[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
HYDROELECTRIC RELICENSING AND NUCLEAR ENERGY
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ENERGY AND AIR QUALITY
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
JUNE 27, 2001
__________
Serial No. 107-55
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
U.S. GOVERNMENT PRINTING OFFICE
73-738CC WASHINGTON : 2001
------------------------------
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COMMITTEE ON ENERGY AND COMMERCE
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan
JOE BARTON, Texas HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia SHERROD BROWN, Ohio
STEVE LARGENT, Oklahoma BART GORDON, Tennessee
RICHARD BURR, North Carolina PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
GREG GANSKE, Iowa ANNA G. ESHOO, California
CHARLIE NORWOOD, Georgia BART STUPAK, Michigan
BARBARA CUBIN, Wyoming ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois TOM SAWYER, Ohio
HEATHER WILSON, New Mexico ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona GENE GREEN, Texas
CHARLES ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi TED STRICKLAND, Ohio
VITO FOSSELLA, New York DIANA DeGETTE, Colorado
ROY BLUNT, Missouri THOMAS M. BARRETT, Wisconsin
TOM DAVIS, Virginia BILL LUTHER, Minnesota
ED BRYANT, Tennessee LOIS CAPPS, California
ROBERT L. EHRLICH, Jr., Maryland MICHAEL F. DOYLE, Pennsylvania
STEVE BUYER, Indiana CHRISTOPHER JOHN, Louisiana
GEORGE RADANOVICH, California JANE HARMAN, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska
David V. Marventano, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Energy and Air Quality
JOE BARTON, Texas, Chairman
CHRISTOPHER COX, California RICK BOUCHER, Virginia
STEVE LARGENT, Oklahoma RALPH M. HALL, Texas
Vice Chairman TOM SAWYER, Ohio
RICHARD BURR, North Carolina ALBERT R. WYNN, Maryland
ED WHITFIELD, Kentucky MICHAEL F. DOYLE, Pennsylvania
GREG GANSKE, Iowa CHRISTOPHER JOHN, Louisiana
CHARLIE NORWOOD, Georgia HENRY A. WAXMAN, California
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
HEATHER WILSON, New Mexico BART GORDON, Tennessee
JOHN SHADEGG, Arizona BOBBY L. RUSH, Illinois
CHARLES ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi TED STRICKLAND, Ohio
VITO FOSSELLA, New York THOMAS M. BARRETT, Wisconsin
ROY BLUNT, Missouri BILL LUTHER, Minnesota
ED BRYANT, Tennessee JOHN D. DINGELL, Michigan
GEORGE RADANOVICH, California (Ex Officio)
MARY BONO, California
GREG WALDEN, Oregon
W.J. ``BILLY'' TAUZIN, Louisiana
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Aurilio, Anna, Legislative Director, U.S. Public Interest
Research Group............................................. 87
Birnbaum, S. Elizabeth, Director, Government Affairs,
American Rivers............................................ 141
Davis, George A., Director, Government Programs Nuclear
Systems, Westinghouse Electric Company..................... 66
Fertel, Marvin S., Senior Vice President, Business
Operations, Nuclear Energy Institute....................... 54
Hebert, Hon. Curt L., Jr., Chairman, Federal Energy
Regulatory Commission; accompanied by J. Mark Robinson,
Director, Office of Energy Projects and Kristina Nygaard,
Associate Counsel for Energy Projects, Office of General
Counsel.................................................... 100
Hill, Barry T., Director, Natural Resources and Environment;
accompanied by Charles S. Cotton, Assistant Director and
Erin Barlow, Senior Analyst, Natural Resources and
Environment, General Accounting Office..................... 126
Magwood, William D., Director, Office of Nuclear Energy,
Science and Technology, U.S. Department of Energy.......... 29
Meserve, Richard A., Chairman, U.S. Nuclear Regulatory
Commission................................................. 19
Parme, Laurence L., Manager, Nuclear Safety and Licensing,
General Atomics............................................ 72
Prescott, John, Vice President of Generation, Idaho Power
Company.................................................... 131
Quattrocchi, John L., Senior Vice President, Underwriting,
American Nuclear Insurers.................................. 80
Shems, Ronald, Attorney, Shems, Dunkiel, PLLC, on behalf of
Vermont Agency of Natural Resources........................ 151
Skolds, Jack, Chief Operating Officer, Exelon Nuclear........ 61
Womack, E. Allen, President, BWX Technology, Inc............. 77
Material submitted for the record by:
Breathitt, Hon. Linda, Commissioner, Federal Energy
Regulatory Commission, prepared statement of............... 164
Hebert, Hon. Curt L., Jr., Chairman, Federal Energy
Regulatory Commission, letter dated August 3, 2001,
enclosing response for the record.......................... 178
Hogarth, William T., Acting Assistant Administrator for
Fisheries, Office of Protected Resources, National Marine
Fisheries Service, U.S. Department of Commerce, prepared
statement of............................................... 175
Massey, Hon. William, Commissioner, Federal Energy Regulatory
Commission, prepared statement of.......................... 166
Sampson, Donald, Executive Director, Columbia River Inter-
Tribal Fish Commission, prepared statement of.............. 168
Veneman, Hon. Ann, Secretary, U.S. Department of Agriculture,
prepared statement of...................................... 174
(iii)
HYDROELECTRIC RELICENSING AND NUCLEAR ENERGY
----------
WEDNESDAY, JUNE 27, 2001
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Energy and Air Quality,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:15 a.m., in
room 2123, Rayburn House Office Building, Hon. Joe Barton
(chairman) presiding.
Members present: Representatives Barton, Cox, Largent,
Burr, Shimkus, Wilson, Shadegg, Pickering, Bryant, Radanovich,
Bono, Walden, Tauzin (ex officio), Boucher, Sawyer, Wynn,
Doyle, John, Markey, McCarthy, Strickland, Barrett, Luther, and
Dingell (ex officio).
Staff Present: Jason Bentley, majority counsel; Andy Black,
policy coordinator; Dwight Cates, majority professional staff;
Peter Kielty, legislative clerk; Elizabeth Brennan, Intern; Sue
Sheridan, minority counsel; and Eric Kesster, minority
professional staff.
Mr. Barton. The subcommittee will come to order. We want
the record to show that the reserve recording clerk got here
before the primary recording clerk. So we are appreciative that
you were able to come. You got here quicker than the person who
is supposed to be here.
We are going to hold our hearing today on hydro relicensing
and nuclear energy. This is another in a long series of
hearings that we have held on national energy policy. As
yesterday's Wall Street Journal reported, the Nuclear
Regulatory Commission is about to be inundated with license
renewal applications from many of our Nation's 103 nuclear
power plants. Those applications are extremely important to our
Nation's future. If the NRC determines that these plants should
have the licenses extended, we can be assured many more years
of safe and reliable electricity generated from nuclear power.
One topic of today's hearing is the readiness of the NRC to
handle those applications properly, whether Congress should
make any changes to NRC and relevant law in order to handle
this coming relicensing application search. I would like to
thank all of our witnesses today who are going to speak on that
subject.
I want to particularly thank Chairman Meserve of the NRC,
who greatly altered his schedule to appear before this
subcommittee. He was in Atlanta yesterday, in a retreat with a
professional staff, and changed his schedule to appear here,
and we appreciate that.
I would have to say that the Wall Street Journal's line
drawing that you viewed in a recent issue does not do you
justice. But your wife may like it; I don't know.
There are several other nuclear issues that deserve our
attention. The NRC might also begin to receive applications,
believe it or not, for new nuclear power plants or expansions
of existing capacity. We have before the subcommittee today
representatives of some of those potential applicants and other
interested parties. The question might be, is the NRC ready for
new applications? What laws will affect our ability to get a
fair, science-based, and timely answer to those permit
applications if they do come?
The subcommittee has also got a history on these issues of
acting in a bipartisan fashion on such things as taking the
Nuclear Waste Fund off budget and looking at comprehensive
legislation dealing with Yucca Mountain. We are going to await
a recommendation from the scientists at Yucca Mountain and then
from the Secretary of Energy before we begin to move a bill on
high-level nuclear waste. This subcommittee is not going to be
complacent while we are waiting.
I personally think we should act again, and very soon, to
take the Nuclear Waste Fund off budget, so that the ratepayers
who have paid their money into this fund over the last 20-some-
odd years actually get what they paid for.
Finally, at some point the subcommittee is going to
reauthorize the Price-Anderson Act which lapses in August 2002,
which is next year. There are many in the industry that think
one of the most important signals that Congress could send in
this session would be to reauthorize Price-Anderson.
This is an issue that we are going to make a decision on as
to when to take it up, in consultation with our Minority
members, but we are going to take it up at some point,
hopefully this year.
Next we are going to look at hydroelectric power. There are
many dams licensed by the Federal Energy Regulatory Commission
that are also coming up or are up for relicensing very soon.
Congress should review the relicensing process to make certain
that all who submit an application for renewal can receive a
timely response, with appropriate conditions, at an acceptable
cost. A recent report by the FERC indicates the current process
may not allow that, and many licensees have told me that they
agree and think that there are significant reforms that should
be enacted on the hydro front.
We have before the subcommittee today a representative of
the Coalition of Hydropower Licensees and the environmental
community, as well as many others who can testify about the
process.
The Chairman of the FERC, Curt Hebert, is not here at the
moment but will be here by 1 o'clock. He has pending business
before the FERC today and has had to change his schedule also
in order to come over and appear before the subcommittee this
afternoon. So I thank him in advance for his willingness to
come before the committee.
Next week is the Fourth of July work period. After that,
Congress and this subcommittee will return to aggressive action
on energy. Chairman Tauzin and I have discussed the
subcommittee going straight to work on a series of issues the
week of our return. We would like to act on conservation,
nuclear energy, hydro relicensing, clean coal, possibly more.
Very soon thereafter, we want to start hearings and
discussions concerning structural reform of our electricity
laws, with a goal of increasing transmission capacity,
improving the operation of our transmission markets and
removing barriers to wholesale and retail competition
generation. I am going to be working very closely for the rest
of this summer with all members of the subcommittee and
especially with the ranking member, Mr. Boucher, my good friend
of the great State of Virginia. I am told that he, Mr.
Whitfield, Mr. Shimkus, Mr. Strickland, Mr. Doyle, and others
are soon going to introduce legislation on clean coal
technology, and hopefully that can be drafted in a way that
this subcommittee can look at it officially and support that
very timely issue.
With that, I would like to recognize the ranking member,
Mr. Boucher of Virginia.
Mr. Boucher. Well, thank you very much, Mr. Chairman. Given
the length of the data we have before us and the number of
witnesses who will be testifying before the committee during
the course of this day, I am going to be exceedingly brief in
these remarks. In fact, this morning I am simply going to make
three points.
First, I think it is vitally important that we take the
time which is necessary to construct carefully the
subcommittee's legislation. And I am somewhat concerned that
the schedule that we have before us for reporting legislation
over the next several weeks is ambitious, and so I would simply
caution this morning that whatever time is necessary to
carefully to construct the committee's bills should be taken.
I appreciate the approach that Chairman Barton has taken to
the subcommittee's work on the entire range of matters now
before us. At each step, he has consulted and sought
recommendations from our side. He has offered and continues to
offer ample opportunity for this side to participate fully in
the drafting process. And I thank him for taking this approach.
I realize that the time constraints we are now facing for
reporting comprehensive energy legislation is not of his making
or, for that matter, of Chairman Tauzin's making, but I must
voice my concern this morning about those constraints
nonetheless.
Second, and with reference to today's hearing, I appreciate
the acceptance by the chairman of our request that a markup of
the Price-Anderson reauthorization be deferred until a later
time. The many complex matters that reauthorization will entail
will necessarily require more time than is available this
summer. It is appropriate that we begin the discussion of those
matters this morning with our two panels of witnesses, and I
look forward to their testimony, which will help to frame the
issues we will address at a later time during the course of
this year.
I support and encourage reauthorization of Price-Anderson
on the longer time line upon which we are now operating for
this matter. I would encourage, however, that we act now in
order to take the Nuclear Waste Fund off budget. And I am
pleased to hear the chairman's remarks in sum on that same
position this morning.
Third, as we address hydroelectric relicensing matters, I
want to urge that environmental concerns be given at least the
priority that they have in the current law. I acknowledge the
concerns that have been expressed by the industry that the
existing relicensing process is time-consuming, cumbersome and
costly, but as we seek ways to address those industry concerns
and facilitate the relicensing process, we in my view must not
diminish the consideration current law requires for the
protection of environmental resources.
Thank you very much, Mr. Chairman, for organizing our
discussion today, and I yield back and look forward to hearing
from our witnesses.
Mr. Barton. I thank the gentleman from Virginia.
We would recognize the distinguished full committee
chairman, Mr. Tauzin of Louisiana.
Chairman Tauzin. Thank you, Mr. Barton, both for this
hearing and for the extraordinary lineup of witnesses who will
help us understand both the nuclear and the hydro relicensing
issues that we will shortly take up. Let me thank my friend,
Mr. Boucher, for his kind words of appreciation and to the
process we are trying to execute.
In the life of our committee, time has always been short.
Time has always been constrained, and we always work under very
tough time lines, and in this case, we will obviously be faced
with a case of that in the next several weeks.
The Nation, however, I think expects us to act. There is, I
think, no larger consumer issue facing America today than the
energy issue. It perhaps even dwarfs the issue that Mr. Dingell
and I have been working on, the broadband issue in the telecom
area, and soon-to-be-introduced third-generation spectrum issue
that will make wireless broadband hopefully available to all
Americans.
Because energy is becoming short and prices are beginning
to rise in a number of marketplaces, consumers are keenly
interested in what we intend to do, and not in the long run,
but in the short run, immediately, as soon as we can, to
alleviate what many experts are predicting to be even larger
price increases and other problems and shortages.
In that light, nuclear power and hydro now, to the surprise
of many Americans, provide two of the Nation's largest sources
of electricity after coal, even larger than natural gas. And
while nuclear was thought for a while to be on its last leg,
there are now many nuclear companies who are prepared and
anxious to relicense their facilities and execute new plants
for construction over the next decade.
Mr. Boucher, we are talking about a terribly benign
environmental way to produce electricity, if it can be done
safely, and we know it can be today. And the question is, will
the Nuclear Regulatory Commission be prepared for all these
relicensing permits, with 25 percent of staff eligible for
retirement, can you handle what may be a new future for nuclear
energy in America? That, of course, is one of the key questions
we will want answered today.
Second, let me thank you, Mr. Meserve, for the several
legislative proposals you have already submitted to us. We have
been examining those and sharing them in this process, and we
thank you for those efforts.
Third, let me ask that this hearing also educate us on the
question whether it is time, in fact, to reauthorize Price-
Anderson. And while we may not be acting on it in this package,
do we need to act on it relatively soon? We are told that the
nuclear industry will not build new plants, unless Price-
Anderson is reauthorized. And because it is set to expire on
August of 2002, perhaps we need to expedite the relicensing of
Price-Anderson as soon as we can, following this package.
In the area of hydroelectric, we know that hydroelectric
power produces--has the capacity to produce as much as 12
percent of this Nation's electricity, and yet it is only now
providing about 8 percent. Out west, it is a critical
component; that is, capacity is one-third of the electric power
needed out west at a time when the West is suffering through
shortages of power and potential blackouts.
We know that the drought out west has reduced that
potential. In fact, we understand it is now down about 15
percent of that capacity. But when we talk about one-third of a
region's electric generation capacity, we would be, I think,
terribly remiss not to examine the relicensing process, not to
roll back or to diminish environmental concerns, but to ensure
that we have a process that is reasonable and gets its power
back online, where in fact it can be put back online in a
region of the country that desperately depends upon this form
of energy for so much of its power.
In short, this hearing today is going to educate us as we
move into legislative markup very soon. And Mr. Barton and Mr.
Boucher, I want to thank you again for the cooperative way in
which you are approaching this very challenging time for our
committee, and I also want to thank my friend, the ranking
member of the full committee, Mr. Dingell, for the help of his
staff and his own guidance as we move forward in trying to find
as many bipartisan agreements we can on this energy package.
Mr. Chairman, I thank you and yield back the balance of my
time.
Mr. Barton. I thank the chairman, and would recognize the
ranking minority member of the full committee, Mr. Dingell of
Michigan, for an opening statement.
Mr. Dingell. Mr. Chairman, thank you. I want to begin by
expressing my appreciation to you for the hearing today, and
also to express my appreciation to the chairman of the full
committee, Mr. Tauzin, for the way in which he has been working
with me on the concerns which we share.
I want to say that there are many things that this
committee can do to improve the energy situation in the
country. I would note that none of them will give us a speedy
or a quick fix. I also would note that to move fast may be to
move poorly. And I think that the result of what we do in this
process will be more important to do well than to do in any
great haste, because it is doubtful that any of the things
which we will do will have a very immediate impact on the
situation that we confront.
Nevertheless, I and my colleagues on this side are prepared
to work with the leadership, anxious to work with the
leadership of this committee, and hope to be able to fashion in
an expeditious fashion a good response to the problems which we
confront.
I would note that these are problems. These do not
constitute a crisis. I think both sides of the aisle are trying
to work together on a number of issues in an effort to report
bipartisan legislation out of this committee. That is good. I
would note that these hearings represent an attempt by the
majority to accommodate the insistence of the minority upon
having hearings to learn the effects prior to undertaking
legislative action. That is good.
Unfortunately, the process will best result, I think, in a
razor-thin record on issues of great complexity and importance.
Those events may then curtail this committee's ability to do
more than legislate on the margins of some very important
matters. I do wish to reiterate that I will do the best I can
to work with my friend, Mr. Tauzin, and you and all the
members, to try and reach consensus on a number of these
matters in the next 2 weeks; although I note again that I think
that that is probably too fast and will lead to probably fights
unneeded, and also perhaps what may be constituted as a
political bill as opposed to a real substance approach to the
situation.
In 1987, this committee reported a Price-Anderson bill with
a strong bipartisan vote. I support nuclear power, and I
believe that by and large, nuclear power and that act has
served this Nation well over time. I will note that there are a
lot of problems that are going to have to be addressed in the
nuclear situation. I would also observe that given a thorough
examination of the issue, I hope the committee will again
report legislation to reauthorize the act.
Today's hearing is a good start, but I do not believe the
Congress should act on Price-Anderson without developing the
kind of thoughtful record that supported the three prior
extensions in 1965, 1975, and 1988. On the utility side, it may
be that the industry needs changes in the law to ensure that
new and smaller reactors are not saddled with overly high
obligations in the event of an accident. On the contractor
side, it is worth examining whether DOE should continue to
indemnify its contractors for injury to the public, even when
gross negligence or willful misconduct by the contractor was
the cause. Our main concern should be whether the act continues
to serve the public interest. And I think a question of the
kind just raised is whether the public interest there is
served.
Turning to hydropower, I have taken a long and a strong
interest in the hydroelectric relicensing process. In the mid-
1980's, I worked closely with Mr. Markey and a number of other
members of this committee to enact the Electric Consumers
Protection Act, which directed FERC to give equal consideration
to fish, wildlife, recreation, and other environmental
benefits, something that had been grossly disregarded both by
the statute, by the government, by the industry, and by the
regulatory process in the years since the original licensing
process had begun. The final version of the legislation was
overwhelmingly passed by a Republican-controlled Senate and
became the law with President Ronald Reagan.
While there is certainly room for improving the licensing
process, those improvements should not come at the expense of
environmental safeguards that are of critical importance to
river ecosystems, States, the municipalities, the Indian
tribes, fishermen, boaters, farmers, and the public's drinking
water.
Making changes in a responsible manner requires time and
effort. Unfortunately, that need to provide time and effort
appears to conflict with the haste that I see possible here.
Since last year, there are two new reports on FERC's
hydroelectric relicensing process for us to consider. One is
written by FERC, I would note hardly a neutral party, and the
other by the General Accounting Office, an independent agency
and known for its independence and integrity.
Now, I would note that this FERC staff report seems to say
that everybody but FERC is the problem, and giving FERC more
power is the answer. Interestingly enough, the FERC staff cited
the individual States, acting pursuant to their Clean Water Act
rights and responsibilities, as the factor most responsible for
extending the duration of the licensing process. If this is
true, it raises great questions about the extent to which we
can expect the duration of the licensing process to be
expedited without opening the Clean Water Act and without
curtailing the rights of several States. The GAO report, which
was commissioned by two of our Republican colleagues, calls
into question the very basis of FERC's claims that
environmental protection, fishermen, hunters, farmers and
Native Americans are the cause of the hydroelectric industry's
woes.
I am hardly surprised to see FERC taking the position it
takes, since I believe that it has been a major part of the
problem. The GAO report concluded that the FERC lacks the data
to back up any of the assertions that it has made in its study
on policy recommendations. This should come as no surprise to
any of my colleagues, who will recall that I raised this very
issue and related questions last year. I still want to know how
many licenses were turned down or delayed by FERC as a result
of environmental protections imposed by the resource agencies.
And if there is anybody around here from FERC, they should be
prepared for a little questioning on that matter today or any
other time--10,000, 1,000, 100, 10 or 1--and the question then
is, if this situation is so bad, why do utilities pay above-
market value for these threatened facilities?
Rivers are a precious natural resource. They are a property
of all of the people, and they should be managed by us and
other regulatory agencies for the benefit of the public. They
are not luxury swim clubs to be run by FERC for the benefit of
any special interest. I do know that there are things we can
do, even in a short timeframe, that would assist the industry
in the manner of creating a good public policy, if the members
of this committee and the stakeholders are willing to accept
modest changes. For example, perhaps we can make some progress
in areas of flexibility with regard to equally protective but
lower-cost alternatives to agency prescriptions; possibly
fixing FERC's inadequate data collection, and perhaps providing
some regulatory incentives for project owners to upgrade their
turbines to more fish-friendly and efficient models.
In any event, I want you to know, Mr. Chairman, I will be
happy to work with you to try and make this process go forward
to address complex technical issues in a reasonable timeframe
under regular order. And, of course, I am always prepared for a
vigorous debate in markup if the situation goes sour, which I
hope it will not.
In any event, I look forward to our distinguished witnesses
and thank you for your kindness and yield back the balance of
my time.
[The prepared statement of Hon. John D. Dingell follows:]
Prepared Statement of Hon. John D. Dingell, a Representative in
Congress from the State of Michigan
Thank you, Mr. Chairman.
Today's hearing is a curious one. Those in the audience are likely
asking themselves what nuclear and hydroelectric issues have in common
with each other. For now, the clearest link I can see is that both are
complex long term issues that we are under pressure to act rapidly upon
to show Congressional action on energy policy.
I think both sides of the aisle are trying to find ways to work
together on a number of issues in an effort to report bipartisan energy
legislation out of this Committee. I would note that these hearings
represent an attempt by the Majority to accommodate our insistence upon
having hearings to learn the facts prior to undertaking legislative
action.
Unfortunately, this process will at best result in a razor thin
record on issues of extreme complexity and importance, and severely
curtail this Committee's ability to do more than legislate on the
margins of some of these matters.
Nonetheless, I want to be clear that I will do what I can to work
with Chairman Tauzin, you and all our Members to try to reach consensus
on a number of these matters in the next two weeks.
In 1987, this Committee reported a Price-Anderson bill with a
strong bipartisan vote. I support nuclear power, and believe by and
large the Act has served the nation well over time.
Given a thorough examination of the issue, I hope the Committee
will again report legislation to reauthorize the Act. Today's hearing
is a good start. But I do not believe Congress should act on Price-
Anderson without developing the kind of thoughtful record that
supported three prior extensions in 1965, 1975, and 1988.
On the utility side, it may be that industry needs changes in the
law to ensure that new and smaller reactors are not saddled with overly
high obligations in the event of an accident. On the contractor side,
it is worth examining whether DOE should continue to indemnify its
contractors for injury to the public even when gross negligence or
willful misconduct was the cause. Our main concern should be whether
the Act continues to serve the public interest.
Turning to hyrdopower, I have long taken a strong interest in the
hydroelectric relicensing process. In the mid-1980s, I worked closely
with Mr. Markey and several other Committee members to enact the
Electric Consumers Protection Act, which directed FERC to give equal
consideration to fish and wildlife, recreation, and other environmental
benefits. The final version of the legislation overwhelmingly passed a
Republican-controlled Senate and became law with the assent of
President Ronald Reagan.
While there is certainly room for improving the licensing process,
those improvements should not come at the expense of environmental
safeguards that are of critical importance to riverine ecosystems and
the states, municipalities, tribes, fishermen, boaters, farmers, and
the public's drinking water. Making such changes in a responsible
manner requires time and effort. Unfortunately, we appear to be rushing
to legislate on this complex matter.
Since last year, too, there are two new reports on FERC's
hydroelectric licensing process for us to consider: one written by FERC
--a not quite neutral party--and the other by the independent General
Accounting Office.
Not surprisingly, the FERC staff report seems to say that everyone
but FERC is the problem and giving FERC more power is the answer.
Interestingly, the FERC staff cited the individual states--acting
pursuant to their Clean Water Act rights and responsibilities--as the
factor most responsible extending the duration of the licensing
process. If this is true, it raises serious questions about the extent
to which we can affect the duration of the licensing process without
opening the Clean Water Act and curtailing the rights of states.
The GAO report--commissioned by two of our Republican colleagues--
calls into question the very basis of FERC's claims that environmental
protection, fishermen, hunters, farmers, and Native Americans are at
the cause of the hydroelectric industries woes. It concluded that FERC
lacks the data to back up any of its assertions or policy
recommendations. This should come as no surprise to my colleagues who
will recall that I raised this very issue and related questions last
year. I still want to know how many licenses have been turned down by
FERC as a result of the environmental protections imposed by the
resource agencies? 10,000? 1,000? 100? 10? 1? Why do utilities pay
above market value to acquire these ``threatened'' facilities?
Rivers are a precious natural resource owned by all the American
people and managed for them by the resource agencies and the states.
They are not luxury swim clubs to be run by FERC for the exclusive
benefit of our nation's electric utilities.
I do think there are a few things we could do on even such a short
time frame that would assist the industry and have the benefit of being
good public policy--if the Members of this Committee and the
stakeholders are willing to accept modest changes. For example, perhaps
we can make some progress in the areas of flexibility with regard to
equally protective but lower cost alternatives to agency prescriptions,
fixing FERC's inadequate data collection, and perhaps providing some
regulatory incentives to project owners to upgrade their turbines to
more fish-friendly and efficient models.
In any event, I will be happy to work with you to try to make some
small changes now or tackle more complex issues in a reasonable time-
frame under regular order. And, of course, I am always prepared for a
vigorous debate and markup if the deadline imposed by the Republican
leadership forces ill-considered Committee action.
For now, I look forward to hearing from our distinguished witnesses
and yield back the balance of my time.
Mr. Largent [presiding]. I thank the gentleman for his
statement. I will recognize myself for a brief remark, simply
to say I have heard a number of my colleagues say we need to
move slowly. It reminds me of the joke about the snail that
crawled upon the turtle's back, and his response was, ``Whee.''
If we move any slower, the lights will be flickering here
in Washington, like they are in California. And I will submit
my entire statement for the record, and we will recognize--the
next Democrat is Mr. Luther, who has returned.
Mr. Luther. Thank you, Mr. Chairman. I will be very brief.
I want to thank you, first of all, for having the hearing. I am
particularly interested in hearing the evidence and the
testimony on hydropower. I think this has often been overlooked
in terms of the potential that this can provide for us, and I
think that as I look at the proposal, the Bush proposal--and I
appreciate the fact that has mentioned hydropower. I think we
have seen few details at this point, but I think that there is
an opportunity here on the part of the committee to actually
look at ways to encourage, not to just talk about the
relicensing process and the regulatory aspects of it, but to
figure out ways to truly encourage hydropower.
And so that is what I will be looking for in terms of
testimony and in discussions with other committee members, and
again, I want to thank you for focusing a part of the hearing
on that particular source of power. Thanks.
Mr. Largent. I thank the gentleman and recognize, let me
see, Mr. Shimkus from Illinois.
Mr. Shimkus. Thank you, Mr. Chairman. With apologies to
Chris John and Michael Doyle and Bart Stupak, I want to say
publicly, ``whee,'' and thank you for your time as a batter
mate in the congressional baseball game. It has been a pleasure
for the Republican side of the House Commerce Committee to have
you, and I am going to miss you next year on the mound.
Let me also mention my colleague, Mr. Boucher, and I and
many other Members throughout the coal bill yesterday, that we
hope will be part of the national energy debate. I have always
said, many of you have heard who have sat in here, that we need
a diversified energy portfolio, coal being one of those. But
nuclear should have a strong seat at the table, along with
hydro. That is why relicensing of both is very critical. That
is why reviewing the Price-Anderson Act is critical to do that.
We cannot continue to have all our energy eggs placed in one
basket, and that is part of the national problem.
Diversification is the key. This hearing is important.
I thank you, and I yield back my time.
Mr. Largent. I thank the gentleman. The Chair will announce
the intention that we are going to continue opening statements
and get to the panel. The chairman of the subcommittee is over
there voting and on his way back, and so we will keep this
going. In order of appearance, the next Democrat is Mr. Doyle
of Pennsylvania.
Mr. Doyle. Mr. Chairman, thank you. And I will say to my
good friend, Mr. Shimkus, that I know you both have been
waiting for a year to talk about the congressional baseball
game, since we beat you last year. But I do want to offer my
congratulations on a well-pitched----
Mr. Largent. Will the gentleman yield?
Mr. Doyle. Yes, I will.
Mr. Largent. Just to correct the record, we beat ourselves
last year.
Mr. Doyle. As we did this year.
Mr. Chairman, thank you for providing the opportunity to
discuss the role of nuclear energy and hydroelectric power in
forming a comprehensive national energy policy. I appreciate
the fact that our ongoing series of subcommittee hearings have
been inclusive in nature. To approach the task of crafting a
viable energy strategy otherwise would be self-defeating, as it
would inevitably lead to the artificial elevation of one source
of generation over another. Clearly, the issues involving
nuclear energy and hydroelectric power demand our full
attention and merit a truly collaborative effort.
As is evident in the testimony that will be presented
today, nuclear energy is experiencing a wave of new interest.
Much of this interest has been stimulated by concerns stemming
from the California electricity crisis and the industry's
success in developing safer and more cost-effective plant
designs.
While nuclear energy still has its critics, and we must
resolve the questions surrounding long-term waste storage, it
would appear that the benefits of nuclear energy have been on a
steady rise since the first generation of plants. My concern is
that we must consider nuclear energy as something more than the
energy flavor of the month, and provide this energy source with
the support it requires to play an appropriate role in our
Nation's energy portfolio.
This support includes adequate funding for DOE's Office of
Nuclear Energy, as well as reauthorization of the--Price-
Anderson Act. During our first subcommittee hearing, we heard
about how my home State of Pennsylvania is achieving greater
success with its electricity deregulation plan than other
States, including California.
An aspect of Pennsylvania's success which was not
sufficiently highlighted is that nuclear power supplies 37.9
percent of its power. This is significant, given that nuclear
power accounts for 20 percent of our national electricity
production. And given the heightened discussions over carbon
dioxide emissions, it is also important to note that in just 1
year nuclear energy avoided carbon dioxide emissions in
Pennsylvania of 16.1 million metric tons of carbon and 227
million metric tons since 1974. Not only should we remain
mindful of the important near-term and long-term role that
nuclear energy plays, but we cannot afford to be distracted
from making the necessary commitments to ensuring its continued
safety and longevity.
The same can be said of hydroelectric power. Hydroelectric
power should continue to contribute to help meeting our energy
needs, and capacity loss should be a cause for concern.
Hydroelectric power is a growing interest of mine, and I am
eager to learn more about the wide range of concerns that
inform the debate on relicensing matters. It is my hope that
some form of consensus can be reached in this critical area.
Mr. Chairman, I look forward to hearing the thoughts of our
witnesses and yield back the balance of my time.
Mr. Largent. Thank the gentleman. The gentleman from
California, Mr. Cox, recognized for an opening statement.
Mr. Cox. Thank you very much, Mr. Chairman. And, of course,
because we have a vote on the floor, nobody wishes to hear long
opening statements. I just want to welcome our witnesses and
tell you how pleased I am that we are focusing on these two
aspects of our Nation's total power needs, in particular,
clean, renewable energy in the form of water power.
It is a shame and a tragedy that hydropower is falling as a
share of our total power generation in the United States. It is
likewise very, very good that we are focusing attention on not
only nuclear energy but on the licensing process, because our
legislation last year, as you know, authorized a study that has
determined that it is now taking a very long time to license
power plants in the hydro area. It is taking nearly 4 years to
get a license. That oughtn't to be the case.
The General Accounting Office has told us, as well, that
the licensing process is now costlier, more complicated and
difficult than it ever has been. So we have work to do in this
area, and I am very, very much looking forward to learning from
our witnesses ways that we can improve in these areas. Thank
you, Mr. Chairman.
Mr. Largent. Thank the gentleman. Recognize Mr. John from
Louisiana for an opening statement.
Mr. John. Thank you, Mr. Chairman. I, too, want to
congratulate you on a win, and I want to wish you good luck in
your future endeavors. I will miss you on the golf course, but
I will not miss your curve ball. So thank you very much. Where
did you learn that thing since last year?
It is really a pleasure to be here today. I want to thank
the chairman of the subcommittee for holding this hearing in a
continued series of hearings on energy. I think the chairman of
the full committee said it best--frankly, there is no more
important issue in America today than energy. And it is not
going away. And I think that this committee has made a
commitment by the series of hearings that we are going to
address the problems that Americans want us to address in this
area.
And this hearing today is a very important component;
whether it is coal, natural gas-powered electricity generators,
wind, hydro, nuclear or solar, those are the issues that we
have to address. They all play an important role in the overall
scheme of things. I think Mr. Shimkus said it best, that
diversification is not only good in a portfolio of financial
instruments, but it is good in whatever we do, from a business
standpoint or other things that we do in our lives.
And I think that this hearing today is going to shed light
on two very important, critical parts and components of a whole
energy policy that I think we are going to debate.
Hydroelectricity represents 90 percent of renewable electricity
generation today.
So thank you, gentlemen, for coming. I look forward to
hearing from you, and I thank the chairman for having this
hearing.
Mr. Barton. I thank the gentleman from Louisiana. I
recognize the gentleman from Arizona for an opening statement.
Mr. Shadegg. I thank the gentleman. Let me begin by
strongly commending you, Mr. Chairman, for holding this hearing
on the two preeminent sources of electricity generation, which
are both inexhaustible and emission-free. While I will focus my
remarks on hydropower, I strongly support nuclear power and
believe that we must encourage its further development.
While this is not a legislative hearing on H.R. 1832, the
Hydroelectric Licensing and Incentives Act, I would like to
point out the importance of that legislation to this issue.
H.R. 1832 will reform the licensing process to ensure that
existing hydro capacity is not diminished by relicensing and
will ensure that environmental concerns are fully considered.
In addition, that legislation has the potential to increase
the amount of electricity generated by over 21,000 megawatts
with few, if any, environmental effects. H.R. 1832 does so by
encouraging the addition of new turbines to existing dams and
efficiency upgrades in existing hydropower facilities. It will
not result in the construction of a single new dam but ensures
that better use is made of the existing dams.
The core debate over hydropower focuses on whether its
environmental costs outweigh its benefits. But let us be
abundantly clear about one fact: Every source of energy has
costs and benefits. Traditional energy sources have costs and
benefits but so do renewables. For example, the senior vice
president of the Audubon Society, David Baird, called the
windmill project in California a Condor quisinart in September
1999, because it was on the flight path frequented by the
endangered California Condors. The fact that a windmill project
in California may pose a measure of environmental harm does not
mean that we can dismiss wind power as an energy source.
Likewise, we cannot dismiss hydropower or nuclear or natural
gas because they are not pristine.
For hydropower, the benefits are obvious: zero emissions of
air pollutants. Hydropower generate electricity without
emitting a single pound of pollutants. In fact, the 92,000
megawatts of electricity generated by hydropower today avoid
the annual emission of 4.75 million tons of sulfur dioxide and
2 million tons of nitrous oxide by eliminating the need to burn
345 million tons of coal. There is zero toxic waste. It is
renewable in nature, and, as I pointed out with a fourth grade
chart on the hydrologic cycle at the September 1999 electricity
markup, water is never consumed. It is there and constantly
circulates and can be used to generate electricity over and
over again indefinitely.
Mr. Chairman, some of my colleagues may have some concerns
about the environmental costs of hydropower, but I believe used
correctly and viewed properly it can be upgraded. We can add
more turbines to existing dams. We can improve the efficiency
of turbines in present dams, and do so without environmental
costs.
I commend you for holding this hearing and yield back the
balance of my time.
Mr. Barton. We thank the gentleman from Arizona. I want to
ask--inquire how the trip from DWF to Arizona in the new car
went?
Mr. Shadegg. It went very well, Mr. Chairman. We had a nice
trip.
Mr. Barton. Where did you spend the night Friday night?
Mr. Shadegg. In Odessa.
Mr. Barton. Odessa?
Mr. Shadegg. Charming Odessa.
Mr. Barton. Odessa, Texas. How about that. Eckard County.
Could have called my uncle, aunt and uncle. I have an aunt and
uncle who live in Odessa.
Mr. Shadegg. You could have saved me money. I could have
stayed there.
Mr. Barton. There you go. They have a nice home with a
pool.
Mr. Shadegg. I am sorry you didn't tell me about that.
Mr. Barton. Well, there may be a reason I didn't tell you
about that.
We have several members that had to go vote that wish to
make an opening statement and have informed the Chair. We are
going to take a very brief recess. I mean very brief. As soon
as another member shows up to give an opening statement, we
will reconvene.
So the committee is in recess, subject to the call of the
Chair, which should be within the next 5 minutes.
[Brief recess.]
Mr. Barton. The subcommittee will come to order. Are you
ready--Chairman Meserve is--I think I see him coming into the
room. So the Chair will recognize Mr. Markey of Massachusetts
for an opening statement.
Mr. Markey. Thank you, Mr. Chairman. Mr. Chairman, when I
was a boy, I am sure Chairman Meserve remembers this, watching
channel 4 when the Mickey Mouse Club came on. Back in 1956,
they used to have--Mickey was a big fan of nuclear power, and I
asked my staff to go pull out what I remembered, which was this
book that Walt Disney produced in 1956, ``Our Friend, the
Atom.'' Old Mickey, he was a big fan of it. And he had the
German scientist, Heinz Hida--I remember he used to have Vern
von Braun as well, Mickey to explain things to us about--but he
explained to us how this genie, this nuclear genie was going to
be coming out of the bottle. Now, it could be a very powerful
and menacing giant, okay? And we just learned that in
Hiroshima, but if we all worked together, we could tame the
nuclear genie, and the nuclear genie would help us--help us.
And so what Mickey did, which I remembered, was to show us
how a chain reaction worked. And what they did was the put all
of these mousetraps with ping pong balls down on the ground,
and then if one ping pong ball hits two and then two hits four,
you have something called a chain reaction, really a good
thing--chain reaction. And so we would watch this, of course,
in cartoon form as the scientist would explain it to us.
And then what you would get is you would be able to make
wishes. And so the first wish would be you would get power from
nuclear energy, really good. The second wish would be--this is
really--I am so glad we got this book--you would get food and
health from nuclear power. And then the third thing that you
would get is peace. Nuclear meant peace.
So I watched these shows, and I believed it. We all
believed it. As a matter of fact, our parents believed in it so
much that we believed that by, as the book says, by the year
2000 we won't need oil and gas and coal to generate
electricity. Isn't that a great vision for our country? I don't
think they would like that in Texas or Pennsylvania, but that
was the vision.
Now, they liked it so much, and it was a fledgling
industry, a small industry. It needed to get started. It was a
baby industry, and it was our friend, ``The Atom.'' So they
couldn't find any insurance for the industry. It was really
hard. No one wanted to insure them, because notwithstanding
what they told us, insurance industry people thought it was a
very dangerous technology. So all of our parents voted for
people who voted for something called the Price-Anderson Act to
limit the liability of this industry. Now, the oil and the coal
and the gas and the hydro industry, they wouldn't come to
Congress, because they could get insurance. But they said, ``It
is a baby industry, and you don't understand. It is very safe.
But once we grow up we won't need that subsidy any more.'' That
was 44 years ago.
But somehow in the never-never land of Washington, DC,
nuclear power never grows up. And this Price-Anderson subsidy
that we put on the books has been perpetuated as a Mickey Mouse
program for the last five decades. And now people say, ``It is
very safe. Don't worry.'' And yet they say, ``We need a Federal
subsidy.'' For what? Insurance, because the insurance industry,
the private sector will not give us any insurance.
So it can't be safe, because we believe in the free market.
We are not France; we are not Japan. They are socialist
nations. Socialist nations say, ``We are going to build nuclear
power, and we are going to protect it in subsidies.'' That is
socialism. We are capitalism. Capitalism doesn't have the
Federal Government.
By requiring dam owners to build passage for fish, protect
critical riparian habitat, adjust river flows, and provide
recreational access and opportunity, we can protect and restore
valuable fisheries, native species diversity, recreational
amenities and natural ecosystem functions. At the same time, we
can enhance economic opportunities such as recreation, tourism
and ecological services. Because original licenses were issued
before the enactment of modern environmental statutes and prior
to our understanding of the impacts of dams on river
ecosystems, virtually none of these dams meets modern
environmental standards before relicensing.
If awarded a license, utilities can monopolize a river for
a half a century with little oversight and no motivation to
make environmental improvements. We must take this once-in-a-
lifetime chance to set conditions that require hydro operators
to modernize the way they operate their dams on our rivers.
In developing the balance of authority in the Federal Power
Act, Congress determined that some basic environmental
protections must be afforded at every dam. Expert Federal and
State resource managers established conditions based on
substantial evidence. Just as there a ceiling on coal plant
emissions under the Clean Air Act, there is a floor above which
FERC can balance license conditions in the public interest.
Both fish passage and Federal lands protections have been
part of the licensing process since the enactment of the
Federal Power Act in 1920. Water quality is a responsibility
delegated to the States. Section 401 of the act ensures that
private hydro projects will not interfere with State standards.
The Supreme Court has confirmed that these standards may be
numeric or narrative and include chemical, physical and
biological parameters.
State and Federal agencies have significant expertise in
the relicensing area. They work in the field on a specific
river as opposed to FERC staff who spend most of their time in
Washington. There is little reason to believe that
consolidation with FERC would either make the process faster or
improve the outcomes.
I will make just a couple of observations on the 603
report. First, we agree with GAO's conclusion that until FERC
does a better job collecting data on the cost and timing of its
process, FERC will not be able to reach informed decisions on
the need for further administrative reforms or legislative
changes. This conclusion makes it difficult to rely on any of
the statisticl information in the 603 report.
Second, it seems clear that FERC saw this report to
eliminate shared jurisdiction with other agencies. The
suggestion on page 6 of the report that Congress should, quote,
``restore'' the Commission's position as the sole Federal
decisional authority ignores the history and structure of the
Federal Power Act since 1920. The Commission has never been the
sole Federal authority on hydro licenses. And, again, the
entire report must be viewed in light of this agenda.
We do believe that further administrative reforms can
improve the way we license hydropower dams without upsetting
the existing balance of agency decisionmaking. First, to ensure
the relicensing process is efficiently implemented, State and
Federal agencies must have sufficient staff resources and
training. For example, in the State of Alabama, licenses for 12
dams on 3 major rivers will expire by 2007. Currently, the Fish
and Wildlife Service has only one staff person to cover this
entire area. This situation is not unique.
Second, collaborative processes should be encouraged.
Elements of FERC's alternative licencing process should be
incorporated into FERC's traditional licensing process wherever
possible. Third, cooperation among FERC and State and Federal
resource agencies will greatly improve the efficiency of the
relicensing process. Unfortunately, FERC has been reluctant to
implement a cooperative environmental analysis structure with
the other agencies.
The good news is that relicensing provides significant
protection to rivers at a low cost to power production.
According to FERC's own report, relicensing has resulted in
average per project reduction in generation of only 1.6
percent. Such few losses in relicensing over the next 10 years
would result in a 0.04 percent reduction in the Nation's
overall annual generation. The losses in generation are
comparable with those caused by installing a scrubber on the
smokestack of core 5 plant, in fact.
Being a good environmental steward is a legitimate cost of
doing business. Unlike other industries, such as offshore oil
development, mining or timber, hydropower licensees pay nothing
for the use of public resources--our rivers. They are not
required to post a bond. After 30 to 50 years, the initial
capital investment in these projects is fully ammortized. The
only costs left are basic operation and maintenance, the lowest
of any electricity source, and environmental protection
measures. Asking that these dams make some small investment in
environmental quality after decades of profitable operation is
a reasonable and minor request. Paying for these changes
continues to leave hydropower as the cheapest source of
electricity nationwide.
subsidizing insurance policies for safe and powerful
industries.
Now, here is the interesting end of the story. No new
nuclear power plants have been successfully since 1973. Why?
Because it is more expensive than natural gas. It costs about
$1,700 per kilowatt hour of power generated to build a nuclear
plant, while the gas plant costs as little as $420 per kilowatt
hour. And if capital costs are included, nuclear power costs 6
cents a kilowatt hour compared to 4 cents a kilowatt hour for
gas or coal. That is 50 percent higher. That is the free
market. Adam Smith is lying in his grave smiling at all of us.
Go with it. It is the free market. It is time for our friend,
``The Atom'' to grow up, move into the free market. And if we
can't survive, we move on. But if it can't survive, and we cut
solar and we cut wind and we cut energy conservation, which is
what the Bush energy plan did, then it is hypocrisy on stilts.
We help the powerful industry of the people say it is safe and
yet we don't, at the same time, deal with the reality.
And, finally, no answer to nuclear waste except the
industry says, ``I can't believe the Federal Government hasn't
solved the nuclear waste problem yet.'' The Government. Again,
where is the free market. They are the ones who told us it was
safe and they could solve all these problems. That is why our
parents voted for it. Now they sue us because we haven't solved
their problem.
And, finally, I was the chairman of this subcommittee in
1985 and 1986. Mr. Dingell and I passed a bill on hydro
relicensing. All we did in 1986, when I was chairman of the
subcommittee, Mr. Dingell was chairman of the full committee--
was to pass a bill which said we are going to upgrade from 1936
to 1986 the new values of the environment, of fisheries, of
other new values that really weren't therein 1936.
Now, I know that to a larger sense, the Bush energy bill is
a Trojan horse meant to make it possible for the energy
industry officials to remove environmental and health care laws
which they always opposed. But I will tell you that the country
has come even further in the last 15 years, from 1986, and the
polling in the New York Times last week makes it clear that on
every one of these issues the public wants us to ensure that we
do maintain environmental and health safeguards.
So I thank you, Mr. Chairman, for the opportunity of
testifying. I think that this is, without question, an area
that deserves much closer scrutiny than we are going to be able
to give it here in a half a day for this and a half a day for
hydro. Back in 1986, we had 10 hearings just on hydro alone
before we passed that bill. I think a half a day of hearing on
such an important subject really doesn't do full justice to the
importance of the subject. Thank you, Mr. Chairman.
Mr. Barton. We thank the gentleman from Massachusetts.
Recognize the gentlelady from California for an opening
statement.
Ms. Bono. Thank you, Mr. Chairman. I will pass.
Mr. Barton. We recognize the gentleman from Ohio, Mr.
Sawyer, for an opening statement.
Mr. Sawyer. Thank you, Mr. Chairman. I will try to be
brief. Nuclear and hydroelectric power provide together some 27
percent of the electricity that we consume without polluting
the air. They are important elements in a diversified energy
policy. Still, nuclear and hydroelectric power both come with
substantial environmental costs and risks, and it is the
balance of those benefits and burdens that we weigh today.
Just three observations. The licensing of hydroelectric
dams now involves extensive coordination with State and Federal
authorities. The process of coordination is complex but so are
the issues that have to be addressed. Second, the Price-
Anderson Act was critical to the establishment of a functioning
nuclear industry. A lot has changed since that time. And
perhaps the way in which we approach Price-Anderson should as
well. It is not something that I think can be done quickly.
Finally, let me say that with regard to nuclear safety, the
protocols of transportation, siting of repositories and the
technology of its storage continue to remain demanding
technical problems. I hope that we can devote appropriate
attention to those.
Finally, Mr. Chairman, I am going to yield to a temptation
that I swore I was never going to do just on the basis of my
friend's example. I know how badly it can be done. But this
morning I just can't resist, and since we don't have any
television cameras here today, let me conclude by saying,
``Who's the leader of the club that is made for you and I, E-D-
D-I-E M-A-R-K-E-Y.''
Thank you so much.
Mr. Barton. That is actually not too bad.
Mr. Sawyer. It was made for 7-year-olds to be able to sing.
Mr. Barton. The gentleman from Ohio, Mr. Strickland, is
recognized. Did Mr. Largent have an opportunity to make an
opening statement. Okay, the gentleman from Ohio, Mr.
Strickland, is recognized for an opening statement.
Mr. Strickland. Thank you, Mr. Chairman, and I will try to
be brief. I am glad we are holding this hearing today, but I am
disappointed that no DOE witness testifying to address
questions about the Department's responsibilities under Price-
Anderson Act is with us. I would have been particularly
interested in asking questions of the DOE Office of
Enforcement, but I was also interested in asking questions of
the Department's counsel, and I would like to ask for unanimous
consent to submit questions for the record, if I may.
Mr. Barton. Without objection.
Mr. Strickland. Still, I think this is an important hearing
today on nuclear energy and hydroelectric relicensing, and I
look forward to the testimony of our witnesses. This committee
has overseen an aspect of Price-Anderson that does not get
enough attention, in my judgment: Provisions that authorize the
Energy Department to issue civil penalties and fines against
contractors who violate nuclear safety rules.
In oversight hearings before this committee last year, I
recall that we learned that the Department of Energy has only
five or six investigators to police nuclear safety violations
throughout the DOE complex. This enforcement authority is very
important to protecting the workers and communities around
nuclear facilities. It is important for taxpayers as well,
because DOE contractors' liability is limited under the Price-
Anderson Act. Now, I will say now that I support the
reauthorization of Price-Anderson, but the question for me is
whether nuclear safety oversight within the DOE is adequate to
protect workers, communities and taxpayers.
It is my understanding that DOE's Office of Enforcement,
which is responsible for the entire DOE complex relies heavily
on contractor self-reporting. In fact, I am told by DOE that
the Price-Anderson coordinator for the Portsmouth, Ohio site is
located in Oak Ridge, Tennessee. By comparison, it is also my
understanding that there is at least one full-time, onsite
resident inspector at major NRC licensed facilities, which are
also indemnified under Price-Anderson. I would like to see the
reauthorization of Price-Anderson proceed with a stronger
health and safety enforcement program at DOE. I have heard from
too many workers at Portsmouth, Ohio raising questions about
the process of reporting safety concerns, and I am hopeful that
as we review the Price-Anderson Act we can strengthen the DOE
program.
And, finally, I am looking forward to the testimony of Mr.
Meserve. I see in his second paragraph of his opening statement
he says, ``The Commission does not have a promotional role. The
agency's role,'' and I emphasize the singular use of that word
``role,'' ``is to ensure the safe application of nuclear
technology if society elects to pursue the nuclear energy
option.'' I believe that this Congress gave the NRC an
additional responsibility to ensure a reliable and domestic
supply of nuclear fuel for our nuclear power plants. And I
would like to hear from Mr. Meserve, at my time of questioning,
why he considers their role to be singular rather than
multiple, as I believe this Congress intended.
I yield back my time.
Mr. Barton. Thank the gentleman from Ohio. I recognize the
gentleman from Wisconsin, Mr. Barrett, for an opening
statement.
Mr. Barrett. Let us roll, Mr. Chairman; I will yield back
my time.
Mr. Barton. Seeing no other members present who wish to
make an opening statement, the Chair would ask unanimous
consent that all members not present, members of the
subcommittee, have an opportunity to put their written
statement in the record. Hearing no objection, so ordered.
We want to welcome our first panel. We have two
distinguished representative of the executive branch. We have
the Chairman of the Nuclear Regulatory Commission, the
Honorable Richard Meserve, and we appreciate your attendance.
We also have the Director, the Office of Nuclear Energy,
Science and Technology at the United States Department of
Energy, Dr. William Magwood, who is the Director, and we
welcome you.
Your statements are in the record in their entirety. We are
going to welcome the Chairman of the NRC to elaborate for 7
minutes. Then we will let Dr. Magwood speak for 7 minutes. Then
we will have some questions.
STATEMENTS OF RICHARD A. MESERVE, CHAIRMAN, U.S. NUCLEAR
REGULATORY COMMISSION; AND WILLIAM D. MAGWOOD, DIRECTOR, OFFICE
OF NUCLEAR ENERGY, SCIENCE AND TECHNOLOGY, U.S. DEPARTMENT OF
ENERGY
Mr. Meserve. Mr. Chairman, members of the subcommittee, I
am pleased to present testimony on behalf of the U.S. Nuclear
Regulatory Commission.
Mr. Barton. Put the microphone, Doctor, very close to you,
because it needs to be as close as possible.
Mr. Meserve. I am pleased to present testimony on behalf of
the U.S. Nuclear Regulatory Commission regarding the outlook
for the construction of new nuclear plants and issues related
to the reauthorization of the Price-Anderson Act. I have
submitted a longer statement for the record, and let me make
just a brief oral statement.
As the subcommittee knows, the Commission does not have a
promotional role. The agency's function is to ensure the safe
application of nuclear technology and materials. The Commission
recognizes, however, that its regulatory system should not
establish inappropriate impediments to the application of
nuclear technology.
Currently, there are 104 nuclear power plants licensed by
the Commission to operate in the United States in 31 different
States. As a group, the plants are operating at high levels of
safety and reliability and have produced approximately 20
percent of our Nation's electricity for the past several years.
Serious industry interest in new construction of nuclear
power plants in the U.S. has only recently emerged. The
Commission has already certified three new reactor designs and
is conducting preliminary reviews associated with other new
designs, designs which may provide enhanced benefits. In
addition, licensees have indicated to the NRC that applications
for early site permits could be submitted in the near future.
These permits would allow pre-certification of sites for
possible construction of nuclear power plants.
To ensure that Commission staff is prepared to evaluate any
applications to introduce these advanced nuclear reactors, the
Commission has directed the staff to assess the technical,
licensing and inspection capabilities that would be necessary
to review an application for an early site permit, a license
application or construction permit for a new reactor unit.
Moreover, the Commission will examine its regulations relating
to license applications, such as those found in 10 CFR Parts 50
and 52, to determine whether any enhancements are necessary.
In addition, in order to confirm the safety of new reactor
designs and technology, a strong nuclear research program
should be maintained. A comprehensive evaluation of the
Commission's research activities has been completed and with
the benefit of these insights the Commission expects to
undertake measures to strengthen our research program.
Also, the NRC has identified areas where new legislation
would be helpful to eliminate artificial restrictions and
reduce uncertainty in the licensing process. I would note that
these matters are included in the legislative proposals that
the NRC recently provided to this subcommittee.
Turning to the Price-Anderson Act, the Commission strongly
and unanimously recommends the act's reauthorization. The act
provides assurance that if an improbable accident should occur,
means are provided to compensate affected members of the
public. Additionally, if Congress intends that nuclear power
remain a part of the Nation's energy mix, this option should
not be precluded by the inability of nuclear plant licensees to
purchase adequate sums of insurance commercially.
The Commission has previously recommended the doubling of
the ceiling on the annual retrospective premium, from $10
million to $20 million per year, per accident, based on the
then likely scenario that a number of reactors would
permanently shut down. In light of the heightened interest in
extending the operating life for most of the currently
operating power reactors and the emerging interest by some
power companies and the possible submission of applications for
new reactors, the Commission does not believe that there is now
justification for increasing the maximum annual retrospective
premium above the current $10 million level.
Thank you, Mr. Chairman. I would be pleased to answer any
questions that you or other members of the subcommittee may
have.
[The prepared statement of Richard A. Meserve follows:]
Prepared Statement of Richard A. Meserve, Chairman, U.S. Nuclear
Regulatory Commission
introduction
Mr. Chairman, members of the Subcommittee, it is a pleasure to
appear before you today.
As you know, the NRC's mission is to ensure the adequate protection
of public health and safety, to promote the common defense and
security, and to protect the environment in the application of nuclear
technology for civilian use. The Commission does not have a promotional
role--rather, the agency seeks to ensure the safe application of
nuclear technology and materials.
The Commission's highest priority is to fulfill its fundamental
mission of ensuring adequate protection of public health and safety.
The Commission also recognizes, however, that its regulatory system
should not establish inappropriate impediments to the application of
nuclear technology and materials. Many of the Commission's initiatives
over the past several years have sought to maintain or enhance safety
while simultaneously improving the efficiency and effectiveness of our
regulatory system. We believe the Commission's most recent legislative
proposals would enhance safety and improve our regulatory system even
further and are pleased to see that many of our proposals have been
incorporated into the bills before this Congress. The Commission also
recognizes that its decisions and actions as a regulator influence the
public's perception of the NRC and ultimately the public's perception
of the safety of nuclear technology. For this reason, the Commission's
primary performance goals also include increasing public confidence.
background
Currently there are 104 nuclear power plants licensed by the
Commission to operate in the United States in 31 different states. As a
group, they are operating at high levels of safety and reliability.
(See Charts on Attachments 1 and 2.)
These plants have produced approximately 20 percent of our Nation's
electricity for the past several years and are operated by about 40
different companies. In 2000, these nuclear power plants produced a
record 755 thousand gigawatt-hours of electricity. (See Graph on
Attachment 3.)
Improved Reactor Licensee Efficiencies (Increased Capacity Factors)
The Nation's nuclear electricity generators have worked over the
past 10 years to improve nuclear power plant performance, reliability,
and efficiency. According to the Nuclear Energy Institute, the improved
performance of the U.S. nuclear power plants since 1990 is equivalent
to placing 23 new 1000 MWe power plants on line. The average capacity
factor for U.S. light water reactors was 88 percent in 2000, up from 63
percent in 1989.1 (See Table on Attachment 3.) The
Commission has focused on ensuring that safety is not compromised as a
result of these industry efforts. The Commission seeks to carry out its
regulatory responsibilities in an effective and efficient manner so as
not to impede industry initiatives inappropriately.
---------------------------------------------------------------------------
\1\ Capacity factor is the ratio of electricity generated, for the
period of time considered, to the amount of energy that could have been
generated at continuous full-power operation during the same period.
---------------------------------------------------------------------------
Electric Industry Restructuring
As you are aware, the nuclear industry is undergoing a period of
remarkable change. The industry is in a period of transition in several
dimensions, probably experiencing more rapid change than in any other
period in the history of civilian nuclear power. As economic
deregulation of the electric power industry has proceeded, the
Commission has seen significant restructuring among its licensees and
the start of the consolidation of nuclear generating capacity among a
smaller group of operating companies. This change is due, in part, to
an industry that has achieved gains in both economic and safety
performance over the past decade and thus is able to take advantage of
the opportunities presented by industry restructuring.
price-anderson act renewal
Legislation will be needed to extend the Price-Anderson Act. The
Act, which expires on August 1, 2002, establishes a framework that
provides assurance that adequate funds are available in the event of a
nuclear accident and sets out the process for consideration of nuclear
claims. Without the framework provided by the Act, private-sector
participation in nuclear power would be discouraged by the risk of
large liabilities.
I am here to deliver the strong and unanimous recommendation of the
Commission that the Price-Anderson Act be renewed with only minor
modifications. But I would like to preface my statement of that
position with the reminder that the Commission's primary concern is
public health and safety. Our mission is to ensure the safe use of
nuclear power. We can look back on a successful history of safe
operation and intend to exercise vigilance to maintain or improve on
this record of safety. Nonetheless, it remains important to assure that
if a highly improbable accident should occur, the means are provided to
care for the affected members of the public. It is also important, if
the Congress intends that nuclear power remain a part of the Nation's
energy mix, that this option is not precluded by the inability of
nuclear plant licensees to purchase adequate amounts of commercial
insurance.
As you know, Congress first enacted the Price-Anderson Act in 1957,
nearly a half century ago. Its twin goals were then, as now:
(1) to ensure that adequate funds would be available to the public to
satisfy liability claims in a catastrophic nuclear accident;
and
(2) to permit private sector participation in nuclear energy by
removing the threat of potentially enormous liability in the
event of such an accident.
On original passage the Congress provided a term during which the
Commission could extend Price-Anderson coverage to new licensees and
facilities. When that term expired, the Congress then, and repeatedly
since, has decided that the Nation would be served by extending the
Price-Anderson Act so that new coverage would be available for newly
licensed reactors. This action preserved the option of private sector
nuclear power and assured protection of the public. At this point, in
order to avoid confusion, I should note that Price-Anderson coverage
for NRC licensees is granted for the lifetime activities of the covered
facility and does not ``expire'' in 2002. Thus, in any event, Price-
Anderson coverage with respect to already licensed nuclear power
reactors will continue and will afford prompt and reasonable
compensation for any liability claims resulting from an accident at
those facilities.
While Congress has amended the Price-Anderson Act from time to
time, it has done so cautiously so as to avoid upsetting the delicate
balance of obligations between operators of nuclear facilities and the
United States government as representative of the people.
Perhaps the most significant amendments to date were those that
effectively removed the United States government from its obligation to
indemnify any reactor up to a half billion dollars and that placed the
burden on the nuclear power industry. Congress achieved this by
mandating in 1975 that each reactor greater than 100 MWe, essentially
every reactor providing power commercially, contribute $5 million to a
retrospective premium pool if and only if there were damages from a
nuclear incident that exceeded the maximum commercial insurance
available. The limit of liability was then $560 million. Government
indemnification was phased out in 1982 when the potential pool and
available insurance reached that sum.
In 1988, Congress increased the potential obligation of each
reactor in the event of a single accident at any reactor to $63 million
(to be adjusted for inflation). The maximum liability insurance
available is now $200 million. When that insurance is exhausted each
reactor licensee must pay into the pool up to $83.9 million, as
currently adjusted for inflation, if needed to cover damages in excess
of the sum covered by insurance. The $83.9 million is payable in annual
installments not to exceed $10 million. Today, the commercial insurance
and the reactor pool together would make available over $9 billion to
cover any personal or property harm to the public caused by an
accident.
In 1998, as mandated by Congress, the Nuclear Regulatory Commission
submitted to the Congress its report on the Price-Anderson system. The
report included a concise history and overview of the Price-Anderson
Act and its amendments as well as an update on developments and events
pertaining to nuclear insurance and indemnity in the last decade.
