[Senate Hearing 111-21]
[From the U.S. Government Publishing Office]





                                                         S. Hrg. 111-21

                       NUCLEAR ENERGY DEVELOPMENT

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                                   TO

            RECEIVE TESTIMONY ON NUCLEAR ENERGY DEVELOPMENT

                               __________

                             MARCH 18, 2009


                       Printed for the use of the
               Committee on Energy and Natural Resources












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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

BYRON L. DORGAN, North Dakota        LISA MURKOWSKI, Alaska
RON WYDEN, Oregon                    RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota            JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana          SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington           JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey          JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas         ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
EVAN BAYH, Indiana                   JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan            BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
               McKie Campbell, Republican Staff Director
               Karen K. Billups, Republican Chief Counsel













                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Bingaman, Hon. Jeff, U.S. Senator From New Mexico................     1
Blackwell, Deborah Deal, Vice President, Licensing & Public 
  Policy Hyperion Power Generation, Inc..........................    48
Cochran, Thomas B., Ph.D., Senior Scientist, Nuclear Program, and 
  Christopher E. Paine, Director, Nuclear Program, Natural 
  Resources Defense Council, Inc.................................    31
Fertel, Marvin S., President and Chief Executive Officer, Nuclear 
  Energy Institute...............................................    19
Klein, Dale E., Chairman, Nuclear Regulatory Commission..........     3
Murkowski, Hon. Lisa, U.S. Senator From Alaska...................     2

                                APPENDIX

Responses to additional questions................................    53

 
                       NUCLEAR ENERGY DEVELOPMENT

                              ----------                              


                       WEDNESDAY, MARCH 18, 2009

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:38 a.m. in room 
SD-366, Dirksen Senate Office Building, Hon. Jeff Bingaman, 
chairman, presiding.

OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW 
                             MEXICO

    The Chairman. OK, why don't we go ahead with the hearing?
    Our meeting this morning has two purposes, both to consider 
the nomination of David Hayes to be the Deputy Secretary of 
Interior and also to hear testimony on nuclear energy 
development.
    To report the nomination or take any action on it, a quorum 
of 12 members must be present. In the absence of a reporting 
quorum, I would propose that we go ahead with the hearing at 
this time, and once a reporting quorum is present, then we 
could briefly recess the hearing and consider Mr. Hayes's 
nomination and then return to the hearing once that has been 
completed.
    Nuclear power is an essential part of our energy mix. The 
104 nuclear power plants now operating in this country supply 
20 percent of our electricity. They do so reliably, cost 
effectively, and without emitting greenhouse gases.
    Nuclear power is an essential part of our energy mix and 
must remain so for the foreseeable future. The current 
generation of nuclear power plants was mostly built in the 
1960s and 1970s and 1980s. For nearly 30 years, utilities did 
not order a single new nuclear power plant. But in the last 2 
years, 17 companies or groups of companies have ordered 26 new 
reactors.
    Our focus this morning will be twofold. First, we have 
invited Dr. Dale Klein, who is the chairman of the Nuclear 
Regulatory Commission, to give us an overview of the licensing 
process that the commission uses to license new nuclear power 
plants and review for us the status of new reactor 
applications.
    The original licensing process was often blamed for the 
construction delays and cost overruns that were experienced in 
the past. But the commission and the Congress replaced that 
process with a new, streamlined, one-step process that is now 
in place but has not yet--but has yet to be fully demonstrated.
    So we look forward to hearing from Dr. Klein on this 
licensing system and on the status of applications.
    Our second panel will focus on the financial challenges and 
other obstacles facing new nuclear power plant development. The 
high capital cost of building a new nuclear power plant is a 
serious obstacle to developing these plants. We have previously 
tried to address the financial challenge through loan 
guarantees, delay and accident insurance, and production tax 
credits, and we will ask the second panel for its perspective 
on these financial challenges and on any other problems facing 
the industry at this time.
    What to do with the spent fuel from nuclear power plants 
is, of course, one of the biggest unsolved problems facing the 
nuclear industry. Nuclear waste is not the subject of today's 
hearing. I hope we can schedule a separate hearing on nuclear 
waste in the weeks ahead.
    Nonetheless, I recognize the keen interest Senators have in 
the problem and in the Administration's decision to stop work 
at the Yucca Mountain repository. I expect we will have 
questions for the panel on the waste problem as well as part of 
this hearing.
    So, with that, let me defer to Senator Murkowski.

        STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 
                          FROM ALASKA

    Senator Murkowski. Thank you, Mr. Chairman.
    I appreciate the hearing on the development of nuclear 
energy here in the United States. We have seen a resurgence of 
the nuclear power industry with 26 license applications from 17 
entities pending for new reactors. But even with the benefits 
of nuclear energy, which are no emissions, stable baseload, and 
large-scale job creation, there has been conflicting evidence 
from the new Administration on what role they will play to 
support this revival.
    If nuclear power has a place in our overall energy policy 
to meet future energy needs and reduce greenhouse gas 
emissions, and I firmly believe that it does, then we in 
Washington need to be doing all that we can to move it forward 
now. While there has been some mention about nuclear energy 
being part of the overall energy strategy, the actions of the 
Administration do not necessarily support that claim.
    So far, this Administration has sought to kill Yucca 
Mountain as a long-term repository for spent nuclear fuel 
without yet providing an alternative. They have shown an 
unwillingness to increase the loan guarantee program funding 
levels to support the construction of new nuclear plants, and 
they have focused on renewable and alternative fuel 
developments to reduce our carbon emissions literally without 
any mention of nuclear energy.
    So where the nuclear energy as an initiative truly stands 
with the current Administration is a bit of a mystery to me.
    The U.S. may have the largest number of nuclear power 
plants in the world, but no new reactors have been ordered in 
the United States since 1978. Since that time, over 250 new 
reactors were constructed outside the United States, compared 
to just over 50 domestically.
    China alone has 24 new nuclear reactors under construction, 
which will be online between 2010 and 2015. Japan intends to 
increase the amount of electricity it gets from nuclear from 
today's 30 percent to over 40 percent by the year 2020. France 
already gets 78 percent of its electricity from nuclear. It is 
safe to say that nuclear has achieved a significant level of 
international acceptance.
    Unfortunately, as other countries have moved forward, the 
United States has been stagnant in perhaps more ways than one. 
Not only did we effectively stop building new reactors 20 years 
ago, but we have allowed our nuclear work force and our 
manufacturing infrastructure to disappear. It will take hard 
work and investment as well as stable regulation and Government 
policies to reestablish our domestic nuclear industry and 
expand our Nation's primary source of carbon-free energy.
    We have just begun to see the rebirth of the nuclear energy 
industry in this country, and I credit a great deal of that to 
the leadership of Senator Domenici, who sat next to you for so 
many years here, Mr. Chairman.
    I look forward to working with my colleagues on this 
committee as well as those within the Administration to 
continue the development and look forward to the comments from 
the witnesses.
    The Chairman. Let me ask Chairman Klein--Dale Klein, who is 
chairman of the Nuclear Regulatory Commission, to go ahead and 
take the chair here. Our first panel is made up of the 
Honorable Dale Klein. He is the chairman of the Nuclear 
Regulatory Commission, and we look forward to hearing from you 
as to your view on this set of issues.
    Please go right ahead.

   STATEMENT OF DALE E. KLEIN, CHAIRMAN, NUCLEAR REGULATORY 
                           COMMISSION

    Mr. Klein. Thank you, Mr. Chairman, Senator Murkowski, and 
members of the committee.
    I am pleased to appear before you today to talk about the 
Nuclear Regulatory Commission's new reactor licensing process. 
My written testimony provides considerable detail on this 
subject. So let me take this time to highlight the main points.
    First, an update of the current status of new reactor 
applications; the second, how the agency has improved and 
streamlined the licensing process for proposed new reactor 
applications with no compromise of safety; and third, our 
extensive preparations to develop the staff and resources 
necessary to provide timely reviews of the applications.
    As you indicated with regard to the current applications, 
the NRC has received 17 applications or combined operating 
license applications for a total of 26 new reactors. A map 
depicting the locations and types of proposed reactors is 
included in my written statement. Based on industry information 
submitted to the NRC, we could see up to five more COL 
applications for seven more reactors by the end of 2010.
    Unlike the current combined license process, the commercial 
nuclear power plants currently operating in the United States 
were licensed under a two-step process--first for construction 
and a second step for operation. This led to a ``design as you 
go'' approach, which deferred resolution of important safety 
issues until plant construction was well underway, and it 
allowed commercial reactors to be built with an unusual degree 
of variability and diversity.
    The Agency's new process approves a plant design before 
construction begins while maintaining significant public 
participation throughout the licensing application process. It 
also provides two other significant procedures--first, review 
and approval of standardized designs through a design 
certification rulemaking and, second, review and approval of a 
site suitability prior to a decision to build a particular 
plant through an early site permit. The applicant may also 
request a limited work authorization, which allows applicants 
to perform limited work activities to prepare the site.
    I should mention that not all the applicants are taking 
full advantage of this new, improved licensing process. In 
addition, some applications received to date initially lacked 
information that the staff needs to complete this review. But 
the NRC is working with the stakeholders to overcome these 
challenges, and we are confident that the agency will be well 
prepared to make timely regulatory decisions.
    To prepare for the increased licensing activity we are 
experiencing at the NRC, we made plans several years ago for 
the staffing. Most significantly, the Commission created the 
Office of New Reactors, or NRO, to lead the agency's effort to 
establish the regulatory and organizational foundation 
necessary to address the new reactor licensing demand. Staffing 
the new office was given high priority, and today, we have over 
475 highly competent and trained employees.
    We also created a new reactor construction inspection 
organization in Region II in our Atlanta, Georgia, location.
    Mr. Chairman, my written testimony addresses other 
important subjects, such as our cooperative efforts with 
regulators abroad on construction and vendor inspection, but I 
think I have mentioned the highlights.
    This concludes my overview of the NRC's licensing process 
for the new reactor applications and the current status of the 
license applications, and I will be pleased to answer questions 
you may have.
    [The prepared statement of Mr. Klein follows:]

        Prepared Statement of Dale E. Klein, Chairman, Nuclear 
                         Regulatory Commission
    Mr. Chairman, Senator Murkowski, and Members of the Committee, I am 
pleased to appear before you today to discuss the Nuclear Regulatory 
Commission's new reactor licensing processes.
    Let me begin by noting that just last week the NRC hosted our 
annual Regulatory Information Conference, which was attended by nearly 
three thousand individuals, including regulators, members of industry, 
stakeholders, and representatives from 31 other nations. Our annual 
conference is part of the NRC's ongoing efforts to share information, 
best practices and lessons learned to enhance nuclear safety and 
security both domestically and abroad.
    Mr. Chairman, my testimony will explain the current licensing 
process for new reactor applications; contrast this with the agency's 
older, less efficient, two-step process; and discuss the current status 
of new reactor applications.
    Congress has provided the NRC with the resources needed to meet the 
growing renewed interest in additional commercial nuclear power in the 
United States. These resources have enabled the NRC to successfully 
complete, on schedule, significant new reactor licensing activities. 
Over a number of years, NRC has taken steps to improve the licensing 
process. These actions have served to increase the effectiveness, 
efficiency and predictability of licensing a new reactor while 
maintaining our focus on safety and security. All currently operating 
commercial nuclear power plants in the United States were licensed 
under a two-step process for approval of construction and later for 
operation. But, all of the new reactor license applications have been 
submitted under a new combined license application approach (also known 
as ``COL''), which essentially takes the previous two-step review 
process down to one step. To date, the NRC has received 17 COL 
applications for 26 new nuclear reactors. A map depicting the locations 
and types of proposed reactors is attached. Based on industry 
information submitted to the NRC, we could see up to five more COL 
applications for seven more reactors by the end of 2010.
    In the simplest terms, under the original two-step licensing 
approach the NRC would first issue a construction permit, based on 
evaluation of preliminary safety and design information, to allow 
construction of a nuclear power plant, and then later issue an 
operating license upon completion of construction. The applicant was 
not required to submit a complete design at the construction permit 
phase. Before the scheduled completion of construction, (typically when 
the plant was 50% completed), the applicant filed an application for an 
operating license. At this point, the applicant had to provide the 
complete design bases and other information related to the safe 
operation of the plant, technical specifications for operation of the 
plant, and description of operational programs.
    Criticism of the two-step process centered on a design-as-you-go 
approach to constructing the plant, which deferred resolution of 
important safety issues until plant construction was well underway. The 
deferral of design details until after construction was authorized 
allowed commercial reactors to be built with an unusual degree of 
variability and diversity--in effect, a set of custom-designed and 
custom-built plants. Other criticisms included regulatory requirements 
that kept changing, and a seemingly inefficient and duplicative review 
and hearing process.
    To address these problems, the process set forth in Part 52 of the 
NRC's regulations allows an applicant to seek a combined license, which 
authorizes construction based on a complete design and provides 
conditional authority to operate the plant, subject to verification 
that the plant has been constructed in accordance with the license, 
design, and the Commission's regulations. Part 52 maintains significant 
public participation throughout the licensing application process. A 
graphic depiction of the licensing process is attached.
    Part 52 provides two other significant procedures: (1) review and 
approval of standardized designs through a Design Certification 
rulemaking, and (2) review and approval of a site's suitability, prior 
to a decision whether to build a particular plant, through an Early 
Site Permit (ESP). The applicant may also request a Limited Work 
Authorization (LWA), which allows applicants to perform limited work 
activities to prepare the site before approval of the COL.
    So far, only one of the five designs currently being referenced in 
COL applications--the Advanced Boiling Water Reactor--has completed the 
certification process and is only referenced in one COL application. It 
should be noted that although the Westinghouse AP1000 is also a 
certified reactor design, the design that was approved in 2006 has two 
revisions under review by the NRC. A final decision on the design 
changes is expected in 2010.
    In addition, the design certification applications and some COL 
applications received to date initially lacked information that the 
staff needs to complete its review. Staff reviews have been further 
complicated because some applicants are revising submission dates and 
submitting modifications to their applications, often with late notice 
to the staff, which is disruptive to the work planning process. The 
result is that the early COL applications are unlikely to achieve the 
full benefits of the Part 52 process. The NRC is working with 
stakeholders to overcome these challenges and is confident that the 
agency will be prepared to make timely regulatory decisions. As this 
process matures, the Commission will seek the continued support of 
Congress to sustain these efforts.
    I would like to focus my comments briefly on improvements we have 
made to date, and what we expect down the road in new reactor 
licensing.
    The NRC has sought to position itself strategically to be ready to 
respond to the new reactor licensing workload. The Commission created 
the Office of New Reactors, or NRO, to lead the agency effort to 
establish the regulatory and organizational foundation necessary to 
address the new reactor licensing demand. Staffing the new office was 
given high priority, and today NRO has over 475 highly competent and 
qualified employees.
    The NRC has made great strides in addressing the new reactor 
licensing challenge:

   The NRC published a revised 10 CFR Part 52 (titled, 
        ``Licenses, Certifications, and Approvals for Nuclear Power 
        Plants'') in August 2007 to clarify the applicability of 
        various requirements and to enhance regulatory effectiveness 
        and efficiency in implementing the licensing and approval 
        processes. The rule also incorporated lessons learned from the 
        reviews of the first design certification and early site permit 
        applications.
   Similarly, the NRC published a final rule on Limited Work 
        Authorizations, or LWAs, which supplements the final rule on 10 
        CFR Part 52. This rule allows certain early construction 
        activities to commence before a construction permit or combined 
        license is issued. The rule specifies the scope of construction 
        activities that may be performed under an LWA, and specifies 
        activities that no longer require NRC approval. Like the Part 
        52 revision, these changes were adopted to enhance the 
        efficiency of the licensing and approval process and to reflect 
        more clearly NRC's authority.
   In March 2007, the NRC completed the first comprehensive 
        update to the NRC's Standard Review Plan (SRP), which provides 
        guidance to the staff on how to perform technical reviews. The 
        update brought the SRP into conformance with the Part 52 
        revision, and extends the applicability of the SRP to the Part 
        52 licensing process.
   The NRC issued a new regulatory guide, RG 1.206 (titled, 
        ``Combined License Applications for Nuclear Power Plants''), 
        which provides guidance to potential applicants on standard 
        format and content of new reactor combined license 
        applications, and also recently issued guidance for applicants 
        on complying with the LWA rule.
   The NRC has implemented a computer-based project management 
        system that significantly enhances the staff's ability to plan 
        and schedule work.
   In 2004, the NRC promulgated substantially revised rules of 
        practice intended to streamline and make the hearing process 
        more effective.
   The NRC promulgated an electronic filing rule that is 
        further increasing the efficiency of the hearing process.
   The NRC created a new reactor construction inspection 
        organization in the Region II Office in Atlanta, Georgia. To 
        prepare for the commencement of construction activities, the 
        staff has observed ongoing new construction activities in 
        China, Finland, France, Japan, Korea, and inspected the 
        refurbishment and startup of the Tennessee Valley Authority 
        (TVA) Browns Ferry Unit 1, which has been idle since 1975, and 
        is currently inspecting the completion of TVA's Watts Bar Unit 
        2, which had been in a suspended state since 1985.
   Finally, the NRC conducted an efficient review of project 
        management using the Six Sigma problem-solving methodology to 
        streamline the design certification rulemaking process.

    With these activities, I believe that the NRC has established a 
strong regulatory foundation for the review of new reactor license 
applications.
    I should also mention that the agency has made a consistent effort 
to improve our coordination with other Federal agencies involved in new 
reactor licensing. For example, consistent with its lead responsibility 
for off-site nuclear emergency planning and response, the Federal 
Emergency Management Agency (FEMA) supports the NRC's COL application 
reviews by providing input to ensure that the off-site emergency plans 
are adequate.
    In addition to COLs, the NRC staff has completed the review of 
three early site permit applications and is proceeding with the review 
of the fourth application. With respect to design certifications, the 
staff is continuing its review of General Electric's Economic 
Simplified Boiling Water Reactor, commonly referred to as the ESBWR; 
Areva Nuclear Power's U.S. Evolutionary Power Reactor, or U.S. EPR; 
Mitsubishi's U.S. Advanced Pressurized Water Reactor, or US-APWR; and 
amendments to Westinghouse's AP1000 design certification.
    The NRC has completed preliminary work for the licensing of the 
Next Generation Nuclear Plant, or NGNP. In August 2008, the NRC and DOE 
delivered a licensing strategy to the Congress, as required by the 
Energy Policy Act of 2005.
    I would like to touch briefly on the GAO's 2007 audit of the NRC's 
readiness to conduct reviews of COL applications. In general, the GAO's 
findings were positive assessments, acknowledging the NRC's extensive 
preparations and the quality of plans. The NRC continues to believe 
that the GAO assessments provide useful insights to the agency's 
management. The GAO identified four recommendations:

   Fully develop and implement criteria for setting priorities 
        to allocate resources across applications by January 2008.
   Provide the resources for implementing reviewer and 
        management tools needed to ensure that the most important tools 
        will be available as soon as is practicable, but no later than 
        March 2008.
   Clarify the responsibilities of Office of New Reactor's 
        Resource Management Board in facilitating the coordination and 
        communication of resource allocation decisions.
   Enhance the process for requesting additional information by 
        (1) providing more specific guidance to staff on the 
        development and resolution of requests for additional 
        information within and across design centers and (2) explaining 
        forthcoming workflow and electronic process revisions to 
        combined license applicants in a timely manner.

    I am pleased to report to you that the NRC has completed its work 
in response to these recommendations.
    The NRC is also working with its international partners on many 
areas of common interest. One program that we have initiated is the 
Multi National Design Evaluation Program (MDEP) in order to take 
advantage of international experience in licensing and constructing two 
EPR plants in Europe to assist the NRC in its review of the US EPR 
application. The NRC also has recently established interactions with 
regulatory counterparts in China, Canada and the United Kingdom to 
exchange information on the licensing review of proposed AP1000 
reactors in the United States.
    In addition to focusing on completing licensing reviews, the NRC is 
working on the development and implementation of a new Construction and 
Vendor Inspection Program. The program is building upon prior 
experience, including lessons learned during the construction of the 
104 currently operating reactors. Numerous historical lessons provide 
insights related to quality and oversight problems during the previous 
period of construction in the United States, and abroad. The most 
important of these lessons is that a commitment to quality, instilled 
early in a nuclear construction project, is vital to ensuring that the 
facility is constructed and will operate in conformance with its 
license and the regulations.
    The NRC staff is working with the industry to ensure that a strong 
commitment to quality is part of the foundation of every new reactor 
project in the United States. Many of the components that will be used 
in the construction of possible new reactors in the U.S. will be 
manufactured abroad, so NRC inspectors are also visiting manufacturing 
facilities and working with our regulatory counterparts in other 
countries to ensure the quality of the manufactured components. Quality 
assurance (QA) inspections of engineering and site activities are 
contributing to the conduct of effective and efficient reviews of 
design certifications, COLs, and early site permit applications. The 
agency has also sought stakeholder involvement in an effort to make 
construction and vendor inspection a timely, accurate and transparent 
process.
    While the Commission is satisfied that we have in place an 
effective regulatory process, we are always looking for ways to 
improve. Just as industry can become more efficient, the NRC is 
constantly working to improve its efficiency with no compromise in 
safety.
    Mr. Chairman and Members of the Committee, this concludes my 
overview of the NRC's licensing process for new reactor applications, 
and the current status of license applications. I would be pleased to 
respond to any questions you may have.

