So what you are asking is that the funds 
coming in by virtue of the fee payments and classified as 
offsetting mandatory receipts be instead made offsetting 
receipts for discretionary spending?
    Mr. Sproat. That is correct. That is at least one of the 
solutions we will need to put in place to help solve this 
problem.
    Chairman Spratt. Do you know to which account or which 
appropriations bill the offsetting receipts, mandatory 
offsetting receipts now go? Is it in the Energy and Water 
appropriations?
    Mr. Sproat. It is Energy and Water Appropriations. I have a 
copy of the 2008 Energy and Water Appropriations bill language 
here. And both the receipts show up as a line item that says, 
``Intra fund transactions earning on investments, Nuclear Waste 
Fund, $954 million and proprietary receipts from the public 
Nuclear Waste Fund, $770 million.''
    Chairman Spratt. And you are saying if you are able to use 
those receipts for this program alone without offsetting them 
against an extraneous program, another program, and also are 
given credit for interest accruing on the balances, you will 
have funds through the foreseeable future adequate to meet your 
obligation?
    Mr. Sproat. That is correct.
    Chairman Spratt. Construction obligation?
    Mr. Sproat. That is correct, Mr. Chairman.
    Chairman Spratt. Let me ask you this, Mr. Hertz, has the 
issue been raised in any of this litigation that this is a 
trust fund and that the funds deposited to it are imbued with 
that trust? They are obligated and encumbered and therefore the 
Court can direct that the monies accumulating in this trust 
fund be used for their intended trust purpose?
    Mr. Hertz. Well, the only litigation that I am aware 
dealing with the fund itself is whether the fund was available 
to pay settlements and judgements. And to those extent that 
those settlements and judgements are essentially damages for 
storage that would of otherwise been done under the contract, 
that the contract had not been breached, you have the situation 
where the Judgement Fund is essentially paying part of the 
expenses that otherwise would of been bourne by the Nuclear 
Waste Fund.
    But the Court ruled against the government's position in 
that case and said that the statutory language of the Nuclear 
Waste Policy Act did not allow the Department of Energy to take 
funds from the Nuclear Waste Fund and pay settlements for the 
breach of contract.
    Chairman Spratt. Of course that involves some equity about 
those who are paying in may have to pay twice. But has the 
issue been raised and litigated that this is a trust fund that 
the monies deposited to it accredited to it have a particular 
purpose and that the government as trustee is obligated to 
fulfill that purpose with the funds available?
    Mr. Hertz. Not that I am aware of.
    Chairman Spratt. You think it is a valid argument?
    Mr. Hertz. I would have to take it back and think about it. 
I am not sure--in other words--I am not sure. I think it is 
contemplated that the funds are going to be used to build the 
repository and to operate the repository. I don't know that it 
has been litigated yet in terms of how the funds have actually 
been treated for budget purposes and whether there is anything 
improper about that.
    Chairman Spratt. Mr. Sproat, are you getting an 
appropriation from the Energy and Water Appropriations bill of 
about $350 to $400 million a year?
    Mr. Sproat. Yes, Mr. Chairman. We requested for fiscal year 
2008, $495 million. The House appropriated $495 or $494.5 and 
the Senate appropriated approximately $50 million less than 
that. And we are waiting to see what happens here through the 
continuing resolution.
    Chairman Spratt. And do you also have available to you the 
interest is credited to the trust fund account?
    Mr. Sproat. No, sir, I don't.
    Chairman Spratt. You can't draw it down without an 
appropriation either?
    Mr. Sproat. That is correct.
    Chairman Spratt. It is credited to your account, but it is 
not available to you?
    Mr. Sproat. That is correct.
    Chairman Spratt. And is that because of PayGo 
considerations at this point in time?
    Mr. Sproat. I guess I am not the best person to answer that 
question, Mr. Chairman. I could certainly take that question 
for the record, but I might suggest----
    [Mr. Sproat's response for the record follows:]

    Amounts in the Nuclear Waste Fund are available only to the extent 
provided in annual appropriations. Under current budgetary procedures, 
all spending from the Fund is considered discretionary and counts 
against the Appropriation Committees' spending allocations. Income from 
fees, by contrast, is recorded on the mandatory side of the budget. Any 
expenditure from the Nuclear Waste Fund in excess of annual receipts 
from industry fees--that is, drawing down the balances in the fund or 
spending the interest being credited to the fund--will increase annual 
deficits or reduce future surpluses. PayGo considerations, therefore, 
play a role in the calculations only in terms of spending against the 
corpus of the Fund or the interest earned, but not for spending the 
annual income from the utility fees collected.