Congress had also required the NRC to address various topics that
relate to and reflect on the need for continuation or modification of
the Act: the condition of the nuclear industry, the state of knowledge
of nuclear safety, and the availability of private insurance.
After considering pertinent information, the Commission considered
what its recommendations should be. It concluded then that it should
recommend that Congress renew the Price-Anderson Act because it
provides a valuable public benefit by establishing a system for the
prompt and equitable settlement of public liability claims resulting
from a nuclear accident. That, as I said at the outset, remains today
the strongly held position of the Commission.
Having noted that substantial changes in the nuclear power industry
had begun and could continue, the Commission believed it would be
prudent to recommend renewal for only ten years rather than the 15-year
period that had been adopted in the last reauthorization so that any
significant evolution of the industry could be considered when the
effects of ongoing changes would be clearer. Notwithstanding that view,
the Commission recommended that the Congress consider amending the Act
to increase the maximum annual retrospective premium installment that
could be assessed each holder of a commercial power reactor license in
the event of a nuclear accident.
The NRC suggested that consideration be given to doubling the
ceiling on the annual installment from the current sum of $10 million
to $20 million per year per accident. The total allowable retrospective
premium per reactor per accident was to remain unchanged at the
statutory ``$63 million'' adjusted for inflation. (It is now $83.9
million as so adjusted). The Commission recommended consideration of an
increase to $20 million because it then appeared likely that in the
coming decade a number of reactors would permanently shut down. The
effect of these shutdowns would have been to reduce the number of
contributors to the reactor retrospective pool. Fewer contributors
would, in turn, reduce the funds that, in the event of a nuclear
accident, would become available each year to compensate members of the
public for personal or property damage caused by an accident.
Increasing the maximum annual contribution available from each reactor
licensee would provide continuing assurance of ``up front'' money to
assist the public with prompt compensation until Congress could
consider whether to enact additional legislation providing further
relief, should it be needed.
Recent events have led the Commission to review its 1998
recommendations and to reevaluate its recommendation that Congress
consider increasing the annual installment to $20 million. The outlook
for the future of nuclear power has changed from pessimistic in 1998 to
more optimistic in 2001. There is now a heightened interest in
extending the operating life for most, if not all, of the 104 currently
licensed power reactors, and some power companies are now examining
whether they wish to submit applications for new reactors or complete
construction of reactors that had been deferred. As a result, the
Commission does not believe that there is now justification for raising
the maximum annual retroactive premium above the current $10 million
level.
initiatives in the area of current reactor and materials regulation
Reactor License Transfers
One of the more immediate results of the economic deregulation of
the electric power industry has been the development of a market for
nuclear power plants as capital assets. As a result, the Commission has
seen a significant increase in the number of requests for approval of
license transfers. These requests have increased from a historical
average of about two or three per year, to 20-25 in the past two years.
The Commission seeks to ensure that our reviews of license transfer
applications, which focus on adequate protection of public health and
safety, are conducted efficiently. These reviews sometimes require a
significant expenditure of staff resources to ensure a high quality and
timely result. Our legislative proposal to eliminate foreign ownership
review could help to further streamline the process, while retaining
the ability to address any associated issues that pertain to common
defense and security. To date, the Commission believes that it has been
timely in these transfers. For example, in CY 2000, the staff reviewed
and approved transfers in periods ranging from four to eight months,
depending on the complexity of the applications. The Commission will
strive to continue to perform at this level of proficiency.
Reactor License Renewals
Another result of the new economic conditions is an increasing
interest in license renewal that would allow plants to operate beyond
the original 40-year term. That maximum original operating term, which
for many plants was established in the Atomic Energy Act (AEA), did not
reflect a limitation that was determined by engineering or scientific
considerations, but rather was based on financial and antitrust
concerns. The Commission now has the technical bases and experience on
which to make judgments about the potential useful life and safe
operation of facilities and is addressing the question of extensions
beyond the original 40-year term.
The focus of the Commission's review of license renewal
applications is on maintaining plant safety, with the primary concern
directed at the effects of aging on important systems, structures, and
components. Applicants must demonstrate that they have identified and
can manage the effects of aging so as to maintain an acceptable level
of safety during the period of extended operation.
The Commission has now renewed the licenses of plants at three
sites for an additional 20 years: Calvert Cliffs in Maryland, Oconee in
South Carolina, and Arkansas Nuclear 1 in Arkansas, comprising a total
of six units. The thorough reviews of these applications were completed
ahead of schedule, which is indicative of the care exercised by
licensees in the preparation of the applications and the planning and
dedication of the Commission staff. Applications for units from two
additional sites--Hatch in Georgia and Turkey Point in Florida--are
currently under review. Also, we recently received application from
four additional sites; Surry and North Anna in Virginia, Catawba in
South Carolina, and McGuire in North Carolina, comprising a total of
eight units. As indicated by our licensees, many more applications for
renewal are anticipated in the coming years.
Although the Commission has met or exceeded the projected schedules
for the first reviews, it seeks to have the renewal process be as
effective and efficient as possible. The extent to which the Commission
is able to sustain or improve on our performance depends on the rate at
which applications are actually received, the quality of the
applications, and the staff resources available to complete the review
effort. The Commission recognizes the importance of license renewal and
is committed to providing high-priority attention to this effort. As
you know, the Commission encourages early notification by licensees of
their intent to submit license renewal applications in order to allow
adequate planning of demands on staff resources. The Commission is
committed to maintaining the quality of its safety reviews.
Reactor Plant Power Uprates
In recent years, the Commission has approved numerous license
amendments that permit licensees to make relatively small power
increases or uprates. Typically, these increases have been
approximately two percent to seven percent. These uprates, in the
aggregate, resulted in adding approximately 2000 MWe or the equivalent
of two new 1000 MWe power plants.
The NRC is now reviewing six license amendment requests for larger
power uprates. These requests are for Boiling Water Reactors (BWR's)
and are for uprates of 15 percent to 20 percent. (There are two primary
designs for operating light water reactors: Boiling Water Reactors and
Pressurized Water Reactors.) While the staff has not received requests
for additional uprates beyond these six, some estimates indicate that
as many as 22 BWR's may request uprates in the 15 percent to 20 percent
range. These uprates, if allowed, could add approximately 3000 to 4500
MWe to the grid.
Approvals for uprates are granted only after a thorough evaluation
by the NRC staff to ensure safe operation of the plants at the higher
power. Plant changes and modifications are necessary to support a large
power uprate, and thus require significant financial investment by the
licensee. While the NRC does not know the number of uprate requests
that will be received, the staff is evaluating ways to streamline the
review process. We would note that power uprates of five percent or
more are considered by the NRC staff to be substantial and to require
significant technical review and analysis. As with license renewals,
the Commission encourages early notification by licensees, in advance
of their applications for uprates, in order to allow adequate planning
of demands on staff resources.
High-Level Waste Storage/Disposal (Spent Fuel Storage)
In the past several years, the Commission has responded to numerous
requests to approve spent fuel cask designs and independent spent fuel
storage installations for onsite dry storage of spent fuel. These
actions have provided an interim approach pending implementation of a
program for the long-term disposition of spent fuel. The ability of the
Commission to review and approve these requests has provided the needed
additional onsite storage of spent nuclear fuel, thereby avoiding plant
shutdowns as spent fuel pools reach their capacity. The Commission
anticipates that the current lack of a final disposal site will result
in a large increase in on-site dry storage capacity during this decade.
The NRC staff is currently reviewing an application for an
Independent Spent Fuel Storage Installation on the reservation of the
Skull Valley Band of Goshute Indians in Utah. This application is
currently subject to an ongoing adjudicatory hearing before an Atomic
Safety and Licensing Board.
We continue to prepare for a potential license application from DOE
for a proposed high-level waste geologic repository at Yucca Mountain.
These efforts include rulemaking to codify recently set radiation
standards for the proposed repository and periodic technical exchange
meetings between NRC and DOE staff which are open to the public.
We are also revising our requirements for the transportation of
spent fuel and radioactive material to make them more risk-informed and
consistent with international standards. We are doing this in
partnership with the Department of Transportation, which will
simultaneously revise its own rule in this area.
Risk-Informing the Commission's Regulatory Framework
The Commission also is in a period of dynamic change as the agency
moves from a prescriptive, deterministic approach toward a more risk-
informed and performance-based regulatory paradigm. Improved
probabilistic risk assessment techniques combined with more than four
decades of accumulated experience with operating nuclear power reactors
has led the Commission to recognize that some regulations may not
achieve their intended safety purpose and may not be necessary to
provide adequate protection of public health and safety. Where that is
the case, the Commission has determined it should revise or eliminate
the requirements. On the other hand, the Commission is prepared to
strengthen our regulatory system where risk considerations reveal the
need.
Perhaps the most visible aspect of the Commission's efforts to
risk-inform its regulatory framework is the new reactor oversight
process. The process was initiated on a pilot basis in 1999 and fully
implemented in April 2000. The new process was developed to focus
inspection effort on those areas involving greater risk to the plant
and thus to workers and the public, while simultaneously providing a
more objective and transparent process. Although the Commission
continues to work with its stakeholders to assess the effectiveness of
the revised oversight process, the feedback received from industry and
the public is favorable.
future activities
Scheduling and Organizational Assumptions Associated with New Reactor
Designs
While improved performance of operating nuclear power plants has
resulted in significant increases in electrical output, significant
increased demands for electricity will need to be addressed by
construction of new generating capacity of some type. Serious industry
interest in new construction of nuclear power plants in the U.S. has
only recently emerged. As you know, the Commission has already
certified three new reactor designs pursuant to 10 CFR Part 52. These
designs include General Electric's Advanced Boiling Water Reactor,
Westinghouse's AP-600 and Combustion Engineering's System 80+ (now
owned by Westinghouse). Because the Commission has certified these
designs, an application for a combined construction permit and
operating license under Part 52 may reference one of these approved
designs. Licensees have also indicated to the NRC that applications for
early site permits could be submitted in the near future. These permits
would allow pre-certification of sites for possible construction of
nuclear power plants.
In addition to the three already certified advanced reactor
designs, there are new nuclear power plant technologies, such as the
Pebble Bed Modular Reactor, which some believe can provide enhanced
safety, improved efficiency, and lower costs, as well as other
benefits. To ensure that the NRC staff is prepared to evaluate any
applications to build these advanced nuclear reactors, the Commission
recently directed the staff to assess the technical, licensing, and
inspection capabilities that would be necessary to review an
application for an early site permit, a license application, or
construction permit for a new reactor unit. This will include the
capability to review the designs for Generation III+ or Generation IV
light water reactors, including the Westinghouse AP-1000, the Pebble
Bed Modular Reactor, General Atomics' Gas Turbine Modular Helium
Reactor, and Westinghouse's International Reactor Innovative and Secure
(IRIS). In addition to assessing its capability to review the new
designs, the Commission will also examine its regulations relating to
license applications, such as 10 CFR Parts 50 and 52, in order to
identify whether any enhancements are necessary. We also recently
established the Future Licensing Project Organization in order to
prepare for and manage future reactor and site licensing applications.
In order to confirm the safety of new reactor designs and
technology, the Commission believes that a strong nuclear research
program should be maintained. A comprehensive evaluation of the
Commission's research program has been completed with assistance from a
group of outside experts and from the Advisory Committee on Reactor
Safeguards. With the benefit of these insights, the Commission expects
to undertake measures to strengthen our research program.
Human Capital
Linked to these technical and regulatory assessments, the
Commission is reviewing its human capital to ensure that the
appropriate professional staff are available for the Commission to
fulfill its traditional safety mission, as well as any new regulatory
responsibilities in the area of licensing new reactor designs.
In some mission critical offices within the Commission, nearly 25
percent of the staff are eligible to retire today. As with many Federal
agencies, it is becoming increasingly difficult for the Commission to
hire personnel with the knowledge, skills, and abilities to conduct the
safety reviews, licensing, research, and oversight actions that are
essential to our safety mission. Moreover, the number of individuals
with the technical skills critical to the achievement of the
Commission's safety mission is rapidly declining in the Nation, and the
educational system is not replacing them. The NRC staff has taken
initial steps to address this situation, and as a result, is now
systematically seeking to identify future staffing needs and to develop
strategies to address the gaps. It is apparent, however, that the
maintenance of a technically competent staff will require substantial
effort for an extended time. (The various energy bills properly give
attention to such matters.)
Budget
The NRC has submitted a proposed bill for authorization of
appropriations for Fiscal Year 2002. We respectfully request the
Committee's support for our budget request. However, as I mentioned
earlier, serious industry interest in new construction of nuclear power
plants has only recently emerged. Therefore, our budget proposal now
before Congress does not include resources to prepare for this
initiative.
legislative proposals
The Commission has identified in its legislative proposals areas
where new legislation would be helpful to eliminate artificial
restrictions and to reduce the uncertainty in the licensing process.
These changes would maintain safety while increasing flexibility in
decision-making. Although those changes would have little or no
immediate impact on the Nation's electrical supply, they would help
establish the context for consideration of nuclear power by the private
sector without any compromise of public health and safety or protection
of the environment.
Commission antitrust reviews of new reactor licenses could be
eliminated. As a result of the growth of Federal antitrust law
since the passage of the AEA, the Commission's antitrust
reviews are redundant of the reviews of other agencies. The
requirement for Commission review of such matters, which are
distant from the Commission's central expertise, should be
eliminated.
Elimination of the ban on foreign ownership of U.S. nuclear
plants would be an enhancement since many of the entities that
are involved in electrical generation have foreign
participants, thereby making the ban on foreign ownership
increasingly problematic. The Commission has authority to deny
a license that would be inimical to the common defense and
security, and thus an outright ban on all foreign ownership is
unnecessary.
With the strong Congressional interest in examining energy policy,
the Commission is optimistic that there will be a legislative vehicle
for making these changes and thereby for updating the AEA. Indeed, I
would note that these matters are included in the legislative proposals
that NRC recently provided to this Committee.
summary
The Commission has long been, and will continue to be, active in
concentrating its staffs efforts to ensure the adequate protection of
public health and safety, to promote the common defense and security,
and to protect the environment in the application of nuclear technology
and materials for civilian use. Within the bounds of those statutory
mandates, however, the Commission is mindful of the need: (1) to reduce
unnecessary burdens, so as not to inappropriately inhibit any renewed
interest in nuclear power; (2) to maintain open communications with all
of its stakeholders, in order to seek to ensure the full, fair, and
timely consideration of issues that are brought to our attention; and
(3) to continue to encourage its highly qualified staff to strive for
increased efficiency and effectiveness, both internally and in our
dealings with all of the Commission's stakeholders.
Thank you Mr. Chairman, I welcome your comments and questions.
[GRAPHIC] [TIFF OMITTED] T3738.001
[GRAPHIC] [TIFF OMITTED] T3738.002
[GRAPHIC] [TIFF OMITTED] T3738.003
U.S. Commercial Nuclear Power Reactor Average Capacity Factor
----------------------------------------------------------------------------------------------------------------
Number of Reactors
Licensed to Average Annual Percent of Total
Operate Capacity Factor U.S.
----------------------------------------------------------------------------------------------------------------
1989................................................ 109 63 19.0
1990................................................ 111 68 20.5
1991................................................ 111 71 21.7
1992................................................ 110 71 22.2
1993................................................ 109 73 21.2
1994................................................ 109 75 22.1
1995................................................ 109 79 22.5
1996................................................ 110 77 21.9
1997................................................ 104 74 20.1
1998................................................ 104 78 22.6
1999................................................ 104 86 22.9
2000................................................ 104 88 23.4
----------------------------------------------------------------------------------------------------------------
Mr. Barton. We thank you, Doctor, and appreciate your
attendance. We now would like to hear from Dr. Magwood of DOE.
STATEMENT OF WILLIAM D. MAGWOOD
Mr. Magwood. Thank you, Mr. Chairman. I am Bill Magwood. I
am Director of the DOE Office of Nuclear Energy, Science and
Technology. It is a great pleasure to appear before this
subcommittee today. And I would like to echo the comments of
some of the members of the subcommittee in recognizing your
efforts in pushing these issues forward.
I believe that looking at both hydro and nuclear together,
there were many people wondering why those two were important
issues as a hearing. But one of the members did also point out
that together they are almost one-third of our electricity
supply, and it is one-third of our electricity supply that is
generating electricity reli-
ably and economically without emitting greenhouse gases or any
other pollutants.
A few years ago, I was on the Hill talking to many Members
of Congress and many staffers about nuclear research and
nuclear power, and I was told almost unanimously that, ``Well,
nuclear power is not going to survive restructuring of electric
utility industry; nuclear power is too expensive; we don't have
a solution for waste, so, there is no point in worrying about
nuclear power anymore.'' It is gratifying to be up here a few
years later and to hear the story has entirely changed.
With the new administration, a new vice president, we have
seen senior officials in the administration here and on
national television saying very clearly that the United States
should build new nuclear power plants. The new national energy
policy states very clearly that nuclear power needs to be a
serious option and that we need to pursue reauthorization of
Price-Anderson as part of that, as well as a range of other
licensing activities and other research activities. Clearly,
the Department fully supports that.
We believe that nuclear does have a bright future in the
United States, and I would say that over the last year, I have
had conversations with senior officials in the utility industry
who are looking very closely at the economics, and they are
capitalists, Mr. Markey. They are looking at the numbers, and
they are saying, ``Yes, we think that the business case is
getting closer and closer all the time, especially as
electricity prices increase nationwide. We don't expect that we
are going to see nuclear power plants just because the
government says it is time to build nuclear power, but we are
going to see nuclear power plants, because industry has made a
judgment that it is time for nuclear to come back.''
There are things the government does have to do, and I have
already mentioned reauthorization of Price-Anderson, which we
support. I would echo something that Mr. Dingell mentioned,
which is that there are some issues such as the issue of how to
provide coverage to small reactors versus large reactors that
probably needs to be considered. It is a very important issue
for new technology, some of which I think you will hear about
later today from other witnesses.
But the government also does need to deal with the nuclear
waste problem. I think it is important to always point out that
utility ratepayers have been paying the freight for the nuclear
waste program at the Department of Energy. They have paid
billions of dollars into the Nuclear Waste Fund, and I think
that the progress that we are making now, which has come with
great difficulty and probably a lot longer than anyone thought
when the Nuclear Waste Policy Act was first passed, is
important progress. We are hoping that late this year we will
be in the position to issue a site suitability report.
Finally, I think that it is important to recognize that we
are not just talking about current reactors and relicensing, as
important as that is. We are also talking about future reactors
that can be built later in this decade. We have assembled a
panel of experts, through our Nuclear Energy Research Advisory
Committee--I think you will hear some of that today, who have
made draft recommendations that there are actions the
government can take to show that some of the unproven licensing
procedures the NRC has developed should be demonstrated to pave
the way for new reactors. But also we believe that there is
some research that should be done in the longer-term future for
new types of reactors.
I appreciate the opportunity to appear before this
subcommittee and I would be happy to answer your questions. We
also look forward to working with this subcommittee as you mark
up legislation.
Mr. Barton. Thank you, Doctor. The Chair would recognize
himself for the first 5-minute question period.
Dr. Magwood, I am told that DOE did prepare testimony,
written testimony on Price-Anderson. Is that true?
Mr. Magwood. That is true. The Deputy General Counsel, Eric
Fygi, I believe, has submitted Price-Anderson related testimony
for the record.
Mr. Barton. And that is my--if you have prepared written
testimony on Price-Anderson, we would appreciate it if it would
be provided for the record.
Mr. Magwood. Absolutely.
Mr. Barton. Okay.
[The prepared statement of Eric Fygi follows:]
Prepared Statement of Eric J. Fygi, Deputy General Counsel, U.S.
Department of Energy
Thank you, Mr. Chairman and members of the Committee, for the
opportunity to discuss renewal of the Price-Anderson Act (Act) to
provide liability coverage for Department of Energy nuclear activities.
This is an opportune time to discuss renewal of this important
indemnification scheme in light of the recommendation in the Report of
the National Energy Policy Development Group that the Price-Anderson
Act be extended. The Administration welcomes your attention to this
important issue for the future of nuclear energy in the United States
and looks forward to working with you to finish work on it this year.
In response to a question during confirmation hearings, Secretary
Spencer Abraham stated that he agreed with the recommendations in the
Department of Energy Report to Congress on the Price-Anderson Act (DOE
Price-Anderson Report) (1999) that supported continued coverage of DOE
nuclear activities under the Price-Anderson Act without any substantial
changes. Secretary Abraham stated that indemnification of DOE
contractors under the Price-Anderson Act was essential to the
achievement of DOE's statutory missions in the areas of national
security, energy policy, science and technology, and environmental
management. Further, he indicated that he looked forward to working
closely with members of both parties and with individuals from inside
and outside government to secure the early renewal of the Price-
Anderson Act.
Based upon over 40 years of experience, DOE believes that renewal
of the Price-Anderson Act is in the best interests of the government,
its covered contractors, subcontractors and suppliers, and the public.
In 1957, Congress enacted the Price-Anderson Act as an amendment to the
Atomic Energy Act of 1954 to encourage the development of the nuclear
industry and to ensure prompt and equitable compensation in the event
of a nuclear incident. Specifically, the Price-Anderson Act established
a system of financial protection for persons who may be injured by a
nuclear incident by cutting through tort defenses of the intermediary
licensees and contractors. With respect to activities conducted for
DOE, the Price-Anderson Act achieves these objectives by requiring DOE
to include an indemnification in each contract that involves the risk
of a nuclear incident. This DOE indemnification: (1) provides omnibus
coverage of all persons who might be legally liable; (2) indemnifies
fully all legal liability up to the statutory limit on such liability
(currently $9.43 billion for a nuclear incident in the United States);
(3) covers all DOE contractual activity that might result in a nuclear
incident in the United States; (4) is not subject to the usual
threshold limitation on the availability of appropriated funds; and (5)
is mandatory and exclusive. Through these means the public is afforded
a streamlined means of compensation for any injury from a nuclear
incident.
DOE is convinced that the indemnification provisions applicable to
its activities should be continued without any substantial change
because it is essential to DOE's ability to fulfill its statutory
missions involving defense, national security and other nuclear
activities; it provides proper protection for members of the public
that might be affected by DOE's nuclear activities; it is cost-
effective; and there are no satisfactory alternatives.
Elimination of the DOE indemnification would have a serious effect
on the ability of DOE to perform its missions. Without indemnification,
DOE believes that it would be difficult to obtain responsible,
competent contractors, subcontractors, suppliers and other entities to
carry out work involving nuclear materials. Other means of
indemnification have practical and legal limitations, do not provide
automatic protection and depend on cumbersome contractual arrangements.
Private insurance generally would not be available for many DOE
activities. Even when available, it would be extremely expensive,
limited, and restricted. Because the DOE indemnification operates as a
form of self-insurance for claims resulting from nuclear incidents, DOE
incurs no out-of-pocket costs for insurance. Moreover, thus far, it has
not paid out significant amounts for claims pursuant to its
indemnification authority.
In the 1999 DOE Price-Anderson Report, DOE recommended that the Act
continue to provide indemnification for DOE nuclear activities without
substantial change. DOE made five recommendations:
DOE Price-Anderson Report Recommendation 1. The DOE indemnification
should be continued without any substantial change.
DOE primarily recommended that the Act be renewed without
substantial change. The Act should extend DOE's responsibility to
indemnify its contractors as well as extend the NRC's authority to
indemnify its licensees. Under the current Act, the authority of DOE
and the NRC to indemnify is scheduled to expire on August 1, 2002.
DOE Price-Anderson Report Recommendation 2. The amount of the DOE
indemnification should not be decreased.
DOE recommended in its report that this Act should not decrease the
DOE amount of indemnification below the current amount of $9.43
billion. In the current Act, DOE's indemnity amount is pegged to the
NRC aggregate amount and to the NRC inflation adjustment of that
amount. DOE believes the continuation of an amount at least this high
is essential to assure the public that prompt and equitable
compensation will be available in the event of a nuclear incident and
its consequences, as well as a precautionary evacuation. DOE also
recommended that the amount of indemnification for nuclear incidents
outside of the United States be increased from $100 million to $500
million.
DOE Price-Anderson Report Recommendation 3. The DOE indemnification
should continue to provide broad and mandatory coverage of
activities conducted under contract for DOE.
DOE recommended that the Act continue to provide broad and
mandatory coverage of contractual activities conducted for DOE. The
protection afforded by the DOE indemnification should not be dependent
on factors, some of them predictive, such as whether an activity (1)
involves the risk of a substantial nuclear incident, (2) takes place
under a procurement contract (as opposed to some other contractual
relationship that might not be so denominated), or (3) is undertaken by
a DOE contractor pursuant to a license from the Nuclear Regulatory
Commission (NRC). Limitations based on such factors would likely render
uncertainty as to public protection and be cumbersome to administer
without achieving any significant cost savings.
DOE Price-Anderson Report Recommendation 4. DOE should continue to have
authority to impose civil penalties for violations of nuclear
safety requirements by for-profit contractors, subcontractors
and suppliers.
DOE recommended that the Act continue DOE's authority to impose
civil penalties for violations of nuclear safety requirements and that
nonprofit entities should remain exempt from civil penalties.
Concerning the exemption of nonprofit entities from civil
penalties, we recently testified that the Department could generally
support in concept the limitation of the nonprofit exemption up to the
amount of the contractor's or subcontractor's fee paid. I pointed out
several concerns, including the definition of a contractor's fee, the
time period over which the fee is paid, the effective date of
application to contracts entered into after the date of enactment, and
the repeal of the automatic remission. Should this concept be pursued
these concerns should be addressed carefully in crafting a legislative
implementation of them.
I also noted in my testimony that in the information security area,
Congress decided, following issuance of the DOE Price-Anderson Report,
to impose potential liability for civil penalties on nonprofit
organizations. For violations of regulations relating to the
safeguarding and security of Restricted Data, the National Defense
Authorization Act for Fiscal Year 2000 made nonprofit contractors,
subcontractors, and suppliers subject to civil penalties not to exceed
the total amount of fees paid by the DOE to each such entity in a
fiscal year. I stated that a similar limitation of the exemption, up to
the amount of the contractor's or subcontractor's fee paid, also would
be a feasible approach for violations of DOE's nuclear safety
regulations. The limitations in this legislation, however, should be
structured to yield uniform standards for decision.
Recommendation 5. The Convention on Supplementary Compensation for
Nuclear Damage should be ratified and conforming amendments to
the Price-Anderson Act should be adopted.
DOE has examined the potential effects on the Price-Anderson Act of
the Convention on Supplementary Compensation for Nuclear Damage and has
concluded ratification of the convention would not necessitate any
substantive changes in the Price-Anderson Act. Nonetheless were this
convention to be submitted and ratified by the Senate, it is
conceivable that some technical and conforming changes to the Price-
Anderson Act might be desirable, such as provisions to make clear the
geographic jurisdictional bounds of each legal regime.
This concludes my prepared statement. I will be pleased to respond
to any questions the Committee may have.
Mr. Barton. Chairman Meserve, EPA recently put out a
separate groundwater standard on Yucca Mountain. What is the
NRC's position on that separate groundwater standard?
Mr. Meserve. You are quite correct that EPA has promulgated
its final rules for Yucca Mountain, and they do include not
only a standard for all pathways, but a separate standard for
groundwater. The NRC is obligated under the statute to adapt
its regulations to that standard, and we will do so. The
Commission has long opposed the notion of a separate
groundwater standard as a matter of policy, however, in that
we, with the support, I might add, of the National Academy of
Sciences, have taken the view that groundwater is already
incorporated as an aspect of the all-pathway standard, and that
there is no need for a separate standard for groundwater.
Mr. Barton. Does that continue to be the view of the full
Commission?
Mr. Meserve. Yes, that continues----
Mr. Barton. You said have long--do you continue to have
that position?
Mr. Meserve. We continue to have that position, but we
recognize that EPA has spoken, and absent some congressional
action----
Mr. Barton. Only took them 18 years--19 years.
Mr. Meserve. [continuing] we will obviously comply.
Mr. Barton. Does DOE, Dr. Magwood, have a position on that
issue, the separate standard?
Mr. Magwood. I would say at this stage that there does
appear to be common ground between where NRC and the EPA would
like to be. Clearly, NRC stated opinion is that one regulator
is enough, and in general, we would like to see one regulator.
But if we can move forward with an EPA groundwater standard, we
ought to try to do that. I understand from the directors of the
High Level Waste Program that they believe that they may be
able to work with these groundwater standards, but nevertheless
it does present the issue of dual regulation. I recognize that
there is some concern about that.
Mr. Barton. Dr. Magwood, can the Department present to this
subcommittee the latest cost estimates on the construction of
the Yucca Mountain facility if the decision is made to go
forward with that facility? Do you have the latest cost
estimates or can you get them and submit them to the
subcommittee?
Mr. Magwood. My office is not responsible for the HLW
program but I would be happy to inquire about it.
Mr. Barton. Would you do that?
[The following was received for the record:]
In response to your question, I would like to provide the latest
cost estimates to construct and open a potential repository at Yucca
Mountain, which were supplied by the Department's Office of Civilian
Radioactive Waste Management. All costs are from the May 2001 report
``Analysis of the Total System Life Cycle Cost of the Civilian
Radioactive Waste Management Program.''
Beginning in fiscal year 2002, the estimated cost is approximately
$8.6 billion (in constant year 2000 dollars) through 2010, the planned
start of repository operations. The estimate is based on assumptions
that the Yucca Mountain site is recommended and approved for
development and is licensed by the Nuclear Regulatory Commission. As
the Subcommittee is aware, these events have not occurred. This
estimate includes repository development, licensing, and construction
($6.3 billion over the same timeframe), including financial assistance
to State and local governments and payments-equal-to taxes; waste
acceptance and transportation ($1.0 billion), including costs to
acquire a national and Nevada transportation infrastructure; and
program management and integration, including funding for the Nuclear
Regulatory Commission and the Nuclear Waste Technical Review Board
($1.3 billion).
Mr. Barton. Are you authorized to give the Department's
position, if any, on the issue of taking the Nuclear Waste Fund
off budget?
Mr. Magwood. No, Mr. Chairman. I am not authorized to
comment on that.
Mr. Barton. Okay. Who would be authorized, the Secretary? I
mean how high do I have to go to get that position?
Mr. Magwood. I would think that would be a good place to
start.
Mr. Barton. Okay. Chairman Meserve, does the NRC have a
position on taking the Nuclear Waste Fund off budget?
Mr. Meserve. Mr. Chairman, we have never had occasion to
examine that.
Mr. Barton. If I were to ask you, on the record, to examine
it, would you do so and poll your other Commissioners and send
us a written response?
Mr. Meserve. We would be happy to do that, sir.
Mr. Barton. Okay.
[The following was received for the record:]
The Commission currently receives an annual Congressional
appropriation to cover high-level radioactive waste management
activities from the Nuclear Waste Fund. The current process
ensures that the Commission receives appropriate resources to
execute its statutorily mandated responsibilities without
burdening licensees. Also, the current process ensures that the
Commission receives those funds independent of the U.S.
Department of Energy (DOE), which would be the potential
license applicant if an application were filed for an NRC
license to dispose of high-level waste and spent fuel in a
geologic repository. It is the Commission's understanding that
these two fundamental attributes (i.e., sufficient funding to
fulfill its role and funding obtained independent of DOE) would
remain even if the Nuclear Waste Fund were taken off-budget. On
that basis has a neutral position.
Mr. Barton. And, finally, Dr. Meserve, we are told that
there are some potential new designs for nuclear power that are
being prepared to be presented to the Commission for reviews.
Is that your understanding?
Mr. Meserve. Well, we have already reviewed three new
designs and have certified them. We are in discussions with
several other vendors about the prospect that we might certify
some additional designs. And included in that might be some
very novel designs. For example, the Pebble Bed Modular Reactor
would be an example of a unique design.
Mr. Barton. Do you have confidence that you have got the
staff expertise and quantity of staff to review these
applications--new design applications in a timely fashion?
Mr. Meserve. Well, this has been a recently emerging
activity, and we are assembling the necessary resources and
doing that evaluation now. I did submit a letter indicating
that for fiscal year 2002 we would anticipate the need of some
additional funding, which in part is in the House markup of our
appropriations bill.
Mr. Barton. Okay.
Mr. Meserve. We are including these matters in our
evaluation for the fiscal year 2003 budget, which is being
developed now, to make sure that we have the resources in place
in order to be able to handle the possibility that we may see
some very different kinds of designs to evaluate.
Mr. Barton. Good. I am going to yield the balance of my
time and recognize the distinguished ranking member, Mr.
Boucher. We have got numerous witnesses today, so I am going to
be a little stricter than normal on the questioning time. Mr.
Boucher is recognized for 5 minutes.
Mr. Boucher. Well, thank you, Mr. Chairman, and I am going
to be very brief. And I simply want to pick up on the last
question that the chairman asked with regard to the Pebble Bed
Modular Reactor. And my question relates to the application of
Price-Anderson principles to that potential new reactor design.
Price-Anderson currently imposes a premium of, I believe,
it is $200 million per reactor unit, and that is the tier I
premium. And then in the event that there is a nuclear
accident, there is a retroactive premium that is, I think, on
the order of $90 million per unit. And that applies without
regard to the size of the unit. And the traditional size is
about 1,000 megawatts. But these new modular units will be on
the order of 100 megawatts. And if several of them are linked
together in a modular configuration, three units, for example,
totaling 300 megawatts, each of them would have to pay the
premium that the current law specifies of $200 million and then
have the same retroactive liability. So you would wind up with
potentially $600 million of premium for 300 megawatts of
nuclear reactor. Whereas if you built a large 1,000 megawatt
unit, you would only have $200 million of premium.
And my question to you is under your current authorities,
do you have the ability to make the adjustments that would be
necessary to scale down the size of that premium in such a way
as to accommodate these new units in the event that you certify
them and find that they are appropriate for construction?
Mr. Meserve. Mr. Boucher, let me say that I think that the
numbers you have are slightly different than my understanding
of the premium amounts.
Mr. Boucher. Okay. Well, that is entirely possible, but----
Mr. Meserve. But, nonetheless, the basic point that you----
Mr. Boucher. Yes. It is more the principle than the amounts
I am addressing here.
Mr. Meserve. Yes, I understand. This is an issue with which
the Commission is grappling as we speak. We are trying to
evaluate the situation as to what flexibility there is within
the statute or whether perhaps some legislative consideration
ought to be given to an amendment of the Price-Anderson Act to
deal with this. And we would be happy to submit materials to
you on this issue for the record.
[The following was received for the record:]
As indicated in our response to Question 1, the Commission believes
that Congress should amend the Act if Congress concludes that multiple
modular reactor units at a single site should be treated as a single
facility for Price-Anderson purposes. The Commission is also of the
view that any statutory changes proposed to address this matter should
be made within the Price-Anderson provision itself (section 170 of the
Atomic Energy Act) so as to limit the potential for unintended impacts
of changes on the overall regulatory framework. Redefining the term
``facility'' exclusively within section 170 in a way different from the
way it is used throughout the Atomic Energy Act and legislative
histories will have the advantage of not disturbing existing law and
implementing rules with respect to non-Price-Anderson issues.
Consistent with this view and in response to the request that we
provide legislative language, we have drafted an amendment to section
170 of the Atomic Energy Act that would treat multiple modular units at
a single site as a single facility for purposes of the Price-Anderson
retrospective assessment. In evaluating whether to pursue such a
provision, the Congress might consider the need to trigger the maximum
insurance and retrospective assessment provisions against the impact
and equity of such requirements on multiple modular units and on
existing plants.
If Congress determines that multiple modular units at a single site
should be treated as a single facility for purposes of the
retrospective assessment, Congress might consider an insert to Section
170b(1), following immediately after the first proviso and before:
``Such primary financial protection . . .'':
And provided further, That for multiple modular reactors
located at a single site, a combination of such reactors
(irrespective of whether they are licensed jointly or singly)
having a total rated capacity between 100,000 and 950,000
electrical kilowatts shall, exclusively and only for the
purposes of this section, be denominated a single facility
having a rated capacity of 100,000 electrical kilowatts or
more.
This provision would define a range of power levels--the current
threshold of 100 Mwe to an upper limit of 950 Mwe--for which a
combination of multiple modular reactors would be treated as a single
facility for the retrospective assessment. We use 100 Mwe as the lower
limit because it is the longstanding threshold power level that
Congress established as the level at which Price-Anderson coverage must
be provided.
We suggest 950 Mwe as a possible upper limit because it roughly
approximates the median power level of the large currently licensed
power reactors (55 licensed reactors have rated power levels between
800 and 1105 Mwe). If chosen, 950 Mwe would avoid conflict with the
existing retrospective premium assessments in the secondary insurance
pool. However, there are many different fairness and equity arguments
on this issue and the Commission does not have a view or preference as
to the specific limits--that is a policy decision for Congress.
If Congress were to choose to amend Section 170 to treat multiple
modular units at a single site as a single facility for purposes of
retrospective assessment, there is no doubt that there are other
formulations that would achieve the same result.
Mr. Boucher. Well, that is very good, Mr. Meserve. And if
you believe that, we do need to act legislatively in order to
address this concern. I would hope that you would inform us of
that fact and perhaps suggest an appropriate course for doing
that. Thank you very much.
Thank you, Mr. Chairman. That is all I have.
Mr. Barton. The gentleman from Oklahoma, Mr. Largent, is
recognized for 5 minutes.
Mr. Largent. Mr. Meserve, I have a question for you, just
one question. It is my understanding that Exelon, General
Atomics and Westinghouse and others are planning to bring
advanced reactor technologies to the NRC for review and
approval. It is my understanding that the NRC is currently
losing a lot of its technical staff to retirement and actually
have fewer nuclear reactor engineers are available to take
their place. And the concern among industry folks is whether
you actually have the technical expertise to even review their
proposal. Is that true?
Mr. Meserve. We have a serious human capital challenge in
that in some important offices of the NRC up to 25 percent of
the people are eligible to retire today. We have a situation
where we have five times as many people over age 60 as we have
under age 30. This is a consequence of many years of declining
budgets at the NRC; the way the NRC has handled that situation
is by allowing attrition to occur. And so the demography of the
agency has become increasingly aged as time has gone on.
We take that issue very seriously. We have underway an
evaluation of the skills we have at the NRC and how long we
expect to be able to have them, what skills we need to have to
do the work that is in front of us, and are developing
strategies to fill the gaps. We are very aggressively
undertaking recruitment activities, examining various retention
activities and other ways in which we can encourage people to
consider government employment with the NRC.
I think there will be a challenge not only for the NRC but
for the industry and for the Department of Energy in that we
have the pipeline of our educational system which is not
producing the people at the moment that all of us collectively
need. And so that there is a national challenge, it is not just
an NRC challenge, in this area.
Mr. Largent. Mr. Meserve, are you aware of any effort by
TVA to complete the nuclear reactor that they have that is not
complete currently?
Mr. Meserve. I believe that there has been some talk of
possible evaluations that TVA might undertake of some reactors
that were partially constructed but not completed. I am not
aware of the current status of its evaluation of that matter.
Mr. Largent. Okay.
Mr. Meserve. But it is something I understand that TVA has,
at least at some level, been considering.
Mr. Largent. Great. Mr. Chairman, that is all the questions
I have. I yield back.
Mr. Barton. Is Mr. Dingell in the outer room? He was here
just a minute ago. Could you all check? He is next if he is in
the annex. If not, it is Mr. Doyle. He is not? The Chair would
recognize the gentleman from Pennsylvania, Mr. Doyle, for 5
minutes.
Mr. Doyle. Thank you, Mr. Chairman, and I would like to
welcome our panelists.
Director Magwood, I remember back in 1998, during a hearing
on the DOE budget, we spoke about the Department's then
proposed nuclear engineering research initiative, which was a
program recommended by the PCAS as a way to address some of the
problems facing nuclear energy. And I realize there is
currently about 55 NERI projects underway, with an additional
12 to 15 projects expected to be selected for award. Can you
give us an overview of some of the projects that you feel are
best addressing the potential long-term barriers of nuclear
power use? And if possible, can you also give us a sense of
direction of how the new projects will complement or differ
from the ones that are already underway?
Mr. Magwood. Yes. I would like to do that. There are lots
of good examples of projects that have been conducted in the
NERI Program that have contributed to the long-term viability
of nuclear power. One that you may find interesting is one that
was submitted by industry for a small light water reactor. This
reactor has, after our NERI award was granted, become the
subject of considerable interest internationally and has drawn
considerable internationally investment. Other countries, I
think, Italy, Japan, and others came into this project
providing far, far more money than we were providing as a NERI
project. There has actually now been some talk--I am sure that
Chairman Meserve has heard it--that this reactor should be
taken to the NRC sometime in the next few years for possible
certification. So here is an example where very advanced
technology has been brought to fruition through a NERI project.
In addition, NERI has been very effective in looking at
very basic technology issues, such as materials. One of the
things that laypeople don't think about when it comes to the
nuclear industry, is the fact that the entire nuclear business
revolves around how materials react in certain conditions, and
we have done lots of research through NERI program on
materials.
With respect to the future, I think we are going to spend a
lot of time thinking about what has become known as Generation
IV nuclear power systems. This is a very exciting area of study
that we are pursuing with other countries. There is a new
Generation IV International Forum has been formed around the
United States and includes eight other countries. And we are
planning to work together to develop what we believe will be
the next generation of nuclear power plants that will be
deployed perhaps 20 years from now.
So the direction is actually very bright. We are working
very closely with our international partners, very closely with
academia and industry and our national laboratories. I think
for the first time in many years, we have been able to bring
that nuclear research community together in a very constructive
way.
Mr. Doyle. What do you think, in the Department's view--you
hear many concerns about nuclear economic safety, proliferation
resistance, waste minimization. What do you feel is currently
the most pressing problem, in the Department's view? And what
in addition to NERI and Generation IV are you doing to address
what you feel is the most pressing concern? And, finally, are
you receiving adequate funding support to meet your goals in
this area?
Mr. Magwood. Well, I think that the biggest challenge
facing the future of nuclear power is something we really can't
do much about it, that's perception. There clearly is a backlog
of negative perceptions through many parts of society, I think,
not just in the general society but within the utilities. I
think there still are people in the utility industries who
remember financial problems for utilities as a result of
nuclear project. I think a lot of people have gotten past some
of those issues. I think the people on Wall Street have gotten
past those issues. So a lot of progress has been made. But I
think the general public still needs yet more information about
the benefits of nuclear power. So, that is one issue that no
amount of funding can take care of it. It just simply will take
time, and I think the good operating record of existing
reactors is also contributing to that.
From a technology standpoint, I think that the long-term
issue of fuel supply and the relationship with spent fuel and
high-level waste is something we are giving a lot of thought
to. The national energy policy speaks to the possibility of
relooking at reprocessing, using transmutation to deal with
waste in the long-term. That doesn't solve the problem today,
but when you are thinking about our energy supplies going out
30 or 40 years, you really have to think carefully about these
issues. It is possible that advanced technology could make the
geological repository we hope to build last a lot longer, maybe
keep us at one repository center, not having to worry about a
second repository, which is the current plan. So, I think those
are the sorts of long-term issues that we need to deal with.
Regarding funding, there is never enough funding for these
activities. The nuclear program has really gone through a very
rough time. In the early 1990's, we had a research budget of
over $200 million a year. In the late 1990's our research
budget was cut to zero. In the current budget proposal for
2002, it is less than $50 million. So it is a real challenge to
really keep these issues rolling, but we are doing what we can
with them.
Mr. Doyle. Thank you. Thank you, Mr. Chairman.
Mr. Barton. Thank the gentleman from Pennsylvania. The
gentleman from Illinois, Mr. Shimkus, is recognized for 5
minutes.
Mr. Shimkus. Thank you, Mr. Chairman. My questions will be
directed to Mr. Magwood, although I know he may not be the
expert on some of this stuff. If possible, if there is no
answer, if you could have DOE submit the answer to us and to
the staff through me, I would appreciate it.
It is my understanding, under Price-Anderson, DOE has the
authority that requires contractors to obtain insurance to
cover public liability in the event of a nuclear incident at
DOE sites. DOE, however, has not required its contractors to
obtain any insurance. Instead DOE provides 100 percent
indemnity to its contractors. And now the question: Has DOE
required any of its contractors to obtain liability insurance?
Mr. Magwood. Your statement exhausted my experience on the
issue, would be happy to find out.
[The following was received for the record:]
While the Price-Anderson Act (Act) gives DOE the statutory
authority to require its contractors to obtain financial protection,
DOE has a long-standing policy of not permitting or requiring its
contractors to obtain liability insurance. DOE provides in its
regulations that its contractors will not normally be required or
permitted to furnish financial protection by purchase of insurance to
cover public liability for nuclear incidents. 48 C.F.R.
Sec. Sec. 950.7010, 970.2870(e). To require private insurance would
increase DOE's operating expenses. The costs of financial protection
for an NRC licensee operation are typically recouped through their rate
base. Conversely, the cost of such financial protection for DOE
contractors would be a reimbursable cost under the Department's cost-
reimbursement type contracts for which DOE would be required to pay.
Under its contracting procedures, DOE generally follows federal
government policy not to approve the purchase of general liability
insurance by cost-type contractors In assessing this policy, the
Comptroller General has reasoned that the magnitude of government
resources obviously makes it more advantageous for the government to
assume its own risks than to shift them to private insurers at rates
sufficient to cover all losses, to pay insurers' operating expenses, in
eluding agency or brokers' commissions, and to provide such insurers a
profit. See, e.g., 19 Comp. Gen. 211 (1939); 55 Comp. Gen. 1343 (1976).
Mr. Shimkus. I don't think there is. I think the answer, we
will find out, is no, but hopefully you will correct me if that
is not correct.
Mr. Magwood. Be happy to go look at that.
Mr. Shimkus. Then the follow-up answer, if it is no, or if
it is 99.9, then the answer is why not, will be the follow-up.
And then has DOE looked into the availability of insurance for
its contractors, to follow-up. And why would DOE not want to
have at least some insurance for its programs?
Mr. Magwood. I will be happy to have all those answers for
you, for the record.
[The following was received for the record:]
Private insurance is expensive and most likely is not available for
many DOE activities. The American Nuclear Insurers (ANI), a private
insurance company, is currently the sole source of nuclear hazards
insurance. In response to a query in connection with DOE's Price-
Anderson Act Report to Congress, ANI set forth the terms under which it
would consider providing private insurance for DOE nuclear
facilities.\1\
---------------------------------------------------------------------------
\1\ Department of Energy Report to Congress on the Price-Anderson
Act, Appendix C, Letter from John L. Quattrocchi, Senior Vice
President, Underwriting, American Nuclear Insurers, to Omer F. Brown,
II, Harmon & Wilmot, L.L.P, January 21, 1998 (Attachment B to Comments
filed by Energy Contractor Price-Anderson Group to Notice of Inquiry)
(attached).
---------------------------------------------------------------------------
ANI stated that it is ``not in a position to guarantee that
coverage would actually be written'' for a DOE nuclear facility and
that any ``agreement to provide insurance would depend on a careful
engineering evaluation of the facility, the activities performed, and
the DOE's agreement to implement recommendations that may be offered.''
ANI added that it would be much easier ``to write nuclear liability
insurance for new DOE facilities than for existing facilities'' because
ANI would have obvious concerns about picking up liability for old
exposures which may well preclude insurability for facilities which
have, in some cases, operated for decades. Moreover. ANI indicated any
insurance policy would exclude on-site cleanup costs; environmental
cleanup; property damage at the insured facility; and bodily injury or
property damage due to manufacturing, handling or use of any nuclear
weapon or other instrument of war. Radiation tort claims by workers
also would be excluded but might be covered under a separate industry-
wide policy issued by ANI subject to a shared industry-wide limit of
$200 million.
ANI stated that it would consider writing nuclear liability
insurance at DOE facilities at limits up to $200 million--the maximum
liability limit that it is currently able to write at any one facility.
For this insurance, ANI would charge DOE contractors a premium from
$500,000 to $2 million annually. ANI indicated it would base premiums
``upon such factors as: type of facility insured, nature of the
activities performed, type and quantities of nuclear material handled,
location of the facility, qualifications of site management, quality of
safety-related programs and operating history.''
Under its government-wide cost-type contracting principles, if DOE
required its major site and facility management contractors to procure
such insurance, DOE would be required to treat the resulting premiums
as allowable costs and would thereby have to reimburse hundreds of
contractors and subcontractors for these insurance premium costs.
Subcontractor insurance premiums would also be passed through to the
government. Reimbursement of these premiums would secure insurance
coverage equal to only approximately 2% of the DOE indemnity of $9.43
billion. Thus, even if private insurance were available, the amount of
insurance coverage would be limited and the cost would be extremely
high. Consequently, there is no economic advantage to DOE, its
contractors, or to the public in requiring private insurance.
Attachment B
American Nuclear Insurers
Underwriting Department
January 21, 1998
Mr. Omer F. Brown, II
Harmon & Wilmot, L.L.P.
1010 Vermont Avenue, N.W.
Suite 810
Washington, D.C. 20005
Re: DOE Notice of Inquiry
Dear Mr. Brown: On December 31, 1997, the DOE published in the
Federal Register a Notice of Inquiry concerning the preparation of its
Report to Congress on the renewal of Price-Anderson. One of the DOE's
questions (Question 11) dealt with the availability of private
insurance for DOE contractors. To the best of my knowledge, ANI is
currently the sole source of nuclear liability insurance in the U.S. In
that context, I thought the Energy Contractors' Price-Anderson Group
might be interested in some of our thoughts on the issue of insurance.
The DOE has always had the option of requiring its contractors to
maintain financial protection below the level at which indemnity is
provided. It has opted not to require any underlying financial
protection because the cost of such protection would be passed through
to the government under the contract. Instead, the government has
elected to self-insure the risk. Thus indemnity under 170(d) has
applied to contractors and other ``persons in indemnified'' on a
``first dollar'' basis. In view of the position taken by the government
over more than forty years, it is unclear why DOE would consider
requiring underlying insurance at this late stage.
In any event, if requested, ANI would consider writing nuclear
liability insurance at DOE facilities at limits up to $200 million--the
maximum liability limit we are currently able to write at any one
facility. However, we are not in a position to guarantee that coverage
would actually be written. Any agreement to provide insurance would
depend on a careful engineering evaluation of the facility, the
activities performed, and the DOE's agreement to implement
recommendations that may be offered.
If insurance is written, premiums would be based on such factors
as: type of facility insured, nature of the activities performed, type
and quantities of nuclear material handled, location of the facility,
qualifications of site management, quality of safety-related programs
and operating history. Although we cannot provide any definitive
numbers, annual per policy premiums might fall in the range of
$500,000-$2 million at policy limits of $200 million. These premiums
would, of course, be subject to change over time.
I might add that it would be much easier for us to write nuclear
liability insurance for new DOE facilities than for existing
facilities. For facilities which have, in some cases, operated for
decades, we would have obvious concerns about picking up liability for
old exposures which may well preclude insurability.
I would also note that the nuclear liability policy written by ANI
provides coverage only for the insured's liability for tort damages
because of offsite bodily injury or property damage caused by the
nuclear energy hazards Among other things, the policy specifically
excludes coverage for:
radiation tort claims of workers which can be covered under a
separate industry-wide policy issued by ANI subject to a shared
industry-wide limit of $200 million;
bodily injury or property damage due to the manufacturing,
handling or use of any nuclear weapon or other instrument of
war;
property damage to any property at the insured facility;
on-site cleanup costs;
environmental cleanup costs--i.e., those costs arising out of
a governmental decree or order to clean up, neutralize or
contain contamination of the environment.
The exclusions I've noted are highlighted and paraphrased for
general information purposes only. All policy terms, conditions and
exclusions should be carefully read in order to determine the scope of
coverage afforded by the policy.
I hope this information is helpful to the review process. In the
final analysis, even if insurance for DOE sites can be written, it
could not replace the roughly $9 billion of indemnity granted under
170(d) since we are only able to write liability limits up to $200
million at this time.
Sincerely,
John L. Quattrocchi,
Senior Vice President, Underwriting
Mr. Shimkus. Okay. Mr. Chairman, the final point is that if
Price-Anderson is not renewed, DOE Price-Anderson will not be
available for DOE contracts after August 2002, which is our
understanding. And if that is the case, please confirm that for
us. And I will yield back my time, Mr. Chairman.
Mr. Barton. The gentleman from Ohio, Mr. Sawyer, is
recognized for 5 minutes.
Mr. Sawyer. Thank you very much, Mr. Chairman. Chairman
Meserve, I have got a series of questions about the
transportation of nuclear waste. You both may want to answer,
but my understanding is that section 108 of the act instructs
the Secretary of Energy only to abide by the regulations of the
Commission regarding advanced notification of State and local
governments prior to transportation of spent nuclear fuel or
high-level radioactive waste.
I would like to inquire about the procedures and the
criteria for choosing those routes before you inform State and
local governments. I am assuming that those criteria include
some combination of route safety, speed of delivery, exposure
time on transportation systems and population. And my first
question is how do you establish what criterion should serve as
the highest priority in that kind of decisionmaking and when
would avoiding transportation through population centers not be
the highest priority?
Mr. Meserve. Let me back up just one moment and say that
one of the things that the NRC, first of all, does is that we
have very high standards for the casks with which spent fuel is
transported to assure that even in the event of an accident
that the cask would not fail in a way that results in the
release of radioactive materials.
In the case of spent fuel that is under our jurisdiction--
and there is divided responsibility here.
Mr. Sawyer. I understand.
Mr. Meserve. The Department of Energy has responsibility
for some materials which it regulates itself, and we regulate
commercial spent fuel. The licensee would come to us if it were
going to transport spent fuel with a proposed route. We
evaluate that route for the purpose of assessing the safeguards
issues associated with that transport, namely the possibility
the material might be hijacked and used for proliferation
purposes. And that would involve the NRC staff, quite
frequently, traveling the route, evaluating whether there are
safe havens on the route and so forth in order to assess it.
The Department of Transportation, as I understand it, has
responsibility for the safety-related issues associated with
the transport of spent fuel and does an evaluation with the
safety side of the issues.
Mr. Sawyer. I don't want to run out of time. I don't want
to curtail your answer, but I don't want to run out of time.
Let me rephrase the question then. Does the concentration of
population along a route play a substantial role in the
establishment of what a route might be?
Mr. Meserve. I am sure it is something--perhaps it would be
better if I responded for the record, but my understanding is
that the examination of population centers is important. There
are other factors to consider--fastest route, safe havens that
would be available. That sort of thing would have to be weighed
in the balance.
[The following was received for the record:]
Population concentrations are factored into the decision
regarding a transportation route. However, other considerations
are factored into routing decisions as well. The routes for
transporting high-level radioactive waste (HLW) are selected by
the carrier (i.e., trucking or railroad company) in
consultation with the shipper, consistent with the U.S.
Department of Transportation (DOT) and/or carrier-specific
requirements. Once selected by a carrier, each transportation
route is submitted for U.S. Nuclear Regulatory Commission (NRC)
approval of its physical protection and security
considerations. NRC regulations specify additional measures to
be taken in heavily populated areas. NRC's physical protection
and security regulations require constant communications
capability when transporting HLW through heavily populated
areas. In addition, highway shipments of HLW through heavily
populated areas are required to be accompanied by an armed
escort. Rail shipments of HLW through heavily populated areas
are required to be accompanied by two armed escorts.
For transportation by public highway, carriers are required
to select routes that reduce the time in transit. To facilitate
selection of a route that reduces time in transit, DOT
regulations specify the use of ``preferred routes,'' meaning
the U.S. interstate highway system and related city bypasses.
States may designate alternate preferred routes to supplement
the DOT prescribed interstate highway system or to provide
suitable alternatives to the interstate highway system. States
use DOT guidance to evaluate and establish alternatives, and
one of several primary route comparison factors is the
contribution of population density to risk. Thus, for highway
transport, the States may consider population density in route
selection.
For railway transportation, population density does not
play a significant role in selection among possible routes.
There are limited routing choices for rail transportation and
often mainline railroad tracks travel between and through
urban-industrial areas; however, rail lines are private
property and generally are farther removed from the public than
highways. For transportation by railroad, route selection
relies on industry practices (there are no DOT regulations for
selecting from among rail route alternatives). Generally,
railroad routing practice is to maximize mileage between
interchanges with forwarding railroads. Future transport of HLW
cargo by railroad may not follow this practice depending on
such factors as the special needs of the shipper, effects on
other rail commerce, use of single-purpose trains, and special
clearance requirements (if any) for railcars loaded with HLW.
DOT regulations require rail carriers to forward each shipment
of hazardous material, including HLW, promptly (i.e., on the
next available train) and within 48 hours after acceptance.
Mr. Sawyer. If there is the establishment of a centralized
repository for waste, would there be regular routes or would
those routes change over time?
Mr. Meserve. I don't know the answer to exactly how that
would be worked out. I would suspect that there might be some
variability in the routes for safeguards reasons.
Mr. Sawyer. Sure. And, of course, highways like hospitals
and universities and airports are always works in progress, and
they change over time.
Let me just go to one final question on this subject. I
assume that accidents during transportation would be covered
under Price-Anderson. I am concerned about the additional
costs, however, particularly communities along the route, in
terms of training and equipment for safety forces, upgrading
road standards, traffic management requirements, and the
increase in risk and potential decrease in property values
along identified regular routes. Would Price-Anderson come into
this at all or would there be other forms of compensation to
communities that understood this burden?
Mr. Meserve. I don't believe that Price-Anderson covers the
types of losses that you have described. But perhaps I would
best answer that question for the record.
[The following was received for the record:]
No. Price-Anderson is only triggered in the event of a
nuclear incident. There are no provisions in the Act to pay for
assistance for costs undertaken by communities for planning
purposes.
Mr. Sawyer. Should there be? Should there be coverage for
that kind of risk undertaken?
Mr. Meserve. I think that is a judgment that Congress might
be in a better position to make than the NRC. I can say that
there has been transport of spent fuel for 30 years and--there
have been accidents that have occurred of an ordinary traffic
variety, but we have never had a cask fail in a way that has
resulted in a release of radioactive materials.
Mr. Sawyer. Thank you very much, Mr. Chairman. Mr. Magwood,
do you have any comments that you would like to make?
Mr. Magwood. Just a very brief comment. Chairman Meserve
mentioned that DOE, under its own oversight, moves spent fuel
around the country on a very regular basis. It has a lot of
expertise, a lot of experience and an excellent safety record
with moving spent fuel around the country.
Mr. Sawyer. Thank you very much.
Mr. Barton. The gentleman from Arizona, Mr. Shadegg, is
recognized for 5 minutes.
Mr. Shadegg. Thank you, Mr. Chairman. There are some new
technologies coming forward, and they are quite, I guess,
dramatically different than existing technologies in the
nuclear field. I would like to ask either of you, though,
Chairman Meserve, it may be more appropriate for you to answer,
what changes you believe will be needed, or the NRC believes
will be needed, to its regulations to address these new
technologies, particular with regard to licensing and
inspections?
Mr. Meserve. Let me say that is a matter that we are
currently evaluating. Of course, the degree to which we would
need to make modifications of our regulations would depend, to
some extent, to a large extent, on the nature of the technology
with which we are presented.
We have a comprehensive regulatory system that is designed
for reactors that are cooled by light water. If somebody were
to come forward with, for example, a gas-cooled reactor, then
we would have to make modifications of our regulatory system in
order to accommodate the different kinds of threats that would
be presented by that design and basically develop a regulatory
process that would be the counterpart of the one that we have
for light water reactors today.
Mr. Shadegg. And you are currently looking at those issues?
Mr. Meserve. Yes, we are.
Mr. Shadegg. Okay. Mr. Magwood?
Mr. Magwood. Yes. I won't comment on the specifics of any
particular technologies out there now, but I would say that we
have encouraged NRC for the longer-term, to move toward a more
advanced methodology of licensing, using risk-informed,
performance-based standards. They are moving in this direction.
I think they have made a lot of progress.
For reactors that would be licensed in this decade,
however, it simply isn't enough time to go into a more advanced
licensing form, so we have to work with more or less the tools
that we have in hand. And I think that, from the discussions I
have had with NRC officials, that the NRC understands the
issues and is looking for ways of moving through the very
complicated technical subjects that have come along.
Mr. Shadegg. I am a supporter of the central repository at
Yucca Mountain. However, it seems to me if we don't get that
issue resolved, the only way nuclear can move forward is that
we either decide to complete Yucca Mountain and use it or to go
to some other form of storage, perhaps dry cask storage, as is
happening in Europe. Do either of you--can either of you give
me the timeframe for those decisions and any input on your
thoughts with regard to alternatives to the central repository?
Mr. Magwood. As I think I mentioned earlier, we expect to
see a decision from DOE on the site suitability analysis around
the end of this year. So we are moving in that direction. I
don't think it is an appropriate for us to speculate about
alternatives to that, because that is really the focal point of
our activity right now, and I think it is essential that that
go forward.
I think it is essential that the government continue to
show progress in moving toward a repository. Even with new
technologies, transportation and recycling, we need a
repository, and I think we just simply need all the support we
can get from Congress to have the funding and the support to go
forward with the program.
Mr. Shadegg. Mr. Chairman, do you have any comment on that?
Mr. Meserve. The only thing I would add is that the
Commission is comfortable that we are able to accommodate the
spent fuel that is being generated by the reactors or in new
reactors until such time as a repository is available. The fuel
is currently stored either in spent fuel pools or in dry cask
storage. We are comfortable that that is a safe way in which to
hold the fuel for a period of decades. It is obviously not a
long-term solution, but there is time in order to get a
repository in place.
Mr. Shadegg. As a supporter of Yucca, I appreciate your
comments. I think there is a new urgency in light of the energy
crisis facing the country and the refocus that we are seeing on
nuclear these days. With that, Mr. Chairman, I yield back the
balance of my time.
Mr. Barton. Thank the gentleman. Would recognize the
gentleman from Michigan, Mr. Dingell, for 5 minutes.
Mr. Dingell. Mr. Chairman, I thank you for your courtesy. I
have no questions at this time.
Mr. Barton. Would then recognize Mr. Strickland for 5
minutes.
Mr. Strickland. Mr. Chairman, thank you. Mr. Meserve,
Chairman Meserve, could you tell us approximately what
percentage of our nuclear fuel for our power plants that
produce some 20 percent of our electricity now comes either
from Russia or other foreign sources?