    The Chairman. Thank you very much.
    Let me just ask what kind of a timeline you anticipate for 
actually--you have 17 applications pending. Is that correct?
    Mr. Klein. That is correct.
    The Chairman. How quickly do you expect that you will be 
able to act on these applications? Are some of them on track to 
be dealt with fairly soon, or what is the timeframe?
    Mr. Klein. We are actively reviewing those applications, as 
we speak. What we do in our process, once an applicant submits 
their COLA, we will review for that application to review for 
its completeness.
    Once it is completed, then we will docket that application, 
and we currently have many applications under review. So our 
475 individuals are actively at work, as we speak, reviewing 
those applications.
    The Chairman. So you have not yet docketed the 
applications?
    Mr. Klein. We have docketed almost all of them.
    The Chairman. Oh, you have docketed them.
    Mr. Klein. Yes.
    The Chairman. So, you are now in the review process, which 
will lead to a yes-or-no decision by the commission as to 
whether they can proceed.
    Mr. Klein. That is correct. In this process, under this new 
approach, what we are expecting is that it will take us about 
30 months for the initial technical review, and we are allowing 
another 12 months for the hearing process, for a total of 42 
months.
    We expect, as the second wave of these applications go 
through, we will have efficiency of scale and be able to reduce 
that time with no compromise on safety. One of the areas that 
we have little control over is that hearing process.
    The Chairman. The 42 months, when would you say that began 
with regard to some of these applications?
    Mr. Klein. The first applications that we received was in 
2006.
    The Chairman. OK. So the 42 months began in 2006?
    Mr. Klein. That is correct.
    The Chairman. You can count forward from that to see when 
you might actually be in a position to act.
    Does the Nuclear Regulatory Commission have adequate staff 
to review all of the combined license and design certification 
and early site permit applications that it has received and 
expects to receive in the foreseeable future?
    Mr. Klein. Mr. Chairman, we do. We have, I think, been 
successful in articulating our need for personnel. We have a 
highly trained staff. So, we have organized our New Reactor 
Office in such a manner that we believe we can do the timely 
review of those applications.
    The Chairman. As to legal authority, are you satisfied that 
the NRC has all of the statutory authority that it needs to 
make this regulatory process work efficiently, or should we be 
legislating changes in the law to help you in this regard?
    Mr. Klein. We believe currently we have the legal authority 
to make the necessary decisions for the licensing.
    The Chairman. Let me ask about the so-called ``waste 
confidence rule. As I understand the commission's original 
waste confidence rule, the commission was confident that we 
would have a repository available by the years 2007 through 
2009 based, in part, on the Nuclear Waste Policy Act, which 
called for such a repository by 1998, I believe.
    Last October, when we still thought that Yucca Mountain 
repository might some day open, the commission proposed 
amending the waste confidence rule to say that you were only 
confident that there would be a repository 50 to 60 years after 
the 60-year extended life of a reactor.
    I guess my question is what effect will the 
Administration's announcement that it intends to not proceed 
with Yucca Mountain have on your proposed rulemaking and on 
your confidence in this area?
    Mr. Klein. Mr. Chairman, as you indicated, we are going 
through our waste confidence rule process currently. The 
comments for the public portion ended recently, and our staff 
will be evaluating and giving a recommendation. We expect the 
Commission to make a decision on waste confidence this summer.
    Based on our rationale, the reason we looked at the waste 
confidence was that we wanted to have a clear understanding of 
our confidence in the event that the Yucca Mountain site at the 
time was not successful. As you know, our job as a regulator 
and required by law is to evaluate that application. Because of 
the uncertainty of the license application, we wanted to make 
sure that we were confident in the case that the license 
application was not successful that there were options forward 
to handle safely the spent fuel.
    The Chairman. So you expect this summer to make a new 
decision as to your view as to the confidence that you can have 
in this process?
    Mr. Klein. Yes, sir. We do.
    The Chairman. All right.
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    I want to follow up with the chairman's inquiry here. The 
decision that was made by the Administration through the--
actually, I shouldn't say it is a decision yet. But through the 
budget blueprint that essentially pulls back on Yucca to an 
extent that I think you have suggested makes it problematic in 
keeping to the deadlines, which you were required to meet. I 
understand that is by 2012.
    Can you speak, just very quickly, to what the regulatory 
commission needs in terms of funding to meet that mandatory 
deadline?
    Mr. Klein. Senator Murkowski, being a regulatory agency, we 
try to follow the law ourselves, and Congress had given us 
guidance that they expected us to evaluate the applications, 
once docketed, within a 3-year period, with 1 year additional 
in order to allow for contingencies. So that meant maximum of 4 
years.
    During our 2009 budget process, we were initially $36 
million short of the funds we expected to be required to meet 
that timely response. During the omnibus bill that was recently 
passed, we were provided about $11 million of our $36 million 
additional that we needed.
    So it will be a challenge for us to meet our statutory 
obligations on a 4-year----
    Senator Murkowski. Can you meet it? Can you meet it, given 
the funding that you have received through the omnibus, and 
meet that 3-year period?
    Mr. Klein. We are early enough in the stage that it is hard 
to give you a definite answer. But it will be very difficult 
for us to meet the 4-year commitment with the limited funding 
that we have been receiving.
    Senator Murkowski. Let me ask you about the challenges that 
you face just with the staffing and the expertise that you 
need. You mentioned you have got 475 staff that have been 
brought on to handle the workload. What challenges do you see 
in these years ahead?
    You are stepping up in terms of the workload and the 
handling the permits and the applications. What challenges do 
you see in terms of the staffing, recruitment, and retention 
within the Commission and being able to keep good people on for 
the extended periods of time?
    I understand that while you have a sufficient number of 
employees, that slightly less than half of the staff have been 
with the agency for less than 5 years. Can you just speak to 
the manpower issue that we are facing?
    Mr. Klein. Senator, as you indicated, we have been staffing 
up for the last several years in anticipation of our increased 
workload. The good news is, we have been able to recruit very 
talented individuals.
    One of the reasons that has helped us recruit is that we 
were selected in 2007 as the best place to work in the Federal 
Government. So we take advantage of that in our recruiting 
activities.
    So I think our challenges are twofold. One is training. We 
have a very massive training program because we do have a lot 
of new hires, and so we want to make sure that we train and 
give the resources needed for our individuals to make their 
proper decisions. So training is an area we focus heavily on.
    I think our next challenge will simply be retention. As the 
industry starts construction and building up, I think we all 
know that industry oftentimes can pay more than the Federal 
Government. So we need to pay attention to the needs of our 
employees and continue with that number-one ranking so that our 
employees will want to stay with us rather than go elsewhere.
    Senator Murkowski. Do you have any concern that perhaps the 
signals that are coming out of the Administration right now in 
terms of, in my opinion, a lack of support for the nuclear 
industry may affect your ability to recruit and retain good, 
qualified, skilled individuals?
    Mr. Klein. I think the area that we will have to watch, 
both the Government and the industry, is what the enrollments 
are our academic programs. We will need to watch those trends 
to make sure that people believe that they have viable careers 
in the nuclear field. So that is one area that I think we all 
need to watch.
    Senator Murkowski. I think we need to be watching it very, 
very carefully.
    Very quickly, you mentioned 42 months in terms of the time 
required to complete these first reference licenses. Can you 
tell me how that compares to the international experience in 
terms of review and completion of the permits?
    Mr. Klein. Senator, it is comparable. Our processes are a 
little different. As you might expect, each country will do 
things slightly different. France, for example, takes a little 
bit longer on their initial siting, and then they will still do 
the two-step process.
    But in general, when we look at countries like France and 
Finland and Japan and Korea, most countries are about in the 3-
to year period when you compare all of it. So we are 
within the range. The UK is currently looking at their process, 
and they are pretty well following our process. So we are not 
outliers currently.
    Senator Murkowski. OK. Thank you, Mr. Chairman.
    [Recessed.]
    The Chairman. Senator Udall, why don't you go ahead with 
your questions?
    Senator Udall. Thank you, Mr. Chairman.
    Mr. Klein, nice to see you here. Thank you for taking your 
time to come up and speak with us about this very important 
energy source.
    I would like to focus on your workload. In that context, 
with so much that you are facing, do you have adequate budget 
and human resources? If we gave you more--that is, if the 
Congress provided you with more resources, what would be your 
priorities for using those resources?
    Mr. Klein. Senator Udall, as you know, when we build our 
budgets, it is always a 2-year process where we start in the 
out-years, and then when we come to the actual fiscal year, we 
sometimes have to make adjustments. For 2009, the only area 
that we have funds that are of a concern would be enough 
resources for the evaluation of the Yucca Mountain application.
    If we had more funds available in out-years, I would say we 
would probably look at additional types of training and also 
additional scholarships to recruit additional individuals into 
the nuclear profession.
    Senator Udall. Do you see a lack of people interested in 
being nuclear engineers and being part of the nuclear industry? 
Have you done inventories? Do you have a sense of that 
potential future work force?
    Mr. Klein. I am on leave of absence from, as I often say, a 
small university in Texas, the University of Texas at Austin, 
where I taught nuclear engineering for a number of years. We 
did see declining numbers for a number of years in nuclear 
education and in health physics.
    We are now seeing those numbers increase, and I think what 
we need to do is make sure we sustain those levels. Because if 
we send a signal that there may not be employment 
opportunities, we may see a drop-off again in the interest of 
the young people in the nuclear profession.
    Senator Udall. Moving to a related subject, this is this 
year, I believe, the 30th anniversary of the incident at Three 
Mile Island. The industry was directed to implement changes in 
procedures and safety protocols. What are you all doing to 
encourage 21st century safety culture at your existing 
facilities?
    Mr. Klein. Senator, I think everyone learned a lot from the 
Three Mile Island accident--the industry, academia, 
Government--all across the board. Certainly, the NRC learned a 
lot. I believe that we are a much better regulator today. We 
have a much more rigorous reactor oversight program. We have a 
safety culture that is recognized both within the NRC and 
within the industry as important.
    I think one of the most significant aspects after Three 
Mile Island was the creation of the Institute of Nuclear Power 
Operations by the industry, where the industry recognized that 
they needed to have more activity, more responsibility, more 
self-checking among themselves.
    So I think post TMI, we have all learned lessons, and we 
have all implemented those lessons. I think the record speaks 
for that. The operational efficiencies are higher. The safety 
issues that we see are less, but the thing that we all need to 
watch is that we can never become complacent. We have to 
maintain high standards.
    Senator Udall. I know at a previous hearing, there was a 
discussion about Yucca Mountain. I know Senator McCain was 
particularly interested in what the plans were for Yucca 
Mountain. If Yucca Mountain were taken offline, what is plan B? 
What is the agency's approach to the waste at, I think, some 
100 sites around the country?
    Mr. Klein. As you know, we are the regulator. So we don't 
propose the solution. So what we would do is, we currently have 
an application that we are required by law to evaluate, and we 
are going through that process. That application is long. It is 
8,000 pages, referencing a million documents, and it will take 
our staff several years to evaluate that application to see if 
it is sufficient.
    In the interim, dry cask storage is safe. We license those 
facilities. We monitor them. So, at-reactor sites, dry cask 
storage currently is plan B.
    Senator Udall. When you provide those licenses for the dry 
cask storage, what is your estimate of the time that that 
storage can be utilized before your concerns rise? In other 
words, is it a 10-year timeline? Fifty years? What is the 
timeline you operate off of?
    Mr. Klein. Currently, our staff has evaluated that issue, 
and in the past, we had looked at 100 years for the dry cask 
storage of being safe and secure. The current waste confidence 
that we are looking at may extend that an additional 20 years 
to look at maybe a 120-year period for the dry cask storage to 
be safe and secure.
    Senator Udall. Do you have any concerns about the security 
around that dry cask storage?
    Mr. Klein. We watch it. Security is an issue that we always 
watch. So, we have policies and procedures in place to ensure 
that they are secure.
    Senator Udall. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Bennett.
    Senator Bennett. Thank you very much, Mr. Chairman.
    Mr. Klein, I have been in the facility in France where the 
spent fuel rods are reprocessed, and instead of being stored--
the final waste product, instead of being stored in something 
like Yucca Mountain, I asked where is it, and they said, ``It 
is in that green building over there.''
    I said, ``What happens when the green building gets 
filled?'' They said, ``Well, we will build another building.''
    The reduction in mass as well as the reduction in 
radioactivity is dramatic. I have been in the plant physically, 
and the degree of safety process is to make sure that anybody 
who is in the plant is properly taken care of, are very obvious 
and more than adequate.
    I understand that we in this country decided not to do 
reprocessing. President Carter is the one who made that 
decision. Although President Reagan reversed it, by that time, 
the industry had pretty much left our shores or the boat had 
left the dock, and we have simply not done that. Other 
countries have.
    My conviction is that we need to now say let us do 
reprocessing. Let us get into that business. Reverse the 
decision that Jimmy Carter made--factually, not just legally. 
What is your experience, and what would be your recommendation 
with respect to reprocessing?
    Mr. Klein. Senator, as the regulator, we need to be 
prepared to evaluate and establish the requirements in the 
regulations if we move toward recycling in the United States. 
So, we have been having consultations with the Department of 
Energy to understand what they might be proposing so that, as 
the regulator, we will be ready if they proceed forward in that 
direction, either they or private industry.
    Senator Bennett. You are a nuclear engineer. Do you see any 
technical or engineering problems with reprocessing?
    Mr. Klein. I have visited the same facilities that you have 
in France, and I have talked to the regulators in France. 
Clearly, those facilities are operated safely and securely. If 
they were built in the United States, we would also operate and 
make sure they were built safely and securely as well. 
Technically, it is well understood.
    Senator Bennett. If we were to increase the number of 
nuclear plants, not just continue the current 20 percent, but 
if we were to say let us drive toward 30 percent or even 40 
percent of American electricity generated by nuclear, how big a 
reprocessing plant would we need, and would we need more than 
one?
    Mr. Klein. That would really be a question probably better 
directed toward industry and DOE. But if you look just at the 
size of the facilities, France has about 58, 59 reactors. They 
have the one facility that you visited in La Hague. We have 
about 104 running today, so one could scale accordingly.
    Senator Bennett. So, as I say, if we were to increase 
beyond the 100-some odd that we currently have, as I think we 
probably need to, then perhaps we would need 2 or even 3 of 
these in the United States to handle that load?
    Mr. Klein. It would be likely that we would. As the 
regulator, we would make sure that those facilities were safely 
and securely operated.
    Senator Bennett. But you have no reason to believe that 
they would present any kind of safety hazard?
    Mr. Klein. I believe that we would be able to evaluate 
those accordingly.
    Senator Bennett. Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Senator Shaheen.
    Senator Shaheen. Thank you.
    Good morning, Chairman Klein. Thank you for being here.
    New Hampshire, as you may know, is home to the Seabrook 
nuclear power plant, which I believe was the last power plant 
licensed in the United States and actually constructed and 
operating. It was quite a process to get that plant operating. 
It took 10 years longer than expected, and it wound up costing 
12 times more than projected. The final cost was over $6.5 
billion.
    The debt that resulted from the bankruptcy of Seabrook's 
major utility owner, Public Service Company of New Hampshire, 
was the fourth-largest bankruptcy in corporate history at the 
time. There are many of us for whom the challenges of Seabrook 
and the memories of that are still quite vivid.
    One of--you talked about your process to streamline 
licensing of plants. Do you think that streamlined process 
would have made a difference in how long it took to license and 
have Seabrook begin to operate?
    Mr. Klein. Senator, I think the answer is yes. I think, in 
other words, if we did a new Seabrook today, it would be, 
hopefully, more predictable. The regulator, namely the NRC, I 
think better understands our requirements today, and I think 
industry would have a better understanding of how they intended 
to build and design and operate those facilities.
    As I indicated in my opening comments, one of the 
challenges that we had with the existing fleet is that every 
one is different. Standardization will make it a lot easier, 
both for the regulator and for the operator. So, I believe that 
we have done two things that are fundamentally different now 
than in the first wave, and that is standardization and a one-
step licensing process with no compromise on safety.
    Senator Shaheen. One of the things that I think drove up 
the cost of Seabrook was the fact that Three Mile Island 
happened in the middle of that construction, and there were 
significant changes made to what was required of the plan.
    How would the one-step licensing process take into 
consideration any future Three Mile Islands or other accidents 
that might affect understanding of how construction should be 
done?
    Mr. Klein. There were a lot of changes, as you indicated, 
immediately after Three Mile Island, both equipment and 
regulatory aspects. I think those have stabilized. I think we 
now articulate our requirements. The industry knows what those 
are.
    So I don't believe that you would see those changing 
requirements today. I believe we have decades of years of 
experience since Three Mile Island. We now use a risk-informed 
regulatory process. We know better what to look for. We have a 
better oversight program, and we have a lot more experience not 
only in the United States, but nationwide.
    Senator Shaheen. To switch topics to cost, which is 
obviously one of the big challenges with Seabrook, as you know 
the Energy Policy Act of 2005 authorized the Secretary of 
Energy to guarantee loans of up to 80 percent of construction 
costs for energy projects that reduce greenhouse gas emissions, 
including nuclear power.
    You have pointed out that there are 17 pending applications 
before the Nuclear Regulatory Commission. My understanding is 
that there are about $18.5 billion in loan guarantees available 
for that program. How many plants do you think that funding 
could support in terms of the pending applications that are 
before you?
    Mr. Klein. As a regulator, we tend not to look at the 
financing that much, and I think it depends on how the 
Department of Energy wants to run that program. That might be a 
better question to ask the next panel. As the regulator, we 
don't follow the loan guarantees, per se.
    Senator Shaheen. OK. As you are thinking about economies of 
scale, which, hopefully, the standardization that you are 
talking about would help lead to, how many reactors do you 
think it would take to get to those economies of scale? Or do 
you think you have already done that?
    Mr. Klein. We hope that with our standard design process 
and holding the industry to those standardization requirements, 
we hope to do the standardization through the design 
certification process and do that on the front end.
    Now what happened was that there are more vendors than I 
think we initially expected. We thought there might have been 
three, and currently, there are a few more than that. So what 
we hope is within each vendor, we will have a standardized 
fleet, and we will do that standardization through the design 
certification process before construction starts.
    Senator Shaheen. Thank you.
    The Chairman. Senator McCain.
    Senator McCain. Thank you, Mr. Chairman.
    Thank you for your good work, Commissioner Klein. Are you 
operating under the assumption that Yucca Mountain will become 
a reality?
    Mr. Klein. No.
    Senator McCain. You are not.
    Mr. Klein. Our staff has not yet evaluated the license 
application, and so we are beginning that process.
    Senator McCain. Are you operating under the assumption that 
Yucca Mountain will become a reality, that plans are in motion 
and the process is moving forward for Yucca Mountain to be a 
nuclear waste repository?
    Mr. Klein. We are not counting on Yucca Mountain being 
successful.
    Senator McCain. You are not counting on it? Meaning, then 
what are you looking at for an alternative?
    Mr. Klein. Dry cask. For the interim, dry cask storage.
    Senator McCain. Dry cask storage. Spent nuclear fuel 
sitting in pools and in dry casks at nuclear power plants all 
over America. Is that what you are planning on?
    Mr. Klein. Yes, sir.
    Senator McCain. Have you consulted any experts on national 
security on this issue to have these spent nuclear fuel sitting 
around nuclear power plants all over America?
    Mr. Klein. Yes. We have. We look at the security both of 
the operating facilities and of the dry cask storage, and we 
consult on a lot of our tactics and techniques with the 
Department of Defense.
    Senator McCain. They say that that is no national security 
threat?
    Mr. Klein. I think there is always security threats. Before 
I came to the NRC, I was at the Department of----
    Senator McCain. What did they say?
    Mr. Klein. I was at the Department of Defense, and there 
are a lot of targets, including chemical plants and other 
facilities. So, we have a wide variety of targets, including 
tall buildings, as 9/11 demonstrated.
    Senator McCain. I am asking again, what did the Department 
of Defense tell you about this threat to our national security 
if you consult with them?
    Mr. Klein. The challenge the Department of Defense and all 
the intel agencies have is exactly where a terrorist might 
strike.
    Senator McCain. The point is, obviously, that we would 
rather have a one place where it can be stored. Any national 
security expert or amateur will tell you that we need to have 
one place to store it, and that is not going to happen now 
because the Administration has declared that.
    So now your answer is dry cask storage all over the United 
States of America. I don't think many Americans believe that 
that is a good solution. There is now presently 104 nuclear 
power plants in operation. Is that correct, roughly?
    Mr. Klein. Yes. That is correct.
    Senator McCain. How many of them will be in operation 20 
years from now? The existing plants.
    Mr. Klein. My guess, assuming that those whose licenses are 
about to expire do a license renewal and we approve those, all 
of those plants could be running in another 20 years from now.
    Senator McCain. I have talked to many utility executives 
who say they aren't going to continue that operation. Have you 
heard that?
    Mr. Klein. No.
    Senator McCain. But you intend--you think that every one of 
those 104 that are now operating will be relicensed?
    Mr. Klein. If they meet our requirements, yes, sir.
    Senator McCain. They can meet your requirements, you 
believe?
    Mr. Klein. So far, 51 of the 104 have.
    Senator McCain. On this waste confidence issue, again, a 
repository can reasonably be expected to be available within 50 
or 60 years beyond the license life for operation of any 
reactor. Do you think that with Yucca Mountain being canceled 
that you can meet the ``waste confidence criteria,'' which has 
been changed, as we know?
    Mr. Klein. We are going through that evaluation, and we 
hope to make that determination by this summer.
    Senator McCain. You mentioned to Senator Bennett that you 
have seen the reprocessing facilities in France?
    Mr. Klein. Yes.
    Senator McCain. You believe that also that technology could 
be employed here in the United States?
    Mr. Klein. I believe that the NRC could establish the 
frameworks, and that could be a viable option for the United 
States
    Senator McCain. Do you believe that there is a problem with 
the material that is reprocessed as far as a national security 
concern is involved?
    Mr. Klein. I believe that we could establish rules and 
procedures that would make that a minimum issue.
    Senator McCain. But there are no plans, obviously, for any 
reprocessing here in the United States, at least that you are 
aware of?
    Mr. Klein. No applicant has come forward with an 
application to the NRC.
    Senator McCain. I guess, finally, if it is 42 months, as 
you mentioned, the process of licensing now, and you mention in 
your testimony that first licensing began in 2006 application. 
Is that correct?
    Mr. Klein. Yes. I think I made an error. I think we really 
started in 2007.
    Senator McCain. So that would mean that a license could be 
issued in late 2010, 2011?
    Mr. Klein. The COL could be issued in that timeframe, and 
then the utility would start construction. So I think the first 
time electricity would be expected to be coming out of a new 
nuclear plant is in the order of 2016.
    Senator McCain. I thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Senator Landrieu.
    Senator Landrieu. Yes, Mr. Klein, I am very impressed with 
your grasp of this issue, and I understand that you have been 
doing this now for quite some time. I think my predecessor, 
Bennett Johnson, when he chaired this committee and authored 
the Yucca Mountain legislation, worked with you and all the way 
back to Speaker Wright.
    So I am glad that someone that is knowledgeable, both with 
a background of defense and energy and with your academic 
background, is in that chair because my general feeling--and I 
am no expert, but I am a promoter of nuclear energy and power 
for this country--it really is a sad and expensive story of a 
policy that would make sense being torpedoed from the left 
years ago from environmentalists that couldn't quite understand 
the benefits of nuclear power to the country and from the right 
about America's natural--sometimes it works well, sometimes it 
doesn't--tendency for just let the free market build whatever 
kind of system.
    The combination of it has been devastating. I hope that now 
President Obama can find a middle road between the kind of 
Government-private sector planning that is necessary for 
something this substantial and that we can put to bed forever 
some of these environmental concerns because the development of 
this industry has a record, particularly not--in Europe and 
other places of safety and security.
    I want to point for the record a couple of things on the 
cost that I think is particularly interesting to my 
constituents on nuclear power and its cost in production of 
electricity. Since projected out and back through 2007, the 
kilowatt-hour of nuclear is $1.76. Coal is $2.47. Gas is $6.78, 
and petroleum is $10.26. I am sorry I don't have what it is for 
wind and solar.
    But as you can see, not only is the cost lower for nuclear 
and coal, two completely different sources, but they are also 
stable. I think what America is looking for first are lower 
energy prices that are stable, a system of producing 
electricity in this country where we can produce as much 
domestically as possible or from friendly allies relatively 
close geographically, and energy that is clean.
    I think you and, hopefully, some of the leaders in this 
Administration can understand that nuclear meets all of those 
objectives and must be pushed forward with great haste and 
needs to be a critical component of our energy regime in this 
country.
    But let me ask you this, and you have talked a bit about 
this. I want to ask you two questions. In the cross-examination 
of Jeanne Shaheen or her comments--no, maybe I think it was 
Senator McCain--you said, Technically, it is well understood.
    Do you remember that phrase that you used in conjunction? 
Could you elaborate a little bit about that? Technically, it is 
well understood.
    Mr. Klein. It was regarding the reprocessing of the spent 
fuel and separating and getting the usable material out and 
then throwing away the residues. So, I think the technical 
community understands recycling. I think there is----
    Senator Landrieu. Inferring that it is just the political 
situation that might be difficult. But technically, you think 
you have got it done?
    Mr. Klein. I think there still needs to be some additional 
research on what might be the best technology. But I think we 
all understand the chemical processes. Reactor spent fuel has, 
as you know, been around for a long time. We know how it 
behaves.
    Then there is a lot of experience, both in the laboratory 
and commercial sides, on the recycling options. The Department 
of Energy wants to look at maybe some optimal techniques on 
what you would do for what they call the back-end of the fuel 
cycle. What we need to do, as a regulator, is whatever the 
Department of Energy might propose, that we are ready to ensure 
that it can be done safely and securely.
    Senator Landrieu. Let me ask you this. I hear the NRC has 
revamped its process for licensing new power plants. It is not 
progressing as well as some of us would like. Can you talk 
about some of those difficulties in a little bit more detail 
than you have? Under the combined licensing process, I know 
that you all are having some difficulties there, I hear. Can 
you explain a bit about that?
    Mr. Klein. What we had hoped the way the process would 
work, and this is where you sort of design how you would like 
it to be, and then reality comes in. We would, as a regulator, 
we would have liked to have the plants completely certified and 
all of that finished before an application comes in.
    Then we would like to look at the siting of that plant at a 
site, do an early site permit, and then look at the combined 
license application. So that is the way that we envisioned the 
process to work in the perfect world.
    The perfect world is oftentimes overcome by reality, and 
there was a need for baseload electricity. So, we have received 
a lot of applications before we have completed the standardized 
designs.
    Now we will not issue the combined license until those 
design certifications are finished, but we won't really 
optimize our one-step licensing process until we go through 
this complete system of design certification and then the 
combined license application.
    Senator Landrieu. I know my time has expired. But for the 
record, you can submit this in writing. Would you outline for 
me, and I will share it with the members of the committee, the 
significant differences in design or licensing requirements 
between the United States and other countries, that perhaps we 
could learn a little bit more about the way they are doing it 
and improve our system here?*
---------------------------------------------------------------------------
    * See Appendix I.
---------------------------------------------------------------------------
    Thank you so much.
    Mr. Klein. Thank you.
    The Chairman. Thank you very much for your excellent 
testimony. We appreciate you taking time out of your busy 
schedule to be here with us, and why don't we go on to the 
second panel at this point?
    Mr. Klein. Thank you.
    The Chairman. Our second panel is made up of Marvin Fertel, 
who is the president and chief executive officer and chief 
nuclear officer for the Nuclear Energy Institute here in 
Washington. Also Dr. Thomas Cochran, who is the senior 
scientist for the nuclear program with the National Resources 
Defense Council.
    We appreciate both of you gentlemen being here and giving 
us your views. Why don't we start with you, Mr. Fertel, and 
then Dr. Cochran, and then we will have some questions for both 
of you.
    So if you will just take 5 or 6 minutes each and tell us 
the main points you think we need to be aware of. Please.

 STATEMENT OF MARVIN S. FERTEL, PRESIDENT AND CHIEF EXECUTIVE 
               OFFICER, NUCLEAR ENERGY INSTITUTE

    Mr. Fertel. Thank you very much, Chairman Bingaman, Ranking 
Member Murkowski, Senator Udall.
    We appreciate the opportunity to be here to share with you 
our thoughts on policies that could facilitate the deployment 
of new nuclear plants in our country. The U.S. nuclear 
industry's top priority is and always will be the safe and 
reliable operation of our existing fleet of plants.
    As Chairman Bingaman said in his opening remarks, we have 
104 nuclear plants, and they continue to sustain excellent 
levels of performance. In 2008, we achieved an average capacity 
factor of 91 percent and avoided emissions of almost 700 
million metric tons of carbon dioxide.
    Construction of new nuclear plants will address two of our 
Nation's top priorities--additional supplies of clean energy 
and creation of jobs. Today, nuclear energy provides 
approximately 75 percent of carbon-free electricity generation.
    Even with aggressive efficiency measures and historically 
low growth in demand, the United States will need additional 
baseload generating capacity. Every form of clean energy 
technology, including nuclear, will be needed to reduce the 
electric sector's carbon footprint.
    As you heard from Chairman Klein, the Nuclear Regulatory 
Commission is reviewing construction operating licenses for 26 
new reactors, totaling about 34,000 megawatts of capacity. 
Safety-related construction of the first new nuclear plants we 
believe will start in 2012, with four to eight in commercial 
operation by around 2016.
    Because of these new plant projects, jobs related to 
nuclear energy are expanding rather than contracting in our 
country. Over the last several years, the nuclear industry has 
invested over $4 billion in new nuclear plants and will invest 
as much as $8 billion more before 2012.
    Investment to date has already created 15,000 jobs over the 
last 2 to 3 years as reactor designers, equipment 
manufacturers, and fuel suppliers expand and build new 
facilities. The number of new jobs will expand significantly 
early in the next decade when the first wave of new projects 
start construction.
    If all 26 reactors currently in licensing were built, it 
would result in over 100,000 new jobs to support construction 
and operation. If the 26 reactors being licensed today were 
built by 2030, they would maintain nuclear at 20 percent of our 
electricity supply.
    Increasing nuclear energy's contribution to meet the 2050 
climate goals we are talking about requires a building rate of 
four to six plants per year. This rate was achieved in the 
1970s and 1980s, despite the challenges we encountered during 
the period. With standardized designs and improved construction 
techniques, this deployment rate is achievable after the first 
wave of plants are constructed.
    However, the electric power industry must invest between 
$1.5 trillion and $2 trillion by 2030 to meet increases in 
electricity demand and reduce carbon emissions. This is a 
formidable financing challenge. The loan guarantee program 
created in the 2005 Energy Policy Act is critical to ensure 
that capital is available to finance modernization of our 
electric infrastructure and to support financing of new 
generating facilities.
    Achieving workable implementation of the title XVII loan 
guarantee program has been a challenge. However, many of the 
difficulties can be corrected through rulemaking, and NEI 
understands that DOE is developing revised rules to address the 
defects in the current rule and implement the new loan 
guarantee program authorized in the economic stimulus 
legislation.
    This committee can play a key oversight role in ensuring 
that necessary revisions to the existing rule are promulgated 
appropriately and quickly. If the changes cannot be implemented 
through rulemaking, we encourage you to take statutory action 
to fix it.
    Existing limitations on loan guarantee authority are also a 
constraint on expansion of nuclear energy and other 
technologies eligible for title XVII loan guarantees. Ten 
nuclear power projects have applied for approximately $93 
billion in loan guarantees, well in excess of the current loan 
volume limitation of $18 billion.
    The original goal of the title XVII loan guarantee program 
to jumpstart construction of the first innovative clean energy 
projects remains as valid today as it was in 2005. But today, 
the United States faces new and larger challenges. Financing 
large-scale deployment of clean energy technologies, the United 
States must have an effective long-term financing platform to 
ensure deployment of clean energy technologies in the numbers 
required.
    During the last Congress, Chairman Bingaman introduced 
legislation to create a 21st century energy development 
corporation, and Senator Domenici, the ranking member of this 
committee during the last Congress, introduced legislation to 
create a clean energy bank. Both proposals have merit, and we 
encourage this committee to start with those legislative 
proposals and address clean energy technology financing in the 
new energy legislation now being developed.
    Let me now comment briefly on the need to develop a 
sustainable used nuclear fuel strategy. Used nuclear fuel is 
managed safely and securely at nuclear power sites today and 
can be managed safely and securely for an extended period of 
time either at sites or at centralized interim storage 
facilities.
    For this reason, we don't believe used nuclear fuel 
represents an impediment to new nuclear plant deployment. It 
is, however, an issue that must be addressed for the long term. 
The nuclear industry has supported implementation of the 
Nuclear Waste Policy Act as the law of the land since 1982, and 
customers across our Nation have paid over $22 billion into the 
Nuclear Waste Fund.
    We are not aware of any technical issue that would 
disqualify Yucca Mountain from the mission Congress assigned to 
it more than 20 years ago. Nonetheless, we recognize the 
position the Administration has taken with regard to the Yucca 
Mountain project.
    Therefore, we support Secretary Chu's proposal to establish 
an independent qualified commission to undertake a reassessment 
of the Federal Government's program to manage used nuclear fuel 
and for it to produce a roadmap for a sustainable long-term 
program, including recommendations for legislative changes. In 
our view, a credible program includes interim storage, advanced 
recycling, and a permanent disposal facility. We encourage this 
committee to provide effective oversight of this independent 
commission activity.
    We do not believe, however, that we can abandon current law 
before a new policy and associated program are defined. To do 
so would likely provoke additional litigation among the Federal 
Government, utility contract holders, and the State officials 
who have authorized collection of the nuclear waste fee from 
customers.
    In conclusion, nuclear energy can and must play a strategic 
role in meeting national environmental, energy security, and 
economic development goals. The nuclear energy industry has a 
limited, well-defined public policy agenda to ensure our Nation 
continues to enjoy the benefits of nuclear energy.
    That agenda includes near-term actions to ensure that the 
title XVII loan guarantee program works as intended; creation 
of a broader permanent financing platform to ensure access to 
capital for the large-scale deployment of advanced 
technologies, including nuclear energy facilities that will 
reduce carbon emissions; and a sustainable strategy for 
management of used nuclear fuel and ultimate disposal of waste 
byproducts.
    I thank you for the opportunity to be here and look forward 
to your questions.
    [The prepared statement of Mr. Fertel follows:]

 Prepared Statement of Marvin S. Fertel, President and Chief Executive 
                   Officer, Nuclear Energy Institute
    Chairman Bingaman, Ranking Member Murkowski, and members of the 
committee, thank you for your interest in nuclear energy and in 
addressing the policies that can facilitate deployment of new nuclear 
plants to meet national energy needs and reduce carbon emissions.
    My name is Marvin Fertel. I am the President and Chief Executive 
Officer of the Nuclear Energy Institute (NEI). NEI is responsible for 
establishing unified nuclear industry policy on regulatory, financial, 
technical and legislative issues affecting the industry. NEI members 
include all companies licensed to operate commercial nuclear power 
plants in the United States, nuclear plant designers, major architect/
engineering firms, fuel fabrication facilities, materials licensees, 
and other organizations and individuals involved in the nuclear energy 
industry.
    My testimony will cover five major areas:

          1. Current status of the U.S. nuclear energy industry
          2. The need for new nuclear generating capacity
          3. Progress toward new nuclear power plant construction
          4. Financial challenges facing the electric power sector
          5. Policy actions necessary to address the challenges facing 
        new nuclear plant development
I. Current Status of the U.S. Nuclear Power Industry
    The U.S. nuclear energy industry's top priority is, and always will 
be, the safe and reliable operation of our existing plants. Safe, 
reliable operation drives public and political confidence in the 
industry, and America's nuclear plants continue to sustain high levels 
of performance.
    Just last week, the Nuclear Regulatory Commission published a Fact 
Sheet highlighting the dramatic improvements in every aspect of nuclear 
plant performance over the last two decades: ``The average number of 
significant reactor events over the past 20 years has dropped to nearly 
zero. Today there are far fewer, much less frequent and lower risk 
events that could lead to reactor core damage. The average number of 
times safety systems have had to be activated is about one-tenth of 
what it was 22 years ago. Radiation exposure levels to plant workers 
has steadily decreased to about one-sixth of the 1985 exposure levels 
and are well below federal limits. The average number of unplanned 
reactor shutdowns has decreased by nearly ten-fold. In 2007, there were 
two shutdowns compared to about 530 shutdowns in 1985.''
    This high level of performance continued last year. In 2008, the 
average capacity factor for our 104 operating nuclear plants was over 
90 percent, and output of over 800 billion kilowatt hours represented 
nearly 75 percent of U.S. carbon-free electricity. According to the 
quantitative performance indicators monitored by the Nuclear Regulatory 
Commission, last year's performance was the best ever. This performance 
represents a solid platform for license renewal of the existing fleet 
and new nuclear plant construction.
II. The Need for New Nuclear Generating Capacity
    Construction of new nuclear plants will address two of our nation's 
top priorities: Additional supplies of clean energy and creation of 
jobs.
    Nuclear energy is one of the few bright spots in the U.S. economy--
expanding rather than contracting, creating thousands of jobs over the 
past few years. Over the last several years, the nuclear industry has 
invested over $4 billion in new nuclear plant development, and plans to 
invest approximately $8 billion more to be in a position to start 
construction in 2011-2012.
    The investment to date has already created 15,000 jobs over the 
last two to three years, as reactor designers, equipment manufacturers 
and fuel suppliers expand engineering centers and build new facilities 
in New Mexico, North Carolina, Tennessee, Pennsylvania, Virginia and 
Louisiana. These jobs represent a range of opportunities--from skilled 
craft employment in component manufacturing and plant construction, to 
engineering and operation of new facilities. The number of new jobs 
will expand dramatically early in the next decade when the first wave 
of new nuclear power projects starts construction. If all 26 reactors 
currently in licensing by the NRC were built, this would result in over 
100,000 new jobs to support plant construction and operations, and does 
not include additional jobs created downstream in the supply chain. 
This would be in addition to the 30,000 new hires in the next 10 years 
to support operation of the existing fleet of plants through the 
extended license period of 60 years.
    New nuclear plants will also help the United States meet its 
climate change objectives. Predominantly independent assessments of how 
to reduce U.S. electric sector CO2 emissions--by the International 
Energy Agency, McKinsey and Company, Cambridge Energy Research 
Associates, Pacific Northwest National Laboratory, the Energy 
Information Administration, the Environmental Protection Agency, the 
Electric Power Research Institute and others--show that there is no 
single technology that can slow and reverse increases in CO2 
emissions. A portfolio of technologies and approaches will be required, 
and that portfolio must include more nuclear power as well as 
aggressive pursuit of energy efficiency and equally aggressive 
expansion of renewable energy, advanced coal-based technologies, plug-
in hybrid electric vehicles and distributed resources.
    NEI is not aware of any credible analysis of the climate challenge 
that does not include substantial nuclear energy expansion as part of 
the technology portfolio. In fact, removing any technology from the 
portfolio places unsustainable pressure on those options that remain.
    Analysis last year by the Energy Information Administration of the 
Lieberman-Warner climate change legislation (S. 2191) demonstrates the 
value of nuclear energy in a carbon-constrained world. In EIA's 
``Core'' scenario, which included new nuclear plant construction, 
carbon prices in 2030 were 33 percent lower, residential electricity 
prices were 20 percent lower and residential natural gas prices were 19 
percent lower than in the ``Limited Alternatives'' scenario, which 
severely limited new nuclear construction.
    It is also clear that the United States will need new baseload 
electric generating capacity even with major improvements in energy 
efficiency. Recent analysis by The Brattle Group, an independent 
consulting firm, showed that the United States will need between 
133,000 megawatts of new generating capacity (absent controls on 
carbon) and 216,000 megawatts (in a carbon-constrained world) by 2030. 
These numbers assume 0.7 percent per year growth in peak load--a 
significant reduction from historical performance. Annual growth in 
peak load between 1996 and 2006 was 2.1 percent, and the Energy 
Information Administration's Annual Energy Outlook assumes a 1.5-
percent annual increase in peak load.
    NEI estimates that if the 26 reactors being licensed today 
(approximately 34,000 MW) were built by 2030, this would simply 
maintain nuclear at 20 percent of U.S. electricity supply. To increase 
nuclear energy's contribution to 2050 climate goals, build rates of 4-6 
plants per year must be achieved. This was possible in the 1970s and 
1980s even with the old licensing process and lack of standardization. 
With standardized designs and improved construction techniques, this 
accelerated deployment is feasible after the first wave of plants are 
constructed.
III. Progress Toward New Nuclear Power Plant Construction
    The Nuclear Regulatory Commission is reviewing construction and 
operating license applications from 17 companies or groups of companies 
for 26 new reactors totaling 34,200 MW. These new plants will be built 
at a measured pace over the next 10-15 years. Safety-related 
construction of the first new nuclear plants will start in 2012, and 
NEI expects four to eight new nuclear plants in commercial operation in 
2016 or so. The exact number will, of course, depend on many factors--
U.S. economic growth, forward prices in electricity markets, capital 
costs of all baseload electric technologies, commodity costs, 
environmental compliance costs for fossil-fueled generating capacity, 
natural gas prices, growth in electricity demand, availability of 
federal and state support for financing and investment recovery, and 
more. We expect construction of those first plants will proceed on 
schedule, within budget estimates, and without licensing difficulties, 
and a second wave will be under construction as the first wave reaches 
commercial operation.
    Supported in part by government-industry cost-shared programs like 
the Department of Energy's Nuclear Power 2010 program, detailed design 
and engineering work on advanced reactor designs is nearing completion. 
This detailed design information will allow companies to develop firm 
cost estimates. Based on what is known today, however, there is a solid 
business case for new nuclear generating capacity.
    Nuclear energy is a capital-intensive technology. NEI estimates a 
new nuclear power plant could cost $6 billion to $8 billion, including 
financing costs. This large capital investment does not mean that new 
nuclear plants will not be competitive. Capital cost is certainly an 
important factor in financing, but it is not the sole determinant of a 
plant's competitive position. The key factor is the cost of electricity 
from the plant at the time it starts commercial operation relative to 
the other alternatives available at that time. Based on NEI's own 
modeling, on the financial analysis performed by companies developing 
new nuclear projects, and on independent analysis by others, new 
nuclear capacity will be competitive. (NEI's white paper, ``The Cost of 
New Generating Capacity in Perspective'', is attached for further 
information on this topic.)
    Florida Power and Light and Florida Progress demonstrated this in 
the financial modeling that supported their requests last year to the 
Florida Public Service Commission for ``determinations of need'' for 
new reactors at Turkey Point and Levy County. In FP&L's modeling, the 
only scenario in which nuclear was not preferred was a world in which 
natural gas prices were unrealistically low and there was no price on 
carbon. The Florida PSC has approved both projects. Independent 
analyses reach the same conclusion. In an integrated resource plan 
developed for Connecticut last year, The Brattle Group concluded that 
new nuclear plants are a lower-cost source of electricity in a carbon-
constrained world than supercritical pulverized coal with carbon 
capture and storage (CCS), integrated gasification combined cycle with 
CCS and gas-fired combined cycle with CCS.
    Understanding the Past.--Many of the nuclear power plants 
commissioned in the 1960s and early 1970s completed construction in 
four to five years with construction costs around $500 million. By the 
late 1970s and early 1980s, however, construction was averaging 10 to 
12 years, and construction costs ranged as high as $5 billion. The 
nuclear industry has conducted detailed and extensive analysis of this 
experience, which demonstrates that the nuclear plants built after the 
early 1970s were built under extremely unfavorable conditions--caused 
by several major factors converging at roughly the same time.
    Nuclear energy technology in the United States scaled up quickly. 
The industry scaled from the first 200-megawatt-scale plants to 1,000-
megawatt-plus plants in just a few years. This rapid increase in 
reactor size occurred at a time when electricity demand was growing at 
seven percent a year on average, which required a doubling of electric 
generating capacity every 10 years. In that business environment, 
bigger was better for new power plants. Larger plants meant greater 
economies of scale. Larger was also more complex, however, and that 
complexity coupled with other factors discussed subsequently created 
project management challenges. Construction times stretched out and 
economies of scale vanished with schedule delays and rising costs.
    Changing regulatory requirements and licensing difficulties added 
to the challenge of managing these large construction projects to 
schedule and budget, but licensing and regulatory requirements were not 
the sole cause of cost increases and schedule delays. Construction 
started before design work was complete. Some projects were managed by 
companies with no prior nuclear construction experience. Project 
planning and management tools equal to the complexity of the task did 
not exist at the time.
    Finally and of significant importance to the increasing cost, the 
first generation of nuclear power plants were built under difficult 
business and economic conditions. Growth in electricity demand slowed 
from six to seven percent a year to one to two percent in the mid-
1970s. Many utilities intentionally slowed construction. The prime rate 
reached 20 percent in the early 1980s. As project schedules stretched 
out, costs increased and companies were forced to borrow more at 
double-digit interest rates.
    Lessons Learned: Roadmap for a Successful Future.--The root causes 
of past construction delays are well understood and both industry and 
government have taken steps to ensure that past experience is not 
repeated.
    The licensing process has been restructured to increase efficiency 
and effectiveness and reduce uncertainty and financial risk. Today's 
plants were licensed under a two-step process: Electric utilities had 
to secure two permits--a construction permit to build the plant and a 
second operating license to operate it. Under the new process, all 
major safety and regulatory issues--reactor design, site suitability--
will be resolved before construction begins, and a company receives a 
single license to build and operate the plant. The use of certified 
standardized designs will also reduce licensing and construction times 
through repetition. Once a design has been certified, the NRC reviews 
will focus only on site suitability and plant operations. The industry 
is working together to ensure that the standardization carries over 
into their license applications, construction practices and operating 
procedures to fully enjoy the benefits of a standard fleet of plants.
    As construction proceeds, inspections and tests are performed to 
ensure the plant has been built in accordance with the approved design. 
These inspections, tests, analyses and acceptance criteria--or ITAAC--
are included in the plant's construction and operating license. ITAAC 
are a key risk-management tool. When the ITAAC are met, the NRC and the 
public know that the plant has been built according to its design and 
will operate safely.
    In addition to an improved licensing process, the next generation 
of nuclear plants built in the United States will benefit from an 
industry-wide inventory of lessons-learned. The roadmap for future 
success includes:

    Detailed design essentially complete before construction.--
Companies planning to build new nuclear plants intend to have virtually 
all detailed design complete before construction is started.
    Standardized, design-specific pre-build preparation.--Starting in 
2006, the nuclear industry formed design-centered working groups (DCWG) 
with each reactor vendor. These groups are charged with maintaining 
standardization within each reactor design, which will enhance 
licensing, preparation for construction and construction.
    Focus on quality assurance.--While quality assurance is a core 
competency at existing plants, in 2005, the U.S. nuclear industry 
formed a New Plant Quality Assurance Task Force. In conjunction with 
the Institute of Nuclear Power Operations (INPO), this task force is 
conducting a systematic lessons-learned review of past and present 
nuclear construction projects in the United States and around the 
world.
    Corrective action programs.--The industry is adapting the 
corrective action program (CAP), which is standard at operating plants, 
for use in new plant construction. A CAP includes a structured database 
to capture and categorize potentially safety-significant items, 
enabling constructors to identify and trend quality deficiencies, 
record that corrective action was taken, and report to the appropriate 
levels of management.
    Focus on safety culture as part of construction.--Safety culture, 
corrective action programs and programs that encourage employees to 
raise safety concerns are now an essential part of the operating 
philosophy at the 104 operating plants. The work force building new 
plants will have the same safety focus.
    Preparation for construction inspection.--In 2001, the U.S. nuclear 
industry formed a New Plant Construction Inspection Program Task Force 
comprised of utilities, reactor vendors and major construction 
companies. The task force is formulating guidance and developing 
programs and processes to implement the inspections, tests, analyses 
and acceptance criteria that the NRC will use to determine whether the 
plant is built according to the approved design and is ready to operate 
safely.
    Improved planning and construction management tools.--Project and 
construction management at new nuclear plants will benefit from a suite 
of sophisticated construction planning and management tools equal to 
the complexity of the task, none of which were developed when the last 
nuclear plants were built. Companies did not have computer-aided design 
(CAD) to enable design changes. Databases for tracking components and 
resources were not yet mature. Computerized tools that linked resources 
with design and construction schedules were in their infancy.
    Improved construction techniques.--Construction of new nuclear 
plants in the U.S. will also benefit from improved construction 
techniques (such as modular construction), many of which were developed 
overseas, for the U.S. nuclear navy or for other industries.
    Successful Track Record.--Recent construction and operational 
experience demonstrates that an experienced project management team--
with effective quality assurance and corrective action programs, with 
detailed design completed before the start of major construction, with 
an integrated engineering and construction schedule--can complete 
projects on budget and on schedule. The global nuclear industry, 
including the U.S. nuclear industry, has performed projects ranging 
from major upgrades to plant restarts to refueling outages efficiently, 
without delay. As recently as 1990, maintenance and refueling outages 
at U.S. reactors lasted more than 100 days; today's average is 37 days. 
There are other examples that provide confidence that new nuclear plant 
development in the United States will proceed smoothly:

   The Tennessee Valley Authority returned Unit 1 of its Browns 
        Ferry nuclear plant to commercial operation in May 2007. The 
        five-year, $1.8-billion project was completed on schedule and 
        only five percent over the original budget estimate, a 
        significant achievement during a period of rapidly escalating 
        commodity costs. The Browns Ferry 1 restart project was 
        comparable in complexity to the construction of a new nuclear 
        power plant. Most systems, components, and structures were 
        replaced, refurbished, or upgraded, and all had to be inspected 
        and tested.
   At the Fort Calhoun plant in Nebraska, Omaha Public Power 
        District replaced the major primary system components--steam 
        generators, reactor vessel head and rapid refueling package and 
        pressurizer--as well as the low pressure turbines, the main 
        transformer and hydrogen coolers, among other equipment. The 
        outage began in September 2006 and ended in December of that 
        year, lasting 85 days. The $417-million project was completed 
        approximately $40 million under budget and five days ahead of 
        schedule.
   Nuclear construction experience in South Korea over the last 
        15 years demonstrates the ``learning curve'' that can be 
        achieved. The ``first of a kind'' nuclear power plants--
        Yonggwang Units 3 and 4--were built in the mid-1990s in 64 
        months. The next two units--Ulchin 3 and 4--were built in 60 
        months at 94 percent of the ``first of a kind'' cost. The next 
        plants--Yonggwang 5 and 6--were built in 58 months for 82 
        percent of the ``first of a kind'' cost. By 2004, Ulchin 5 and 
        6 were built in 56 months for 80 percent of the ``first of a 
        kind'' cost. The next two plants--Shin-Kori 1 and 2--will be in 
        service next year. Construction duration: 53 months and 63 
        percent of what it cost to build Yonggwang 3 and 4. South 
        Korea's goal is a 39-month construction schedule.
   Nuclear power plants in Japan achieve construction schedules 
        similar to those in South Korea. The first two Advanced Boiling 
        Water Reactors built were constructed in times that beat the 
        previous world record and both were built on budget. 
        Kashiwazaki-Kariwa Unit 6 began commercial operation in 1996, 
        and Unit 7 began commercial operation in 1997. From first 
        concrete to fuel load, it took 36.5 months to construct Unit 6 
        and 38.3 months for Unit 7. Unit 6 was built 10 months quicker 
        than the best time achieved for any of the previous boiling 
        water reactors constructed in Japan.
   The Qinshan nuclear power plant in China consists of two 
        728-megawatt pressurized heavy-water reactors. First concrete 
        was placed on June 8, 1998. Unit 1 began commercial operation 
        on December 31, 2002, 43 days ahead of schedule. The 
        construction period was 54 months from first concrete to full-
        power operation. Unit 2 began commercial operation on July 24, 
        2003, 112 days ahead of schedule.

    U.S. projects will also benefit from this learning curve in other 
countries, since most of the reactors being licensed in the United 
States will be built overseas prior to U.S. construction. South Texas 
Project Units 3 and 4, for example, are Advanced Boiling Water Reactors 
of the type already built in Japan. There are 44 nuclear plants under 
construction worldwide, and 108 more ordered or planned.
IV. Financial Challenges Facing the Electric Power Sector
    The U.S. electric industry faces a formidable investment challenge. 
Consensus estimates show that the electric sector must invest between 
$1.5 trillion and $2 trillion in new power plants, transmission and 
distribution systems, and environmental controls to meet expected 
increases in electricity demand by 2030. To put these numbers in 
perspective: the book value of America's entire electric power supply 
and delivery system today is only $750 billion, which reflects 
investments made over the last 60 years.
    Addressing the financing challenge will require innovative 
approaches. Meeting these investment needs will require a partnership 
between the private sector and the public sector, combining all the 
financing capabilities and tools available to the private sector, the 
federal government and state governments--particularly at a time when 
the electric sector is already showing some signs of stress.
    The financial crisis has forced investor-owned utilities to reduce 
capital spending for 2009 by approximately 10 percent, on average. The 
industry is experiencing downward pressure on equity returns, largely 
because rate increases have not kept pace with rising costs. Bond 
spreads are also wider (in some cases, significantly wider) and, 
although all-in debt costs are not dramatically higher because yields 
on Treasuries are so low, the cost of debt will be significantly higher 
than historical norms when Treasury yields recover if bond spreads 
remain at current levels. Industry leverage is beginning to rise--not 
to the levels seen in 2003, when debt represented about 61 percent of 
the investor-owned utilities' capital structure--but it has increased 
somewhat over the last three years and debt now represents about 56 
percent of industry capital structure.
    In summary, the electric power sector is in the early stages of a 
major, 20-year capital investment program, and is not as well 
positioned for these capital expenditures as it was in the 1970s and 
1980s when it last undertook a major capital expansion program.
    For new nuclear power plants, the financing challenge is 
structural. Unlike the many consolidated government owned foreign 
utilities and the large oil and gas companies, U.S. electric power 
sector consists of many relatively small companies, which do not have 
the size, financing capability or financial strength to finance power 
projects of this scale on their own, in the numbers required. Loan 
guarantees offset the disparity in scale between project size and 
company size. Loan guarantees allow the companies to use project-
finance-type structures and to employ higher leverage in the project's 
capital structure. These benefits flow to the economy by allowing the 
rapid deployment of clean generating technologies at a lower cost to 
consumers. The recent stimulus bill recognized the need to provide 
access to low-cost capital to encourage rapid deployment of renewable 
energy projects. Similar support is required for nuclear energy since, 
in many cases, new nuclear plants and renewable energy projects are 
built by the same utilities.
    Loan guarantees are a powerful tool and an efficient way to 
mobilize private capital. The federal government manages a loan 
guarantee portfolio of approximately $1.1 trillion to ensure necessary 
investment in critical national needs, including shipbuilding, 
transportation infrastructure, exports of U.S. goods and services, 
affordable housing, and many other purposes. Supporting investment in 
new nuclear power plants and other critical energy infrastructure is a 
national imperative.
    The loan guarantee program created by title XVII of the Energy 
Policy Act is an essential and appropriate mechanism to enable 
financing of clean energy technologies. In fact, an effective and 
workable loan guarantee program is significantly more important today 
than it was when the Energy Policy Act was enacted in 2005.
    The title XVII program currently includes 10 technologies that are 
eligible for loan guarantees. They include renewable energy systems, 
advanced fossil energy technology (including coal gasification), 
hydrogen fuel cell technology for residential, industrial, or 
transportation applications, advanced nuclear energy facilities, 
efficient electrical generation, transmission, and distribution 
technologies, efficient end-use energy technologies, production 
facilities for fuel efficient vehicles, including hybrid and advanced 
diesel vehicles, and pollution control equipment. Each of these 
technologies presents different financing challenges.
    The financing challenges are, of course, somewhat different for the 
regulated integrated utilities than for the merchant generating 
companies in those states that have restructured. But these challenges 
can be managed, with appropriate rate treatment from state regulators 
or credit support from the federal government's loan guarantee program, 
or a combination of both.
    Supportive state policies include recovery of nuclear plant 
development costs as they are incurred, and Construction Work in 
Progress or CWIP, which allows recovery of financing costs during 
construction. Many of the states where new nuclear plants are planned--
including Florida, Virginia, Texas, Louisiana, Mississippi, North 
Carolina and South Carolina--have passed legislation or implemented new 
regulations to encourage construction of new nuclear power plants by 
providing financing support and assurance of investment recovery. By 
itself, however, this state support may not be sufficient. The federal 
government must also provide financing support for deployment of clean 
energy technologies in the numbers necessary to address growing U.S. 
electricity needs and reduce carbon emissions.
    The title XVII program also represents an innovative departure from 
other federal loan guarantee programs. It is structured to be self-
financing, so that companies receiving loan guarantees pay the cost to 
the government of providing the guarantee, and all administrative 
costs. For this reason, a title XVII loan guarantee program is not a 
subsidy. In a well-managed program, in which projects are selected 
based on creditworthiness, extensive due diligence and strong credit 
metrics, there is minimal risk of default, and minimal risk to the 
taxpayer. In fact, the federal government will receive substantial 
payments from project sponsors.
V. Policy Actions Necessary for New Nuclear Plant Development
            Financing
    Since enactment of the Energy Policy Act in August 2005, achieving 
workable implementation of the title XVII loan guarantee program has 
been a challenge. The implementation difficulties predate formation of 
the Loan Guarantee Program Office. In fact, NEI is impressed with what 
a relatively small staff in the Loan Guarantee Program Office, 
operating under chronic budgetary constraints, have been able to 
accomplish in the time--slightly more than a year--that they have been 
at work.
    Despite this significant progress, implementation of the program by 
the Executive Branch continues to be difficult, for reasons outside the 
control of the Loan Guarantee Program Office. The staff is working to 
address problems with the regulations governing this program that were 
promulgated by the Department of Energy in 2007, but one of the major 
difficulties stems from an unnecessarily narrow and restrictive reading 
of the original statutory language by the DOE Office of General 
Counsel. Section 1702(g)(2)(B) of title XVII asserts that ``[t]he 
rights of the Secretary, with respect to any property acquired pursuant 
to a guarantee or related agreements, shall be superior to the rights 
of any other person with respect to the property.'' This language can 
be misinterpreted as a prohibition on pari passu financing structures, 
and a requirement that the Secretary must have a first lien position on 
the entire project. Counsel for NEI and many of the project sponsors, 
with substantial experience in project finance, believe that Section 
1702(g)(2)(B) gives the Secretary a ``superior right'' to the property 
he guarantees, not to the entire project.
    The current interpretation of this language is thus a major 
obstacle to co-financing of nuclear projects. Projects financed as 
undivided interests cannot proceed if this interpretation stands. 
Financing from export credit agencies in other countries like France 
and Japan, would be equally difficult. This result makes little sense 
since such co-financing will leverage the existing loan volume of $18.5 
billion, and reduce the risk to which the Department of Energy is 
exposed.
    NEI is encouraged by Energy Secretary Steven Chu's intent, 
expressed before this committee during his confirmation hearing and at 
other times, to address the difficulties that have arisen during 
implementation of the title XVII loan guarantee program. Many of these 
problems can be corrected through rulemaking, and NEI understands that 
DOE is developing revised rules to address defects in the current rule 
and to implement the new loan guarantee program authorized in the 
economic stimulus legislation. The Energy and Natural Resources 
Committee can play a key oversight role in ensuring that the necessary 
revisions to the existing rule are promulgated quickly, and do not 
become entangled in internal Executive Branch procedural difficulties, 
as has happened so often in the past. If the necessary changes cannot 
be implemented through rulemaking, it will, of course, be necessary to 
seek statutory changes to accomplish the same purpose.
    Insufficient Loan Volume.--The title XVII loan guarantee program 
was an important step in the right direction. That program was designed 
to jump-start construction of the first few innovative clean energy 
projects that use ``technologies that are new or significantly improved 
. . . as compared to commercial technologies in service in the United 
States at the time the guarantee is issued.''\1\
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    \1\ AEnergy Policy Act of 2005, Section 1703(a)(2)
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    That goal remains as valid now as it was in 2005, but today the 
United States faces a larger, additional challenge--financing large-
scale deployment of clean energy technologies, modernizing the U.S. 
electric power supply and delivery system, and reducing carbon 
emissions. As noted earlier, this is estimated to require investment of 
$1.5-2.0 trillion between 2010 and 2030.
    The omnibus appropriations legislation for FY 2008 and FY2009 
authorizes $38.5 billion in loan volume for the loan guarantee 
program--$18.5 billion for nuclear power projects, $2 billion for 
uranium enrichment projects, and the balance for advanced coal, 
renewable energy and energy efficiency projects.
    DOE has issued solicitations inviting loan guarantee applications 
for all these technologies and, in all cases the available loan volume 
is significantly oversubscribed. For example, the initial nuclear power 
solicitation resulted in requests from 14 projects seeking $122 billion 
in loan guarantees, with only $18.5 billion available. NEI understands 
that 10 nuclear power projects submitted Part II loan guarantee 
applications, which represented $93.2 billion in loan volume. Two 
enrichment projects submitted Part II applications, seeking $4.8 
billion in loan guarantees, with only $2 billion available. NEI also 
understands that the solicitation for innovative coal projects resulted 
in requests for $17.4 billion in loan volume, more than twice the $8 
billion available.
    It is, therefore, essential that limitations on loan volume--if 
necessary at all in a program where project sponsors pay the credit 
subsidy cost--should be commensurate with the size, number and 
financing needs of the projects. In the case of nuclear power, with 
projects costs between $6 billion and $8 billion, $18.5 billion is not 
sufficient.
    The scale of the challenge requires a broader financing platform 
than the program envisioned by title XVII. An effective, long-term 
financing platform is necessary to ensure deployment of clean energy 
technologies in the numbers required, and to accelerate the flow of 
private capital to clean technology deployment.
    During the 110th Congress, Senator Bingaman introduced legislation 
to create a 21st Century Energy Deployment Corporation. Senator 
Domenici, ranking member of this committee during the last Congress, 
introduced legislation to create a Clean Energy Bank. Both proposals 
address aspects of the financing challenge facing the United States and 
its electric power industry.
    NEI believes that the existing title XVII program and the DOE Loan 
Guarantee Program Office, operating under workable rules, could serve 
as a foundation on which to build a larger, independent financing 
institution within the Department of Energy. There is precedent for 
such independent entities, equipped with all the resources necessary to 
accomplish their missions, in the Federal Energy Regulatory Commission 
and the Energy Information Administration. This approach could have 
significant advantages:

          1. An independent clean energy financing authority within DOE 
        could take advantage of technical resources available within 
        the Department, to supplement its due diligence on prospective 
        projects and to identify promising technologies emerging from 
        the research, development and demonstration pipeline that might 
        be candidates for loan guarantee support to enable and speed 
        deployment.
          2. An independent entity within DOE would have the resources 
        necessary to implement its mission effectively, including its 
        own legal and financial advisers with the training and 
        experience necessary for a financing organization. Providing 
        the independent entity with its own resources would eliminate 
        the difficulties encountered during implementation of the title 
        XVII program.
          3. Programmatic oversight in Congress would remain with the 
        Energy Committees, which have significantly more experience 
        with energy policy challenges, and in structuring the 
        institutions necessary to address those challenges.
            Development of a National Used Fuel Strategy
    Used nuclear fuel is managed safely and securely at nuclear plant 
sites today, and can be managed safely and securely for an extended 
period of time. For this reason, used nuclear fuel does not represent 
an impediment to new nuclear plant development in the near term. It is, 
however, an issue that must be addressed for the long-term.
    The Administration has made it clear that Yucca Mountain ``is not 
an option.''
    The nuclear industry's position on used fuel management is clear:

   The Nuclear Waste Policy Act establishes an unequivocal 
        federal legal obligation to manage used nuclear fuel, and 
        remains the law of the land. Until that law is changed, the 
        nuclear industry believes the NRC's review of the Yucca 
        Mountain license application should continue.
   If the Administration unilaterally decides to abandon the 
        Yucca Mountain project without enacting new legislation to 
        modify or replace existing law, it should expect a new wave of 
        lawsuits seeking further damage payments and refunds of at 
        least $22 billion in the Nuclear Waste Fund already collected 
        from consumers that has not been spent on the program.
   Given the uncertainties associated with the Yucca Mountain 
        project, DOE should reduce the fee paid by consumers to cover 
        only costs incurred by DOE, NRC and local Nevada government 
        units that provide oversight of the program.
   A credible and effective program to manage used nuclear fuel 
        must include three integrated components: interim storage of 
        used nuclear fuel at centralized locations, technology 
        development necessary to demonstrate the technical and business 
        case for recycling used nuclear fuel and, ultimately, the 
        licensing of a permanent disposal facility.