    Chairman Spratt. Mr. Cawley, do you have an opinion about 
that?
    Mr. Cawley. Yeah. I would say that the budgetary 
classification of the cash flows related to the Nuclear Waste 
Program are laid out in the 1982 Energy Policy Act. In that Act 
it specifies that the fees be considered as offsetting receipts 
for a business like activity. They are mandatory collections. 
They are not dependant upon any other future action of the 
Congress.
    The collection of those fees really has nothing to do with 
the annual appropriations process. That is a separate activity. 
So those the Act envisioned that the fees would be collected 
and credited with any interest earnings on the unspent 
balances.
    The Act clearly says that amounts from the fund should be 
made available through the appropriations process, annual 
decisions that the Congress makes to decide the funding levels.
    In addition, maybe I wasn't clear, that the Department sort 
of receives two different appropriations. It receives an 
appropriation from the Nuclear Waste Fund as well as an 
appropriation from the general fund for the portion of the 
repository that is considered a cost of the Defense Programs 
and will be used by the Defense Programs.
    Chairman Spratt. Well is the Energy and Water Subcommittee 
using these receipts as mandatory offsetting receipts that free 
up spending on mandatory programs under their jurisdiction?
    Mr. Cawley. Just like all kinds of other offsetting 
receipts or revenues, those receipts offset all federal 
spending.
    Chairman Spratt. All for----
    Mr. Cawley. They are not particularly designated to an 
individual committee or anything like that. No.
    Chairman Spratt. Okay. Mr. Ryan.
    Mr. Ryan. Thank you, Chairman. Kim, let me--let me go down 
this path a little bit farther.
    So we are getting these mandatory receipts coming in. It is 
to the tune of how much each year right now on average?
    Mr. Cawley. Seven fifty.
    Mr. Ryan. Seven fifty. And that creates $750 million of 
room under the 302 ``A'' which can then be allocated how ever 
the Appropriation Committee determines?
    Mr. Cawley. Those receipts aren't credit in the 
appropriations process. They are mandatory receipts.
    Mr. Ryan. No, I realize that. They are mandatory receipts, 
but they are offsetting, right?
    Mr. Cawley. No.
    Mr. Ryan. Okay. Let me ask it a different way. I understand 
your point. What is the delta between what we are--and this is, 
I think, for you Mr. Sproat. What is the delta between what we 
are spending now and what we need to be spending to meet your 
deadline in 2017?
    Mr. Sproat. Yeah, Mr. Ryan, the chart that I showed that 
had the----
    Mr. Ryan. Yeah.
    Mr. Sproat [continuing]. Blue and the orange. That shows 
you our projected annual budget authority requirements to meet 
the 2017 date. And that delta, those cash flow budget authority 
requirements are fluctuating between $1.3 to $1.9 billion a 
year.
    Mr. Ryan. And we are at?
    Mr. Sproat. And right now we are at approximately $450 
million a year.
    Mr. Ryan. Four fifty?
    Mr. Sproat. Yes.
    Mr. Ryan. Okay. And we are bringing in $750 million?
    Mr. Cawley. Correct.
    Mr. Sproat. Seven fifty plus the interest on the fund.
    Mr. Ryan. And the interest on the fund annually is 
approximately?
    Mr. Sproat. Is approximate about $900 million.
    Mr. Ryan. Okay. And if we met those targets the 
discretionary spending would have to go up by that amount from 
the Energy and Water Committee, correct?
    Mr. Cawley. The way things are currently. So I--yeah.
    Mr. Ryan. Right. Okay. Mr. Sproat, what is the projection 
on the life of Yucca on how long can it operate continuing to 
take all of the waste from around the country at the pace that 
we currently project----
    Mr. Sproat. Sure.
    Mr. Ryan [continuing]. It is going to be produced?
    Mr. Sproat. In the Nuclear Waste Policy Act there was an 
administrative limit of 70,000 metric tons of heavy metal 
content spent nuclear fuel and high-level waste that could be 
put in Yucca Mountain.
    The Administration has submitted legislation to the 
Congress to lift that 70,000 metric ton limit and let the 
Nuclear Regulatory Commission decide what the maximum allowable 
technical limit should be. With that 70,000 metric ton limit 
with the existing fleet of nuclear plants, and no new nuclear 
plants being built, the 70,000 metric tons will be fully 
committed by early 2010.
    So in other words, Yucca Mountain will be full under the 
70,000 metric ton administrative limit in another two, two and 
a half years.