Mr. Meserve. I would have to provide that information for
you for the record. It is certainly the case that some of the
fuel that is burned in the United States does come from foreign
sources. Some portion of it comes from Russia, as the result of
the arrangements for the diluting of the high-enriched uranium
from the weapons program.
Mr. Strickland. Mr. Magwood, could you confirm that we now
import over 50 percent of the fuel that we use for our nuclear
power plants?
Mr. Magwood. If you include the HEU agreement with Russia,
yes, that is accurate.
Mr. Strickland. And that is primarily from Russia but some
portion from other countries.
Mr. Magwood. We do receive some amount of our supply--the
United States uses about 10 million SWUs, as we call them.
Mr. Strickland. Sure.
Mr. Magwood. And I think about 2.5 million SWU comes from
Europe.
Mr. Strickland. Great. So right now, today, in America, we
are importing more than half of the fuel that produces the 20
or so percent of the electricity generated in this country. We
are deeply dependent on foreign sources for nuclear fuel today.
Is that right?
Mr. Magwood. With the shutdown of the plant in Portsmouth,
that is accurate. We are importing a large percentage of our
needs, yes.
Mr. Strickland. Well over 50 percent.
Mr. Magwood. About that.
Mr. Strickland. I have been led to believe perhaps 53
percent.
Mr. Magwood. Well, I think it is important to recognize,
though, that USEC exports to foreign customers.
Mr. Strickland. But the important thing that I am trying to
emphasize here is that we are heavily dependent on Russia and
other countries for nuclear fuel. These new reactors that may
come on-stream, my understanding is that they may need enriched
uranium or enriched fuel, up to 8 percent; is that correct?
Mr. Magwood. That is correct.
Mr. Strickland. To what level was the Portsmouth facility
licensed to enrich?
Mr. Magwood. I believe Portsmouth was licensed up to 5
percent.
Mr. Strickland. Ten percent, I believe.
Mr. Magwood. Excuse me, 10 percent.
Mr. Strickland. And we have closed it down. To what level
is the Paducah facility licensed to enrich?
Mr. Magwood. I think I will defer to Chairman Meserve on
that, but I believe it is----
Mr. Meserve. Five percent.
Mr. Magwood. [continuing] 5 percent.
Mr. Strickland. Five percent. So we are proceeding to
develop new reactors, and we do not have a facility currently
capable of enriching uranium to produce the fuel those reactors
may need.
Mr. Chairman, Chairman Meserve, you said that the role of
the NRC is safety. Certainly, that is one of the roles. But I
believe as a result of the 1996 Privatization Act you have a
second role, and I would like to read from that act: ``No
license or certificate of compliance may be issued to the USEC
or its successor, under this section, if the Commission
determines the issuance of such a license or certificate of
compliance would be inimical to, and one of the things is, the
maintenance of a reliable and economic domestic source of
enrichment services.'' It seems to me that we have given you a
second responsibility, and that being responsibility for
ensuring energy security in terms of nuclear fuel? Would you
agree?
Mr. Meserve. It is in fact the case that in the legislation
covering the privatization of the enrichment facilities, there
was a unique obligation that was given to the Commission to
examine reliable and economical supply, among other issues,
associated with the issuance of a certificate to that facility.
Mr. Strickland. And do you feel that you fulfilled that
obligation when you approved the closing of the Portsmouth
facility and the upgrading of the Paducah facility?
Mr. Meserve. Well, actually, we approved the upgrading of
the Paducah facility. It was a decision by the certificate
holder to close the Portsmouth facility.
Mr. Strickland. But wasn't that a factor in whether or not
we can maintain a reliable domestic supply, since as a result
of Mr. Magwood's statement, since Portsmouth has closed we are
now importing over 50 percent of the fuel we use from foreign
sources? That is not a reliable domestic supply, in my
judgment.
Mr. Meserve. We have had the opportunity to discuss this
before. As I think I have indicated in the past, the assessment
from our General Counsel's Office was the language to which you
have quoted from the statute was chiefly looking at foreign
ownership issues.
Mr. Strickland. Chairman Meserve, excuse me for
interrupting. I would challenge you or your General Counsel to
find anything in the congressional debate regarding that act
that would lead one to believe that was the intent of this
language. Would you please supply me with any reference within
the congressional discussion, debate or within the act itself
that would verify or justify such a conclusion?
Mr. Meserve. We would be happy to do so.
[The following was received for the record:]
On April 26, 1996, President Clinton signed into law H.R. 3019
(Public Law No. 104-134), legislation which provided FY 1996
appropriations to a number of Federal agencies. Included within this
legislation is a sub chapter entitled the ``USEC Privatization Act.''
Section 31I6 of this Act amended several provisions of the AEA
including section 193 by adding the following:
(f) LIMITATION.--No license or certificate of compliance may be
issued to the United States Enrichment Corporation or its successor
under this section or sections 53, 63, or 1701, if the Commission
determines that--
(1) the Corporation is owned, controlled, or dominated by an alien,
a foreign corporation, or a foreign government; or
(2) the issuance of such a license or certificate of compliance
would be inimical to--
(A) the common defense and security of the United States; or
(B) the maintenance of a reliable and economical domestic source
of enrichment services.
The evolution of section 193(f) indicates that the intent behind
the provision was to guard against attempts by foreign corporations or
governments to acquire control of the GDPs and subsequently take
actions to undermine the U.S. enrichment capability.
The substance of Section 193(f) was initially proposed in a draft
bill submitted by the Administration providing comments on S. 755, a
bill to provide for USEC privatization. The Administration's comments
included the following provision as a new section entitled, ``Section
1704 Foreign Ownership Limitation,'' in Chapter 27 of the AEA:
No license or certificate of compliance may be issued to the
Corporation under Sections 53, 63, 193, or 1701 if, in the
opinion of the Nuclear Regulatory Commission, the issuance of
such a license or certificate of compliance to the Corporation
would be inimical to the common defense and security of the
United States due to the nature and extent of the ownership,
control or domination of the corporation by a foreign
corporation or a foreign government or any other relevant
factors or circumstances.1 (Emphasis added)
---------------------------------------------------------------------------
\1\ S. Rpt. 104-173, at 50 (1995) (June 19,1995, Letter from
William H. Timbers, Jr. enclosing draft bill).
---------------------------------------------------------------------------
The Administration's bill included the following codification
change to the AEA as section 193(f):
(f) LIMITATION--No license or certificate of compliance may be issued
to the United States Enrichment Corporation or its successor under
this section or sections 53, 63, or 1701, if in the opinion of the
Commission, the issuance of such a license or certificate of
compliance--
(I) would be inimical to the common defense and security of the
United States; or
(ii) would be inimical to the maintenance of a reliable and
economical domestic source of enrichment services because of
the nature and extent of the ownership, control, or domination
of the Corporation by a foreign corporation or a foreign
government or any other relevant factors or
circumstances.2 (Emphasis added)
---------------------------------------------------------------------------
\2\ S. Rpt. 104-173, at 54 (1995)
---------------------------------------------------------------------------
S. 755, as reported by the Senate Committee on Energy and Natural
Resources, included the Administration's proposed codification of an
amendment to section 193 of the AEA.3 The Committee's report
to accompany S. 755 discusses the provision in a section entitled
``Limitations on Foreign Ownership.'' It noted that:
---------------------------------------------------------------------------
\3\ S. Rpt. 104-173, at 11 (1995).
---------------------------------------------------------------------------
S. 755, as introduced, contains a provision providing the
Nuclear Regulatory Commission with the authority to deny a
license or certificate of compliance if the ``issuance of such
a license or certificate of compliance to the corporation would
be inimical to the common defense and security of the United
States due to the nature and extent of the ownership, control
or domination of the Corporation by a foreign corporation or
foreign government or any other relevant factors or
circumstances'' (emphasis added).
The Committee substitute, in section 17(a)(2) includes the
``common defense and security'' requirement while adding that
the NRC may also deny a license or certificate of compliance if
doing so would be ``inimical to the maintenance of a reliable
and economical domestic source of enrichment services due to
the nature and extent of the ownership, control or domination
of the Corporation by a foreign corporation or a foreign
government or any other relevant factors or circumstances. This
provision was added to guard against the possibility of a
foreign uranium enrichment company acquiring the Corporation
with the intent of operating it in a manner inconsistent with
its maintenance as an ongoing uranium enrichment concern.''
4
---------------------------------------------------------------------------
\4\ S. Rpt. 104-173, at 19-20 (1995) (emphasis in original).
---------------------------------------------------------------------------
The report further states that no certificate or license should be
issued:
if in the opinion of the NRC the issuance of such a license or
certificate of compliance would be inimical to the common
defense and security of the United States or would be inimical
to the maintenance of a reliable and economical domestic source
of enrichment services because of the nature and extent of the
ownership, control, or domination of the Corporation by a
foreign corporation or a foreign government or any other
relevant factors or circumstances. Id. at 31. (Emphasis added).
The language contained in S.755, to provide for a USEC
Privatization Act, was merged into S.1357, a bill to provide for a
Balanced Budget Reconciliation Act of 1995 which passed the Senate on
October 27, 1995.5 S.1357 included the language reported out
on S.755. On the next day, the Senate then inserted S.1357 into H.R.
2491 which was the House bill for the same budget act.6
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\5\ 141 Cong. Rec. S16096 (October 27, 1995)
\6\ 141 Cong. Rec. S16159 (October 28,1995)
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The House bill also contained language for a section 193(f). Its
version provided language addressing common defense and security and
foreign ownership and control, but not language addressing a reliable
and economical domestic source of enrichment.7 The intent of
the House bill was to ensure that enrichment activities would be
subject to the same foreign ownership limitations as any other nuclear
production or utilization facility and that the interpretation of
section 193(f) be consistent with interpretations of similar language
in sections 103 and 104 of the AEA.8
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\7\ H.R. 2491 as enrolled by the House on October 27, 1995
contained the following language:
If the privatization of the United States Enrichment Corporation
results in the corporation being--
(1) owned, controlled, or dominated by a foreign corporation or a
Foreign government, or
(2) otherwise inimical to the common defense or security of the
United States, any license held by the Corporation under sections 53
and 63 shall be terminated.
\8\ House Report 104-86, at 20 (1995) on H.R. 1216, a bill to
establish the USEC Privatization Act, which was incorporated into H.R.
2491.
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Following the conference on the two bills, the Congress enacted the
language that is in the current statute. The Conference report stated
that it was adopting the Senate version with minor changes. While a few
provisions were discussed, there was no discussion relevant to the
section 193 provision.9 Thus, there is no indication that
the language in the conference version of H.R. 2491--separating the
concept of a reliable and economical domestic source of enrichment from
the common defense and security--was intended to change the intent
described in Senate Report 104-173 which was to guard against the
possibility of a foreign uranium enrichment company acquiring the
Corporation with the intent of operating it in a manner inconsistent
with its maintenance as an ongoing uranium enrichment concern.
---------------------------------------------------------------------------
\9\ H. Rpt. 104-350, at 1015 (1995).
---------------------------------------------------------------------------
On December 6, 1995, the President vetoed the Balanced Budget
Reconciliation Act of 1995 for reasons unrelated to its enrichment
provisions.
Thereafter, on January 26, 1996, Mr. Murkowski submitted a
substitute amendment to S.755. In introducing this legislation, he
stated that this bill ``is virtually identical to USEC privatization
language contained in the Budget Reconciliation measure passed earlier
by the Senate.'' As to section 193(f), it contained the same language
that the President had earlier vetoed as part of the Balanced Budget
Reconciliation Act of 1995. Thereafter, the substitute language of
S.755 was incorporated into the legislation that was enacted into the
USEC Privatization Act as Public Law 104-134(April 26, 1996). There was
no further discussion that addressed section 193(f).In sum, as there
were no floor discussions in either the House or Senate pertaining to
section 193(f), the only relevant legislative history is contained in
Senate Report 104-173. Again, that Report states that:
This provision was added to guard against the possibility of
a foreign uranium enrichment company acquiring the Corporation
with the intent of operating it in a manner inconsistent with
its maintenance as an ongoing uranium enrichment concern.
Mr. Meserve. I think that this is a statutory provision
that has rather sparse legislative history associated with it.
It does make reference to this obligation arising in the
context of issuance of certificates, which we would understand
might include transfers as well, but that, arguably, does not
include license amendments.
I might also add that there is a practical problem for the
NRC in this area in that we have limited tools available to us.
We have an obligation to assure the safe operation of these
facilities and others. The ultimate sanction that we can impose
is to require a facility to be brought into safe shutdown
condition. It is rather awkward for us, given that obligation
to assure safety, to be simultaneously being asked to issue
orders to require facilities to remain open. There is a
conflict there.
Mr. Strickland. Chairman Meserve----
Mr. Barton. This will have to be the last comment in this--
--
Mr. Strickland. Sure. And this is my last comment: I hope
the fact that it would have created an awkward situation did
not prevent you from doing the right thing. And awkward
situation could have occurred, I agree. And then this Congress
would have had the responsibility for determining how to deal
and resolve that awkward situation. But I don't think it was
the responsibility of the NRC to make that judgment. I think
that should have been the responsibility of the Congress. Thank
you, Mr. Chairman.
Mr. Barton. Thank the gentleman from Ohio. The Chair would
recognize the gentleman from Massachusetts for 5 minutes.
Mr. Markey. Let me just find my questions here. Sorry. I
can hear the sigh of relief coming from the panel.
Mr. Chairman, Mr. Magwood, if there was a catastrophic
nuclear accident in this country, let us say a full core
meltdown, breach of containment and massive release of
radiation, what are your best estimates of how much such an
accident might cost in a major metropolitan area, top 10 size
metropolitan area in the United States?
Mr. Meserve. Of course it would depend on the circumstances
of what facility and what area. I think I----
Mr. Markey. Indian Point, for example.
Mr. Meserve. I think I would best provide that sort of
information for the record. I don't have that at my fingertips.
Mr. Markey. So you don't know that?
Mr. Meserve. I don't know that answer.
Mr. Markey. Okay. Well, I will just tell you that several
years ago there was an estimate that if Indian Point had that
full core meltdown, it would cost approximately $300 million in
New York City area. Under Price-Anderson, how much of the
damage would the operator of a nuclear power plant be liable
for?
Mr. Meserve. Well, the way the system operates is that
there is $200 million of primary insurance coverage, and then
there is a retrospective premium where, per reactor, per
accident, all of the utilities would be required to kick in
money per plant to the total amount, I think, per accident of
$83 million, in increments of $10 million per year. You sum all
that up over the 104 power plants, that means that the private
sector is providing over $9 billion of coverage.
Mr. Markey. So each nuclear power plant would be
responsible for approximately how much, each nuclear power
plant operator?
Mr. Meserve. Well, my understanding would be that it would
be the amount of the retrospective premium, which is $83
million for each accident, plus whatever the premium is for the
first $200 million in coverage.
Mr. Markey. Okay. So, essentially, the nuclear power plant
operator would not have--that individual would not have a huge
financial insurance exposure; is that correct? It would be
spread dramatically?
Mr. Meserve. Well, my understanding of the statutory
provision is that if there were a circumstance where more than
then $9 billion would be required, the Congress has left open
the prospect that it might reach into the pockets of the
licensees for additional contributions.
Mr. Markey. But the problem is is that the licensees have
come to us, because they don't have the resources. And as a
result, the taxpayers would--it would be like a hurricane going
through Florida. Everyone would have insurance, and then they
would come to Congress and say, ``Could you please appropriate
these emergency funds.'' And I think that is essentially the
case, because, obviously, no individual company would have
that.
Mr. Barton. Would the gentleman yield for a very brief----
Mr. Markey. I would be glad to, sure.
Mr. Barton. Do you know what Three Mile Island cost in
terms of insurance?
Mr. Meserve. I am told that it is $80 million in claims and
claims expenses.
Mr. Barton. Yes. Because that is an actual occurrence. I am
told $70 million, so $70 million, $80 million.
Mr. Meserve. That means they never reached through even the
primary insurance layer in that event.
Mr. Markey. Thank you very much. I am having a hard time
with this, because they are giving us their enthusiastic
endorsement of reauthorization of Price-Anderson, but the
individual details of how it operates are not available, and we
are going to be moving to a markup of the bill, basically, on
the day that we get back. So that is troubling to me.
Under the act, how much would the companies that designed
and constructed the plant be liable for?
Mr. Meserve. I believe the way the system operates is that
the system is one that provides for the licensees to provide
the compensation. But there is, in fact, far more than
insurance that is involved in the Price-Anderson Act. It
involves a whole procedural system in order----
Mr. Markey. But there is no liability for those that
constructed it or designed it; is that correct?
Mr. Meserve. And there are also certain defenses that are
waived as well so that there are some trades that are made.
Mr. Markey. They are not liable then. So if you build
something and it is defective, they are not liable, which there
is no other product in American society that is in that
category. Who would pick up the rest--Okay. If the new reactor
designs are so safe, why do they need limits now on liability
on the Price-Anderson? I am hearing testimony that it is really
totally safe. Mr. Magwood believes it, and you do. Why do we
need to have the Federal Government subsidize the insurance?
Mr. Meserve. I don't think that anyone can tell you that it
is totally safe. The purpose of the regulatory system assures
that there is adequate----
Mr. Markey. Is it more dangerous than the other electrical
generating sources of electricity in the United States?
Mr. Meserve. That is a complicated question. If one looks
at coal, for example, as an alternative, there are risks that
are imposed from coal mining.
Mr. Markey. But they don't need Federal insurance. Why does
the Federal Government have to insure the nuclear industry?
Mr. Meserve. Well, I mean the history of the nuclear
industry has been one that has shown that the plants have been
operated safely in the United States----
Mr. Markey. Right.
Mr. Meserve. [continuing] even in the instance of Three
Mile Island.
Mr. Markey. But, you see, you can't have it both ways. You
realize that Mr. Magwood----
Mr. Meserve. But no one can tell you that there isn't a
possibility, one that we believe is very small, that there
could be a catastrophic accident. So we do need to have a
system in place to deal with the eventuality that all of us
hope will not happen and which----
Mr. Markey. Why can't the market deal with that? Why can't
the industry go to the market and get insurance for that?
Mr. Meserve. Well, I believe you have some people in
another panel from the nuclear insurance industry who may be
prepared to discuss that. It is my understanding is that given
the nature of this sort of risk, that it is something that you
need to have the system----
Mr. Markey. You are saying the risk is so great that the
nuclear industry cannot get insurance, and therefore you
enthusiastically recommend to us----
Mr. Meserve. Well, the risk also would include a
consideration of the probability of occurrence. Consequences
might be large, but the probability of the occurrence we
believe is very small so that we believe the risk is
acceptable.
Mr. Markey. Well, that is the basis of hurricane or tornado
insurance in Massachusetts. The chances are very low of having
a tornado in Massachusetts; therefore, the insurance rates for
it are very low. Why wouldn't the same thing work for nuclear
power if the probability of any occurrence is very low that the
rates are very low?
Mr. Meserve. Well, I think that actually the probability is
different. Having lived in Massachusetts, I have had the
opportunity to see many hurricanes that have occurred there.
Mr. Markey. No, but a tornado.
Mr. Meserve. Well, my point is that there are a range of
probabilities that an event may occur. We believe the
probability of a reactor accident is small, but it does exist.
And we have tried through regulation to make it as small as
possible.
Mr. Markey. Let me go to you, Mr. Magwood.
Mr. Meserve. I think it is very difficult to insure it,
given the nature of that risk.
Mr. Markey. Let me go to you, Mr. Magwood, for a final
question. What about the DOE contractor hauling nuclear waste
to Yucca Mountain? Let us say that it gets into a terrible
accident as the result of gross negligence or willful
misconduct. Under Price-Anderson, he is totally indemnified
from liability, isn't he?
Mr. Magwood. That is my understanding, but, again, I am not
the Price-Anderson expert, so I won't be able to answer
detailed questions about that. But, yes, that is my
understanding.
Mr. Markey. But do you support reauthorization of Price-
Anderson?
Mr. Magwood. Yes.
Mr. Markey. Are you here authorized to take that position
for the agency?
Mr. Magwood. I am authorized to point you toward our
written testimony, which we will submit for the record.
Mr. Markey. That would be very helpful. But does that
really make any sense that every other industry has to pay for
its own insurance to lug the coal or the oil or the gas or
everything else across the country, but yet the Federal
Government subsidizes the insurance for gross negligence and
willful misconduct of the nuclear industry, as they are saying
that the containers are totally safe and no one has to worry.
Why can't they go, again, into the private sector and get
insurance?
Mr. Magwood. I would only reiterate what Chairman Meserve,
that these are very, very small possible scenarios.
Mr. Markey. Right.
Mr. Magwood. But the scenario that you----
Mr. Barton. This will have to be the gentleman's last
question.
Mr. Markey. So why doesn't the insurance industry given
them insurance if it is a very slight possibility? That is the
basis of insurance. It is just basically a----
Mr. Magwood. I think I would probably tend to blame the
trial lawyers.
Mr. Markey. You would blame the trial lawyers.
Mr. Barton. The gentleman's time is expired on that note.
Mr. Markey. They have no case to bring. They are
indemnified, so they can't bring the case.
Mr. Barton. The gentleman's time is expired.
Mr. Markey. Thank you.
Mr. Barton. We want to thank this panel. We apologize for
the tardiness of the start of the hearing. Members will have
opportunity to have written questions, and we would hope that
if they are presented, that your agencies will expedite the
answers, because we are going to begin to be drafting and
marking up legislation in the very near future. So you are
excused.
Mr. Meserve. Thank you very much.
Mr. Barton. Thank you.
Mr. Magwood. Thank you.
Mr. Barton. We would all now like to hear our second panel.
If you will please begin to come forward. Hopefully we have Mr.
Marvin Fertel, who is the senior vice president of Business
Operations for the Nuclear Energy Institute. We should also
have Mr. Jack Skolds, the chief operating officer of Exelon
Nuclear Power; Mr. George Davis, with the Westinghouse Company;
Mr. Laurence Parme, who is with General Atomics; Dr. Allen
Womack, who is the president of BWX; Mr. John Quattrocchi, the
senior vice president of Underwriting of the American Nuclear
Insurers; and Ms. Anna Aurilio, who is the legislative director
of the U.S. Public Interest Research Group. I think we are all
here.
Mr. Fertel, we are going to start with you, ask you to
summarize in 5 minutes. We will go right down the line, and
then we will have some questions. So welcome to the
subcommittee.
STATEMENTS OF MARVIN S. FERTEL, SENIOR VICE PRESIDENT,
BUSINESS OPERATIONS, NUCLEAR ENERGY INSTITUTE; JACK SKOLDS,
CHIEF OPERATING OFFICER, EXELON NUCLEAR; GEORGE A. DAVIS,
DIRECTOR, GOVERNMENT PROGRAMS NUCLEAR SYSTEMS, WESTINGHOUSE
ELECTRIC COMPANY; LAURENCE L. PARME, MANAGER, NUCLEAR SAFETY
AND LICENSING, GENERAL ATOMICS; E. ALLEN WOMACK, PRESIDENT, BWX
TECHNOLOGY, INC.; JOHN L. QUATTROCCHI, SENIOR VICE PRESIDENT,
UNDERWRITING, AMERICAN NUCLEAR INSURERS; AND ANNA AURILIO,
LEGISLATIVE DIRECTOR, U.S. PUBLIC INTEREST RESEARCH GROUP
Mr. Fertel. Thank you, Mr. Chairman and members of the
subcommittee. Thank you for the opportunity to testify on
behalf of the nuclear energy industry on both the
reauthorization of the Price-Anderson Act and on the future of
nuclear energy in the U.S. I would appreciate it if my entire
statement could be included in the record.
Mr. Barton. Without objection, so ordered.
Mr. Fertel. Let me start with the prospects for new nuclear
plants in the United States. Demand for electricity in the
United States is growing and will continue to grow in order to
support our economy. Recently, the Department of Energy
estimated that our Nation will need 393,000 megawatts of
additional generating capacity between now and the year 2020,
and that assumes a relatively modest growth rate per year.
The Nuclear Energy Institute believes that to meet future
electricity demands requires and energy policy that combines
conservation and efficiency measures with major investments in
generating plants, transmission lines and other infrastructure
components like pipelines. We also believe that diversity of
fuel type and technology is necessary to ensure reliability,
hedge against fuel cost volatility and meet our environmental
goals.
Nuclear energy as our Nation's second largest source of
electricity and our largest source of electricity that doesn't
emit greenhouse gases or any other air pollutants regulated by
the Clean Air Act, is already a major factor in meeting our
energy needs and in satisfying our environmental goals, and we
are committed to doing more in the future.
To satisfy this electricity demand and ensure that nuclear
energy is available when needed, the U.S. nuclear industry is
implementing a three-part program. First, maintaining the
contribution from our existing plants through license renewal.
We expect all of our existing plants will pursue license
renewal. Second, expanding output from existing nuclear units
by continuing improve efficiency and reliability and by
investing the capital required to increase the rate of capacity
of the units. This program has been so successful to date that
over the last 10 years improved efficiency and upgrades at our
existing plants has added the equivalent of 22,000 megawatts of
new generating capacity to the grid.
Finally, we are moving forward toward construction of new
nuclear plants. Just last month, our industry announced the
vision 2020 goal of adding 50,000 megawatts of new nuclear
capacity by the year 2020. The industry is working together to
ensure that new nuclear plants in the United States will be
even safer, more reliable and more cost-efficient than our
current plants, which are already setting standards of
excellence on all of these fronts.
The industry is pursuing two parallel approaches to deploy
new plants. In both paths, we will be looking at building
families of standardized plants. On one path, we are looking at
deploying the new reactor designs already certified by the NRC
or derivatives of those designs. Also, in addition to the three
new reactor designs already certified, several companies, as
you will hear later from this panel, are developing advanced
gas-cooled reactors. These designs would also be standardized
and modular in nature, with each module being much smaller than
our current reactor size. We expect license applications for
new plants will be filed over the next few years.
Leadership support from this committee in the past has been
instrumental in establishing a more effective licensing process
for new plants. And continued support from the committee will
be instrumental in the success to be achieved in the future.
Examples of areas where Congress could be helpful include
continuation of the Government/industry partnership to pursue
resolving technical and/or regulatory issues associated with
new nuclear plant designs and validating the new licensing
process. We believe there are a number of amendments to the
Atomic Energy Act that would modernize its provisions to
reflect the new competitive market situation that the industry
faces.
Continued progress on implementing the Government's
responsibility for waste management, particularly as related to
fulfilling its contractual obligations to nuclear generators
will be essential. I was pleased to hear that both the chairman
and ranking member are committed to taking the Nuclear Waste
Fund off-budget. We would certainly fully support that.
Finally, changes to tax laws to allow quicker recovery of
capital investment, including such techniques as accelerated
depreciation and possibly investment tax credits, may be very
helpful.
Let me now turn to Price-Anderson renewal. The Price-
Anderson Act is the most comprehensive, effective liability
protection law in the world. It has been proved effective for
nearly 45 years, and over that period has been renewed 3 times
by Congress; in many respects, thanks to the leadership
exhibited by members of this committee. The industry fully
supports renewal of Price-Anderson Act. The industry also
recommends that the law be renewed permanently. In a response
to Chairman Tauzin's question, we believe it should be done as
soon as possible.
The Price-Anderson Act does support our Nation's program to
build new nuclear power plants. The law provides effective, no-
fault insurance for the public, it ensures the availability of
money for claims immediately in the event of a reactor
accident, and it provides congressional authority to provide
additional funding for claims if more than the $9.5 billion
immediately available from the industry is not sufficient.
Over the 45 years that the Price-Anderson Act has been law,
no taxpayer dollars have been paid for Price-Anderson coverage
related to the commercial nuclear industry--none. In fact, the
Government has received $21 million in payments from the
industry as part of collecting Price-Anderson premiums. And
over the entire history of the act, the total payments made by
the industry insurance, including those related to the accident
at Three Mile Island, is less than $190 million. That is
compared to the $9.5 billion that the law requires to be
available.
In conclusion, renewal of the Price-Anderson Act is not
only required to ensure comprehensive third-party liability
protection for the public, but as you will hear later from
other members of the panel, it is absolutely essential to
ensure that the Government will be able to effectively retain
contractors to work at Department of Energy facilities.
I thank you for the opportunity to testify today and look
forward to answering your questions. Thank you.
[The prepared statement of Marvin S. Fertel follows:]
Prepared Statement of Marvin S. Fertel, Senior Vice President, Business
Operations, Nuclear Energy Institute
Mr. Chairman, members of the subcommittee, I am Marvin Fertel,
Senior Vice President of the Nuclear Energy Institute. I am pleased to
have this opportunity to testify on the prospects for nuclear energy in
the United States, and the policy initiatives necessary to ensure that
our nation derives the greatest possible benefit from nuclear energy.
Those policy initiatives include renewal of the Price-Anderson Act, and
federal government support for nuclear energy research and development
(R&D).
The Nuclear Energy Institute (NEI) is the U.S. nuclear energy
industry's Washington-based policy organization. NEI represents 270
members with a broad spectrum of interests, including every U.S.
electric company that operates a nuclear power plant. NEI's membership
also includes nuclear fuel cycle companies, suppliers, engineering and
consulting firms, national research laboratories, manufacturers of
radiopharmaceuticals, universities, law firms and labor unions.
The nuclear energy industry commends you, Mr. Chairman, and the
members of this subcommittee, for devoting this hearing to a discussion
of the value of nuclear energy. Today, America's 103 nuclear power
plants are the safest, most efficient and most reliable in the world.
Nuclear energy is the second largest source of electricity in the
United States, and the nation's largest source of emission-free
electricity generation. The industry last year reached record levels of
safety, reliability, efficiency and output.. In our view, increasing
nuclear energy's contribution to U.S. electricity supply is not an
option. It is essential to sustain economic growth, meet the
electricity needs of our growing population, and satisfy our nation's
clean air and environmental goals.
the outlook for new nuclear power plants
Demand for electricity in the United States is growing rapidly. The
Department of Energy's Energy Information Administration estimates that
our nation will need an additional 393,000 megawatts of additional
generating capacity between now and 2020, assuming average growth in
electricity demand of 1.8 percent per year. At 2.5 percent annual
growth, which is closer to the growth rates experienced during the
1990s, the United States will require an additional 564,000 megawatts
to meet new electricity demand and replace aging power plants that have
reached the end of their useful life.
To satisfy this electricity demand, and ensure that nuclear energy
is available when needed, the U.S. nuclear industry is implementing a
three-part program:
1. maintaining the contribution from its existing plants through
license renewal;
2. expanding the output from the existing nuclear units by continuing
to improve efficiency and reliability, and by investing the
capital required to increase the rated capacity of the units;
and
3. laying the groundwork for construction of new nuclear plants.
The nation's largest nuclear generating companies, working with
NEI, are implementing a broad-based plan to create the business
conditions necessary for construction of new nuclear power plants. The
plan includes: (1) a number of initiatives to reduce the initial
capital cost of new nuclear power plants; (2) programs to create a
stable licensing regime and reduce regulatory uncertainties, and (3) a
series of initiatives to build support for new nuclear power plants
among policymakers, the media and local communities around prospective
sites for new nuclear power plants.
The companies intent on starting construction of new nuclear power
plants in the United States within the next five years are doing so
because new nuclear capacity represents a solid business opportunity.
For an electricity generating company, new nuclear power capacity
represents:
1. a reliable source of electricity with low ``going-forward'' or
``dispatch'' costs;
2. a high level of forward price stability and protection against the
fuel price volatility that impacts gas-fired power plants; and
3. protection against possible escalation in environmental requirements
imposed on fossil-fueled power plants. For companies already
operating coal-fired or gas-fired power plants, new nuclear
capacity reduces the cost of clean air compliance that might
otherwise be imposed on that coal- and gas-fired capacity.
The 1992 Energy Policy Act, enacted during the first Bush
Administration, completely overhauled the licensing process for new
nuclear plants so that all design, safety and site-related issues are
resolved before capital is invested. The chairman of this subcommittee,
Mr. Barton of Texas, was a principal author of this major improvement
to the licensing process. The new approach allows NRC (1) to evaluate
and pre-approve a prospective site for a new nuclear plant; (2) to
issue a single license to construct and operate a new nuclear plant if
a company uses a certified design and a pre-approved site; and (3) to
``certify'' a standardized design. Certification is a formal rulemaking
process. It requires a substantial up-front investment to prepare a
reactor design--complete and detailed enough to satisfy the NRC that it
meets all necessary safety standards.
Three reactor designs--a 1,300-megawatt advanced boiling water
reactor, a 1,300-megawatt pressurized water reactor, and a 600-megawatt
pressurized water reactor--have been certified by the NRC. Several of
these designs have already been deployed overseas, which testifies to
the fact that U.S. nuclear technology remains at the leading edge
worldwide. Japan has already built two advanced boiling water reactors,
and will build more. Taiwan is building two advanced boiling water
reactors. And South Korea is building variants of the large pressurized
water reactor.
The U.S. nuclear industry is pursuing two parallel approaches to
new nuclear power plants:
1. Preparing to deploy one of the three new reactor designs already
certified by the NRC, or derivatives of those designs. This
initiative includes a systematic program to reduce the initial
capital cost of these new designs--through improved
construction techniques, faster construction schedules,
innovative approaches to project structure or, in the case of
one of the three designs, increasing the power output from 600
megawatts to 1,000 megawatts.
2. In addition to the three new reactor designs already certified,
several companies are developing advanced gas-cooled reactors,
including an international consortium--that includes Exelon and
British Nuclear Fuels, the parent of Westinghouse--which is
looking at a smaller, modular reactor for deployment in the
United States. Exelon has launched an aggressive program to
commercialize this 110-megawatt modular reactor. The project is
still in the feasibility stage, but Exelon is proceeding on the
assumption that economic and technical feasibility will be
established, and is developing a strategy that will lead to the
first U.S. order, license application, and construction.
The industry is committed to validating both the economic
performance of the new plants, and the licensing process for them. Over
the next year, for example, a group of companies will begin a program,
coordinated through the Nuclear Energy Institute, to address a number
of generic issues associated with the concept of early site approval,
ultimately leading to a formal application to the NRC to approve one or
more sites.
The U.S. nuclear energy industry estimates that new nuclear power
plants could be built in the United States for between $1,000 and
$1,200 per kilowatt of capacity. At this capital cost 1 of
$1,000-1,200 per kilowatt of capacity, new nuclear power units are
fully competitive with the other alternatives for baseload electricity
production.
---------------------------------------------------------------------------
\1\ To ensure a common basis for comparison, the capital costs of
electric generating technologies are expressed in dollars per kilowatt
of capacity. The capital costs used in such comparisons are so-called
``overnight'' capital costs--i.e., they assume the plant is built
``overnight'' and thus do not include interest charges and financing
costs.
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The alternatives to new nuclear plants include:
1. Conventional coal-fired power plants with a full suite of
environmental controls. Largely because of the significant
increase in the cost of natural gas, which has increased the
cost of electricity from gas-fired power plants, a growing
number of new coal-fired projects are being proposed. These
conventional coal-fired plants typically have capital costs in
the range of $1,000-1,100 per kilowatt of capacity.
2. The so-called ``clean coal'' technologies, which have capital costs
in the range of $1,200-1,500 per kilowatt of capacity. Over
time, as more of these atmospheric fluidized bed plants are
built, the technology developers expect to be able to reduce
the capital cost. Their current target is $1,000-1,200 per
kilowatt.
Other ``clean coal'' technologies have higher capital costs than
atmospheric fluidized bed combustion. An integrated
gasification combined cycle (IGCC) 2 plant currently
has a capital cost of approximately $1,800 per kilowatt for the
first plants built, according to estimates from the technology
developers and data from the Department of Energy's clean coal
technology program. The technology developers hope to reduce
this capital cost to $1,200-1,500 as the technology matures and
more of these plants are built.
---------------------------------------------------------------------------
\2\ Integrated gasification combined cycle is a multi-step process
in which coal is gasified, and the resulting fuel gas is used to fire a
conventional combined-cycle power plant.
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3. Combined-cycle gas-fired power plants, which have capital costs in
the range of $600-700 per kilowatt of capacity. Unlike the
nuclear and coal-fired technologies, however, gas-fired power
plants are extremely sensitive to fuel prices. Economic
analysis shows that a new nuclear unit at $1,000 per kilowatt
of capacity is competitive with a new gas-fired combined cycle
plant fueled with gas at $4-5 per million Btu. (Although
wellhead gas prices in the spot market have slumped below $4
per million Btu in recent weeks, the cost of gas delivered to
electricity generators remains well above $5 per million Btu in
all major consuming regions of the United States except
California. In California, delivered prices for natural gas are
considerably higher, in the $10-15 per million Btu range.)
Like renewable energy, conventional coal-fired power plants and
advanced ``clean coal'' technologies, nuclear power is a capital-
intensive technology. Large new nuclear power plants--of the 1,000-
megawatt 3 size now operating--would cost approximately $1
billion each, and would thus represent a substantial investment risk
for the company or companies that build them.
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\3\ A 1,000-megawatt power plant will serve the needs of
approximately 650,000 households.
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Private companies would only undertake investments of this size if
they were convinced that new nuclear power plants, once built, would be
competitive with other sources of electricity. Given the significant
public policy benefits of nuclear energy, however, limited policy
initiatives are appropriate for new nuclear power plants to stimulate
companies to invest in new nuclear plants sooner and in larger numbers
than they otherwise would; and to reduce the investment risk associated
with construction of new nuclear power plants.
The policy initiatives necessary to stimulate construction of new
nuclear generating capacity include:
1. Creation of a government/industry partnership to pursue two short-
term objectives: resolving technical and/or economic issues
associated with the new nuclear plant designs, and validating
the new licensing process--verifying that it works as intended
and will not place private sector investment at risk. This
initiative will require a modest additional federal investment
in nuclear energy research and development.
2. Changes to the tax laws to reduce the investment risk associated
with new nuclear plant construction and to allow quicker
recovery of capital investment, including such techniques as
accelerated depreciation and an investment tax credit.
renewal of the price-anderson act
Congress should renew the Price-Anderson Act as soon as possible,
and it should provide an indefinite renewal. Price-Anderson is a proven
framework that has worked for nearly 45 years. Given this proven
record, Congress should renew it indefinitely. If needed, Congress can
re-open the law at any time if modifications are needed. In addition,
Congress can request periodic updates on the status of Price-Anderson
Act implementation from the NRC in order to provide a basis for change
if necessary.
The Price-Anderson Act of 1957, signed into law as an amendment to
the Atomic Energy Act, provides for payment of public liability claims
related to any nuclear incident. In its 1998 report to Congress, the
Nuclear Regulatory Commission said that the Price-Anderson Act has
``proven to be a remarkably successful piece of legislation'' that has
grown in depth of coverage and that proved its viability in the
aftermath of the Three Mile Island accident.
Since the inception of the Price-Anderson Act, the law has been
extended three times for successive 10-year periods, and in 1988 it was
extended for 15 years. Unless Congress renews the Price-Anderson Act,
it will expire on Aug 1, 2002.
The Price-Anderson Act is a proven law that works in these
important ways:
Assures the availability of billions of dollars to compensate
affected individuals who suffer a loss as a result of a nuclear
incident.
Establishes a simplified claim process for the public to
expedite recovery of losses.
Provides for immediate emergency reimbursement for costs
associated with any evacuation of residents near a nuclear
power plant.
Establishes two tiers of liability for each nuclear incident
involving commercial nuclear energy and provides a guarantee
that the federal government will review the need for
compensation beyond that explicitly required by law. The Price-
Anderson framework provides $9.5 billion of coverage in the two
levels of protection.
For the primary level, the law requires nuclear power plant
operators to buy nuclear liability insurance available or provide for
an equal amount of financial protection. That amount of insurance is
$200 million.
For the second level, power plant operators are assessed up to $88
million for each accident that exceeds the primary level at a rate not
to exceed $10 million per year, per reactor for a total of $9.3
billion. The NRC increases the level for inflation every five years. An
important feature of the law is that it spreads the liability for a
major accident across the entire industry. In addition, Congress may
establish more assessments if the first two levels of coverage are not
adequate to cover claims. The Price-Anderson Act framework provides the
same level of liability for DOE facilities as for the commercial
sector.
Research or small power reactors are required to self-insure at
least the first $250,000 of any nuclear incident. The federal
government also provides up to $500 million of indemnity. At present,
there are no small power reactors in operation that qualify for this
coverage. But the groundwork is being laid to design power reactors
that would be smaller, safer and more cost effective to build. That
very extensive research and development would be jeopardized if the
Price-Anderson Act is not renewed expeditiously.
The costs of Price-Anderson coverage are included in the cost of
electricity, they are not a taxpayer expense or federal subsidy. That
means the nuclear industry bears the cost of insurance, unlike the
corresponding costs of some major power alternatives. For example,
risks from hydropower (dam failure and flooding) are borne directly by
the public. The 1977 failure of the Teton Dam in Idaho caused $500
million in property damage. The only compensation for this event was
about $200 million in low-cost government loans.
In addition to the approximately $180 million paid in claims by the
insurance pools since the Price-Anderson Act went into effect, the law
has resulted in payment of $21 million back to the government in
indemnity fees.
The NRC and DOE has recommended renewal of the Price-Anderson Act
to Congress. The NRC, in its 1998 report, describes the benefits the
law provides to the public. The agency says that ``the structured
payment system created to meet the two objectives stated in the Price-
Anderson Act has been successful. The Commission believes that in view
of the strong public policy benefits in ensuring the prompt
availability and equitable distribution of funds to pay public
liability claims, the Price-Anderson Act should be extended to cover
future as well as existing nuclear power plants.
The Department of Energy in 1999 has also recommended renewal of
the law. The Energy Department said that its indemnification ``should
be continued without any substantial change because it is essential to
DOE's ability to fulfill its statutory missions involving defense,
national security and other nuclear activities . . .''
The Price-Anderson Act has withstood court challenges dating back
to 1973 when the Carolina Environmental Study Group, the Catawba
Central Labor Union and 40 individuals brought suit against Duke Power
Co., which was building nuclear power plants in North and South
Carolina.
In June 1978, the U.S. Supreme Court upheld the constitutionality
of the law. In an opinion written by Chief Justice Warren Burger, the
court held that because the liability limit was created to encourage
private sector construction of nuclear power plants it was neither
arbitrary nor irrational.The industry recommends an indefinite renewal
of the Price-Anderson Act. Like any other legislation, if Congress
wants to reconsider and amend the law it can do so at anytime. We would
encourage Congress to hold periodic oversight hearings and, if
required, modify the law accordingly.
The industry believes that the retrospective premium should remain
at $10 million per nuclear plant. The NRC initially recommended it be
increased to $20 million, based in part on the assumption that 25
nuclear plants would be closed without relicensing, and that total
insurance coverage would decrease as a result. However, most nuclear
plants will be relicensed. NRC Chairman Richard Meserve, in a May 11,
2001 letter to members of Congress, retracted this recommendation based
on the number of plants seeking license renewal. The NRC no longer
believes that the increase in the retrospective premium to $20 million
is necessary.
other federal government policy support for new nuclear plant
construction
In addition to renewal of the Price-Anderson Act, the nuclear
industry has identified several areas where continuing, sustained
federal government policy support would assist the construction of new
nuclear power plants. These areas include:
Nuclear Energy R&D. As noted above, the industry believes it would
be appropriate to create a government/industry partnership to share the
modest cost of resolving remaining technical or economic issues, and to
validate the new licensing process for new nuclear plants. An expert
working group assembled by the U.S. Department of Energy to advise the
agency on actions necessary for near-term deployment of new nuclear
power plants believes that validating the new licensing process, and
other similar pre-commercial activities, will require approximately $36
million in the 2002 fiscal year, and an estimated $47 million in FY
2003.
It is appropriate for the federal government to bear part of the
cost of these programs for two reasons. First, these are generic, pre-
commercial activities that provide no financial return to private
industry. And second, these pre-commercial programs are designed to
assure that federal government regulations work as intended and will
not place private industry investment at risk.
It is equally crucial that industry and the federal government
continue to invest in nuclear technology research and development for
the United States to remain the world leader in nuclear technology.
This includes continuing support for the Department of Energy's
existing nuclear energy R&D programs, in line with the funding levels
recommended by the President's Committee on Advisors on Science and
Technology (PCAST), and the Secretary of Energy's Nuclear Research
Advisory Committee.
Continued Progress in Waste Management. Expansion of nuclear
energy's contribution to U.S. electricity supply also requires
continued progress in the federal government's program to manage used
nuclear fuel, and to develop storage and disposal facilities for that
fuel. This includes adherence to programmatic milestones, including the
Secretary of Energy's site suitability determination scheduled for
later this year, and a Presidential determination as soon after that as
possible.
Amendments to the Atomic Energy Act. The nuclear industry also
believes the time has come to update the Atomic Energy Act so that the
NRC is positioned to meet the challenges of the 21st century. This
would include:
1. removing the statutory requirement that NRC conduct antitrust
reviews of of applications to build new nuclear plants;
2. removing the statutory prohibition on foreign ownership of U.S.
commercial nuclear power planbts; and
3. revising the Atomic Energy Act to ensure that small, modular nuclear
reactors are not subjected to excessive levels of liability
under the Price-Anderson Act's secondary protection scheme.
conclusion
The industry clearly understands what must be done to preserve
nuclear energy's emission-free contribution to the nation's electricity
supply.
Nuclear energy is the only large source of electricity that is both
emission-free and readily expandable. Its exemplary safety record, high
reliability, low operating costs and price stability make nuclear
energy a vital fuel for the future. That is clear from the current U.S.
electricity situation, which is marked by thinning capacity margins as
demand outruns available supply, and by punishing volatility both in
electricity prices and the price of natural gas used to generate
electricity.
As electricity demand continues to rise, nuclear energy will be
even more important to American consumers.
Thank you for giving me this opportunity to share the industry's
perspective on the important nuclear energy issues the subcommittee is
focusing on in this hearing.
Mr. Largent [presiding]. Thank you, Mr. Fertel.
Mr. Jack Skolds, chief operating officer from Exelon
Nuclear. You have 5 minutes to summarize your statement.
STATEMENT OF JACK SKOLDS
Mr. Skolds. Thank you, Mr. Chairman and members of the
subcommittee, for the opportunity to be here today.
As Exelon examines our future sources of generation, we
judge potential projects on two sets of criteria: First, the
technology must be safe, economic and clean; and second, there
must be a stable and predictable regulatory environment which
will make the projects acceptable to the investment community.
We believe we have found the technology that meets the
first set of criteria in the Pebble Bed Modular Reactor, the
PBMR. Exelon is a partner in a multi-national effort underway
in South Africa to develop the technology, which is a gas-
cooled 110 to 125 megawatt reactor that is an evolution of an
earlier technology. However, we believe that despite the
tremendous advances made by the NRC in recent years, there are
a number of regulatory and legislative changes needed at the
Federal level to meet the second criteria: a stable and
predictable regulatory environment.
These changes generally fall into one of two categories:
Changes necessitated by the changed nature of the electric
industry in the United States, and changes required as a result
of the PBMR's design differences from traditional reactors.
Now, on the first set of changes, the electric industry has
changed. If Exelon builds a PBMR, it will be what is known as a
merchant nuclear plant that will not depend on a regulated
utility rate structure. The financial risk of the plant will
rest on Exelon and our shareholders, not on the ratepayers. And
as a result of the dramatic changes in which the utilities and
power plant owners are regulated at the State and Federal
level, many laws and regulations related to the oversight of
nuclear power plants are plainly outdated. Current NRC
regulations were promulgated when it was anticipated that only
regulated electric utilities would build nuclear plants.
If these outdated regulations are not changed, the
financial burden imposed on merchant plants, like the PBMR,
clearly has the potential to make the economics untenable. Some
of the key regulations that need to be addressed include the
financial protection requirements of 10 CFR Part 140, the
decommissioning funding requirements of 10 CFR Part 50.75 and
the antitrust review requirements of 10 CFR Part 50.33(a).
My written statement includes a more complete explanation
of each of these issues. And most of the changes we are seeking
are to remove duplicative regulatory requirements and to assure
that merchant plants with financially responsible owners are
treated similarly to utility-owned plants.
Now concerning the PBMR and the changes necessitated by
this design, the PBMR is a small, modular reactor that produces
roughly one-tenth of the power of a conventional 1,100 megawatt
light water reactor, and the technology is designed so that 10
modules can be operated from a single control room. Small
modular plants were not contemplated when the current
regulations were put in place. The financial burden imposed on
small, modular plants by existing regulations has the potential
to make the PBMR uneconomic.
The primary issue is whether the NRC will issue a separate
license for each 110 to 125 megawatt PBMR module or whether the
Commission will issue a single license for a multiple-module
site. A number of related issues flow from this central
question: The assessment of annual NRC fees on a per reactor
basis, the treatment of modular facilities for purposes of
retroactive liability assessment under Price-Anderson and
staffing requirements under 50.54(m).
The annual fees assessed by the NRC on a per reactor basis
should be revised to recognize the differences between the
small, modular PBMR and a much larger light water reactor. The
resources required to regulate a PBMR module are significantly
less than those of a large reactor. Similarly, Price-Anderson
should be interpreted such that the PBMR are treated in a
manner that recognizes the inequity of treating individual PBMR
modules as separate facilities. The NRC is currently examining
whether such an interpretation is possible or whether the
Price-Anderson Act will need to be amended in order to
accomplish that goal. We will keep the subcommittee members
advised as our dialog with the Commission progresses on this
issue.
A final area that is unrelated to the small, modular nature
of the PBMR is the issue of emergency planning zone
requirements in 10 CFR Part 50.47. Exelon believes that the
fundamental safety differences between a PBMR and current
reactors may justify a smaller emergency planning zone for
Pebble Bed Reactor sites. Mr. Chairman, I would note that
Exelon has filed White Papers on many of these issues with the
Nuclear Regulatory Commission, and we would be happy to share
those with the committee upon request.
In conclusion, let me touch on a few final issues that are
not technology-specific. If new nuclear plants are to be built
in the U.S., the Federal Government must address these
additional issues: First, as you have heard from other
witnesses, we must renew Price-Anderson; second, Congress and
the administration must take steps to assure the existence of a
competitive nuclear fuel market; and finally, the
administration should move forward expeditiously with Yucca
Mountain as a permanent repository for used nuclear fuel.
Mr. Chairman, thank you again for the opportunity, and I
look forward to any questions.
[The prepared statement of Jack Skolds follows:]
Prepared Statement of Jack Skolds, Chief Operating Officer, Exelon
Nuclear
Mr. Chairman, Members of the Subcommittee: Thank you for the
opportunity to appear before you today to discuss policy issues related
to the licensing of advanced nuclear power plants in the United States.
I am Jack Skolds, Chief Operating Officer of Exelon Nuclear, the
nuclear division of Exelon Generation Company. Exelon is the largest
nuclear generation operator in the country with approximately 20% of
the nation's nuclear generation capacity, and the third largest private
nuclear operator in the world.
As Exelon examines future sources of generation, we judge potential
projects on two sets of criteria: first, the technology must be safe,
economic, and clean; and second, there must be a stable and predictable
regulatory environment that will make the project acceptable to the
investment community.
Exelon believes that we have found a technology that meets the
first set of criteria in the Pebble Bed Modular Reactor, also called
the PBMR. Exelon is a partner in a multi-national effort underway in
South Africa to develop the technology, which is a gas-cooled 110 to
125 megawatt reactor that is an evolution of an earlier technology
built and operated in Germany.
However, Exelon believes that--despite the tremendous advances made
by the Nuclear Regulatory Commission in recent years--there are a
number of regulatory and legislative changes needed at the Federal
level to meet the second criteria: a stable and predictable regulatory
environment that will make the project acceptable to the investment
community.
Why are changes necessary? Simply put, the current regulatory and
legislative structure governing nuclear power plants is obsolete,
neither reflecting the realities of the markets in which new plants
will operate nor accommodating the emergence of advanced technologies.
My testimony today will address several changes I believe are
necessary to ensure an acceptable regulatory environment. These changes
generally fall into one of two categories: (1) changes necessitated by
the changed nature of the energy industry in the United States; and (2)
changes required as a result of the PBMR's design differences from
traditional reactors. We believe that the Nuclear Regulatory Commission
(NRC) has sufficient flexibility under existing law to address many--if
not all--of these issues through rulemakings.
Changes Necessitated by the Changed Nature of the Energy Industry
The energy industry and the regulatory environment in which energy
companies operate today are fundamentally different than just a few
years ago. The deregulation of wholesale power markets sparked by
enactment of the Energy Policy Act of 1992, along with retail
deregulation in some states, has led to the creation of hundreds of
generation companies operating outside the traditional cost-of-service
regulatory arena. If Exelon builds a PBMR, it will be what is known as
a ``merchant'' power plant that will not depend on a regulated utility
rate structure. The financial risk of the plant will rest on Exelon and
our shareholders, not on ratepayers.
As a result of the dramatic changes in the way that utilities and
power plant owners are regulated at the state and Federal level, many
laws and regulations related to the oversight of nuclear power plants
are plainly outdated. Current NRC regulations were promulgated when it
was anticipated that only regulated electric utilities would build
nuclear plants.
If these outdated regulations are not changed, the financial burden
imposed on merchant plants clearly has the potential to make the
economics untenable. Some of the key regulations that need to be
addressed include the financial protection requirements of 10 CFR Part
140, the decommissioning funding requirements of 10 CFR Part 50.75, and
the antitrust review requirements of 10 CFR Part 50.33a.
Most of the changes we are seeking are to remove duplicative
regulatory requirements and to assure that merchant plants with
financially responsible owners are treated similarly to utility-owned
plants.
Financial Protection
Current NRC financial protection regulations require an applicant
for a license to provide information on its financial qualifications to
build and operate a reactor. While electric utilities are exempt from
this requirement, merchant plant owners would be required to submit
financial qualification data for each plant they seek to build. Exelon
has recommended that the NRC initiate a rulemaking to revise its
financial qualification regulations to enable certain categories of
merchant generating companies to have the same status as utilities to
avoid duplicative reviews for subsequent applications. The NRC should
initiate rulemaking to establish specific criteria that would enable
non-utilities to demonstrate financial qualification without providing
the detailed information currently required by NRC regulations and
guidance each time a license application is submitted.
Decommissioning
10 CFR Sec. 50.75 requires licensees to establish financial
assurance for decommissioning and provides six methods for providing
financial assurance. These methods include prepayment, an external
sinking fund, surety, insurance, or other ``equivalent'' method.
However, the regulations essentially restrict use of external sinking
funds to licensees that recover decommissioning funds through rates or
a non-bypassable charge. While this system works well for utilities
operating in a regulated cost-of-service market, it fails to
accommodate merchant plants selling into the wholesale power market.
Exelon is evaluating the possibility of seeking NRC approval for an
alternative decommissioning funding mechanism in which Exelon would
make partial prepayment (5%, for example) of the total decommissioning
cost estimate and annual contributions for the remainder spread over 20
years. Such a mechanism would substantially reduce the initial costs
associated with the PBMR while still providing assurance of funds for
decommissioning at the time a module is likely to be decommissioned.
NRC should initiate rulemaking to explicitly authorize the use of this
and other alternative decommissioning funding methods being developed
by the industry.
If NRC were to require 100% prepayment of the decommissioning cost
estimate for new plants, such prepayment might jeopardize the economic
viability of any new plant that is to be operated on a merchant basis.
Antitrust
Section 105 of the Atomic Energy Act (AEA) requires that the NRC
conduct an antitrust review, seek the advice of the Attorney General,
and if necessary conduct a hearing on antitrust matters in connection
with applications for a construction permit (CP) or combined operating
license (COL) for a nuclear power reactor. As the NRC has noted in
previous recommendations to the Congress, these antitrust requirements
are duplicative and burdensome. The Department of Justice, the Federal
Trade Commission, and--in the case of merchant power plants--the
Federal Energy Regulatory Commission, each have jurisdiction over
antitrust laws. The NRC has recommended that the Atomic Energy Act be
amended to delete these antitrust provisions.
Exelon believes that, at the very least, the NRC should initiate a
proceeding, and seek the approval of the Attorney General, to determine
that the issuance of licenses to merchant plant applicants will not
significantly affect such applicants' activities under the antitrust
laws. NRC should make a determination that merchant plant applicants
are excepted from antitrust review. The rule should state that an
applicant need only provide information sufficient for the NRC to make
a determination as to whether the applicant qualifies as a member of
the excepted class. This model is consistent with the approach pursued
by NRC when it made its determination that it would not conduct
antitrust reviews in connection with license transfers.
The antitrust review provisions of Section--105 have limited
applicability to the modern electric industry, and they serve no useful
purpose with respect to proposed operation of a nuclear reactor on a
merchant plant basis. Changes in the electric industry--including the
emergence of a competitive wholesale electric market and mandated open
access to the transmission system--reduce, if not eliminate, the
incremental protection of competition that the NRC provides through its
antitrust review for license applications for merchant plants.
Changes Necessitated by the Nature of the PBMR Design
The second category of changes results from the fact that the PBMR
is fundamentally different both from the current fleet of light water
reactors and from the advanced designs that have been certified by the
NRC in recent years. The PBMR is a small, modular reactor that produces
roughly one-tenth of the power of a conventional 1,100 megawatt light
water reactor, and the technology is designed so that up to 10 modules
can be operated from a single control room.
Small modular plants were not contemplated when current regulations
were put in place. The financial burden imposed on small, modular
plants by existing regulations has the potential to make the economics
of the PBMR untenable. The primary issue is whether the NRC will
consider each 110 to 125 megawatt PBMR module as an individual reactor
or facility or whether the Commission will treat a multiple-module site
as a single facility for licensing purposes.
A number of related issues flow from this central question: the
assessment of annual NRC fees on a per reactor basis under 10 CFR 171,
the treatment of modular facilities for purposes of retroactive
liability assessments under the Price-Anderson Act, and staffing
requirements under 10 CFR Sec. 50.54(m).
Annual Fees
The annual fees assessed by the NRC on a per reactor basis should
be revised to recognize the differences between a small, modular PBMR
and a much larger light water reactor. The resources required to
regulate a PBMR module are significantly less than those required to
oversee a larger, more complex light water reactor.
Price-Anderson Act
Similarly, the Price-Anderson Act should be interpreted so that
Pebble Bed Modular Reactors are treated in a manner that recognizes the
inequity of treating individual PBMR modules as separate facilities.
The NRC is currently examining whether such an interpretation is
possible or whether the Price-Anderson Act will need to be amended in
order to accomplish that goal. We will keep the subcommittee members
advised as our dialogue with the Commission progresses on this issue.
Under the current NRC interpretation of Price-Anderson, a 10-module,
1,100 megawatt PBMR site would have 10 times the potential retroactive
liability of a single 1,100 megawatt light water reactor. Treating each
PBMR module as an individual reactor would result in an unfair economic
burden which would significantly hamper the economics of the
technology.
Staffing Requirements
In addition, existing NRC regulations specify minimum licensed
operator staffing requirements. In general, the formula used to develop
the staffing levels and the requirements on the location of operators
are excessive for PBMRs. These requirements were developed when all
operating nuclear power plants relied on active safety systems to
mitigate accidents. The Pebble Bed technology relies on a ceramic fuel
design that cannot suffer meltdown. In the PBMR, the reactor
temperature never rises above 1600 degrees Celsius, even under a worst-
case loss of coolant accident. PBMR fuel, however, does not begin to
degrade until temperatures reach 2000 degrees Celsius.
Since the PBMR is a passive plant that does not require early
operator intervention to mitigate accidents, staffing levels less than
those indicated in existing regulations are appropriate for the PBMR.
The Commission itself has recognized that an exemption from the
staffing requirements may be warranted to provide for ``reduced
staffing levels based on plant size, lack of complexity, or other
unique factors.''
Emergency Planning Zones
A final area that is unrelated to the small, modular nature of the
PBMR is the issue of the emergency planning zone (EPZ) requirements in
10 CFR Part 50.47. Exelon believes that the fundamental safety
differences between a PBMR and current reactors may justify a smaller
emergency planning zone for Pebble Bed reactor sites. Again, since the
PBMR uses a ceramic fuel design that cannot suffer meltdown, the NRC
should consider whether a smaller EPZ is merited.
Exelon has presented White Papers on many of these issues to the
Nuclear Regulatory Commission, and they are publicly available.
Transition Issues Facing New Nuclear Plants
The licensing process which Exelon proposes to follow under 10 CFR
Part 52 to obtain a combined construction and operating license for
these plants has never been utilized. As a result, we expect that there
will be a steep learning curve for both the NRC staff and ourselves on
how to execute this process with resultant high costs and delays.
Exelon is working with the NRC staff to develop the technical licensing
framework for the PBMR. Existing regulations are written for light
water reactors, and regulations will need to be developed for gas
reactors, also at additional costs and potential delay.
Exelon believes strongly that the development of the design and the
cost to commercialize and build the PBMR should be borne by the PBMR
partners. We anticipate that the partners will invest upwards of $600
million of their own money to make the PBMR commercially viable with
Exelon investing a significant additional amount to license and build
the first PBMRs. There are, however, a number of first of a kind costs
that Exelon will bear as the first licensee for this new technology
that will flow directly to government agencies such as the NRC in the
form of licensing fees and the national laboratories as consultants to
the NRC. As stated earlier, we expect that the costs of licensing this
technology will be higher than normal because of the unproven nature of
the 10 CFR Part 52 licensing process and the need to create a gas
reactor licensing framework. The technical expertise needed to review
the PBMR application does not currently exist either in the NRC or in
the national labs and will need to be developed. We believe it is
appropriate for some level of government funding to be provided to fund
the work of government agencies in these areas.
Generic Issues Related to New Nuclear Plants
In concluding, let me touch on a few final issues that are not
technology-specific. If new nuclear plants are to be built in the U.S.,
the Federal government must address three additional issues:
First, Congress must renew the Price-Anderson Act, which will
expire in August 2002. The Act represents a carefully balanced
mechanism for providing a comprehensive liability scheme for nuclear
activities while ensuring the prompt payment of claims for nuclear
incidents.
Second, Congress and the Administration must take steps to assure
the existence of a competitive nuclear fuel market. One of the primary
benefits of nuclear power is the low, stable cost of nuclear fuel.
There are a number of pending developments that could jeopardize a
competitive market for this material, including trade actions filed by
USEC against enrichment service providers from Europe.
Finally, the Administration should move forward expeditiously with
its investigation of Yucca Mountain as a permanent deep-geologic
repository for used nuclear fuel. Congress should support the continued
characterization of Yucca Mountain by fully funding the
Administration's budget request. As members of this committee are well
aware, the Federal government is woefully behind schedule on this
project despite having spent billions of dollars collected from utility
customers.