    The nuclear energy industry supports creation by the Executive 
Branch of a bipartisan blue-ribbon commission of credible experts to 
undertake a reassessment of the federal government's program to manage 
used nuclear fuel, and produce a roadmap for a sustainable long-term 
program.
            Regulatory Effectiveness and Predictability
    An objective, effective Nuclear Regulatory Commission is a key 
factor in ensuring safe and secure operation of the 104 operating 
nuclear generating plants. An objective regulatory process--i.e., a 
process that is safety-focused and performance-based--will ensure that 
nuclear plant operators remain focused on safety-significant issues and 
that management attention is not diverted by matters of low safety or 
security significance. For new nuclear plants, a central element of the 
regulatory process is a predictable licensing process for the review 
and inspection of new reactor designs and new construction. The 
industry and the financial community must have confidence that the 
licensing process provides the level of predictability necessary to 
support large capital investments.
            Research and Development
    NEI appreciates this committee's recognition--in the draft research 
and development legislation published recently--of the strategic 
importance of increased funding for research and development. 
Substantial increases in energy R&D investment will be necessary in the 
years ahead to create a sustainable electric supply infrastructure. 
Unfortunately, recent trends are in the opposite direction. In a 2007 
analysis, the Government Accountability Office found that DOE's budget 
authority for renewable, fossil and nuclear energy R&D declined by over 
85 percent (in inflation-adjusted terms) from 1978 through 2005. The 
need for new technologies to address critical energy needs has not 
diminished over the same time period, however, nor have the energy and 
environmental imperatives facing the United States become any less 
urgent.
    The Electric Power Research Institute (EPRI) has estimated that the 
United States must increase investment in energy R&D by $1.4 billion 
annually between now and 2030 to develop and demonstrate the technology 
portfolio necessary to bring electric sector carbon emissions back to 
1990 levels by 2030. That additional cumulative investment of 
approximately $32 billion in R&D would reduce by $1 trillion the cost 
to the U.S. economy of bringing electric sector emissions back to 1990 
levels, according to EPRI's analysis.
    A robust research and development program is necessary if nuclear 
energy is to realize its full potential in the nation's energy 
portfolio. In 2008, the directors of the 10 DOE national laboratories, 
including now Secretary of Energy Chu, published a report recognizing 
that ``nuclear energy must play a significant and growing role in our 
nation's energy portfolio in the context of broader global energy, 
environmental, and security issues.'' The report also expressed support 
for the required R&D effort: ``The national laboratories, working in 
collaboration with industry, academia, and the international community, 
are committed to leading and providing the research and technologies 
required to support the global expansion of nuclear energy.''
    The report from the national laboratory directors identified areas 
of research that were incorporated, earlier this year, into a 
comprehensive strategy for nuclear R&D developed by EPRI and the Idaho 
National Laboratory. NEI supports the R&D priorities identified:

   Maintaining the high performance of today's light water 
        reactors and extend their operating life beyond 60 years, to 80 
        years. R&D will be required, among other items, to develop 
        advanced diagnostic and maintenance techniques, to extend 
        component life and introduce new technologies, and to enhance 
        fuel reliability and performance.
   Completing the cost-shared government-industry Nuclear Power 
        2010 Program, to complete the design and engineering work that 
        will support the nuclear plants on track to start construction 
        over the next several years.
   Developing proliferation-resistant recycling technologies 
        that will capture the vast amount of energy that remains in 
        used nuclear fuel and reduce the volume and toxicity of the 
        waste by-product that requires permanent disposal.
   Developing high-temperature gas-cooled reactors to produce 
        electricity and for non-electric applications. High-temperature 
        reactors can reduce greenhouse gas emissions from large-scale 
        process heat operations in the petroleum and chemical 
        industries currently fired by liquid fuels and natural gas. 
        This technology will also be capable of producing hydrogen 
        economically for fuel-cell vehicles and industrial 
        applications, as well as desalinating water cost-effectively.

    The national laboratory directors, EPRI and INL point out that the 
leadership position of the U.S. in the global nuclear enterprise is at 
stake. Participation in the development of advanced nuclear energy 
technologies will allow the U.S. to influence energy technology choices 
around the world, and to ensure that non-proliferation regimes are in 
place as other countries develop commercial nuclear capabilities. 
Therefore, technical leadership is in the interest of the 
Administration, the congress, and the industry.
            Supply Chain
    During the 1970s, the United States had the manufacturing 
capability to produce the large vessels, steam generators and other 
components necessary for nuclear power plant construction. Much of that 
capability--and the associated jobs--moved offshore over the last 30 
years.
    In the nuclear sector, there are signs that U.S. manufacturing 
capability is being rebuilt. In North Carolina, Indiana, Pennsylvania, 
Virginia, Tennessee, Louisiana, Ohio and New Mexico, among other 
states, U.S. companies are adding to design and engineering staff, 
expanding their capability to manufacture nuclear-grade components, or 
building new manufacturing facilities and fuel facilities--partly in 
preparation for new reactor construction in the United States, partly 
to serve the growing world market.
    Last year, for example, AREVA and Northrop Grumman Shipbuilding 
formed a joint venture to build a new manufacturing and engineering 
facility in Newport News, Va. This $360-million facility will 
manufacture heavy components, such as reactor vessels, steam generators 
and pressurizers. Global Modular Solutions, a joint venture of Shaw 
Group and Westinghouse, is building a fabrication facility at the Port 
of Lake Charles to produce structural, piping and equipment modules for 
new nuclear plants using the Westinghouse AP1000 technology. In New 
Mexico, LES is well along with construction of a $3-billion uranium 
enrichment facility, scheduled to begin production this year. Even for 
ultra-heavy forgings, Japan Steel Works is expanding capacity, and 
companies in South Korea, France and Great Britain are planning new 
facilities.
    Although progress in this area is encouraging, federal government 
policy could accelerate the process of creating new jobs and generating 
economic growth. Specifically, the expansion and extension of 
investment tax credits for investments in manufacturing provided in the 
stimulus would ensure continued expansion of the U.S. nuclear supply 
chain and help restore U.S. leadership in this sector.
            Work Force
    The U.S. nuclear industry recognizes the critical importance of a 
skilled, well-trained and dedicated work force to operate and maintain 
the 104 nuclear plants that supply 20 percent of America's electricity, 
and to build and operate new nuclear plants in the years ahead.
    The nuclear industry is working with the federal government, state 
governments, universities and community colleges, high schools, labor 
unions, utilities, other trade associations and professional 
organizations to address the work force challenge.
    Electric utilities have created 42 partnerships with community 
colleges to train the next generation of nuclear workers. The industry 
is developing standardized, uniform curricula to ensure that graduates 
will be eligible to work at any nuclear plant. Sixteen states have 
developed programs to promote skilled craft development. Enrollment in 
nuclear engineering programs has increased over 500 percent since 1999. 
Grant programs from the NRC, the Department of Energy, the Department 
of Labor and the Department of Defense for education and training are 
having a major impact on increasing our trained workforce.
    NEI commends Senators Bingaman and Murkowski for the attention to 
workforce development in the draft legislation published recently on 
research and development. As with the nuclear supply chain, targeted 
tax credits to encourage companies to invest in apprenticeship programs 
and other work force development would accelerate job creation and 
training in the nuclear energy sector.
VI. Conclusion
    In conclusion, the need for advanced nuclear plants is well 
established. Nuclear energy clearly can and must play a strategic role 
in meeting national environmental, energy security and economic 
development goals. The nuclear energy industry has a limited and well-
defined public policy agenda to ensure our nation continues to derive 
the benefits that nuclear power provides. Those policy conditions 
include:

          1. near-term actions to ensure that the title XVII loan 
        guarantee program is working as intended, and creation of a 
        broader, permanent financing platform to ensure access to 
        capital for the large-scale deployment of advanced technologies 
        including nuclear facilities that will reduce carbon emissions,
          2. a sustainable strategy for the management and ultimate 
        disposal of used nuclear fuel,
          3. an effective and predictable licensing process, and
          4. a research and development program that will allow the 
        nation to meet environmental goals and provide leadership on 
        issues related to expansion of nuclear technology and non-
        proliferation.
    Mr. Chairman, thank you for the opportunity to testify, and this 
completes my testimony.

    The Chairman. Thank you very much.
    Dr. Cochran, go right ahead.

   STATEMENT OF THOMAS B. COCHRAN, PH.D., SENIOR SCIENTIST, 
 NUCLEAR PROGRAM, AND CHRISTOPHER E. PAINE, DIRECTOR, NUCLEAR 
        PROGRAM, NATURAL RESOURCES DEFENSE COUNCIL, INC.

    Mr. Cochran. Mr. Chairman, Ranking Member Murkowski, 
Senator Udall, Senator Sessions, thank you for providing the 
Natural Resources Defense Council the opportunity to present 
its views on several current issues related to nuclear energy.
    Our testimony focuses on three issues--whether additional 
Federal loan guarantees should be provided to construct new 
nuclear power plants, whether the United States should engage 
in reprocessing of spent nuclear fuel, and whether Congress 
should intervene in the Nuclear Regulatory Commission's 
proposed rulemakings on temporary storage of spent fuel and the 
so-called waste confidence rule.
    Turning to the first issue, Congress should not provide 
additional loan guarantees to construct new nuclear plants. 
Sufficient nuclear loan guarantee authority already exists to 
accomplish the legitimate public purpose that is involved 
here--namely, to shift much of the downside financial risk 
involved in the initial commercial deployment of new or 
significantly improved low-carbon energy technologies from 
private interests to the Federal taxpayers.
    To avoid serious and lasting distortion of the U.S. energy 
marketplace and an economically inefficient decarbonization 
effort, nuclear loan guarantees should be limited to the lead 
units of new nuclear plant designs not previously deployed in 
the United States or in similar markets abroad with comparable 
regulatory requirements. These designs must incorporate 
substantial design innovations promising improved safety, 
increased operating efficiency, significantly reduced capital 
costs, and lower environmental impacts.
    In our view, few, if any, of the Generation III+ reactors 
being proposed today plausibly meet this description. But if 
any of them do, it could only be the lead units of new passive 
safety, small-footprint, less capital-intensive designs that 
have not yet been deployed elsewhere. Fitting this description 
currently are the AP1000 and the ESBWR. Possibly later, the 
very high-temperature gas-cooled reactor under development by 
the Department of Energy might also qualify.
    But even here, we find there are currently three regulated 
utilities, each proposing to add two AP1000 units to their 
respective rate bases. These do not appear to require loan 
guarantees for financing, or at least full loan guarantee 
coverage at 80 percent of the total project cost.
    Thus, we believe the $18.5 billion is already sufficient to 
support construction of more than just the lead units of the 
innovative standardized reactor designs currently available to 
the United States market. Therefore, no additional loan 
guarantee authority is needed.
    More loan guarantee support to underwrite the U.S. market 
penetration of additional designs already deployed or under 
construction in foreign markets would only further distort the 
energy marketplace and undermine the goal of design 
standardization, which is a widely shared objective of DOE, 
NRC, the nuclear industry, and others concerned about the 
future effectiveness of NRC safety regulations.
    Federal loan guarantees should not be abused to insulate an 
entire industry from competition with a host of new energy 
technologies that promise comprehensive environmental and 
social benefits. Unlike improvements in efficiency and 
renewable technologies, nuclear power is a decarbonization 
solution packaged with a host of noncarbon environmental, 
security, and waste problems.
    For these reasons, nuclear power should not be considered 
for inclusion in any renewable electric standard Congress may 
legislate.
    Turning to the second issue, the Federal Government should 
not encourage or support commercial spent fuel reprocessing. 
Reprocessing of commercial spent fuel, as it is practiced today 
in France, Russia, and Japan, offers no advantages and numerous 
disadvantages over continuing to rely on the once-through 
nuclear fuel cycle as practiced in the United States and most 
countries with nuclear power plants. The trend in recent years 
has been for more countries to abandon reprocessing than to 
initiate reprocessing.
    Relative to the existing open fuel cycle, the use of a 
closed or partially closed MOX fuel cycle in thermal reactors 
has proven to be more costly, less safe, leads to greater 
routine releases of radioactivity into the environment, greater 
worker exposure to radiation, larger inventories of nuclear 
waste that must be managed, and it does not appreciably reduce 
the geologic repository requirements for spent fuel or high-
level waste.
    Putting aside for the moment the serious proliferation and 
security concerns involved in any future global shift toward 
reprocessing, it is clear that combating climate change is an 
urgent task that requires near-term investments yielding huge 
decarbonization dividends in a 5- to 20-year timescale. For 
thermal reactors, the closed fuel cycle is unlikely ever to be 
less costly than the once-through fuel cycle, even assuming 
significant carbon controls.
    But setting aside even these near-term cost barriers, 
commercial viability for a closed fuel cycle employing fast 
reactors is an even longer-term proposition. So even fervent 
advocates of nuclear power need to put the reprocessing agenda 
aside for a few decades and focus on swiftly deploying and 
improving the low-carbon energy solutions.
    Spent fuel reprocessing, plutonium recycle, and fast 
reactor transmutation are currently uneconomical, high-risk, 
100-year answers to an urgent climate question that now 
requires low-risk, 5- to 10-year solutions. For now, Congress 
and the new Administration should terminate the Global Nuclear 
Energy Partnership program of the Department of Energy and its 
associated efforts to close the nuclear fuel cycle and 
introduce fast burner reactors into the United States.
    Finally and very quickly turning to the last issue, as the 
political sun sets on the proposed Yucca Mountain project, the 
Federal Government needs to begin identifying alternative 
geologic disposal sites for the country's nuclear waste. 
Congress should initiate a search for a new geologic--one or 
more new geologic repository sites for the disposal of spent 
fuel and to assure adequate Federal funding--ensure that 
adequate Federal funding is available to retain the technical 
community associated with the Yucca Mountain project so that 
this expertise will be available to assess and develop new 
proposed geologic waste disposal sites.
    Congress should not interfere in the NRC's ongoing waste 
confidence and temporary storage rulemakings and let this 
regulatory body attempt to fulfill its independent regulatory 
mandate.
    Thank you very much, Mr. Chairman. I would be pleased to 
answer questions.
    [The prepared statement of Mr. Cochran follows:]

   Prepared Statement of Thomas B. Cochran, Ph.D. Senior Scientist, 
 Nuclear Program, and Christopher E. Paine, Director, Nuclear Program, 
                Natural Resources Defense Council, Inc.
I. Introduction
    Mr. Chairman and members of the Committee, thank you for providing 
the Natural Resources Defense Council (NRDC) the opportunity to present 
its views on several current issues related to nuclear energy. NRDC is 
a national, non-profit organization of scientists, lawyers, and 
environmental specialists, dedicated to protecting public health and 
the environment. Founded in 1970, NRDC serves more than 1.2 million 
members and supporters with offices in New York, Washington, D.C., Los 
Angeles, San Francisco, Chicago and Beijing.
    Our testimony focuses on three issues: a) whether additional 
federal loan guarantees should be provided to construct new nuclear 
power plants; b) whether the United States should engage in 
reprocessing of spent nuclear fuel; and c) whether Congress should 
intervene in the Nuclear Regulatory Commission's proposed rulemakings 
on temporary storage of spent fuel and so-called ``waste confidence,'' 
that is, whether sufficient confidence exists today in our long-term 
ability to isolate spent fuel from the biosphere that we can 
responsibly license new reactors that will add to the nuclear waste 
burden.\1\
---------------------------------------------------------------------------
    \1\ NRC, Consideration of Environmental Impacts of Temporary 
Storage of Spent Fuel After Cessation of Reactor Operation (hereinafter 
``Proposed Temporary Storage Rule'') 73 Fed. Reg. 59547 (October 9, 
2008), and Waste Confidence Decision Update, (hereinafter ``Proposed 
Waste Confidence Rule'') NRC, 73 Fed. Reg. 59551 (October 9, 2008).
---------------------------------------------------------------------------
II. Summary of Recommendations
    A. Loan Guarantees.--Congress should not provide additional loan 
guarantees to construct new nuclear plants. Sufficient nuclear loan 
guarantee authority already exists to accomplish the legitimate public 
purpose that is involved here. Let us define here what we believe to be 
the legitimate purpose of loan guarantees--they are intended to shift 
much of the downside financial risk involved in the initial commercial 
deployment of new or significantly improved low-carbon energy 
technologies from private interests to federal taxpayers.
    Since the underlying light-water reactor technology to be supported 
by these guarantees has been around for 45 years, has been the prior 
recipient of many tens of billions of dollars in government support, 
and already accounts for 20% of U.S. grid-connected power generation, 
the technology innovation case for nuclear loan guarantee support is 
weak, and at best, a very narrow one. To avoid serious and lasting 
distortion of the U.S. energy marketplace and an economically 
inefficient decarbonization effort, nuclear loan guarantees should be 
limited to the lead units of new nuclear plant designs, not previously 
deployed in the United States or in similar markets abroad with 
comparable regulatory requirements. These designs must incorporate 
substantial design innovations promising improved safety, increased 
operating efficiencies, significantly reduced capital costs, and lower 
environmental impacts.
    In our view, few if any of the Gen III + reactors being proposed 
today plausibly meet this description, but if any of them do, it could 
only be the lead units of new passive safety, smaller footprint, less 
capital intensive designs that have not yet been deployed elsewhere. 
Fitting that description currently are the AP-1000 and the Economic 
Simplified Boiling Water Reactor (ESBWR), and possibly later the Very 
High-Temperature Gas-Cooled Reactor (VHTGR), now in the early stages of 
development by the Department of Energy (DOE).
    But even here, we find that there are currently three regulated 
utilities, each proposing to add two AP1000 units to their respective 
rate bases, which do not appear to require loan guarantees for 
financing, or at least full loan guarantee coverage at 80% of total 
project cost. We believe that the $18.5 billion is already sufficient 
to support construction of more than just the lead units of the 
innovative standardized reactor designs currently available to the U.S. 
market, and therefore no additional loan guarantee authority is needed.
    More loan guarantee support to underwrite the U.S. market 
penetration of additional designs, already deployed or under 
construction in foreign markets, would only further distort the energy 
marketplace and undermine the goal of design standardization, which is 
a widely shared objective of the DOE, Nuclear Regulatory Commission 
(NRC), nuclear industry and others concerned about the future 
effectiveness of the NRC's safety regulation.
    Federal loan guarantees should not be abused to insulate an entire 
industry from competition with a host of new energy technologies that 
promise comprehensive environmental and social benefits. Unlike 
improvements in efficiency and renewable technologies, nuclear power is 
a decarbonization solution packaged with a host of non-carbon 
environmental, security, and waste problems. For these reasons, nuclear 
power should not be considered for inclusion in any ``Renewable 
Electricity Standard'' Congress may legislate.
    B. Spent Fuel Reprocessing.--The federal government should not 
encourage or support commercial spent fuel reprocessing. Putting aside 
for the moment the serious proliferation and security concerns involved 
in any future global shift toward reprocessing, it's clear that 
combating climate change is an urgent task that requires near term 
investments yielding huge decarbonization dividends on a 5 to 20 year 
timescale. For thermal reactors, the closed fuel cycle (spent fuel 
reprocessing and recycling plutonium) is unlikely ever to be less 
costly than the once-through fuel cycle, even assuming significant 
carbon controls. But setting aside such near-term cost barriers, 
commercial viability for a closed fuel cycle employing fast reactors is 
an even longer-term proposition. So even fervent advocates of nuclear 
power need to put the reprocessing agenda aside for a few decades, and 
focus on swiftly deploying and improving the low-carbon energy 
solutions.
    Think about it. In pursuit of closing the fuel cycle, the U.S. 
government could easily spend on the order of $150 billion over 15 
years just to get to the starting line of large-scale 
commercialization. But all that spending will not yield one additional 
megawatt of low-carbon electricity beyond what could be obtained by 
sticking with the current once-through cycle, much less by investing 
that $150 billion in renewable and efficient energy technologies. 
Spent-fuel reprocessing, plutonium recycle, and fast reactor waste 
transmutation are currently uneconomical, higher-risk, 100-year answers 
to an urgent climate question that now requires low-risk 5 to 20 year 
solutions. For now, Congress and the new Administration should 
terminate funding for the Global Nuclear Energy Partnership (GNEP) and 
its associated efforts to close the nuclear fuel cycle and introduce 
fast burner reactors in the United States.
    At any point along the way, Mr. Chairman, we can revisit this issue 
to assess whether there may be truly disruptive innovations in nuclear 
technology that would alter this negative assessment, and induce us to 
view closing the fuel cycle as a more cost-effective pathway to 
decarbonization than the host of cheaper alternatives we have available 
to us today.
    C. Nuclear Waste Disposal.--As the political sun sets on the 
proposed Yucca Mountain project, the federal government needs to begin 
identifying alternative geological disposal sites for the country's 
nuclear waste. Congress should initiate a search for a new geologic 
repository site for disposal of spent fuel, and insure that adequate 
federal funding is available to retain the technical community 
associated with the Yucca Mountain project, so that this expertise will 
be available to assess and develop new proposed geological waste 
disposal sites. The Congress should not interfere in the NRC's ongoing 
Waste Confidence and Temporary Storage rulemakings, and let this 
regulatory body attempt to fulfill its independent regulatory mandate.
III. Detailed Observations
            A. Loan Guarantees--Congress should not further subsidize 
                    the construction of new nuclear power plants and 
                    not provide additional loan guarantees for this 
                    purpose
    In the United States existing nuclear power plants operate 
efficiently and are profitable either because ratepayers long ago paid 
the piper for their stranded capital costs, or these assets were 
heavily discounted when corporate ownership changed in the 1990's and 
now are carried on the books of the new owners at a small fraction of 
their original asset value. The domestic nuclear power industry, 
however, is confronting two big economic dilemmas with respect to new 
nuclear plants. New plants remain uneconomical when compared to other 
electricity generating technologies and improvements in end-use 
efficiency; and the unit costs of new nuclear plants are so high that 
they are difficult to finance in the private capital markets, 
especially today.
    As a purely commercial proposition, when stripped of all the 
various forms of federal and state subsidies, new nuclear plants are 
likely to remain non-competitive with other forms of baseload 
generation in most areas of the country until the price of carbon 
emissions exceeds $50 per ton of carbon dioxide. We note, however, that 
efficiency and many renewable sources are competitive with nuclear now 
and will only become more so. To bridge this gap, the nuclear industry, 
through its congressional boosters, has already received production tax 
credits for the first 6,000 megawatts of new capacity, licensing cost 
sharing with DOE, ``regulatory risk'' insurance against delays in 
construction, and to date some $18.6 billion in federal loan authority 
to support the construction of new plants. In addition, most new 
reactor projects are benefitting from additional subsidies and 
incentives, such as tax abatements and worker training programs, 
offered by state and county governments.
    Now the industry is returning to Congress for yet more support, 
essentially stipulating that nuclear power ``must be part of the energy 
mix'' needed to mitigate climate change and to provide for jobs under 
the economic stimulus plan. We should reject this categorical 
imperative, command economy type approach. It reminds us of the mindset 
we used to encounter in Minatom, the old Soviet Ministry of Atomic 
Energy. The economically efficient way to mitigate climate change is to 
internalize the cost of carbon emissions through a declining cap-and-
trade program, which NRDC strongly supports.
    This Committee should reject any broader attempt to use loan 
guarantees to recapitalize a technically mature industry, or to shift 
the overall terms of trade in the electricity marketplace in favor of 
nuclear power. This runs a serious risk of misdirecting investment 
capital away from commercialization of low-carbon energy technologies 
that are cheaper, cleaner, and more versatile than currently available 
nuclear power plants.
    Shifting the overall terms of energy commerce in favor of low-
carbon solutions, nuclear power included, is the task of a climate 
bill, not the federal loan guarantee program. At best, federal loan 
guarantees should be construed as bridging the gap between successful 
prototype development and a foothold in the commercial marketplace, by 
spreading the risk of the initial capital investments required to bring 
a new technology to commercial scale.
    But federal loan guarantees should not be abused to insulate an 
entire industry from competition with a host of new energy technologies 
that promise comprehensive environmental and social benefits. Unlike 
improvements in efficiency and renewable technologies, nuclear power is 
a decarbonization solution packaged with a host of non-carbon 
environmental, security, and waste problems. For these reasons, nuclear 
power should not be considered for inclusion in any ``Renewable 
Electricity Standard'' Congress may legislate.
    In sum, the economically inefficient way to mitigate climate change 
is to broadly subsidize deployment of currently available nuclear power 
plant technologies. This will crowd out or slow investment in improved 
energy efficiency, utility-scale renewable electricity supply, and 
decentralized smart-grid technologies that can mitigate climate change 
in less time, with less cost and risk. If Congress is unwilling or 
unable politically to let a climate bill do the work of sorting out the 
most cost-effective low-carbon energy technologies, one possible way to 
mitigate economic inefficiency would be to closely couple any 
additional federal loan guarantees for nuclear with utility commitments 
to phase out existing coal capacity, such that future electricity 
demand growth in the affected service area or regional grid must be met 
in the first instance by large improvements in less costly energy 
efficiency, and by the development of renewable sources having 
environmental impacts and a marginal cost of generation less than 
nuclear power.
    The idea that the nuclear and coal dependent Southeastern region of 
the United States is without renewable resources worthy of development 
is a gross distortion that needs to be dispelled. The region has vast 
distributed potential for photo-voltaic solar development, waste-heat 
cogeneration, bio-gasification, small hydro, and offshore wind. Above 
all, with the highest rates in the nation of energy consumption per 
unit of economic output, the region has a huge energy efficiency 
resource that can be tapped at far less cost than nuclear. The fact 
that the dominant utilities and electricity grid in that region are not 
currently structured to take advantage of these resources does not mean 
that they do not exist.
    We should not use loan guarantees, or any other federal subsidies, 
to promote the economically inefficient use of nuclear power ahead of 
low-carbon energy alternatives that will be available sooner, at lesser 
cost, and with fewer environmental impacts. Under a well designed cap 
and trade system with competitive open access to the transmission and 
distribution grid, if nuclear power is needed for decarbonization, the 
marketplace for low-carbon energy will get around to demanding more of 
it, but not before it has exhausted the potential of other available 
energy resources (including all cost-effective avenues for extracting 
energy savings from improvements in efficiency) that can displace 
CO2 at a lower cost per ton than nuclear power.
    An appropriate role for direct federal support of low-carbon energy 
is to underwrite research, development, and demonstration of 
meritorious new technologies that are unlikely to be developed by 
private industry acting alone, either because the return on the 
investment is too distant or because the investment risks are too high. 
Alternatively, society may reap benefits by using production or 
investment tax credits to more rapidly expand the market for beneficial 
emerging technologies, thereby helping to driving down unit costs of 
production to a level that allows the technology to become self-
sustaining in the marketplace.
    Further subsidization of new nuclear power plants does not meet 
either of these criteria. The first 6,000 megawatts of nuclear new-
build capacity are already covered by a production tax credit 
comparable to wind, and sufficient loan guarantee authority ($18.5 
billion) has already been made available to support construction of the 
first 'new' Gen TIT+ reactor designs proposed for the U.S. market--the 
Toshiba-Westinghouse AP1000 and the GE-Hitachi ESBWR. All other reactor 
designs proposed for construction in the United States either don't 
qualify as innovative, have already been constructed elsewhere, or 
both.
    Furthermore, loan guarantees are not essential for nuclear plants 
currently being developed by regulated utilities as evidenced by 
Progress Energy's efforts to build two new units in Levy County, 
Florida, Georgia Power's efforts to build two units (Alvin W. Vogle 
Units 3 and 4), and South Carolina Electric & Gas's efforts to build 
two units (Virgil C. Summer Units 2 and 3). All six of these proposed 
units are AP1000 designs.
    Finally, as NRC Chairman Dale E. Klein noted last week, the 
``excessive exuberance'' for nuclear power has declined because of the 
global credit and economic crisis. The current economic recession has 
reduced the projected demand for electricity and there is a reduced 
need to build new base-load electricity generating capacity.
            B. Reprocessing--The Federal Government should not 
                    encourage or support commercial spent fuel 
                    reprocessing
    Reprocessing of commercial spent fuel, as it is practiced today in 
France, Russia and Japan offers no advantages and numerous 
disadvantages over continuing to rely on the once-through nuclear fuel 
cycle as practiced in the United States and most countries with nuclear 
power plants. The trend in recent years has been for more countries to 
abandon reprocessing than to initiate reprocessing. Relative to the 
existing open fuel cycle, the use of a closed or partially closed 
mixed-uranium and plutonium oxide (MOX) fuel cycle in thermal reactors 
has proven to be more costly and less safe. It leads to greater routine 
releases of radioactivity into the environment, greater worker 
exposures to radiation, larger inventories of nuclear waste that must 
be managed, and it doesn't appreciably reduce the geologic repository 
requirements for spent fuel or high-level nuclear waste.
    Because reprocessing as it is practiced today does not appreciably 
reduce repository requirements it is not an alternative to Yucca 
Mountain. Should GNEP's advanced reprocessing technologies--essential 
to the success of the GNEP vision--prove technically feasible, they are 
unlikely to significantly impact repository requirements, because the 
fast reactors required for efficient waste transmutation are likely to 
remain more costly and less reliable than conventional thermal 
reactors, and hence will not be commercially deployed in sufficient 
numbers to effect the desired reductions.
    The GNEP vision of burning the long-lived actinides, requires that 
some 30 to 40 percent of all reactor capacity be supplied by fast 
reactors. In other words, for every 100 thermal reactors of the type 
used throughout the United States today, some 40 to 75 new fast 
reactors of similar capacity would have to be built. The commercial use 
of large numbers of fast reactors for actinide burning is unlikely to 
occur because--to borrow observations made by U.S. Navy Admiral Hyman 
Rickover more than 50 years ago that remain true today--fast reactors 
have proven to be ``expensive to build, complex to operate, susceptible 
to prolonged shutdown as a result of even minor malfunctions, and 
difficult and time-consuming to repair.''
    The development of fast reactors to breed plutonium failed in the 
United States, the United Kingdom, France, Germany, Italy, and Japan. 
We would argue it failed in the Soviet Union despite the fact that the 
Soviets operated two commercial-size fast breeder plants, BN-350 (now 
shut down in Kazakhstan) and BN-600 (still operational in Russia), 
because the Soviet Union and Russia never successfully closed the fuel 
cycle and thus never operated these plants using MOX fuel.
    Moreover, the advanced reprocessing technologies are even more 
costly than the conventional PUREX method and produce even larger 
inventories of intermediate and low-level nuclear wastes.
    The closed fuel cycle technologies required by GNEP pose greater 
proliferation risks than the once-through fuel cycle. Even though 
GNEP's ambitious vision of deploying new reprocessing plants and fast 
reactors in large numbers will surely fail to materialize, the 
partnership's research program will encourage the development in non-
weapon states of research facilities well suited for plutonium 
recovery, i.e., small hot cells and even larger reprocessing centers, 
as well as the training of experts in plutonium chemistry and 
metallurgy, all of which pose grave proliferation risks. It is for this 
reason that we advocate terminating the GNEP research on advanced 
reprocessing technologies.
    For now, Congress and the new Administration should terminate 
funding for the GNEP and its associated efforts to close the nuclear 
fuel cycle and introduce fast burner reactors in the United States. 
This leaves the question of what level of long-term DOE research 
funding is appropriate to explore advanced nuclear fuel recycling 
technologies.
    We hold the view that even substantial research spending in this 
area is unlikely to lead to disruptive nuclear technology breakthroughs 
that actually meet the stated goals of the research--cost-effective and 
non-proliferative techniques for reprocessing, recycling and 
transmuting plutonium-based fuels. And while the proliferation risks of 
this cooperative international research would be ongoing and tangible, 
we and many others in the nonproliferation community believe that 
shutting down the current U.S. plutonium recycle research effort, and 
any support it extends to foreign efforts, is the wisest course, at 
least until such time as the latent nuclear proliferation risk in the 
world is much better controlled than it is today.
    Others, including Energy Secretary Steven Chu, appear to believe 
that some level of ongoing advanced fuel cycle research is appropriate 
and has some chance of yielding the desired disruptive nuclear 
technology breakthrough, if pursued for perhaps a decade or more. 
History has not been very kind to this view, but the plutonium fuel 
cycle community is a lot like the fusion energy community in this 
respect--hope springs eternal as long as federal research dollars are 
within reach.
    So weighing these contrasting glass-half-full and glass half-empty 
perspectives, Mr. Chairman, you might conclude that some modest long-
term research program, geared to narrowing the technical and cost 
uncertainties surrounding the toughest unresolved technical, economic, 
safeguards, and proliferation issues, would be an appropriate and 
prudent middle path to pursue with respect to closing the fuel cycle. 
We would emphasize that even more important than the particular choice 
of technology is a better understanding of the requirements for the 
international institutional setting in which a large-scale fast reactor 
roll-out would be attempted. This, more than the technology, is the 
long pole in the closed fuel cycle tent. If one is serious about 
wanting to minimize the risks of proliferation, one is more or less 
driven to consider some form of international ownership and control 
over nuclear fuel cycle facilities, and this is likely to prove just as 
demanding a task as the development of more ``proliferation resistant'' 
strains of reprocessing. We also note that absent such an international 
structure for closely regulating the closed fuel cycle, we are unlikely 
ever to transition to a world free of nuclear weapons.
            C. Congress should not interfere in the NRC's ongoing Waste 
                    Confidence and Temporary Storage rulemakings
    The issue of whether and how the availability of permanent geologic 
disposal should factor into the NRC licensing of commercial nuclear 
power plants has been with us for decades. A compromise on how the 
issue would be addressed in a scientific and publicly acceptable manner 
was reached nearly twenty five years ago and the basic framework of 
that compromise has not changed substantially over the years.
    To make a long story short, in June of 1977, the NRC denied a NRDC 
petition that forced the question of whether there should be a 
rulemaking proceeding to determine whether high-level radioactive 
wastes generated in nuclear power reactors can be permanently disposed 
of without undue risk to public health and safety. NRDC then petitioned 
the United States Court of Appeals for the Second Circuit to review the 
NRC decision. The D.C. Circuit remanded the matter to the NRC for 
further proceedings to determine whether there was reasonable assurance 
that a permanent disposal facility will be found. This and a related 
case gave rise to the NRC's ``waste confidence'' rulemaking. The NRC 
issued a set of findings in 1984 and subsequently revised them in 1990, 
and reaffirmed them in 1999. The NRC is now revisiting the issue.
    The resolution of this issue properly remains with the NRC which 
was established to address health and safety issues associated with 
civil use of atomic energy. We would caution against intervention into 
this ongoing NRC decision-making process. It may be instructive to 
remind ourselves that the current failure to develop a geologic 
disposal facility for high level radioactive waste and spent fuel is 
due in large part to interventions by Congress subsequent to the 
passage of the Nuclear Waste Policy Act of 1982.