    Mr. Ryan. What is the estimate as to the maximum capacity 
of the site? Regardless of the statutory limit, what is the----
    Mr. Sproat. Sure.
    Mr. Ryan [continuing]. What do you project to be the 
maximum capacity?
    Mr. Sproat. In our environmental impact study of the site 
that we did in preparation for the site recommendation as well 
as the supplement to that, which we are about ready to release, 
we have evaluated about 135,000 metric tons.
    Mr. Ryan. Okay. And what is the----
    Mr. Sproat. Which is the full expected inventory to be 
discharged from the existing fleet of nuclear plants.
    Mr. Ryan. Okay. Okay. So Yucca is big enough to handle 
135,000?
    Mr. Sproat. We believe it is at least big enough to handle 
that.
    Mr. Ryan. Okay. And the 135,000----
    Mr. Sproat. Technically.
    Mr. Ryan [continuing]. Is the full output of all the fleet 
of current fleet of plants?
    Mr. Sproat. That is correct.
    Mr. Ryan. And that takes us to what year?
    Mr. Sproat. The last plant--I don't have the exact--I will 
have to get back to you with the exact year. We--that projects 
to the last of those plants would shut down. It is somewhere in 
the 2035, 2040 range. Maybe a little bit earlier than that.
    Mr. Ryan. So the best case scenario, funding occurs, you 
hit your deadlines. Best case scenario is it is filled up by 
20--somewhere in the middle of 2030s?
    Mr. Sproat. Yes.
    Mr. Ryan. And then we have to figure out something else?
    Mr. Sproat. Obviously at that point in time we would know 
whether or not there are additional nuclear plants being built.
    Mr. Ryan. Right.
    Mr. Sproat. Assuming we get a license to build the 
repository, this issue of what the maximum limit will come 
probably in front of the Congress because one of the other 
things the Nuclear Waste Policy Act requires is that the 
Secretary of Energy needs to report to Congress no later than 
January of 2010 on the need for a second repository.
    We are going to provide that report to Congress in 2008. 
Probably in the first half of 2008. And based on just straight 
very easy math, we need a second repository if the 70,000 
metric ton limit isn't changed.
    Mr. Ryan. Okay. Thank you.
    Chairman Spratt. Thank you, Mr. Ryan. Mr. Berry.
    (No response.)
    Chairman Spratt. Mr. Moore.
    (No response.)
    Chairman Spratt. Mr. Porter. I think you have a question or 
two.
    Mr. Porter. Thank you, Mr. Chairman. Of course my 
perspective is that of seeing it first hand and I think maybe, 
Director, if you could take a moment and just describe this 
hole. What it is.
    Mr. Sproat. I think your previous description of a tunnel 
is very accurate. The Yucca Mountain site is located on the 
nuclear test site in South Western Nevada on federal land. It 
is adjacent to the Nellis test range in Southwestern Nevada, 
about 100 miles outside of Las Vegas.
    It is a ridge of mountain ranges out there. And the actual 
repository would be located off a tunnel that goes through a 
mountain ridge and the nuclear waste would be placed about 
1,000 feet below the surface in that mountain ridge.
    Mr. Porter. And you said that with a straight face. I 
appreciate that, because it--we had a chance to tour it 
together and I appreciated your time.
    But, Mr. Chairman, this has to be the largest earmark in 
the history of our country. A $50 billion earmark that has an 
insatiable appetite while Congress turns a blind eye to it is 
an incredible waste of money.
    But what I would like to know is, again Director, I 
appreciate working with you through the years. Can you explain 
for this body how literally we had to change the whole science 
in the last year because of finding faults in the documents?
    Mr. Sproat. I would say, Congressman, that is probably not 
an accurate characterization. We didn't find--I am assuming you 
are referring to this Bow Ridge fault question that has come up 
recently?
    Mr. Porter. Actually it is about the science that we--we 
had the emails where scientists were changing the information. 
So you have spent $27 million changing the----
    Mr. Sproat. Yes.
    Mr. Porter [continuing]. Information because it wasn't 
accurate.
    Mr. Sproat. And that particular issue has to do with models 
that were developed by the U.S. Geological Society, USGS on how 
much water would infiltrate into the repository from rainfall. 
And so the key issue was from emails, there were emails 
discovered by the Department of Energy, which we made public, 
that indicated that at least there was a perception that some 
of the scientist were working and developing these mathematical 
models on water infiltration were ``fudging the data.''
    So there was----
    Mr. Porter. Excuse me. But you then re-did the science.