Mr. Chairman, thank you again for the opportunity to appear before
the committee. I look forward to any questions you may have.
Mr. Largent. Thank you, Mr. Skolds.
Now we recognize Mr. George Davis, director of Government
Programs Nuclear Systems with Westinghouse. Thank you, Mr.
Davis, for being here.
STATEMENT OF GEORGE A. DAVIS
Mr. Davis. Well, thank you, Mr. Chairman, and I appreciate
the opportunity to be here today. I am also currently
participating in DOE's Near Term Deployment Group, which is a
topic I want to talk about in just a moment.
The recent volatility we have seen in natural gas prices
nationwide and certainly the electric power shortages we have
seen in California have been a real wake-up call for power
companies all over the country. And they are beginning to
realize they can no longer continue to rely exclusively on
natural gas as the only source of new power plant generating
capacity. Nor can they ignore the erosion of power reserve
margins.
When you look at economic competitors to natural gas
plants, the only two energy sources likely to be deployable in
the near-term on a large scale are going to be coal and
nuclear. However, when you compare against coal and nuclear
burning plants--coal and gas burning plants, nuclear plants
face a significant hurdle, because they have to go through the
NRC licensing process before they can be introduced into the
marketplace.
Now despite the dramatic improvements that we have seen at
the NRC in recent years, there is still a significant cost and
uncertainty associated with going through that licensing
process for new plants. The Commission has certified three
standardized designs in the 1990's; however, the early site
permit and combined operating licenses processes are still
untested.
Now, one of the standardized designs is already certified
is our AP600. It is ready for the marketplace today, and it has
an estimated construction cost of about $1,400 per kilowatt
electric. Now, this would be competitive in today's U.S. market
as long as electricity prices remained about where they are,
with generating costs on the average of about 5 cents per
kilowatt hour. However, if electricity prices should decline
back to the levels we saw just a couple of years ago before gas
prices went up, then we would need a lower cost alternative
that is likely to be in the 3 cents to 4 cents per kilowatt
hour range.
Therefore, we began developing changes to the AP600 design
to upgrade its power level from 610 megawatts all the way up to
1,090. We found we could increase the size of the major
components without necessarily increasing the footprint of the
plant, therefore keeping the design changes to a minimum. The
end result is that we can increase the power rating about 75
percent while only increasing the capital cost about 13
percent. This brings down the construction cost to less than
$1,000 per kilowatt electric, which would make us very
competitive, even if electricity prices do come back down to
the 1999 levels.
We are currently in a pre-application phase with the NRC,
and if all goes as expected, we would hope to submit a complete
application early next year and have the changes, or this new
AP1000 design, certified by 2004.
Now, this year, DOE also launched an initiative called the
Technology Road Map for Generation IV reactors. They set up
working groups comprised of representatives from industry, labs
and academia that are carrying out this initiative under the
guidance of an advisory committee called NURAC. And I am
participating in one of those groups, the Near-Term Deployment
Group. Our task is to identify nuclear plant designs that could
be commercially put into operation in the United States by
2010, and then to identify the technological and institutional
gaps that must be completed to allow them to do so. Our final
product is to be a report issued in September that will
summarize these designs and the actions needed to bring them to
market, including what DOE and NRC need to do.
Although 2010 sounds like a long time away, we quickly
realize that there are a number of activities that need some
action right now. To have a plan in operation by 2010, pretty
much all the licensing activities with the NRC need to be
essentially completed by 2006, which isn't very far off. Our
group issued an interim report that is basically identification
of a number of activities that need attention in the fiscal
year 2002 and fiscal year 2003 budgets. Specifically, we
recommended about $36 million be included in DOE funding for
fiscal year 2002 to be used for providing cost share and for
reimbursement of NRC fees and research on the new plant
activities.
We believe there are a number of actions that Congress and
the administration can take to provide an environment conducive
to the expansion of nuclear energy. We don't ask any special
favors for nuclear. We just would like to see a level playing
field. We realize that nuclear has to compete in the
marketplace on its own.
First, we feel like Price-Anderson must be renewed for a
number of obvious reasons. Next, we need to see progress on the
disposal of high-level waste. We don't necessarily need to
start burying waste, but we do need to know that there is an
unambiguous path forward that will lead to resolution. We think
the interim recommendations of the DOE Near-Term Deployment
Group to provide $36 million in fiscal year 2002 funding should
be implemented so that licensing of nuclear plants doesn't
become a delay step in bringing new plants to market by 2010.
When the group's final report is issued in September, we
think its recommendations for future years should also be
incorporated into government planning. Likewise, we need to
think that--we think that the government also needs to make
sure that NRC receives the resources that it needs to carry out
licensing of new plants. And, finally, Congress and the
administration should consider options for encouraging the
first wave of new nuclear plants in the U.S. Since no plants
have been ordered in this country in over 20 years, first-time
startup costs and the financial risks will be significant
hurdles for that first wave. Incentives, such as the one that--
some of the ones that Marv Fertel just mentioned, would go a
long way in helping to bring those plants to market. Thank you.
[The prepared statement of George A. Davis follows:]
Prepared Statement of George A. Davis, Director, Government Programs,
Nuclear Systems, Westinghouse Electric Company
Chairman Barton, Ranking Member Boucher and distinguished members
of the Energy and Air Quality Subcommittee, my name is George Davis. I
am Director of Government Programs for the Nuclear Systems division of
Westinghouse Electric Company. I am also currently participating in
DOE's Near Term Deployment Group, which I will discuss later. The
Nuclear Systems division is responsible for designing and selling new
nuclear plant projects. Besides supplying reactor systems for new
plants, Westinghouse also provides services, plant safety and
monitoring equipment, and fuel to operating nuclear plants worldwide.
The company employs about 9,000 people, mostly in the U.S., including
those of the former ABB Combustion Engineering that was merged into
Westinghouse just last year.
Westinghouse has a long and active history in supporting the
commercialization of peaceful nuclear energy. We have provided about
twenty five percent of the reactors operating worldwide. The number
grows to about fifty percent, if we include Westinghouse licensees that
use our technology. The bulk of nuclear plant construction activity is
currently centered in South Korea, where there are ten units in
operation based on our technology, six units under construction, and
four more units in negotiation. We are also working on near term
opportunities in Japan, China, and Finland. What we are becoming
excited about now, however, is the possibility for a rebirth of the
nuclear energy option here at home in the United States.
Today, I would like to provide you with our company's views on what
Congress and the Administration could be doing to provide an
environment conducive to the expansion of nuclear energy in a way that
allows nuclear energy to be economically competitive in the deregulated
marketplace, while assuring that public safety and environmental
protection are not compromised in any way. First, however, I would like
to provide our perspectives on (1) the current environment for new
nuclear plants in the U.S., (2) the major issues to be addressed before
new plants can be deployed, and (3) what Westinghouse, the rest of
industry, and the Department of Energy are all doing to address these
issues.
The Current Environment for New Nuclear Plants in the U.S.
With its roots in the Energy Policy Act of 1992, deregulation has
been the great engine driving change in the electric power industry
over the past decade. The sales of existing plants, coupled with
consolidation of plant owners and suppliers, are creating a healthy,
viable industry that is composed of larger, more efficient companies.
Benefiting from the economy-of-scale (by operating and servicing a
larger number of nuclear plants within a single organization), these
companies will be in a position to handle the financial and
technological challenges that must be managed, in launching the next
generation of nuclear plants. Partly because of these consolidations,
the operating costs and performance of the current fleet of nuclear
plants have improved dramatically within the last several years.
Conditions have improved so much that nuclear plants now operate at
costs lower than coal burning plants (considering fuel plus operating &
maintenance expenses).
Another reason for these dramatic improvements must be credited to
changes at the Nuclear Regulatory Commission. The NRC's move toward a
more risk-informed, performance-based oversight process has
significantly reduced the regulatory burden on plant operators, by
focusing attention on the issues that are truly important to safety.
Coupled with its timely review of license-extension applications, the
NRC has created an atmosphere of optimism about the prospects for
licensing new nuclear plants--without the delays and obstacles that
plagued us in the 1980s.
As air pollution and greenhouse gas production move to the
forefront of the public's concern about the environment, there is a
growing awareness that nuclear energy plants are quietly producing
twenty percent of our nation's electricity without emitting any
pollutants or greenhouse gases into the atmosphere. Coupled with the
U.S. nuclear industry's exemplary safety record, it's not surprising
that public support for nuclear energy is growing.
Perhaps, the one dark cloud over our heads is the disposal of high-
level wastes. If there is not progress on this issue, public support
could begin to erode. We don't necessarily need to start burying waste
yet, but we do need to know that there is an unambiguous path forward
that will lead to final resolution. This is not a problem unique to new
nuclear plants. The high-level waste issue must get resolved somehow,
because there is already waste in existence from the plants currently
operating. Therefore, it is not a question of if the issue will be
resolved. It must be a question of when.
The recent volatility in natural gas prices, nationwide, and the
electric power shortages in California are serving as a wakeup call to
power companies all over the country. They cannot continue to rely
almost exclusively on natural gas as the fuel source for new power
plants. Nor can they ignore the erosion of reserve margins in their
generating capacity. Many people would like to think that renewables
could provide the major alternative to natural gas. Although they may
play a rapidly increasing role in electricity generation, we have to
acknowledge that they are currently producing less than one percent of
our electricity supplies and that it is extremely unlikely that they
will be able to provide a substantial share of our electricity, at
competitive prices, within the foreseeable future. The cold hard
reality is that there are only two energy sources likely to be
deployable on a large scale, as economical competitors to natural gas
plants. Those are coal and nuclear energy. If nuclear energy were
removed from the list of alternatives, then we could expect to see a
dramatic increase in the number of coal burning power plants being
built over the coming years.
Issues Related to Deployment of New Nuclear Plants
This leads us to the question: What will it take for new nuclear
plants to be a viable alternative? In the deregulated markets that are
evolving in the United States, economic competitiveness is an absolute
requirement. Every issue must be reduced to a calculation of its cost
and financial risk. In the end, investors will back the projects that
offer the best financial return, with the least uncertainty. The
successful economic performance of the operating nuclear plants has
removed any stigma about attracting investors just because a project is
nuclear. Recent sale prices of operating plants attest to this fact. It
is on this basis that new nuclear plants must compete against natural
gas and coal plants. Therefore, in preparing for the marketplace, it is
critical that we focus on activities that will reduce costs and
uncertainty.
As one would expect, the fundamental economic requirement for new
coal and nuclear plants is that they must be able to generate
electricity with a total generation cost that competes with natural gas
plants. Total generating costs include the capital charges (i.e., the
mortgage payments) for building a new plant--along with the production
costs (i.e., fuel plus operating & maintenance expenses). The capital
cost of building a coal or nuclear plant is at least twice the cost of
building a comparably sized natural gas plant; however, the fuel costs
are dramatically lower. To compound matters, investors want the capital
costs on a new plant (be it gas, coal, or nuclear) to be paid off
within twenty years or less--as opposed to the thirty year mortgages
that regulated utilities were able to use in the past. This creates
even more pressure to hold down capital costs.
The overnight capital cost (i.e., without including interest
charges or inflation during the construction period) of building a new
coal plant in the U.S. is estimated to be around $1,000/kilowatt. Since
new nuclear plants are expected to have production costs (fuel plus
O&M) slightly below coal plants, this means that the overnight capital
costs for nuclear units must also be around $1,000/kwe to be
competitive. This would place the total generating costs of coal and
nuclear plants in the range of 3 to 4 cents/kilowatt-hour--which is
where natural gas generated electricity was, until the sudden run-up in
natural gas prices last year. Today, gas plants are generally producing
electricity at more than 5 cents/kilowatt-hour (although this varies by
region of the country).
Compared to the gas and coal burning plants, new nuclear plants
face a significant hurdle that is unique to nuclear--NRC licensing. If
an unregulated power generation company wants to bid to supply
electricity to a regulated utility (in a power purchase agreement), the
generation company can obtain the necessary permits for a coal or gas
plant prior to submitting its bid--with relatively little investment of
time and expense. On the other hand, obtaining the permits for a
nuclear plant is substantially more expensive and time consuming. Since
the generation company may not know whether it will actually construct
the plant until it has won the power purchase agreement, incurring
these costs beforehand is a significant risk.
Despite the dramatic improvements at NRC, there is still
significant cost and uncertainty associated with the licensing of new
plants. In 1989, the Commission implemented a new regulation (10CFR52)
to streamline the licensing process. It provided for approval of (1)
standardized designs via Design Certification, (2) individual plant
sites via Early Site Permits, and (3) construction and operation of
individual plants via Combined Operating Licenses. During the 1990s,
the Commission issued three Design Certifications; however, the Early
Site Permit and Combined Operating License processes still remain
untested.
What Westinghouse, Industry, and DOE Are Doing to Prepare for New
Plants
One of the three standardized designs certified by NRC is our AP600
design. Rated at 610 Megawatts, it is the only Light Water Reactor
design that is based on the use of passive safety systems to improve
safety, simplify the plant, and reduce costs. It is ready for the
marketplace today and, in fact, has been submitted for consideration in
potential overseas projects. The estimated overnight costs for
constructing AP600 units is on the order of $1,400/kwe, which is
slightly lower than for the other two standardized designs that are
already certified by NRC. It should be noted, however, that there would
be significant first-time startup costs in building the first units--
which would have to be included in the price of those units or spread
out over a number of the follow-on units. From the previous discussion,
we can see that the AP600 design would be expected to be competitive in
the U.S. market, if electricity prices remain at their current levels
of 5 cents/kw-hr or higher. If, on the other hand, electricity prices
should decline back to the 1999 levels, a lower cost alternative will
likely be needed.
To address this need, Westinghouse began developing changes to the
AP600 design in 1999--to uprate its power level from 610 Megawatts to
1090 Megawatts. We found that we could increase the size of the reactor
core and vessel, the steam generators, the reactor coolant pumps, the
containment height, and the turbine-generator--without increasing the
footprint of the plant. Therefore, changes to the plant design are
minimal. The larger components are the same size as those used in some
of the operating Westinghouse plants; thus, assuring that design detail
and proven features are maintained. The overall impact is an increase
in power rating of about 75%, with an increase in capital cost that is
only about 13%. The revised design, dubbed AP1000, would have a capital
cost below $1,000/kwe--which would make it very competitive against
natural gas and coal plants, even if electricity prices drop back down
to 1999 levels.
We are currently in a pre-application phase with the NRC and are
providing the Staff with information on the nature of the changes to
the design and the safety analyses. By the end of this year, we hope to
reach agreement on the scope, schedule, and budget for the NRC's review
and approval of a complete application for Design Certification of the
AP1000 design changes. We would then expect to submit the complete
application early in 2002. Although the NRC has not issued its schedule
estimate, we believe that issuance of the Certification by the end of
2004 should be a reasonable target.
In addition to our effort to develop and license the AP1000 design
changes, we are also becoming involved in the development and licensing
of the Pebble Bed Modular Reactor--a 110 Megawatt gas-cooled reactor.
Building off of the demonstration project being pursued in South
Africa, the PBMR offers an incredible opportunity to bring forth an
economical nuclear plant design, at a much lower power level. Since the
PBMR has already been discussed with this Committee by Exelon, I will
not go into the details of it here--other than to reiterate the point
that licensing of the PBMR will necessitate the development of new NRC
requirements and review processes.
For completeness, I should also mention that Westinghouse is also
working on a longer-term Light Water Reactor design, called IRIS, under
a grant from DOE. IRIS is an integral reactor that could range in size
from 100 to 300 Megawatts and includes a number of inherent safety
features that go beyond what we have done in other passive designs. It
might be thought of as a Light Water Reactor counterpart to the PBMR--
except that it is not as far along in the development process.
Meanwhile, the nuclear industry, as a group, has begun paving the
way for new nuclear plants by establishing the Nuclear Energy Institute
Executive Task Force on New Plants. The Task Force includes
representatives from power companies, architect-engineers, reactor
suppliers, EPRI, and INPO. It is providing management and oversight of
the many new-plant activities being carried out by industry--in
coordination with NRC and DOE. For example, there is an NEI group that
is looking at how the Early Site Permit process in 10CFR52 would be
implemented. Another group is looking at changes to 10CFR52 itself that
would benefit new plant licensing.
Since 1999, DOE's Nuclear Energy Research Initiative has included a
number of small research projects to assist in the efforts to prepare
for new plants. This year, however, DOE has launched an initiative to
prepare a technology roadmap for guiding nuclear R&D activities that
will lead to what it calls Generation IV reactors. Working groups
(comprised of representatives from industry, laboratories, and
academia) are carrying out this initiative under the guidance of the
Nuclear Energy Research Advisory Committee (NERAC). I am a participant
in one of the working groups. It is called the Near Term Deployment
Group.
The Near Term Deployment Group is co-chaired by Lou Long (Southern
Nuclear Operating Company) and Tony McConnell (Duke Engineering &
Services, Inc.). The task of this group is to identify nuclear plant
designs that could be commercially put into operation in the U.S. by
2010, and, then, identify the technological and institutional gaps that
must be addressed for them to do so. The final product of this group,
to be completed in September of this year, will be a comprehensive
report that summarizes the designs and actions needed--including
identification of what is needed from DOE and NRC.
Although 2010 may seem like a long time from now, our group quickly
realized that some activities require action right away. As one might
guess, these activities relate almost entirely to regulatory issues--in
particular, the need to support ongoing interactions between NRC and
industry, related to implementation of 10CFR52: Early Site Permits,
Combined Operating Licenses, Design Certifications, and introduction of
new advanced reactor technologies, e.g., the PBMR. To have a new plant
operating by 2010, all of these NRC licensing activities need to be
completed by 2006 or sooner. Therefore, at the end of May, our group
issued an interim report that identifies activities needing immediate
attention, which should be included in fiscal year 2002 and 2003 budget
planning. Specifically, the group recommends that $36 million be
included in DOE's budget for fiscal year 2002. The funding would be
used to provide cost-share and reimbursement of NRC fees and research
on these new plant activities. (In fact, 30 to 50% of this funding
would ultimately be paid to NRC.) This funding would encourage
companies to step forward and enter into the Early Site Permit,
Combined Operating License, and Design Certification processes on an
early enough schedule that the U.S. could witness operation of new
plants by 2010.
Suggestions for Government Actions to Support Expansion of Nuclear
Energy
Consistent with the recommendations of the Vice-President's
National Energy Policy Development Group, we believe that there a
number of actions that Congress and the Administration can take to
provide an environment conducive to the expansion of nuclear energy in
a way that allows nuclear energy to be economically competitive in the
deregulated marketplace, while assuring that public safety and
environmental protection are not compromised in any way. We do not ask
for any special favors for nuclear energy. Nuclear plants must be able
to compete in the marketplace on their own. However, we would like to
see a level playing field with the other generating options of coal,
gas, and renewables--in terms of regulation, incentives, and research
support. More importantly, the industry and its investors must feel
confident that nuclear energy has the government's support, if we are
to invest the many billions of dollars that would go into the next
generation of nuclear plants.
Price-Anderson must be renewed. It has served the industry and the
American people very well, for over forty years. Failure to renew it
would be sure to keep the industry and the investment community from
involvement in financing new nuclear plants.
Progress on the disposal of high level wastes must be demonstrated.
We don't necessarily need to start burying waste yet, but we do need to
know that there is an unambiguous path forward that will lead to final
resolution. Otherwise, public support for the nuclear option could
begin to erode. In addition, the industry and investors would have to
allow for substantial financial risks in the uncertainty of the
outcome, when estimating the costs of new plants.
The interim recommendations of DOE's Near Term Deployment Group to
provide $36 million in fiscal year 2002 should be implemented, so that
NRC licensing issues do not delay the possibility of starting up new
nuclear plants by 2010. The activities described in the group's interim
report will play a crucial role in developing and demonstrating the new
streamlined licensing process for future plants. When the group's final
report is issued in September, its recommendations for future years
should be incorporated into government planning and budgets.
Complementary to the recommendation of the Near Term Deployment
Group, it is also important to assure that NRC receives the support
that it needs from Congress and the Administration, to assure that it
has adequate resources necessary to carry out the licensing of a new
generation of nuclear plants.
Congress and the Administration should consider options for
encouraging the first wave of nuclear plant orders in the U.S. Since no
new plants have been ordered in the U.S. in over twenty years, the
first-time startup costs and financial risks will be significant
hurdles for the first wave of plants that are ordered. Incentives for
that first group of orders--e.g., accelerated depreciation for tax
purposes, loan guarantees, deferral of licensing fees, etc.--could help
to encourage the first buyers to take action. Making available
financial credits for the deployment of new nuclear plants, based on
the clean air and greenhouse gas benefits of nuclear energy, should be
strongly considered.
Conclusion
The potential for rebirth of the nuclear option in the U.S. is a
reality. Nuclear plants can be expected to be economically competitive
with the coal and gas options. However, government support for the
nuclear option will play an important role in overcoming some of the
up-front financial and regulatory risks. We strongly encourage Congress
and the Administration to take the actions suggested above.
Mr. Largent. Thank you, Mr. Davis.
And now we recognize Mr. Laurence Parme from General
Atomics. You have 5 minutes.
STATEMENT OF LAURENCE L. PARME
Mr. Parme. Mr. Chairman, members of the subcommittee, I
want to thank you for this chance to talk to you about some of
the legislative initiatives or reforms that we think would
facilitate licensing of a next generation of nuclear power.
As you may be aware, General Atomics is the leading
developer and proponent of High-Temperature Gas-Cooled
Reactors. We have been at the forefront of research on this
technology for over 40 years. The Gas Turbine Modular Helium
Reactor is a next generation of Generation IV reactor
technology and builds on this experience. The GT-MHR couples a
gas turbine directly to a modular reactor, not all together
different than the Pebble Bed plant. It is characterized by
meltdown-proof safety, much improved economics, substantially
reduced production of wastes, both nuclear and thermal, and
very good proliferation resistance.
Now, while this technology was first conceived of in the
U.S. in the early nineties, the development is now proceeding
in Russia as part of an international program aimed at the
destruction of surplus weapons grade plutonium. This is being
done under a joint U.S.-Russian cost-sharing arrangement, with
contributions also being made by Japan and France.
If you take out the plutonium core and put in a U.S.-
designed, low-enriched uranium core, this plant makes a very
promising and competitive commercial plant. General Atomics,
along with interested utilities, are currently working to
commercialize the technology and bring it to the U.S. market. I
believe attached to my written testimony you will see a letter
to Chairman Barton from Entergy representing our Utility
Advisory Group on their participation in the program.
Now, among the major challenges facing this effort,
licensing and regulatory issues are some of the large ones.
There is really three areas of hurdles or where we see that the
Congress and others can help us get through. First of all, the
NRC. Now, it has been discussed today questions of the NRC
staff and do they have the staffing to support licensing of new
plants. And I won't go into that further, but beyond that,
there are two items. There is, not surprisingly, the NRC's
experience is with licensing light water reactor plants. And
this leads us in two places. First of all, many of their review
criteria are based on water reactors, and these are not always
appropriate for gas-cooled reactors. In addition, it is our
view that their expertise in looking at gas-cooled reactors is
limited.
A second area that General Atomics is interested in is
bringing back technology from overseas. While we understand and
have every anticipation that a reactor built in the U.S. will
be built to U.S. codes and standards, there are a number of
unknowns and may also bring back analysis and take credit for
component testing and full prototyping that will be done
overseas.
Finally, there are several regulations that are either
outdated or need to be modified or adapted for advanced
reactors in general, but the gas-cooled reactors in particular.
Mention a few of these that can be a burden: anti-trust review
requirements, 10 CFR 50 Part 33. One of the things General
Atomics is concerned about is the ban on foreign ownership of
U.S. nuclear power plants. In today's world where the industry
is consolidating and international cooperation is becoming more
common, this becomes more of a problem. Many of the industrial
partnerships we have looked at for bringing a first plant into
the U.S. would involve foreign partners.
The large emergency planning zone requirements, also in 10
CFR Part 50. When these were originally developed and
specified, the thought was on large water-cooled reactors. I
think there is a good deal of evidence that the definition of
how large these emergency planning zones need to be may not be
appropriate to a gas-cooled reactor, especially a modular
reactor.
Finally, the per reactor basis for both annual fees,
licensing fees for reactors and the per reactor basis for
Price-Anderson. Price-Anderson we would like to see renewed,
but the way these laws just blindly go on a per reactor basis
without consideration for the megawatt rating of the reactor
can be detrimental to small modular reactors. So we believe
that it is important for increased use of nuclear energy in
this country, to also think about advanced reactors, the
introduction of these new reactors will, however, require a
fresh look in a number of areas in regulation and licensing.
Thank you.
[The prepared statement of Laurence L. Parme follows:]
Prepared Statement of Laurence L. Parme, Manager: Safety and Licensing,
General Atomics
Mr. Chairman and Members of the Subcommittee, my name is Larry
Parme and I am the Manager of Nuclear Safety and Licensing for General
Atomics. I appreciate the opportunity to speak before you today to
present the views of General Atomics on legislative and other reforms
necessary to facilitate the licensing of next generation nuclear power
As you may be aware, General Atomics is a leading developer and
proponent of High Temperature Gas-Cooled Reactors and has been at the
forefront of research on these technologies for over 40 years.
Today we and interested utilities are looking to bring to the U.S.
market the Gas Turbine-Modular Helium Reactor (GT-MHR). (Attached to my
testimony is a copy of a letter from the Chairman of our Utility
Advisory Board to this Subcommittee). We believe this technology offers
the promise of several desirable features including enhanced safety, a
favorable environmental impact, and competitive economics. We have
initiated pre-application discussions with the NRC to facilitate an
anticipated application in the future. In addition, recognizing certain
similarities in the technologies, we have been collaborating on generic
issues with the Pebble Bed Modular Reactor (PBMR) project.
Background and Overview of Design
U.S. and European technologies provide the basis for the Gas
Turbine-Modular Helium Reactor (GT-MHR). For more than 4 decades, High
Temperature Gas-cooled Reactors (HTGRs) have been under development in
several countries. Numerous prototypes and demonstration plants have
been constructed and operated including Peach Bottom 1 and the Fort St.
Vrain Nuclear Generating Station in the United States. At the time of
these initial plants, the vision was one of scaling up the technology
to large, steam cycle plants comparable to modern Light Water Reactors,
thus benefiting from economy of scale.
However, in the early 1980s, both in the U.S. and abroad a shift in
paradigm occurred and it was recognized that safety and modularization
should be the primary drivers of our future nuclear plant design.
Several features of the HTGR, particularly the unique coated particle
fuel, lend themselves to the design of smaller, modular plants with
significant simplification and safety advantages. Furthermore, this
simplification when coupled with shortened construction schedules, and
incremental capacity additions, promised improved economics. Hence, the
Modular High Temperature Gas-Cooled Reactor (MHTGR) was the DOE
sponsored, General Atomics developed, U.S. modular plant design
submitted for pre-application review by NRC in the latter half of the
1980s. The GT-MHR represents a further refinement on this concept.
Taking advantage of the high temperature capability of the gas-cooled
reactor and an evolving technology base, the GT-MHR replaces the steam
cycle with a closed loop gas turbine (Brayton) cycle. With the gas
turbine, a net plant efficiency of nearly 50% (which is approximately
50% more efficient than existing reactors) can be realized, further
improving the concept's economics.
The 285 MW (electric) GT-MHR is now being developed under a joint
U.S./Russian Federation agreement aimed at the destruction of surplus
weapons plutonium. In addition to the U.S. and Russia, Japan and France
also sponsor the program. Conceptual design of this International GT-
MHR program is completed and preliminary design is on schedule for
completion in early CY 2002. Construction of the first module is
currently scheduled to begin in 2006 with startup in 2009 and a 4-
module plant to follow.
Commercialization in the U.S. involves the importation of the
International design with a U.S. engineering effort to adopt the design
for the U.S. and world markets. These would include ensuring compliance
with U.S. codes and standards, a low enriched uranium core, and a 60-
Hertz generator. I should point out that the development work on the
International program is proceeding with this adaptation in mind.
Finally, a licensing submittal would be prepared in the U.S. and
submitted to NRC. The first U.S. module could be operating
approximately 1 year after the first International module.
Challenges to Deployment
While the technical challenges facing the design teams now working
to complete preliminary design are considerable, surmounting several
legal and institutional hurdles will be at least as important if the
GT-MHR is to play a part in the future U.S. energy mix. These hurdles
may be summarized as falling into three general categories. These are;
1. Institutional inexperience with gas-cooled reactors and a
predisposition to view them as variants of the more familiar
(in the U.S.) water-cooled reactors.
2. Returning the GT-MHR technology to the U.S., and
3. Regulations enacted without a deregulated market or smaller, modular
reactors foreseen.
Institutional inexperience: Just as the GT-MHR represents a shift
in several of the paradigms in reactor design, its licensing requires a
certain amount of fresh thinking. While on the surface 10CFR Part 50
and especially the combined license and certification offered by Part
52 are adequate to license advanced reactors, a substantial portion of
the review criteria developed by the NRC to implement these regulations
is based on experience with large, Light Water Reactor (LWR) plants.
Consequently, the GT-MHR licensing plan builds on General Atomics'
experience of the mid-80s at which time we submitted for NRC review
another gas-cooled modular reactor, the steam cycle MHTGR. Because of
the unique design approach, especially with regards to safety, the
licensing approach we proposed returns to the fundamental safety
requirements of allowable dose and risk to the public. It was then used
to derive risk-informed licensing bases similar to those in use by the
NRC but appropriate to a gas-cooled modular reactor and directed at
assuring compliance with these ``top-level'' safety requirements.
This type of review is required to realize the benefits of a
simplified safety approach and to ensure that the licensing process
addresses questions unique to gas-cooled reactor safety.
At this point I should add that the Pebble Bed Modular Reactor
(PBMR) project, as it is being pursued in the U.S. by Exelon
Generation, is also using the 1980s MHTGR licensing approach as the
starting point for their interactions with NRC. We are currently
cooperating with Exelon in establishing a licensing approach capable of
effectively dealing with both of our concepts. We feel that this is not
only in the best interests of both programs but that such cooperation
will ultimately work to the taxpayers and ratepayers advantage.
Finally, the question has been previously raised before the
Congress as to whether the NRC has the staff to handle on-going
regulation of existing power plants, expected license renewals, plus
applications for new plants. In addition to this, the technical
expertise to adequately review the GT-MHR, or other gas-cooled reactor,
in the NRC or in the national laboratories supporting the agency is
limited.
Returning GT-MHR technology to the U.S.: I have previously alluded
to the fact that while the GT-MHR was first conceptualized in the U.S.,
it is currently under development as part of an International program.
Specifically, much of the engineering and developmental testing is
being performed in the Russian Federation with significant technology
transfer and review being made by Japan, France, and the U.S. as part
of the program for dispositioning of surplus, weapons grade plutonium.
To efficiently commercialize the GT-MHR in the U.S. we are attempting
to gain maximum leverage from this International effort in a manner not
altogether dissimilar from the development of the PBMR in South Africa.
Within the International program, every effort is being made to
ensure that the GT-MHR will be marketable in the U.S. and elsewhere. We
understand that components will need to be manufactured to U.S.
consensus code and standards. Nonetheless, the path and degree to which
foreign performed testing programs and analyses are usable in the U.S.
remains somewhat uncertain.
Outdated Regulations: Several regulations that impact the owners
and operators of plants could act as significant impediments.
Specifically, the economic competitiveness and hence the ability to
deploy a smaller, modular design would benefit from updating
legislation enacted at a time when the assumptions about nuclear power
and utilities operating them was different from today's realities.
Regulations that we feel should be revisited and revised are;
The antitrust review requirements of 10CFR Part 50.33a,
The ban on foreign ownership of U.S. nuclear plants of 10CFR
50.38,
The large emergency planning zone requirements in 10CFR Part
50.54, and
The annual fees on a per reactor basis of 10CFR Part 171.
The NRC antitrust review requirements of 10CFR Part 50.33a is based
on the assumption of regulated monopolies, electric utilities, owning
and operating nuclear power plants. However, antitrust review of a
competing commercial plant is an added cost to the user with little or
no benefit apparent to consumers. Furthermore, the review is redundant
with the reviews performed by other agencies.
The ban on foreign ownership of U.S. nuclear plants (10CFR 50.38)
should be considered for elimination. Many of the power generation
entities that could be either potential customers or part of a
consortium to build the first U.S. modules have foreign participants.
With the continuing consolidation of the industry the ban on foreign
ownership is likely to become increasingly burdensome to new nuclear
generation. The NRC has the authority to deny a license that would be
inimical to the common defense and security of the U.S., and thus the
blanket ban on foreign ownership is unnecessary.
The large emergency planning zone requirements in 10CFR Part 50.54
were developed based on an understanding of ``worst case'' accidents in
large water reactors being placed in service at the time. However, the
GT-MHR, from its inception, was designed to limit radiological releases
during accident to very much lower levels. Furthermore, the time frame
over which an accident would progress in these modular designs is
fundamentally different. Rather than the potential for core damage in
minutes, worse case accidents in the modular reactors progress over
days. Consequently, the typical 10 mile Emergency Planning Zone in
which preparations are in place for rapid off site actions in a large
area surrounding the plant does not appear required nor appropriate for
the modular gas reactors.
The annual fees specified in 10CFR Part 171 are currently assessed
equally on all reactors. Such a fee structure is punitive on smaller
sized reactors since for a given level of electric power production,
more reactors are involved. With an output of approximately 285
Megawatts, 3 or more GT-MHR modules would be required to equal the
output of a large Light Water Reactor. Under the current fee
arrangement, 3 or more times the annual fee would be assessed an
operator of the GT-MHRs. For operators of still smaller modules, the
fee would become an even greater burden.
Summary
In summary, the GT-MHR offers an environmentally benign source of
electric power that could be part of the answer to U.S. energy needs.
It is rooted in decades of international HTGR technology development
and builds on the mid-1980s MHTGR experience. The design features
optimization of characteristics inherent to high temperature gas-cooled
reactors to achieve high thermal efficiency, and easily understood,
assured safety.
To realize the benefits of this technology, though, legal and
institutional disincentives stemming from 1970's assumptions of what
nuclear power plants looked like and the environment in which they
would operate need to be reviewed and revised.
appendix
Description of the GT-MHR
The GT-MHR design is centered around a 600 Megawatt graphite core
comprised of 1020 fuel blocks essentially identical to those
successfully used in the Fort St Vrain reactor in the 1970s and 80s.
The system is contained in a 3 vessel, side-by-side arrangement. The
reactor is located in one vessel, while a compact arrangement of the
entire gas turbine based power conversion system, including the
generator is located in a second parallel vessel. A small horizontal
vessel provides coaxial ducting of gas between the reactor and power
conversion system. The entire nuclear unit is located in a below grade
silo with service areas above. The silo provides containment and
protection of the reactor but is not designed to hold pressure.
Naturally circulating water or air in panels around the reactor vessel
carry off heat radiated from the uninsulated vessel and provides
entirely passive reactor cooling.
Ceramic-coated fuel is the key to the GT-MHR's safety and
economics. A kernel of Uranium oxycarbide (or UO2) is placed in a porus
carbon buffer and then encapsulated in multiple layers of pyrolytic
carbon and silicon carbide. These micro pressure vessels withstand
internal pressures of up to 2,000 psi and temperatures of nearly 2,000
o C providing extremely resilient containment of fission products under
both normal operating and accident conditions. The fuel particles are
blended in carbon pitch, forming fuel rods, and then loaded into holes
within large graphite fuel elements. Fuel elements are stacked to form
the core.
Modular gas reactors and the GT-MHR represent a fundamental shift
in reactor design and safety philosophy. Up through approximately 1980,
HTGR development proceeded on a path of scaling up core size in the
interests of economics. In the process of this scale-up, overall core
power density was kept nearly constant while its surface to volume
ratio decreased. At the time, this was believed necessary to achieve
low capital cost. As a consequence of this thinking, the maximum
predicted accident temperatures of these large cores increased well
above the temperature capabilities of the fuel particles. This placed
ever increasing reliance on engineered safety features to assure
continued core cooling and to contain released fission products should
this cooling be lost. The modular reactor represents a 180-degree turn
around in design philosophy. From its inception, the modular design
first addresses safety, sacrificing size and optimized nuclear geometry
to ensure that regardless of cooling system operation or coolant
boundary integrity, fuel temperatures will never exceed the point at
which fission products would be released. Having first addressed safety
with the inherent features available in the gas-cooled reactor, good
economics are sought in the efficient Brayton cycle and plant
simplification.
Fuel particle testing in Japan, Germany, and U.S. has repeatedly
demonstrated the high temperature resilience of coated particle fuel to
temperatures approaching 2,000 deg.C. As a conservative design goal,
GT-MHR has been sized to keep maximum fuel temperatures below
1,600 deg.C during the limiting accident condition of lost coolant
circulation, pressure, and all AC power. Like other reactor types, the
GT-MHR has a negative temperature coefficient (i.e., the hotter the
reactor becomes, the less able it is to support a fission chain
reaction). But unique to reactors with an all refractory, high
temperature core, there is several hundred degrees of temperature
margin in the core design to make full use of this feedback mechanism.
Mr. Largent. Great. Thank you for your testimony.
Now, we recognize Dr. Allen Womack, president of BWX
Technology, on behalf of the Energy Contractors Price Anderson
Group, and you have 5 minutes to summarize your testimony.
STATEMENT OF E. ALLEN WOMACK
Mr. Womack. Thank you, Mr. Chairman. The Energy Contractors
Group is an ad hoc organization made up of BWX Technologies,
Battelle Memorial Institute, BNFL, Incorporated, Fluor
Corporation, Johnson Controls, Nuclear Fuel Services and
Washington Group International and USEC, Incorporated. This
represents a significant cross-section of DOE contractors.
Each of these entities is covered by one or more nuclear
hazard indemnity agreements with the U.S. Department of Energy
under section 170(d) of the Price-Anderson Act. Collectively,
we are here today to advocate an extension of the Price-
Anderson Act. We support another extension sooner rather than
later to ensure there is no break in this vital authority next
year.
The protection of the public has been the principal purpose
of the Price-Anderson Act since its adoption. Failure to extend
the act would result in substantially less protection for the
public in the event of a nuclear incident at a DOE site or in
transporting materials from a DOE site. Absent Price-Anderson
coverage, the Department of Energy would greatly be inhibited
in attracting and hiring the kinds of contractors needed to
tackle some of the tough work that lies before them. Without
Price-Anderson protection, most private contractors and
suppliers could not prudently take the financial risks
associated with assisting DOE to perform its vital cleanup,
national defense and other missions. Price-Anderson
indemnification is simply the only viable substitute for the
commercial insurance that prudent contractors doing work for
the Federal Government would purchase, if they could, to
protect themselves.
In 1999, the Department of Energy submitted a report to the
Congress calling for a renewal of Price-Anderson, and we
support that recommendation. Attached to their 1999 report to
Congress was a letter from American Nuclear Insurers indicating
that commercial insurers are not in a position to guarantee
that any nuclear liability insurance would be written for DOE
facilities. It further stated that even if it were, it could
not replace the $9.4 billion of indemnity granted under the
Price-Anderson Act, since ANI has been limited in their ability
to write coverage beyond $200 million.
There would be a strong reluctance on the part of existing
and potential contractors to do nuclear business with the
Department if the authority to enter into Price-Anderson
indemnity agreements were discontinued. The strong reluctance,
if not inability, to do business would apply especially to
contractors whose nuclear activities are a small percentage of
their overall business. This would lessen competition and
otherwise increase costs to the Government. the strong
resistance would also extend to subcontractors and equipment
suppliers, including many small businesses throughout the
country who might be held liable for an accident but not have
the financial resources to cover that liability or the legal
defense costs associated with such litigation.
With regard to safety, Price-Anderson indemnification
provides an incentive for safety. Not only are there existing
criminal laws to punish egregious behavior, in the 1988
amendments to Price-Anderson, Congress added enhanced criminal
and civil penalty provisions to further encourage DOE
contractor accountability. These provisions are now being
rigorously enforced. In addition, DOE can and does hold
contractors accountable by other actions, such as performance
fee reductions, stop work orders, contract modification and
contract revocation.
Reducing the number of potential contractors and suppliers
to DOE would obviously have an adverse impact on the
Department's costs and schedules. Of even greater concern would
be the potential adverse impact on the overall quality and
safety levels of DOE contract work, since the most qualified
and most safety-conscious contractors and suppliers would
probably be the first to abandon DOE work because of inadequate
liability protection.
In conclusion, the Price-Anderson indemnity system should
be continued in substantially its present form. After nearly 45
years of Price-Anderson Act indemnification, private industry
has assumed, as Congress intended, a larger role in assisting
the Federal Government in carrying its own nuclear activities
safely and efficiently. In other words, Price-Anderson
contractor indemnification is a system that has worked well in
encouraging this private industry participation, and it should
be promptly extended again.
Thank you for the opportunity to testify. I will be happy
to answer questions.
[The prepared statement of E. Allen Womack follows:]
Prepared Statement of E. Allen Womack, President, BWX Technologies,
Inc. on Behalf of Energy Contractors Price-Anderson Group
Mr. Chairman and Members of the Subcommittee, my name is Allen
Womack and I am President of BWX Technologies, Inc. I am here this
morning representing fellow Department of Energy contractors through
the Energy Contractors Price-Anderson Group.1 I am
accompanied by Omer F. Brown of Harmon, Wilmot & Brown, L.L.P., counsel
to the Group. We appreciate this opportunity to testify before your
Subcommittee and for the fact that you have scheduled this hearing
about extension of the Price-Anderson Act (``Price-Anderson'').
---------------------------------------------------------------------------
\1\ The Energy Contractors Price-Anderson Group is an ad hoc group
composed of Battelle Memorial Institute; BNFL, Inc.; BWX Technologies,
Inc.; Fluor Corporation; Johnson Controls World Services Corporation;
Nuclear Fuel Services, Inc.; Washington Group International Inc.; and,
USEC Inc. Each of these entities now is covered by one or more nuclear
hazards indemnity agreements with the U.S. Department of Energy (DOE)
under Section 170d of the Price-Anderson Act.
---------------------------------------------------------------------------
Price-Anderson Act authority of the Department of Energy provides
indemnity protection for nuclear risks associated with DOE contracts
and is to expire on August 1, 2002. We are here today to ask for its
renewal. We support extension, sooner rather than later, to ensure
there is not a break in this vital authority next year.
Protection of the public has been the principal purpose of Price-
Anderson. Failure to extend Price-Anderson would result in
substantially less protection for the public in the event of a nuclear
incident at a DOE site or in transportation. Moreover it would greatly
inhibit the Department of Energy in attracting and hiring the kinds of
contractors needed to tackle some of the tough work that lies before
them.
For almost 45 years, through Price-Anderson, the Congress has been
able to ensure the availability of adequate funds to the public (now
about $9.4 billion) in the unlikely event of a catastrophic nuclear
accident. In addition, other benefits to the public include such
provisions as emergency assistance payments, consolidation and
prioritization of claims in one court, channeling of liability
permitting a more unified and efficient approach to processing and
settlement of claims, and waivers of certain legal defenses in the
event of a large accident (``extraordinary nuclear occurrence'').
The 1988 Price-Anderson Amendments Act required DOE and the Nuclear
Regulatory Commission (NRC) to submit to Congress reports containing
their recommendations for continuation, repeal or modification of the
Price-Anderson Act. The DOE Report was submitted to Congress in March
1999 recommending an extension. NRC's Report, which also strongly
recommended an extension (with relatively minor changes), was filed in
October 1998.
The 1999 DOE Price-Anderson Report makes five basic
recommendations, which we support:
(1) DOE indemnification of its contractors for nuclear risks should be
continued without substantial change, because it is ``essential
to DOE's ability to fulfill its statutory mission.'' The Report
further makes the point that DOE indemnification guarantees the
availability of funds to ensure prompt and equitable
compensation for the public, provides for consolidating claims
in one federal court, and minimizes protracted litigation. DOE
goes on to state that Price-Anderson indemnification is cost-
effective, pointing out that DOE payments to date ``have not
been significant.''
(2) The amount of DOE indemnification (about $9.4 billion) should not
be decreased.
(3) DOE indemnification should continue to provide broad and mandatory
coverage of activities conducted under contract for DOE.
(4) DOE should continue to have authority to impose civil penalties on
for-profit contractors, subcontractors and suppliers for
nuclear-safety violations.
(5) The 1997 International Atomic Energy Agency Convention on
Supplementary Compensation for Nuclear Damage (CSC) should be
ratified, and conforming amendments to the Price-Anderson Act
should be adopted. (Technically, U.S. ratification of the CSC
would have little impact on the portions of the Price-Anderson
Act applicable to indemnification of DOE contractors. The CSC
is of more relevance to commercial nuclear activities, which
would enjoy substantial benefits from its ratification by the
United States and other countries. For example, the CSC would
provide a portion of the funds for a power plant accident in
the United States through international contributions.)
This year, we have seen several comprehensive energy bills
containing nearly identical Price-Anderson extension provisions
introduced in the House of Representatives (H.R. 1679) and the Senate
(S.388, S.472, and S.597). These are based on last year's bipartisan
Senate bill, S.2162 (106th Congress), introduced by Senator Frank
Murkowski (R-Alaska) and Senator Jeff Bingaman (D-New Mexico). We
support extension of the DOE contractor provisions of these bills whose
simplicity, similarity and bipartisan nature reflect a consensus on a
simple extension of Price-Anderson. We further note that the
President's National Energy Policy Report also supports extension of
the Price Anderson Act.
Without Price-Anderson protection, most private contractors and
suppliers could not prudently take the financial risks associated with
assisting DOE to perform its vital cleanup, national defense, and other
missions. Price-Anderson indemnification is not a ``subsidy'' to DOE
contractors and suppliers. It simply is the only viable substitute for
the commercial insurance that prudent contractors doing work for the
Federal Government would purchase, if they could, to protect
themselves, and the public.
Attached to the 1999 DOE Report to Congress is a letter from
American Nuclear Insurers (ANI) indicating that commercial insurers are
not in a position to guarantee that any nuclear liability insurance
would be written for DOE facilities. It further states that even if it
were, it could not replace the $9.4 billion of indemnity granted under
the Price-Anderson Act, since ANI has been limited to nuclear liability
limits of only $200 million.
In any case, ANI observed that it would be much easier for it to
write nuclear liability insurance for new DOE facilities than for
existing ones. The insurers said, for facilities which have, in some
cases, operated for decades, ANI ``would have obvious concerns about
picking up liability for old exposures, which may well preclude
insurability.'' Even if some limited private insurance were available
for some DOE nuclear activities, it would not protect against all
nuclear hazards, and would increase Government costs substantially, as
the DOE Report to Congress observes. Few nuclear claims have ever been
paid by the Government, so DOE has concluded it is cost-effective for
the Government to continue to self-insure the nuclear risks associated
with its own activities.
With regard to safety, Price-Anderson indemnification does not
provide a disincentive to safety any more than the purchase of
liability insurance by an individual or a corporation provides a
disincentive to safety. There are existing criminal laws to punish
egregious behavior. Furthermore, in the 1988 Amendments, Congress added
enhanced criminal and civil penalty provisions to further encourage DOE
``contractor accountability.'' These provisions, which now are being
rigorously enforced, were added to enable DOE to impose civil fines of
up to $110,000 per day and increased criminal penalties for violations
of DOE nuclear safety rules. DOE also can hold contractors accountable
by other actions, such as award-fee reductions, stop-work orders,
contract modification, and contract revocation.
There would be strong reluctance on the part of existing and
potential contractors to do nuclear business with the Department if
authority to enter into Price-Anderson indemnity agreements were
discontinued. The strong reluctance, if not refusal to do business,
would apply especially to contractors whose nuclear activities are only
a small percentage of their overall businesses. This would lessen
competition and otherwise increase costs to the Government. The strong
resistance also would extend to subcontractors and equipment suppliers,
including many small businesses throughout the country, who might be
held liable for an accident but not have the financial resources to
cover that liability or the legal defense costs associated with such
litigation.
Reducing the number of potential contractors and suppliers to DOE
would obviously have an adverse impact on their costs. Of even greater
concern would be the potential adverse impact upon the overall quality
and safety levels of DOE contract work since the most qualified and
most safety conscious contractors and suppliers would most probably be
the first to abandon DOE work because of inadequate liability
protection.
Contractor coverage prior to Price-Anderson often was inconsistent,
subject to individual contract idiosyncrasies, inapplicable to
subcontractors, and subject to the availability of appropriated funds.
Subsection 170d was carefully designed to correct many of these
deficiencies and to provide a uniform system of public protection.
Without Price-Anderson, DOE would be faced with performing its missions
with small, lightly capitalized contractors or Federal employees. In
those situations, the public would not be as well protected.
Contractors without assets could not pay claims. Use of Federal
employees would mean that the Federal Tort Claims Act would apply,
which would eliminate jury trials and the possibility of class actions,
and require the submission of individual administrative claims.
The Price-Anderson system specifically was developed to provide
assurance that significant sums of money would be available over an
extended period of years to make prompt payment to victims in the
remote case of a nuclear accident. The only fundamental change since
the original adoption of Price-Anderson in 1957, has been the
revolutionary change in the American tort system, most of which has
occurred over the last twenty-year period. This change has increased
greatly the unpredictability of the probable dollar damages resulting
from any major accident, whether it is nuclear or non-nuclear in
nature. This makes a system such as Price-Anderson only more essential
for the period beyond 2002.
Unlike NRC-licensed nuclear power plants that are ``grandfathered''
under Price-Anderson (i.e., their coverage lasts for the duration of
their license), DOE sites and facilities are not. Most DOE contracts
expire in five years or less. Indemnity in DOE contracts signed or
extended prior to the Act's expiration will remain in effect for the
duration of the contract, but contracts entered into or extended after
that date will have no indemnity. There are major DOE contracts that
will be coming up for renewal as early as September 2002. Therefore, it
is critical to the public to have Congress renew the Act before its
2002 expiration.
In conclusion, the Price-Anderson indemnity system should be
continued in substantially its present form. It should also be
clarified that the Act does apply to the new National Nuclear Security
Administration. After nearly forty-five years of Price-Anderson Act
indemnification, private industry has assumed, as Congress intended, a
larger role in assisting the Federal Government in carrying out its own
nuclear activities without any significant damage or injury to the
public. In other words, Price-Anderson contractor indemnification is a
system that has worked well. It should promptly be extended again.
Thank you again for this opportunity to testify before your
Subcommittee.
Mr. Largent. Thank you, Dr. Womack. I am not even going to
attempt to try to pronounce your name. Is it Quattrocchi?
Mr. Quattrocchi. Quattrocchi.
Mr. Largent. Quattrocchi. He is a senior vice president of
Underwriting for the American Nuclear Insurers, and we welcome
your testimony. You have 5 minutes to summarize it.
STATEMENT OF JOHN L. QUATTROCCHI
Mr. Quattrocchi. Thank you for the opportunity to address
the subcommittee today, Mr. Chairman. Yes, the name is John
Quattrocchi, although for obvious reasons most people refer to
me as John Q. I am chief underwriting officer at the American
Nuclear Insurers, which I will abbreviate today as ANI.
I am here today representing the member companies of ANI,
which are some of the largest insurers in the United States.
ANI, by way of background, is a joint underwriting association
or a pool of insurance companies that were formed for the very
special purpose of insuring the nuclear risk. We were created
in 1956 in response to Congress' desire for the insurance
industry to find a way to insure what was then a new
technology. Now, we worked very closely with Congress in those
early days to develop the Price-Anderson Act, which is
essentially an insurance program.
The law had several purposes in mind. The first was to
encourage private development. The second was to establish a
framework for handling potential claims. The third was to
provide a ready source of funds to compensate injured victims
of an accident. My purpose then today is to let you know that
from our perspective, as insurers, the act has served the
American public well and should be renewed with little, if any,
change.
Let me just quickly mention a couple of the key provisions
of the act that have allowed us, as insurers, to provide this
market for more than 40 years without interruption. First, the
law requires reactor operators to maintain primary financial
protection equal to the maximum amount of liability insurance
available from private sources. That requirement is satisfied
under nuclear liability policies that we write. Over the years,
the primary insurance limit has increased from $60 million in
1957 to $200 million today. The primary limit was last
increased in 1988, coincident with the last renewal.
Second point, in the event of loss that exceeds the primary
limit, the law requires reactor licensees to participate in
what is called a secondary financial protection program, which
we at ANI administer. Under that program, each licensee is
retrospectively assessable for any loss in excess of a primary
limit up to a maximum assessment of roughly $88 million per
reactor, per accident. So the second layer of protection is
actually drawn from reactor operators' own funds. And with 106
reactors still in this secondary program, the level of
financial protection available for the public is just over $9.5
billion.
Now, there are a number of other key provisions in the law
critical to our interests as insurers and to the public. Those
are outlined in my formal testimony, and I won't go through
them now.
But just some other quick points. I mentioned earlier that
our primary limit has not been increased since 1988, and
obviously inflation has taken a toll. So assuming that the act
is renewed essentially in tact, we will canvass our member
insurance companies to see if we can increase that primary
limit to something in the range of $300 million. We have also
begun talking with industry representatives about their
interest in a possible new coverage that would pay the
retrospective assessment in the second layer for the reactor
that has the accident. We think that in the unlikely event of
an accident that requires assessments, the utility that
actually suffers the accident will be under the most severe
financial pressure. And this new coverage would shift that
pressure to insurers, at least for one full retrospective
assessment.
Now, I will just sum up by saying that the financial
protection this law provides far surpasses any other system
which we know of. The act is clearly in the public interest. In
its first true test in 1979, after the Three Mile Island
accident, it served the public well. We, as insurers, responded
under the act within 24 hours of the evacuation advisory. We
made emergency assistance payments to some 3,100 families
without requiring a liability waiver of any kind. I was part of
that effort, and I am proud that we were able to help those
people affected by the accident.
Now, there is a little amusing story, and a short story, I
should add, that I shared with the Senate Energy Committee
yesterday and I would like to share with you today. I think it
illustrates the difficult time that was evident during that
accident. The insurance team that I was with was staying in a
motel that was roughly 10 miles from the accident site. And the
motel was very nearly deserted. At breakfast one morning, I
spotted a young family, a husband and wife, two children. The
husband and wife were clearly distraught at what they thought
would be serious consequences here to the children.
A waitress walked over to the table and she tried to
console the family. She said to them, ``Do you see those people
seated over there? They are with the insurance company, and
there is no way they would be here if we were in any real
danger.'' And then she added, ``But watch them very carefully,
because when they leave we leave.''
Now, I don't expect that to happen again, but if it does,
the public needs the protection that this act provides. We,
therefore, urge the members of the subcommittee and the full
committee to support renewal of the act in its existing form.
I thank you for your time and the opportunity to express
the views of insurers on this important issue. I would be happy
to respond to questions, and I would ask that my full testimony
be entered into the record. Thank you.
[The prepared statement of John L. Quattrocchi follows:]
Prepared Statement of John L. Quattrocchi, Senior Vice President,
Underwriting, American Nuclear Insurers
Mr. Chairman and distinguished members of the Subcommittee, I am
John Quattrocchi, Senior Vice President, Underwriting at the American
Nuclear Insurers--or ANI. Joining me today is Mr. Tim Peckinpaugh,
Washington, D.C. Counsel to ANI. We appear today on behalf of the
member insurance companies of ANI. The National Association of
Independent Insurers also joins in our statement. We appreciate your
invitation to present our views on the nuclear risk with a special
focus on the financial protection requirements of the Price-Anderson
Act.
ANI is a joint underwriting association that acts as managing agent
for its member insurance companies. We are, in effect, a ``pool'' of
insurance companies formed for the purpose of insuring a unique risk.
Together with our reinsurance partners from around the world, we
represent the worldwide insurance community.
We will not dwell on the advantages of nuclear power. We are not
advocates for any particular energy source. However, as professional
insurers and long-term observers of the energy scene, we believe
nuclear power represents a safe, reliable and environmentally friendly
part of our nation's energy mix. The nuclear industry has achieved an
impressive safety record and, as insurers, we are proud of the role
we've played in supporting their efforts.
ANI and its predecessor organizations were created in 1956 in
response to Congress' urging that insurers find a way to insure what
was then a fledgling technology. We worked closely with Congress and
with the industry to develop the Price-Anderson law. The law is
essentially an insurance program that had several purposes in mind.
The first was to encourage the private development of nuclear
power.
The second was to establish a legal framework for handling
potential liability claims.
And the third was to provide a ready source of funds to
compensate injured victims of a nuclear accident.
The Act represents a careful balancing of the interests of the
public as private citizens and as participants in and beneficiaries of
private business enterprise. We also believe the Act has been critical
in enabling us to provide stable, high quality insurance capacity for
nuclear risks in the face of normally overwhelming obstacles for
insurers--those obstacles being catastrophic loss potential, the
absence of credible predictability, a very small spread of risk and
limited premium volume. This has been accomplished for more than four
decades without interruption and without the ``ups and downs'' (or
market cycles) that have affected nearly all other lines of insurance.
key provisions of the price-anderson act
Financial Protection 1 . . . In Two Layers
---------------------------------------------------------------------------
\1\ Defined in Section 11.k. of the Atomic Energy Act of 1954, as
amended.
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To assure a source of funding to compensate accident victims, the
law requires reactor operators to maintain primary financial protection
equal to the maximum amount of liability insurance available from
private insurance sources at reasonable terms.2 This
provision has enabled insurers to develop and sustain secure, high
quality insurance capacity from worldwide sources. Evidence of this
lies in the stability of limits, price and coverage that insurers have
provided in what is a very special line of business. Indeed, primary
insurance limits actually increased after the Three Mile Island (TMI)
accident in 1979 from $140 million to $160 million, and prices rose
only modestly. The primary limit was last increased to $200 million in
1988 coincident with the last renewal of the Act. This limit is written
by ANI at each operating power reactor site in the U.S., which
satisfies the requirement for primary financial protection.
---------------------------------------------------------------------------
\2\ The Atomic Energy Act of 1954, as amended, Section 170.b.(1).
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The Act also requires reactor operators to participate in an
industry-wide retrospective rating program for loss that exceeds the
primary insurance limit.3 ANI writes a Secondary Financial
Protection (SFP) Master Policy through which we administer the SFP
program. Under this policy, each insured is retrospectively assessable
for loss that exceeds the primary insurance limit up to a maximum
retrospective assessment currently set at $88.095 million (adjusted
every five years for inflation) per reactor, per incident. In other
words, the second layer of protection is drawn from reactor operators'
own funds. Insurers have a contingent liability to cover potential
defaults of up to $30 million for one incident or up to $60 million for
more than one incident. Under the terms of the contract, however, ANI
would expect to be reimbursed with interest for any funds it advances
under this program. With 106 reactors in the program, the total level
of primary and secondary financial protection is just over $9.5 billion
($200 million in the primary layer + $88.095 million in the secondary
layer X 106 reactor units participating).
---------------------------------------------------------------------------
\3\ Ibid.
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Limitation on Aggregate Public Liability 4
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\4\ The Atomic Energy Act of 1954, as amended, Section 170.e. (1)
(A) and Section 170.o. (1) (E).
---------------------------------------------------------------------------
The Act limits the liability of reactor operators or others who
might be liable for a nuclear accident to the combined total of primary
and secondary financial protection, though Congress is committed to
providing additional funds if financial protection is insufficient.
5 Knowing the extent of one's liability provides economic
stability and incentives that would not exist without a limit.
---------------------------------------------------------------------------
\5\ The Atomic Energy Act of 1954, as amended, Section 170.e. (2).
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Legal Costs Within the Limit 6
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\6\ The Atomic Energy Act of 1954, as amended, Section 170.e. (1)
(A).
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The expenses of investigating and defending claims or suits are
part of and not in addition to the limit of liability. The inclusion of
these costs within the limit enables insurers to offer their maximum
capacity commitments without fear of exceeding those commitments. This
provision is absolutely essential if insurers are to maintain and
hopefully increase the assets they place at risk.
Economic Channeling of Liability 7
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\7\ The Atomic Energy Act of 1954, as amended, Section 11.t. and
170.c.
---------------------------------------------------------------------------
The Act channels the financial responsibility and insurance
obligation for public liability claims to the nuclear plant operator.
This helps assure that injured parties will be able to establish with
certainty liability for a nuclear accident that will be backed by solid
financial resources to respond to those liabilities.
Waiver of Defenses 8
---------------------------------------------------------------------------
\8\ The Atomic Energy Act of 1954, as amended, Section 170.n. (1).
---------------------------------------------------------------------------
In the event of what is called an Extraordinary Nuclear Occurrence
(ENO),9 insurers and insureds waive most standard legal
defenses available to them under state law.10 The effect of
this provision is to create strict liability for a severe nuclear
accident. Claimants in these circumstances need only show that the
injury or damage sustained was caused by the release of nuclear
material from the insured facility. Fault on the part of a particular
defendant does not have to be established.
---------------------------------------------------------------------------
\9\ Defined in Section 11.j. of the Atomic Energy Act of 1954, as
amended. Without citing all the specifics, the term refers to a
significant nuclear incident that results in severe offsite
consequences.
\10\ The legal defenses waived in the policy include (i) any issue
or defense as to the conduct of the claimant or the fault of the
insured, (ii) any issue or defense as to charitable or governmental
immunity, and (iii) any issue or defense based on any statute of
limitations if suit is instituted within three years from the date on
which the claimant first knew, or reasonably could have known, of his
bodily injury or property damage and the cause thereof.
---------------------------------------------------------------------------
Federal Court Jurisdiction in Public Liability Actions 11
---------------------------------------------------------------------------
\11\ The Atomic Energy Act of 1954, as amended, Section 170.n. (2).
---------------------------------------------------------------------------
Historically, state tort law principles have governed nuclear
liability determinations. The Price-Anderson Act provides for a federal
overlay to the application of state law. The Act confers jurisdiction
over public liability actions on the Federal District Court in which
the accident occurs. This removes the confusion and uncertainties of
applicable law that would otherwise result when multiple claims and
lawsuits are filed in multiple courts. The provision also reduces legal
costs and speeds the compensation process.
Precautionary Evacuations 12
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\12\ Defined in Section 11.gg. of the Atomic Energy Act of 1954, as
amended.
---------------------------------------------------------------------------
The system anticipates that insurers will provide immediate
financial assistance to people who are forced to evacuate their homes
because of a nuclear accident or because of imminent danger of such an
event.