    The Chairman. Thank you both very much for your testimony.
    Mr. Fertel, I gather from your testimony you think the top 
priority for the nuclear power industry, as far as legislation 
might be concerned, would be fixing this loan guarantee 
program, getting this in a form that it is able to assist all 
of those that would like to go forward and construct these 
facilities. Is that an accurate understanding?
    Mr. Fertel. That is accurate, Mr. Chairman.
    The Chairman. Dr. Cochran has made the argument that these 
loan guarantees should be limited to the lead units of new 
nuclear plant designs and not made available to subsequent 
units that employ designs that have already been built. What is 
your response to that?
    Mr. Fertel. My response is quite straightforward on that, 
sir. As a Nation, we are looking to radically change our 
electricity supply system. We are looking to go to much lower 
carbon footprints for everything. We talk about smart grid. We 
are clearly moving toward renewables. We need to do more 
efficiency.
    There is no silver bullet. We basically need a portfolio 
that does all of these things very effectively, and the only 
large proven baseload source of electricity that doesn't emit 
carbon is nuclear. The reality is that if we are going to go to 
a low-carbon footprint across our electricity system, it won't 
happen in 5 years, as Tom is saying. It will take us much 
longer.
    But to do that, we are going to have to finance large 
projects, and there is advantage from a public policy 
standpoint to loan guarantees, which I will explain. If I 
leverage--if I am a merchant plant in a State that actually has 
deregulated, I would actually leverage more debt to equity. If 
I had loan guarantees, I would be able to do that.
    That reduces the cost of electricity to our customers. So 
it helps there. It helps us deploy quicker, whether it is 
nuclear or renewables or anything else.
    The third thing right now in title XVII, the way you wrote 
it, sir, we actually pay the Government for the loan 
guarantees. It is not a gift. You actually get money for it. 
The companies want to deploy nuclear and they will ultimately 
maybe get financing in the open market, but in our economic 
situation today, you are not going to get a lot of financing 
for anything.
    So it is good public policy, in our opinion, if you are 
trying to move our electricity system in a different way and 
moderate the impact on customers.
    The Chairman. Let me ask a question about this 
reprocessing. Is there any interest on the part of private 
companies, Mr. Fertel, as far as you know, in building fast 
reactors or reprocessing plants with private capital? Is there 
any move to do that?
    Mr. Fertel. There is clearly interest by a couple of the 
prime movers in that area over the last couple of years because 
of the Bush Administration discussing of GNEP, and they have 
been looking at it as a business case. Where I agree with Tom 
is it won't happen fast, and it doesn't have to happen fast.
    But we do need to look at what we should do if we do want 
to close the fuel cycle in this country, and I think Tom may be 
wrong in his premise that the rest of the world won't continue 
to look at reprocessing. If we want to influence them on 
technology, on safety, on environmental, and on 
nonproliferation issues, you can't do it when you say we don't 
care to do it, and we think you shouldn't. You have to engage.
    The Chairman. Dr. Cochran, let me ask you about this NRC 
waste confidence rulemaking. You suggest that Congress stay out 
of that. Do you believe, in light of the current state of the 
repository program, that the NRC can reasonably expect a 
repository to be available even in this timeframe of 50 to 60 
years after the 60-year operating life of a reactor?
    Mr. Cochran. I believe that is such a long time that I 
don't think any answer would be meaningful. First of all, half 
the nuclear power plants have extended their licenses for 60 
years. The other half are expected to apply and extend their 
licenses. They are already beginning to think about a second 
extension to 80 years, and then you add on another 50 to 60 
years beyond that, you are well beyond 100 years into the 
future.
    Now do I have confidence that we will find a solution 
within the next 100 years? Let us review the history. Yucca 
Mountain is not the first failure to find a solution to the 
spent fuel or high-level waste disposal. It is actually the 
third failure in the last 50 years.
    The first failure, you recall, was efforts by the AEC to 
dispose of high-level waste at Lyons, Kansas, in a salt 
repository. When that program was terminated because the site 
proved to be less attractive than initially thought, the newly 
formed ERDA/Department of Energy proposed--this was, I think, 
during the Carter Administration--a retrievable surface storage 
facility solution, where we would gather up all the fuel and on 
an interim basis store it in one large central pool or pools.
    That proposal was also shot down and abandoned, and that 
led to the nuclear--development of a new alternative and the 
passage of the Nuclear Waste Policy Act of 1982. In that case, 
we supported that act. It set up a beautiful system where one 
Federal agency, the Department of Energy, was to go out and 
find the best sites in the Nation and narrow it down to two.
    A second Federal agency, the EPA, was to independently 
develop criteria for safe disposal of the waste in the 
repository. The third Federal agency, the Nuclear Regulatory 
Commission, would make the decision.
    In the intervening years, the Department of Energy and the 
Congress corrupted the site selection process, and it led to 
singling out Yucca Mountain. In the intervening years, the EPA 
took decades to finalize the criteria, and they corrupted that 
process as well. So, you have ended up with now a political 
solution that is essentially eliminating Yucca.
    Will that happen again? Perhaps. I think it is incumbent 
upon us--because the large inventories of spent fuel exist and 
geologic disposal is still the best solution for long-term 
disposal of this material, it is incumbent upon us to 
immediately start to identify new geologic repositories. We are 
going to lose a couple of decades if we simply cutoff the 
funding for the technical people who know this issue best so 
that they are not around to help us engage in identifying the 
best options under plan B.
    The Chairman. Thank you very much.
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    Interesting panel. Very seldom do we have just two, and 
really, you couldn't be on----
    Mr. Fertel. So close together, right?
    [Laughter.]
    Senator Murkowski. So close together. That is right. 
Anyway, it has been interesting hearing the comments from both 
of you.
    Mr. Fertel, first to you, you have--we all recognize that 
the number of applications that Department of Energy has 
received for the loan guarantees far exceeds, $93 billion as 
opposed to the $18.5 billion that is currently available and 
limited to.
    What does NEI believe that the authorized loan volume needs 
to be in order to get the nuclear industry reestablished?
    Mr. Fertel. That is an excellent question, Senator, and we 
are trying to get a better handle. I mean, you have an 
indication by just what was filed.
    Senator Murkowski. Right.
    Mr. Fertel. Which is $93 billion by the 10. You shouldn't 
look at that as 10 plants. We are not privy to what they filed, 
but I am sure there are multiple units in those filings. It is 
not 10 applications, 10 single units.
    I think the difference, again, is that the program that the 
2005 act put in place was a program that Tom described very 
well. It was to jumpstart some new technologies.
    I think the situation is a structural problem that we are 
trying to address, which is the ability of our Nation to 
privately finance large projects and particularly when the 
companies are the size of our electric utilities. They are not 
the size of Electricite de France or some of the German 
companies, which are almost 10 times at times the size of some 
of our companies that you can't finance as easily or at all in 
some cases.
    So Government intervention to support it actually has 
merit. Right now, the program is $111 billion, of which $18.5 
billion is for nuclear. The rest goes to renewables and other 
technology.
    So we ought to be clear. Nuclear is not running away with 
the bulk of the money in the current program, but I think you 
have an indication from what has been filed.
    Senator Murkowski. You made a statement that I want to 
follow up with because I made the suggestion at a hearing that 
we had last week that the Administration's actions with regard 
to Yucca could be viewed as a disincentive to those in the 
industry to pursue new applications to advance this nuclear 
renaissance that we have been talking about.
    You have suggested here this morning that you don't think 
that that is necessarily the case, and I appreciate that. But 
let me ask you this. If, in fact, we do not get a strong signal 
from the Administration that they believe--let us say that they 
trend toward Dr. Cochran's view that, in fact, the loan 
guarantees are perhaps not that necessary or perhaps we do not 
need to increase the amount.
    You have that message coupled with the message on Yucca. 
What does that do to the growth of the industry?
    Mr. Fertel. Yes, I think it immediately causes some of the 
companies to slow down because they can't finance some without 
loan guarantees. You would probably lose the merchant plants 
just as a business decision.
    I think that in other boardrooms, you would have the board 
of directors sitting and saying, ``Well, where is the 
Administration on this, and what do we do?'' So I think, 
clearly, the combination would have to slow down any deployment 
of new nuclear.
    My comment on the waste issue is that you always had the 
possibility, and Chairman Klein referred to it, of Yucca not 
getting licensed. We think that there is great technical stuff 
and they have worked so hard and they have worked so long, but 
that was always a possibility. You would then have to go find 
another location.
    So that was always out there. As the chairman said, they 
will make sure you manage safely and securely the used fuel 
onsite or at any other location we put it. So we would say you 
could go forward if it was just waste, as long as there is an 
effort by our country to do something.
    With Senator Bingaman back in his question to Tom about 
waste confidence, let me just add maybe a perspective on waste 
confidence that you don't usually hear. The reason NRC has the 
waste confidence rulemaking is because of NEPA. It is to allow 
them to deal with the issue of waste, which is an environmental 
issue as well as a safety issue under NEPA.
    This is a personal opinion. We have a law. We may not be 
implementing it very effectively, but it is the law. It would 
seem to me that if the Federal Government passes a law that 
says we are going to ultimately deal with waste--Tom is right--
eventually, we should ultimately deal with the waste.
    I am not sure they should litigate that either through a 
waste confidence rulemaking or through individual proceedings 
in regulatory. I think you could legislatively say you have 
waste confidence because otherwise you don't believe our 
Government will ever implement what it says it is going to do.
    Now I think NRC is accommodating the process very well by 
doing a very robust rulemaking and then relying on it. But that 
is why they have to deal with it, because of NEPA.
    Senator Murkowski. My time has expired. But if I may, Mr. 
Chairman, just one question of Dr. Cochran?
    Because you have very clearly articulated your perspective 
that we should not expand the nuclear loan guarantee program, 
we should not pursue the spent fuel reprocessing. You have seen 
the President's blueprint in terms of the goals that he is 
looking to for climate change and reduction in emissions. He is 
looking for an 83 percent reduction in emissions by 2050. That 
is pretty aggressive.
    Do you believe that we can achieve the goals that he is 
setting out without nuclear?
    Mr. Cochran. First of all, we have nuclear. We have 104 
plants. They have been increasing their capacity factor and 
their capacity, and there will be more nuclear plants. So 
nuclear is in the mix, and nuclear is here to stay.
    Senator Murkowski. But when you say that, I want to follow 
on the question that I asked to Mr. Fertel.
    Mr. Cochran. I want to finish my answer.
    Senator Murkowski. If, in fact, we do not have an increase, 
if we just stay at our 104, can we get there from here?
    Mr. Cochran. Let us put in place the policies that will 
achieve a priority objective, which is to mitigate climate 
change. The economically efficient, most efficient way to do 
that is to treat carbon as you would any other pollutant.
    So, the highest priority is to get Federal legislation to 
implement a cap and trade program on carbon, a meaningful cap 
and trade program. We should solve the climate issue by dealing 
with the pollutant, not by going out and subsidizing your 
favorite technologies.
    There is a role for Federal subsidies. There is a role for 
loan guarantees.
    Senator Murkowski. That is clearly what we are doing.
    Dr. Cochran. But it is not to, as Mr. Fertel wants to do, 
provide unlimited loan guarantees to all the nuclear plant 
owners and operators that come to the table and want to build a 
new nuclear plant. Now----
    Senator Murkowski. So could we----
    Mr. Cochran. Wait just a minute.
    Senator Murkowski. I still want to get back to my question, 
which is can we achieve the level of reductions that the 
President is looking for, given what we have with our current 
nuclear capacity?
    Mr. Cochran. NRDC thinks we can, but more importantly, we 
ought to put in place the policies that get us there the 
quickest, most safely, and at the least cost to the Federal 
Government. Our concern is that providing these unlimited loan 
guarantees to the nuclear energy industry will ultimately 
reduce the efforts to deploy technologies that can provide 
carbon offsets more cheaply and more quickly.
    Now let me--let us just take--first of all, let us 
recognize that the loan guarantees are not needed for those 
utilities that are regulated because they can go to the PUCs 
and get money provided through increased rates and finance 
these plants.
    He mentioned that it would likely eliminate or reduce the 
number of merchant plants we build. Well, let us take a case. 
Let us take the business model for Calvert Cliffs plant right 
down the street.
    Calvert Cliffs is a proposal by UniStar, which ultimately 
is a proposal by the French government because UniStar is a 
joint venture between Constellation Energy and Electricite de 
France, and Electricite de France just bought half of 
Constellation Energy. Electricite de France is owned, 85 or 
higher percent, by the French government.
    They want to build a French plant, EPR, which is built by 
AREVA, owned by the French----
    Senator Murkowski. Dr. Cochran, I am----
    Mr. Cochran [continuing]. Government.
    Senator Murkowski [continuing]. Double over my time here. I 
am 5 minutes over, and I am not quite sure where you are going.
    Mr. Cochran. I am not sure I am not over my time, but let 
me finish my point.
    Senator Murkowski. You are over your time. Where you are 
going is----
    Mr. Cochran. Where I am going is----
    Senator Murkowski [continuing]. Really inconceivable.
    Mr. Cochran [continuing]. That your loan guarantees, you 
have got to go to your constituents and the constituents in New 
Mexico and say we want to tax homeowners, families, so that we 
can provide insurance to the French government so that through 
Electricite de France they can enter the American market, sell 
electricity below cost so the consumers in Washington, DC., and 
Baltimore don't have to provide energy efficiency, and they can 
make a profit by selling nuclear energy below cost.
    I think that is a bad model for solving climate. It is a 
bad model--it is a bad business model for having efficient 
nuclear power plants.
    Senator Murkowski. I think where the Natural Resources 
Defense Council is coming is they do not believe that nuclear 
should be any part of the solution for this country, and I am 
disappointed with your response.
    Thank you, Mr. Chairman.
    Mr. Cochran. Senator, the highest priority program of the 
Natural Resources Defense Council is to achieve Federal 
legislation that will cap carbon emissions. This happens to be 
the single most important Federal policy that would help the 
nuclear industry.
    The second most important Federal policy that could help 
the nuclear industry would be to encourage the development and 
deployment of plug-in hybrids and electric vehicles. This is 
also a priority of our organization. So don't tell me----
    Senator Murkowski. We will work with you on that.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Senator Udall.
    Senator Udall. Thank you, Mr. Chairman.
    This previous interchange is informative and entertaining 
enough, I am tempted to yield my 5 minutes to Senator Murkowski 
and----
    [Laughter.]
    Senator Udall [continuing]. We will continue the 
discussion. I do think my colleague from Alaska is on to an 
important line of questioning, and I think it is, in many ways, 
why this hearing was held today.
    Dr. Cochran, thank you for your passion and your interest 
and the time you dedicate to understanding nuclear power. I did 
want to return to you for some additional comments.
    But Mr. Fertel, in the interest of fairness, I would like 
to hear your thoughts on loan guarantees and once again give 
you a couple of minutes to talk about why you think this is 
important.
    Mr. Fertel. Thank you, Senator Udall.
    Again, I think going--not to rebuke, but some of Tom's 
points. First of all, the loan guarantees, the citizens of 
Colorado and the taxpayers of New Mexico or Alaska or Alabama 
are not paying any money for the loan guarantees that we get. 
We are paying the Government money for the loan guarantees that 
we get, and then we are producing cheaper electricity with it.
    To be honest, on Tom's sort of attack on the French, I 
don't want to defend the French, but AREVA is in the process 
right now of building a facility in Norfolk, Virginia, that is 
going to employ 500 people, that is going to build equipment 
for the EPR that would be built in this country. Their 
facilities in Lynchburg have hired probably more than 500 
people in the last couple of years, and the people that will 
build the plant in this country will be unionized people that 
they have signed a contract with to build in Maryland.
    So I think we need to maybe not throw as many stones at 
some of what is going on. First, it is a global marketplace, 
and second, the building is going to come here and the 
electricity will be here.
    We think loan guarantees are a good public policy. We think 
that they allow for a more effective deployment of clean 
technologies. As I said, there is $111 billion in the loan 
guarantee program now, of which $20.5 billion is nuclear. So I 
don't know if Tom thinks they should take out the other $90 
billion that goes to renewables and other things, too? We 
don't. We think they should get it if they need it. We don't 
imagine how they can spend it.
    It helps us reduce the cost of electricity. It helps us 
deploy low-carbon technologies quicker than we could without 
them because of the size of some of our projects in particular, 
but others that are having trouble. We think that the 
Government actually gets money back for it.
    So we see it as a good public policy. We see it as 
something that achieves the end goals we want. I agree with Tom 
that if we do a climate bill with cap and trade or whatever 
form it takes, it will also have an impact on the technology 
decisions.
    The answer, Senator, is we need all the technologies we can 
use. How we deploy them depends upon the policies we set.
    Senator Udall. Is it fair to say that when Dr. Cochran 
talked about his concern that the loan program was initially 
framed to promote these new cutting-edge technologies, these 
more modular units that we are now hearing that we ought to 
expand those loan guarantees to the more mature technologies, 
is that because of the marketplace and the----
    Mr. Fertel. That is exactly right, Senator.
    Senator Udall [continuing]. Stresses there?
    Mr. Fertel. Yes, we actually agree that when Senator 
Bingaman and the committee passed the 2005 act, its intent was 
different. It is still a valid thing to look at and to do. But 
the financing and structural problems that we have in deploying 
the bulk of technologies we need actually needs more help than 
what the original program was intended to do.
    Yes, sir. That is correct.
    Senator Udall. Dr. Cochran, in the interest of fairness, 
would you care to comment?
    Mr. Cochran. The renewable industry, as I understand it, 
was not seeking loan guarantees prior to the financial 
meltdown. Now the Congress, in its wisdom, has put in large 
amounts of loan guarantees to reflect the difficulty of 
immediate financing following the financial meltdown.
    It is my view that the loan guarantees should be limited to 
application of the new innovative energy technologies, and once 
the technology has gone above, say, 5 percent of the market, 
you shouldn't continue them. You don't need to continue them.
    The economically efficient way to solve the climate problem 
is through a cap, a carbon cap. It is not through a loan 
guarantee program. There is nothing in the loan guarantee 
program from preventing utilities from, let us say, shutting 
down a gas-fired plant rather than a coal plant. So, we lose 
half the benefits, the carbon benefits, if they are going to 
shut down some other technology rather than the plants that 
emit the most CO2.
    So I think the economically efficient way to address that 
CO2 problem is cap CO2 and put a price on 
it. Let these guys compete in the marketplace, and your job 
ought to be to eliminate all these Government subsidies rather 
than load them up.
    There are legitimate reasons to subsidize new energy 
technologies. One is to do R&D on long lead-time technologies 
that are valuable to society or technologies that are high risk 
that the industry won't provide the R&D.
    The second is to lower initial costs by creating a market 
and introducing technologies, building a marketplace and 
reducing the costs in that manner. Beyond that, the Government 
ought to get out of the business and let the marketplace work.
    Senator Udall. Thank you. My time has expired.
    That is certainly the mission of this committee and the 
Senate of the United States is to not advantage one technology 
over another technology. Easy to say. Harder to do.
    I am glad Senator Murkowski and Senator Bingaman are 
leading the charge so that we find our way to that goal.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Senator Sessions.
    Senator Sessions. Thank you.
    We are certainly advantaging one technology over another in 
that we are giving direct substantial subsidies for wind and 
also talking about mandating a certain amount of it.
    Whereas, all the nuclear power industry who, if we can get 
it going again, will produce far more clean baseload power with 
no emissions is a loan guarantee, which I suppose, Mr. Fertel, 
you intend to pay back?
    Mr. Fertel. We not only pay it back, but we need to pay for 
it. I mean, Tom uses ``subsidy'' as a sort of throw-away line, 
and usually a subsidy means you are getting it for free. For 
our loan guarantees, we actually have to pay the Government to 
get it, and then, of course, we pay it back. So----
    Mr. Cochran. There were more nuclear plants canceled than 
built in the United States. Mr. Fertel believes that there is 
no risk associated with the construction of these nuclear 
plants, and therefore, the Government is not at risk.
    Senator Sessions. Mr. Cochran, we know the history of that, 
and it is one of the dark days in this country that those 
plants were stopped. I am telling you, if we had gone forward 
with nuclear power, we wouldn't have to be depending on France 
today for certain technologies. You and some of your colleagues 
are the reason that happened.
    It has damaged our emissions, increased the CO2 
in the atmosphere, and if we don't build--tell me how many 
plants, Mr. Fertel, we need to build to just keep our 
electricity by nuclear power at 20 percent in America today?
    Mr. Fertel. Our estimate right now is if we built 26, which 
is 34,000 megawatts, by 2030, we would stay at 20 percent in 
2030.
    Senator Sessions. This is--I just saw an MSNBC poll. Sixty-
seven percent of Americans are in support of building more 
nuclear plants. Now the Administration has talked about it. Dr. 
Chu is a nuclear physicist. He has been cooperative and talking 
somewhat positive. But Mr. Chairman, I am not seeing any action 
yet.
    I know our bill that you are working and Senator Murkowski 
has got a lot of good things in it, but I don't see anything in 
it would help us with nuclear much. So I hope we can do some 
things that signal that Congress is supportive. I am just sorry 
to be upset about that.
    I am looking, in Alabama, at the Bellefonte plant, they put 
$4 billion in it, TVA did, 25 years ago. It is the fundamental 
reason TVA has a large debt today, $4 billion with no income 
for 30 years nearly. They want to restart it. They are going to 
commence soon to restart that plant.
    How much better would the environment be and how much 
better would TVA's bottom line be had that plant been completed 
and not stopped?
    With regard to the--hopefully, we won't have an RPS 
renewable standards, but it strikes me, Mr. Fertel, that if 
required renewable standards are made, the purpose of renewable 
portfolio is reduce CO2 emissions, shouldn't there 
be some credit for a utility that is spending billions of 
dollars over 6 years to get a massive reduction of 
CO2?
    Shouldn't they be given some credit as opposed to somebody 
that was able to get some renewable in the interim, and should 
these utilities be required to pay fines when, in the long run, 
they will reduce CO2 far more?
    Mr. Fertel. Obviously, we think that nuclear's significant 
role in reducing CO2 emissions should be recognized 
in some way, as Congress looks at both the climate bill and as 
it also looks at any sort of electricity standards. But I have 
confidence that the chairman and the ranking member and the 
members of this committee will try and work together to figure 
out the best way to do that.
    We think renewables have a role. We think efficiency has a 
major role. Obviously, if we can get coal--the carbon capture 
and storage, coal will continue to play a role. If we don't do 
that, the rest of what we do may not matter because the rest of 
the world will build lots of coal.
    So we see everything having a role, and where I differ with 
Tom, where he says let the marketplace decide, he doesn't 
really do that because he knows which ones he wants. What I 
would say is that the marketplace will help you decide where 
you go with what, but this whole discussion on carbon, while 
important, you actually want to produce electricity, too.
    We need to make sure that we are producing electricity, and 
one of the reasons we think that you need to deal with the 
structural problem is that you really can't build quick enough 
electricity plants, and we won't build, no matter how much we 
think we will, a smart grid in the next 5 years. We may not 
define a smart grid in the next 5 years.
    So we really need to go about this smart as a Nation and 
not pick winners or losers, but not decrease our options by 
doing things that makes it harder to deploy the technologies we 
know work.
    Senator Sessions. Just briefly, one of the things, Mr. 
Fertel, that I think nuclear power provides us is an 
opportunity for smart meters, where in off-peak hours, you can 
utilize the baseload nuclear power. Is that a positive factor 
for the public and the environment?
    Mr. Fertel. It is a positive factor there. It is a positive 
factor what Tom said about plug-in hybrids.
    Senator Sessions. I agree.
    Mr. Fertel. It would be a really good time to be charging 
your hybrid overnight when the nuclear plant is working and 
producing electricity at the low numbers that Senator Landrieu 
mentioned from an operating standpoint.
    Senator Sessions. Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Let me just ask you one more question, Dr. Cochran. Is it 
your view that the NRC should go ahead with licensing new 
reactors before Congress comes up with a solution to the 
nuclear waste problem? I mean, if Yucca Mountain is not going 
to be the solution, do you see that as an impediment to the NRC 
going ahead and granting applications or granting licenses?
    Mr. Cochran. I don't see that as an immediate impediment. 
But there is a rulemaking process ongoing before the Nuclear 
Regulatory Commission to resolve that issue and to address the 
environmental issues that Mr. Fertel raised, which are part of 
that rulemaking process.
    I think the proper way to deal with that issue is for the 
NRC to complete that rulemaking, to go back and revise the 
environmental assessments that are assumed for all nuclear 
power plants--is going to be zero emissions associated with a 
geologic repository and that the repository is going to be in 
some salt deposit somewhere--and do that in an orderly, proper 
rulemaking procedure where the public can engage on those 
issues.
    The Chairman. That concludes my questions.
    Senator Murkowski, do you have any other questions?
    Thank you both very much. I think it has been a useful 
hearing.
    Thank you.
    [Whereupon, at 11:35 a.m., the hearing was adjourned.]