    Mr. Sproat. We basically did an investigation. There was 
both a criminal and a civil investigation. We had independent 
reviews of the work they did and as an added level of 
confidence we basically developed a whole separate independent 
infiltration model by Sandia National Labs. And that 
independent model is the one we are going to use.
    But the Congressman is correct. We spent a lot of money 
investigating this issue and redoing some of the work to make 
sure we got it right.
    Mr. Porter. Thank you. Thank you, Mr. Chairman.
    Chairman Spratt. Mr. Simpson.
    Mr. Simpson. Thank you. I thank you all for being here 
today. I appreciate the work you are doing. I know it is a 
tough job and a thankless job. I think most of us understand 
you have been trying to get it. But I appreciate the job you 
are doing down there. It is very difficult. But first let me 
ask Mr. Hertz a couple of questions.
    You mentioned these funds that are being paid--these court 
cases that there is a claim for like $91 million and another 
one case coming up for $56 million or something like that. Is 
that for the cost that the utility has incurred in storing the 
spent nuclear fuel that should of been accepted by the 
government or are there other liability cost that are included 
in there? Are there pain and suffering costs?
    Mr. Hertz. No, no. Well, you know, that is the claim. And 
the legal basis for the claim is the expenditures they made 
that wouldn't otherwise have to make. And we will be litigating 
whether all those expenditures were the result of the breach 
whether some of those expenditures would of been necessary 
regardless whether there had been no breach. But the legal 
theory is it is not pain and suffering or anything like. It is 
really and it should be you know the cost that they incurred.
    Mr. Simpson. Actual cost?
    Mr. Hertz. Yeah.
    Mr. Simpson. This has been being paid out of the Judgement 
Fund for some time, but it is an anticipated cost. We know that 
it is out there. Should this be continued to be part of the 
Judgement Fund or should DOE start budgeting for it in their 
annual budget?
    Mr. Hertz. Well the Judgement Fund is available when there 
is no other available fund to pay--and it is the only time the 
Judgement Fund is available
    Mr. Simpson. Right.
    Mr. Hertz [continuing]. When there is no other available 
fund. So the only available fund that we were aware of was the 
Nuclear Waste Fund and the Court said that is not available. I 
think at this point what you are looking at is if you wanted to 
change that, that would require new legislation to make either 
the Nuclear Waste Fund available or some other fund available 
to pay these judgements.
    Mr. Simpson. Mr. Sproat, you mentioned this 70,000 metric 
tons available. You said that that was an administrative limit. 
Is it a statutory limit, administrative, or?
    Mr. Sproat. Thank you for that clarification. It is a 
statutory limit that is contained in the Nuclear Waste Policy 
Act.
    Mr. Simpson. And so that it would take the legislation that 
you have submitted to Congress in order to change that 
statutory limit?
    Mr. Sproat. Yes, sir.
    Mr. Simpson. Is--obviously, I shouldn't say obviously, I 
guess. The Nuclear Waste Fund is not being used to build the 
repository in the way it was anticipated, I wouldn't suspect?
    Mr. Sproat. It is not being used at all right now at this 
stage of the game, other than on an annual basis its interest 
component is offsetting general government deficits.
    Mr. Simpson. We have a lot of trust funds that do that. 
Whether it is the Aviation Trust Fund, the Harbor Trust Fund, 
Inland Waterways Trust Fund, the Highway Trust Fund. Anytime 
they build a surplus it is used to offset the size of the 
deficit. We have taken some action as an example in the 
transportation area to spend down that trust fund. If the 
taxpayers are paying that money for a specific purpose and the 
roads are getting bad, we assume that it was a good idea to 
spend the money on building the roads. Isn't the same thing 
true here that the rate payers that have paid this kilowatt tax 
assume this is being used to build the repository to take care 
of the spent nuclear fuel?
    Mr. Sproat. Yes, sir, they do assume that. I am both a 
nuclear rate payer in Pennsylvania and I am a taxpayer. So I am 
paying for both the judgements and into the Nuclear Waste Fund. 
And it is a very frustrating experience. And I know I am not 
alone in that.
    Mr. Simpson. It is frustrating to me that I don't know why 
it would take a legislative change to or fix to change that so 
that the Appropriations Committee could be using the trust fund 
to pay the cost of building the repository.
    Mr. Sproat. I would----
    Mr. Simpson. I guess I haven't got it clear in my mind what 
we have got to do yet.
    Mr. Sproat. I would defer to Mr. Cawley to answer that.
    Mr. Cawley. I guess the current budgetary treatment we have 
is the budgetary treatment that the Congress wanted to have in 
2000--or excuse me--in 1982.