The Act, and these provisions in particular, have stood the test of
time and served the public well as demonstrated by the response at
Three Mile Island.
the accident at three mile island
The accident at Three Mile Island occurred on March 28, 1979.
Within twenty-four hours of the Pennsylvania Governor's advisory for
pregnant women and pre-school age children to evacuate a five-mile area
around the site, we had people in the area making emergency assistance
payments. Two days later, a fully functioning claims office staffed
with some 30 people was open to the public. The claims staff grew to
over 50 people within the next two weeks. All of the claims staff came
from member insurance companies from around the country. I spent about
10 days at the claims office shortly after it opened to lend whatever
support I could.
As the office was being set up, we placed ads on the radio,
television and in the press informing the public of our operations and
the location of the claims office. Those people affected by the
evacuation advisory were advanced funds for their immediate out-of
pocket living expenses, that is to say, expenses for food, clothing,
shelter, transportation and emergency medical care. Approximately $1.3
million in emergency assistance payments were made to some 3,100
families without requiring a liability waiver of any kind.
We responded as quickly as we did because we had prepared for
emergencies in advance. Emergency drills were conducted periodically,
and an emergency claim response manual helped guide our response.
Checks and other claim forms that had been pre-printed and stored for
emergencies were immediately available to us. The insurance industry
received high praise for its quick response at TMI. In responding as we
did, we helped to alleviate some of the fear and dislocation of those
affected by the accident.
policy coverage and claims experience
The nuclear liability policy written for nuclear site operators is
designed to respond to an insured's liability for damages because of
bodily injury or offsite property damage caused by a large, sudden
catastrophic accident. However, it can also respond to allegations of
injury from very small amounts of nuclear material. That bears
repeating. In addition to providing coverage for catastrophic events,
we are providing coverage for alleged offsite damages from normal plant
operations.
All of our insured facilities release very small amounts of
material within acceptable regulatory limits. But the public perception
of what is ``acceptable'' and what constitutes ``damage'' is a moving
target. Indeed, almost all of our claims allege injury or damage (or
fear of future injury or damage) from little or no documented radiation
exposure. And, with the exception of the accident at Three Mile Island,
few of the claims from members of the offsite public are the result of
a clearly identifiable event. Instead, our claims experience is more
related to routine releases and the latent injury phenomenon now
popular--at least in the U.S.--in the toxic torts arena. The alleged
damages usually involve somatic, psychosomatic or genetic effects from
exposure to radiation at de minimis levels.
From inception, ANI has handled some 205 reported claims or
incident notifications. We've paid just under $187 million for
indemnity and legal defense and have incurred losses of $463 million,
all through March 1 of this year. The difference between the paid and
incurred loss figures represents what is reserved for indemnity and
defense on outstanding claims.
Radiation claims are costly to defend and there is often no
relationship between the amount of radiation alleged and the expense
necessary to defend the claim. While the judicial process is expensive,
it does expose claims that have no basis in scientific fact. Given the
finite resources available to compensate truly injured victims, it
serves no one's interest for insurers to compensate claims without
merit. The importance of the legal framework established in the Act,
including the cost of defense within the system, cannot therefore be
overstated.
nrc's report to congress . . . primary liability limits
In its 1998 Report to Congress on the status of the Act, the NRC
strongly supported reauthorization of the Price-Anderson Act and
offered eight recommendations. In the interest of time, and because the
Subcommittee is, I'm sure, familiar with the report, I will focus
particular attention on just one of the recommendations--specifically,
that Congress discuss with insurers the potential for increasing the
primary liability insurance limit. The NRC indicated in its report that
an increase to roughly $350 million would at least keep pace with
inflation since 1957.
As was noted earlier in my testimony, the Act requires power
reactor licensees to maintain primary financial protection equal to the
maximum amount of liability insurance available from private sources at
reasonable terms. But for this provision, it is doubtful that limits at
the levels written could have been sustained without interruption or
fluctuation for more than forty years. To illustrate the point, when,
in the mid-1980's, liability insurance became unavailable at almost any
price for conventional lines of business, nuclear liability insurers
continued to provide a stable market for their limited customer base--
thanks, in part, to this provision.
Liability limits have been increased periodically from $60 million
in 1957 to $200 million presently. The limit was last increased to its
present level in 1988 coincident with the last renewal of the Act. The
attached Table of Limits outlines the history of primary liability
limits from 1957.
We believe an increase in the level of primary insurance coverage
would benefit the system and enhance public protection for a number of
reasons:
(1) The existing limit has not changed since 1988 and its value has, in
fact, been eroded by inflation. When measured against the rate
of inflation from 1988 to June 1998, the limit would have grown
to roughly $275 million. When measured against inflation from
1957 to June 1998, the limit would have increased to about $350
million.
(2) An increase in the primary limit to reflect the impact of inflation
is consistent with inflationary increases mandated by the
Price-Anderson law in the second layer. Section 170.t. of the
Act requires that the maximum retrospective premium in the
second layer be adjusted at five-year intervals. The maximum
retrospective premium in the second layer has, in fact, been
increased twice since 1988 to reflect the impact of inflation.
(3) A higher primary limit would provide an added buffer between loss
in the primary layer and retrospective assessments on utility
operators in the second layer. Sound funding for the remote but
nevertheless possible nuclear catastrophe calls for pre-funding
a substantial portion of the costs of that accident. The higher
the potential retrospective liabilities on the nuclear industry
in the second layer, the more desirable reasonable increases in
the primary insurance layer become.
(4) The number of reactor licensees can be expected to decrease in the
coming years as reactor units are sold to a relatively smaller
number of buyers. The effect of this would be to substantially
increase the maximum potential retrospective assessment on
those remaining operators at a time of severe economic stress
for nuclear utilities generally--that is to say, following a
large-scale nuclear accident. In these circumstances, a higher
primary liability limit would provide a better balance between
pre- and post-funded layers of accident protection, in effect
enhancing the protection to the public.
(5) Deregulation of the electric utility industry may hamper a
utility's ability to pass on to ratepayers the cost of a
retrospective assessment. A higher primary limit would reduce
the chances of, or at least delay, an assessment in the second
layer.
Consistent with the long-standing objective of Congress to provide
the most financial protection possible to compensate the public, we
will work with our members and reinsurers to develop higher primary
insurance limits coincident with the renewal of the Act. This assumes
the Act is renewed in essentially its existing form. Any effort on our
part to increase the primary limit would also have to be balanced
against the needs and desires of our customer base. If these needs can
be balanced, our goal would be to develop only capacity that is
financially secure and committed for the long term. While I cannot
provide any commitments at this time, a reasonable goal might be a
primary limit in the range of $300 million, again assuming a
satisfactory renewal of the Act.
possible new protection in the second layer
As my testimony has indicated, in the unlikely event that
retrospective premiums in the second layer need to be assessed because
of a severe nuclear accident, those assessments will be levied at a
time of great political and financial stress. The pressures on the
utility that suffers the accident will, in all likelihood, be the most
severe. For that reason, we have begun to discuss with the industry a
potential new coverage under the existing Secondary Financial
Protection (SFP) program that would pay up to one full retrospective
premium (currently up to $88.095 million) on behalf of the utility at
whose site the accident occurs. Payment of this retrospective premium
would be made on a guaranteed cost basis--that is to say, we would not
expect to be reimbursed. Since coverage would apply on a guaranteed
cost basis, we would have to secure additional capacity over and above
whatever additional capacity might be developed for the primary layer.
We envision that coverage would be added by endorsement to the
existing SFP program for an additional per reactor premium. We would
prefer that coverage be purchased on a voluntary basis and not made
part of the financial protection requirements. For the coverage to be
viable, at least half the number of reactor units in the SFP program
would have to participate.
This coverage would shift to the insurance industry some of the
strain that would undoubtedly be felt within the utility industry after
a severe nuclear accident. If the potential new coverage is something
the industry desires, we will try to implement it coincident with the
renewal of the Act, or as soon thereafter as reasonably possible.
price-anderson as a subsidy?
Some have argued that Price-Anderson is a subsidy for the nuclear
industry. For what it's worth from our perspective as independent
insurers, that view is clearly inaccurate. We are not aware of any
payments made by the Federal Government to private licensees under
Price-Anderson. Indeed, the industry not only pays the cost of the
insurance required by the Act, it has paid millions of dollars in
indemnity fees and has assumed more than $9 billion in potential
retrospective assessments to compensate injured accident victims--all
of this at no cost to the government.
Some argue that the Act's limitation on liability is a subsidy for
the industry in that it limits potential recoveries of accident
victims. The fact is, however, that, in exchange for the limit on
liability, the Act provides for a large, ready source of funds for
accident victims that would not otherwise exist.
Insurers have a great deal of experience handling litigation that
is ``unfettered'' by limitations on liability. No case stands out in my
mind more than the Bhopal accident in India in 1984. As many as 4,000
people died and another 500,000 were injured. After years of
litigation, Union Carbide settled with the Indian Government for $470
million--or roughly $1,000 in compensation for each of those killed or
injured.
The simple fact is that there is always a limit on liability--that
limit equal to the assets of the company at fault. Those who helped
shape the Price-Anderson Act understood that fact. It was their belief
that those who share in the benefits of nuclear energy should also
share in the risks through a system of solid financial protection
provided by industry and by government.
Beyond serving the public interest, the limitation on liability
enables insurers to quantify their potential liabilities. Without the
limitation, suppliers and others who might incur potential nuclear
liabilities would be forced to seek separate insurance protection for
their own accounts, in turn, exposing insurers to unacceptable
accumulations. In these circumstances, the level of available liability
insurance might well diminish.
conclusion
To the best of our knowledge, the financial protection that the Act
provides the public far surpasses the performance of any other system
in place in the United States. The essential fact is that the public is
far better off with this system of financial protection than without
it. For us as insurers, its provisions make an otherwise difficult risk
insurable. We therefore urge the members of this Subcommittee to
support expeditious renewal of the Act with little if any change as
recommended by the NRC report to Congress and the Administration's
National Energy Policy released last month. In terms of the legislation
pending before this Subcommittee, we support in general the Price-
Anderson reauthorization provisions of H.R. 1679, the Electricity
Supply Assurance Act of 2001 (Subtitle A of Title I).
We are grateful to the Committee for the opportunity to express the
views of insurers on this important issue.
Table of Limits
History of Maximum Nuclear Liability Insurance Available from 1957 to
Present
------------------------------------------------------------------------
Liability
Limits ($ in % Increase
Million)
------------------------------------------------------------------------
1957..................................... 60 -----
1966 *................................... 74 23.3
1969..................................... 82 10.8
1972..................................... 95 15.8
1974..................................... 110 15.8
1975 *................................... 125 13.6
1977..................................... 140 12.0
1979..................................... 160 14.3
1988 *................................... 200 25.0
------------------------------------------------------------------------
* Coincident with the renewal of the Price-Anderson Act.
Mr. Largent. So ordered, and we thank you, Mr. Quattrocchi.
And now we recognize Ms. Aurilio, who is the legislative
director with U.S. Public Interest Research Group. You have 5
minutes. Thank you.
STATEMENT OF ANNA AURILIO
Ms. Aurilio. Thank you. Good afternoon. My name is Anna
Aurilio, and I am the legislative director with U.S. PIRG. We
are the national lobbying office for the State public interest
research groups. We are non-profit, non-partisan consumer,
environmental and good government organizations active across
the country. I have also submitted this testimony on behalf of
Friends of the Earth.
We have a long history of working for clean, affordable
energy future. We actually have a web site now called
newenergyfuture.com to talk about our vision. Our goal is to
shift away from polluting dangerous sources of energy, such as
nuclear and fossil energy, and to increase energy efficiency,
which saves consumers money, and clean renewable energy
sources.
Nuclear power is not part of our vision for the future. It
is unsafe, unreliable, uneconomic, and generates dangerous
wastes for which there is no safe solution. We believe it
should be phased out as soon as possible and should not be
encouraged as a future energy source. We also believe that the
President's energy plan is very misguided in this regard. He
believes that we would need to build 1,300--at least 1,300 new
power plants to meet future electricity demand.
In fact, both the Department of Energy's clean energy
future report and the Union of Concerned Scientists report show
that we can meet the vast majority of future electricity demand
by increasing energy efficiency, shifting to renewable energy
sources. This would all occur at consumer savings of tens or
hundreds of billions of dollars. And that at least half of the
1,300 power plants that are proposed by the President are
actually already in the pipeline. Whether anybody likes them or
agrees with them or not, they are already in the pipeline,
according to the Energy Information Administration. So we
actually don't need to build any dirty, new power plants.
Nuclear power wouldn't exist today if it weren't for
massive Government subsidies and other unfair policies. In
fact, I have even quoted Jerry Taylor of the Cato Institute who
says, ``The nuclear industry is purely a creature of
Government. The administration needs to practice the free
market rhetoric that it preaches and put away its nuclear pom-
poms.''
The Price-Anderson Act represents just one of the
unwarranted subsidies enjoyed by the nuclear industry. Others
include the lion's share, or at least 60 percent, of Federal
research and development money, a Federal nuclear waste
disposal program and more than $100 billion in ratepayer
bailouts dues to State deregulation programs.
The Price-Anderson Act, which is what I am going to focus
the rest of my testimony on, guarantees protection for the
nuclear industry while the public would have to beg before
Congress for compensation if there were a large catastrophic
nuclear accident. It does not guarantee full compensation for
victims of a nuclear accident; it perpetuates a long history of
subsidies and unfair policies, which reward the industry at
public expense; and it exempts contractors from liability for
public damages, as Congressman Markey pointed out, even if they
were reckless or wilfully negligent.
The Price-Anderson Act was first passed in 1957. It was
supposed to be a temporary measure for a fledgling industry.
Today, the industry has grown enormously, and it has reaped
enormous profits. It has reaped substantial benefits from
Price-Anderson coverage, from the Nuclear Waste Program, from
ratepayer bailouts at the State level. Meanwhile, victims of a
major nuclear accident would still not be guaranteed
compensation in case of an accident. This is not good
government. The Price-Anderson Act should not be renewed and
should either be radically reformed or replaced by legislation
that truly protects the public and truly provides incentives
for safe conduct.
I want to highlight some of our concerns with nuclear
safety. First of all, the nuclear fleet today is aging, and we
are extremely concerned about some of the aging related
problems that seem to be ignored by the industry and the
regulators. In particular, over the last year, according to the
Union of Concerned Scientists, there have been at least nine
reactor shutdowns due to aging related problems. Rather than
provide incentives or changing safety rules to make it easier
for the nuclear industry to extend its licenses, I would hope
that this committee actually would look a little bit more
closely at aging related problems. I think this is a serious
problem.
Going back to the Price-Anderson Act with regard to new
reactors, the gas-cooled reactor designs, which actually
Congress, wisely, in 1995, killed funding for one of the gas-
cooled reactor designs, in part, because two National Academy
of Sciences studies said that it wasn't warranted, and in part
because it was going to cost an enormous amount of money for
taxpayers, these designs lack conventional containment. And,
again, as one of the congressmen pointed out, the Price-
Anderson Act actually shields builders and designers of nuclear
power plants for liability, and yet the folks who are promoting
these new designs that would lack conventional containment want
to pay less, not more, in case of a nuclear accident. That
doesn't make sense, and I have a solution for those who worry
about smaller nuclear reactors not wanting to pay as much as
the----
Mr. Barton. Could you give us your solution in the next 15
seconds?
Ms. Aurilio. Absolutely. I am sorry. I didn't have one of
those lights in front of me.
Mr. Barton. I know. I have given you an extra minute, so we
are trying to be gracious.
Ms. Aurilio. I will wrap up by saying for those folks who
worry about having to pay into the fund, new nuclear reactors
just shouldn't be covered by Price-Anderson, and you should go
to the private industry and get your own coverage. Thank you.
[The prepared statement of Anna Aurilio follows:]
Prepared Statement of Anna Aurilio, Legislative Director, U.S. Public
Interest Research Group on Behalf of the U.S. Public Interest Research
Group and Friends of the Earth
Good morning, my name is Anna Aurilio and I'm the Legislative
Director of the U.S. Public Interest Research Group, or U.S. PIRG. U.S.
PIRG is the national office for the State PIRGs, which are
environmental, good government and consumer advocacy groups active
around the country. Thank you for the opportunity to speak today.
The state PIRGs have a long history of working for a clean
affordable energy future. Our goal is to shift from polluting and
dangerous sources of energy such as nuclear and fossil energy to
increased energy efficiency and clean renewable energy sources.
Nuclear power is unsafe, unreliable, uneconomic and generates long-
lived radioactive wastes for which there is no safe solution. We
believe it should be phased out as soon as possible and should not be
encouraged as a future energy source.
Nuclear power would not exist today if it weren't for massive
government subsidies and other unfair policies. Jerry Taylor of the
Cato Institute agrees.
In the final analysis, the nuclear industry is purely a
creature of government. The administration needs to practice
the free-market rhetoric that it preaches and put away its
nuclear pompoms.1
---------------------------------------------------------------------------
\1\ Taylor, J., ``Nuclear Power Play'', Washington Post, 5/18/01.
---------------------------------------------------------------------------
The Price Anderson Act represents just one of the unwarranted
subsidies enjoyed by the industry. Others include: the lion's share, or
60%, of federal research and development dollars since 1948
2; a federal nuclear waste disposal program 3,
and more than $100 billion in ratepayer bailouts from state utility
deregulation plans.4
---------------------------------------------------------------------------
\2\ Congressional Research Service
\3\ http://www.greenscissors.org/energy/nuclearwastefundfee.htm
\4\ http://www.safeenergy.org/ratepayer.htm
---------------------------------------------------------------------------
During reauthorization of the Price-Anderson Act in the 1980's, the
PIRGs, the Environmental Policy Institute (the predecessor to Friends
of the Earth) and other environmental, consumer and taxpayer groups
advocated for reforms of the Price Anderson Act. Our policy then, as it
is now, is that the American public deserves a sound and responsible
nuclear accident policy. Such a policy would accomplish three
fundamental goals:
Assure full compensation of any nuclear accident victims,
Protect taxpayers from subsidizing nuclear industry
negligence, and
Increase safety incentives and require high standards of
industry accountability.
Unfortunately, the Price Anderson Act as (amended in 1988) does not
accomplish these goals. Instead, this Act does not guarantee full
compensation for victims of a nuclear accident, perpetuates a long
history of federal subsidies and policies which reward the nuclear
industry at public expense, and exempts contractors from liability for
public damages even if they were reckless or willfully negligent.
background
Enacted in 1957, the Price Anderson Act was intended to be a
temporary solution to a temporary problem--the refusal of insurers to
underwrite nuclear risks. According to a 1957 Senate report, it was
expected that after the Act expired in ten years, ``...the problem of
reactor safety will be to a great extent solved and the insurance
people will have had an experience on which to base a sound program of
their own.'' 5
---------------------------------------------------------------------------
\5\ Berkovitz, Dan ``Price-Anderson Act: Model Compensation
Legislation?--The Sixty-Three Million Dollar Question, Harvard
Environmental Law Review, 1989.
---------------------------------------------------------------------------
Forty-four years later, few of these expectations have been
realized. Many of the problems of reactor safety continue to be
unsolved. In addition certain reactor components such as reactor
pressure vessels and steam generator tubes have exhibited unanticipated
aging-related problems. The nuclear industry continues to be unwilling
to assume the risks of its activities.
In its current form, the Price-Anderson limits liability for
damages to the public in the case of a nuclear accident. The Act
expires on August 1, 2002. Existing reactors will continue to operate
under the current system if it is not extended.
Price Anderson currently requires owners of licensed commercial
reactors to carry $200 million of liability insurance. If claims
following an accident exceed that amount, all commercial reactor
operators must contribute up to $83.9 million per reactor. With 106
reactors currently covered by Price-Anderson, the total pool of funds
is approximately $9.09 billion for public compensation.6 The
public has no legal right to compensation for damages exceeding the
limit. Price-Anderson leaves this question to Congress.7
Companies that build, design, and supply parts for nuclear power plants
are completely exempt from public liability.8
---------------------------------------------------------------------------
\6\ Holt M. and Behrens C., ``Nuclear Energy Policy'',
Congressional Research Service IB88090, 3/22/01, p.14.
\7\ 42 U.S.C. 2210(e).
\8\ Berkovitz, Dan ``Price-Anderson Act: Model Compensation
Legislation?--The Sixty-Three Million Dollar Question, Harvard
Environmental Law Review, 1989.
---------------------------------------------------------------------------
DOE contractors are indemnified up to a total of $9.43 billion.
This means taxpayers could pay $9.43 billion in case of an accident
cause by a DOE contractor regardless of the contractor's conduct. While
the 1988 amendments allow DOE to assess civil fines and penalties
against its contractors, it specifically exempts seven non-profit
institutions. These institutions plus their for-profit subcontractors
are exempt from civil penalties.
The seven institutions listed in the Price Anderson Act are: The
University of Chicago for activities at Argonne National Laboratory;
The University of California for activities at Los Alamos; Lawrence
Livermore, and Lawrence Berkeley National Laboratories; American
Telephone and Telegraph and its subsidiaries for activities at Sandia
National Laboratory (now operated by Lockheed Martin which is subject
to civil penalties); Universities Research Association for activities
at FERMI National Laboratory; Princeton University for activities at
the Princeton Plasma Physics Laboratory; the Associated Universities
Inc for activities at Brookhaven National Laboratory ( now operated by
Brookhaven Science Associates which is subject to civil penalties) and
Battelle Memorial Institute for activities associated with the Pacific
Northwest Laboratory.9
---------------------------------------------------------------------------
\9\ U.S. DOE, ``Report to Congress on the Price Anderson Act,''
March 1999, p. 23.
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the price anderson act is an unwarranted subsidy to the nuclear
industry
Because reactor operator liability is limited, the Price Anderson
Act denies accident victims full compensation and will inevitably
result in either taxpayers or victims footing the bill for catastrophic
nuclear accidents. Because DOE contractors are not held responsible for
any public damages in nuclear accidents they cause, the taxpayer will
foot the bill for commercial nuclear waste transport accidents,
accidents at research reactors and weapons site cleanups. Taxpayers
will foot the bill for DOE contractor accidents even if they resulted
from recklessness, gross negligence, or intentional disregard for
public health and safety. The companies that design, build and supply
parts for nuclear power plants are totally exempt from any liability
for damages to the public. These commercial nuclear contractors are not
responsible for damages to the public even if they were reckless,
grossly negligent, or intentionally disregarded public health and
safety.
Estimates of the value of this subsidy to nuclear power plant
owners range from $3.45 million 10 to $33 million
11 (2001 dollars) per reactor per year. With 106 reactors
covered, is a total annual subsidy to the nuclear industry of $366
million to $3.5 billion.
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\10\ Heyes, A, and Liston-Heyes, C. ``Liability Capping and
Financial Subsidy in North American Nuclear Power; Some Financial
Results based on Insurance Data,'' Department of Economics, University
of London, England.
\11\ Dubin, J.A. and Rothwell, G.S. ``Subsidy to Nuclear Power
Through Price Anderson Liability Limit,'' Contemporary Policy Issues,
Vol III, July, 1990.
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The nuclear industry and its cheerleaders keep touting the safety
of nuclear power and its cost-effectiveness. Yet, they are here today,
asking that they not be held fully responsible for the public
consequences of designing, building and operating these ``safe''
reactors and transporting the lethal waste generated from these
activities.
Even the Vice President admits that the industry needs continued
subsidies. If the Price Anderson Act is not renewed, Vice President
Cheney said, ``Nobody's going to invest in nuclear power plants.''
12
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\12\ ``Cheney Says Push Needed to Boost Nuclear Power,'' Reuters
News Service, 5/15/01.
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The industry cannot have it both ways. If nuclear power is cost-
effective and safe, then the nuclear industry should bear full
liability for the costs of a nuclear accident. Insurance for these
risks should be internalized as a cost of doing business, just as it is
for every other industry. The Act should not be re-authorized in its
current form. Either Congress should radically reform the Price
Anderson Act or it should enact separate legislation, which will
provide fair and full compensation to the public in the event of a
nuclear accident.
the price anderson act protects the nuclear industry but not the public
Under Price Anderson, nuclear reactor operators get a guarantee of
limited liability for public damages in the event of a nuclear
accident. The designers, builders and suppliers of the reactors are
exempt from all liability for damage to the public. DOE contractors are
fully indemnified by the government. In contrast, the public gets no
guarantee of full compensation.
All players in the last Price Anderson debates, including the
Nuclear Regulatory Commission (NRC), the Department of Energy, and the
nuclear utilities testified in favor of full compensation for victims.
Because liability is limited to a little more than $9 billion, no one
is legally obligated to pay damages over the limit and no one has a
right to recover for those damages. The current system puts much of the
risk of a catastrophic nuclear accident on the shoulders of its
victims. Victims would have to plead their case before
Congress.13
---------------------------------------------------------------------------
\13\ Magavern, W., Testimony to the Presidential Commission on
Catastrophic Nuclear Accidents, 10/25/89.
---------------------------------------------------------------------------
The question of who should pay when damages exceed the limit has
never been fully resolved. If there is an accident, the money will have
to come from somewhere, and we see only three choices. It will come
from the victim's pockets, from the taxpayers' pockets, or the
industry's pockets. We believe it should come from the industry.
However, under the current law, it seems inevitable that taxpayers
would foot the bill or victims would go uncompensated.
The Price Anderson Act calls for Congressional action to ``provide
full and prompt compensation to the public for all public liability
claims resulting from a disaster of such magnitude.'' 14 On
July 29, 1987, during the floor debate on amendments to the house bill
(H.R. 1414) that was ultimately enacted into law, Representative Morris
Udall described compensation for damages above the limit as the ``third
level.''
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\14\ 42 U.S.C. 2210(e).
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The third layer is the disaster layer. Let us say the Indian Point
Nuclear Plant in New York has a meltdown or some very serious matter
affecting whole cities and regions. We could not decide whether that
ought to be $20 billion or $50 billion or $100 billion or what, so we
decided that the third layer will be determined by a commission
appointed by the President and given two years to come up and say how
we should handle claims above the $7 billion or $8 billion. Obviously,
you would have to have a large amount of money, and it should not be
the ratepayers of the nuclear utilities who paid for the first two
levels. We believe, and so wrote the bill that the third level will
come from ratepayers everywhere and taxpayers everywhere and the
commission will tell us in advance how we ought to finance this and set
it up and distribute the available money.15
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\15\ Report to the Congress on Catastrophic Nuclear Accidents,
August, 1990, p.15.
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In 1990, as authorized by the Act, the Presidential Commission on
Catastrophic Nuclear Accidents issued a report on ``the means of fully
compensating victims of catastrophic nuclear accident that exceeds the
amount of aggregate public liability.'' 16 While the report
affirmed that victims be fully compensated, it ducked the question of
who should pay.17 It should be no surprise that the
Presidential Commission refused to lay the ultimate responsibility for
public damages from a catastrophic nuclear accident on the shoulders of
the responsible industry. For from being ``representative of a broad
range of interests'' as required by the Price Anderson Act, it
consisted entirely of men with ties to the nuclear
industry.18
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\16\ U.S.C. 42 Section 2210 (i).
\17\ Washington Post, ``Nuclear Claims Envisioned: Panel's Calls
for Catastrophic Compensation Omits Source of Funds,'' 9/21/90.
\18\ Testimony of Bill Magavern, Staff Attorney, U.S. PIRG to the
Energy and Environmental Subcommittee of the House Interior
Committee.9/26/90.
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We support a mechanism similar to that recommended in a report
authored by the NRC in 1983 19. This would provide a legal
guarantee of full compensation for victims. I would also retain the
industry's protections against the full liability that it would have if
there were no Price-Anderson scheme at all.
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\19\ NUREG -0957
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Basically, in order to shield both victims and taxpayers from
unwarranted risk, the NRC unanimously recommended a system that would
subject reactor licensees to annual assessments. Unlike current law
which caps total retrospective premiums at $83.9 million, the 1983 NRC
reported recommend these premiums be paid until all public liability
has been satisfied. The NRC concluded that this approach represents the
best alternative for minimizing the potential for both uncompensated
losses by the victims of an accident and additional contributions by
the taxpayers to meet public liability claims.
According to the NRC report, the key to any fair and effective
compensation scheme is the assurance that all valid claims will be
paid. The current cap on total liability completely undermines that
principle. Victims should not have to plead their case before Congress
or go uncompensated. Federal taxpayers should not foot the bill,
either.
The nuclear industry that profited from the activities creating the
risk of an accident should be obligated to pay all damages through
these retrospective premiums. If that became overly burdensome, the
industry could always go to Congress to get relief. That way, the
burden is on the industry, not the victims or taxpayers.
Currently, if there is an accident above $200 million, each nuclear
operator contributes up to $10 million per reactor per year in
``retrospective premiums'' until the current cap of $83.9 million is
reached.20 In contrast, the 1983 NRC report recommended
annual payments of $10 million per plant for as many years as necessary
to compensate all public damages. Unfortunately, under pressure from
the nuclear industry, all but one of the commissioners reversed their
stance by the time Representative Markey chaired a hearing on the issue
in July 1986. Commissioner James Asseltstine continued to support the
original recommendation of no cap on total liability to protect
taxpayers.
---------------------------------------------------------------------------
\20\ Holt M. and Behrens C., ``Nuclear Energy Policy'',
Congressional Research Service IB88090, 3/22/01,
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Having provided by law that the industry's liability would be
fixed at a specific dollar level and with new indemnity
contracts in effect which reflect this limited liability, I
think it will be difficult for the Congress to obtain
additional funding from the industry after an accident has
occurred. Thus, it is likely that additional funding to pay
liability claims, funding which could run into the billions of
dollars, would have to come from the federal
Treasury.21
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\21\ Testimony of James K. Asselstine, before the House Committee
on Energy and Commerce, 7/17/86.
---------------------------------------------------------------------------
PIRG and others supported lifting the total liability cap and
replacing it with an annual cap during the debate over the 1988
amendments. We believe that this would be a fair way to ensure that
victims were compensated and the industry would have an affordable and
predictable way to assure this.
NRC recently recommended raising the retrospective premium to $20
million per reactor per year (still capped at $83.9 million). NRC
justified this increase that would ``. . . substantially increase the
amount of funds available shortly after a nuclear accident to pay
public liability claims but should not jeopardize the financial
viability of the participating utilities.'' 22 Provisions to
increase this premium are also contained in several bills introduced by
members of this committee. Strangely, the NRC has now reversed its
earlier recommendation.23
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\22\ NUREG/CR-6617 p. 131.
\23\ ``NRC Drops Recommendation to Double Some Coverage in Price-
Anderson,'' Platt's Inside NRC, Vol 23, No 11, 5/21/01.
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As part of a more equitable nuclear accident compensation package,
Congress should consider mechanisms to fully compensate victims of a
catastrophic accident. One way would be to lift the total liability cap
and implement the original 1983 NRC concept of an annual retrospective
premium for as many years as necessary to compensate all public
damages. Since NRC has more recently stated that the industry could
afford a $20 million annual premium and that a higher premium would
help victims get compensated faster, Congress should ensure that annual
premiums be no lower than $20 million per reactor per year.
the industry can afford to pay the full costs of an accident:
The nuclear industry opposes paying its own way. Yet this industry
has benefited greatly from unjustified federal and state subsidies.
With deregulation of many state's electricity industry came billions in
bailouts for the industry (and blackouts for hapless Californians!).
These bailouts (also known as ``stranded costs'') have increased the
profitability of nuclear power plants according to Lehman Brothers
Managing Director and former NRC Commissioner James
Asselstine.24
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\24\ Testimony of James K. Asselstine, Managing Director, Lehmann
Brother, Inc. Before the Senate Energy and Natural Resources Committee,
5/3/01.
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According to a report released in 1998 with the Safe Energy
Communication Council entitled ``Ratepayer Robbery'' we estimated these
bailouts could total more than $132 billion for just eleven states.
Surely an industry that is receiving billions of dollars in public
bailouts could afford $20 million per year per reactor to compensate
the public in case of an accident. Along with unjustified bailouts,
state deregulation bills have left consumers at the mercy of large,
unregulated power generators. Several large nuclear operators are
enjoying the high prices for electricity generated.
For example, Southern Company, which operates six reactors reported
net income for 2000 of $1.313 billion--a record profit for that
company. In case of an accident, the $20 million retrospective premium
represents less than 9% of their profits.
Entergy, which touts itself as ``the fastest growing nuclear
operator in the nation.'' 25is proposing to build new
reactors and currently operates eight reactors, reported $160.9 million
in net income for the first quarter of 2001, a nearly 50% increase from
the same time last year. A $20 million retrospective premium for all
its reactors is less than the profits for one quarter. This is a
company that should be embarrassed to ask for a penny of taxpayer
assistance.
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\25\ Testimony of C. Randy Hutchinson, Senior Vice President,
Entergy, before the Energy and Air Quality Subcommittee of the House
Energy and Commerce Committee, 3/27/01.
---------------------------------------------------------------------------
Exelon Corporation touts itself as the ``largest nuclear generation
operator in the country with approximately 20% of the nation's nuclear
generation capacity.'' 26which is proposing to build a risky
new reactor that would cut costs by not including conventional
containment, reported $586 million in net income last year. This
company has testified that the public should fund the work of the
government agencies responsible for certifying the safety of these new
designs.
---------------------------------------------------------------------------
\26\ Testimony of Edward F. Sproat III, Vice President, Exelon
Generation Company, before the Energy and Air Quality Subcommittee of
the House Energy and Commerce Committee, 3/27/01.
---------------------------------------------------------------------------
Duke Energy reported $1.776 billion in net income last year. Duke
Power operates 7 reactors. A $20 million retrospective premium
represents less than 8% of their profits.
conclusion
The Price Anderson Act was supposed to be a temporary measure for a
fledgling industry. Today that industry has grown enormously and has
reaped substantial benefit from this and other taxpayer subsidies.
Meanwhile, victims of a major nuclear accident would be left to plead
their case before Congress. This is not good government. The Price
Anderson Act should not be renewed and should be either radically
reformed or replaced by legislation that truly protects the public.
Mr. Barton. Thank you. The Chair would recognize himself
for the first 5 minutes of questions.
Mr. Skolds, you indicated that your company had provided a
number of White Papers to the Nuclear Regulatory Commission on
the proposed design, the Pebble Bed Reactor design, and also
some of the issues associated with its licensing. If those
aren't proprietary, we would like to have them at the
subcommittee.
Mr. Skolds. They will be provided.
Mr. Barton. Okay.
Second question to you, Mr. Skolds, Mr. Strickland is not
here, but he has pointed out that we are in the process of
shutting down the uranium enrichment plant in this country that
is licensed to enrich to 10 percent. My understanding is that
the Pebble Bed Reactor that is under review by your company, if
it were to be licensed, would require 9 percent enrichment fuel
source. Is that correct?
Mr. Skolds. Approximately.
Mr. Barton. How do we get 9 percent fuel when right now the
best we could do under current conditions was enrich to 5
percent?
Mr. Skolds. Well, regardless of where it comes from, we are
in favor of multiple sources and competition in that industry.
I don't have a solution for you right now to say this is how we
can fix it, but what we are interested in is getting multiple
sources of fuel suppliers.
Mr. Barton. Would they be private sector sources or would
they be government sources from overseas or both?
Mr. Skolds. I think it would be both.
Mr. Barton. Okay. And, Mr. Davis, you mentioned your group
is about to submit, maybe has submitted, a new reactor design
called the AP1000. If in fact a utility were to order that and
if in fact it were to be licensed and permitted, once you got
through the permitting process, how long would it actually take
to build that reactor?
Mr. Davis. Once permitted, we are talking about 3 years
from the time that the first concrete is in place until the
plant loads fuel. If you include the site preparation time and
then the startup testing, the total period is 5 years from the
time that you complete the licensing until it goes into
operation.
Mr. Barton. But the construction process, you hope, would
be 3 years.
Mr. Davis. It would be 3 years.
Mr. Barton. What would the construction process of the
Pebble Bed Reactor be, Mr. Skolds?
Mr. Skolds. We are studying that right now, but we are
looking for 24 months, 18 months to 24 months.
Mr. Barton. Two years. Okay. Mr. Markey is not here, but
when he was here earlier this morning he asked the Chairman of
the Nuclear Regulatory Commission a worse-case scenario about a
total core meltdown, breach of containment, just the absolute
worst imaginable civilian reactor nuclear accident that we
could have. My question to you, Mr. Fertel, what is the
likelihood--assuming we had a total core meltdown, I can
envision that. I cannot envision the containment building
failing. What would it take for the containment building to
fail in the event we had the worse-case core meltdown?
Mr. Fertel. It is really hard, Mr. Chairman, to come up
with a scenario that would do that. I mean I heard Mr. Markey's
question to Chairman Meserve, and you can hypothetically come
up with scenarios that can't happen or that have the
probability that is so low that it is more likely you are going
to hit by an astroid rather than that happening. So I am not
sure I can answer that with any accuracy.
Mr. Barton. Now, I have been told----
Mr. Fertel. The answer would be it is beyond the realm.
Mr. Barton. [continuing] that the current containment
structures in this country that the operating reactors are
encased in could sustain a direct nuclear bomb attack. Is that
true?
Mr. Fertel. It could sustain aircraft flying into them and
other types of things but not a nuclear explosion.
Mr. Barton. So if we were--if they were to be targeted by
one of the Russian large thermonuclear warheads----
Mr. Fertel. You would lose the plant.
Mr. Barton. The whole plant.
Mr. Fertel. But then no one would care.
Mr. Barton. But I mean is that the level at which you have
to go to see something----
Mr. Fertel. Pretty significant.
Mr. Barton. If there were an earthquake, these things are
designed to withstand----
Mr. Fertel. Yes, sir.
Mr. Barton. [continuing] 9.0----
Mr. Fertel. Earthquakes, tornados, all kinds of horrendous
types of external events, not nuclear attacks. I think to Mr.
Markey's question and even to what Ms. Aurilio said, we firmly
believe Price-Anderson actually does a wonderful job of
protecting the public, and I am not quite sure how the public
gets protected if you don't have it. What has been said is that
you only have $9.5 billion worth of protection. So, ``it is not
unlimited.'' Well, one, you have set up a process--and I think
Congress did a good job in policy space--they took a law that
in 1957 did subsidize the industry. In the 1957, you could only
get $60 million worth of insurance from firms like ANI. And
Congress put $500 million of taxpayer money in and said, ``Here
is a $560 million protection for third-party liability. And if
it goes beyond that, we, Congress, will think about it.'' But
500 came from taxpayers. Today, there is $9.5 billion; there is
zero from taxpayers--zero in the $9.5 billion. If you had an
accident that went beyond the $9.5 billion, you could decide
where it comes from. You could say industry should pay more,
you could say that it should be taxpayer dollars or whatever.
It is hard to fathom an accident. Your comment on Three Mile
Island was appropriate. Over 45 years, there has been $190
million paid in aggregate, for everything. So it is hard to
fathom.
The thing that Price-Anderson does that I think is very
important from a policy space is it doesn't hold Exelon
responsible for $9.5 billion; it holds a whole industry
responsible. It creates a pool of shared liability. If you have
unlimited liability, your liability is very limited; you
declare bankruptcy. So it is really, I think, a very sound
public policy, and I think, as John Quattrocchi said, it is
probably the best third-party liability program in the world.
Mr. Barton. Last question, Mr. Quattrocchi, and then I will
give you a chance to comment on that. Assume that--well, let us
assume that Hoover Dam collapses or Grand Cooley Dam or pick
any dam. Who pays for the liability if one of these major hydro
dams were to collapse and there would be a flood as a
consequence of that?
Mr. Quattrocchi. Well, to the extent that there is
insurance available for that kind of an accident, insurance
would pay.
Mr. Barton. But the owner of the dam doesn't pay, do they?
There is not a comparable Price-Anderson--there is no
requirement that the owner of the dam pays. If a property owner
had private insurance, that private insurer would pay that
property damage, but the owner of the dam is not liable, like
in the case if there were a nuclear accident. Is that correct?
Mr. Quattrocchi. Well, potentially, the owner of the dam
could be liable, assuming that there was some sort of
negligence on the part of the owner of the dam. The fact is,
though, that in terms of level of insurance----
Mr. Barton. That is just telling us we have to go vote.
Mr. Quattrocchi. [continuing] I don't think there is any.
The insurance that the Price-Anderson system provides far
surpasses any other insurance that is available for the
accidents you mentioned. In my testimony, I mention the fact
that in the case of Bhopal in 1984, there were 4,000 people
killed in that accident. And what happened----
Mr. Barton. It is just telling us we have three recorded
votes instead of one.
Mr. Quattrocchi. In the case of Bhopal, there was no
limitation on liability, but the fact is that Union Carbide,
after years of litigation, sought bankruptcy protection and
ultimately settled for $470 million. That is roughly $1,000 for
every person killed and injured. Here is a system that provides
more than $9 billion of financial protection.
I have heard a lot today about subsidies. I am not sure
what subsidies are being provided here. The fact is that in
return for limitation on liability there is a large, ready
source of funds available to compensate the public. In our
minds, as insurers, there is nothing like this system. The
public has no greater protection under any other system that we
are aware of and we are aware of most of the liability systems
in the world.
Mr. Barton. Okay. The gentleman from Pennsylvania is
recognized for 5 minutes.
Mr. Doyle. Thank you, Mr. Chairman. Ms. Aurilio, you state
that the goal of the Public Interest Research Group is to shift
away from dangerous and polluting energies, and I think
everybody shares the goal of having energy that is safe and
doesn't pollute. Yet when we look at realistically how we are
going to meet the energy needs of the country, fossil fuels for
at least the next 20-some years, at the very least, are going
to continue to supply 80 percent of our power needs. When we
had the discussion about greenhouse gases and the Kyoto
Protocol and we look at the Europeans and their ability to meet
the protocol because they have largely gone to nuclear, which
doesn't emit any greenhouse gases.
So you have two technologies that we look at outside of
natural gas, coal and nuclear, and the thrust of the Federal
Government, in partnership with the private sector and
academia, has been to develop ways in which we can burn coal
more efficiently and cleaner and to develop nuclear power in
such a way that it is safe and reliable. And it seems to me
that we have made great strides in both those areas.
So you have one energy source, nuclear, that is clean,
doesn't emit any greenhouse gases, would help us deal with the
global warming issues that confront the world. And for the past
40 years, I mean I don't know of any incident where we have
lost a single life as a result of failure of a nuclear power
plant. And we, through the Nuclear Regulatory Commission and
the work that has been done in the Congress, continue to look
for ways to pre-certify these plants so that they are safe and
affordable. With our Clean Coal Technology Program and other
things that we have funded in fossil energy R&D, we continue to
look for ways to take this abundant natural resource we have,
coal, and learn how to build it cleaner and cheaper.
I guess I just have a hard time understanding where your
group is coming from, where you see the country meeting its
energy needs for the next 20, 30 years if you don't want to use
coal and you don't want to use nuclear. How does it get done?
Ms. Aurilio. Thanks for the question. First of all, you
mentioned Europe, and last week, there was a great op ed,
actually, by a gentleman from Deutsche Bank, certainly not a
green environmentalists or radical person, talking about how
the Europeans are actually 40 percent more efficient than the
U.S. So, certainly, we have not at all maximized our ability to
use energy efficiently, and therefore we are wasting money,
which is bad for the economy, it is bad for the consumers, and
it is bad for the environment. So I think we can go a lot
further in terms of energy efficiency.
Second, with regard to clean coal, as you know, we don't
support subsidies for coal. We don't think coal can ever be
truly clean, and we would be happy to provide you with
testimony that we had before. And today is a code red day in
Washington, DC in part because of our dependence on fossil
energy.
With regard to nuclear energy, I just have to say we don't
believe it is safe or clean, and if it is----
Mr. Doyle. Based on what, though? I mean you say it is not
safe. What do you base this on? What facts can you point to?
Ms. Aurilio. We are basing it on the fact that the nuclear
industry is here today saying that they cannot get insurance to
fully cover their liability in case of an accident. And,
therefore, it must be unsafe. And that they will not build new
nuclear power plants unless they can get a limit on their
liability. So either it is safe and they can get the insurance
or it is not.
Mr. Doyle. So you think coal can never be clean, nuclear
can never be safe, and that by being more efficient, like the
Europeans, that we can just meet the energy needs for the next
20 years. Do you really believe that?
Ms. Aurilio. As I pointed out in my testimony, DOE's five
lab studies and the Union of Concerned Scientists show how can
we meet 60 to 70 percent of future electricity needs through
energy efficiency and shifting to clean renewable energy. I
don't think this is all going to happen tomorrow, but,
certainly, it is time to start shifting and leveling the
playing field for truly clean energy sources and stop the
enormous subsidies and unfair practices that have benefited the
nuclear industry.
Mr. Doyle. I will tell you, I do agree with you that we
need to put more money into energy efficiency and conservation.
I have watched--every budget year, we have this tremendous
fight where we rob from Peter to pay Paul. We steal money from
EE or EC to fund FE or vice versa, and I think that is a
process that has to stop, that we need to fund all of these
categories to their sufficient levels.
I am curious, with Price-Anderson, I happen to be--I worked
in the State capitol for 16 years and was in Harrisburg the day
they evacuated that place for Three Mile Island. And tell me,
you didn't mention Three Mile Island in your remarks, and I am
just curious your concerns about Price-Anderson as it relates
directly to Three Mile Island. I mean it seems to me that that
was a pretty good example of a program that worked very well
for the residents around Three Mile Island, and I think they
will all tell you that. And why don't--it seems to me this is a
very consumer-friendly program, one that guaranteed that these
families got assistance and got it immediately. I would shutter
to think what that would have looked like under a different
scenario where they were fighting in court and battling
companies back and forth. What are your concerns about that,
and how do you see this as a subsidy?
Mr. Barton. It is going to have to be your last question,
because we are about to go vote.
Ms. Aurilio. Really quickly, we have no problem with strict
liability for nuclear operators in case of an accident, and we
have no problem with making sure that funds are readily
available; in fact, we would argue that according to NRC's
previous recommendations, the retrospective payment should be
$20 million not $10 million. What we do have a problem with is
capping liability, and in the event of a major accident,
citizens would not be allowed to sue for compensation if there
were a major accident above $9 billion. That is what we have a
problem with.
In terms of the subsidy, I quote two economist studies in
my testimony who estimate that the value of this, of capping
the liability to the nuclear industry, and remember that
contractors are completely indemnified so the subsidy there is
$9.43 billion or whatever you want to call it in terms of what
taxpayers might have to pick up. In terms of----
Mr. Barton. I hate to cut you off, but we have got to vote
in about 7 minutes. I have got one more questioner, and then
you all get to go. Okay? There is an incentive here for short
answers and short questions. I don't want to cut you off, if
you want to wrap that up, but then I am going to----
Ms. Aurilio. Just real quick, you can look at my testimony
as far as what the economists estimate as the subsidy.
Mr. Doyle. Thank you, Ms. Aurilio.
Mr. Barton. I am going to recognize Mr. Largent, the vice
chairman, leave him in charge. When he is finished, he can
recess the hearing until 1:45. This panel is free to go. When
we come back, the Chairman of the FERC should be here, and we
will take his testimony.
Mr. Largent. Thank you, Mr. Chairman. I just have one
question for Mr. Quattrocchi. In your statement, you mention
that the amount of maximum available liability has not been
increased since 1988. As we look at reauthorizing Price-
Anderson, would it be appropriate to look at increasing that
$200 million level?
Mr. Quattrocchi. Yes. And as I mentioned both in my verbal
testimony and in my written testimony, we think that increasing
the primary limit, if only to reflect the impact of inflation
since 1998, makes sense. It would also be consistent with a
current provision in the act, section 170(t) to be exact, which
mandates inflationary increases in the second layer. Those are
put into place at 5-year intervals. So therefore we think an
increase in the primary layer would be consistent both with
that and with trying to offset some of the erosionary effects
of inflation. And as I said, assuming that Price-Anderson is
renewed essentially in tact, we intend to canvass our members
to do just that, to increase the primary limit.
Mr. Largent. Okay. And I think it may have been Mr. Parme
who mentioned about having a predictable regulatory structure.
Somebody in the panel said that. Was it Mr. Skolds? Would part
of that predictability be us reauthorizing Price-Anderson this
year versus putting it off until next year or something?
Mr. Skolds. For Exelon, yes.
Mr. Largent. Thank you. We will dismiss this panel and
recall the rest of the witnesses at 1:45. Thank you.
[Brief recess.]
Mr. Barton. The subcommittee will come to order. We want to
reconvene our hearing on hydro nuclear power, and we have now
before us the distinguished Chairman of the Federal Energy
Regulatory Commission, the Honorable Curt Hebert, Jr. He is
accompanied by Mr. Mark Robinson, who is the Director of the
Office of Energy Projects at FERC, and Ms. Kristina Nygaard,
who is the Associate Counsel for Energy Projects in the Office
of the General Counsel.
Chairman Hebert, you have been before the subcommittee
before. You are always welcome. Your written testimony is in
the record in its entirety. I would ask that you summarize it
in 7 minutes. And then if either of your associates wishes to
say something, and they will be recognized, and then we will
have some questions for you.
STATEMENT OF HON. CURT L. HEBERT, JR., CHAIRMAN, FEDERAL ENERGY
REGULATORY COMMISSION; ACCOMPANIED BY J. MARK ROBINSON,
DIRECTOR, OFFICE OF ENERGY PROJECTS AND KRISTINA NYGAARD,
ASSOCIATE COUNSEL FOR ENERGY PROJECTS, OFFICE OF GENERAL
COUNSEL
Mr. Hebert. Thank you, Mr. Chairman. Glad to be before you
again. Always glad to come and share with you. I would like to,
in my opening statement, provide the opportunity for Mark
Robinson and Kris Nygaard, as well, to join me, if there are
answers that they would like to add. Since they are experts in
leading our agency in the right direction hydro power
licensing, I would certainly invite both of them to add to
anything that I may say, for your benefit.
The Commission currently regulates over 1,600 hydropower
projects at over 2,000 dams, pursuant to Part 1 of the Federal
Power Act. These projects represent more than half of the
Nation's approximately 100 gigawatts of hydropower capacity and
over 5 percent of all electric power generated in the United
States. Hydropower is an essential part of the Nation's energy
mix and offers the benefits of an emission-free renewable
energy resource.
The Commission's responsibility in issuing hydropower
licensing under the Federal Power Act is to strike an
appropriate balance among the many competing power and non-
power interests, as required by the public interest standards
of sections 4(e) and 10(a) of the Federal Power Act. However,
various statutory requirements, as interpreted by the courts,
give other agencies a powerful role in licensing cases and
significantly affect the Commission's ability to control the
timing and content of licenses.
The Commission currently uses two different processes in
relicensing: the traditional process and the alternative
process. Experience to date demonstrates that the alternative
procedures can reduce the length, cost and contentiousness of
relicensing proceedings. The Commission is driven within the
constraints of the Federal Power Act to make the hydropower
licensing process less time-consuming and costly.
Energy shortfalls in the West and especially in California
have given impetus to the need for further improving the
licensing process. Pursuant to section 603 of the Energy Act of
2000, the Commission staff, on May 8, 2001, submitted to the
Congress a report on the cost and the time to obtain a license,
including recommendations, which I endorse, for legislative,
procedural and policy changes to reduce those costs and time.
The legislative recommendations include, one, establish a
one-stop shop at the Commission for all Federal authorizations.
Federal agencies with mandatory conditioning authority would
retain that authority subject to a statutory reservation of
Commission authority to reject or modify the conditions, based
on inconsistency with the Commission's overall public interest
determination.
If this recommendation is not adopted, then, second,
require agencies to better support their conditions. This would
require resource agencies to consider the full panoply of
public interest and support their conditions on the record and
provide a clear administrative appeal process.
Third, focus Clean Water Act authority. Limit water quality
certification to physical and chemical water quality parameters
related to the hydropower facility. Provide a statutory
definition of fishway. The proposed definition recently issued
by Interior and Commerce is overbroad and would allow these
agencies to dictate virtually all aspects of a project. Remit
annual charges for other Federal agency Federal Power Act Part
1 costs directly to agencies, specifying that they are to be
used for implementing Part 1.
The procedural and policy recommendations include, first,
require license applicants to submit during pre-filing
consultation a status report focusing on study requests to
enable staff to determine if pre-filing involvement is
warranted because of significant cost and time delay. Is there
need to agree upon and perform additional environmental
resource studies? Allow agencies to revise their
recommendations and conditions only with Commission concurrence
and in a reasonable period after the first or only
environmental document. The last filed recommendations and
conditions are a source of delay.
Require applicants to conduct pre-filing consultation with
the public and non-governmental organizations, as well as
agencies and tribes. Allow applicants to maintain public
information electronically rather than in hard copy at a
specific location. Continue to promote alternative licensing
processes and settlements through more staff outreach and
involvement. Issue both a draft and final environmental
assessment on a more limited basis. Issue one NEPA scoping
document and accommodate any comments on the scoping document
and the environmental analysis document. And increase the
standard new license term to 50 years, in most cases, in
recognition of adaptive management.
Mr. Chairman, members of the subcommittee, those are my
recommendations. That is the direction that I believe the FERC
and the United States should move in. I look forward to your
questions and your comments.
[The prepared statement of Hon. Curt Hebert, Jr. follows:]
Prepared Statement of Curt Hebert, Jr., Chairman, Federal Energy
Regulatory Commission
Mr. Chairman and Members of the Subcommittee: My name is Curt
Hebert, Jr., and I am Chairman of the Federal Energy Regulatory
Commission. I appreciate the opportunity to appear before you to
discuss the Commission's hydropower licensing program.
My testimony today will provide a brief overview of the hydropower
licensing program, and some of the challenges it faces. I will then
focus on the recommendations for improving the hydroelectric licensing
process made by Commission staff in a report submitted to Congress on
May 8, 2001, as required by Section 603 of the Energy Act of 2000 (the
603 Report). I fully endorse staff's recommendations.
1. The Commission's Licensing Program
The Commission currently regulates over 1,600 hydropower projects
at over 2,000 dams pursuant to Part I of the Federal Power Act (FPA).
Non-federal hydropower projects are required to obtain Commission
authorization if they are on lands or waters subject to Congress'
authority. Those projects represent more than half of the Nation's
approximately 100 gigawatts of hydroelectric capacity and over 5
percent of all electric power generated in the United States.
Hydropower is an essential part of the Nation's energy mix and offers
the benefits of an emission-free, renewable energy source.
The Commission's hydropower work generally falls into three
categories of activities. First, the Commission licenses and relicenses
projects. Relicensing involves projects that originally were licensed
30 to 50 years ago. The Commission's second role is to manage
hydropower projects during their license term. This post-licensing
workload has grown in significance as new licenses are issued and as
environmental standards become more demanding. Finally, the Commission
oversees the safety of licensed hydropower dams. This program is widely
recognized for its leadership in dam safety.
The Commission is in the second year of a 10-year period (CY2000 to
CY2010) during which 218 applications for hydropower relicenses are due
to be filed. The Commission has already received 84 of these relicense
applications. This group of projects has a combined capacity of
approximately 22,000 megawatts (MW), or 20 percent of the Nation's
installed hydroelectric capacity. Approximately forty percent of these
218 projects will have filed their relicense applications by the
beginning of 2002.
Over the last three decades, the enactment of numerous
environmental, land use, and other laws, and new interpretations of
certain provisions of the FPA, have significantly affected the
Commission's ability to control the timing of licensing and the
conditions of a license. Under the standards of the FPA, projects can
be authorized if, in the Commission's judgment, they are ``best adapted
to a comprehensive plan'' for improving or developing a waterway for
beneficial public purposes, including power generation, irrigation,
flood control, navigation, fish and wildlife, municipal water supply,
and recreation. The Electric Consumers Protection Act of 1986 (ECPA)
amended the FPA to require the Commission to give ``equal
consideration'' to developmental and non-developmental values.
While the Commission's responsibility under the FPA is to strike an
appropriate balance among the many competing power and non-power
interests, various statutory requirements give other agencies a
powerful role in the licensing process. Among others, those
requirements include:
Section 4(e) of the FPA, which authorizes federal resource
agencies such as the Departments of Agriculture and the
Interior to impose mandatory conditions on projects located on
Federal reservations they supervise.
Section 18 of the FPA, which authorizes the Departments of
Commerce and the Interior to impose mandatory fishway
prescriptions.
Section 10(j) of the FPA, which in essence establishes a
presumption for inclusion of Federal and State fish and
wildlife agencies' recommendations to protect fish and
wildlife.
Section 401 of the Clean Water Act, which authorizes States to
impose mandatory conditions as part of the State water quality
certification process.
The Coastal Zone Management Act, which requires that projects
affecting coastal resources be consistent with State management
programs.
The Endangered Species Act, which directs the Departments of
the Interior and Commerce to propose measures to protect
threatened and endangered species.
The National Historic Preservation Act, which requires
Commission consultation with Federal and State authorities to
protect historic sites.
There have been three important court decisions concerning the
roles of the Commission and the resource agencies under these statutes.
In PUD No. 1 of Jefferson County v. Washington Department of
Ecology, 511 U.S. 700 (1994) (Jefferson County), the Supreme
Court held that a State acting under the CWA could regulate not
only water quality (such as the physical and chemical
composition of the water), but water quantity (that is, the
amount of water released by a project), as well as State-
designated water uses (fishing, boating, etc.). It is important
to note that the Court specifically acknowledged that its
decision did not address the interaction of the CWA and the
FPA, since no license had been issued for the project in
question. Its decision therefore did not discuss which
regulatory scheme would prevail in the event of a direct and
critical conflict.
In American Rivers [I] v. FERC, 129 F.3d 99 (2nd Cir. 1997),
the Court held that the Commission lacked authority to
determine whether conditions submitted by State agencies
pursuant to Section 401 of the Clean Water Act were beyond the
scope of that section. The court held that challenges to such
conditions were to be resolved instead by the courts.
Finally, in American Rivers [II] v. FERC, 187 F.3d 1007 (9th
Cir 1999), the Court ruled that the Commission lacked authority
in individual cases to determine whether prescriptions
submitted under color of Section 18 of the FPA were in fact
fishways. As in the Second Circuit case, the Court held that
challenges to a fishway prescription were to be resolved by the
courts, not the Commission. (On December 22, 2000, the
Departments of the Interior and Commerce issued a joint Notice
of Proposed Interagency Policy on the Prescription of Fishways.
The Commission staff filed comments noting that the
unilaterally-developed policy would define the term ``fishway''
in an extremely broad manner that in staff's view is
inconsistent with the definition of that term enacted by
Congress in the Energy Policy Act of 1992).
As a result of these judicial rulings, if the Commission were to
conclude that one or more mandatory conditions would render a project
inconsistent with the public interest, its only recourse would be to
deny the license application. Not only is this a blunt instrument, but
in most relicense proceedings denial is not a viable alternative.
2. The Commission's Licensing Process
The Commission currently uses two different processes in licensing:
the ``traditional'' process and the ``alternative'' process. Under the
alternative process, pre-filing consultation and environmental review
can be integrated and proceed concurrently, in a collaborative manner,
thereby dramatically shortening the processing time for an application.
Although the Commission staff invests substantial time and effort
on alternative licensing processes during the pre-filing stage, it is
clear that the effort produces savings in processing time and
efficiency once applications are filed with the Commission. After an
application is filed, the median time for the Commission to process the
application and issue a new license order is about 16 months. An
example is the Upper Menominee River Basin Projects, eight existing
hydroelectric developments located in Michigan and Wisconsin. New
license were issued January 12, 2001, about 15 months after the
applications were filed.
Based on discussions Commission staff has had with the industry, we
expect that about one-third of the next wave of relicense applicants
will pursue the alternative process route.
The Commission has worked to improve the licensing process by
making its regulations more clear and specific, enhancing opportunities
for stakeholder participation, and providing flexibility to license
applicants and others to design collaborative efforts that meet the
needs of all participants. In addition, Commission staff routinely
holds ``outreach'' meetings throughout the country to inform all
stakeholders about the licensing process, and has taken an active role
in facilitating settlements and introducing alternative dispute
resolution procedures. The staff has also participated in Interagency
training on hydropower licensing, and in the Electric Power Research
Institute's National Review Group, which shares ``lessons learned'' in
the hydropower licensing process. The details of these efforts are
described in Commission staff's 603 Report.
3. Costs and Times for Obtaining a License
The following discussion is based on information contained in the
603 Report. The staff found that, using the traditional process, it
takes about 32 months in pre-filing consultation and study in addition
to 47 months in post-filing processing to license a project. In the
alternative licensing process, prefiling consultation and study is more
intense and takes about 40 months, but the post-filing process takes
only about 16 months. Thus, on average the total time spent on an
application is 23 months shorter with the alternative licensing process
than with the traditional process.
For the traditional process, the average cost of application
preparation is $109/kW, and the cost for protection, mitigation, and
enhancement measures is $264/kW. In contrast, for the alternative
licensing process, the average costs for application preparation and
protection, mitigation and enhancement measures are $39/kW and $58/kW,
respectively--substantially lower than for the traditional process.
4. Recommendations to Reduce the Cost and Time of Licensing
My colleagues and I are aware of the need to complete the
relicensing process as expeditiously as possible while also protecting
the environment. Many have said that the licensing process takes too
long and costs too much. Much of time and resources spent are
unavoidable. But the recent energy shortfalls in the West and
especially in California, have given more impetus to the need not just
to pursue marginal efficiencies but for a fundamental restructuring of
the licensing process.
The 603 Report identified the primary sources of cost and delay in
the licensing process and proposed time-saving changes to certain
Commission policies and procedures, but also identified, as Congress
requested, legislative changes needed to effectuate any significant
reduction in the time and cost of relicensing.
In the 603 Report, the staff made the following recommendations,
which I endorse:
a. legislative recommendations
1. Establish one-stop shopping at the Commission for all federal
authorizations.
Federal agencies with mandatory conditioning authority would retain
that authority, subject to a statutory reservation of Commission
authority to reject or modify the conditions based on inconsistency
with the Commission's overall public interest determination.
The license would also be the only federal authorization required
to operate the project, e.g., special use authorizations for projects
on Forest Service lands and similar authorizations would be eliminated.
A single administrative process would be established by the Commission
to address all Federal agency issues in a licensing case, with
schedules and deadlines established by the Commission, and with one
administrative record compiled by the Commission in consultation with
the other Federal agencies. The Commission would prepare a single NEPA
document. The Federal agencies would not be required to adopt the
Commission's conclusions, but would have to provide for the record
their own analysis and conclusions based on the evidentiary record. The
agencies' analyses and conclusions would be included in the record of
the Commission's order acting on the application, and judicial review
would be obtained by seeking rehearing of the Commission's order.