    [The following statement was received for the record.]
Statement of Deborah Deal Blackwell, Vice President, Licensing & Public 
                 Policy Hyperion Power Generation, Inc.
    The Committee's interest in nuclear energy development is 
appreciated. It is no secret that nuclear must be part of the ``mix'' 
of energy generating tools for the future of the United States and the 
world. Clean, emission-free energy from nuclear power plants can 
provide the baseload power today that is required and that wind, solar 
and hydro will probably not be able to supply for decades.
    And, the people of the United States are ready to accept more 
nuclear power. This year's Gallup Environment Poll has found new high 
levels of support. Seventy-five percent of Americans whose total annual 
household incomes are at least $75,000 favor using nuclear power to 
produce electricity in the United States. With all income levels 
factored in, 59% now favor the use of nuclear power. A global survey 
just released from Accenture reveals that more than two-thirds of 
people around the world believe that their countries should start using 
or increase their use of nuclear power
    However, little attention has been paid to a key development in the 
nuclear industry--small, modular nuclear power reactors (SMRs). SMRS 
solve many of the problems of large-scale nuclear power plants. 
According to an independent report by the Wall Street Journal, each of 
the next traditional-sized new nuclear power plants will cost $6 
billion to as much as $12 billion, and they will take as long as 12 
years to build and license.
    Clearly financing of such expensive projects is going to continue 
to be a problem. The loan guarantees approved by you and your 
colleagues are welcome and appreciated. But, they will only assist in 
the building of perhaps three or four traditionally large-scale plants. 
As you realize, four additional nuclear plants will not meet the 
burgeoning need for baseload power in this country.
    The answer may well lie in the development of SMRs. There are less 
than a handful of companies developing SMRS that have been identified 
by the Nuclear Regulatory Commission as upcoming license applicants. 
And, there is only one wholly-American owned and operated private 
company that is developing for global commercialization, a small 
nuclear power reactor for distributed power from the U.S. Department of 
Energy and that is Hyperion Power Generation. The company's SMR was 
invented at Los Alamos National Laboratory. It has been licensed to 
Hyperion through the lab's technology transfer program.
    Providing 70 MW thermal power (27 to 30 MW of electric), each 
stand-alone proliferation-resistant Hyperion Power Module provides 
enough power for 22,000 average American-style homes or the industrial 
equivalent, for a capital investment of only $25 to $30 million per 
module. (Modules can be teamed for greater output.) The HPM, with its 
small amount of low-enriched fuel, makes the benefits of nuclear power 
available almost anywhere in the world without a multi-billion dollar 
investment. And, as the HPM will be mass produced in an American 
factory and is only 1.5 meters wide by 2 meters tall, the time from 
purchase to installation can be only a matter of months--not years, 
depending on the site.
    Because the HPM is transportable, the design provides a desirable 
solution for emergency response and U.S. military installation use, 
among many others. Attached is a more in-depth discussion of the 
Hyperion Power Module and its global applications.
    Thank you for your attention. We appreciate the Committee's 
interest in our national energy security and in its commitment to 
increasing U.S. economic security through technical innovation and 
small business development.
              Attachment.--The Hyperion Power Module (HPM)
    Perhaps the most important component of U.S. infrastructure is its 
system for generating and distributing electric power. Supplied by 
conventional centralized power plants and transmitted often hundreds of 
miles by an aging grid system, electricity is the lifeline of the 
country. Terrorism aside, the system is frightfully vulnerable due to 
normal wear and tear and simple accidents, as evidenced by the blackout 
several years ago in the Northeast. In addition to replacing or 
providing backup for the existing infrastructure, the amount of 
electricity needed for residential, commercial, industrial and military 
use is growing at an unprecedented pace.
    While solar, wind and hydropower technologies can deliver peak 
power, they will not be able to deliver reliable baseload power--the 
electricity that is needed 24 hours a day, seven days a week, to run 
the world's infrastructure for schools, homes, government, commercial, 
and industrial purposes. Nuclear energy is the only viable baseload 
power solution for the rest of the 21st century.
    But nuclear power in its current configuration cannot meet global 
needs now or in the future.
    Conventional nuclear power reactor plants, designed to serve large 
regions, cost billions of dollars to construct. A recent article in the 
Wall Street Journal forecast that the next new nuclear plant would end 
up costing $12 billion and take 15 years to license and build. The 
national and global economy will not be able to support such investment 
in time or funds. Conventional plants cannot be financed and built fast 
enough to meet the growing demand for energy.
    Now, for the first time, the advantages of nuclear power--
efficient, cheaper, and non-polluting with no greenhouse gas 
emissions--are available in a significantly smaller, less capital 
intensive, less complex package. The small modular reactor (SMR) for 
``distributed generation'' can have an impact on electricity needs and 
a place in the history of mankind's accomplishments that far exceeds 
its metaphoric miniature version--the common battery. Distributed 
generation systems generate electricity from many small energy sources 
instead of one large, vulnerable and capital-intensive site. They 
reduce the size and number of power lines that must be constructed. 
And, they reduce the amount of energy lost in transmitting electricity 
because the electricity is generated very near where it is used. An 
aesthetic and environmental improvement, distributed generation also 
makes widespread outages less likely regardless of cause.
    Designed to provide distributed power, SMRs can be manufactured at 
a single location and shipped wherever they are needed. They provide 
essential power to even the most remote locations without designing and 
building individual, massive, and costly conventional power plants. The 
only U.S. small modular power reactor (SMR) design feasible for 
deployment within the next five years is the Hyperion Power Module 
(HPM).
American Innovation, American Jobs, the Hyperion Opportunity
    The HPM was invented at Los Alamos National Laboratory. Through the 
U.S. government's technology transfer initiative, the exclusive license 
to develop and commercialize the invention was granted to Los Alamos, 
New Mexico-based Hyperion Power Generation, Inc. (HPG). The company has 
now retained the nation's top nuclear power design and engineering 
teams, including staff from U.S. federal laboratories and industry, to 
further develop the reactor. HPG will also partner with industrial 
leaders for the production, operation, and maintenance of the HPM. 
Hyperion Power Generation, Inc. is a small business totally owned and 
operated by U.S. citizens, and is the only U.S. owned and controlled 
small reactor design firm in the world.
    In addition to generating income for the labs involved in the 
project, Hyperion Power Generation can stimulate both short and long-
term jobs in the private sector. Construction of a U.S. manufacturing 
facility will involve a variety of building trades. Long-term, the 
factory will ensure a wide variety of positions ranging from assembly, 
forging and security, to quality assurance, testing and management. 
Additionally many jobs would be created and ensured for complementary 
technology and manufacturing companies both new and currently existing. 
Already, over $7 billion worth of HPMs are in the company's ``sales 
pipeline.'' The company expects to produce at least 2,000 units in the 
first ten years of operation and a great number of those will be sold 
before the factory is open. This early enthusiasm for the product is a 
clear indication of the product's coming success and contribution to 
future U.S. employment.
Applications for the Hyperion Power Module
    Generating nearly 70 megawatts* of thermal energy and from 27 to 30 
megawatts of electrical energy, the HPM is the world's first small 
transportable reactor, taking advantage of the natural laws of 
chemistry and physics and leveraging all of the engineering and 
technology advancements made over the last fifty years.
---------------------------------------------------------------------------
    * While individual HPM units produce 70WM thermal power, the units 
can be ``ganged'' for even greater energy output.
---------------------------------------------------------------------------
    The HPM was initially created in response to the need for an 
efficient source of steam to power equipment for removal of fossil 
fuels from oil sands and shale. Thus far, retorting and processing 
equipment cost an unacceptable amount of the very resource that is 
being accessed and the HPM was created to eliminate that unsatisfactory 
paradigm. Using hydrocarbons to recover heavy hydrocarbons is 
inefficient and unnecessary.
    However, Hyperion Power Generation's small modular, self-
stabilizing reactor (the HPM) offers such attractive advantages that it 
could alter the manner in which nuclear energy is harnessed for 
generating electricity and creating industrial steam. As such, the 
possible applications for the technology are enormous. Meeting all the 
nonproliferation criteria of the Global Nuclear Energy Partnership 
(GNEP), the HPM is appropriate anywhere cost, safety and security is of 
concern.
    There are five main areas of application for the HPM:

   Distributed ``baseload'' power for urban and rural 
        communities
   Quickly installed back-up and emergency power for disaster 
        areas
   Military bases (independent, baseload power)
   Oil & gas recovery and refining, including in oil sands and 
        shale recovery
   Remote communities lacking accessibility to a source of 
        electrical generation.
Energy Savings Around the Globe
    A key design objective of the HPM is the ability to produce 
electricity anywhere in the world for less than 10 cents a kilowatt 
hour. As an example, the costs of the HPM for use in heavy oil recovery 
have been estimated to save over $1 billion dollars a year, for a 
single, high-power application when compared with the present cost of 
using natural gas. The estimate is based on the projected 5-year life 
of the HPM reactors, and includes the cost of refueling and waste 
handling. The savings come from the higher energy content of nuclear 
fuel and the low personnel costs for operating the HPM. The inherent 
safety of the HPM's core, coming from its chemistry-based self-control, 
minimizes the human oversight needed for operation. The compact design 
permits staged introduction of the new power source to any application 
and the low unit costs reduce financial risk, both for the initial 
demonstration programs and for final deployment. Furthermore, the 
compact design and ``walk-away'' safety can permit, for the first time, 
the distributed production of power from nuclear sources.
    The compact nature and inherent safety opens the possibility for 
low cost mass production and operation of HPM reactors. The overnight 
capital costs and the operating costs for this device have been 
estimated and found to be very attractive. The capital costs were 
estimated by an expert in the nuclear industry and found to be $1,400 
per kW of electricity, which compares favorably with an estimate of 
$4,500 for the same electrical production but from gigawatt scale 
installations. The operating costs for thermal power steam production 
have been estimated to be $3 per million BTU, costs that are not only 
lower than natural gas but also more stable--all without 
CO2, nor NOX nor SOX emissions.
Summary of Unique Advantages of the HPM:

   ransportable baseload power source
   Installed within a day or so once minimal site prep is 
        performed
   Substantial power--enough power for an entire community 
        infrastructure (20,000 homes)
   Reliable, continuous power--enough for five to eight years 
        depending upon demand
   No refueling on site
   No maintenance of heat source
   Only small area required for sighting
   Attractive costs and low investment
Technical Overview
    The Hyperion Power Module (HPM) was specifically designed to avoid 
the high construction costs and uncertainties associated with 
traditional reactor technology. Each unit will generate approximately 
27 megawatts of electrical power. A one and one-half meter diameter 
core, without internal mechanical moving parts, permits the reactor to 
be sealed at the factory, sited underground, and eventually returned to 
the factory for fuel recycling and refueling after a useful life of 
five to seven years.
    The HPM has the following attributes:

   Single-unit, sealed construction and dispersed, underground 
        siting also provides anti-tampering protection.
   The inherent simplicity and compactness of the design will 
        enable mass production of Hyperion modules as turnkey devices.
   The modest size of the modules greatly reduces the financial 
        investment risk in both the development and the eventual 
        deployment of the reactors.
   Mass-production and the minimal required operational 
        oversight make the Hyperion reactor economically competitive 
        and attractive for new and distributed power production 
        deployment, and could substantially contribute to national 
        energy independence.

    The physical characteristics of uranium hydride, a combined fuel 
and neutron energy moderator, are ideal for the generation of safe 
nuclear power. The reactor operates at an optimum temperature of 550C. 
At 550C, the dissociation pressure for the hydrogen above the hydride 
is approximately eight atmospheres, which permits easy transportation 
of the gas without presenting significant high-pressure risk. The 
temperature-driven mobility of the hydrogen contained in the hydride 
can change the moderation, and therefore the reactor criticality, 
making the HPM reactor self-regulating and passively safe.
    The hydrogen forced out of the core during any over-temperature 
excursion reduces the neutron energy moderation necessary for nuclear 
criticality. The Hyperion Power Module is inherently fail-safe, since 
any temperature increase from excess activity immediately reduces the 
criticality parameters and thus the power production. The consequent 
power reduction causes the temperature to decrease and that temperature 
decrease eventually reverses the process, resulting in relaxation 
oscillations that quickly damp out to steady-state operation.
History of the Fuel & Technology
    Hydride materials have long been recognized as possible controls 
for self-regulating nuclear reactors. In addition, uranium hydride was 
demonstrated to be a successful reactor fuel very early in the nuclear 
era, although the hydride was cast into blocks using a polymeric binder 
to prevent the hydrogen from escaping. This binding of the fuel 
precluded any observation of the self-regulation characteristics 
inherent to the material.
    While the science of the Hyperion reactor has been around for this 
long time, it has not been implemented because the conditions for self-
regulation had not been explored and the limits on those conditions 
delineated. We have now performed the critical modeling and thereby 
discovered the critical feature and design criteria for exploiting the 
safety and self-regulation advantages of hydride materials within the 
reactor that make a hydride reactor practical for construction and 
deployment.
    Hyperion is proposing a new concept for an inherently safe nuclear 
power source that is self-stabilizing and requires no moving mechanical 
components. The modest size of the modules reduces the financial 
investment risk for both development and deployment. The potential for 
mass-production and the minimal operational oversight make these 
reactors economically attractive for new and dispersed power production 
deployment.
In Conclusion
    Transportable and buried safely underground out of sight, HPMs, 
with their small size, but mighty power, and virtually maintenance-and 
proliferation-free design, offer the long-awaited solution to our 
country's desire for increased national security through independent 
and robust distributed power systems.
    Hyperion will seek a design certification from the U.S. Nuclear 
Regulatory Commission. The company expects its first installation to go 
live in late 2013.
                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

     Responses of Dale E. Klein to Questions From Senator Murkowski
    Question 1. The increased interest in new reactor licensing over 
the last few years has put the NRC in the position of certifying new 
reactors while at the same time reviewing license applications.
    Do you see any issues with this fact in terms of continuing to 
maintain the safety of new reactor construction or maintaining public 
involvement in the process?
    Answer. The NRC has long sought standardization of nuclear power 
plant designs, and the enhanced safety and licensing reform that 
standardization could make possible. The NRC's licensing process, 
regulation (Part 52 to title 10 of the Code of Federal Regulations), 
provides a predictable licensing process, including certification of 
new nuclear plant designs. This process reflects decades of experience 
and research involving reactor design and operation. The design 
certification process provides for early public participation and 
resolution of safety issues prior to an application to construct a 
nuclear power plant.
    NRC approval of each standard design is formalized via a specific 
design certification rulemaking. This process allows the public to 
review and comment on the designs up front, before anyone builds a 
plant of this design. NRC design certification fully resolves safety 
issues associated with the design.
    A specific provision of Part 52 allows applicants to reference a 
certified design that has been docketed but not approved. Thus, 
although the Commission anticipated that applicants would first seek to 
have designs certified before submitting combined license (COL) 
applications that reference those designs, the NRC's regulations, 
nonetheless, allow an applicant--at its own risk--to submit a COL 
application that does not reference a certified design. The 
Commission's Policy Statement on the Conduct of New Reactor Licensing 
Proceedings addresses this very situation and its effect on public 
participation in COL adjudications. The Commission determined that 
issues concerning a design certification application should be resolved 
in the design certification rulemaking and not in a COL proceeding. 
When an issue is raised in a COL proceeding that challenges information 
in the design certification rulemaking, under NRC processes, that issue 
should be referred to the staff for consideration in the design 
certification rulemaking. This makes the process more effective and 
efficient by allowing the NRC review and a public COL hearing to focus 
on remaining issues related to plant ownership, design issues not 
resolved earlier, and organization and operational programs. Granting a 
COL signifies resolution of all safety issues associated with the 
plant. The new licensing process affords multiple opportunities for 
public participation in the process.
    With respect to maintaining the safety of not only new reactor 
construction but the operating reactors as well, the NRC reorganized 
the Office of Nuclear Reactor Regulation to create an Office of New 
Reactors to ensure effective oversight of operating nuclear power 
plants and prepare for the industry's interest in licensing and 
building new nuclear power plants in the near term. The agency also 
added a new organizational unit, headed by a Deputy Regional 
Administrator for Construction in its Atlanta office, to oversee 
inspections related to expected new construction of nuclear facilities. 
These changes will ensure we maintain our focus on the safe and secure 
operation of existing nuclear power plants, while enhancing our 
effectiveness in processing the anticipated new plant licensing 
workload.
    Question 2. The NRC has recently proposed changes to the 1990 Waste 
Confidence Decision that would base this decision on the probable 
availability of a deep geologic repository for wastes within 60 years 
of the end of any reactor's operating license. Recently the 
Administration has made it clear that although it intends to continue 
to support the Yucca Mountain license review, it does not intend to 
open the repository.
    In light of the proposed waste confidence decision changes do you 
feel the Administration's position will impact the NRC's ability to 
grant new reactor licenses or extend current licenses?
    Answer. As published in the Federal Register on October 9, 2008, 
the Commission sought public comment on proposed revisions to two 
elements of its 1990 waste confidence findings, one of which would 
potentially alter the date when a geologic repository may be expected 
to be available. The public comment period closed on February 6, 2009. 
NRC staff will review these comments and prepare a recommendation for a 
final rule to be presented to the Commission for action later this 
year.
    The proposed revision issued for public comment would predict that 
repository capacity will be available within 50 to 60 years beyond the 
licensed operation of all reactors and would affirms the Commission's 
confidence that spent fuel can be safely stored for at least 60 years 
beyond the operating license. Changes to existing U.S. policies--or 
revisions to strategies--for the long-term management of high-level 
waste, should any be adopted, would be considerations as the Commission 
deliberates its waste confidence findings.
     Responses of Dale E. Klein to Questions From Senator Cantwell
    Question 1a. While nuclear power has proven to be a reliable way to 
generate greenhouse gas emissions free electricity--including about 10% 
of the power in Washington state--there seems to be continued doubt 
about the economic viability of any new reactor plants.
    Given the current credit crisis, tightness in the supply chain, 
lack of skilled craft and sub-suppliers, among other challenges, how 
many nuclear plants do you think can be built in the U.S. in the next 
decade?
    Answer. NRC agrees there am challenges; however, as a safety 
regulator engaged in the process of reviewing combined license 
applications, it would be inappropriate for the NRC to speculate on the 
number of nuclear plants that will be built in the next decade. To 
date, the NRC has received 17 combined license applications for 26 
units. Part of the review process for a combined license application 
includes a review of the applicant's financial qualifications to carry 
out the licensed activities. For an application to be approved, the NRC 
must have reasonable assurance that the applicant possesses or can 
obtain the funds necessary to cover estimated construction costs, 
related fuel cycle costs, and provide decommissioning funding 
assurance. An applicant must also demonstrate that it possesses or can 
obtain the funds necessary to cover the costs of operation for the 
period of the license. If the NRC approves the application and issues a 
license, the decision to construct the facility is the licensee's 
business decision.
    Supply chain issues, lack of skilled craft and sub-suppliers are 
among the challenges the NRC is anticipating and our inspection program 
is being developed to assure quality is maintained if construction 
moves forward.
    Question 1b. Is it accurate that only about four or five U.S. 
utilities even have the financial capacity to build a two-unit nuclear 
plant?
    Answer. Of the 17 combined license applications that the NRC has 
received to date, nine utilities have submitted applications for two-
unit nuclear power plants. These applications are still under review, 
including the financial qualifications review. The utilities are: 
Tennessee Valley Authority, Luminant Generation Company, LLC, Progress 
Energy Florida, Inc., Progress Energy Carolinas, Inc., South Texas 
Project Nuclear Operating Company, Exelon Nuclear Texas Holdings, LLC, 
Duke Energy, South Carolina Electric & Gas, and Southern Nuclear 
Operating Company.Senator Maria Cantwell to Chairman Dale Klein
    Question 5a. I understand the NRC is currently considering 
applications that reference five different reactor designs and the 
industry is expected to submit additional designs for NRC review and 
approval. But in a speech last week, NRC Commissioner Jaczko 
characterized current new reactor licensing as ``a situation where we 
have incomplete designs and less than high quality applications 
submitted for review.'' And pointed out that ``today, almost a fifth (3 
of 17) of the combined operating license applications we have received 
are on hold at the request of the applicants themselves.''
    If one of the factors leading to the massive nuclear construction 
costs overruns in the 1970s and 1980s was the lack of standardization 
among reactor designs at the time, what is the NRC doing to ensure that 
only a limited number of the safest and most cost-effective advanced 
technologies are approved?
    Answer. The NRC's licensing process for new reactors (10 CFR Part 
52) evolved from 30 years of lessons learned in licensing today's 104 
operating commercial reactors, and is expected to make the licensing 
review process more effective and efficient. Under the Part 52 
licensing process, the NRC established regulatory requirements for 
Design Certifications. The design certification process allows an 
applicant to obtain approval of a nuclear reactor design, independent 
of an application to construct or operate a plant. During the design 
certification review, the NRC reviews the safety issues associated with 
the proposed nuclear power plant design. Because the certification of a 
reactor design requires rulemaking, the issues addressed and resolved 
in the certification process have a high degree of regulatory finality. 
A design certification is valid for 15 years from the date of issuance, 
but can be renewed for an additional 10 to 15 years. Any applicant can 
reference a certified design in a combined license application, which 
addresses site-specific design features and environmental impacts. This 
newer licensing process resolves design issues early in the process 
before construction begins, reduces regulatory uncertainty, and 
encourages the standardization of reactor technology within the U.S.
    The NRC's reactor licensing process under Part 52 permits an 
applicant to submit an application which references a reactor design 
that is not yet certified. If an applicant selects a reactor design 
that has not yet been certified, however, then the design certification 
rulemaking is conducted concurrent with the combined license review. 
The applicant assumes the likely risk that this will result in a more 
resource-intensive review process compared to a combined license 
application that references an already-certified design.
    Question 5b. Is there anything Congress can do to support more 
plant design standardization? For example, should we make nuclear 
financing contingent on one or two standardized designs?
    Answer. The NRC believes that the current NRC licensing process 
provides sufficient incentive for applicants to use standardized 
designs while not constraining innovation or continued improvements to 
reactor technology. In general, applicants for new reactor combined 
licenses are choosing among the 5 designs currently under review on the 
basis of their power planning needs, their experiences with reactor 
technologies already in their reactor fleets, and other economic and 
business considerations that the individual applicants are best 
equipped to address.
                                 ______
                                 
    Response of Gregory B. Jaczko to Question From Senator Cantwell
    Question 5a. I understand the NRC is currently considering 
applications that reference five different reactor designs and the 
industry is expected to submit additional designs for NRC review and 
approval. But in a speech last week, NRC Commissioner Jaczko 
characterized current new reactor licensing as a situation where we 
have incomplete designs and less than high quality applications 
submitted for review.'' And pointed out that ``today, almost a fifth (3 
of 17) of the combined operating license applications we have received 
are on hold at the request of the applicants themselves.''
    If one of the factors leading to the massive nuclear construction 
costs overruns in the 1970s and 1980s was the lack of standardization 
among reactor designs at the time, what is the NRC doing to ensure that 
only a limited number of the safest and most cost-effective advanced 
technologies are approved?
    Answer. Standardization is important. From the regulatory 
perspective, it is technically an efficiency issue and not a safety 
issue, but it is crucial to an effective and predictable license review 
process.
    Standardization does not necessarily mean moving forward with only 
one new design. Having some diversity is beneficial so that any generic 
safety issues that may be discovered in the future will not affect all 
plants simultaneously. However, we are now looking at the possibility 
of applications to build more than six unique new designs, including 
the potential of two separate versions of the Advanced Boiling Water 
Reactor and small modular light water reactors. We have approached an 
unnecessary and inefficient number of reactor designs to review and 
potentially regulate. Such a situation would only make the NRC's 
application review and potential oversight work more complicated.
    There has been recognition on the part of the industry that 
standardization is important, Applicants have developed a set of 
working groups around specific designs. Vendors and applicants are 
working together to ensure applications are as uniform and consistent 
as possible. The NRC has attempted to encourage applicants to continue 
their coordination and to provide high quality applications for the 
agency's review if they desire a predictable license review schedule.
    The NRC is committed to thoroughly review each license application 
and provide oversight of operating reactors to ensure the Atomic Energy 
Act standard of ``a reasonable assurance of adequate protection'. is 
met. Without additional standardization, however, the Nuclear 
Regulatory Commission may ultimately be challenged to secure and manage 
the resources necessary to conduct licensing reviews and regulate a 
large number of diverse new reactors if they are approved and built.
    Question 5b. Is there anything Congress can do to support more 
plant design standardization? For example, should we make nuclear 
financing contingent on one or two standardized designs?
    Answer. There are a couple of steps the Congress could take if it 
wanted to support additional requirements for nuclear reactor 
standardization. It could provide additional guidance to the NRC about 
how to prioritize its resources. It could also restrict the use of 
financial incentives to a finite number of designs.
                                 ______
                                 
     Responses of Dale E. Klein to Questions From Senator Barrasso
    Question 1. Chairman Klein, can I have an update on the in-situ 
recovery General Environmental Impact Statement (GEIS)? As you know, 
the prompt resolution of the GEIS will allow several Wyoming uranium 
production operators to move forward on their In-situ Recovery (ISR) 
permit applications.
    Answer. The NRC expects to issue the final GEIS by June 2009. The 
final GEIS addresses approximately 2200 comments received on the draft 
GEIS, which was issued for public comment on July 28, 2008. These 
comments were received from federal, state, and local agencies, the 
uranium mining industry, advocacy groups, and interested members of the 
public. The purpose of the GEIS is to provide a starting point for 
NRC's environmental reviews of applications to obtain, renew, or amend 
NRC licenses for in-situ recovery (ISR) uranium recovery facilities, in 
accordance with NRC's NEPAimplementing regulations at 10 CFR Part 51. 
Each site's environmental characteristics will be evaluated 
specifically in a supplemental environmental impact statement that 
addresses issues not covered by the GEIS. It is expected that the GEIS 
will improve the efficiency of NRC review of ISR applications.
    The NRC is currently reviewing five license applications for new 
ISR facilities in Wyoming. The NRC has been using the draft GEIS in the 
environmental reviews for these applications. The NRC expects to make 
its licensing decision on each application within the two-year schedule 
it provided to the applicants at the start of NRC's review--This 
schedule is dependent on the timing and quality of each applicant's 
submittals, the response to NRC requests for additional information, 
and on the availability of sufficient resources.
    Question 2. The Wyoming Bureau of Land Management (BLM) is 
currently not recognizing NRC's primacy over regulating ISR sites in 
Wyoming and is requiring their own Environmental Assessments and/or 
Environmental Impact Statements for ISR projects already licensed by 
the NRC.
    What progress has been made by the NRC towards signing a Memorandum 
of Understanding or similar document between the NRC and the BLM?
    Answer. The NRC and the BLM initiated discussions regarding formal 
cooperation in September 2008, which has resulted in a draft Memorandum 
of Understanding (MOU). Several meetings have occurred to discuss the 
structure and content of the MOU including the roles and 
responsibilities of each agency and the process by which information on 
environmental impacts wouid be shared between the agencies. It is 
anticipated that the MOU will be finalized before the end of summer 
2009.
    The NRC and BLM have agreed to share information to increase 
efficiency and avoid duplication of efforts--Timing differences in the 
availability of environmental information will likely preclude 
developing one environmental document that can be used by both 
agencies. In many cases, the BLM is required to complete an 
environmental analysis on the potential impacts of exploratory 
drilling, an activity that is not within the NRC's jurisdiction. 
Therefore, BLM begins its environmental review before the applicant 
applies to the NRC for a license.
    NRC's National Environmental Policy Act analysis, in comparison, 
begins when a company's application for a sou'ce materials license for 
uranium recovery is accepted for docketing. Further, given the 
different applicable legislation, the different agencies' missions and 
the resultant differing decisions stemming from the agencies' 
environmental evaluations, the content of the two documents may 
necessarily differ. Nevertheless, coordination and communication 
between the two agencies will allow the environmental documents 
prepared by the two agencies to be tiered or to have information 
incorporated by reference.
    The NRC continues to work closely with the individual BLM field 
offices in Wyoming (without a formal MOU) on the uranium recovery 
applications that have been received, accepted, and for which 
environmental documentation is being prepared. Information is being 
shared on a regular basis, including NRC requests to the applicants for 
additional information to support an environmental analysis, and 
notices submitted by the applicant to the BLM for exploratory and 
confirmatory drilling on the site. In addition, BLM field office 
personnel give NRC staff regular updates on applicant activity on the 
uranium recovery sites.
    NRC and BLM will continue to communicate with industry to improve 
understanding of both agencies' processes, which should help facilitate 
applicants' planning process.
    Question 3. I have a question regarding the infrastructure needs in 
the domestic uranium production industry. Do you agree there is an 
urgent need for new milling capacity for domestic conventional uranium 
mining projects? What is NRC doing to promote or assist in the 
licensing of such milling facilities?
    Answer. As a health and safety regulator, it would be inappropriate 
to comment on whether there is a need for new milling capacity for 
domestic conventional uranium mining projects. The need for domestic 
uranium milling capacity is generally reflected in the price of 
uranium. Both spot prices and long-term prices are substantially higher 
than they have been over the past decade and beyond, reflecting a gap 
between supply and demand. As a result, new applicants have emerged to 
fill this gap. Countries like the United Kingdom, China, India, and 
Russia are planning significant expansions of nuclear energy; other 
nations are also planning new reactors. Many new reactors are under 
construction today throughout the world. U.S. companies are considering 
or planning to build up to 33 new reactors. Building all of these 
reactors would likely put substantial pressure on current uranium 
supplies.
    The NRC's mission is to license and regulate the Nation's civilian 
use of byproduct, source, and special nuclear materials to ensure 
adequate protection of public health and safety, promote common defense 
and security, and protect the environment. Under this mandate, the NRC 
does not promote nuclear projects, but provides the regulatory 
framework to enable the safe use of radioactive material. In its 
uranium recovery program, the NRC regulates the construction, 
operation, and decommissioning of conventional and heap leach uranium 
mills and in-situ recovery operations, but does not regulate 
conventional uranium mining.
    The NRC licensing process is designed to be efficient, effective, 
and stable. In that regard, we have updated regulatory guidance for 
licensing new facilities, held a new licensing workshop with 
prospective licensees to guide them through the licensing process, 
committed to meet with applicants throughout the licensing process, and 
implemented operational metrics that ensure that NRC's licensing 
activities are completed in a transparent and timely manner.
    The NRC is nearing completion of a Generic Environmental Impact 
Statement addressing common issues for environmental reviews of ISR 
facilities to allow a more efficient environmental review process. The 
NRC has also increased its coordination with the State of Wyoming, the 
Bureau of Land Management, the U,S. Forest Service, and Indian Tribes 
to enhance efficiency and maintain consistency for regulatory actions 
and to effectively engage our stakeholders in NRC's regulatory process. 
In addition, NRC co-sponsors an annual uranium recovery workshop in 
Denver, Colorado with the National Mining Association to discuss 
licensing issues and other uranium recovery topics of interest. Over 
250 attendees participated in the last workshop.
      Response of Dale E. Klein to Question From Senator Landrieu
    Question 1. Would you outline for me, and I will share it with the 
members of the committee, the significant differences in design or 
licensing requirements between the U.S. and other countries, that 
perhaps we could learn a little bit more about the way they are doing 
it and improve our system here?
    Answer. The regulatory licensing process used by the countries 
currently involved with the review and construction of new nuclear 
power plants is similar to the original, 10 CFR part 50, NRC licensing 
process. This process uses a two-step licensing process. After the 
regulator is satisfied that the design selected by the applicant meets 
established safety criteria, the regulator issues a construction 
permit. The level of inspection effort during construction varies from 
country to country but once construction is completed and startup 
testing and preoperational testing are successful, the r egulator will 
issue an operating license. This process allows for construction for 
new designs to start before the vendor completes the design process and 
before the regulator has an opportunity to complete a full design 
review. The NRC is currently implementing a one-step licensing process 
in which we complete a design review before issuing a license to begin 
construction.
    The NRC is participating in international initiatives, through 
bilateral and multi-lateral agreements among regulators, and through 
programs facilitated by international organizations such as the 
International Atomic Energy Agency and Nuclear Energy Agency, which are 
designed to better understand each other's regulatory regulatory 
requirements and increase multi-national convergence of codes, 
standards and safety goals. One example is the Multinational Design 
Evaluation Program--a program that includes 10 countries that are 
currently in the process of reviewing designs similar to those that the 
NRC is reviewing. Significant progress is being made on the overall 
MDEP goals of increased cooperation and enhanced convergence of 
requirements and practices. Particularly noteworthy accomplishmnets 
include: performance of the first joint vendor inspection, 
establishment of the MDEP library, development of common positions in 
the area of digial instrumentation and controls, and development of a 
comparison table which will identify the similarities and differences 
between the Korean, Japanese, and French codes for class I pressure 
vessels as the compare to the ASME code. MDEP has developed a process 
for identifying common positions on specific issues among the member 
countries which may be based on existing standards, national regulatory 
guidance, best practices, and group inputs. NCR is using this program, 
and other vehicles, to better understand the other regulators' 
processes so that we can cooperate with them on design reviews with the 
goal of making our reviews more efficient and effective.
                                 ______
                                 