    And you mentioned the Highway Trust Fund and the Aviation 
Fund and a few other funds like that where revenues in one form 
or another or fees in one form or another are brought into the 
government. And Congress makes annual decisions about how much 
of that money will be appropriated.
    This is a similar situation where Congress is making annual 
decisions about how much of this money should be appropriated.
    Mr. Simpson. It wouldn't take any changes to the Budget Act 
or anything like that to change how we spend that trust fund?
    Mr. Cawley. We are spending the trust fund now. It is spent 
through annual decisions made by the Appropriations Committee. 
What isn't happening is that the monies being collected are 
considered a mandatory receipt and they do not accrue to any 
credit to the Appropriations Committee. You know, nor do the 
revenues for example from the Highway gasoline tax accrue to 
the Appropriations Committee.
    Mr. Simpson. So this is all paper?
    Mr. Cawley. I don't know what you mean.
    Mr. Simpson. It is all paper stuff. It is figures on a 
piece of paper is what it is.
    Mr. Cawley. Well I think the issue----
    Mr. Simpson. To make one thing look bigger than, you know, 
to make the deficit look smaller than it is or something else. 
And----
    Mr. Cawley. All of the revenues being collected from 
nuclear rate payers are offsetting the deficit. They are not at 
this moment offsetting the spending decisions made by the 
Appropriations Committee individually but they are offsetting 
all spending.
    Mr. Simpson. Mr. Sproat, we mentioned that you had--that I 
think the House Appropriations Committee appropriated the full 
amount that you had requested----
    Mr. Sproat. That is correct.
    Mr. Simpson [continuing]. $495 million.
    Mr. Sproat. For fiscal year 2008. That is correct, sir.
    Mr. Simpson. Yeah. And we had the discussion here that we 
are going to be spending one and a half to two billion dollars 
is going to be necessary in the future. I assume this testimony 
is going to be cleared with OMB?
    Mr. Sproat. Yes, sir.
    Mr. Simpson. And we are anticipating those costs in the 
future. But we are fully funding what you have requested in the 
current year?
    Mr. Sproat. In the current year--well assuming we will see 
how the continuing resolution goes, but as of right now the 
answer to that is yes. We will have to see what happens in 
conference between the House and the Senate what number comes 
out of that.
    Mr. Simpson. As soon as Yucca Mountain is open, the 
liabilities don't drop to zero.
    Mr. Sproat. No, that is correct. And----
    Mr. Simpson. Because it takes a while to move waste there 
and----
    Mr. Sproat. Yes, sir. That is exactly the point I wanted to 
show--I intended to show with the very first slide that I put 
up which showed the yellow line and the crossover between the 
green and red lines. That indicates the year that we will catch 
up and that liabilities will continue to accumulate even after 
Yucca is open until we hit that catch up point.
    Mr. Simpson. I am--I have heard the numbers tossed around 
on the actual liability of what we pay annually in these costs. 
That we spend about a billion dollars a year in costs because 
we haven't opened Yucca Mountain yet.
    Is that--they say it is about $500 million in liability 
cost but there is another $500 million a year cost for the 
government nuclear materials that should of gone to Yucca 
Mountain. Is that anywhere near an accurate number? Am I just 
throwing things out there?
    Mr. Sproat. Well I think in terms of the civilian component 
from the civilian nuclear plants, our working assumption and 
based on those graphs I showed you that on average, and it does 
vary from year to year and it varies by time period. But on 
average we are expecting that the liability to the commercial 
sector is about a half a billion dollars per year of delay on 
average.
    But in addition to that there is the defense liability. And 
when I say, obviously, we don't--the government doesn't owe 
liability payments to itself. But 20 percent of the repository 
is earmarked, plus or minus, for defense waste both Naval 
nuclear spent fuel, defense waste that is currently at Hanford 
from the Legacy Defense programs. All of that is going to Yucca 
and it can't be moved until the repository opens.
    So obviously there are added costs to the government to 
keep the existing government storage facilities open at about a 
half a billion dollars a year is probably not a bad number and 
maybe is even a little low.
    Mr. Simpson. Okay. When we talk about the 70,000 metric 
tons, you said 20 percent of it give or take is set aside for 
defense nuclear waste?
    Mr. Sproat. That is correct.
    Mr. Simpson. So it is not just a matter of when we reach a 
total of 70,000 metric tons across the country. As I understand 
it there is not a path forward for some of the defense nuclear 
waste that currently exist?
    Mr. Sproat. That is correct.