If this recommendation is not enacted, then the following
recommendation might reduce some of the high costs resulting from
mandatory conditions:
2. Require agencies to better support their conditions (alternative to
A.1).
If the Commission is not given authority to balance all the
developmental and environmental values and make a decision in the
public interest, and, if agencies with conditioning authority conduct
separate proceedings, an alternative would be to require resource
agencies to consider the full panoply of public interest values,
support their conditions on the record, and provide a clear
administrative appeal process. Supporting Findings for A1. And A.2
The 603 Report showed that the costs for protection, mitigation,
and enhancement measures for traditional licenses containing Section
4(e) and 18 mandatory conditions ($590/kW) were 2.7 times the cost for
licenses not containing those conditions ($218/kW). The Commission
staff does not routinely highlight disagreements with mandatory
conditions; however, in the 12 percent of cases where staff did so,
staff found that those conditions were substantially more expensive
than conditions that staff thought adequate to protect environmental
resources. Alternative Recommendation A.2. might reduce the cost of
some mandatory conditions.
3. Focus Clean Water Act authority.
At least for hydropower projects, limit water quality certification
to physical and chemical water quality parameters.
Supporting Findings
Water quality certification requirements can be costly and the time
to obtain certification is a substantial source of delay. There has
clearly been an increase in the number and variety of certification
conditions since the Jefferson County and American Rivers I decisions.
For comparison, staff reviewed licenses issued in 1992, before these
decisions were issued, and in 1999, two years after American Rivers.
Staff reviewed the number and kinds of water quality certification
conditions in each license. These were categorized as pertaining to the
physical characteristics of the water (temperature, dissolved oxygen,
clarity, etc.), designated uses of the water body (e.g., fishing or
swimming, and therefore fish passage and instream flows), or
administrative (state approvals, reopener clauses, etc.). The 603
Report documented a substantial increase in the number of certification
conditions and a more than doubling of the number of conditions related
to designated uses. Of equal concern, of 129 currently pending
licensing cases, 52 (25 percent) are currently held up by certification
issues. Clearly, water quality certification is a substantial source of
cost and delay.
4. Provide a statutory definition of fishway.
Supporting Findings
Since the American Rivers II case (1999), the Commission lacks
authority to decide if a prescription is a ``fishway.'' If the
Commission concludes that a fishway prescription is drafted so broadly
as to render the project inconsistent with the public interest, its
only recourse is to deny the license.
5. Remit annual charges for other federal agency FPA Part I costs
directly to agencies, specifying that it is to be used for
implementing Part I.
Supporting Findings
Numerous agency, tribe, and non-governmental organizations
supported amending the FPA to permit the Commission to remit directly
to other Federal agencies with FPA Part I responsibilities the portion
of administrative annual charges attributable to their costs, and to
specify that such remittances be used for FPA Part I purposes. By
ensuring that Federal agencies recover appropriated funds spent for the
licensing process, such legislation would support the federal agencies'
participation in that process.
b. regulatory and policy changes
1. Require license applicants to submit during prefiling consultation a
status report focusing on study requests, to enable Staff to
determine if pre-filing involvement is warranted.
Supporting Findings
The median time from filing to issuance of the notice that a
license application is ready for environmental assessment is 17.4
months for the traditional process, and only 2.1 months for the
alternative licensing process. The difference can be attributed to the
high number of additional study requests under the traditional process.
Resolving study disputes pre-filing would save about 15.3 months in
total processing time. About 25 percent of application preparation
costs are incurred post-filing. These costs largely involve study needs
that were not resolved pre-filing.
2. Agencies would be allowed to revise their recommendations and
conditions only with the agreement of the Commission, and in a
reasonable period after the first (or only) environmental
document. Eliminate the option for Federal agencies to file by
the deadline only preliminary terms and conditions and a
schedule for filing final conditions.
Supporting Findings
In many of the cases pending over five years as of 1997, delays in
processing are caused by agencies filing their 10(j), Section 18, and
4(e) conditions filed late in the process (average one to six months
delay on initial conditions, and up to 17 months for final conditions).
3. Applicants would be required to conduct pre-filing consultation with
the public and non-governmental organizations. Currently,
applicants are required to consult only with agencies and
tribes.
Supporting Findings
Staff expects that greater involvement of interested entities up-
front would result in fewer delays from new issues, and resultant new
study requests.
4. Allow applicants to maintain public information electronically
rather than in hard copy.
Supporting Findings
The Commission's rules currently require applicants for new
licenses to maintain on file and available for public inspection
certain data regarding the existing project facilities and operation.
Licensees, who maintain that little use is made of physical libraries,
propose instead that the Commission give them the option to put the
data on a web site, with hard copy on request at no cost.
5. Continue to promote alternative licensing processes and settlements,
through more staff outreach and involvement.
Supporting Findings
The alternative licensing process results in a median process time
that is 23 months less than traditional license process times. Average
costs of application preparation and protection, mitigation and
enhancement measures are significantly less for the alternative
licensing process as compared to the traditional license process.
Substantially more settlements and substantially less rehearings result
from the alternative licensing process as compared to the traditional
license process.
6. Issue a draft Environmental Assessment (EA) before preparing the
final EA only if necessary. Comments on the final EA would be
handled in the merits order. Staff would retain discretion to
do a draft or supplemental EA.
Supporting Findings
Staff conservatively estimated that about one-third of the average
time between the Draft EA and the Final EA--that is, about two months--
would be saved if no Draft EA were prepared, and that the Commission
would save about $24,000 for the traditional licensing process and
$8,000 for the alternative licensing process.
7. Issue a single NEPA scoping document, and instead would accommodate
any comments on the scoping document in its preparation of the
NEPA document.
Supporting Findings
Staff conservatively estimated that about one-third of the time for
preparing a second NEPA scoping document--that is, about two months--
would be saved, and that the Commission would save about $7,500.
8. Increase the standard new license term to 50 years, absent
compelling reasons to do otherwise. This is consistent with the
``living license'' approach and expanded use of the
Commission's reserved authority to amend the license to address
new issues.Summary Findings
A relatively high portion of licensing costs, $85/kW, is for
application preparation costs, as compared to $212 for protection,
mitigation, and enhancement measures. For small projects, application
costs are about half of total licensing costs. This proposal would
reduce licensee costs by decreasing the frequency of the application
preparation costs and by providing more time to amortize the costs of
protection, mitigation, and enhancement measures.
5. Conclusion
The Commission is well aware of the importance of hydropower, and
of the significant role we play in licensing and overseeing crucial
hydropower projects. We also recognize that the hydropower licensing
process is often too long and too costly. The Commission and its staff
will do everything we can to improve that process. At the same time, we
are prepared to work with Congress and other agencies to craft
legislative solutions. Together, we can develop the efficient,
comprehensive licensing process that our Nation's energy needs demand.
Thank you. I will be pleased to answer any questions you may have.
Mr. Barton. Do either of your associates wish to say
anything verbally? Okay. The Chair would recognize himself for
the first 5 minute question rounds.
Mr. Chairman, you talk in your written testimony, and you
spoke to it somewhat in your verbal statement, about a one-stop
shop. Does that mean, in your mind, that the FERC would be the
shop where it all stops or would it be another agency? Could
you elaborate on that a little bit?
Mr. Hebert. I do think that FERC provides a great
opportunity to be the one-stop shop, and the reason for that is
that we do have to balance and maintain the public interest. So
many and the resource agencies don't have to balance. They can
be single-source type agencies and single-interest agencies
that are not required to balance, and we are. So, therefore, I
think that is a reason that FERC would naturally be the one-
stop shop.
Mr. Barton. Okay. We have to get the clock set. Put me on
about 4 minutes. I don't think he talked for 2 minutes. I don't
want to cheat my own self here. There you go. All right.
Your testimony is silent on the potential for future hydro
sites. Does your agency have any information about future
potential, either large or small, hydro sites in this country
where we might get additional hydroelectric power?
Mr. Hebert. Mr. Chairman, I would certainly invite the
experts to my right and left to comment on that. I would tell
you specifically I am not aware of any substantial projects in
the United States of America. It would be my thought, based on
what I know now, that if there is development as far as
increasing hydro capacity through new structures, most of that,
if in North America, would be somewhere in Canada and not in
the United States.
Mr. Barton. Well, I have got information--it is dated; it
is over a year old--that there are at least 2,000 potential
small hydro sites. Would Mr. Robinson or Ms. Nygaard----
Mr. Hebert. There are some small ones, I know.
Mr. Barton. Do either one of you wish to comment on that?
Mr. Robinson. Certainly. There are at least that number of
sites that are available. However, we haven't seen interest in
new hydropower since about 1987 or 1988. A number of
congressionally authorized sites expired around that time, but
since then, we have been basically in the business of
relicensing existing projects.
Mr. Barton. Right. But if we could do an interconnection
standard and some of the distributed generation issues in a
larger electric restructuring bill, there is some thought that
small hydro would really conceivably play a noticeable part in
new generation. Small is 5 megawatts or less, perhaps 10
megawatts or less.
Mr. Robinson. I think, certainly, as the economics change,
those projects would become viable, and we might see a rebirth
of small hydropower project and applications come into the
Commission.
Mr. Barton. Okay. This is off the subject, but I want to
ask--I don't get the Chairman before me publicly that often.
Later this afternoon on the floor, we are going to have a
Congressman Kucinich of Ohio amendment that would restrict any
funding to the FERC for setting market-based wholesale electric
rates. If you had the opportunity to go to the floor and debate
that, Chairman, would you oppose or support the Kucinich
amendment? And, hopefully, you will say you will oppose it, and
you would give me one or two good bullet points why I should
oppose it.
Mr. Hebert. May I start out by saying we do that for free.
Mr. Barton. Okay.
Mr. Hebert. But if that is not good enough, I certainly
don't know and understand the intent behind the legislation. I
would like to know more about that to give you a better answer.
But I would tell you I think that the Commission needs the full
range of its entire tool shed in dealing with competition in
making certain that Americans have choice and that that choice
develops along with adequate supply and adequate
infrastructure. And that is best provided, I believe, by
incentives. What are those incentives, and what are those
opportunities? Part of it is market-based rates.
The FERC is now exhibiting, I believe, a strong ability to
be able to bring markets in that seem dysfunctional. We have
done that, we are continuing to do that. I don't see the alarm
that there was perhaps four and 5 months ago in dealing with
these issues. And I do think the market-based rate authority is
one of the tools that is necessary for FERC to have.
Mr. Barton. Okay. Let me ask one last hydro question, and
then I will yield to Mr. Dingell for questions. Is there any
interagency working group right in the Bush Administration that
is looking at hydroelectric reform as an option?
Mr. Hebert. Yes. The IHC is a follow-up to the ITF.
Mr. Barton. What is IHC?
Mr. Hebert. Mark Robinson can tell you more about it, but
that is the only development I am aware of.
Mr. Barton. Okay.
Mr. Robinson. The interagency administrative group that
existed up until December 31, 2000 was the Interagency Task
Force, the ITF. One of the recommendation of the ITF was that a
follow-up group be formed, the Interagency Hydropower
Committee, the IHC. That is just now kicking off. We are trying
to have our first meeting of that group during July.
Mr. Barton. And do you know, off the top of your head,
which cabinet agencies are involved in that?
Mr. Robinson. Yes. They are the Department of Commerce, the
Department of Agriculture, the Department of the Interior and
ourselves as the four primary agencies that would conduct this
follow-up group.
Mr. Barton. Okay. And do you know--is one agency the lead
agency in coordinating the group?
Mr. Robinson. Well, we are taking the initiative to try to
get it started.
Mr. Barton. We being the FERC.
Mr. Robinson. Yes, the FERC. But the idea behind this is
that each of those agencies would chair a session each quarter.
So we would meet four times a year, approximately.
Mr. Barton. Well, we are going to draft a hydro reform
title to a bill next week. So if you could encourage your
working group, even though it hasn't met yet, to prepare its
conclusions and get them to us at the staff level next week so
we could review them for incorporation into our bill, we
would--whatever input you can give us at the staff level or
even at the member level, if we need to do that, by telephone,
when we come back week after next, we hope to mark up a bill
that will include a hydro title.
Mr. Robinson. Certainly.
Mr. Barton. Okay. The Chair would recognize Mr. Dingell.
Mr. Dingell wishes to recognize Mr. Boucher. Mr. Boucher is
then recognized for 5 minutes.
Mr. Boucher. Well, thank you very much, Mr. Chairman. And
Commissioner Hebert, welcome. We are delighted to have you here
this afternoon.
I have several questions concerning the recent report that
was issued through the Federal Energy Regulatory Commission.
Section 603 of the Energy Act of 2001 states, and I will quote
this, ``That the Commission shall, in consultation with other
appropriate agencies, immediately undertake a comprehensive
review of policies, procedures and regulations for the
licensing of hydroelectric projects.''
The report that the Commission issued, pursuant to that
direction in May of 2000, is characterized as a staff report.
And so my first question to you is this: Is that report a
product of the staff or is this really the Commission's report?
Mr. Hebert. It is certainly a staff report. It is what came
from the staff level and worked its way up to the Commission.
It is something that I endorse as what the position of the
Commission should be.
Mr. Boucher. Did the other members of the Commission have
an opportunity to review that report?
Mr. Hebert. Yes. The report has been provided to all
Commissioners, so I am assuming it has been reviewed. As you
know now, we have two new Commissioners. I would doubt that
they have had the opportunity to go through it yet. I certainly
don't want to speak for them. The other two Commissioners that
have been there the same time I have been, Commissioner
Breathitt, Commissioner Massey have had an opportunity to look
at it. I can tell you, and certainly in their testimony, they
make it clear that they have differences of opinions in which
direction we should go.
Mr. Boucher. And so it is fair to say that the other two
members of the Commission who were members of the Commission at
the time that this report was issued do have some differences
of opinion with respect to certain of the recommendations; is
that correct?
Mr. Hebert. That is correct.
Mr. Boucher. Has there been an opportunity for those other
Commissioners, in some formal mechanism, to express their
disagreements and to indicate what those disagreements are?
Mr. Hebert. They have not yet. They are being briefed now.
As you know, there have been many issues before the Commission
to which we have paid great attention. This report has not been
placed on the back burner, but there have been other things
that have been more pressing. But the new Commissioners,
certainly, are going to be briefed on it quickly.
Mr. Boucher. Well, I would be happy to know that the new
Commissioners are going to be briefed, but my question relates
to the numbers of the Commission who were there at the time
this report was issued. So Commissioner Massey and Commissioner
Breathitt and I believe you answer was that they do have some
differences with these recommendations; is that correct?
Mr. Hebert. That is correct.
Mr. Boucher. And has there any been mechanism for the two
of them to express in a formal way what their differences with
these recommendations are?
Mr. Hebert. They have their testimony that they provided to
you today. We certainly continue to have conversations. As you
know, we are prohibited from getting together as a quorum, but
we can get together on a basis of one to one, and we continue
to do that. But as for any formal document from my office to
them requesting that they share with me any differences, that
has not been done.
Mr. Boucher. All right. And this report was not actually
adopted by the Commission; is that correct?
Mr. Hebert. That is correct.
Mr. Boucher. It does bear your endorsement, but it does not
bear the endorsement of the Federal Energy Regulatory
Commission; is that correct?
Mr. Hebert. That is accurate.
Mr. Boucher. Now, do you believe that the process you
undertook to submit this report conforms with the statutory
requirement that the Commission issue a report?
Mr. Hebert. Do I believe that it conforms to that?
Mr. Boucher. Yes. Do you believe it conforms with the
statutory requirement that the Commission issue the report?
Mr. Hebert. Well, it is the Commission's report through the
staff. I guess if you are asking me has it been voted up or
down by the Commission, no, it has not. If you believe that is
the intent of the act, then I will certainly look at that.
Mr. Boucher. Okay. Well, let me move on to another matter.
The statute also requires consultation with other appropriate
agencies. That was certainly the intent of Congress. That was
made clear at the time this provision was adopted. And my
second question to you second question to you is, what
consultation did the Commission undertake with other Federal
agencies as these recommendations were adopted?
Mr. Hebert. The Commission, through its staff, communicated
on a pretty regular basis with the other agencies. Let me allow
either Mr. Robinson or Ms. Nygaard to tell you exactly what
they did to give you a better answer.
Mr. Boucher. Just tell me which agencies you consulted
with.
Mr. Robinson. Just about every agency that we could think
of. Departments of the Interior, Agriculture, Commerce----
Mr. Boucher. Agencies with environmental responsibilities?
Mr. Robinson. I'm sorry?
Mr. Boucher. Agencies with environmental responsibilities?
Mr. Robinson. Absolutely.
Mr. Boucher. All right.
Mr. Robinson. And we started this process by calling all of
those agencies with environmental responsibilities together to
talk about how we were going to launch this effort and what
studies we were going to do and how we were going to do them.
Mr. Boucher. Did those agencies have an opportunity to take
part in the drafting of these recommendations?
Mr. Robinson. No, they did not.
Mr. Boucher. Did they have an opportunity to comment on the
recommendations after you had drafted them?
Mr. Robinson. There was no opportunity to comment on the
draft document, and thus no opportunity----
Mr. Boucher. All right. It doesn't sound like very
comprehensive consultation to me. Well, thank you, gentlemen.
Mr. Chairman, my time has expired, and I yield back.
Mr. Barton. Thank you. Does Mr. Dingell wish to be
recognized now or does he wish to recognize Ms. McCarthy?
Mr. Dingell. Thank you, Mr. Chairman. I appreciate that
courtesy. Mr. Chairman Hebert, in appearing before the
committee last year, your predecessor announced that the
Commission had succeeded in implementing environmental
improvements while maintaining the viability of the hydropower
industry, and cited a number of successful administrative
efforts to expedite the relicensing process and even to give
examples of success stories.
Many of the proposed changes you have suggested, in my
view, would harm the environment without necessarily
contributing much to the continued viability of the hydropower
industry. Commissioner Breathitt seems to allude to this in her
written testimony where she rejects the idea of putting FERC in
charge of all aspects of relicensing, including environmental
protection, under the concept of one-stop shopping.
You noted in response to questions from Mr. Boucher that
you have had consultations but have not gotten approval or
assent or further communications or comment from any of the
agencies with whom you had consulted; is that correct?
Mr. Hebert. That is correct.
Mr. Dingell. Now, how many licenses have been surrendered
since FERC began the relicensing in the projects class of 1993?
Have any been surrendered at all?
Mr. Hebert. Surrendered?
Mr. Dingell. Have any licenses been surrendered since FERC
began relicensing projects in the class of 1993?
Mr. Hebert. Yes.
Mr. Dingell. How many?
Mr. Hebert. I can provide that. A handful, anyway.
Mr. Dingell. Please submit a list of the projects where the
licenses have been surrendered, what they were, and why they
were surrendered.
Mr. Hebert. Glad to.
[The response appears at the end of the hearing.]
Mr. Dingell. Now, under current law, a project whose
license expires before a new one is issued is allowed to
continue to operate under an annual license; is that not
correct?
Mr. Hebert. That is correct.
Mr. Dingell. Are State and Federal resource agencies and
other stakeholders consulted or provided with official period
for comment on these annual licenses, yes or no?
Mr. Hebert. No, they are not.
Mr. Dingell. Does FERC apply conditions to these annual
licenses which will provide interim resource protections until
a new license is issued, yes or no?
Mr. Hebert. By law, they have to be identical to the
existing license.
Mr. Dingell. But that means that you apply no conditions
for the protection of environmental or fish and wildlife
values, even if the law has been changed since the original
license was written; is that correct? So you just relicense--
you just extend the license when you get an application that
you can't act upon, the result of which is that the relicensing
simply extends the original terms of the license and that no
conditions are imposed, either for protection of fish or
wildlife or for concern about environmental matters; is that
right?
Mr. Hebert. I would respectfully phrase it differently.
Mr. Dingell. Well, how would you phrase it? I think I have
phrased it simply enough that it doesn't need much change.
Mr. Hebert. No, sir. I was not speaking to the
simplification of it. I was just suggesting that in fact it is
the goal of our agency, the FERC, to issue licenses that will
produce the maximum amount of power at the cheapest possible
cost. But at the same time, we are fully protecting the
environment, and we are the only agency, the FERC, that is
directed to provide such a balance.
Mr. Dingell. Well, do you apply the Northwest Power Act or
any of the provisions with regard to fish and wildlife
protection or endangered protection in the relicensing of these
projects on which you give just a 1-year extension?
Mr. Hebert. I am going to let Ms. Nygaard go into that
further for you, if you don't mind.
Mr. Dingell. The answer should be a simple yes or no.
Mr. Hebert. But what I would love to share with you----
Mr. Dingell. You do or you don't. Which is the case.
Mr. Hebert. We do look at the Clean Water Act and consider
it, the Endangered Species Act, the National Historical
Preservation Act.
Mr. Dingell. What conditions do you impose upon a
relicensing? You told me you simply duplicate the preexisting
license for a period of 1 year.
Mr. Barton. Let us let Ms. Nygaard. I think she actually
wants to be informative to Mr. Dingell. Did you want to----
Ms. Nygaard. Thank you.
Mr. Dingell. I just want a yes or no answer.
Ms. Nygaard. No, because the Federal Power Act requires the
issuance of an annual license on the identical terms as the
prior license.
Mr. Dingell. So you impose then no----
Ms. Nygaard. Therefore, if the prior license has reserved
authority, we have it to invoke; if it doesn't, we don't.
Mr. Dingell. You are talking about a license that was
originally issued probably 50 years ago on which there have
been a number of changes by the Congress in laws relative to
the protection of fish and wildlife; is that not so?
Ms. Nygaard. Yes, but we consider----
Mr. Dingell. And do you apply any of those----
Mr. Barton. Mr. Dingell, we ought to let the witness have a
chance----
Mr. Dingell. Mr. Chairman, I believe I am proceeding on my
own time. I want the witness to be clear as to the question so
that the witness, either of them or any of them, can respond
properly to the question.
Mr. Barton. But I also know the chairman, the former
chairman, wants the whole truth in the record. You consistently
tell me that every time we have a conversation.
Mr. Dingell. I am consistently telling you that, and I am
fully capable of asking my questions----
Mr. Barton. I understand. Nobody disparages your question.
Mr. Dingell. [continuing] and seeking the proper answers
thereof. So I gather that you are reissuing a license that is
50 years old that is identical to the original license. It
reflects none of the changes that have been made in the Federal
law with regard to protection of fish and wildlife value or the
environment; is that correct?
Ms. Nygaard. That is correct as to annual licenses.
Mr. Dingell. Thank you. Thank you. There is a great deal of
difficulty getting that answer. I want to thank you for your
assistance, Mr. Chairman, but I really didn't need it.
Mr. Barton. I don't think the gentleman has ever had
difficulty asking a question.
Mr. Dingell. Now, do you deny that this gives strong
incentive then for licensees to stonewall and to fail to
provide the necessary information they are supposed to provide
knowing that they will continue to operate without having to
adhere to modern environmental laws, such as NEPA, the Clean
Water Act or any of the fishery protection acts that have been
imposed in the last 20 years?
Ms. Nygaard. I can't speak to what is an incentive for
them.
Mr. Robinson. That hasn't been what has been the----
Mr. Dingell. Pardon?
Mr. Robinson. That has not been the case in my experience
in dealing with licensing projects for the past 24 years.
Mr. Dingell. You are telling me it is not an incentive to
get out from under what might conceivably be an onerous burden,
such as the----
Mr. Robinson. Typically, our licensees are seeking
certainty in the operation of their project, and that certainty
comes from receiving the new license. They are interested as
anyone in receiving that.
Mr. Dingell. Let us look at this. You are intelligent
people down there in the well. There are a bunch of
requirements. Some of the fishery acts require, for example,
when the new license is issued, that steps be taken for the
protection of salmon runs, fishways up and down. By getting one
of your 1-year extensions, they don't have to put in a fishway.
Other mitigation features for the protection of spawning and
things of that kind are not required by the simple 1-year
extension. So the people keep extending it. They don't have to
spend a $0.5 million or $1 million or $2 million for a fishway.
They don't have to put in spawning. They don't have to do
anything about moving the fish around the dam by barge or by
truck, and they save lots of money; isn't that right?
Mr. Robinson. I don't agree with that.
Mr. Dingell. You don't.
Mr. Robinson. No, I don't.
Mr. Dingell. What is the truth then? While you are busy
disagreeing with me, tell me what the truth is.
Mr. Robinson. My experience has been that our licensees are
as interested as anyone in trying to move the process along so
that they have the certainty of the new license, so they can
make business decisions about what they want to do with that
project. Staying in limbo in the annual license State is not in
their best interest either.
Mr. Dingell. But by having the annual license, they get out
of any of these onerous burdens, do they not?
Mr. Robinson. Most of our licenses include reopen
provisions. Even during the annual license period, if we have
to make a change in that project, we can use those reopeners to
make those changes, including requiring fish ladders.
Mr. Dingell. How many times--I want you to submit for the
record how many times the Commission has during its activities
taken the necessary steps to reopen an existing license to
assure that----
Mr. Robinson. Be happy to.
Mr. Dingell. [continuing] fish and wildlife protection
activities were taken by the licensee during the pendency of
that 1-year extension. And I would like to have every one that
you can name, giving the name and identification of the
particular facility, the licensing, the time and the dates.
[The response appears at the end of the hearing.]
Mr. Dingell. And, Mr. Chairman, I would ask that that stay
open--that the record stay open. I thank you for your courtesy.
I think my time has expired. I have some other fine questions.
Mr. Robinson. I would be glad to provide that information.
Mr. Barton. Well, we are going to let Congresswoman
McCarthy ask her questions. And then if the gentleman from
Michigan wishes to ask additional questions, he will be given
that opportunity. Congresswoman McCarthy for 5 minutes.
Ms. McCarthy. Thank you, Mr. Chairman, and I thank the
distinguished experts here with us today. In listening to the
prior questioning of my colleagues, I thought I might follow up
with a concern that I have listening to the responses. And that
is with regard to relicensing, I really think based, at least
on the experience out in Missouri where I am, that we have a
terrific union electric dam that created the Lake of the Ozarks
that has brought all kinds of beauty and commerce and good
things, including energy, to that area of the Ozarks.
But at the time it was originally licensed, a lot of
thought wasn't given to environmental concerns, for example. In
the process of relicensing, I would expect that environmental
quality concerns might be brought into play. And so I guess
what I want to pursue is reforming the process of relicensing
is a good thing, and it can indeed result in significant
improvements to environmental quality, and putting a strong
process in place would be both good to expedite as well as
improve.
Would you reflect for me, Mr. Chairman, on how FERC has the
knowledge of all of these issues and can do so without
consultation with other groups like the U.S. Fish and Wildlife
Service and the National Marine Fisheries Service? Because when
Mr. Boucher was visiting with you, you mentioned that they
hadn't been consulted in this report of May 2. Is it those
agencies that are slowing down the process that you don't want
to consult with them so you can speed up the process? And if
so, does your staff have the expertise they have so the same
considerations will in fact be brought to the table and become
part of an improved process of licensing? Does that make sense?
Mr. Hebert. It makes great sense, and let clear up in the
very beginning that I don't believe the FERC can adequately
attempt to speed up the process while at the same time
protecting the environment without consultation with those
resource agencies. I don't want you to think that at all. I do
not believe that. I understand Congressman Boucher's concern
about consultation after we came out with the 603 report and
the staff recommendations, but I will assure you, as has been
done by Mr. Robinson, that there was much consultation with the
resource agencies that went into the process before the 603
report came out. Now, was there consultation after the report
was made, no, and I do want to make it clear there was not. But
we can----
Ms. McCarthy. Was that because of a time factor?
Mr. Hebert. Yes. We were trying to get the report out. We
had a period that we had to get it out in 6 months, and we did
get it in under the wire. But we did do the consultation on the
front end, and I genuinely feel good about that. We are
certainly always willing to take more comments and learn as we
go down the road, but I don't want you to think that we are
trying to maneuver around resource agencies.
We certainly need their input, and if you ask about
resources at the FERC, I can tell you that 70 percent of our
people have previously worked at resource agencies. So we get
talent from them, and we have got their people in our agency.
So, certainly, we are continuing to work with those resource
agencies. In fact, we have got 80 environmental specialists at
the FERC right now, and 24 of those are fish biologists. So we
draw from those resource agencies.
Ms. McCarthy. I think the issue that is before us is
wanting to help you improve the process.
Mr. Hebert. Right.
Ms. McCarthy. But in so doing, we genuinely want a
collaborative effort that takes a look at issues that might not
have been considered before this plant was initially licensed
or even during a relicensing, depending on its age, because
environmental concerns are very real today on any number of
levels----
Mr. Hebert. Sure.
Ms. McCarthy. [continuing] in all forms of energy. That is
why we are looking--and hydro has obviously been a very
important component for States like my own. But I think that is
what you are hearing from these various members today is the
concern that for the sake of speeding it up so we have more
energy, we don't want to lose what we have gained as far as
issues like environmental quality and a balanced approach where
all voices weigh in and we try to do what is best for the
community, the State and the Nation.
Mr. Hebert. I totally agree with you, and that is why if
you see the direction that FERC has gone this year, even
through our price mitigation plan that we have done for the
West, we have certainly made it very important to look at
efficiency to try to get the older, dirtier systems off, to get
the cleaner units on. We certainly understand at FERC the best
way to have a clean environment, be it clean water, clean air
or anything else, is to never make it dirty in the first place.
So we are committed to doing that. And I want you to understand
we are committed to working with those resource agencies. I
would never want to exclude them. They have plenty of valuable
information that we would not necessarily have.
Ms. McCarthy. I appreciate that very much. I just know that
my own plant in Missouri is up now for relicensing, and I
certainly hope that consideration is being given in that
process to some of the issues that weren't addressed prior to
this and that hopefully the process will prove that we can make
those changes, if necessary, if recommended, as part of the
relicensing and improve the process. Thank you very much. Thank
you, Mr. Chairman.
Mr. Barton. Thank you. The gentleman from California, Mr.
Radanovich, is recognized for 5 minutes.
Mr. Radanovich. Thank you, Mr. Chairman, and welcome, Mr.
Hebert; it is good to see you again. I have got a couple of
questions, but one kind of revolves around an article in the
Wall Street Journal about Richard Meserve and the NRC's
relicensing process for nuclear facilities. And in that article
was mentioned a nuclear power generating plant that during the
past year had costs of $200 million to operate while producing
about $1.6 billion worth of electricity. And I believe it was a
municipality or something that is--it is not under FERC
jurisdiction. And the gap between the cost of production and
what they were getting is quite large. In much the same way are
the companies that are under your jurisdiction are being
charged, as far as high prices.
And I am wondering, given that, that because 30 percent of
the alleged overcharge is for electricity in California from
non-FERC jurisdiction power sellers, to what extent are these
power sellers participating in the current settlement
conference that you are dealing with? And what is FERC doing to
make sure that prices charged by all the power sellers are
treated equally, given that you don't have the jurisdiction
over almost 60 percent, even in California?
Mr. Hebert. Actually, what we did to subject everyone to
our price mitigation plan, is we said that, in fact, if you
were using the ISO, if you were using the tariffs, a wire
subject to FERC's jurisdiction, that you would be roped into
that process. So that was our way to, as we lawyers say, to
bootstrap them in so we can get them under the price
mitigation.
Now, when it comes to the refund authority, that is very
tricky and somewhat different. As we set up the settlement
process for California, we are learning that the parties are
coming to the table. Everyone has always got a different
negotiation strategy of what they come forth with. We did issue
a clarification on the order Friday, which would include the
parties to the Northwest so we can hopefully get one settlement
that comes forward. I think that moves us in a proper
direction.
What comes out of it, I don't know, but I will tell you
even though I am extrinsic right now to the settlement process
because we have sent the refund case to a settlement judge,
ethically and legally I am prohibited from being involved, and
we are hoping our settlement judge will bring us some
recommendation after the 15-day period, and then 7 additional
days after that to make a recommendation if they don't meet
settlement. But it has been shared with me by my chief of staff
earlier that BPA is in the room--I am sorry? WPA is in the
room. So we have some of the non-jurisdictional facilities in
there.
Mr. Radanovich. Okay, great. I appreciate that.
Mr. Hebert. LADWP I do know is in there as well.
Mr. Radanovich. Is that right? Okay. And also being from
California, I am real interested in California getting its act
together in the power generating business here as soon as
possible. And in that scenario, I really don't think things are
going to be back to normal until we get the Governor out of the
energy purchasing business and somehow make the utilities
creditworthy again. And then get them a sizable portion of
their purchases off the spot market.
Given that, I am kind of surprised that FERC is in this
area of negotiation in order to settle the past problems that
we have experienced in California, although I welcome and I am
glad that everybody is at the table working this thing out. I
guess my question is, is it possible for FERC to get involved
in any way in making sure that our utilities are creditworthy
again?
Mr. Hebert. We have done that through our price mitigation
plan. I, certainly, personally thought it was important
understanding that if you are in the energy industry the
business climate is somewhat undesirable right now because of
non-payment in California. That is why we had the 10 percent
adder on to the costs that we are looking at through the price
mitigation plan. It is something that we are continuing to work
through, but I think it is vitally important that we do
everything we can to keep California moving forward.
As to that, I will tell you a utility being in bankruptcy,
talks about another one declaring certainly doesn't help us.
When we talk about generation, as we all know, we have got to
add capacity, we have got to add supply. When we have press
releases which say there are going to be 5,000 megawatts added
by August of this year and then another press release some 3 or
4 months later is issued saying, ``Well, we are going to have
2,300.''
Mr. Radanovich. Yes, if that.
Mr. Hebert. If some are saying 1,200 megawatts now, I will
be frank with you, I don't think that is not enough to get it
done, and there have to be some real tough decisions made by
some leaders in California. Let me say this while I am before
this committee, the debate that was brought forth by this
committee I believe got information in front of FERC and other
people that allowed us to make good decisions.
Mr. Radanovich. Okay. Then I would just express my
gratification for the fact that FERC is going through this
arbitrage, I guess, if you want to call it. And if the efforts
of that, whatever refunds there are, can be directed toward
making our utilities creditworthy again and getting them back
in business would just go a long way to solving California's
energy problems.
Mr. Hebert. My intent as Chairman of FERC and why I like
the settlement process right now is to put the problems behind
us and move forward. And then we can completely focus on
getting the supply in and building the infrastructure. But
right now we are still dealing with some past debts, and we
really need to put that behind us.
Mr. Radanovich. Yes, I agree with you 100 percent, and
appreciate your efforts in that area.
Mr. Hebert. Thank you.
Mr. Barton. The gentleman from Oregon is recognized for 5
minutes. And would remind members the subject of the hearing is
supposed to be hydro relicensing and nuclear. The FERC Chairman
is here specifically for hydro licensing, although he is
obviously knowledgeable on electricity issues in general.
Mr. Hebert. We did, as a part of our mitigation plan,
remove obstacles and impediments to help squeeze out every
megawatt, including out of hydropower, and make it available,
if that helps, for the record, Mr. Chairman.
Mr. Barton. It does help. Thank you.
Mr. Walden. Mr. Chairman, thank you for the time. Chairman
Hebert, I am delighted you are here. I was sort of hoping that
Mr. Massey would be here as well, because it would be one of
the rare times that his testimony and yours would actually be
in concert on an issue, and I was looking forward to
celebrating that.
I would commend you for the action that the Commission took
in several instances to make changes in the way some of these
projects were operated to provide more power during critical
times. And I would specifically note one involving Idaho Power,
where involving Twin Falls you allowed more power to be
produced simply by reducing the water going over the falls that
had been there for aesthetic purposes so you can see a falls,
except on State and Federal holidays. Then we can flow the
water. So that added, I think, 6,300 or 9.700 megawatt hours--
15 to 17 percent increase.
And I don't need to tell you that in the Northwest where
upwards of 70 percent of our power comes from hydro, we are
both concerned about the relicensing process, how to fully
maximize use of existing hydro. And then on a side note, it
would be splendid, I think, to look at existing hydro projects
where additional capacity could be achieved. There are all kind
of reports out there where that is a possibility.
What disturbs me, though, are reports of a range of 1.6 to
8 percent reduction with relicensing. And yet we see that and
it is almost dismissed by some as necessary. On the other hand,
I go to the floor today, and we are going to debate another
sort of price cap issue, because we are concerned about price.
Price and supply are connected.
Mr. Hebert. They are.
Mr. Walden. And that brings us, I guess, to the relicensing
process. And I have read through GAO's report. I have tried to
wade through FERC's rather lengthy document as well. And I
guess I am concerned about whether you view the ability of FERC
to be able to really balance the need for an effective hydro
system where these mandatory requirements of these other
agencies. Is that possible to do or do those mandatory
requirements actually trump your ability run a hydro system?
Mr. Hebert. You really put your finger on the crux of the
problem. However, you mentioned Idaho Power, and that is a
great example of how FERC can work with other agencies and can
get things done in a very positive manner. We are trying to
squeeze out every megawatt for the West so we can keep the
lights on and keep prices at a reasonable level.
But, when we start looking at mandatory requirements, one
of the problems that slows the process down, that adds cost
and, in the end, probably means that we lose some very valuable
megawatts that, quite frankly, we desperately need in the West
right now, is that the resource agencies are not required to
balance the mandatory requirements with power interests and
other needs. FERC is the only agency that is statutorily bound
to provide balance and therefore that is where the trump comes
in.
Mr. Radanovich. So those agencies then really are able to
define the operations of the projects--operation of a project
in a way that they see fit, irrespective of the power
generation issue. Is that accurate?
Mr. Hebert. Correct.
Mr. Radanovich. So, basically, what they tell you, you have
to take and use, right?
Mr. Hebert. Pretty much, yes.
Mr. Radanovich. Now, it seems like, and I believe it is you
alternative licensing process, sort of the up-front process,
very collaborative involving all the stakeholders. That seems
to result in a much rapid and reliable licensing process. Are
there improvements from there that you see being able to be
applied elsewhere?
Mr. Hebert. Let me tell you, we are learning from the
collaborative process. It is something certainly we have seen
work very well in the gas pipeline industry. When we get groups
together, we choose the correct route in the first place. So we
don't have a second route, we cut our processing time. So we
don't miss the construction seasons. We get the infrastructure
there quickly.
Our belief, and certainly my belief, is that that the same
styled collaborative process with some adjustments down the
road will aid and benefit Americans.
Mr. Radanovich. Let me ask you one final question, if I
may. There has been some discussion about FERC's inability or
lack of activity in reopening some of these projects for
environmental issues as they have arisen. And yet aren't there
are at least two examples in the Northwest and PGE and Idaho
Power where those cases have been reopened for environmental
reasons? My understanding.
Mr. Hebert. Let me get Mr. Robinson to answer that real
quick.
Mr. Robinson. From the references you make, I am not
familiar with the specific cases, but we have reopening type
proceedings going on at all times, including projects for Idaho
Power and PG&E. Most of those, and I think it speaks to the
licensees trying to live within that community in which their
projects exist and keep everything moving smoothly, include
changes initiated by the licensees themselves coming and
seeking amendments to their project to satisfy environmental
concerns without us having to reopen those proceedings.
Mr. Radanovich. But you have the statutory authority to
reopen, correct?
Mr. Robinson. In those licenses which include that
provision, which I think since about 1975 or so is just about
all the licenses we have issued since then and a good number
before then.
Mr. Radanovich. Thank you, Mr. Chairman.
Mr. Barton. Thank you. Does the gentleman from Michigan
have additional questions? The gentleman is recognized for 5
additional minutes.
Mr. Dingell. I thank you. Mr. Chairman, please tell us how
many dams the Federal Energy Regulatory Commission has licensed
new since 1978 on a year-by-year basis. You don't have to do
that now, but please submit it for the record.
[The response appears at the end of the hearing.]
Mr. Dingell. I would ask, though, how many new dams, large
dams, have been licensed by FERC since 1990?
Mr. Hebert. Large?
Mr. Dingell. Large.
Mr. Hebert. None.
Mr. Dingell. None. How many between 1980 and 1990?
Mr. Hebert. I would like to look at the record, but my
guess would be none. But I will provide that information.
Mr. Dingell. I would appreciate that.
[The response appears at the end of the hearing.]
Mr. Dingell. The reason I ask this question, Mr. Chairman,
is your complaints about the different environmental statutes
that you confront in licensing are not much of a problem
because you simply issue--if the initial application is not
properly perfected, you simply then issue a year extension to
them and disregard the requirements of law that are so onerous
to the applicants; is that not so?
Mr. Hebert. We do extend from time to time, but I would not
say that we disregard the law; no, sir.
Mr. Dingell. Well, your complaint, though, lies about
relicensing; isn't that right?
Mr. Hebert. That is correct.
Mr. Dingell. And so on relicensing if they are not ready to
go forward on relicensing, you just give them a year extension;
isn't that right?
Mr. Hebert. That has been done, yes.
Mr. Dingell. So what is the delay that stems from these
environmental requirements and these fish and wildlife
protection requirements?
Mr. Hebert. Well, the delay is that if we don't have the
relicensing provision that is finally completed, there
continues to be costs that are borne by the ratepayers.
Mr. Dingell. But not significantly, because you issue the
renewal automatically; isn't that right?
Mr. Hebert. I would say significantly probably depends on
if you live in Oregon, California or New York.
Mr. Dingell. Well, if you live in Oregon, California or New
York, you get your relicensing issued by an automatic renewal
issued by the Commission. How much time and money does that
cost?
Mr. Robinson. If I could add, relicensing process itself
costs money. It takes----
Mr. Dingell. How much?
Mr. Robinson. [continuing] effort and time.
Mr. Dingell. How much?
Mr. Robinson. We calculated that the overall cost of
supporting the application was around $85 per kilowatt of
installed capacity. But that varies tremendously by the length
of the licensing process. Fully 25 percent of the cost of
relicensing occurs after the application is filed.
Mr. Dingell. How long does it take--if I was to walk in to
get a relicensing and you were just to issue me an automatic
renewal, how long would it take me to get it and get out of
there?
Mr. Robinson. The automatic renewal, if you came in----
Mr. Dingell. How long would it take, and how many papers
would I have to submit?
Mr. Robinson. You have to submit a significant amount of
paper. In fact, most of our applicants now are asking if they
can come in on CD-Rom, because the paper requirements are so
large.
Mr. Hebert. I would love to provide the committee a matrix,
basically, of what you are required to do. And I assure you,
sir, it is uninviting.
Mr. Dingell. All right. Now, how much delay then comes from
the Clean Water Act about which you complain, Mr. Chairman? You
told us this was a significant problem. The only thing that you
have to do is show that they are in compliance with the Clean
Water Act and that the placing of the dam or the renewal of the
license is not going to create any additional pollution in the
stream. The only pollutions I can think of that could flow from
a dam would be the cooling of the water. What other situations
would afflict the State agency and would affect adversely the
water quality standards which would be fixed by the agency
under Clean Water Act?
Mr. Hebert. Congressman Dingell, we have found that close
to 40, I think it is 39, percent of the delay is caused by 401
Clean Water. And I will tell you I think that is a great point
to make, because I think when Americans think of clean water,
they think about preventing pollution. But, the 401 is used to
establish many other things other than to make certain that we
have clean water. I will go anywhere with you to ensure that we
have clean water and we don't have pollution. I guarantee you
that. But when there are costs that are borne by ratepayers
because docks and camping facilities are included to meet Clean
Water Act requirements.
Mr. Dingell. Mr. Chairman, I don't mean to be discourteous,
but I am limited on time.
Mr. Hebert. I am just trying to give you a full answer.
Mr. Dingell. But I am trying to find out what you are
compelled to enforce of the Clean Water Act in the relicensing
process. The only change in water quality that comes from the
issuance of that license is temperature. You don't increase
salinity, you don't increase turbidity, you don't add salinity
or anything else to the water. And there is no pollution, which
is increased, which cannot be addressed by the State agency
under its other powers against the polluter through other
activities.
Mr. Hebert. Chairman Dingell, on pollution, I totally agree
that we need to do everything we can. But, sir, the problem is
that we don't get to define it. It is defined within the
States, and the States throw a list of things in there, which
don't have, quite frankly, anything to do with pollution or
clean water.
Mr. Dingell. Well, but that is not then a Clean Water Act
problem; that is a different problem.
Mr. Hebert. It is the mandatory requirements of those
resource agencies that they are able to use through 401.
Mr. Dingell. Well, what are you supposed to do with those
mandatory requirements?
Mr. Hebert. Well, we include them.
Mr. Dingell. You include them?
Mr. Hebert. Absolutely; we are forced to.
Mr. Dingell. Unless you issue an automatic renewal.
Mr. Hebert. For a year.
Mr. Dingell. For a year.
Mr. Hebert. Which gets us nowhere, sir. I am trying to make
good decisions that will give American's decisions they can
rely on for more than 365 days at a time.
Mr. Dingell. I hope you are not offended, but what it tells
me is that it gets them and you to the point where you issue
another one of these automatic renewals at the end of the year.
And then at the end of that year, another automatic renewal,
and the end of that year, another automatic renewal.
Mr. Hebert. Well, let me sum it up by saying this: With all
due respect, I will do whatever you think is important to
ensure that we have clean water and that pollution is
prevented. But, sir, with all due respect, looking at something
from year to year is exactly the type of mentality that got us
to California with the lack of supply and the lights going on
and energy costs high.
Mr. Dingell. My concern here is that you were complaining
about the burden of enforcing the State water quality
standards. I don't think there are any State water quality
standards I find here that would cause you any significant
trouble since the dam contributes nothing to the level of
pollution in the river, with the possible exception of a change
of the thermal temperature of the river. I yield to my friend,
the chairman.
Mr. Barton. Well, I am just saying the gentleman's time
expired about 3 minutes ago.
Mr. Dingell. Can I get an answer to the question, Mr.
Chairman?
Mr. Barton. I think he has answered it three or four times
in somewhat slightly different variations. If you ask the
question again three or four times----
Mr. Dingell. It would comfort me if I could get an answer.
Mr. Barton. Well, we want you comforted, so----
Mr. Dingell. Otherwise, I will be sad.
Mr. Hebert. Can I do it this way: Congressman Dingell is
absolutely right. Would that help?
Mr. Barton. It is okay by me. If that satisfies him. I am
not sure that would satisfy him.
He may think he has asked the question wrong if you say he
is totally right.
Mr. Dingell. I was sort of afraid that you would come to
that conclusion, Mr. Chairman, but I am comfortable with it.
Mr. Barton. All right. Before I go to Mr.----
Mr. Hebert. I respect your opinion, Congressman Dingell.
Mr. Barton. We are going to recognize Hydro Man Shadegg
here, but under your chairmanship on the issue that Mr. Dingell
was talking about, has the FERC Commission in the time you have
been either a commissioner or Chairman of it operated any
differently on these automatic renewals? In other words, have
you continued the existing practices in place when you came on
the Commission? Or have you changed any procedures in the
issues that Mr. Dingell was asking about?
Mr. Hebert. We are hopeful that through our 603 report we
will make changes, but they have not been made at this point,
no. And the renewals that Congressman Dingell is speaking about
I don't have the ability to grant or not; they are automatic.
Mr. Barton. But that is not a practice that you established
as Chairman. It was a practice that was in place when you came
on to the Commission and then became Chairman.
Mr. Hebert. That is correct and required by law. And I am
trying to get out of the year to year. I am trying to either
grant a license or deny a license and move forward.
Mr. Barton. Okay. The gentleman from Arizona is recognized
for 5 minutes.
Mr. Shadegg. Thank you, gentlemen, and I want to thank our
witnesses, particularly Commissioner Hebert, for being here. I
appreciate the work he is doing in a difficult climate as the
country faces an energy crisis, and we in the west coast in
particular face one. And I think the Commission is attempting
to respond to the various pressures and demands on it, which
are intense.
This hearing is devoted to, in part, nuclear energy but
also, in part, hydropower. I am, as the chairman has indicated
by his quip, Hydro Man. I am a strong proponent of hydropower,
because I believe it holds the potential to provide very clean
energy at a very low cost. It is uniquely suited to dealing
with peaking problems, which is the problem we face in
California and other places. And it can do so in an
environmentally neutral fashion.
And, therefore, I think it is something we ought to be
looking at? I believe, Mr. Chairman, you may know that I am
responsible for proposing legislation that would allow the
addition of new turbines to existing dams which have no
turbines and the addition of more efficient turbines as a
substitute for inefficient turbines current in dams. We are not
talking about building new dams; we are talking about
generating more electricity at the dams that we already have.
In that regard, I want to ask you a question about the
relative cost of preparing a license application and
implementing the environmentally based mandatory condition
measures between smaller hydro projects and the projects which
are naturally gas-fueled, as most of them are. The information
I have suggests that the total cost for a small hydropower
project is about $1,900 per kilowatt hour versus as little as
$500 per kilowatt hour at a gas-fired generating plant.
It seems to me to make no sense to take a plant that uses
natural gas, of which we have a finite supply and which does in
fact pollute to some degree, even though it probably pollutes
less than any other we have besides nuclear and hydro, and make
the regulatory cost much less for that source than it is for a
clean source like hydro. And if you could address that, I would
appreciate it.
Mr. Hebert. Well, what we are committed to doing is to try
to lessen the cost of regulation, be it on hydro or gas or
anything else. But, certainly, it is important right now during
this time of needed supply with questionable reliability to
have any and all energy. You talk about gas, you talk about
hydro, you talk about nuclear. The one that you are
consistently talking about is fuel.
And when you look at the opportunities for fuel, you look
at nuclear, you look to hydro. You have to believe, as I know
you do believe, that those are available resources that are
clean when it comes to air quality, and we need to be looking
for every available opportunity that is out there. But at the
same time, we must be committed to speeding up that process and
therefore cutting the costs. Because, as you know, the cost is
always picked up by the ratepayers; it gets to them.
Mr. Shadegg. It seems to me, and I still didn't--maybe I am
not unlike former Chairman Dingell in this regard. I am not
certain I heard an answer. Let me ask you point blank, does it
make sense for us to have a regulatory structure where it costs
almost four times as much to license a hydropower plant as it
costs to license a new natural gas-fired plant?
Mr. Hebert. It does not make economic sense. I will tell
you that there are burdens within the regulatory scheme, when
you look at hydro, that are not there, when it comes to simple
cycle or combined cycle natural gas. Specifically, we are
talking about recreation. We are talking about fish. So there
are added environmental aspects that we must protect that are
important as well.
Mr. Shadegg. It seems to me that we ought to be looking at
policies which say that if it is a small hydro plant with very
little environmental implication, we ought to be what we can to
reduce those licensing costs. And right now I think there is a
lower licensing burden for extremely small hydro plants, but we
ought to be looking at whether or not that is set at an
appropriate level.
The other question I want to ask you is that between 1982
and 1992 there was a median processing time for relicensing
cases of 30 months. Now, in the decade or in the time span
between 1993 and 2000, that median processing time has grown to
43 months. It seems to me, if the Nation faces an energy
crisis, as I believe it does, we need to be going in the
opposite direction on that time span, and I would like to give
you a chance to address that issue.
Mr. Hebert. That one is easy: I agree with you 100 percent.
We need to squeeze every megawatt that is available out there,
and we need to get available capacity and supply quickly. That
not only means hydro capacity; it also means natural gas, it
means clean coal technologies, it means nuclear. It also means
intrastate capacity on pipes within States. We have seen
problems in California where they can't deliver to it once we
get it to them in the border. We also need better interstate
capacity on pipes.
Several years ago, I testified right here where they talked
about 30 TCF marketplace by the year 2010. If we do what is in
the queue now of natural gas, there was a projection from Wall
Street about a month or 2 ago that said we would be at 30 TCF
by the year 2004. We certainly do not have the infrastructure
to supply that.
Mr. Shadegg. My last question may seem like a trick
question, but it is not. I don't know--I know the legislation I
have sponsored would both allow the installation of generating
turbines in dams that don't have turbines but water comes
through those dams, so we could capture that fuel. You called
it a fuel. I brought a hydrologic cycle in here from a fourth
grade textbook in 1999 and pointed out that with hydro it
really isn't fuel; it is kind of a continuing process of
nature, and we went through a little lesson on hydrology.
Mr. Hebert. Since you are the expert, I would say that is
right.
Mr. Shadegg. That is right. Well, fourth graders learn it.
But I guess the second part of my bill says we ought to
encourage the installation of more efficient newer turbines in
existing dams. Now, I can concede that there might be an
environmental implication for putting a turbine into a dam that
does not now have a dam, though it is not the building of a new
dam, about which there are great environmental concerns.
But I guess my question of you is, are you aware of any
environmental implication by pulling an inefficient turbine out
of an existing dam and putting a more efficient turbine into
that dam?
Mr. Hebert. Well, FERC has taken a strong position on
efficiency as a very good thing, and we should move in that
direction. At this point, no, I am not aware of any, and I
would think if you are going to put in new turbines, you could
improve upon the environmental benefits of that turbine.
Mr. Shadegg. Precisely. Thank you, Mr. Chairman. I yield
back the balance of my time.
Mr. Barton. Does the gentleman from Massachusetts wish to
ask questions? Okay.
Mr. Hebert. I was hoping for a song.
Mr. Barton. Do not encourage the gentleman from
Massachusetts now.
Mr. Hebert. He wanted to talk about windmills last night.
Mr. Barton. He is being cooperative. We do not want you to
bait him, okay?
Mr. Hebert. We had a discussion on Cervantes.
Mr. Barton. We are going to hold the witness in contempt of
the Chair here.
Mr. Hebert. I am sorry.
Mr. Barton. We do thank you----
Mr. Hebert. Thank you.
Mr. Barton. [continuing] Chairman and the associates from
FERC. We will have written questions for the record. Any ideas
on legislation in this area you need to get to us at the member
staff level in the next week, because we want to mark this up
the week we come back after July 4.
Mr. Hebert. I will. And once again, Mr. Chairman, if I may
close with saying I really appreciate all members of this
committee. I certainly appreciate your leadership in helping us
get the debate out there to move California in the right
direction.
Mr. Barton. Well, we do think that now that you are at a
five-member commission, you are doing excellent work, and you,
as Chairman, are to be commended. Many of the things that you
and I talked about on the record last summer have come to pass
in a negative sense in terms of the environment. But on the
positive side, many of the solutions that we have both
supported, somewhat grudgingly, in cases are beginning to be
implemented, and we are seeing an improved situation. You are
to be commended for that. You don't get too much public
commendation, and I want to commend you.
Mr. Hebert. Thank you. I would commend the FERC staff, and
I appreciate you saying that.
Mr. Shadegg. Mr. Chairman? Mr. Chairman?
Mr. Barton. Yes.
Mr. Shadegg. Thank you. I missed Chairman Dingell's
questioning, but I just wanted to ask Mr. Hebert if he had an
opportunity--if he needed to clarify the water quality
certification process and the burden on States, in light of the
questioning that occurred before?
Mr. Hebert. I would be more than happy, and it would help
me to be able to provide additional testimony on that to the
committee.
Mr. Shadegg. That would be very helpful.
[The response appears at the end of the hearing.]
Mr. Barton. We are going to excuse this panel and call
forth our last panel of the day. We have Barry Hill, who is
director of the Natural Resources and Environment Department of
the Government Accounting Office, and he is accompanied by Mr.
Charles Cotton. We should have Mr. John Prescott, the vice
president of Generation for Idaho Power. We should have Ms.
Elizabeth Birnbaum, who is the director of Government Affairs
for the American Rivers Association. And we should have Mr.
Ronald Shems, who is appearing on behalf of the Vermont Agency
of Natural Resources.
If we could shut the door there at the back of the hearing
room, if one of the folks could shut that door.
Well, welcome. It has been a long day. We appreciate you
agreeing to testify. We are going to start with Mr. Hill, then
we will go to Ms. Barlow, Mr. Prescott and Ms. Birnbaum, and
last but not least Mr. Shems. Your testimony is in the record
in its entirety, so we will recognize each of you for 5 minutes
to verbally summarize it.
Welcome, Mr. Hill.
STATEMENTS OF BARRY T. HILL, DIRECTOR, NATURAL RESOURCES AND
ENVIRONMENT; ACCOMPANIED BY CHARLES S. COTTON, ASSISTANT
DIRECTOR AND ERIN BARLOW, SENIOR ANALYST, NATURAL RESOURCES AND
ENVIRONMENT, GENERAL ACCOUNTING OFFICE; JOHN PRESCOTT, VICE
PRESIDENT OF GENERATION, IDAHO POWER COMPANY; S. ELIZABETH
BIRNBAUM, DIRECTOR, GOVERNMENT AFFAIRS, AMERICAN RIVERS; AND
RONALD SHEMS, ATTORNEY, SHEMS, DUNKIEL, PLLC, ON BEHALF OF
VERMONT AGENCY OF NATURAL RESOURCES
Mr. Hill. Thank you, Mr. Chairman. I am pleased to be here
today to discuss the process that FERC uses to issue licenses
for constructing and operating non-Federal hydropower projects.
In recent years, some licensees and other participants in
FERC's licensing process have expressed concern that obtaining
a license now takes too long and costs too much. Responding to
these concerns, FERC established an alternative licensing
process, and other Federal agencies have introduced reforms
intended to make the licensing process more efficient and less
costly. However, these reforms did not quell the concerns. As a
result, in November 2000, the Congress directed FERC to conduct
a comprehensive review of the policies, procedures and
regulations relating to the licensing of non-Federal hydropower
projects to determine how to reduce the time and cost
associated with obtaining a license.
Prior to the enactment of this statute, the chairman of the
House Appropriations Subcommittee on Interior and Related
Agencies asked GAO identify and assess significant issues
related to the process. We reported our findings on May 2 of
this year, and FERC reported its findings on May 8. Both
reports observed that Federal and State land and resource
agencies, licensees, environmental groups, and other
participants in the licensing process, acknowledge that the
process to obtain a license is far more complex, time-consuming
and costly today than it was 30 to 50 years when FERC issued
original licenses to own and operate about 1,000 non-Federal
hydropower projects.
Today, FERC faces a formidable challenge in issuing a
license that is legally defensible, scientifically credible and
likely to produce and enhance fish and wildlife and other
resources while still preserving hydropower as an economically
viable energy source.
Both FERC and we also found that participants in the
licensing process do not agree on the effectiveness of recent
reforms to the process or on the need for further reforms to
shorten the process and make it less costly. Some within and
among the diverse parties believe that the time and money spent
on licensing a project reflect the level of complexity of the
issues involved. And that recent reforms will likely reduce the
time and cost needed to obtain a license. Conversely, others
believe that recent reforms will do little to reduce time and
costs. However, they cannot agree on what further reforms are
needed to shorten the process and make it less costly.
FERC and we do not agree, however, on the better time and
cost data to reach informed decisions about process reforms. To
resolve the disagreement among process participants and to
reach informed decisions on the effectiveness of recent reforms
and the need for further administrative reforms or legislative
changes, we believe that FERC needs to work with other process
participants to develop a system to collect and share complete
and accurate data on process related time and costs by
participant, project and process step, and develop the ability
to link the data to projects displaying similar characteristics
in order to identify those projects, process and outcome
characteristics that increase the time and cost to obtain a
license.
Conversely, FERC believes that available data, coupled with
its years of experience with the licensing process are adequate
to reach informed decisions on the effectiveness of recent
reforms to the licensing process, as well as the need for
further reforms to the process.
Mr. Chairman, if FERC Federal and State land and resource
agencies, licensees, environmental groups, and other
participants in the licensing process agreed on whether further
reforms are needed to reduce process related time and costs,
then the importance of good data to reach good decisions would
be diminished. However as FERC states in its May report, the
areas of agreement tend to be overshadowed by disagreements
among process participants. As a result, the recommendations in
FERC's report reflect only the views of its staff on how to
make the process more efficient.
We believe that both the Commission and the Congress need
to carefully consider the recommendations made by the FERC
staff. Some of the recommendations appear to be based on
inadequate or inappropriate data, and more importantly, some,
such as making FERC the sole Federal decisional authority for
licensing conditions and processes, may cause changes and
unintended consequences to the outcomes of the process.
Mr. Chairman, this concludes my statement. I would be happy
to answer any questions you may have.
[The prepared statement of Barry T. Hill follows:]
Prepared Statement of Barry T. Hill, Director, Natural Resources and
Environment, United States General Accounting Office
Mr. Chairman and Members of the Subcommittee: We are pleased to be
here today to (1) discuss our May 2, 2001, report on the process used
by the Federal Energy Regulatory Commission (FERC) to issue licenses to
construct and to operate nonfederal hydroelectric power (hydropower)
projects 1 and (2) provide our preliminary views on FERC's
congressionally mandated May 8, 2001, report on hydroelectric licensing
policies, procedures, and regulations.2
---------------------------------------------------------------------------
\1\ Licensing Hydropower Projects: Better Time and Cost Data Needed
to Reach Informed Decisions About Process Reforms (GAO-01-499, May 2,
2001).
\2\ Report on Hydroelectric Licensing Policies, Procedures, and
Regulations: Comprehensive Review and Recommendations Pursuant to
Section 603 of the Energy Act of 2000, prepared by FERC staff (May 8,
2001).
---------------------------------------------------------------------------
In summary:
FERC, federal and state land and resource agencies, licensees,
environmental groups, and other participants in the licensing
process acknowledge that the process to obtain a license is far
more complex, time-consuming, and costly today than it was 30
to 50 years ago when FERC issued original licenses to own and
operate about 1,000 nonfederal hydropower projects. Today, FERC
faces a formidable challenge in issuing a license that is
legally defensible, scientifically credible, and likely to
protect and enhance fish, wildlife, and other resources while
still preserving hydropower as an economically viable energy
source.
Both FERC and we have reported that participants in the
licensing process do not agree on the effectiveness of recent
reforms to the process or on the need for further reforms to
shorten the process or make it less costly. Some within and
among the diverse parties believe that the time and money spent
on licensing a project reflect the level of complexity of the
issues involved and that recent reforms will likely reduce the
time and costs needed to obtain a license. Conversely, others
believe that recent reforms will do little to reduce time and
costs. However, they cannot agree on what further reforms are
needed to shorten the process and make it less costly.
FERC and we do not agree, however, on the need for better time
and cost data to reach informed decisions about process
reforms. To resolve the disagreement among process participants
and to reach informed decisions on the effectiveness of recent
reforms and the need for further administrative reforms or
legislative changes, we believe that FERC needs to work with
other process participants to develop (1) a system to collect
and share complete and accurate data on process-related time
and costs by participant, project, and process step and (2) the
ability to link the data to projects displaying similar
characteristics in order to identify those project, process,
and outcome characteristics that can increase the time and
costs to obtain a license. Conversely, FERC believes that
available data coupled with its ``years of experience'' with
the licensing process are adequate to reach informed decisions
on the effectiveness of recent reforms to the licensing process
as well as the need for further reforms to the process.