   Responses of Thomas B. Cochran to Questions From Senator Cantwell
    Question 2a. What are utilities estimating the per kilowatt cost of 
constructing a new nuclear power plant?
    (b) How long will it take to build a plant once its license is 
approved?
    (c) I understand that AREV A's experience building one of their new 
standardized plants in Finland has not been ideal. What can we learn 
from that project that can inform the current debate on whether to 
construct new nuclear plants today?
    (d) Given the other clean energy alternatives out there and the 
need to quickly build more capacity to meet growing electricity demand, 
what is the business case for a utility to build a new nuclear plant? 
How do the costs of new reactors compare with projected costs for wind 
or solar facilities in the decade it will likely take to get a new nuke 
plant up and running?
    Answer. (a) The best recent public estimates of the cost of 
construction of new nuclear plants in the United States are those that 
have been presented to public utility commissions associated with: the 
proposal by Progress Energy to build two API000 plants (Units 1 & 2) at 
a new site in Levy County, Florida; the proposal by Georgia Power, a 
unit of Southern Company, to build two API000 plants (Units 3 & 4) at 
the existing Alvin W. Vogtle Nuclear Power Station in Georgia; and the 
proposal by South Carolina Light and Gas to build two APlOOO plants 
(Units 2 & 3)at the existing Virgil C. Summer Nuclear Power Station. 
The estimated plant ``overnight costs,'' i.e., construction cost before 
borrowing charges, allowances for inflation and real cost growth during 
construction, and other owner's costs, are in the range of $3,000 to 
$6,000 per kilowatt, where the upper end of this range includes the 
cost of new transmission lines and facilities. New nuclear plant cost 
estimates are a moving target given that the best estimates of the 
costs of new nuclear plants have doubled over the past five or six 
years.
    (b) If a license for a new plant is approved, it would likely take 
from four to six years to construct the reactor and perhaps another 
year before it is fully operational. The nuclear industry is in a 
better position than NRDC to estimate the actual time of construction.
    (c) Construction of AREVA's new Evolutionary Pressurized Water 
Reactor (EPR) at the Olkiluoto nuclear site in Finland began in August 
12,2005, but has already fallen three years behind schedule to 2012, 
after safety and quality-assurance problems with the piping, 
containment liner and concrete base slab were discovered. This has put 
the Finnish EPR 50 percent over budget with a current estimated cost of 
at least $6.7 billion.
    AREVA's partner Siemens has pulled out of the project, leaving 
AREVA to buyout Siemens' share at an estimated cost to AREVA of $2.6 
billion.
    Construction of a second EPR, at Flamanville, France, began 
December 3, 2007, and the construction period was estimated to be 54 
months but has encountered problems. Construction of this plant is 
being managed by Electricite de France (EdF). In the summer of 2008, 
Autorite de Surete Nucleaire (ASN), the French nuclear safety 
authority, shut down the construction site due to safety concerns about 
technical and quality-control problems with the reinforced steel used 
in the concrete base. ASN's action followed a series of letters from 
the agency to Flamanville's construction manager. In the letters, ASN 
inspectors highlighted a range of problems including nonconformities in 
the pinning of the steel framework of the concrete base slab, 
incorrectly positioned reinforcements and inadequacy of technical 
inspection by both the construction companies and EdF. Inspectors also 
uncovered inconsistencies between the blueprint for reinforcement work 
and the plan for its practical implementation. They noted incorrect 
composition of concrete that could lead to cracks and rapid 
deterioration in sea-air conditions. Concrete samples were also not 
collected properly, according to ASN. Cracks have already been observed 
at part of the base slab beneath the reactor building. The supplier of 
the steel containment liner reportedly lacks the necessary 
qualifications. Fabrication of the liner was continuing despite quality 
failures demonstrating the lack of competence of the supplier. As a 
result, one quarter of the welds of the steel liner in the reactor 
containment building were deficient. [WISE, ``Flamanville EPR 
Construction Suspended, ``Nuclear Monitor, June 5, 2008].
    EdF insists the Flamanville EPR will open on schedule in 2012, 
despite news reports that put the project nine months behind schedule 
after just nine months of construction. In early March 2009, EdF ran 
afoul of the European Commission, which raided the company's offices, 
suspecting EdF of antitrust violations and illegal price hikes.
    (d) Commercial nuclear power plants are not a ``clean energy 
alternative.'' In light of the potential for improvements in energy 
efficiency and the recent downturn in the economy, we do not see a 
``need to quickly build more capacity to meet growing electricity 
demand.''
    In any event, the cost of new nuclear plants and other supply 
alternatives will vary from site to site and over time. Before 
committing to build a new nuclear power plant a utility or energy 
generating company should, among other considerations, be required by 
the public utility commission to demonstrate that the projected energy 
need cannot be met by an integrated portfolio of alternatives that has 
a lower average delivered cost to the customer. The mix of alternatives 
should include improvements in energy efficiency, matched with 
renewables firmed by natural gas and distributed sources of industrial 
waste-heat cogeneration. Estimates of the cost of fossil-fueled 
alternatives should be based upon meeting effective constraints on 
carbon emissions, and nuclear electricity costs should be assessed 
without assuming that they will be paid down by federal, state and 
local government subsidies and federal loan guarantees, and should 
include charges that cover the full cost of storing and disposing of 
spent nuclear fuel.
    To us the most important public policy issue with respect to 
nuclear financing is not what the plants will ultimately cost-the 
honest answer today is nobody really knows-but who should bear the 
financial risk of such large and costly nuclear projects. The best 
science and engineering available suggests that we are not close to the 
point of exhausting the cost-effective decarbonization potential 
available from a wide range of renewable energy and efficiency 
technologies that are cleaner, intrinsically less hazardous than 
nuclear power and can be deployed more quickly. Basic considerations of 
economic logic and sound public investment suggest that we turn our 
attention first to exploiting the full potential of these more benign 
energy sources where it is economical to do so, and turn to nuclear at 
the point when the marginal cost of adding another megawatt of 
efficiency savings, wind, biogas, or solar exceeds the true life cycle 
cost to society of adding a megawatt of nuclear power.
    The public policy justification for taxpayers to bear the downside 
economic risks of private investments in costly new nuclear plants 
that, from a technical standpoint, do not differ significantly from 
existing nuclear power technology, and show no likelihood of delivering 
lower costs to electricity consumers and ratepayers, is highly dubious 
in our view. On the one hand, there are a host of rapidly evolving 
clean energy and efficiency technologies that have low current market 
penetration and enormous decarbonizing potential. On the other hand, we 
have a mature nuclear power industry with a 20 percent market share 
demanding public support for massive reactor investments that in many 
regulated electricity markets will likely displace, not dirty cheap 
existing coal-fired generation, but relatively cleaner new natural gas 
capacity and potentially cheaper distributed generation from biomass, 
biogas, waste-heat cogeneration, wind, and PV solar.
    If the utilities and merchant companies seeking to deploy new 
nuclear units are truly convinced of their economic viability, and are 
merely concerned that the first-of-a kind project execution risk for 
their own particular project could undermine their individual balance 
sheets, then the appropriate solution is more widespread private cross-
ownership of the initial tranche of reactor projects, so that several 
companies share the risk of each individual project. The solution is 
not to load the downside economic risk of a historically noncompetitive 
industry onto taxpayers, while reserving the risk-reduced economic 
upside for highly leveraged limited liability corporations with only 20 
percent equity invested from one or a few private owners.
    Bottom line on cost: Let the $18.5 billion in loan guarantee 
authority already provided by Congress do what it was originally 
designed to do: reduce the economic risk of deploying the first two or 
three ``first-of-a kind'' units of innovative reactor designs new to 
the American market. If these initial projects vindicate the economic 
potential of new Gen 3+ nuclear power plants, then presumably there 
will be no need for further government support. If they do not provide 
such evidence of viability, then presumably both industry and 
government will look to other generating technologies in the near term, 
and focus on a program for developing a more cost-effective nuclear 
reactor candidate for deployment in 2025 and beyond. Either way, 
enlargement of the nuclear loan guarantee program is not needed now, 
and could even be harmful by handing a position in the market to 
nuclear power technologies and projects that do not deserve to be there 
based on their intrinsic levels of performance. Either ratepayers or 
taxpayers will be forced to make up the difference.
    Question 3. As you know, Congress authorized DOE to guarantee loans 
that support early commercial use of advanced technologies if there was 
a reasonable prospect of repayment. And currently, $18.5 billion of the 
allotted $38.5 billion for the loan guarantee program is earmarked for 
nuclear power projects. But the GAO has since estimated that the 
average risk of default for DOE loan guarantees could be 50 percent or 
higher and Wall Street has put the industry on notice that it won't 
provide loans without a complete underwriting by the federal 
government.
    Do you agree with GAO's assessment of the average risk of default 
for new nuclear plants? If you disagree please detail your objections 
to their analysis and provide your estimate of the average risk of 
default for the 17 pending nuclear plant applications. Given your 
estimate, please quantify the likely cost to the US Treasury of those 
defaults.
    Do you support the Energy Department pursuing non-cash equity such 
as land or other assets as part of a loan guarantee package?
    Answer. We do not have independent information to determine the 
validity of the GAO assessment of the probability of default for new 
nuclear plants. In the United States there were 110 operational nuclear 
power plants in 1990 and 104 operational plants today. According to our 
records, more than 130 proposed U.S. power reactors were cancelled 
before becoming operational. Of these cancelled reactors, many were 
cancelled before construction. We have identified one reactor that was 
cancelled after construction was completed. We have identified another 
20 reactors that were cancelled during construction. And we have 
identified yet another 22 reactors that were cancelled after a 
construction permit was issued. While these data suggest that the 
future default rate could be high, we are not in a position to judge 
the relevance of this historical information for estimating future 
default rates. One reason to expect a lower default rate is precisely 
because of this financial train wreck that ended the first nuclear 
build-out. People have presumably learned from this experience and 
would not rush headlong into risking large sums without due diligence 
and more careful sharing of the risks between reactor vendors, 
constructors, and owners.
    Equally important, the global economy is in recession because bank 
and other financial institutions bundled toxic assets with less risky 
assets in order to remove or lessen the risks associated with the 
higher risk loans. Surely we have learned that separating the risk of 
investments from the investments themselves carries a significant risk.
    In short, for the reasons outlined in our testimony, we do not 
support Federal loan guarantees for the construction of new nuclear 
power plants in any form.
    Question 4. When the loan guarantee program was created in the 2005 
Energy and Policy Act it was intended to promote a small number 
projects for new and innovative energy sources that did not have the 
proven track record necessary for Wall Street financing.
    Please describe how the 17 projects that have applied to the DOE 
loan guarantee program to date employ ``new and innovative'' technology 
relative to the 104 nuclear power plants up and running today.
    Answer. Some of the proposed reactor designs are not new or 
innovative. The ABWR, for example, is an old design although none are 
operating in the United States today. General Electric submitted the 
Standard Design Certification Application for the ABWR to the U.S. 
Nuclear Regulatory Commission (NRC) in piecemeal format from September 
29, 1987, through March 31, 1989. The NRC issued a final rule 
certifying the ABWR design on May 12, 1997. Two ABWR in Japan, 
Kashiwazaki Kariwa Units 6 and 7, began construction in September 1991 
and February 1992, and became operational in 1996 and 1997, 
respectively. Both were then shut down as a consequence of the 
earthquake near the site on July 16, 2007. Three additional ABWRs are 
under construction, two in Taiwan and one in Japan.
    AREV A claims the USEPR is safer than previous PWRs built in 
France, but AREV A also claims the EPR is ``a mature design based on 
familiar technology.''
    The French government owns 93 percent of the stock in AREV A, which 
is the vendor of the USEPR. The French government is also the principal 
investor in Electricite de France (EdF) which proposes through a joint 
venture (Unistar Nuclear) with Constallation Energy (partially owned by 
EdF) to build a USEPR at the Calvert Cliffs Nuclear Power Station in 
Maryland. If built EdF would own about one-half of the new unit. It 
makes no sense for U.S. taxpayers to subsidize the construction of a 
French plant whose majority owner will be EdF, the French government 
electricity monopoly, or guarantee the French government's investment 
risks in these plants through U.S. taxpayer-backed loan guarantees. If 
the French government wishes to insure EdF against the risks of 
investing in the U.S. nuclear power market, in the same way that the 
Overseas Private Investment Corporation (OPIC) reduces risks for U.S. 
investors making overseas investments, the French government is welcome 
to do so, but there is no reason why U.S. taxpayers should assume the 
vast share of the economic risk of helping a foreign state-owned 
company to penetrate the U.S. nuclear electricity market, and drive up 
their electricity costs in the process. This outcome makes no economic 
or political sense.
    Response of Thomas B. Cochran to Question From Senator Murkowski
    Question 1. In your written testimony you refer to the political 
sun setting on the Yucca Mountain project and argue that the Congress 
should initiate a search for a new geologic repository site for spent 
nuclear fuel.
    Given that the Department of Energy conducted such a study in the 
early 1980s why is the NRDC confident that such a study would yield 
substantially different results today?
    Why is it reasonable to assume that any site selected would avoid 
the same political fate as the Yucca Mountain repository?
    Answer. The site selection process for two geologic repositories as 
required by the Nuclear Waste Policy Act of 1982 (NWPA of 1982) was 
corrupted. First, the Department of Energy (DOE), in its initial 
selection of candidate media and sites for a repository, showed a 
preference for sites on DOE and other federal lands. Then, the U.S. 
Congress short-circuited the site selection process by choosing the 
single Yucca Mountain site for development as a repository.
    Before initiating a new site selection process, Congress and the 
Administration should seek an independent study, followed by 
Congressional hearings, to fully understand what went wrong in the site 
selection process of the 1980s and then put in place safeguards to 
prevent repetition of previous mistakes. If something along these lines 
is not done, NRDC would not have confidence that a new search would 
yield results different from the failed efforts to site a repository at 
Lyons, Kansas or at the Yucca Mountain site in Nevada.
                                 ______
                                 
    Response of Marvin S. Fertel to Question From Senator Murkowski
    Question 1. Over the last twenty years the nuclear utilities have 
achieved a remarkable level of operational efficiency and worker safety 
that is far better than the industrial sector in general and rivals 
that of the financial industry. You referred to a number of statistics 
in your testimony. The industry will require thousands of new workers 
all across the country to construct and operate just the new reactors 
that have already submitted license applications to the NRC.
    In NEI's view what is the best way to perpetuate the nuclear 
industry's commendable safety culture as we go through the coming 
expansion?
    Answer. There are many ways by which the nuclear industry will 
perpetuate the high levels of safety performance. First, all companies 
are implementing knowledge transfer and retention programs to ensure 
that the experience gained over the first 3,000 reactor operating years 
is maintained. These programs include formal interviews and 
documentation from experienced personnel as well as mentoring programs 
for younger employees. Second, the industry is continuing to expand its 
training programs by partnering with many universities and community 
colleges to ensure there is a steady pipeline of qualified personnel. 
Finally, and perhaps most importantly, the industry will continue to do 
what it does best--learn from operational events and benchmark the best 
practices in the world as it strives for continuous improvement.
    Responses of Marvin S. Fertel to Questions From Senator Cantwell
    Question 1a. While nuclear power has proven to be a reliable way to 
generate greenhouse gas emissions free electricity--including about 10% 
of the power in Washington State--there seems to be continued doubt 
about the economic viability of any new nuclear plants.
    Given the current credit crisis, tightness in the supply chain, 
lack of skilled craft and sub-suppliers, among other challenges, how 
many nuclear plants do you think can be built in the U.S. in the next 
decade?
    Answer. Despite the current economic crisis, nuclear energy is one 
of the few bright spots in the U.S. economy--expanding rather than 
contracting, creating thousands of jobs over the past few years. Over 
the last several years, the nuclear industry has invested over $4 
billion in new nuclear plant development, and plans to invest 
approximately $8 billion more to be in a position to start construction 
in 2011-2012.
    In the nuclear sector, there are signs that U.S. manufacturing 
capability is being rebuilt. In North Carolina, Indiana, Pennsylvania, 
Virginia, Tennessee, Louisiana, Ohio and New Mexico, among other 
states, U.S. companies are adding to design and engineering staff, 
expanding their capability to manufacture nuclear-grade components, or 
building new manufacturing facilities and fuel facilities -partly in 
preparation for new reactor construction in the United States, partly 
to serve the growing world market.
    Last year, for example, AREVA and Northrop Grumman Shipbuilding 
formed a joint venture to build a new manufacturing and engineering 
facility in Newport News, VA. This $360-million facility will 
manufacture heavy components, such as reactor vessels, steam generators 
and pressurizers. Global Modular Solutions, a joint venture of Shaw 
Group and Westinghouse, is building a fabrication facility at the Port 
of Lake Charles to produce structural, piping and equipment modules for 
new nuclear plants using the Westinghouse AP1000 technology. In New 
Mexico, LES is well along with construction of a $3-billion uranium 
enrichment facility, scheduled to begin production this year. Even for 
ultra-heavy forgings, Japan Steel Works is expanding capacity, and 
companies in South Korea, France and Great Britain are planning new 
facilities.
    Although progress in rebuilding the supply chain is encouraging, 
federal government policy could accelerate the process of creating new 
jobs and generating economic growth. Specifically, the expansion and 
extension of investment tax credits for investments in manufacturing 
provided in the stimulus would ensure continued expansion of the U.S. 
nuclear supply chain and help restore U.S. leadership in this sector.
    Electric utilities have created 42 partnerships with community 
colleges to train the next generation of nuclear workers. The industry 
is developing standardized, uniform curricula to ensure that graduates 
will be eligible to work at any nuclear plant. Sixteen states have 
developed programs to promote skilled craft development. Enrollment in 
nuclear engineering programs has increased over 500 percent since 1999. 
Grant programs from the NRC, the Department of Energy, the Department 
of Labor and the Department of Defense for education and training are 
having a major impact on increasing our trained workforce.
    As with the nuclear supply chain, targeted tax credits to encourage 
companies to invest in apprenticeship programs and other work force 
development would accelerate job creation and training in the nuclear 
energy sector.
    The supply chain and work force are responding to the opportunities 
offered by the expansion of nuclear energy. Access to financing in the 
current credit markets, however, is a potential constraint.
    The United States faces a significant challenge--financing large-
scale deployment of clean energy technologies, modernizing the U.S. 
electric power supply and delivery system, and reducing carbon 
emissions. This is estimated to require investment of $1.5-2.0 trillion 
between 2010 and 2030.
    The omnibus appropriations legislation for FY 2008 and FY2009 
authorizes $38.5 billion in loan volume for the loan guarantee 
program--$18.5 billion for nuclear power projects, $2 billion for 
uranium enrichment projects, and the balance for advanced coal, 
renewable energy and energy efficiency projects.
    DOE has issued solicitations inviting loan guarantee applications 
for all these technologies and, in all cases the available loan volume 
is significantly oversubscribed. For example, the initial nuclear power 
solicitation resulted in requests from 14 projects seeking $122 billion 
in loan guarantees, with only $18.5 billion available. NEI understands 
that 10 nuclear power projects submitted Part II loan guarantee 
applications, which represented $93.2 billion in loan volume. Two 
enrichment projects submitted Part II applications, seeking $4.8 
billion in loan guarantees, with only $2 billion available. NEI also 
understands that the solicitation for innovative coal projects resulted 
in requests for $17.4 billion in loan volume, more than twice the $8 
billion available. The recent stimulus package added an additional $60 
billion in loan volume to the existing allocation of $10 billion for 
renewable technologies and transmission projects to assist with 
financing constraints.
    It is, therefore, essential that limitations on loan volume--if 
necessary at all in a program where project sponsors pay the credit 
subsidy cost--should be commensurate with the size, number and 
financing needs of the projects. In the case of nuclear power, with 
projects costs between $6 billion and $8 billion, $18.5 billion is not 
sufficient.
    The scale of the challenge requires a broader financing platform 
than the program envisioned by title XVII. An effective, long-term 
financing platform is necessary to ensure deployment of clean energy 
technologies in the numbers required, and to accelerate the flow of 
private capital to clean technology deployment.
    Safety-related construction of the first new nuclear plants will 
start in 2012, and NEI expects four to eight new nuclear plants in 
commercial operation in 2016 or so. The exact number will, of course, 
depend on many factors--U.S. economic growth, forward prices in 
electricity markets, capital costs of all baseload electric 
technologies, commodity costs, environmental compliance costs for 
fossil-fueled generating capacity, natural gas prices, growth in 
electricity demand, availability of federal and state support for 
financing and investment recovery, and more. We expect construction of 
those first plants will proceed on schedule, within budget estimates, 
and without licensing difficulties, and a second wave will be under 
construction as the first wave reaches commercial operation.
    To increase nuclear energy's contribution to 2050 climate goals, 
build rates of 4-6 plants per year must be achieved. This was possible 
in the 1970s and 1980s even with the old licensing process and lack of 
standardization. With standardized designs and improved construction 
techniques, this accelerated deployment is feasible after the first 
wave of plants is constructed.
    Question 1b. Is it accurate that only about four or five utilities 
even have the financial capacity to build a two-unit nuclear plant?
    Answer. It is accurate to say that most utilities will have 
difficulties building a two unit site without support from the federal 
loan guarantee program, support from state regulators (such as 
construction work in progress), or both. Several projects also involve 
partnerships to spread the costs and risk.
    Unlike the many consolidated government owned foreign utilities and 
the large oil and gas companies, U.S. electric power sector consists of 
many relatively small companies, which do not have the size, financing 
capability or financial strength to finance power projects of this 
scale on their own, in the numbers required. Federal loan guarantees 
offset the disparity in scale between project size and company size. 
Loan guarantees allow the companies to use project-finance-type 
structures and to employ higher leverage in the project's capital 
structure. These benefits flow to the economy by allowing the rapid 
deployment of clean generating technologies at a lower cost to 
consumers. The recent stimulus bill recognized the need to provide 
access to low-cost capital to encourage rapid deployment of renewable 
energy projects. Similar support is required for nuclear energy since, 
in many cases, new nuclear plants and renewable energy projects are 
built by the same utilities.
    Question 2. What are utilities estimating the per kilowatt cost of 
constructing a new nuclear power plant?
    Answer. The per kilowatt cost of a new nuclear plant will depend on 
the size of the units and infrastructure required at a given facility 
location. However, an evaluation by the Brattle Group conducted for the 
state of Connecticut showed a cost of 8.34 cents per kilowatt hour for 
a base case. This study showed that new nuclear was the least expensive 
option with the exception of combined cycle natural gas with no carbon 
controls. If a carbon tax is imposed, nuclear will likely be the least 
expensive baseload electricity.