    Mr. Simpson. Tough job. But it----
    Mr. Sproat. Somebody has got to do it.
    Mr. Simpson. Somebody has got to do it and ultimately other 
countries are facing this same problem. France, as you know, is 
trying to find a deep repository for their waste. So is 
Scandinavia and some other places. And hopefully I know that 
Mr. Porter has a different opinion on that. And I understand 
that. But hopefully we will keep on schedule.
    What is your thoughts of actually being able to meet the 
2000--you know that is your best estimate of 2017. What is your 
realistic estimate?
    Mr. Sproat. Well I have been asked that question before in 
hearings and my answer is that best achievable is not 
necessarily the most probable. And on the critical path to 
achieving that date is the getting the license application to 
the Nuclear Regulatory Commission. We will get that license 
application in or before the date I set last year of June 30, 
2008.
    Once it is in to the NRC, the Nuclear Waste Policy Act 
gives the NRC three years to do their review and make their 
decision with a fourth year if they come back to Congress and 
say they need a fourth year.
    Our 2017 date assumes that three year period. Personally, 
they are going to need at least the fourth year, because this 
is a first of a kind regulation; a first of the kind facility 
anywhere in the world. So it is going to take a while.
    In addition, there is clearly going to be litigation 
associated with this. And how long that litigation takes, 
whether or not there are stays placed on the construction 
authorization, if we get it, who knows.
    So I would say more likely that licensing period from the 
time we submit to the time we actually get authorization to 
build, assuming we do, it is probably more around seven years--
six to seven years as opposed to three years.
    All that said though, if we don't address this issue of 
funding and this delta between the existing $450 million a year 
versus $1.9 billion a year to execute that critical path cash 
flow, it will never ever get built.
    Mr. Simpson. Right.
    Chairman Spratt. Will the gentleman yield?
    Mr. Simpson. Certainly.
    Chairman Spratt. What is the limitation, when do you hit 
the limit of what can be stored on site?
    Mr. Sproat. The 70,000 metric tons?
    Chairman Spratt. Right.
    Mr. Sproat. That the repository----
    Chairman Spratt. No, not at Yucca Mountain but at 
individual nuclear reactor sites around the country.
    Mr. Sproat. That varies. I used to be a vice president at 
Peco Nuclear and at Excelon and have some experience in this.
    Each of the nuclear power plants has a wet spent fuel 
storage pool adjacent to the reactor. And they were designed 
when the plant was built for varying lengths of time. But just 
about all of those--just about all plants now have those pools 
either filled or very close to capacity. And as a result a 
number of plants have already started taking fuel out of the 
pool, putting them in casks and putting them outside on pads in 
interim spent fuel storage facilities. Storing them dry in 
those casks.
    Most plants have a lot space on their sites and could 
probably continue to store that fuel on interim basis on their 
sites. So it really does vary from plant to plant.
    Mr. Simpson. Safety wise, we would be better off having a 
nuclear repository in Yucca Mountain or 121 sites with nuclear 
waste stored on site?
    Mr. Sproat. Well, having been personally involved in 
licensing the spent fuel and the spent fuel storage facility at 
our at the Peach Bottom Plant that Excelon owns, it is a very 
safe means of storage. However, we currently have between the 
civilian sites and the government sites 121 different sites 
around the country with either spent nuclear fuel or high level 
radioactive waste in 39 different States.
    It would seem to me the prudent thing to do is put it all 
in one place.
    Mr. Simpson. Have we thought about has DOE looked at 
interim storage? The possibility of interim storage taking 
ownership of this spent nuclear fuel around the country 
building an interim storage facility and----
    Mr. Sproat. Yes, sir, we have to an extent. Let me explain. 
That solution has been offered by a number of people of a way 
of minimizing the continued growth of liability, regardless of 
what happens with Yucca Mountain. Why doesn't the Department 
take title and take possession of the spent nuclear fuel and 
either manage it where it is at the reactor sites or condense 
it and put it into centralized locations at either one or 
several government sites.
    That idea would require legislation. The Department is 
prohibited by the Nuclear Waste Policy Act of doing any interim 
storage until Yucca Mountain gets a construction authorization 
from the Nuclear Regulatory Commission.
    So, number one, that would require legislation. Assuming we 
would get that legislation, the second question is so we had 
that authority now we have to start spending money on finding a 
site or sites, doing the environmental impact studies, doing 
the engineering, getting a license for that facility, and 
buying the transportation casks. The question comes, so are we 
really saving time and money by taking that approach?
    In my judgement the answer is no.