After reviewing FERC's May 8, 2001, report, we continue to
believe that good data are needed to reach good decisions.
Moreover, we believe that both FERC's five-member Commission
and the Congress need to carefully consider the recommendations
made by FERC staff. Some of the recommendations appear to be
based on inadequate or inappropriate data and some may change
the outcomes of the process.
Background
About 10 percent of all electricity production in the United States
is generated by hydropower projects. Federally owned and operated
hydropower projects generate approximately half of this amount, while
about 1,000 nonfederally owned and operated hydropower projects, which
are licensed by the federal government, generate nearly all of the
rest.3 Hydropower projects can include dams, reservoirs,
stream diversion structures, powerhouses containing water-driven
turbines, and transmission lines.
---------------------------------------------------------------------------
\3\ About 600 additional small generating capacity hydropower
projects are exempted from the federal licensing requirement.
``Projects'' in this testimony refers to the large, licensed hydropower
projects.
---------------------------------------------------------------------------
Hydropower is an important part of the nation's energy mix. It
offers the benefits of a comparatively inexpensive, emission-free,
renewable energy source, the quantity of which can be increased quickly
in periods of peak demand. In addition, the reservoirs behind
hydropower dams often provide other benefits, including recreation,
flood control, irrigation, and a municipal water supply. However,
hydropower projects can also have adverse effects on ecosystems and
resources, including fish and wildlife. They can change the fundamental
chemical, physical, and biological processes of river ecosystems by (1)
fluctuating river levels and altering the timing of flows, (2) blocking
the downstream flow of nutrients and sediments, (3) changing water
temperatures and oxygen levels, (4) impeding fish from migrating up and
down streams or killing them as they pass through turbines used to
generate power, and (5) drying out sections of streams.
The Federal Power Act (FPA) authorizes FERC to issue licenses to
construct and to operate nonfederal hydropower projects. FERC--an
independent five-member commission appointed by the President and
confirmed by the Senate--issues licenses valid for periods up to 50
years, after which the projects must be relicensed in order to continue
operations.
FERC issued original licenses for most of the about 1,000
nonfederal hydropower projects decades ago. It now issues few licenses
to construct and operate new hydropower projects. Therefore, most of
FERC's licensing activities relate to the relicensing of projects with
licenses currently nearing their expiration dates.
Between January 1, 1993, and December 31, 2000, the licenses for
395 of these projects expired. Many of these were small projects that
do not generate much power. According to FERC, over the next 15 years,
the licenses for another 238 projects will expire. The 238 projects,
many of which are large, combine to generate over half of the nation's
nonfederal hydropower.
In recent years, some licensees and other participants in the
licensing process have expressed concern that obtaining a license now
takes too long and costs too much. Responding to these concerns, FERC
established an alternative licensing process, and other federal
agencies have introduced reforms intended to make the licensing process
more efficient and less costly. However, these reforms did not quell
the concerns. As a result, in November 2000, the Congress directed FERC
to conduct a comprehensive review of the policies, procedures, and
regulations relating to the licensing of nonfederal hydropower projects
to determine how to reduce the time and costs associated with obtaining
a license. FERC reported its findings on May 8, 2001.
The Licensing Process Is More Complex, Lengthy, and Costly Than It Was
30 to 50 Years Ago
FERC and other participants in the licensing process acknowledge
that the process is far more complex, time-consuming, and costly today
than it was when FERC issued the approximately 1,000 original
hydropower licenses 30 to 50 years ago. Since 1986, the Commission has
been required to give ``equal consideration'' to, and make tradeoffs
among, hydropower generation and other competing resource needs,
including protecting and enhancing fish and wildlife.
Moreover, FPA authorizes federal and state agencies other than FERC
to influence license terms and conditions, and in some instances,
precludes FERC from altering license conditions imposed by other
agencies. Environmental and land management laws--enacted primarily
during the 1960s and 1970s--have placed additional requirements on
these agencies to address specific resource needs, including protecting
endangered species, achieving clean water, and preserving wild and
scenic rivers.
In addition, section 401 of the Clean Water Act--added in 1972--
requires anyone seeking a license or permit for a project that may
affect water quality to seek approval from the relevant state water
quality agency. States have begun to use section 401 to influence
license terms and conditions.
The regulations adopted by FERC under FPA also require FERC to
involve the public in the licensing process. Public values toward
hydropower have changed and now reflect a growing concern about the
environmental impacts of hydropower projects.
Changing public values, coupled with requirements to give equal or
greater consideration to environmental concerns than to hydropower
generation, have resulted in new license conditions intended to protect
and enhance fish, wildlife, and other resources. For example, in an
effort to reduce the risk to fish resources, new licenses may include
conditions that require licensees to change minimum streamflows,
construct fish-passage facilities, install screens and other devices to
prevent fish from being injured or killed, limit the amount or timing
of reservoir drawdowns, or purchase or restore lands affected by a
project.
Attempts to balance and make tradeoffs among competing economic and
environmental interests and to improve the environmental performance of
projects, while preserving hydropower as an economically viable energy
source, have lengthened the process and made it more costly.
Participants Cannot Agree on the Need for, and Type of, Reforms to the
Licensing Process
FERC, federal and state land and resource agencies, licensees,
environmental groups, and other participants in the licensing process
do not agree on whether further reforms are needed to reduce process-
related time and costs.
Some participants believe that the time and money spent on project
licensing reflect the level of complexity of the issues involved. They
consider the process to be worthwhile as long as it results in a new
license that is legally defensible, scientifically credible, and more
likely to protect and enhance resources over the term of the license.
Some of these participants also believe that recent reforms will likely
reduce the time and costs associated with obtaining a new license and
that additional reforms may not be necessary. For example, they believe
that, when compared with projects using the traditional licensing
process, projects using FERC's relatively new alternative licensing
process are more likely to obtain licenses before their old ones expire
and less likely to have their license decisions delayed as a result of
administrative and judicial reviews.
Other participants in the licensing process believe that recent
reforms will do little to reduce the time and costs to obtain a new
license. For example, they believe that licensees and other
participants will not use FERC's alternative licensing process for
projects that involve contentious issues or when participants have
conflicting values and concerns. They also believe that, while the
alternative licensing process may shorten the time required to obtain a
new license, it may also be more costly than the traditional licensing
process. However, these participants cannot agree on what further
administrative reforms or legislative changes are needed to shorten the
process and make it less costly.
FERC Needs Better time and Cost Data to Reach Informed Decisions on the
Effectiveness of Recent Reforms and the Need for Further
Reforms to the Licensing Process
To reach informed decisions on the effectiveness of recent reforms
to the licensing process as well as the need for further reforms to the
process, FERC must accomplish two tasks.
First, it needs complete and accurate data on process-related time
and costs by participant, project, and process step. Currently, FERC
does not systematically collect much of these data. For example,
because it has not provided clear guidance to the other agencies on
what costs they should report, FERC cannot identify other federal
agencies' actual costs to participate in the licensing
process.4 In addition, FERC does not request, and states
generally do not report, their process-related licensing costs.
Similarly, although some licensees have voluntarily reported their
process-related licensing costs to FERC, FERC does not request
licensees to report these costs.
---------------------------------------------------------------------------
\4\ Hydropower Relicensing: Federal Costs Are Not Being Recovered
(GAO/RCED00107, June 30, 2000).
---------------------------------------------------------------------------
Second, FERC needs to identify (1) why certain projects or groups
of projects displaying similar characteristics take longer and cost
more to license than others do and (2) why the time and costs to
complete certain process steps vary by project or group of similar
projects. Similar characteristics may be project-related, such as
whether the project is on federal land; process-related, such as
whether FERC had to resolve a dispute during the process between the
licensee and a federal or state agency; or outcome-related, such as
whether the terms and conditions of a new license compromise the
project's economic viability or environmental performance.
Our May 2, 2001, report contained recommendations that, if
implemented, would allow informed decisions on the effectiveness of
recent reforms to the licensing process as well as the need for further
reforms to the process. In its written comments on a draft of our
report, FERC agreed that it does not systematically collect complete
and accurate data on process-related time and costs by participant,
project, and process step. However, it believed that it did not need
these data to make recommendations on further reforms to the licensing
process. Rather, its May 8, 2001, report is based on the limited data
that were available as well as FERC's ``years of experience'' with the
licensing process.
Observations on FERC's may 2001 Report and Recommendations
Mr. Chairman, if FERC, federal and state land and resource
agencies, licensees, environmental groups, and other participants in
the licensing process agreed on whether further reforms are needed to
reduce process-related time and costs, then the importance of good data
to reach good decisions would be diminished. However, as FERC states in
its May report, ``the areas of agreement tend to be overshadowed by
disagreements'' among process participants. As a result, the
recommendations in FERC's report reflect only the views of its staff on
how to make the process more efficient.
We believe that both the Commission and the Congress need to
carefully consider the recommendations made by FERC staff. Some of the
recommendations appear to be based on inadequate or inappropriate data
and some may change the outcomes of the process. For example:
The report states that the ``most effective way to reduce the
cost and time of obtaining a hydropower license would be for
Congress to make legislative changes necessary to restore the
Commission's position as the sole federal decisional authority
for licensing conditions and processes.'' However, FERC and its
independent predecessor (the Federal Power Commission) have
never had the ``sole federal decisional authority for
licensing.'' 5 Thus, FERC staff are asking the
Congress to restore an authority that the Commission has never
had.
---------------------------------------------------------------------------
\5\ Prior to 1930, the Commission (then known as the Federal Power
Commission) was comprised of three Cabinet officials, the Secretaries
of Agriculture, the Interior, and War. 42 Stat. 1063 (1920). In 1930,
the Commission was reorganized as a five-person body independent of the
Secretaries. 46 Stat. 797 (1930). Throughout its history, the
Commission's licensing authority has been subject to the mandatory
condition provisions of what are now sections 4(e) and 18 of the
Federal Power Act. See 42 Stat. 1065, 1073 (1920). Accordingly, FERC
and its independent predecessor have never had the ``sole federal
decisional authority for licensing.''
---------------------------------------------------------------------------
The report states that changes to regulations and policies
``are not an adequate substitute for legislative reform.''
However, the report notes that a 1993 FERC policy to issue
draft environmental analyses for comment added about 6 months
to the relicensing process. Thus, it appears that there are
opportunities to reduce time and costs within the existing
legislative framework.
FERC's report states that it ``focuses on relicensing of
existing hydropower projects, as relicenses comprise the great
majority of licensing proceedings currently and for the
foreseeable future.'' However, 14 of the 16 projects that it
uses to ``illustrate vividly how the dispersal of decisional
authority can work to paralyze a licensing proceeding'' are for
original licenses to construct new projects, not to relicense
existing ones.
The scope of FERC's review was limited to reducing process-
related time and costs. However, its recommendation to
establish ``one-stop shopping'' at FERC could affect the
emphasis given to protecting and enhancing fish, wildlife, and
other resources. Thus, any potential gains in efficiency from
establishing ``one-stop shopping'' at FERC would need to be
weighed against the policy reasons that led to separating the
responsibility for licensing hydropower projects from the
responsibility for ensuring regulatory compliance with
environmental and other laws.
Mr. Chairman, this concludes my formal statement. I will be pleased
to respond to any questions that you or other Members of the
Subcommittee may have.
Mr. Walden [presiding]. Thank you, Mr. Hill.
Now, let us go to Mr. Prescott. I would like to welcome you
to present your testimony, and thanks for being here.
STATEMENT OF JOHN PRESCOTT
Mr. Prescott. Okay. Mr. Walden, members of the
subcommittee, thank you very much for giving me the opportunity
to appear before you to discuss the important role that
hydropower has played and must continue to play in our Nation's
energy policy.
I appear before you in two capacities: As vice president of
Generation for Idaho Power Company and as a representative of
the hydropower industry. As a board member of the National
Hydro Association, my testimony today reflects the sentiments
of a thorough cross-section of the industry.
The benefits of hydropower and its importance to our
Nation's environmental and energy policy objectives are well
documented. Hydropower is not only our largest renewable energy
resource; it is low cost and efficient, and it provides
Americans with abundant recreational opportunities, as well as
flood control and irrigation benefits. It is also emissions-
free, which in a time of ongoing concern over greenhouse gases
cannot be overlooked.
As California and the West grapple with an energy supply
insufficient to meet growing demand, it is another of hydro's
attributes that has taken on increased importance: reliability.
The management of the Nation's electric grid depends upon fast,
flexible generation sources like hydro to meet peak power
demands and to restore service after a blackout. Hydro's
ability to go from zero power to maximum output quickly makes
it exceptionally good at meeting changing loads and providing
ancillary services.
Despite these many benefits, we are in danger of losing
hydropower capacity and operational flexibility at a time when
it is most needed. As we face rising energy prices, energy
shortages, reliability and pollution concerns, now is the time
for policymakers to better incorporate hydropower into the
Nation's energy strategy. To that end, I applaud Chairman
Barton for holding this hearing.
As lawmakers devise an energy strategy, I offer the
following thoughts on how best to address the decline of
hydropower and to encourage development of additional hydro
capacity at existing sites, steps that would allow the country
to increase its use of renewable, emissions-free generation in
an environmentally compatible manner.
Most importantly, the hydropower relicensing process needs
to be fixed. Over the next 15 years, 240 projects in 38 States,
nearly 29,000 megawatts of power, must undergo the FERC
relicensing process. Idaho Power alone must relicense nearly
1,500 megawatts before the year 2010.
As has been well documented in congressional hearings over
the past few years, the process suffers from dispersed
decisionmaking authority and an inability to balance competing
values. The bottom line is that costs, delays and conflicting
mandates inherent in the process threaten generation capacity
and operational flexibility. As we lose megawatts and
flexibility, we must rely on less efficient generation sources
that both cost more and produce greenhouse gas and other
emissions.
While many studies and reports have found varying levels of
generation loss due to relicensing, we should not be haggling
over figures. The point is that in today's tight energy
climate, any loss in electrical generation, especially from
such a clean, cost-efficient source, is too much.
How did we get to this point? Why such a dysfunctional
process? Most of it can be boiled down to one unfortunate
reality: The process fails to properly balance the
environmental impact of hydro projects with the crucial energy
and non-energy values of the resource.
Under Federal law, FERC has the responsibility and
authority to strike a balance between power and environmental
values. The courts, however, have interpreted the Federal Power
Act so as to prevent any balancing from taking place. The
courts have given Federal resource agencies the authority to
set mandatory conditions on FERC relicenses, conditions that
cannot be altered or changed by FERC. FERC has no opportunity
to balance the license in the broadest public interest. The net
result is that no one has the authority to look at the big
picture.
Some have suggested that the problems with the licensing
process can be solved solely through administrative means. I
disagree. Properly developed and implemented administrative
remedies can help on a number of fronts and should be
encouraged. But taken alone, administrative reforms can not
fully address the fundamental and substantive problems with the
process.
Legislative fixes are necessary if we are to truly fix the
hydroelectric licensing process. The issue of licensing
improvement transcends partisanship. In addition to the Towns
bill's bipartisan roster of cosponsors, both Senate energy
packages contain hydro licensing language. The FERC 603 report
echoes the call for legislative reform, and the Bush
Administration's national energy plan declares licensing
improvement to be a top energy policy priority. We are
encouraged by the emerging consensus on this issue and look
forward to continuing to work with Chairman Barton, Congressman
Boucher and the entire subcommittee on enacting balanced,
bipartisan licensing improvement measures this year.
In closing, the hydropower industry strongly believes that
healthy rivers and hydropower can coexist. As we look to self-
sustaining energy strategies, now is the time to better
incorporate hydro into the Nation's energy mix. Reforming the
license process and providing incentives for hydro development
at existing sites can benefit hydro producers, the environment
and consumers and is a goal that all Americans should support.
Thank you.
[The prepared statement of John Prescott follows:]
Prepared Statement of John Prescott, Vice President of Generation,
Idaho Power Company
Chairman Barton, members of the Subcommittee, thank you very much
for giving me the opportunity to appear before you today to discuss the
important role that hydropower has played and must continue to play in
our nation's energy policy.
I appear before you today in two capacities. First and foremost, as
Vice President of Generation for Idaho Power Company. Hydroelectric
power plays an integral role in our company's generation base. In an
average water year, Idaho Power Company's 17 hydroelectric plants
provide approximately 60% of our generation. Perhaps equally important,
hydroelectric power's unique ability to follow customer load allows us
to use this resource in an efficient and comparatively low-cost manner.
These are the paramount reasons that Idaho Power Company has been rated
as one of the nation's lowest cost providers of electric energy, and in
1998, we were rated as the most efficient electricity provider by
Public Utilities Fortnightly.
I am also here representing the hydropower industry. As a board
member of the National Hydropower Association for the past year, I have
participated in numerous discussions with industry colleagues and non-
industry stakeholders as to the challenges and opportunities facing
hydropower in the 21st century. In addition, Idaho Power Company is an
active member of the Hydroelectric Licensing Reform Task Force, a
coalition of public and investor-owned hydropower generators drawn from
the memberships of the American Public Power Association, the Edison
Electric Institute, and the National Hydropower Association. As such,
my testimony today reflects the sentiments of a thorough cross-section
of the hydropower industry. We are also members of WaterPower: The
Clean Energy Coalition, a group of over 660 consumer, labor,
environmental, farming and other organizations that recognize the need
to improve the hydro licensing process.
Hydropower accounts for about ten percent of the nation's
electricity and over 80 percent of its renewable energy. The benefits
of hydropower, and its continued importance to our nation's
environmental and energy policy objectives are well documented.
Hydropower is not only our largest, renewable energy resource; it is
low cost and efficient; it is a purely domestic resource; and it
provides Americans with abundant recreational opportunities, as well as
many flood control and irrigation benefits. It is also an emissions-
free resource, which in a time of ongoing concern over greenhouse gases
cannot be overlooked. In 1999, hydro displaced the emissions of 77
million metric tons of carbon; that is the equivalent of removing 62.2
million passenger cars, nearly 50% of the current fleet, from our
nation's roadways. In addition, emissions-free hydropower generation
helps us avoid significant amounts of Nitrogen Oxide (NOX)
and Sulfur Dioxide (SOX), which are major contributors to
decreased air quality.
As California and the West continue to grapple with an energy
supply insufficient to meet growing consumer and industrial demand--and
as this crisis now threatens to expand throughout the rest of the
nation this summer--it is another of hydropower's attributes that has
taken on increased importance: its reliability. The management of the
nation's electric grid depends upon fast, flexible generation sources
like hydropower to meet peak power demands and to restore service after
a blackout. Hydropower's ability to go from zero power to maximum
output quickly and predictably makes it exceptionally good at meeting
changing loads and providing ancillary electrical services.
Despite these varied benefits, supply of hydropower is waning and
America is in danger of losing significant hydropower capacity and
operational flexibility at a time when it is most needed. As we face
rising energy prices, increased levels of pollution, energy shortages
and reliability concerns, now is the time for policymakers at the
federal level to better incorporate hydropower into the nation's long-
term energy strategy. To that end, I applaud Chairman Barton for
holding this hearing.
As lawmakers devise a long-term energy strategy, I offer the
following thoughts on how best to address the decline of hydropower as
well as to encourage development of additional hydropower capacity at
existing sites; steps that would allow the country to increase its use
of renewable, emissions-free generation in an environmentally
compatible manner and to strengthen the reliability of the transmission
system.
Hydropower Relicensing Reform
First and foremost, the hydropower relicensing process needs to be
fixed. Over the next 15 years, two-thirds of all non-federal
hydroelectric capacity--nearly 29,000 MW of power (enough to serve 29
million homes)--must undergo the Federal Energy Regulatory Commission's
(FERC) relicensing process. This includes 240 projects in 38 states,
much of it in western states where power supply is a major concern.
Idaho Power alone is in the process of relicensing 1,485 megawatts
before 2010, including the 1,167 megawatt Hells Canyon Complex.
As has been well documented in Congressional hearings over the
previous few years, and most recently by FERC in its Section 603 Report
issued this past May, the licensing process suffers from dispersed
decision-making authority and an inability to balance competing values.
The bottom line is that costs, delays, and conflicting mandates
inherent in the process threaten generation capacity and operational
flexibility throughout the nation. As we lose megawatts and operational
flexibility, we must rely on less efficient generation sources that
both cost more and produce greenhouse gas and other emissions.
One note on generation loss. FERC, in its 603 Report, reviewed all
relicense proceedings since October, 1986 and found an average annual
generation loss of 4.23%; discounting one project which it claims to be
``unrepresentative,'' the percentage drops to a 1.59% loss. Other
studies have found an average generation loss of nearly 8%. I don't
think we should be haggling over figures. The point is that in today's
tight energy supply climate, any loss in electrical generation--
especially from such a clean, cost-efficient source--is too much.
How did we get to this point? Why such a dysfunctional process?
While there is no shortage of explanations, most of it can be boiled
down to one unfortunate reality: the licensing process fails to
properly balance the environmental impact of hydro projects with the
crucial energy and non-energy values of the resource.
Since 1986, FERC has been required, under the Federal Power Act, to
give ``equal consideration'' to a variety of factors when issuing hydro
project licenses and relicenses. This balancing authority requires FERC
not only to consider the power, economic, and development benefits of a
particular hydro project, but also to consider energy conservation and
the protection, mitigation of damage to, and enhancement of fish and
wildlife. In other words, under Federal law, FERC has the
responsibility and authority to strike a balance between power and
environmental values.
The courts, however, have interpreted the Federal Power Act so as
to prevent any balancing from taking place. The courts, in effect, have
given Federal resource agencies the authority to set ``mandatory''
conditions on FERC relicenses--conditions that are automatically
attached to a final license. This means that FERC has no opportunity to
question the basis of mandatory conditions set by the agencies.
This would not be a problem if federal resource agencies, when
imposing a mandatory condition, considered the various factors that
FERC is required to examine pursuant to the Federal Power Act. However,
this is simply not done. The net result is that no one is balancing. No
one has the authority to look at the big picture of how hydro fits into
our national energy policy. I go back to my earlier observation: in
today's supply-thirsty climate, where every megawatt counts, this is a
situation that must be remedied, and remedied soon.
As mentioned, in an average water year hydropower accounts for 60%
of Idaho Power's generation, with the three-dam Hells Canyon Complex
project accounting for 75% of our total hydropower generation. Within
this complex, the nearly 1 million-acre feet Brownlee Reservoir and
hydropower site is the primary facility we have to follow our daily and
seasonal peak loads. If balancing is not achieved, we run the risk of
not only losing valuable energy, but also crucial load-following
benefits of the resource. Additionally, our customers may lose the
project's economic value and reservoir users a highly popular fishery.
While we have not yet seen the mandatory condition proposals from the
federal resource agencies--we will see them over the coming year--
recent history suggests that a final Hell's Canyon relicense will not
reflect a balanced consideration of the public interest values of the
project.
Attached to my written testimony is a compilation of relicensing
anecdotes, reflecting the recent experiences of many of our hydropower
colleagues who have witnessed first hand the problems associated with
the current licensing process. For example, the National Marine
Fisheries Service last year imposed a fish passage requirement on the
Enloe Dam project license in Washington that was contrary to the wishes
of a Congressionally authorized regional collaborative planning
council. Look at PacifiCorp's North Umpqua project in Oregon where the
relicensing process took over 10 years; even though a settlement--was
recently reached in this proceeding, licensing process--improvements
could have resulted in smoother settlement negotiations, at far less
cost and resulted in investments being made in environmental
improvements rather than in study upon study upon study.
Some have suggested that the problems with the FERC licensing
process can be solved solely through administrative, rather than
legislative means. I disagree. Properly developed and implemented
administrative remedies can certainly help on a number of fronts and
should be encouraged. But taken alone, administrative reforms can not
fully address the fundamental and substantive problems with the
process. Earlier this year, the six industry representatives to the
Federal Advisory Committee (FACA) that worked with the Interagency Task
Force towards administrative improvements to the hydro licensing
process wrote members of this Subcommittee expressing the following
assessment of the ITF's work product:
``While the [ITF] reports themselves are helpful, they do not
resolve the fundamental conflict inherent in the existing
system of government oversight of hydropower projects, nor will
they assure maintenance of this reliable and low-cost source of
electricity . . . The reforms necessary to achieve substantive
improvements in the licensing of hydroelectric facilities can
best be obtained through legislation addressing the Federal
Power Act.''
I wholeheartedly concur with this assessment. Legislative fixes are
necessary if we are to truly fix the hydroelectric licensing process in
a manner satisfactory to most stakeholders.
As for specific suggestions on how legislation might best fix the
licensing process, that will hopefully be a subject for legislative
hearings before this Subcommittee in the near future. I want to note,
however, that the issue of hydro licensing improvement transcends
partisanship. In addition to H.R. 1832's--the Towns bill's--bipartisan
roster of cosponsors, both Senate energy policy packages contain hydro
licensing improvement language; the aforementioned FERC 603 report
echoes the call for legislative reform of the hydro licensing process;
and the Bush Administration's National Energy Policy Development Group
Report adds its voice to those declaring hydro licensing improvement to
be a top energy policy priority. We are encouraged by the emerging
consensus on this issue and look forward to continuing to work with
Chairman Barton, Congressman Boucher, and the entire Subcommittee on
enacting balanced, bipartisan licensing improvement measures this year.
Market Incentives for Hydropower Development
While we must act to reverse the lost hydro capacity and
operational flexibility due to a flawed licensing process, we can also
act to encourage the development of more, environmentally-responsible
hydropower. The U.S. has an impressive amount of new hydropower
potential, and it has been ignored for far too long. A Department of
Energy (DOE) study shows there are approximately 21,000 MWs of
potential capacity at existing dams. More importantly, much of this
potential--over 10,000 MWs--is located in the capacity-hungry west.
This hydro capacity sits unused largely because of the complex
regulatory scheme described above. But, it is also undeveloped because
there are no incentives for producers to bring new generation on-line,
a process that is more expensive and complicated than ever.
Historically, most legislative proposals that addressed renewable
energy ignored hydropower and its increasingly marginal economic state
caused by escalating regulatory costs and capacity restrictions. While
other renewable resources have received incentives for development and
production--sparking growth in those industries--hydropower generation
has been on a downward trend.
In the 107th Congress, however, there has been a new-found
bipartisan interest in providing incentives for new hydropower
development and efficiency upgrades at existing dams. While the costs
clearly vary from project to project, new hydro capacity, depending on
the type of upgrade, runs from $650 to $2,000 per kilowatt (Kw). On
average, new hydro generation costs about 5 to 8 cents per kilowatt
hour (KwH).
While not the same disadvantages as those encountered by other
renewable industries, hydro's disadvantages hold equal merit and demand
similar policies designed to encourage the development of renewable
sources of power. Additionally, unlike many other generation sources
currently getting rushed through the environmental permitting process,
upgrades at existing hydropower sites can be accomplished with little,
if any, new environmental impacts. In fact, incremental hydropower
development will often result in the usage of new technology that
significantly increases the efficiency of hydropower turbines while
bringing improvements to aquatic habitat.
In conclusion, I would like to offer the following thoughts on the
nexus between energy priorities and natural resources. Idaho Power, and
the hydropower industry as a whole, take seriously its role as stewards
of the rivers we are privileged to use. Licensees go to great lengths
to involve stakeholders and members of the public in licensing and
relicensing processes. These consultations take years and, without
question, natural resource issues constitute the bulk of those
discussions. Ultimately, the majority of direct and indirect
expenditures are spent on environmental protection, mitigation and
enhancement measures. Some rhetorically argue that the hydropower
industry wants to ``roll back'' environmental regulations in this
process. That is fundamentally absurd. With hydropower process
improvements, resource enhancement and protection will continue. But it
must continue in tandem with a process that also recognizes and
protects the value of the product that is the subject of the licensing
in the first place. We can and must achieve balance in this arena. We
strongly believe that healthy rivers and hydropower can coexist and we
continue to work toward that end.
Time is short. As we look to self-sustaining energy strategies, now
is the time for policymakers to better incorporate hydropower into the
nation's energy mix. We urge you to craft energy policies that embrace
this extremely valuable resource, not further contribute to its
decline. Reforming the licensing process and providing incentives for
new hydropower development that deploys new, advanced technology can
benefit hydro producers, the environment and consumers and is a goal
that all Americans should support.
Thank you.
What's Wrong With the Hydropower Licensing Process?
real-life examples
Roughly half of all federally-regulated hydroelectric capacity--240
projects in 38 states, representing 28,784 megawatts of electricity
generation--is due to be relicensed by FERC in the next fifteen years.
An inefficient licensing process that is time-consuming, arbitrary, and
costly places all of these projects, and the future of hydropower as a
clean, renewable energy source, at risk. The following examples, taken
from hydro projects around the nation, illustrate some of the many
problems associated with the current hydropower licensing process.
arbitrary and unilateral exercise of mandatory conditioning authority
On February 23, 2000 FERC rescinded a license previously issued for
the 4.1 MW Enloe Dam Project in Okanogan County, Washington. Although
FERC was in the process of engaging all parties in addressing fish
passage issues at the dam, the National Marine Fisheries Service (NMFS)
challenged that process as encroaching its unilateral conditioning
authority under Section 18 of the Federal Power Act. NMFS insisted on
imposing a fish passage requirement in the project license despite i)
opposition to such passage by the Washington Department of Fish and
Wildlife, the Okanagan Indian Nation, and the Canadian government; and
ii) the desire of the Congressionally authorized Northwest Power
Planning Council to assign financial responsibility for fish passage at
Enloe Dam to regional entities.
NMFS had stated that its preferred position in the proceeding was
license denial and dam removal. By insisting on fish passage as a
condition of the license and at the licensee's expense, NMFS not only
acted, in the words of FERC Commissioner Massey, ``out of sync with
regional planning,'' but ultimately prevailed in gaining denial of the
license application. As FERC Commissioner Hebert explained in his
concurring opinion:
``Unfortunately, the Commission's hope that this protracted
dispute could result in a mutually-acceptable agreement has
been undermined by the recalcitrance of a single agency...In
today's order, the Commission states that it no longer has the
discretion to continue to resist NMFS'' overtures . . .
One party, carrying mandatory conditioning authority, and
focusing myopically on its own particular interest, can upset
the collaborative process if so inclined. To a party opposing
licensing, stalemate may mean victory for one party and defeat
to the rest of America . . .
I view this process, where some participants, bearing veto
power, have more negotiating authority than others, if indeed
inclined to negotiate at all, as absurd. As a result, I am
encouraged by pending legislative efforts to rationalize this
process, by requiring a greater level of cooperation among
federal and state resource agencies. Such reform would benefit
consumers by forcing all parties to the table in an effort to
resolve such disputes in a fashion that is best suited for the
benefit of all Americans.''
excessive length and cost of process/arbitrary nature of process/
inappropriate application of agency authorities
PacifiCorp is currently seeking a new FERC license for its eight-
dam, 185 MW North Umpqua project in Douglas County, Oregon. The company
recently reached a Settlement Agreement with state and federal agencies
which will be submitted to the FERC as the basis for a new license.
Even thought a settlement has been reached, the North Umpqua experience
points to significant flaws in the current laws governing relicensing.
The licensing process to-date has taken over 10 years, been
extremely arduous and cost over $42 million. The bulk of the funds
spent on relicensing have gone to studies of environmental impacts and
documented in a 43-volume license application and a 3-volume watershed
analysis report. In fact, process and study costs at North Umpqua are
more than double the cost of installing fish passage facilities at the
project as agreed to in the settlement. Moreover, another three to four
years of process remain before PacifiCorp can expect to receive a
license as FERC conducts its NEPA review and the state Department of
Environmental Quality pursues 401 certification for the project. Both
processes will likely require the collection of yet more data and add
to licensing costs.
If the Federal Power Act required conditioning agencies to take a
balanced approach in setting their demands and included some
accountability over them, the settlement negotiations might have been
conducted more smoothly, at far less cost and resulted in investments
being made in environmental improvements vs. studies. A brief history
of the licensing process follows.
PacifiCorp initiated the process in 1992 and went far beyond the
normal requirements for public involvement and science collection in
the hope that the North Umpqua licensing process would become a model
of how a utility could work collaboratively with all stakeholders.
After submitting its relicense application in 1995, PacifiCorp
initiated the North Umpqua cooperative Watershed Analysis with all
interested parties to identify and address specific resource concerns
that emerged during the relicensing process. This was a first-of-its-
kind for a hydro project. PacifiCorp and the parties then entered
detailed settlement discussions in 1997.
After two years of discussions, yielding little consensus, the U.S.
Forest Service (USFS) insisted--without providing an adequate
scientific explanation--that Soda Springs Dam (one of the eight dams on
the project) be removed as a condition of settlement to meet objectives
contained in the President's Forest Plan. This, despite the fact that
removal of Soda Springs Dam would put the viability of the entire
project at serious risk, from both an operational and economic
standpoint, and despite there being other mitigation alternatives
available. This also represented the first time that the Forest Service
had indicated its intent to use its 4 (e) conditioning authorities
under the Federal Power Act to require a dam removal. This would have
created a broad, adverse precedent for other hydroelectric projects in
the West located wholly or in part on Forest Service lands.
Concerns over the precedential nature of the removal and lack of
scientific justification caused Pacificorp to walk away from settlement
negotiations in November, 1999. PacifiCorp re-initiated settlement
talks in June 2000 and following a year of negotiations involving
agency heads, an agreement was reached.
excessive length of process/judicial call for legislative improvements
In March, 1997, the Eugene Water & Electric Board (EWEB) received a
new FERC license for two projects (23.2 MW combined) on the McKenzie
River in Oregon. In the license, FERC incorporated certain fishery
conditions prescribed by federal resource agencies under Section 18 of
the Federal Power Act (FPA)--at a cost to EWEB of $14,000,000--but
rejected several conditions because they did not meet the requirements
of the FPA for ``fishway prescriptions.''
Despite the $14,000,000 of project improvements, several interest
groups and agencies requested an administrative rehearing of the
license before FERC; upon denial of the requests, the parties
challenged the license before the U.S. Court of Appeals for the Ninth
Circuit. Among other claims, the parties contended the FPA does not
authorize FERC to refuse to accept any condition prescribed under
Section 18. In other words, the parties asked the court to rule that
the resource agencies had absolute power to dictate license conditions
under the FPA whether they met the intent of the FPA for a fishway
prescription or not.
In its August, 1999 decision, the court did just that--concluding
the FPA denied FERC the authority to modify, reject, or reclassify
prescriptions submitted by resource agencies under Section 18, even
while noting FERC's observation that the resource agencies ``do not
concern themselves with the delicate economic versus environmental
balancing required in every license.'' The court went on to acknowledge
Congressional ``failure'' to require agencies to develop improved
``regulations, procedures or standards for implementing Section 18.''
The court noted that, absent Congressional action, the court was
powerless to rewrite the statute. ``Our task,'' the opinion stated,
``is to apply the statute's text, not to improve upon it.'' The court's
decision means that currently only a federal court of appeals has the
authority to determine whether a fishery condition offered by a federal
resource agency and required to be included in a license meets the
requirements for a ``fishway prescription'' under the FPA.
With its hands thus tied, the court's decision will mean a remand
of the license back to FERC to be re-written once the appeal is
completed--8 years after EWEB first submitted its license application;
with only the Ninth Circuit then having the authority to decide whether
any condition prescribed by a resource agency meets the FPA
requirements for ``fishway prescriptions.''
conditions making project uneconomic/arbitrary nature of process/
insufficient impact analysis
In 1996, during the relicensing of the Edwards Dam near Augusta,
Maine, the US Fish and Wildlife Service (USFWS) and the National Marine
Fisheries Service (NMFS) prescribed a fishway system on the dam to
safeguard a few species of fish. The fishery agencies estimated this
fishway system would cost approximately $9 million dollars while the
licensee estimated the cost at $12 million--both of these estimates
effectively rendered the project uneconomic. Lacking the authority to
amend the prescription or otherwise balance it against the energy or
other resource values of the project, FERC instead ordered the removal
of the dam in November 1997.
During the relicensing process, the USFWS and NMFS also recommended
that flows of 4,500 cubic feet per second be released annually in July
into a deep hole below the dam they determined was a spawning and
nursery habitat for the Atlantic sturgeon. This flow recommendation had
severe economic implications on the project since it would force the
project to forgo power generation completely in July most years. This
deep hole was located just below the area where the dam was eventually
breached and this once-important spawning and nursery habitat is now
assumed to be filled with rubble.
The US Department of Interior and segments of the environmental
community have hailed FERC's decision as a means of restoring a 17-mile
stretch of the Kennebec River to its ``natural condition''. Moreover,
certain environmental groups are now claiming that the simple act of
removing the dam has successfully restored this section of the river
yet no comprehensive studies are being planned to actually measure the
success of this dam removal on the restoration of the river ecosystem.
arbitrary nature/excessive length of process
In an ongoing relicensing of a 35.5 MW facility in New York State,
arbitrary fishway prescriptions have been proposed by the USFWS, at a
cost of over $2 million. Why arbitrary?
The blueback herring, the primary species on which the
prescriptions were premised, is not native to the river where
the project is situated.
With an 80-foot waterfall blocking upstream fish passage,
there would be no migration without the man-made lock system
adjacent to the project.
The project (and other hydro facilities on the river) have
operated without fishways for several decades--and during that
time the fish population has grown to over 100 million
annually.
Pre-filing consultation started on this project in 1986, and a
final license order still has not been issued. If the fishway
prescription is included in the license along with other resource
protection measures, the project would become economically unviable.
arbitrary nature of process/ferc approval of inappropriate conditions
In a recent relicensing of a Western project, the U.S. Forest
Service imposed numerous conditions, including one that required the
project owner to annually send the Forest Service a set payment,
expected to cover all operation and maintenance costs associated with
existing campgrounds in the project vicinity. The owner pursued an
administrative appeal of this condition at the Forest Service, arguing
that the Forest Service failed to demonstrate that most of the
campgrounds' use was related to the project. Furthermore, the Forest
Service did not attempt to justify the amount of the annual payment for
the operation and maintenance costs it sought from the licensee.
Nonetheless, FERC included the condition in the project license,
concluding that it lacked the authority to even consider if a
relationship between the condition and the project justified the Forest
Service condition. Similarly, FERC was unable to reject an instream
flow release imposed upon the project by the Bureau of Land Management,
even though FERC summarily dismissed as inappropriate and unsupported
the same exact amount of instream flow release recommended by the
California Department of Fish and Game.
After FERC issued the new license for the project, containing the
contested condition, the owner challenged the condition at FERC and
took the case before the U.S. Court of Appeals. Just prior to the case
being heard and five years after the first of the two administrative
appeals were filed with the Forest Service, the Forest Service decided
that the operation and maintenance costs were indeed inappropriate and
accepted an owner-proposed method for reimbursement of only those
campground operation and maintenance costs related to the project--
approximately 1.25% of the amount originally demanded by the Forest
Service.
ferc approval of conditions that result in ``no quantifiable benefit''/
excessive length of process
After FERC asserted jurisdiction over a 70 year old, 1.2 MW project
in New England, the project owner reached agreement with one state
agency on the level of minimum flows to be released from the project.
However, a resource agency from an adjacent state and the USFWS
prescribed a minimum flow that was nearly twice the agreed upon level.
In its final environmental assessment for the project, FERC concluded
that the owner's minimum flow could be provided with existing project
equipment and that there was no ``quantifiable benefit'' from requiring
the USFWS flow level rather than the level proposed by the owner.
However, because the recommendation was made under section 10(j) of
the FPA, and because the recommendation appeared ``consistent with the
FPA,'' FERC incorporated the higher minimum flow requirement in the
license. FERC's rubber stamp approval of the USFWS 10(j)
recommendation, along with other conditions imposed on the project, had
the effect of reducing net revenue from the project by 60%, making the
project economically marginal at best. (Note: Issuance of the license
for this small project took more than 8 years.)
duplicative nature of process
The Energy Policy Act of 1992 specifically prohibits federal land
managing agencies from requiring an existing hydropower project to
obtain a Special Use Permit. However, in a number of licenses, the
Forest Service has taken the standard Special Use Permit terms and
included them in the conditions submitted to FERC under section 4(e) of
the Federal Power Act. In turn, FERC has had no choice but to impose
these conditions on the project license. These Special Use Permit
conditions are designed to allow the Forest Service to regulate the
project in the same manner that FERC administers the licensed project.
Thus, despite the Energy Policy Act prohibition, the Forest Service is
duplicating FERC's legislative mandate to administer federally licensed
hydropower projects.
conditions making project uneconomic
In 1997, six years after the licensee filed its initial plan, FERC
issued an order approving a mitigation and management plan for the 170
MW Kerr Project in Montana. The FERC plan incorporated conditions
submitted by the Department of the Interior requiring a variety of non-
operational measures, including: a fish and wildlife implementation
strategy to be funded through a one-time payment of $12.5 million and
annual payments of $1.27 million, a fish stocking plan, the acquisition
of 6,800 acres to serve as replacement wildlife habitat, the
construction of five islands to serve as waterfowl habitat and
construction of erosion control structures.
The FERC environmental impact statement (EIS) on the mitigation and
management plan concluded that the conditions imposed by Interior would
``eliminate the project's positive economic benefits.'' The EIS found
that the project's current annual net benefits were approximately $9
million, but that with Interior's conditions, the annual net benefits
would be a negative $2.7 million. Not even Interior disputed that the
conditions would reduce the project's net annual benefits by many
millions of dollars. However, the Commission noted that ``any economic
analysis of the impact of Interior's conditions is of at best
tangential relevance to our decision,'' since FERC was obligated to
impose the Interior conditions.
conditions making project uneconomic/insufficient impact analysis/
arbitrary nature of process/litigation as only recourse
The 700kw Yaleville project in upstate New York is one of the
smallest hydro facilities operated by Niagara Mohawk Power Corporation.
In pre-filing consultation in connection with the 1988 licensing of the
project, the USFWS raised the issue of fish passage. The agency
recommendation was to provide for downstream passage of freshwater non-
migratory resident species, namely bass and walleye. This, despite:
spillage over the dam provided natural passage of fish at
least 85% of the time;
despite decades of hydro project operation,--an abundance of
bass and walleye was evident on the river both above and below
the project; and
the $400,000 price tag for the agency-recommended fishway was
prohibitive for such a small project.
Niagara Mohawk disputed the agency recommendation in its license
application and FERC, in its 1991 draft Environmental Assessment (EA)
for the project, agreed with the owner and recommended a lower cost
fish protection alternative. USFWS, after failing to sway FERC away
from its position in dispute resolution proceedings, responded by
prescribing the downstream passage fishway under its Section 18
mandatory conditioning authority.
FERC denied the fishway prescription in its 1992 license order
because it did not meet the day's definition of ``fishway'' [at the
time, a fishway had to serve the purpose of passing fish whose life
cycle depended entirely on migration past the hydro facility--which was
not the case with the Yaleville bass and walleye.] A broader
``fishway'' definition was established with the passage of the Energy
Policy Act of 1992; accordingly, FERC had to rescind its prior denial
and require Niagara Mohawk to install the fishway--despite the lack of
biological basis and the fact that its cost would negate the economic
operation of the project.
Niagara Mohawk promptly appealed the FERC order. Negotiations with
USFWS ultimately led to an agreement to install a less expensive
fishway design (at a cost one-tenth of that originally prescribed.) If
the owner had not pursued an aggressive litigation action, USFWS would
likely never had agreed to negotiate. Litigation, in this case, spawned
reason; but only after more than 8 years of licensing process and a
cost to the owner of nearly $300,000.
conditions making project uneconomic
In 1997, FERC issued a license for a 70 MW project in Washington
state. In the text of the license itself, FERC noted that the
prescribed resource agency conditions would result in a yearly
operating loss of over $6.5 million for the project owner. Indicating
that the project as licensed would not be ``economically beneficial'',
FERC issued the license with the conditions, leaving it to the owner to
``make the business decision whether [to operate the facility] in view
of what appear to be the net economic costs.''
Mr. Walden. Thank you, Mr. Prescott.
We now turn to Ms. Birnbaum, the director of Government
Affairs for American Rivers. Welcome. We look forward to your
testimony.
STATEMENT OF S. ELIZABETH BIRNBAUM
Ms. Birnbaum. Thank you. Good afternoon, Mr. Chairman and
Congressman Boucher, members of the subcommittee. My name is
Liz Birnbaum. I am the director of Government Affairs at
American Rivers, the national river conservation organization
with more than 30,000 members nationwide. We also Chair the
Hydropower Reform Coalition, a consortium of more than 70
conservation and recreation organizations from around the
country, with a combined membership of more than 800,000.
Our organizations strongly oppose any efforts to diminish
environmental protections in hydropower relicensing, either
directly or through misguided process reforms. While we have
participated in and encouraged administrative efforts to make
the licensing process more efficient, we strongly disagree with
the proposition that the faults in the process lie with State
and Federal natural resource agencies. It is clear to us that
the vast majority of the remaining inefficiencies in licensing
lie elsewhere.
The two major problems are FERC's unwillingness to develop
a single, cooperative environmental review process involving
all State and Federal agencies, and the licensees incentive, as
discussed by Congressman Dingell earlier, to delay relicensing
and withhold necessary information regarding environmental
impacts of their projects.
I would like to talk about four basic themes today: First,
protecting the public trust resources; second, opposing
rollback of environmental protections; third, taking a close
look at FERC's analysis; and fourth, ways to improve the
process without causing harm.
First, I think that all participants in the process will
acknowledge that hydropower relicensing is a natural resource
issue, a rivers issue, not just an energy issue. In fact,
President Bush's energy plan acknowledges and catalogs the
impacts of hydropower dams on natural resources. The
improvements and changes made through relicensing will have
huge implications for hundreds of species, thousands of river
miles and millions of dollars in recreational opportunities for
decades to come. In contrast, these decisions have relatively
small impacts on energy generation, electric rates or industry
viability.
By requiring dam owners to build passage for fish, protect
critical riparian habitat, adjust river flows, and provide
recreational access and opportunity, we can protect and restore
valuable fisheries, native species diversity, recreational
amenities and natural ecosystem functions. At the same time, we
can enhance economic opportunities such as recreation, tourism
and ecological services. Because original licenses were issued
before the enactment of modern environmental statutes and prior
to our understanding of the impacts of dams on river
ecosystems, virtually none of these dams meets modern
environmental standards before relicensing.
If awarded a license, utilities can monopolize a river for
a half a century with little oversight and no motivation to
make environmental improvements. We must take this once-in-a-
lifetime chance to set conditions that require hydro operators
to modernize the way they operate their dams on our rivers.
In developing the balance of authority in the Federal Power
Act, Congress determined that some basic environmental
protections must be afforded at every dam. Expert Federal and
State resource managers established conditions based on
substantial evidence. Just as there is a ceiling on coal plant
emissions under the Clean Air Act, there is a floor above which
FERC can balance license conditions in the public interest.
Both fish passage and Federal lands protections have been
part of the licensing process since the enactment of the
Federal Power Act in 1920. Water quality is a responsibility
delegated to the States. Section 401 of the act ensures that
private hydro projects will not interfere with State standards.
The Supreme Court has confirmed that these standards may be
numeric or narrative and include chemical, physical and
biological parameters.
State and Federal agencies have significant expertise in
the relicensing area. They work in the field on a specific
river as opposed to FERC staff who spend most of their time in
Washington. There is little reason to believe that
consolidation with FERC would either make the process faster or
improve the outcomes.
I will make just a couple of observations on the 603
report. First, we agree with GAO's conclusion that until FERC
does a better job collecting data on the cost and timing of its
process, FERC will not be able to reach informed decisions on
the need for further administrative reforms or legislative
changes. This conclusion makes it difficult to rely on any of
the statistical information in the 603 report.
Second, it seems clear that FERC saw this report to
eliminate shared jurisdiction with other agencies. The
suggestion on page 6 of the report that Congress should, quote,
``restore'' the Commission's position as the sole Federal
decisional authority ignores the history and structure of the
Federal Power Act since 1920. The Commission has never been the
sole Federal authority on hydro licenses. And, again, the
entire report must be viewed in light of this agenda.
We do believe that further administrative reforms can
improve the way we license hydropower dams without upsetting
the existing balance of agency decisionmaking. First, to ensure
the relicensing process is efficiently implemented, State and
Federal agencies must have sufficient staff resources and
training. For example, in the State of Alabama, licenses for 12
dams on 3 major rivers will expire by 2007. Currently, the Fish
and Wildlife Service has only one staff person to cover this
entire area. This situation is not unique.
Second, collaborative processes should be encouraged.
Elements of FERC's alternative licensing process should be
incorporated into FERC's traditional licensing process wherever
possible. Third, cooperation among FERC and State and Federal
resource agencies will greatly improve the efficiency of the
relicensing process. Unfortunately, FERC has been reluctant to
implement a cooperative environmental analysis structure with
the other agencies.
The good news is that relicensing provides significant
protection to rivers at a low cost to power production.
According to FERC's own report, relicensing has resulted in
average per project reduction in generation of only 1.6
percent. Such few losses in relicensing over the next 10 years
would result in a 0.04 percent reduction in the Nation's
overall annual generation. The losses in generation are
comparable with those caused by installing a scrubber on the
smokestack of core 5 plant, in fact.
Being a good environmental steward is a legitimate cost of
doing business. Unlike other industries, such as offshore oil
development, mining or timber, hydropower licensees pay nothing
for the use of public resources--our rivers. They are not
required to post a bond. After 30 to 50 years, the initial
capital investment in these projects is fully amortized. The
only costs left are basic operation and maintenance, the lowest
of any electricity source, and environmental protection
measures. Asking that these dams make some small investment in
environmental quality after decades of profitable operation is
a reasonable and minor request. Paying for these changes
continues to leave hydropower as the cheapest source of
electricity nationwide.
[The prepared statement of S. Elizabeth Birnbaum follows:]
Prepared Statement of S. Elizabeth Birnbaum, Director of Government
Affairs, American Rivers
introduction
American Rivers, a national river conservation organization with
more than 30,000 members nationwide, strongly opposes any efforts to
diminish environmental protections in hydropower licensing either
directly or through misguided process reforms. These comments are also
joined by the Hydropower Reform Coalition. The Hydropower Reform
Coalition is a consortium of more than 70 conservation and recreation
organizations from around the country (see attachment). The Coalition
was formed in 1992 with the purpose of improving river health and
recreational opportunities through the licensing, relicensing, and
regulatory enforcement of hydropower dams under the jurisdiction of the
Federal Energy Regulatory Commission (FERC). Coalition members are
national, regional and local conservation organizations, and together
have a combined membership totaling more than 800,000.
I would like to talk about four basic themes today, geared
primarily toward industry-supported legislative proposals, FERC's
recently released report to Congress pursuant to Section 603 of the
Energy Act of 2000, and the Administration's energy plan released in
May:
1. Protect our public trust resources--Hydropower harms rivers, but a
strong process for relicensing can result in significant
improvements to environmental quality;
2. Oppose environmental roll-backs--The current balance of authorities
in hydropower relicensing is appropriate and effective and
proposed changes to that balance threaten environmental
quality;
3. FERC's analysis must be closely scrutinized--The Commission's recent
603 Report to Congress is flawed, reaches poor conclusions, and
illustrates FERC's quest for jurisdictional expansion; and
4. Improve the process without causing harm--The Commission should
improve licensing through administrative changes that take a
holistic approach that acknowledges multiple authorities and
improve environmental quality. Otherwise, Congress should
require FERC to do so.
This testimony does not directly address the specifics of
legislation before the Committee such as H.R. 1832, ``The Hydroelectric
Licensing and Incentives Act of 2001,'' because of the rapidly changing
nature of the debate. Instead I will focus on basic themes and
overriding elements of the debate regarding regulation of hydroelectric
power.
hydropower impacts public rivers
Hydropower relicensing is a natural resource issue--a rivers
issue--not simply an energy issue. The improvements and changes made
through relicensing at hydropower dams will have huge implications for
hundreds of species, thousands of river miles, and millions of dollars
in recreational opportunities for decades to come. In contrast, these
decisions have a relatively small impact on energy generation, electric
rates, or industry viability.
American Rivers and members of the Hydropower Reform Coalition are
not anti-hydropower. We simply wish to ensure that these dams are
operated to protect and restore river resources using best available
technologies and best management practices. While decommissioning is a
popular topic these days, we believe that dam removal will be the
exception and not the rule.
As early as 1908, President Teddy Roosevelt understood the need to
safeguard our nation's rivers and helped to devise a system of periodic
review to protect these national treasures.
``The public must retain control of the great waterways. It
is essential that any permit to obstruct them for reasons and
on conditions that seem good at the moment should be subject to
revision when changed conditions demand.''
More than 75 years later, the 9th Circuit Court of Appeals in
Yakima Indian Nation v. FERC found that:
``Relicensing is more akin to an irreversible and
irretrievable commitment of a public resource than a mere
continuation of the status quo. Simply because the same
resource had been committed in the past does not make
relicensing a phase in a continuous activity. Relicensing
involves a new commitment of the resource . . .''
The impacts of hydropower dams on public trust resources are well
known and well documented. The President's own plan acknowledges and
catalogues the impacts of hydropower dams on natural resources.
``Hydropower, although a clean energy source, does present
environmental challenges. Unless properly designed and
operated, hydropower dams can injure or kill fish, such as
salmon, by blocking their passage to upstream spawning pools.
Innovations in fish ladders, screens, and hatcheries are
helping to mitigate these adverse impacts. Ongoing dam
relicensing efforts are resulting in community involvement and
the industry's application of the latest technologies to ensure
the maintenance of downstream flows and the upstream passage of
fish. These efforts also have been successful in identifying
and removing older, nonfunctioning dams and other impediments
to fish movements.'' (President's Plan, 3-8)
By requiring dam owners to build passage for fish, protect critical
riparian habitat, adjust river flows to conform to a more natural
pattern, and provide recreational access and opportunity, we can
protect and restore valuable fisheries, native species diversity,
recreational amenities, and natural ecosystem functions. At the same
time we can enhance economic opportunities such as recreation, tourism,
and ecological services. Because original licenses were issued before
the enactment of modern environmental statutes and prior to our
understanding of the impacts of dams on river ecosystems, virtually
none of these dams meets modern environmental standards before
relicensing.
The widespread recognition of these environmental impacts
demonstrates a need for a careful review process that addresses some of
the sins of the past. If awarded a license, utilities can monopolize a
river for a half a century with little oversight and no motivation to
make environmental improvements. It's perfectly reasonable that we take
this once-in-a-lifetime chance to set conditions that require hydro
operators to modernize the way they operate their dams on our rivers.
relicensing--an important balancing act
Because rivers are public resources with many competing interests
and significant environmental issues, the licensing process for
hydropower dams involves multiple stakeholders. Unlike most electricity
generating technologies, hydropower does not have ``end of pipe''
standards to ensure that the dam's operations do not unduly damage the
environment. This is because every dam and every river is different,
and generic standards cannot be applied to each project. The Federal
Power Act (FPA), although commonly considered an energy statute, also
occupies an important role in environmental protection. The statute was
amended in 1986 to require FERC to give ``equal consideration'' to
power (electricity generation) and non-power (fish and wildlife
protection, recreation, etc.) benefits of the river. The economics of
the hydropower facility should be taken into account by FERC in this
balancing process.
In developing this balance, Congress determined--and rightly so--
that some basic environmental protections must be afforded at every
dam, and should not be balanced away to promote cheap hydropower. Under
these statutory requirements, expert federal and state resource
managers establish conditions based on substantial evidence to protect
public trust resources. These basic protections form a floor above
which FERC can balance license conditions in the public interest.
Sometimes referred to as mandatory conditions, these requirements
assure that:
(1) Fish can be passed upstream and downstream of a dam (FPA Section
18);
(2) If the private dam is located on federally owned land, the multiple
purposes of the federal land are protected (FPA Section 4(e));
and
(3) The dam complies with state-developed water quality standards (CWA
Section 401).
Both fish passage and federal lands protection have been part of
the relicensing process since enactment of the Federal Power Act in
1920.
The current structure of the Act, which sets fishways apart as a
special consideration, is in keeping with the law and practice that
came to us from Europe at the time of settlement. Requiring millers--
dam owners--to provide fishways at their own expense dates back many
hundreds of years, based on the recognition that fish are equally
important to commerce.
The provision under Section 4(e) of the Federal Power Act that
grants authority to land management agencies to ensure that projects on
their lands meet current management goals and objectives is simple and
is based on common sense. Projects that are located on federal or
tribal lands are already getting the benefit of cheap rent. In order to
adequately manage the lands entrusted to them, federal land management
agencies must have a say over how these projects are operated.
The protection of water quality is a responsibility that has been
delegated to the states under the Clean Water Act (CWA). Section 401 of
the act ensures that private hydro projects will not interfere with
state standards, by requiring that each federally licensed project
receive a certification from the state where it is located,
demonstrating that the project is consistent with the standards,
including the designated uses for each water body. The Supreme Court
has confirmed that standards may be numeric or narrative and include
chemical, physical, and biological parameters.
Any effort to shift these responsibilities to FERC would be
inefficient and would fundamentally change the standards upon which we
base these decisions. State and federal agencies have already developed
significant expertise in the relicensing arena and work in the field on
a specific river as opposed to FERC staff who spend most of their time
in Washington. Because FERC's mandate is ``equal consideration,'' these
basic environmental protections would be assured only if they did not
affect a utility's bottom line. There is little reason to believe that
consolidation with FERC would improve the process in any event.
facts don't support the claims of a crisis
If we are worried about hydropower's impact on the environment,
then where do we turn for energy? The good news is that the benefits
derived from relicensing provide significant protection to rivers with
a low cost to power production. According to FERC's own report,
relicensing has resulted in an average per project reduction in
generation of only 1.6%. Based on this track record, we can reasonably
expect a similar loss from projects due to be relicensed over the next
ten years (these represent 2.5% of the annual generation of the US).
Such losses in relicensing would result in a 0.04% reduction in the
nation's overall annual generation. In any case, the amount of ``lost''
generation is significantly less than the 5% average fluctuation of
energy demand caused by factors such as weather, fuel prices, and
advances in technology.1 These losses in generation are
derived from comparing a baseline of operation that had NO
environmental conditions to one with modern environmental standards--
the losses in generation are comparable with those caused by installing
a scrubber on the smokestack of a coal-fired plant. We need not trade
healthy rivers for power production. We can have both.
---------------------------------------------------------------------------
\1\ The mean net generation of electric utilities and non-utility
power producers for 1990 to 1996 is 3,203,998 million kilowatt-hours,
with a standard deviation of +/-159084.6 million kwh or +/-4.96%.
---------------------------------------------------------------------------
Being a good environmental steward is a legitimate cost of doing
business. Should the federal government guarantee profitability for
hydropower utilities? If a project is already unprofitable because of
market forces or because it is run poorly, should it be exempted from
any environmental conditions? The answer to these questions is clearly
no. According to the courts, ``There can be no guarantee of
profitability of water power projects under the Federal Power Act;
profitability is at risk from a number of variable factors, and values
other than profitability require appropriate consideration.''
2
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\2\ Wisconsin Public Service Corp. v. FERC, 32 F.3d 1165, 1168 (7th
Cir. 1994)
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Unlike other industries such as offshore oil development, mining,
or timber, hydropower licensees pay nothing for the use of public
resources--our rivers--and are not required to post any kind of bond to
ensure that at the end of the projects useful life there is money to
properly dispose of it. After 30 to 50 years, the initial capital
investments in these projects are fully amortized. The only costs left
to the licensee are basic operations and maintenance (the lowest of any
electricity source) and environmental protection measures. Asking that
these dams make some small investment in environmental quality after
decades of profitable operation is a reasonable and minor request.
Paying for these changes continues to leave hydropower as the cheapest
source of electricity nationwide.
It is simply a false threat to suggest that dams are being
surrendered or abandoned due to the cost of environmental regulation.
Since 1996, only three operating licenses have been surrendered--each
because the facilities fell into disrepair or were damaged by flooding.
According to FERC, since1993 ``no licensee has refused to accept or
surrender their license citing project economics.'' 3
---------------------------------------------------------------------------
\3\ Written supplemental testimony of Doug Smith, FERC General
Counsel, before the Senate Energy and Natural Resources Committee, 10/
27/99
---------------------------------------------------------------------------
The Administration's own energy plan confirms that the principal
factors limiting hydropower development have nothing to do with
environmental regulation. The President's report explains that,
``Hydropower generation has remained relatively flat for years. The
most significant constraint on expansion of U.S. hydropower generation
is physical; most of the best locations for hydropower generation have
already been developed. Also, the amount of hydropower generation
depends upon the quantity of available water. A drought can have a
devastating effect on a region that depends on hydropower. In fact,
this year's water availability has been a contributing factor in
California's electricity supply shortages.'' (President's Plan, 5-18)
In the scramble to find a magic bullet for the energy crisis, we
should be careful not to over-rely on our nation's already troubled
rivers. Through careful and deliberate evaluation involving expertise
of a range of agencies, we can bring hydropower dams up to modern
environmental standards without compromising power generation.
solutions in search of problems
Over the past several years, a number of legislative proposals have
been put forward by members of the electric utility industry and most
recently by FERC. We have consistently opposed those efforts. The
common element of those reform bills has been to blame the resource
agencies for costs and delays and to consolidate greater authority with
FERC. We believe that these reforms address the wrong problem and
therefore offer a poor solution to inefficiencies with hydropower
regulation. Until recently, these proposals have been based on little
more than anecdotal evidence and industry assertion. However, the
publication of FERC's 603 Report offers new data and presents the first
comprehensive look at the relicensing process in several years,
offering little rigorous evidence or statistical verification for the
claim that resource agency participation in the process creates major
costs and delays.
Without going into great detail, let me offer a brief critique of
the Commission's report--both its analysis and its recommendations. I
will refrain from addressing specifics of the legislative proposals in
this testimony but instead focus on basic themes and conclude with
several recommendations that could require Congressional action.
critique of ferc's 603 report
In November 2000, Congress required FERC within six months ``to
undertake a comprehensive review of policies, procedures, and
regulations for the licensing of hydroelectric projects to determine
how to reduce the cost and time of obtaining a license.'' Congress
specified action by the Commission, but the report filed in May 2001
was explicitly a product of Commission staff (Report pg. 5). While it
is entirely appropriate for staff to assist the Commission in the
development of this report, we are troubled by the fact that the
persons with decision-making authority--the Commissioners--have no
ownership of this document.