------------------------------------------------------------------------
                                           Overnight
                                         capital cost      Electricity
                                          (2008 $/kW)      cost (c/kWh)
------------------------------------------------------------------------
nuclear                                           4038             8.34
------------------------------------------------------------------------
supercritical coal                                2214             8.65
------------------------------------------------------------------------
supercritical coal + CCS                          4037            14.19
------------------------------------------------------------------------
IGCC                                              2567             9.22
------------------------------------------------------------------------
IGCC + CCS                                        3387            12.45
------------------------------------------------------------------------
gas combined cycle                                 869             7.60
------------------------------------------------------------------------
gas combined cycle + CCS                          1558            10.31
------------------------------------------------------------------------

                 CCS = carbon capture and sequestration

             IGCC = integrated gasification combined cycle

 Figure 1. Comparison of electricity generation technology capital and 
 electricity costs from ``Integrated Resource Plan for Connecticut,'' 
                    The Brattle Group, January 2008

    Similarly, Florida Power and Light, Florida Progress, Southern 
Company, and SCANA demonstrated new nuclear's competitive busbar cost. 
These costs were presented in the financial modeling that supported 
their requests in the past two years to their respective state public 
service commissions (PSCs) for ``determinations of need'' for new 
reactors. For instance, FP&L modeled nine different scenarios. The only 
scenario in which nuclear was not preferred was a world in which 
natural gas prices were unrealistically low and there was no price on 
carbon. The Florida, Georgia, and South Carolina PSCs have approved 
these new nuclear plant projects.
    Question 2a. How long will it take to build a plant once its 
license is approved?
    Answer. The timeline to build a new plant once a license is 
approved by the NRC is estimated at roughly 60 months for the first 
plants in the U.S. However, once the process has been tested, foreign 
experience shows that with standard designs, the timeline can be 
significantly shortened. As an example, the Japanese have demonstrated 
that they can build an Advanced Boiling Water Reactor in less than 39 
months from the first safety related concrete pour until the unit is 
synched to the grid while meeting budget goals.
    Question 2b. I understand that AREVA's experience building one of 
their new standardized plants in Finland has not been ideal. What can 
we learn from that project that can inform the current debate on 
whether to construct new nuclear plants today?
    Answer. The schedule delays and cost overruns at Areva's Olkiluoto 
Unit 3 project in Finland are due to deficient project management, 
according to a report by the Finnish regulator. These project 
management deficiencies are similar to those that helped cause delays 
in nuclear power plant construction during the 1970s and 1980s.
    However, the root causes of these construction delays are now well-
understood. Over the last several years, industry teams have conducted 
systematic assessments of what caused construction delays, and 
developed a detailed inventory of lessons-learned that are shared 
industry-wide. The industry also undertook a comprehensive project to 
benchmark major maintenance and upgrade projects at operating plants, 
to identify the characteristics of successful project management. Based 
on this research and analysis, the industry then developed project 
management strategies and techniques intended to ensure completion of 
major projects on time and within budget.
    Largely as a result, the nuclear industry, including the U.S. 
nuclear industry, has performed major projects efficiently and without 
delay-ranging from $400 million material upgrades such as the Fort 
Calhoun refurbishment, to the $1.8 billion plant restart at Browns 
Ferry Unit 1, to refueling outages averaging 37 days industry-wide.
    Recent construction and operational experience demonstrates that an 
experienced project management team, with effective quality assurance 
and corrective action programs, and with detailed design completed 
before the start of major construction, can complete projects on budget 
and on schedule.
    Question 2c. Given the other clean energy alternatives out there 
and the need to quickly build more capacity to meet growing electricity 
demand, what is the business case for a utility to build a new nuclear 
plant?
    Answer. Nuclear energy provides base load electricity that can be 
widely deployed and has a capacity factor in the ninety percent range. 
In addition, a single new nuclear plant typically provides between 
1,000 and 1,700 megawatts of generation which allows fewer plants to 
deliver significant increases in electricity to the grid.
    As discussed earlier in this response, two utilities in Florida 
have had certificates of need approved by the state public utilities 
commission based on nuclear providing the lowest cost option for rate 
payers. Similar decisions have been made in South Carolina and Georgia 
in support of building new nuclear units.
    Seventeen companies have applications under NRC review for twenty-
six new nuclear plants to ensure that they preserve the option for 
nuclear generation as demand grows. It is anticipated based on the 
efficiencies in the new licensing process and new construction 
techniques for standard designs that the timeline to build a new plant 
will be gradually trimmed to seven years once the first wave of new 
plants is licensed and constructed.
    Question 2d. How do the costs of new reactors compare with 
projected costs for wind or solar facilities in the decade it will 
likely take to get a new nuke plant up and running?
    Answer. It is difficult to predict the costs for wind or solar 
facilities in the future. The costs of these projects tend to be site 
specific depending on the natural resources available. In addition to 
the costs of the generating capacity, solar and wind technologies 
typically require transmission upgrades and back-up electricity sources 
such as a combined cycle natural gas plant.
    Predominantly independent assessments of how to reduce U.S. 
electric sector CO2 emissions--by the International Energy 
Agency, McKinsey and Company, Cambridge Energy Research Associates, 
Pacific Northwest National Laboratory, the Energy Information 
Administration, the Environmental Protection Agency, the Electric Power 
Research Institute and others--show that there is no single technology 
that can slow and reverse increases in CO2 emissions. A 
portfolio of technologies and approaches will be required, and that 
portfolio must include more nuclear power as well as aggressive pursuit 
of energy efficiency and equally aggressive expansion of renewable 
energy, advanced coal-based technologies, plug-in hybrid electric 
vehicles and distributed resources.
    Recent analysis by the Electric Power Research Institute (EPRI) 
suggests that nuclear will be the low cost generating option going 
forward as carbon taxes are imposed. As shown on the graph in Figure 
2*, the costs of non-greenhouse gas emitting technologies are constant 
while the costs of natural gas combined cycle (NGCC) and coal without 
carbon capture and sequestration (CCS) climb as the carbon tax 
increases on the x-axis.
---------------------------------------------------------------------------
    * Figure 2 has been retained in committee files.
---------------------------------------------------------------------------
    As discussed in previous answers, analyses by several other parties 
also indicate that new nuclear plants will be a competitive source of 
baseload power. Deployment of a combination of technologies will be the 
best path forward to meet our climate change goals in the most 
expeditious and economic manner.
    Question 3. As you know, Congress authorized DOE to guarantee loans 
that support early commercial use of advanced technologies if there was 
a reasonable prospect of repayment. And currently, $18.5 billion of the 
allotted $38.5 billion for the loan guarantee program is earmarked for 
nuclear power projects. But the GAO has since estimated that the risk 
of default for DOE loan guarantees could be 50 percent or higher and 
Wall Street has put the industry on notice that it won't provide loans 
without a complete underwriting by the federal government.
    Do you agree with GAO's assessment of the average risk of default 
for new nuclear plants? If you disagree please detail your objections 
to their analysis and provide your estimate of the average risk of 
default for the 17 pending nuclear plant applications. Given your 
estimate, please quantify the likely cost to the U.S. Treasury of those 
defaults.
    Answer. No, NEI does not agree with the assessment cited. The 
reference to the default rate is unsupported and is misleading.
    On page 20 of its July 2008 report\1\, the GAO estimates that the 
loss rate (the product of default rate times recovery rate) would be 
over 25 percent. The report says this rate was calculated using the 
assumptions included in the fiscal year 2009 president's budget. A 
footnote references Table 6 of the Federal Credit Supplement, Fiscal 
Year 2009. In that document, a default rate of 50.85 percent and a 
recovery rate of 50 percent were assumed for the entire loan guarantee 
program. Furthermore, as Note 4 in Table 6 explains, these rates are 
``[a]ssumptions reflect[ing] an illustrative example for informational 
purposes only. The assumptions will be determined at the time of 
execution, and will reflect the actual terms and conditions of the loan 
and guarantee contracts.'' Thus, the cited basis for the GAO's assumed 
default rate of more than 50 percent recognizes that the actual default 
rate and recovery rate to be used in estimating loss rate must be based 
on the details of individual projects and deals. It is unlikely that a 
single value (50.85 percent) chosen to be illustrative of the entire 
pool of guaranteed projects would be representative of a specific 
portion of that pool (e.g., the nuclear power projects) with its 
particular risks and characteristics.
---------------------------------------------------------------------------
    \1\ ``Department of Energy: New Loan Guarantee Program Should 
Complete Activities Necessary for Effective and Accountable Program 
Management'', GAO-08-750, July 2008.
---------------------------------------------------------------------------
    Similarly, a CBO estimate of 50% default probability is also an 
unsupported assumption. The CBO language dates back to a 2003 analysis 
of S.14, the Energy Policy Act of 2003, which was considered (but never 
passed) during the 108th Congress. The loan guarantee program in the 
2003 legislation bore no resemblance to the loan guarantee program in 
the 2005 Energy Policy Act. The 2003 program was nuclear-specific, not 
technology-neutral. It did not require project sponsors to pay the 
credit subsidy cost, and thus did not have the significant fiscal 
discipline associated with title XVII. The CBO ``analysis'' simply 
asserted that there will be a 50 percent default probability, with no 
modeling or financial analysis to support that assertion.
    The Nuclear Energy Institute believes that the nuclear projects now 
undergoing NRC licensing review will not present any risk of default to 
the DOE loan guarantee program. These projects have been structured and 
are being managed in ways designed to minimize risks.
    The federal government uses loan guarantees widely to ensure 
investment in critical national needs, including shipbuilding, 
transportation infrastructure, exports of U.S. goods and services, 
affordable housing, and many other purposes. The federal government 
successfully manages a loan guarantee portfolio of $1.1 trillion. A 
disciplined process is used to ensure that the taxpayers' interests are 
protected before federal agencies issue loan guarantees. The Department 
of Energy will use a similar process for its loan guarantee program.
    The title XVII loan guarantee program evaluation process includes 
financial analysis, due diligence and underwriting performed by expert 
outside financial, technical and legal advisors (whose fees and 
expenses are paid by the companies developing the projects) to assist 
in the underwriting, negotiation, documentation, and monitoring of the 
projects. The strength and credit worthiness of the project can be 
measured by indicators (widely used by investment banks and rating 
agencies) such as the credit rating of the project sponsor, project 
capital structure, project cash flow, strength of power purchase 
agreements, borrower's exposure to market and commodity risks, 
management and operator experience, etc. Projects that do not meet 
defined metrics will not be approved for loan guarantees.
    In the case of new nuclear power projects, the companies will have 
significant shareholder equity ($1 billion or more per project) at 
risk. This equity is in a ``first-loss'' position--i.e., the company 
forfeits that equity in the event of default. For most electric 
companies, such a loss would be unsustainable. The significant amount 
of money at risk imposes a high level of discipline on investment 
decisions. As a result, the companies seeking loan guarantees for 
nuclear power plants have a powerful incentive to ensure that projects 
are properly developed, constructed, operated and maintained to achieve 
commercial success. The federal government's interest and the company's 
interest are completely aligned. Like the federal government, the 
nuclear companies wish to avoid default at all costs.
    The energy loan guarantee program is self-financing: There is no 
cost to the taxpayer. The 1990 Federal Credit Reform Act created a 
standardized way of accounting for loan guarantee programs in the 
federal budget. Federal agencies that provide loan guarantees are 
required to calculate a ``cost,'' following standardized protocols. In 
most loan guarantee programs, this cost appears in the federal budget 
as an appropriated amount. The energy loan guarantee program took a 
different and innovative approach. The Department of Energy cannot 
issue a loan guarantee unless the company receiving the loan guarantee 
has paid the cost of the guarantee and all administrative fees and 
costs incurred by the agency in administering the program.
    Based on the above, NEI believes that the nuclear projects subject 
to the loan guarantee program will cost the U.S. Treasury nothing and 
will actually return a profit to the Treasury through the payment of 
credit subsidy fees.
    Question 3a. Do you support the Energy Department pursuing non-cash 
equity such as land or other assets as part of a loan guarantee 
package?
    Answer. Yes. NEI believes that non-cash project assets, such as 
land, should be allowed as part of the project sponsor's equity 
contribution.
    Question 4. When the loan guarantee program was created in the 2005 
Energy Policy Act it was intended to promote a small number of projects 
for new and innovative energy sources that did not have the proven 
track record necessary for Wall Street financing.
    Please describe how the 17 projects that have applied to the DOE 
loan guarantee program to date employ ``new and innovative'' technology 
relative to the 104 nuclear power plants up and running today.
    Answer. The 17 applicants that originally applied to the loan 
guarantee program are planning to construct and operate advanced 
nuclear power facilities employing passive and evolutionary design 
features. These features are new and innovative when compared to the 
existing 104 operating reactors that provide 20 percent of the 
country's electricity. Although several projects are under 
consideration, the nuclear power facility proposed by each is one of 
five standardized designs that is or will be certified by the NRC.
    A key example of the use of new and innovative technology is in the 
area of instrumentation and control. Most of the operating reactors 
today use hard wired point-to-point control room to field monitoring 
and control systems. In simple terms this means there is one wire per 
function or 30-50,000 wires coming from the field to the plant control 
room. The new reactors are designed with three-layer instrumentation 
and control system that uses extensive multiplexing and fiber optics. 
Single multiplexer units can generally handle 300 to 400 signals. Fiber 
optics allows the plant operator to interface with all screens, 
peripherals and alarms.
    Also, many of the new reactors designs are utilizing modular 
construction. These modules are rail shippable, which allows 
construction to take place in a controlled environment and then shipped 
to the construction site. Advances in 3D computer modeling play a 
significant role in this modular construction approach. This approach 
reduces construction time and ensures efficient use of field manpower.
    Two of the five new plant technologies achieve enhanced safety 
through incorporation of passive or inherent safety features. These 
features require no active controls or operational intervention to 
avoid accidents in the event of malfunction, and may rely on gravity, 
natural convection or resistance to high temperatures. Traditional 
reactor safety systems are `active' in the sense that they involve 
electrical or mechanical operation on command. Inherent or full passive 
safety depends only on physical phenomena such as convection, gravity 
or resistance to high temperatures, not on functioning of engineered 
components. There is no need for active equipment such as pumps, fans, 
and other rotating machinery.
    In addition to advanced instrumentation and control systems, all 
five new reactors benefit from:

   Use of NRC-approved probabilistic risk assessments that show 
        the likelihood of a release of radiation is significantly below 
        that of operating facilities and well below the NRC safety 
        goals.
   Enhanced protection from fires through physical separation 
        of equipment and cables and redundancy in safety systems
   Enhanced protection against aircraft impacts
   Fewer valves, less piping, less control cabling, and fewer 
        pumps than the existing operating fleet based on lessons 
        learned from over 30 years of experience with commercial 
        operation

    Question 5a. I understand the NRC is currently considering 
applications that reference five different reactor designs and the 
industry is expected to submit additional designs for NRC review and 
approval. But in a speech last week, NRC Commissioner Jaczko 
characterized current new reactor licensing as ``a situation where we 
have incomplete designs and less than high quality applications 
submitted for review,'' and pointed out that ``today, almost a fifth (3 
of 17) of the combined operating license applications we have received 
are on hold at the request of the applicants themselves.''
    If one of the factors leading to the massive nuclear construction 
cost overruns in the 1970's and 1980's was the lack of standardization 
among reactor designs at the time, what is the NRC doing to ensure that 
only a limited number of the safest and most cost effective advanced 
technologies are approved?
    Answer. It is important to remember that many of the plants 
constructed in the 1970's and 1980's were built and commissioned under 
the most unforgiving conditions.
    The defining event for the 1980s-vintage plants was the accident at 
the Three Mile Island nuclear power plant in 1979. After that accident, 
nuclear power plants-both operating plants and those under 
construction--were engulfed in new regulatory requirements imposed by 
the Nuclear Regulatory Commission. The changing requirements forced 
extensive redesign and rework at nuclear units under construction. This 
stretched out construction schedules and--to make matters worse--the 
delays coincided with a lengthy period of double-digit inflation and 
national economic distress. All this combined to drive up the cost of 
these nuclear units to several times the original cost estimates. For 
some of these nuclear plants, half the total cost was interest on debt 
raised to finance construction.
    The 104 nuclear power plants now supplying about 20 percent of U.S. 
electricity also were built under a two-step licensing system. Under 
this system, electric utilities had to secure two permits-one to build 
a nuclear power plant, a second to operate it. Many companies started 
construction before design and engineering was complete. In fact, in 
many cases, the design/engineering work had barely started.
    This ``design as you go'' approach led to big problems. The Nuclear 
Regulatory Commission (NRC) obviously could not finish its review and 
approval of the plant design until the plant was built and the power 
company requested an operating license.
    Even before the accident at Three Mile Island, requests for 
operating licenses were complex and contentious. After the accident, 
they became even more difficult. The reviews, conducted by licensing 
boards, were formal adjudicatory proceedings with all the trappings of 
a courtroom trial-discovery, cross-examination and the like. They were 
typically lengthy, bitterly contested, divisive events. And they caused 
delays in plant operation, which added hundreds of millions of dollars 
to the cost.
    Based on that experience, the electric power industry resolved that 
future nuclear power plants would be fully designed before construction 
began. Never again would electric utilities start building a nuclear 
power plant that was only partly designed, or do extensive design and 
engineering work during construction. The change in design philosophy 
was accompanied by a complete overhaul of the licensing system, which 
was ratified by Congress in the Energy Policy Act of 1992.
    The new licensing process delineated in 10 CFR Part 52 allows 
nuclear power plant designers to submit their designs to the NRC for 
``certification.'' When a design is certified, electric utilities can 
order that plant, confident that design and safety issues have been 
resolved.
    The new process also lets a company request a combined license to 
build and operate a new nuclear unit. As long as the design is pre-
approved, and as long as the plant is built to pre-approved 
specifications (and the Nuclear Regulatory Commission will be on-site, 
checking to make sure that it is), then the power company can start the 
plant up when construction is complete--assuming of course, that no new 
safety issues have emerged.
    Taken together, the new design philosophy and the new licensing 
system ensure that the major licensing issues--design, safety, siting 
and public concerns--will be settled up front before a company starts 
building a nuclear power plant and puts billions of dollars at risk.
    In summary, the conditions that led to large cost increases for 
some operating nuclear power plants no longer exist. Past experience is 
useful in identifying the weaknesses in the regulatory process and 
fixing those weaknesses. Past experience does not, however, provide 
useful guidance as to the cost of nuclear power plants that will be 
built in the future, or the length of time it will take to build them.
    Regarding design certifications, the NRC's statutory responsibility 
is to ensure the designs are safe. As noted in their policy statement 
on regulation of new reactors, the Commission expects, as a minimum, at 
least the same degree of protection of the environment and public 
health and safety and the common defense and security that is required 
for current generation light-water reactors. Furthermore, the 
Commission expects that advanced reactors will provide enhanced margins 
of safety and/or use simplified, inherent, passive, or other innovative 
means to accomplish their safety and security functions. How many 
designs are ultimately certified and whether those designs are cost 
effective is not for NRC to decide. The market place will make that 
determination.
    The industry agrees that reviewing the design certifications and 
COL applications in parallel is not ideal, but is necessary for the 
first wave of applications. The NRC has completed acceptance reviews 
formally accepted (docketed) all of the design certifications and COL 
applications submitted by the industry to date. The NRC has provided 
review schedules to applicants and has been successfully meeting early 
milestones which is another indication that the applications are 
complete.
    The long lead times for these new nuclear projects allow the 
sponsors to make adjustments as market conditions change. A limited 
number of applicants have placed their NRC reviews on hold pending 
resolution of business issues. The NRC has requested notifications from 
applicants as soon as possible if there are changes in the content or 
schedule for applications to support the NRC's work load management 
efforts. The NRC and industry are working to prioritize the review 
activities to ensure project sponsors will be able to meet their online 
need dates for power. Note that all review activities are paid for by 
project sponsors through hourly billing by the NRC.
    Question 5b. Is there anything Congress can do to support more 
plant design standardization? For example, should we make nuclear 
financing contingent on one or two standardized designs?
    Answer. Presently three standardized designs and one design 
certification amendment are under review by the Nuclear Regulatory 
Commission. The Department of Energy's Nuclear Power 2010 program plays 
a critical role in supporting the design and licensing activities 
needed for the NRC to complete its reviews of two standardized designs. 
Congressional support of funding for this program in fiscal year 2010 
would be beneficial.
    As discussed above, standardized designs serve a function in 
reducing risks before a project sponsor proceeds with construction. 
Financing for construction activities should not be tied to a limited 
number of designs as the major construction risks related to design 
certainty will already be addressed at that point.
     Response of Marvin S. Fertel to Question From Senator Shaheen
    Question 1a. As you know the Energy Policy Act of 2005 authorized 
the Secretary of Energy to guarantee loans for up to 80% of 
construction costs for energy projects that reduce greenhouse gas 
emissions, including new nuclear facilities. Last June, DOE solicited 
applications for guarantees of loans totaling up to $18.5 billion. The 
DOE now has received 17 applications for 26 new reactors seeking 
guarantees for a total of $122 billion in loans, which it is now 
evaluating.
    How many reactors do you think the current amount of funding that 
is available for loan guarantees, $18.5 billion, will cover?
    Answer. It is difficult to predict how many new nuclear power 
plants will be built with the $18.5 billion in federal loan guarantees 
currently authorized. Some projects have multiple co-owners, and it is 
possible that not all co-owners will choose to avail themselves of the 
loan guarantee program. Some projects will receive partial support from 
the government export credit agencies of France and Japan, which 
testifies to the degree of confidence the French and Japanese 
governments have in nuclear power. Such co-financing will leverage the 
$18.5 billion in existing loan guarantee authority and, as a result, it 
may cover 3-4 projects.
    Certainly, the $18.5 billion in existing loan guarantee authority 
will not cover all the projects that filed Part I loan guarantee 
applications with the Department of Energy. DOE originally received 
loan guarantee applications from 17 companies for 21 new reactors, with 
an aggregate loan volume loan volume of $122 billion and total project 
costs of $188 billion. Those applications represent 28,800 megawatts of 
carbon-free generating capacity and would, NEI estimates, avoid 183 
million metric tons per year of CO2, 124,000 tons of 
NOX, and 348,000 tons of SO2 (based on a 90% 
capacity factor).
    Question 1b. In your opinion, how many new reactors will be 
necessary for economies of scale to begin to kick in and the costs of 
each reactor begin to come down, making it easier to secure financing?
    Answer. International experience proves that each consecutive 
construction project using a standard design will benefit from 
efficiencies learned from the first. Particularly in the U.S. where the 
reactor designer and architect/engineers are teamed for construction, 
this will be the case.
    The United States faces a significant challenge--financing large-
scale deployment of clean energy technologies, modernizing the U.S. 
electric power supply and delivery system, and reducing carbon 
emissions. This is estimated to require investment of $1.5-2.0 trillion 
between 2010 and 2030.
    The omnibus appropriations legislation for FY 2008 and FY2009 
authorizes $38.5 billion in loan volume for the loan guarantee 
program--$18.5 billion for nuclear power projects, $2 billion for 
uranium enrichment projects, and the balance for advanced coal, 
renewable energy and energy efficiency projects.
    DOE has issued solicitations inviting loan guarantee applications 
for all these technologies and, in all cases the available loan volume 
is significantly oversubscribed. For example, NEI understands that 10 
nuclear power projects submitted Part II loan guarantee applications, 
which represented $93.2 billion in loan volume. Two enrichment projects 
submitted Part II applications, seeking $4.8 billion in loan 
guarantees, with only $2 billion available. NEI also understands that 
the solicitation for innovative coal projects resulted in requests for 
$17.4 billion in loan volume, more than twice the $8 billion available. 
The recent stimulus package added an additional $60 billion in loan 
volume to the existing allocation of $10 billion for renewable 
technologies and transmission projects to assist with financing 
constraints.
    It is, therefore, essential that limitations on loan volume--if 
necessary at all in a program where project sponsors pay the credit 
subsidy cost--should be commensurate with the size, number and 
financing needs of the projects. In the case of nuclear power, with 
projects costs between $6 billion and $8 billion, $18.5 billion is not 
sufficient.
    The scale of the challenge requires a broader financing platform 
than the program envisioned by title XVII. An effective, long-term 
financing platform is necessary to ensure deployment of clean energy 
technologies in the numbers required, and to accelerate the flow of 
private capital to clean technology deployment.
    During the 110th Congress, Senator Bingaman introduced legislation 
to create a 21st Century Energy Deployment Corporation. Senator 
Domenici, ranking member of this committee during the last Congress, 
introduced legislation to create a Clean Energy Bank. Both proposals 
address aspects of the financing challenge facing the United States and 
its electric power industry.
    NEI believes that the existing title XVII program and the DOE Loan 
Guarantee Program Office, operating under workable rules, could serve 
as a foundation on which to build a larger, independent financing 
institution within the Department of Energy. There is precedent for 
such independent entities, equipped with all the resources necessary to 
accomplish their missions, in the Federal Energy Regulatory Commission 
and the Energy Information Administration. This approach could have 
significant advantages:

   An independent clean energy financing authority within DOE 
        could take advantage of technical resources available within 
        the Department, to supplement its due diligence on prospective 
        projects and to identify promising technologies emerging from 
        the research, development and demonstration pipeline that might 
        be candidates for loan guarantee support to enable and speed 
        deployment.
   An independent entity within DOE would have the resources 
        necessary to implement its mission effectively, including its 
        own legal and financial advisers with the training and 
        experience necessary for a financing organization. Providing 
        the independent entity with its own resources would eliminate 
        the difficulties encountered during implementation of the title 
        XVII program.
   Programmatic oversight in Congress would remain with the 
        Energy Committees, which have significantly more experience 
        with energy policy challenges, and in structuring the 
        institutions necessary to address those challenges.
    Responses of Marvin S. Fertel to Questions From Senator Stabenow
    Question 1. Retooling Plants. In your testimony, you emphasize that 
the U.S. is ramping up its ability to manufacture nuclear components. 
This is partly to serve as a growing world market. Do you see any 
attempts being made to retool existing manufacturing facilities that 
were once used for other purposes--such as what is happening in 
Michigan--with manufacturing plants?
    Answer. Yes, the U.S. is seeing retooling of existing facilities, 
development of new facilities and expansion of existing product lines 
(with augmented quality programs). Some examples include:

    Retooling--Precision Custom Components, LLC in York, PA has 
retooled their existing manufacturing facility with machine tools and 
other needed equipment to expand into the commercial nuclear industry. 
PCC provides reactor vessel internals, reactors servicing equipment 
such as integrated reactor head packages and spent nuclear fuel casks.
    Holtec in Turtle Creek, PA added 90,000 square feet to its 
manufacturing division in a facility that had been an old Westinghouse 
factory. They manufacture dry fuel storage canisters and high-tech fuel 
racks for electric utilities in the United States and around the world. 
With this expansion, Holtec added 75 new jobs last year and has 
announced plans for 500 new hires in the next three to five years, 
including manufacturing and welding engineers, production workers and 
machinists.
    Development of New Facilities--Curtiss Wright Flow Control 
Corporation is building a $62 million, state-of-the-art, multipurpose 
Large Manufacturing Complex in Cheswick, PA. The nine-story, 48,000-
square-foot facility will be used to build commercial nuclear reactor 
coolant pumps as well as support the production and testing of other 
new large products.
    AREVA and Northrop Grumman Shipbuilding are building a new 
manufacturing and engineering facility in Newport News, Va., to supply 
the growing American nuclear energy sector. The 300,000-square-foot 
facility represents an investment of more than $360 million, and will 
manufacture heavy components, such as reactor vessels, steam generators 
and pressurizers. This will result in more than 500 skilled hourly and 
salaried jobs.
    Global Modular Solutions, a joint venture of Shaw Group and 
Westinghouse, is building a 600,000-square-foot module fabrication 
facility at the Port of Lake Charles to produce structural, piping and 
equipment modules for new nuclear plants using the Westinghouse AP1000 
technology. The new facility is scheduled open in the summer of 2009 
and will employ 1,400 workers or more at full capacity.
    Augmenting Quality Programs--In order to supply many nuclear 
components, it is necessary to have an appropriate quality 
certification and/or quality program in place that meets the industry 
standards. One such quality certification is the ASME N-Stamp. Over the 
past 2 years, the industry has seen a nearly 20 percent increase in the 
number of N-Stamps held in the U.S. from only 221 in 2007 to 263 today.
    The Nuclear Energy Institute has been actively engaging U.S. 
businesses to encourage them to consider entering the global nuclear 
supply chain through a series of regional workshops that bring together 
procurement and supply chain leaders from reactor vendors and 
engineering, procurement and construction firms with businesses 
exploring the nuclear market.
    In February, NEI conducted our fourth workshop in Chattanooga, 
Tennessee and nearly 450 people participated. Our next event is 
scheduled in Detroit on June 4th and will target manufacturers in the 
Great Lakes Region. Local co-sponsors for this event include the 
Michigan Chamber of Commerce, the Michigan Minority Business 
Development Council and the Michigan Manufacturers Association. 
Nationally, these events are co-sponsored by the U.S. Department of 
Energy, the National Association of Manufacturers and the Association 
of Mechanical Engineers.

    NEI believes that Congress can help accelerate this retooling and 
manufacturing expansion by:

   Providing a manufacturing tax credit to allow the 
        development of new facilities or the expansion or retooling of 
        existing manufacturing facilities.
   Providing grants and technical assistance to small and mid-
        sized business to assist them with putting appropriate nuclear 
        quality programs in place.
   Providing a worker training tax credit to assist with the 
        development of a qualified workforce to support this expansion 
        of nuclear manufacturing capacity.
   Encouraging the export of nuclear products and services by 
        better coordinating federal policy initiatives and actively 
        advocating for the industry.

    Question 2. Incentives for Nuclear Manufacturing. When nuclear 
manufacturing in the U.S. is discussed, a lot of the focus is on heavy 
manufacturing that not only takes long lead times, but is done 
overseas. What do you think will be done in the manufacture of non-
heavy components for nuclear plants--such as wiring--in the U.S.?
    NEI believes that there is substantial opportunity to manufacture 
both heavy and non-heavy components for nuclear plants in the U.S. In 
addition to heavy components, the first eight new nuclear plants built 
in the U.S. may require:

   Over 1,800 miles of cable
   4,000 to 24,000 nuclear grade valves
   1,000 to 2,000 pumps
   30 to 150 miles of nuclear grade piping
   Over 3 million cubic yards of concrete
   Over 700,000 electrical components
   Roughly 500,000 tons of structural and reinforcing steel
   500 to 1,300 large and small heat exchangers

    Many of these components and commodities are produced in the U.S. 
Yet with the advent of licensing and eventually constructing 26 
reactors in the U.S. and potentially 200 overseas, there is an 
opportunity to significantly expand U.S. manufacturing capacity. 
Additionally, while there are U.S. manufacturers capable of producing 
components, many lack the necessary quality programs required to 
participate in the nuclear market.
    A key criteria in selecting the locations of the industry's 
regional manufacturing outreach workshops (described above) is the 
current industrial base that exists in the region. In 2008, workshops 
were held in Columbia, SC, Cleveland, OH and San Antonio, TX to reach 
out to the existing industrial base for components like valves, pumps, 
cabling, cable tray, hangers, fasteners, steel, etc. The 2009 program 
also targets regions of the country with an existing manufacturing base 
that can be repurposed to support the nuclear industry. As mentioned in 
the first response, the next event is scheduled in Detroit on June 4th 
and will target manufacturers in the Great Lakes Region.
    Finally, we are seeing growth in the heavy component manufacturing 
area as well. The Babcock & Wilcox Company has the ability to fabricate 
heavy components at their facilities and the recent announcement by 
AREVA and Northrop Grumman Shipbuilding will add additional heavy 
component manufacturing capacity in the U.S.
    NEI believes that the policy recommendations outlined above can 
help accelerate U.S. industry's entrance into the nuclear market for 
heavy and non-heavy 

                          


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