    Mr. Simpson. One final question, if I could ask it? When a 
license is applied for today for a new nuclear facility, they 
have to have a path to disposal of their nuclear waste, don't 
they?
    Mr. Sproat. They will have to show the Nuclear Regulatory 
Commission that they have a contract with the Federal 
Government so that the Federal Government is committed to 
eventually taking their spent nuclear fuel.
    Mr. Simpson. How is that going to happen if Yucca Mountain 
is not open? We don't know if it is going to open. What is the 
path they are going to show?
    Mr. Sproat. They would need to have a contract or an 
amendment to the existing standard contract signed between the 
Federal Government and the potential licensee indicating under 
what terms the Federal Government would accept their spent 
nuclear fuel.
    And we are currently in the process of drafting such an 
amendment to the standard contract.
    Mr. Simpson. Before the Federal Government is going to sign 
any contract like that, they are going to have to have some 
assurance that they are going to have a place to put it.
    Mr. Sproat. That is correct.
    Mr. Simpson. Thank you.
    Chairman Spratt. Mr. Porter, you have some parting shots? 
[Laughter.]
    Mr. Porter. Thank you, Mr. Chairman. Just to highlight, 
1982 Michael Jackson's song ``Thriller'' was popular when we 
started this project. And I think that was very appropriate. It 
has been a thriller of ride seeing, like I said, the largest 
earmark in the history of the country. If I had asked for this 
earmark, can you imagine what this Congress would say? So 
again, thank you for this opportunity.
    I have had numerous opportunities with our panel and I 
appreciate your being here and thank you very, very much.
    Mr. Sproat. You are welcome.
    Chairman Spratt. Thank you very much. Mr. Sproat, Mr. 
Hertz, Mr. Cawley, thank you very much. You have enriched our 
understanding of this, not that we have ready solutions, but we 
certainly understand it better. We have gained some insight and 
we will take under advisement.
    Thank you very much for you participation today.
    Mr. Sproat. Thank you, Mr. Chairman.
    Mr. Hertz. Thank you.
    [Responses to Mr. Barrett's questions from Mr. Sproat 
follow:]

  Responses to Mr. Barrett's Questions for the Record From Mr. Sproat

    Q1a. The goal laid out in the Nuclear Waste Policy Act was to begin 
loading commercial waste into the Yucca Mountain repository in 1998, 
but due to several circumstances, DOE now does not expect to open the 
facility until 2017 at the earliest. This delay has led to substantial 
costs for the federal government because it has failed to live up to 
its contractual obligations to move this waste from commercial sites. 
What do you estimate the cost incurred by the federal government will 
be for each year that the opening of Yucca Mountain is delayed past the 
2017 date due to liability costs for waste remaining at commercial 
sites?

    A1a. The Department notes a mistake in one of the premises of this 
question. Although the question indicates that the ``goal laid out in 
the Nuclear Waste Policy Act was to begin loading commercial waste into 
the Yucca Mountain repository in 1998,'' the United States Court of 
Appeals for the District of Columbia Circuit in Indiana Michigan Power 
Co. v. United States Department of Energy, 88 F.3d 1272 (D.C. Cir. 
1996), has held that the 1998 acceptance date was not tied to the 
repository and that, although the Department was obligated to begin 
accepting commercial waste at some facility by 1998, the Nuclear Waste 
Policy Act did not obligate it to have a repository in place by that 
date. Nevertheless, the Department acknowledges that it has not yet 
been able to open any facility for commercial waste acceptance, and the 
Department is currently focusing all of its efforts on the development 
of a repository, rather than some alternative storage facility.
    The Department estimates that U.S. taxpayers' potential liability 
to contract holders who have paid into the Nuclear Waste Fund will be 
approximately $7.0 billion if the Department begins to accept spent 
nuclear fuel in 2017. If, as a result of expected delays due to 
limitations on funding and other factors, the opening date for the 
repository is 2020, the estimated potential liability will increase to 
approximately $11 billion. Although the increase in estimated potential 
liability is not a linear function, as a general matter, the average 
potential increase is approximately $500 million for each year the 
opening of the repository is delayed. There will also be added costs 
associated with keeping defense waste sites open longer than originally 
anticipated. The Department has not yet estimated those costs. It can 
be seen, however, that each year of delay in opening the repository has 
significant taxpayer cost implications.

    Q1b. What can Congress do to ensure the plans at Yucca Mountain 
continue on schedule?

    A1b. The Congress can pass the Administration's proposed 
legislation or similar legislation to provide funding reform for the 
Yucca Mountain Program in a budget-neutral manner. Funding reform can 
facilitate the Department's access to the Nuclear Waste Fund as 
intended in the Nuclear Waste Policy Act.
    The Administration's proposed legislation will allow the Department 
to receive appropriations from the Nuclear Waste Fund equal to its 
annual receipts from utilities. Funding for the Program would still 
have to be requested by the President and appropriated by the Congress 
from the Nuclear Waste Fund.

    Q2. Furthermore, I understand there [sic] some issues with DOE 
being able to access monies within the Nuclear Waste Fund for 
construction of Yucca Mountain. I know a few legislative fixes have 
been suggested by both the Administration and Members of Congress. Are 
there any additional approaches available to resolve the funding issues 
for Yucca Mountain?

    A2. The Administration is committed to work with Congress to 
resolve the funding issue. The Administration has proposed legislation 
to fix the funding issue by reclassifying mandatory Nuclear Waste Fund 
fees as discretionary in an amount equal to appropriations from the 
Fund for authorized waste disposal activities. Alternative approaches 
to resolve the funding issue have been reviewed in the past. Some of 
these approaches, such as the use of a revolving fund, are set forth 
and discussed in Alternative Means of Financing and Managing the 
Civilian Radioactive Waste Management Program (http://
www.ocrwm.doe.gov/about/pm/pdf/amfm--report.pdf), a report issued by 
the Department in 2001.

    [Responses to Mr. Barrett's questions from Mr. Cawley 
follow:]

                                                 December 19, 2007.
Hon. J. Gresham Barrett,
Committee on the Budget, U.S. House of Representatives, Washington, DC.
    Dear Congressman: This letter responds to your questions concerning 
the Congressional Budget Office's testimony before the House Budget 
Committee on October 4, 2007, regarding the Nuclear Waste Disposal 
Program.
    1. What is your estimate of the federal liabilities that would be 
incurred each year if the Yucca Mountain nuclear waste disposal 
facility is unable to accept waste in 2017 and the Department of Energy 
(DOE) must continue to reimburse utilities for the costs of onsite 
storage of waste?
    CBO has no independent estimates of the federal government's 
liabilities to electric utilities resulting from DOE's partial breach 
of contractual obligations to accept nuclear waste from civilian 
facilities. DOE currently estimates that if the agency begins to accept 
such waste in 2017, taxpayers' liabilities will total roughly $7 
billion (in 2007 dollars). DOE further estimates that for each 
additional year that schedule is delayed, liabilities will increase by 
at least $500 million, reaching $11 billion by 2020 if the agency 
begins to accept waste that year.
    2. Are there any additional approaches available to resolve the 
funding issues for Yucca Mountain--particularly related to DOE's access 
to funds within the Nuclear Waste Fund?
    One alternative to providing the department with annual 
appropriations from the Nuclear Waste Fund would be to change the law 
and give the department access to the trust fund balances without 
further appropriation action. Providing such authority would result in 
new direct spending, however.
    The Nuclear Waste Fund is credited with waste disposal fees paid by 
electric utilities as well as interest on the unspent balances of those 
fees. At the end of 2007, the fund had a balance of just over $20 
billion. Under the Nuclear Waste Policy Act, amounts credited to the 
fund are available, subject to appropriation, to DOE for the 
construction and operation of the Yucca Mountain facility and other 
activities related to managing nuclear waste. In 2007, the Congress 
appropriated $99 million from the fund to DOE; deposits from fees paid 
by utilities totaled about $750 million.
    3. Do you believe the Global Nuclear Energy Partnership (GNEP) can 
help reduce the liability costs incurred by the government by lessening 
the volume of waste being temporarily stored at commercial nuclear 
sites across the country?
    Dr. Orszag recently testified on the potential for the reprocessing 
of spent nuclear fuel (a component of GNEP) to reduce the estimated 
cost of the nuclear waste disposal program (see enclosed testimony 
presented to the Senate Committee on Energy and Natural Resources on 
November 14, 2007). Although GNEP could reduce the volume of waste by 
reprocessing it, CBO found that the total cost of managing the fuel 
cycle would be more with reprocessing than it would be under the 
alternative where spent fuel is stored temporarily and then placed in a 
long-term repository.
    I hope this information is helpful to you. If you have additional 
questions, please contact the CBO staff.
            Sincerely,
                                           Kim Paul Cawley,
         Chief, Natural and Physical Resources Cost Estimates Unit.

    [Whereupon, at 11:12 a.m., the Committee was adjourned.]

                                  
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