Congress also required the Commission to consult with other
appropriate agencies, yet no draft was provided to those agencies
despite repeated pleas for cooperation. Although FERC includes agency
comments in its appendix (as well as those from members of the public),
it does not address these recommendations individually or provide any
explanation of the consultation process.
We are also troubled by an April report by the Government
Accounting Office (GAO) which strongly criticized the Commission for
failing to keep adequate records of its regulatory
activities.4 According to GAO's report, until FERC does a
better job collecting data on the cost and timing of its process,
``FERC will not be able to reach informed decisions on the need for
further administrative reforms or legislative changes to the licensing
process.'' (pg. 17) In response to criticisms about not having adequate
information to make decisions about policy, FERC responded ``The
primary mission of the Commission with respect to license applications
is the processing of applications for the purpose of determining what
outcomes best serve the public interest, not the gathering and
processing of data documenting the process.'' (pg. 24) It is hard for
us to understand how FERC is able to draw reasoned conclusions about
whether it is fulfilling its mandate or respond to the Congressional
report requirement without sound data.
---------------------------------------------------------------------------
\4\ Licensing Hydropower Projects: Better Time and Cost Data Needed
to Reach Informed Decisions About Process Reforms, U.S. General
Accounting Office GAO-01-499, May 2001.
---------------------------------------------------------------------------
In light of the GAO's indictment of FERC's data and record keeping,
let me highlight several conclusions in FERC's report about timing and
cost, some of which appear reasonable, others suspect.
Time data
FERC's data on timing of the relicensing process appear more
reliable than its information on costs--although as GAO pointed out,
none of FERC's information can be relied upon to draw conclusions about
the causes for delays or costs. It is clear from the report that there
are delays in the relicensing process. However, the report suggests
that Section 4(e) and 18 requirements by the federal resource agencies
are not a major cause for relicensing delays (Report pg. 38). This is
supported by an independent analysis by the Department of the Interior,
which draws the same conclusion. The report does identify state
agencies as being associated with significant delays, but it fails to
show whether these delays are within the sphere of influence of those
agencies or whether they are a victim of industry procrastination and
delay. Other evidence would suggest the latter.
We do know that license applicants have caused significant delay of
the relicensing process by failing to provide complete license
applications. Of the 157 relicensing applications filed by industry in
1993, only nine provided sufficient scientific information about
project impacts, forcing FERC to issue hundreds of additional
information requests in the other 148 cases.5 The need to
conduct further studies to complete their applications was a
significant reason that there were major delays in these relicensings.
---------------------------------------------------------------------------
\5\ Barnes, FERC's ``Class of '93'': A Status Report, Hydro Review
(Oct., 1995).
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FERC's own timeframes appear to be lengthy and contribute to delay,
although the 603 Report is silent on FERC's own responsibility. For
instance, the median time for processing an application until it is
``ready for environmental analysis'' is 18 months. This leaves only 6
months to issue a draft and final NEPA document before the project
license expires.
FERC's median time to respond to requests for administrative appeal
or rehearing is 13.6 months, with a minimum of 6 months and a maximum
of 62 months--more than 5 years. Other types of petitions also go
unaddressed by the Commission for months or years. For instance, in one
case environmental groups filed a petition to the Commission to
initiate consultation under Section 7 of the Endangered Species Act
four years ago and have yet to receive any response. In these
situations, parties are prohibited from seeking judicial review until
FERC acts, but cannot force FERC to act. In the meantime the
environment continues to be harmed and legislative interpretations go
unanswered.
Cost data
FERC's section on costs is even more problematic. The report
considers costs of the relicensing process to be limited to only those
of the licensee and the agencies. They do not consider the cost to the
public whether due to direct participation, or through the attendant
impacts to the environment. They also offer no measure of what costs
should be measured--no standard of analysis.
The 603 legislative language does say that the report should
address ``. . . how to reduce the cost and time of obtaining a
license.'' However, the statute does not define cost, and although one
could contend that the term ``obtaining a license'' justifies limiting
the report to the private costs incurred by the applicant, it hardly
seems in the public interest or in the interests of good government to
ignore the costs to the American public. Further, and perhaps more
troublesome, the staff did not confine its analysis to the costs
incurred by the license applicant alone; the staff addressed costs
incurred by the Federal agencies. Since these non-licensee costs are
evaluated, the report should also have considered costs to other non-
licensees and to the environment.
Cost is closely linked to time. Due to the lengthy term of original
hydropower licenses those issued before the environmental reform era
have been largely insulated from the responsibility of paying for the
environmental cost that it imposes on society. No other major source of
power--coal, nuclear, gas, or oil--has been so privileged. All these
others have confronted their environmental obligations, and begun to
internalize such costs. Congress has designated the issuance of a new
hydropower license as the time when this maldistribution of costs and
responsibilities is to be corrected.
Delays in the process often save the project owners money in the
short-run by maintaining status quo terms and conditions that allow the
postponement of expenditures for mitigation. These savings come at an
enormous expense to the environment, the public, and the tribes because
of delayed mitigation, and provide a perverse incentive on the part of
licensees to drag their feet and stonewall. Thus, it is often in the
interest of the public and the environment to minimize licensing time--
but finding ways to make the process more efficient should not override
the need to protect other public interests in public resources.
FERC's main evidence in support of its recommendation for ``one-
stop shopping''--eliminating mandatory conditioning by other federal
agencies--is the fact that projects with mandatory conditions incur
higher mitigation costs per kilowatt of capacity. However, consistent
with the criticisms outlined in the GAO report, this turns out to be a
very superficial analysis. Do the two groups of projects analyzed
(those with mandatories and those without) display any other
differences? Are projects without mandatories smaller? Less
controversial? Have they done less damage to the environment? In order
to make any sense out of these numbers, one would have to organize the
projects so that the only significant difference between the two groups
is that one group had mandatory conditions and one did not. In any
case, one must question whether FERC is suggesting that it would
dramatically reduce those costs if it were the agency in charge? How
would such efficiencies be found? Would that mean a reduction in
environmental protection? FERC offers no specifics as to how the
Commission would reduce costs to licensees but still maintain the same
level of environmental protection.
Clean Water Act
In its 603 report recommendation on Clean Water Act Section 401,
FERC demonstrates a complete misunderstanding of the Clean Water Act
and a total disregard for state delegated authority. Water quality is
inextricably linked to water quantity. The Clean Water Act requires the
protection of physical, chemical and biological components of a water
body. Protection of ``designated uses'' is a fundamental component of
the Clean Water Act. Designated uses ensure that waters will be
``fishable, swimmable, and boatable.'' Yet the Commission advocates
limiting the definition of ``clean water'' to apply to only a few,
simple parameters, excluding water quantity and designated uses.
FERC's proposal to weaken the State's authorities under the CWA is
an attempt to take away state's rights, in direct conflict with
Congress's intent and the US Supreme Court's rulings. (This was
mentioned above but is worth repeating.) The 603 Report goes so far as
to suggest that, ``Staff has no reason to think (state conditions)
costs are balanced by measurable additional protection of the
environment or other public benefits.'' This is a fairly sweeping
indictment of state delegated authority and shows little respect for
the values embodied in state water quality goals and standards.
CWA delays are not always the fault of state agencies. As with
licensing delays generally, responsibility often lies with the
applicants who file for certification at the wrong time, or without
proper information to allow full review of the project and its effects
on water quality and quantity. Applications are often withdrawn due to
the applicant's poor preparation, causing unnecessary delays.
Applicants should be allowed to file for certification only if all
necessary information is provided at the time of filing.
One stop shopping--A common theme but a bad idea.
At no time in its history has the Commission had sole decision-
making authority in hydropower licensing. The Federal Power Act has
always been clear. The courts have consistently confirmed this
plurality of decision-making over the past 10 years. The problem is not
the multiple actors but FERC's unwillingness to cooperate and cede
authority.
FERC has not demonstrated itself to be a great environmental
steward. This was a primary reason for the amendments to the Federal
Power Act in 1986. They don't have expertise equal to the agencies,
they lack intimate local knowledge, their mandate is different, and
their track record is poor. Contrary to FERC's 603 Report assertion
that they accept 95% of fish and wildlife recommendations, a 1997
University of Michigan study showed that FERC rejected or modified 35%
of agency fish and wildlife recommendations.
In relying on FERC to do the final balancing analysis on license
issuance, Congress did not intend the Federal Power Act Section 10(a)
to be a trump card over other applicable sections of the FPA or other
laws, and it should remain subject to other legal standards. FERC over-
relies on what it characterizes as ``the public interest,'' but is
little more than best professional judgment clouded by institutional
bias. The Commission's decisions are often made in a black box and are
arbitrary and capricious.
No regulatory process is perfect and this one is no exception. Many
in the environmental community believe that there should be stronger
environmental conditions at hydropower projects. Many in the industry
believe that they should be weaker. Whichever position one believes,
the past few years of legislative proposals and most of the
recommendations in FERC's 603 report will only make matters worse.
ongoing improvements to relicensing
Numerous administrative reforms can make incremental improvements
to the way that we license hydropower dams that do not place blame on
one sector, and that meet at least some of the interests of all
stakeholders.
Provide Adequate Resources for Agency Participation--To ensure that
the relicensing process is efficiently implemented, state and federal
natural resource agencies must have sufficient staff, resources and
training to enable productive involvement in individual relicensings.
At present, many of the relevant state and federal agencies do not have
sufficient staff dedicated to relicensing. As a result, a range of
individuals (few of whom are trained in the relicensing process) may
participate in different parts of a relicensing proceeding as time
allows, or the appropriate staff is overburdened and cannot spend the
time to conduct an adequate review of the environmental needs at the
site or participate constructively in the relicensing. Because of the
complex nature of the proceedings, and because of the new, more
productive trend toward collaborative relicensing efforts, a consistent
presence of qualified staff with an appropriate workload would make
agency efforts more efficient and productive.
In the state of Alabama, licenses for 12 dams on three major rivers
will expire by 2007. Relicensing these projects will involve regular
meetings, extensive studies, and detailed negotiation. Currently, the
US Fish and Wildlife Service, which has significant statutory
responsibilities for participating in this process, has only one staff
person to cover this area. His situation is not unique. Without
additional resources, there is a risk of inefficient or incomplete
participation on the part of USFWS and potential disruption or delay in
the process. This can be avoided with additional resources.
One potential solution is Section 1701(a) of the Energy Policy Act
of 1992, which provides authority for FERC to reimburse resource
agencies for their costs associated with licensing FERC projects. The
provision calls for FERC to pass these costs on to licensees through
annual fees. Since 1992, FERC has been collecting fees from licensees
for some of the federal resource agency relicensing expenses but this
money has not found its way back to these agencies. Instead, it has
gone to the Treasury where these reimbursements to federal and state
resource agencies have not been made available through annual
appropriations from Congress. This system is not working. To provide
adequate resources to these agencies that can facilitate more efficient
relicensings, this provision of law should be implemented so that
monies collected on behalf of state and federal natural resource
agencies are reimbursed directly to those agencies.
Collaboration Not Confrontation--Since the codification of FERC's
rules on the alternative relicensing or collaborative process, an
increasing number of projects have reached successful settlement
leading to positive project economics and greater environmental
protection. Throughout FERC's 603 Report, Commission staff touts their
Alternative Licensing Process (ALP) as a model for effective
relicensing. In an independent evaluation of the costs of hydropower
relicensing, the Electric Power Research Institute (EPRI) found that on
average, savings of 20 to 50 percent can be realized by using a
collaborative approach. EPRI also found that the settlement process, on
average, leads to reduced mitigation costs of 5 to 20
percent.6 Elements of the alternative process should be
incorporated into FERC's traditional licensing process wherever
possible and licensees should be encouraged to work collaboratively
with other stakeholders.
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\6\ EPRI, Hydro Relicensing and Mitigation Cost Data, Excerpted
from EPRI Report TR-104858, Water Resource Management and Hydropower:
Guidebook for Collaboration and Public Involvement (Dec., 1995).
---------------------------------------------------------------------------
While collaboration can be good for everyone, as with most things,
it must be done well. In addition to the many success stories, there
are also some examples of hydropower operators that give an appearance
of collaboration but fail to follow through on many of the most
critical elements of this new technique. Often characterized as
``hybrids,'' such processes can be as resource- and time-intensive in
the early stages as the alternative process but fail to yield similar
successes over time because mistrust among participants leads to
litigation. This has been the case in a case in Hells Canyon on the
Snake River in Idaho.
Increase Cooperation and Coordination among FERC and Resource
Agencies--Cooperation among FERC and state and federal resource
agencies will greatly improve the efficiency of the relicensing
process. Under a charter signed in October 1998, the four principle
federal agencies involved in relicensing--FERC, Interior, Agriculture,
and Commerce--formed an Interagency Task Force to Improve Hydroelectric
Licensing Processes (ITF). This committee was established to coordinate
federal and state mandates. In July of 1999, the ITF established a
Federal Advisory Committee to provide a forum for non-federal entities
consisting of industry, states, tribes and environmental groups, to
review and provide feedback on the activities of the ITF.
This forum concluded its work at the end of 2000 with the
publication of six guidance documents covering a broad range of issues
that confront hydropower regulation. It also resulted in one rulemaking
on the part of FERC and two formal guidance documents on the part of
Interior and Commerce. We believe that these reforms represent
significant steps forward in improving the relicensing process, but
they have not been given much time to work. Additional reforms,
particularly by FERC, are still desirable. American Rivers supports a
process that is structured around NEPA with draft and final decisional
documents, complete information for all participants, flexible but
reliable timeframes, and transparency of analysis. Unfortunately, as an
independent agency, FERC cannot be compelled by the administration to
make administrative or regulatory changes.
This fact was recently confirmed by the President's energy plan.
``The NEPD Group recommends that the President encourage the Federal
Energy Regulatory Commission (FERC) and direct federal resource
agencies to make the licensing process more clear and efficient, while
preserving environmental goals.'' (President's Plan emphasis added, 5-
18 and 5-22)
While the President can ``direct'' federal resource agencies to
act, just as his predecessor did through the efforts of the ITF, he can
only ``encourage'' FERC. To date, FERC has been unwilling to undertake
major changes to its licensing process other than those that reduce its
own costs and time such as the ALP. If the President and Congress make
changes to the relicensing process for federal resource agencies
without requiring FERC to make changes as well, we will diminish the
few basic environmental protections afforded in this process.
legislative changes to consider
American Rivers continues to believe that legislation is
unnecessary to improve the licensing process for hydropower dams;
however, if Congress insists on moving forward with a legislative
package, we offer the following elements that we believe should be
included:
Require FERC to establish a process that begins at the
beginning, revolves around NEPA, and provides all information
deemed necessary by all decision-makers.
Implement direct cost recovery for federal and state agency
participation
Reauthorize the Office of Public Participation
Require timely and complete development of studies on the part
of applicants
Insist on a relicensing schedule from FERC
Institute a royalty fee for the private use of public rivers
Limit and condition the issuance of annual licenses
Grant shorter license terms with more flexible conditions
conclusion
Our nation's rivers and fisheries are facing a crisis of slow but
steady extinction. Resource agencies with expertise in these areas and
mandates that minimize environmental harm are in the best position to
address this threat. We can endeavor to find better ways to generate
hydropower and new sources of energy but we cannot bring back species
once they have gone extinct. Reforms of the hydropower licensing
process must focus on improved relations among the agencies rather than
reduced protections for our river resources.
Members of the Hydropower Reform Coalition
Alabama Rivers Alliance (AL)*; American Canoe Association; American
Rivers*; American Whitewater*; Anglers of the Au Sable (MI);
Appalachian Mountain Club*; Atlantic Salmon Federation--Maine (ME);
California Hydropower Reform Coalition (CA)*; California Outdoors (CA);
California Save Our Streams (CA); California Sportfishing Protection
Alliance (CA); California Trout (CA); Catawba Riverkeeper (SC); Center
For Sierra Nevada Conservation (CA); Chattahoochee Riverkeeper (GA);
Chattooga River Watershed Coalition (GA); Chota Canoe Club (TN);
Coldwater Fisheries Coalition; Colorado Rivers Alliance (CO); Committee
to Save the Kings River (CA); Conservation Law Foundation*; Coosa River
Paddling Club (AL); Earthjustice Legal Defense Fund*; Environmental
Action! (GA); Federation of Fly Fishers; Foothill Conservancy (CA);
Friends of the Eel River (CA); Friends of the Kennebec Salmon (ME);
Friends of the River* (CA); Friends of Sebago Lake (ME); Georgia River
Network (GA); Housatonic Coalition (CT); Idaho Rivers United (ID)*;
lzaak Walton League of America; The Institute for Fisheries Resources
(OR); Kern River Alliance (CA); Kern Valley Community Consensus Council
(CA); Kernville Chamber of Commerce (CA); Michigan Hydro Relicensing
Coalition (Ml)*; Michigan United Conservation Clubs (MI); Mono Lake
Committee (CA); Montana River Action Network (MT); The Mountaineers
(WA); Natural Heritage Institute*; Natural Resources Council of Maine
(ME); New England FLOW*; New Hampshire Coldwater Fisheries Coalition
(NH); New Hampshire Rivers Council (NH); New York Rivers United (NY)*;
North Carolina Watershed Coalition (NC); Northwest Resources
Information Center (ID); Oregon Natural Resources Council (OR); Oregon
Trout (OR); Pacific Coast Federation of Fishermen's; Associations (OR);
Planning and Conservation League (CA); River Alliance of Wisconsin
(WI)*; Rivers Alliance of Connecticut (CT); Rivers Council of
Washington (WA); Rivers Unlimited of Ohio (OH); San Joaquin Paddlers
(CA); Save our Streams; Sawmill River Watershed Alliance (MA); Sequoia
Paddlers (CA); Shasta Paddlers (CA); Sierra Nevada Alliance (CA); South
Carolina Coastal Conservation League (SC); The Steamboaters (OR);
Tennessee Valley Canoe Club (TN); Trout Unlimited*; Tuolumne River
Preservation Trust (CA); Upper Chattahoochee River Keeper (GA); Utah
Rivers Council (UT); Vermont Natural Resources Council (VT); and West
Virginia Rivers Coalition (WV).
* Denotes Steering Committee member
Mr. Walden. Thank you. We appreciate your testimony.
Let us go now to Mr. Ronald Shems. Welcome. We look forward
to your testimony, sir.
STATEMENT OF RONALD SHEMS
Mr. Shems. Thank you, and I thank the committee----
Mr. Walden. You need to turn on--yes, pull that close to
you.
Mr. Shems. Thank you, and I thank the committee for having
invited me to testify today on behalf of the State of Vermont.
Vermont values and relies upon renewable energy sources, such
as hydroelectricity, and we share your desire to make the
process more efficient and offer the following thoughts to
assist the committee in that endeavor.
Vermont issues Clean Water Act section 401 certifications
for a variety of programs, the most common of which are Army
Corps of Engineers, 404 dredge and fill permits, and also FERC
licenses. FERC, in its May 2001 report on the relicensing
process, seems to blame delays on the licensing process on the
State 401 certification process. In addition, FERC asserts that
the Federal Power Act and Clean Water Act should be changed to
give FERC significant authority over State water quality
decisionmaking. However, Vermont believes that the FERC
process, which is currently unresponsive to State and local
concerns, is the root cause of any 401 process delay.
To truly streamline the water quality certification
process, I am here to point out that the FERC itself needs to
work closely with the States on Clean Water Act compliance,
given that the States, not FERC, are vested with authority over
the Clean Water Act. FERC also needs to recognize that
licensing terms, currently 30 to 50 years, should be
dramatically shortened or periodically reviewed. FERC should
also require immediate compliance with the Clean Water Act at
the end of a licensing term.
FERC has not taken a comprehensive look at the 401 process
and the benefits of State expertise. For example, the vast
majority of certifications issued by the State of Vermont are
instantaneous, issued in conjunction with nationwide dredge and
fill permits issued by the Army Corps of Engineers. This was
achieved through the Corps working closely with the State of
Vermont and reaching an agreement that covers Corps projects
falling under the nationwide permits.
Over the last year, Vermont has issued a number of 401
certifications, and the usual turnaround time for these 401
certifications has been approximately 3 to 9 months for several
major projects, including major highway and water withdrawal
projects for ski areas and snowmaking. Comprising almost two-
thirds of our major projects requiring 401 certifications,
highway and water withdrawal projects are expensive, long-term
projects, much like hydroelectric dams.
In Vermont, the 3 to 9-month turnaround is typical for our
401 certification program. Yet, the certification process in
regards to the hydroelectric facilities involving FERC can be
very lengthy. As I mentioned before, Vermont attributes these
delays not to section 401 or the certification process but to
the characteristics of the FERC licensing process. I will take
the next few minutes to outline these in more detail for the
committee.
First, FERC is refusing to fully recognize the State's need
to assure ongoing compliance of the Clean Water Act over the
full-term of a hydroelectric license. The Federal Power Act,
when enacted in 1920, encouraged dam construction by providing
for a 50-year license. The era of dam construction is, as we
have heard today, for all practical purposes, over. Yet, unlike
licenses issued for sewer treatment facilities, coal- or gas-
fired power plants or hazardous waste facilities that are on a
5-year licensing cycle, hydroelectric facilities are still on a
30 to 50-year licensing cycle. This means that many
hydroelectric facilities licensed in the 1940's and 1950's are,
for the first time, being brought into compliance with the
Clean Water Act.
More significantly, it means that States, through the
single 401 certification that we have to issue now, has to
assure compliance with the Clean Water Act for the next 30 to
50 years. That is an enormously difficult task that offers very
little flexibility to the States. Because certification sets
the stage for compliance for up to 50 years, negotiations with
utilities are extensive and the pressures are very great on all
sides.
In short, the length of the licensing term reduces the
flexibility and raises the stakes. Shortening the licensing
term or alternatively creating a periodic review mechanism that
provides flexibility and allows the States to review Clean
Water Act compliance throughout the full term of the license
would make the process a lot more efficient. For Vermont, we
believe that this could cut the 401 process turnaround time for
a hydroelectric facility 2 to 3 to 9 months that we see with
other projects.
Second, utilities are not providing timely and complete
information, directly causing delay. Delay results in FERC's
issuance of a year-to-year license. In the case of Vermont's
largest hydroelectric project, a four-dam project in the Lemoil
River, FERC has issued year-to-year licenses for 15 years,
allowing the project to continue operating today under a
licensed issued in the 1940's.
The utilities' lawyers are fond of reminding us that time
is on their side. Delay puts off compliance with the Clean
Water Act. We believe that in the interim, the interim being
between the license expiration and the issuance of a new
license, FERC should require at least minimum Clean Water Act
compliance, thus easing the utilities' ability to comply in the
long-term. This would dramatically speed up the 401 process.
FERC could take the leadership role on this issue but has
chosen to reject this management option.
Third, FERC has not established a working rapport with the
States that other Federal agencies, including the Army Corps of
Engineers, the Fish and Wildlife Service and EPA, have
recognized as crucial to timely permitting and compliance.
Instead it avoids State expertise and complains that its
authority is being dissipated. However, as decided by the U.S.
Supreme Court in the case of PUD Number 1 of Jefferson County
v. Washington Department of Ecology, and as decided by the
Second Circuit Court of Appeals in American Rivers and State of
Vermont v. FERC, the authority lies with the States, not with
FERC. There is no authority that is being dissipated here.
Instead, the States and EPA are those with congressionally
authorized power to oversee water quality. FERC's
characterization of dissipated authority seems, in fact, an
attempt to override local control and State expertise on water
quality standards.
Vermont is under the impression that FERC is more concerned
with consolidating its authority than with achieving a real
partnership with the States. A true cooperative relationship
between FERC and the States would allow the coordination and
communication that would make the 401 process a lot more
efficient.
Finally, I ask this committee to recognize that the
authority and expertise of States. States are not delaying the
401 process. Antiquated FERC practices are the main cause of
the delay. FERC clearly takes issue with the 401 process, but
it must recognize the States' leadership on this issue and not
try to override local concerns if it truly wants to achieve
reform.
Despite this basic fact, I note that there were no State
representatives on the Interagency Task Force, nor are there
any State representatives on the successor to the Interagency
Task Force. In addition, the Federal Advisory Committee that
was advising the ITF had several county, industry, tribal
representatives on that committee. There was only one State
representative and only one representative dealing with the
Clean Water Act--this State. The Electric Power Research
Institute, an industry research group, also advised FERC on
revamping this process. There was no meaningful State
participation in the EPRI process.
Mr. Walden. Can you sum up your remarks. We are about 2
minutes over here, 2\1/2\.
Mr. Shems. We would just ask that the State be involved in
the ongoing process of trying to revamp the hydroelectric
licensing process. Thank you.
[The prepared statement of Ronald Shems follows:]
Prepared Statement of Ron Shems on Behalf of the Vermont Agency of
Natural Resources
My name is Ron Shems and I am appearing on behalf of the State of
Vermont Agency of Natural Resources. I thank the Chair and the
Committee for inviting me today.
Vermont values and relies upon renewable energy sources such as
hydroelectricity. We share your desire to make the process more
efficient and offer the following thoughts.
Vermont issues Clean Water Act 401 certifications for a variety of
programs, the most common of which are Army Corps of Engineers Sec. 404
dredge and fill permits and FERC licenses. FERC, in its May 2001 report
on relicensing issues, seems to blame delays in its licensing process
on the State 401 certification process. In addition, FERC argues that
the Federal Power Act and Clean Water Act should be changed to give
FERC significant authority over State water quality decision-making.
However, Vermont believes that the FERC process--which is currently
unresponsive to State and local concerns--is the root cause of any 401
certification delay. To truly streamline the 401 process, I am here to
point out that FERC itself needs to work closely with States on Clean
Water Act compliance, given that States--not FERC--were vested with
authority over Clean Water Act issues.
FERC also needs to recognize that licensing terms--currently 30 to
50 years--should be dramatically shortened or periodically reviewed.
FERC should also require immediate compliance with the Clean Water Act
at the end of a licensing term.
FERC has not taken a comprehensive look at the 401 process and the
benefits of State expertise. For example, the vast majority of
certifications issued by the State of Vermont are instantaneous, issued
in conjunction with nation-wide dredge and fill permits issued by the
Army Corps of Engineers. This was achieved through the Corps working
closely with the State of Vermont and reaching an agreement that covers
Corps projects falling under nationwide permits.
Vermont is able to have a 401 certification turnaround time of
approximately 2-9 months (with an average of five months) for major
projects such as major highway and water withdrawal projects for ski
area snowmaking. Comprising almost \2/3\ of our major projects
requiring 401 certifications, highway and water withdrawal projects are
expensive, long-term projects--much like hydroelectric dams. In
Vermont, this kind of turnaround is typical of our CWA 401
certification program.
Yet the certification process in regards to hydroelectric
facilities, involving FERC, can be very lengthy.
Vermont attributes these delays, not to the 401 certification
process, but to the characteristics of the FERC licensing process, and
three reasons in particular:
First, FERC is refusing to fully recognize the States' need to
assure ongoing compliance with the Clean Water Act over the full term
of a hydroelectric license. The FPA, when enacted in 1920, encouraged
dam construction by providing for a 50-year license. The era of dam
construction is, for all practical purposes, over. Yet, unlike licenses
issued for sewage treatment facilities, coal or gas-fired power plants,
or hazardous waste facilities that are on a five-year relicensing
cycle, hydroelectric facilities are still on a 30 to 50 year
relicensing cycle.
This means that many hydroelectric facilities licensed in the 1940
and 1950s are, for the first time, being brought into compliance with
the Clean Water Act. More significantly, it means that States, through
the single 401 certification issued now, have to assure compliance with
the CWA over the next 30 to 50 years.
This is an enormously difficult task that offers very little
flexibility. Because the 401 certification sets the stage for
compliance for up to 50 years, negotiations with utilities are
extensive and the pressures are great on all sides. In short, the
length of the licensing term reduces flexibility and raises the stakes.
Shortening the licensing term, or alternatively, creating a mechanism
for periodic review during the licensing term, would provide
flexibility and allow States to assure CWA compliance throughout the
full licensing term. Shortening the licensing term would also lower the
stakes. For Vermont, we believe this could cut 401 process turnaround
time for hydroelectric facilities to 2-9 months, similar to the timing
of certification of other major projects.
Second, utilities are not providing timely and complete
information, directly causing delay. Delay results in FERC's issuance
of a year-to-year license. In the case of Vermont's largest
hydroelectric project, a four-dam project on the Lamoille River, FERC
has issued a year-to-year license for fifteen years allowing the
project to continue operating under a license issued in the 1940s. The
utility's lawyers are fond of reminding us that time is on their side.
Delay puts off compliance with the Clean Water Act. We believe that in
the interim, between license expiration and the issuance of a new
license, FERC should require interim Clean Water Act compliance
measures. This would remove a utility's incentive to delay, and
dramatically speed up 401 certification of hydroelectric facilities.
FERC could take a leadership role on this issue, but has chosen to
reject this management option.
Third, FERC has not established a working rapport with States that
other federal agencies, including the Army Corps of Engineers, the Fish
and Wildlife Service, and EPA, have recognized as crucial to timely
permitting and compliance. Instead, it avoids State expertise and
complains that its authority is being dissipated. However, as decided
by the Supreme Court in PUD of Jefferson County v. Washington Dept. of
Ecology (1994), and the Court of Appeals in American Rivers and State
of Vermont v. FERC (2d Cir. 1997), FERC has no authority over Clean
Water Act issues. Instead, the States and EPA are those with the
congressionally-authorized power to oversee water quality. FERC's
characterization of ``dissipated'' authority seems, in fact, an attempt
to override local control and state expertise on Water Quality
Standards. Vermont is under the impression that FERC is more concerned
with gathering authority than with achieving a real partnership with
the States. A true, cooperative relationship between FERC and the
States would allow the coordination and communication that would hasten
401 certification of hydroelectric facilities.
Finally, I ask this committee to recognize the authority and
expertise of States involved in this process. States are not delaying
the 401 process. Antiquated FERC practices are the main cause of the
delay. FERC clearly takes issue with the 401 process, but it must
recognize States' leadership on this issue--not override Water Quality
Standards--if it truly wants to achieve efficient hydroelectric
licensing reform.
FERC should not blame the States without first having given the
States the opportunity to provide meaningful input. There were no state
representatives on the Interagency Task Force (ITF) to review
hydroelectric project relicensing issues, nor are there any State
representatives on the ITF's successor, the Interagency Hydro
Committee. In addition, the Federal Advisory Committee (FACA) committee
advising the ITF consisted of several counties, tribes, and industry,
but only one State representative. Only the State member represented an
interest with authority over Clean Water Act issues. The Electric Power
Research Institute (EPRI)--an industry research group--also advised
FERC without any State input.
FERC has no authority in Clean Water Act issues and cannot, and
should not, be dictating compliance with State Water Quality Standards.
FERC should work with the States if it wants to truly streamline the
401 certification process.
Mr. Walden. Thank you very much. The Chair would yield
himself 5 minutes for the round of questioning.
Mr. Prescott, let us go to you as an applicant on the
panel. We have heard a lot today about the process that is
involved--good, bad, indifferent. Can you speak to this issue
of these automatic license renewals? Is it as simple as you
walk in and say, ``I want to renew for another year,'' or do
you have to--what kind of information do you have present FERC
when you go through that process?
Mr. Prescott. Well, Mr. Walden, before we get to the point
of annual licenses, we have to submit a full and complete final
application. And that was referred to earlier by Mr. Robinson
from FERC. It is so voluminous and so intense, right now we are
$30 million into studies to get to that point.
Mr. Walden. Thirty million?
Mr. Prescott. Thirty million dollars in studies we have
worked on so far at Hell's Canyon. That application is due July
2003. So there is a tremendous amount of work that goes into
the point that gets you to annual licenses.
I would also like to say that in annual licenses it creates
a vast amount of uncertainty for Idaho Power and its customers.
Mr. Walden. How so?
Mr. Prescott. I have the responsibility to make sure that
there are resources available for the customers of Idaho Power
Company in both Idaho and Oregon. And I have to be certain that
if the hydro system isn't going to be there, I have to provide
other resources. It most likely would be some sort of
combustion gas-fired turbine. So, again, in the annual
licenses, it is total uncertainty for me. I don't know how to
plan----
Mr. Walden. It sounded like today that those annual
licenses were automatic. You can just go year after year after
year. So can you explain the uncertain element?
Mr. Prescott. They are annual licenses and they renew year
by year, but at what point does the new license come out, what
does it look like? That is the uncertainty.
Mr. Walden. Okay.
Mr. Prescott. I can't put the value on the resource till I
get that certain.
Mr. Walden. So reliability in getting--surety is the big
issue for you?
Mr. Prescott. Yes, in annual licenses.
Mr. Walden. And we heard testimony from Ms. Birnbaum that
we are only talking about .4 of 1 percent of the Nation's power
might be reduced, I think is----
Ms. Birnbaum. That is .04, actually.
Mr. Walden. I am sorry, .04 of 1 percent. What does that
mean in terms of a region, because not every region in the
country has hydro to the extent we do in the Northwest? What is
the reduction of, let us say, just 1 percent mean to Idaho
Power if you lose 1 percent of your power, hydro?
Mr. Prescott. Well, 1 percent, I don't have the exact
number here, is going to be on the order of like probably 100
megawatts. It is significant in that that has to be replaced
with something, and, again, the only thing I can do is go out
and construct a gas-fired combustion turbine to replace that
capacity. Again, in my testimony, I point out that without
quibbling over percentages, any loss of a clean, renewable
energy source, I think is a disgrace.
Mr. Walden. One percent for Idaho Power would be 100
megawatts.
Mr. Prescott. I think so; I will have to check.
Mr. Walden. Roughly, though; is that what you are saying?
Okay.
Ms. Birnbaum, I was interested in your testimony which I
read this morning. On page 14, I noticed you cite a 1997
University of Michigan study that showed FERC rejected or
modified 35 percent of agency Fish and Wildlife
recommendations. Those weren't the mandatory recommendations,
were they?
Ms. Birnbaum. Right. They can't reject those.
Mr. Walden. I am sorry, cannot?
Ms. Birnbaum. They cannot reject the mandatory
recommendations, although they have tried to argue that some of
them are outside the jurisdiction of the agencies or that if
they are submitted too late, that they cease to be mandatory.
So far----
Mr. Walden. So the ones mentioned here, then, are the--are
those the 10J? I am trying to learn this as I go. And those
would be the non-mandatory?
Ms. Birnbaum. I am not sure whether the study looked only
at 10J; I believe they also looked at 10A recommendations.
Mr. Walden. Okay. But these would be the non-mandatory.
Ms. Birnbaum. Right.
Mr. Walden. So these are added on top of whatever the
agencies came up with with the mandatory recommendations?
Ms. Birnbaum. Right. Now FERC has asserted that it accepts
95 percent of them. This study found they rejected actually 35
percent.
Mr. Walden. Well, 95 percent of the non-mandatory?
Ms. Birnbaum. Right.
Mr. Walden. Or 95 percent of all?
Ms. Birnbaum. Of the recommendations as opposed to the
mandatory conditions. The terminology is different. Of the
recommendations, they maintained that they accepted 95 percent.
The study finds a different figure.
Mr. Walden. And of those that use the terms ``rejected'' or
``modified,'' 35 percent of the agency Fish and Wildlife
recommendations, how much was rejected, how much was modified
and----
Ms. Birnbaum. I am not certain. I would have to look at the
study to get you that.
Mr. Walden. Okay, okay. I was just curious, because I was
trying to figure out. It looks like if Fish and Wildlife and
NMFS and you have got the State through the 401 process have
the mandatory recommendations. And then you have these non-
mandatory on top of that. And then a certain percent are either
rejected or modified. Modified could mean a whole host of
things.
Ms. Birnbaum. That is correct.
Mr. Walden. And 65 percent of them then are accepted. I
realize where you are coming from, the 95 versus 65, but----
Ms. Birnbaum. Right. That recommendation non-mandatory
materials are the only routes where other State agencies have
any input into the process. The State fish and game agencies
only can make recommendations, can't supply mandatory
conditions, other agencies who are interested. So those are
significant to those agencies.
Mr. Walden. Let me ask one final question, as my time is
out. But, Mr. Prescott, we heard earlier, too, that really on
the Clean Water Act issues, the 401, that you are just talking
basically water temperature is what a colleague said, turbidity
issues maybe. But are there other issues that come up from the
States unrelated? What sorts of things have you run into that
other entities are trying to work into the application process?
Mr. Prescott. Well, what we are seeing is things that go
well outside the Clean Water Act. It could be such things as
boat docks, recreational facilities, you name it. We refer to
it as the Christmas tree approach.
Mr. Walden. Okay. Thank you, Mr. Prescott. My time has
expired. I now turn to my colleague from Virginia for 5
minutes.
Mr. Boucher. Thank you very much, Mr. Chairman. Mr. Shems,
I particularly want to thank you this afternoon for your
willingness to appear here on what I know was very short
notice.
Mr. Shems. Thank you.
Mr. Boucher. And we are grateful for your testimony, and I
thank you very much for preparing it just over less than a 24-
hour period.
Let me get your response to one of the recommendations that
is in the FERC 603 Report. It recommends that State Clean Water
Act authority and the relicensing procedures be limited to
physical and chemical water quality parameters related to the
hydropower facility. That particular recommendation has raised
concern from a number of quarters, not the least of which is
Commissioner Breathitt. In her comments concerning this set of
recommendations, she has objected to that. I would like to get
your view on what you think that recommendation, if
implemented, would do to the States' authority to continue to
protect water quality. And if you could comment on that, I
would appreciate it.
Mr. Shems. I believe that----
Mr. Boucher. And could you pull that microphone a bit
closer. We are having a little trouble. Thank you.
Mr. Shems. If that recommendation were adopted, it would
have a devastating impact on a state's ability to assure
compliance with the Clean Water Act.
Mr. Boucher. Could you explain that and tell us why that
would be true?
Mr. Shems. The Clean Water Act requires States and/or EPA
to protect the biological, chemical and physical integrity of
water. And, essentially, FERC is cutting out the biological
aspect of things. The Clean Water Act also requires us to
manage waters in order to achieve designated uses, such as
habitat. And if we don't have sufficient flow or if we don't
have sufficient temperature or if the quality of the water body
is insufficient or not good enough to maintain habitat, we
cannot meet the designated use and cannot meet the requirements
of the Clean Water Act.
Mr. Boucher. So there are essential factors that would have
to be considered in addition to merely the physical and
chemical characteristics for a complete evaluation to occur.
Mr. Shems. Absolutely. And the courts--the U.S. Supreme
Court and also the Second Circuit Court of Appeals, in
litigating these issues, have said that the States have been
absolutely correct to consider the biological, chemical and
physical integrity of water, sir, in doing so.
Mr. Boucher. Thank you very much, Mr. Shems.
Mr. Shems. Thank you.
Mr. Boucher. Mr. Hill, in your testimony, you state that
Congress needs to consider carefully the recommendations that
are made by the FERC staff--and you are referring to the 603
report--because, and I will quote from your testimony, ``Some
of the recommendations appear to be based on inadequate or
inappropriate data, and some may change the outcomes of the
process.'' That is a pretty strong criticism of the report, and
it seems to undermine a lot of the basis on which we might be
proceeding as a committee. And I would like to ask for you to
elaborate, if you would, please, on the testimony that you have
given in this particular, and cite specific examples, if you
can.
Mr. Hill. Yes, sir. And if I may, I would like to have Ms.
Barlow and Mr. Cotton respond to this. They have done the bulk
of the work here. They have seen the specific examples. We cite
a couple of them in the report.
Mr. Boucher. We would be happy to hear from them.
Mr. Hill. But I am going to refer to Ms. Barlow and Mr.
Cotton.
Mr. Boucher. All right. Ms. Barlow?
Mr. Barlow. A couple of the specific examples----
Mr. Boucher. And if you could pull the microphone just a
bit closer, please. Thank you.
Mr. Barlow. A couple of the specific examples that we found
specifically regarding cost was that FERC obtained licensing
costs from the applicants. These were voluntarily provided. And
these costs were--FERC gave no guidelines for administering
these costs, so it is sort of hard to tell what the results of
those would be, as far as who decided to give these costs.
In addition, we also found that FERC was unable to separate
the amount of costs that they provided for themselves from the
relicensing--from the costs that they also do to do other
relicensing studies and things.
Mr. Boucher. Okay. Do you have some further examples? Mr.
Cotton?
Mr. Cotton. Yes. She touched on the inadequate data that
FERC was using. We also touched on the inappropriate data. For
example, the data that they used to justify their need to be
the sole source, one-stop shopping, identified 16 projects that
took a longer period of time than would be normally expected
under the process and couldn't be tied to any particular
reason, such as water certification. That they used to argue
needed to change the process before all these projects are
relicensed. Only problem is 14 of the 16 projects that they
referred to were for original licenses, not projects that were
coming in to be relicensed.
Now it is true that they all go through the same steps in
the process, but you address different issues for a project
that hasn't been built yet versus one that has been out there
for 50 years and may have to put in fish ladders to continue
operating. So that is where we raised the concern, when we
looked at FERC's report, that not only did they not have what
we felt was adequate data to make decisions, but we thought the
data that they used sometimes they didn't use appropriately.
Mr. Boucher. Okay. You are very credible agency, and
absolutely neutral, and your construction of recommendations--
you don't have an axe to grind. And your recommendations come
with great weight and authority in the minds of this Member of
Congress. And so I want to thank you very much for those
comments, and we will certainly consider very seriously what
you have had to say about this report. Thank you very much, Mr.
Chairman.
Mr. Walden. Now the Chair yield 5 minutes to the gentleman
from Arizona, Mr. Shadegg.
Mr. Shadegg. Thank you, Mr. Chairman. Let me begin, Mr.
Hill, with you and with your assistants. I guess there is a
question about the reliability of the FERC data. I want to go
to some of that data. In the FERC report, they contend that the
licensing time period required for relicense applications
between January 1982 and May 1992, that 10 or 11-year span, was
30 months. And then they content that they looked a second
block of 93 cases for relicensing between January 1, 1993 and
December 31, 2000. And they say that of the 93 cases they
looked in that class, I believe the time was 42 months. Do you
challenge those findings on just objectively how much time it
took to relicense?
Mr. Hill. I am not in a position to challenge them, because
we have not really looked behind that source data. But I will
raise the following questions. They are basically running--
whatever numbers they can scrape together, there is incomplete
data sets. There is a question as to the sample that they are
taking. In other words, is that earlier sample--what types of
projects are we talking about, big hydropower projects or small
hydropower projects? Our understanding is that the relicensing
that has been done up to this point has been primarily on
smaller projects, and the ones that are coming into the
pipeline now are bigger projects.
Could that account for the difference in the delays, or the
additional time it is taking? It is hard to say. There are a
lot of factors that could go into why it would be longer versus
shorter, and that is exactly why the point we are making is you
need to kind of get the data together, and you need to get the
data by participant, by project, by parts of the process. And
then you need to analyze that data to see where the snags are
occurring, and that is where you can focus your reforms.
Mr. Shadegg. I guess one of my concerns about that answer
is that you say it is your understanding that they were looking
at smaller projects versus larger projects. Your report would
be more useful to me at least if you could answer the question
I just put and we could get some data to rely upon.
One of the concerns I have----
Mr. Cotton. Could I add to that?
Mr. Shadegg. Well, my time is pretty limited, but----
Mr. Cotton. Okay. We couldn't find anybody that disagreed
with what you just said. They may disagree over the exact
numbers, but we couldn't find anybody, not in the environmental
community, not in the States, not in the Federal regulatory
agencies that would not agree that it takes longer, costs more,
and is far more controversial today than it was when that first
set of projects went through. The problem you have right now is
you don't know why.
Mr. Shadegg. That is a great segue. And in your report, you
make an effort to identify some causes. You point out at page 9
of your report that public values have changed over the past 30
to 50 years and now reflect a growing concern about the
environment. And I would agree with that. I am concerned about
the environment; I am concerned about the impacts of dams and
hydro projects on our rivers. I care deeply about them. We
don't have enough in Arizona, and the ones we have I care a lot
about. But that covers a span of 30 to 50 years. Their data
talks about just the last 20 years, roughly. And it is tough to
know the answer.
You do go a little more specifically, at page 8 of your
report, and talk about the Electric Consumers Protection Act in
1986, which as I understand it, gave the States a great deal of
additional role, including Mr. Shems, in the process, which I
personally think is an appropriate role. But I guess that is
where I wanted to kind of get to the nub of my question, which
was, okay, that act passed in 1986. Their data looked at 1982
to 1992. It seems to me that there was a period of time when
that act was in place that we were still processing, according
to their report, applications at a more rapid pace, medium
time, than the time span from 1993 to 2000.
And I guess my question is it seems to me that it can't
be--it could well be that over time environmental concern has
caused the delay. And it could be that following 1986, the
Electric Consumers Protection Act caused some additional
environmental study, perhaps appropriately, and caused some
delay following 1986. But that doesn't explain between 1986 and
1992 why we were processing, at least according to that data,
those applications more quickly than we are now. And I would be
happy to have you comment, and then I have got some questions
for others.
Mr. Cotton. Could I respond to that very quickly? You
passed a law in 1986. FERC did not enact the implementing
regulations or complete anyway that implementing regulations
till 1992.
Mr. Shadegg. Okay.
Mr. Cotton. So that could and probably does explain why you
are going to see that difference between 1992 and now and
looking back. There is a lag time between you pass a law and
when an agency publishes or promulgates the implementing
regulations. In this case, it was 1992.
Mr. Shadegg. Do you want comment? Sure.
Ms. Birnbaum. Yes. Might I suggest another reason? I think
that the most significant factor in why there is a longer
licensing period starting in 1993 was the class of 1993
relicensing class overwhelmed everybody. Since then, FERC has
formalized its regulations for relicensing. There has been the
interagency work and so on to try to keep that from happening
again, as this new glut of applications comes in. But simply,
at that point, nobody had the capacity to handle the number of
applications that came in, and it delayed everything.
Mr. Shadegg. I appreciate that information. Ms. Birnbaum,
since you are at the microphone, let me ask you a question. Mr.
Prescott expressed a concern that I think reflects that of many
people, which is with a growing population in the country and
therefore a growing demand for energy, no matter how much more
efficient we make it, which we need to be working very
aggressively on, loss of power generating capacity at
hydroelectric plants, even if it is in the small numbers you
talked about, for many of us is going in the wrong direction,
particularly given the ability of hydro to do, at least in some
circumstances, peaking power, to provide peaking power.
My question of you is the same question I asked of
Commissioner Hebert before, which was assuming a turbine, a
more efficient turbine, is made more efficient by the way its
windings go, not by its blades that the fish have to swim
through, and assuming that the new, more efficient turbine is
neutral in its damage to fish and/or assuming other mitigating
things are done to let fish bypass that, fish ladders, other
things you have talked about, would your organization agree or
would you not agree that replacing inefficient turbines with
more efficient turbines ought to be a part of the mix and that
there is nothing negative about doing so?
Ms. Birnbaum. We strongly favor improved technologies that
increase the amount of power generated by each drop of water.
That is different, however, from saying that we would support
turbine changes that might increase capacity, increase the
peakings of power plants, which often, although I recognize it
may meet the peak power demand in Phoenix, has a significant
impact on river environments.
Mr. Shadegg. One of the things we do in Arizona that is
very important is we have a pump-back system. We take water out
of one lake, pump it into the lake above, and release it during
the peaking areas. I would be interested in if you have
information on whether that has negative environmental
consequences.
Ms. Birnbaum. Frequently, pump-back systems do have
negative environmental consequences. Those need to be dealt
with on a case-by-case basis.
Mr. Shadegg. They have not seemed to be a problem or have
not gotten publicity in Arizona.
Mr. Walden. We need to wrap it up.
Mr. Shadegg. Mr. Prescott, I assume you support more
efficient turbines?
Mr. Prescott. Absolutely.
Mr. Shadegg. And that technology does exist?
Mr. Prescott. Yes, it does.
Mr. Shadegg. Thank you, Mr. Chairman.
Mr. Walden. Thank you. I believe we have a unanimous
consent request?
Mr. Boucher. Mr. Chairman, I ask unanimous consent that a
letter from a variety of environmental organizations relating
to these hydro licensing renewal processes be included in the
record.
Mr. Walden. Without objection.
[The letter follows:]
Trout Unlimited, Izaak Walton League of America,
American Sportfishing Association,
Bass Anglers Sportsman Society (B.A.S.S.),
Pacific Coast Federation of Fishermen's Associations,
June 26, 2001
To the Energy and Commerce Committee, Energy and Air Quality
Subcommittee:
In the coming weeks, this Subcommittee will consider changes to the
hydropower licensing process set out in the Federal Power Act, as
amended. We urge you to oppose rolling back environmental protections
in the hydropower licensing process. Hydropower licensing ``process
reform'' and ``streamlining'' that undermines state and federal
resource agency protection of valuable fisheries, federal lands used by
the public for recreation, and water quality will harm recreational
fishing and the fishing industry.
President Theodore Roosevelt recognized the importance of fisheries
when the rules for use of our public waterways by private hydropower
developers were established in the Federal Power Act. He also
understood that the management of these rivers would need to change as
our knowledge of this valuable resource and public priorities changed.
Today we have overwhelming scientific evidence that hydropower dams
have caused significant harm to our nation's fisheries. Most notable
are the declines of Atlantic salmon, now almost extinct in the
Northeast, and Pacific salmon and steelhead stocks, many of which are
sliding down that same path. While salmon are the most publicly visible
of the species affected by hydropower dams, they are by no means the
only ones.
We also have a much better understanding of how to avoid these
fishery declines, and in some instances, how to use technology and
project operations to enhance fisheries. Striped bass and shad
fisheries are recovering in many areas of the Northeast due in part to
better operation and facilities at hydropower dams. Well-operated
hydropower projects also enhance bass and other freshwater fisheries
that are vital to local recreation-dependent businesses. When
hydropower projects are relicensed, we should require the best
available technology, adopt best management practices, and take full
advantage of the expertise of state and federal resource agencies in
setting the terms for hydropower use of public rivers for the next
generation.
Resource agencies responsible for the health of fisheries have only
one chance every 30 to 50 years to affect how private hydropower
projects are operated. These agencies are charged with protecting
resources that large numbers of anglers and others enjoy, and upon
which numerous small and large businesses depend. Resource agencies
should be allowed to do their job, and not be saddled with excessive
procedural and substantive requirements that effectively deny them an
effective role in hydropower relicensing. In particular, the resource
agencies should not be required to duplicate the role of the Federal
Energy Regulatory Commission. Nor should they be denied the tools,
resources and information needed to make good decisions.
In 1986, Congress passed a package of amendments to the Federal
Power Act that reaffirmed the need to consider all interests in public
rivers, not just hydropower. Since then, FERC, the agencies, hydropower
project owners, fisheries advocates and the public have built a strong
foundation for increasingly efficient and environmentally satisfactory
hydropower relicensing proceedings. It's the kind of smart evolution of
river management that President Roosevelt had in mind.
Over the next 15 years the licenses for more than 450 dams
affecting more than 130 of our nation's rivers will come up for
renewal. We ask you to ensure that we continue to make progress toward
restoring and enhancing fisheries affected by those projects by
opposing amendments to the hydropower licensing process.
Sincerely,
Steve Moyer
Vice President for Conservation Programs, Trout Unlimited
Jim Mosher
Conservation Director, Izaak Walton League of America
Michael Nussman
Vice President, American Sportfishing Association
Bruce Shupp
National Conservation Director, Bass Anglers Sportsman Society
(B.A.S.S.) Inc.
Glen Spain, Northwest Regional Director,
Pacific Coast Federation of Fishermen's Associations (PCFFA)
Mr. Walden. We now ask unanimous consent that we be allowed
to take testimony for other witnesses who want to provide it to
the committee and that we have requested. Without objection, so
ordered.
Ladies and gentlemen, thank you for being here today. We
appreciate your testimony as we work on this issue. Thank you.
The committee is adjourned.
[Whereupon, at 3:50 p.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:]
Prepared Statement of Hon. Linda Breathitt, Commissioner, Federal
Energy Regulatory Commission
Mr. Chairman and Members of the Subcommittee: I am pleased to have
the opportunity to submit my testimony on the role of hydroelectric
power in helping to meet our Nation's energy demands, the role of
federal government in licensing the operation of hydroelectric dams,
and barriers to efficient operation and licensing of hydroelectric
dams. The Commission regulates hydroelectric facilities that produce
over five percent of all electric power generated in the United States.
The Commission's Office of Energy Projects administers programs for (1)
the licensing and relicensing of jurisdictional projects; (2) the
continued regulatory oversight of licensed projects during their
license term; and (3) the oversight of the safety of licensed
hydropower dams.
Most recently, the Commission's focus in the hydroelectric arena
has been to seek ways, within our jurisdiction, to minimize the
severity of the power crisis faced by citizens in the Western states.
Hydropower comprises approximately 40 percent of the total Western
Systems Coordinating Council (WSCC) generation capacity. In the
testimony I submitted for the March 20, 2001 hearing before this
Subcommittee, I noted that the Commission has launched an initiative to
explore the feasibility of increasing energy production, peaking
capacity, and other power benefits of hydropower projects by easing
certain operating constraints. I also anticipated the tensions that
would likely occur, upon review of licensees' applications responding
to our initiative, in finding a balance between greater operational
flexibility and the protection of environmental resources.
The Commission has so far responded to three requests by licensees
in the West to waive certain license conditions pertaining to minimum
flow and reservoir level requirements in order to increase generation.
Indeed, the major issues in those cases have involved competing power
and non-power interests. To grant even a temporary waiver of license
conditions entails careful consideration since such operating
constraints serve to protect many resources, such as resident and
anadromous fish, water quality, recreation, municipal and industrial
water supplies, and agricultural resources. In each case, my support
for waiver of the license conditions at issue was tempered with a
concern that any action taken should not negatively affect the long-
term health of the environment. I believe that it is important not to
create additional problems through lack of measured consideration and
foresight. Rehearing is pending on two of the approved waivers, and the
Commission is reviewing comments in the third proceeding. The
Commission also has pending before it six additional applications for
relief from license conditions to increase generation in the WSCC
region. I intend to give these pending matters my full attention.
The Subcommittee asks the Commissioners to comment on procedures
for licensing projects that are within the Commission's jurisdiction.
In this regard, I refer the Members of the Subcommittee to the Report
on Hydroelectric Licensing Policies, Procedures, and Regulations:
Comprehensive Review and Recommendations Pursuant to Section 603 of the
Energy Act of 2000 (Staff Report), a document prepared by the
Commission's staff and submitted to the United States Congress in May
2001. The Staff Report provides a thorough review of our hydroelectric
licensing program and presents staff's conclusions and recommendations
for legislative, procedural, and policy changes to reduce the costs and
time involved in the licensing process. As the report points out, the
median time from the filing of a license application to its conclusion
for recent applications is 43 months, and many proceedings take
substantially longer. Clearly there remain impediments to the efficient
administration of the Commission's licensing authority; and to the
extent I can add my perspective on staff's recommended measures, I will
do so below.
More so than in any other program area administered by the
Commission, the hydroelectric licensing process entails statutory
requirements that give other agencies a significant and powerful role
in the licensing process. The Commission has continuously endeavored to
work with these other agencies to seek faster resolution to licensing
proceedings; however, I agree with staff's conclusions that additional
legislation would assist in this regard. Staff's primary recommendation
is that Congress restore the Commission's position as the sole federal
decisional authority for licensing conditions and processes. Under this
approach, those Federal agencies with the authority to impose mandatory
license conditions would retain that authority, subject to a statutory
reservation of Commission authority to reject or modify the conditions
based on inconsistency with the Commission's overall public interest
determination. This approach could be described as ``one-stop
shopping'' at the Commission for all federal authorizations.
While I share staff's views that there remain impediments to
efficient hydrolicensing that legislation could alleviate, I do not
join in the recommendation for a ``one-stop shopping'' approach. As
detailed in the Staff Report, various agencies--the Departments of
Agriculture, Interior and Commerce, among other federal and state
entities--are called upon during the licensing process to evaluate many
competing aspects of license applications, and I believe it is
appropriate for licenses to reflect the specialized expertise of these
other agencies. Each brings to the table important responsibilities in
mitigating the environmental effects of hydropower generation. While I
firmly believe that the cost and delay of licensing should be minimized
where possible, this should not come at the expense of legitimate
environmental mitigation.
I do, however, agree with some of the alternative legislative
recommendations presented in the Staff Report. I would support
legislation that would target legislative solutions to the specific
impediments the Commission faces in exercising our existing statutory
authority. First, I would advocate requiring agencies with mandatory
conditioning authority to better support their conditions with a full
range of public interest values and to provide a clear administrative
appeals process. I believe that this could result in licenses that
reflect a better balance of developmental and environmental values, as
well as less costly mandatory conditions.
Second, I believe it would be very helpful if Congress clarified
the statutory definition of ``fishways'', which Section 18 of the
Federal Power Act gives the Secretaries of Commerce and Interior the
authority to prescribe. The authority to mandate fishways has taken on
great significance in licensing and relicensing proceedings because
fishways can dramatically affect the capital cost and revenue potential
of a project. As explained in greater detail in the Staff Report, the
Commission has little recourse when it concludes that one or more
mandatory conditions would render a project inconsistent with the
public interest; and a clear definition would result in fewer such
conflicts.
Third, I would support an amendment to the Federal Power Act (FPA)
to permit the Commission to remit annual charges for other federal
agency FPA Part I hydropower costs directly to the agencies, specifying
that they are to be used for implementing Part I. This would better
allow federal agencies to recover their funds spent for the purpose of
participating in the licensing process, and it would permit licensees
to seek administrative appeal of other agency costs from the agencies
themselves-and, if necessary, seek judicial review of other agencies'
final determinations. The Commission should not be in a position to
review the appropriateness of other agencies' expenditures. I believe
the three legislative measures I have described would provide the
Commission with the appropriate tools to act more expeditiously on
license applications, and in some cases, could reduce the costs
associated with license conditions.
I would like to comment on one final recommendation that I cannot
support. The Staff Report recommends that state Clean Water Act (CWA)
authority should be limited to physical and chemical water quality
parameters related to the hydropower facility. Currently, a state may
act under the CWA to regulate not only water quality, but water
quantity and state-designated uses. I do not disagree with staff's
premise that reducing the ambit of the certification to water quality
itself would reduce the need for licensees to conduct studies of other
matters relating to the use of project waters and thereby serve to
streamline CWA certification. Nevertheless, I do not concur in staff's
recommendation to limit the states' CWA authority. I believe that the
determinations of state water quality agencies concerning the use of
project waters reflect legitimate local concerns, and I would prefer to
seek other means of working with states on CWA issues than the
recommended legislation.
As a matter over which the Commission already has control, I
support the continuation of the the Alternative Licensing Process
(ALP), notwithstanding the fact that it involves lengthy and extensive
pre-filing consultation and may not significantly reduce the overall
time for obtaining a license. The most important benefit of the ALP is
that it encourages parties to communicate earlier, identify issues, and
discuss resolution. As a general proposition, I favor negotiated
resolutions over regulatory mandates, and for this reason support the
ALP. Finally, I will consider the regulatory and policy changes
delineated in the Staff Report if they come before the Commission for
decision.
In closing, I note that, given the events in energy markets this
year, the hydroelectric program at the Federal Energy Regulatory
Commission has not received as much public attention as our electric
and natural gas programs. However, the energy crisis and drought
conditions affecting the West have served to emphasize the importance
of hydroelectric generation in the Nation's energy mix. I assure this
Subcommittee that matters involving the critical issues of
hydroelectric licensing, regulatory oversight, and safety have received
the Commission's and staff's full attention and will continue to be a
high priority for me.
______
Prepared Statement of Hon. William Massey, Commissioner, Federal Energy
Regulatory Commission
Mr. Chairman and Members of the Subcommittee on Energy and Air
Quality: Thank you for the opportunity to testify on the subject of the
Commission's role in the licensing of hydroelectric power. As I am sure
you will agree, recent events in the California and western electricity
markets have highlighted the critical role of hydropower in meeting our
nation's energy needs.
The Northwest Power Planning Council has reviewed the reports that
snowpack levels are less than 50 percent of average in many areas of
the Columbia and Snake River basins, and that spring and summer
streamflows well below average are forecast for most of the west. In
addition, the Council notes that reports of below average water storage
in the west have ``serious implications for the reliability of power
supply'' as well as ``serious implications for power prices through the
west . . .'' The Council has requested that the Commission give
expedited consideration to modifications of operations at licensed
projects in the region in order to alleviate power shortage.
These events have presented the Commission with some tough
challenges in carrying out its responsibility to determine the proper
balance between the development of hydropower as a renewable energy
source and environmental protection. The Commission has met these
challenges in a thoughtful and responsible manner. We recently issued
three orders amending licenses to increase hydropower generation in the
western United States. In each of these instances, I agreed with the
Commission's finding that temporary measures required to increase power
production could be implemented without any long-term environmental
impact. Let me briefly summarize these cases:
1. On March 15, 2001, Idaho Power Company filed a request for a 1-
year waiver of article 410 of its Twin Falls Project No. 18 license.
The project is located on the Snake River in Idaho. Article 410
requires spills of 300 cubic feet per second (cfs) over Twin Falls
during certain daylight hours to protect aesthetic resources at the
falls. On May 8, 2001, the Commission issued an order that allowed the
aesthetic flows to be temporarily suspended through March 31, 2002
except on state and federal holidays. The order also required the
licensee to resume releasing flows over Twin Falls if necessary to
maintain the state water quality standards for dissolved oxygen. The
additional power that can be generated by the suspended flows is
between 6,300 and 9,700 MWh, an increase of 15 to 17 percent.
2. On March 19, 2001, Idaho Power Company filed a 1-year waiver of
Article 407 of its Milner Project No. 2899 license. The project is
located on the Snake River in Idaho. Article 407 requires the release
of 200 cfs to enhance the fishery resources in the 1.6-mile-long reach.
The amendment was publicly noticed on March 26, 2001. On May 8, 2001,
the Commission issued an order approving the request to suspend the
minimum flow in the bypass reach through March 31, 2002. The additional
power that would be generated by the suspended flow is between 10,250
and 14,086 MWh, an increase of from 31 to 50 percent.
3. On May 9, 2001, Public Utility District No. 2 of Grant County,
Washington (Grant County), filed an application to suspend its spill
flow requirements at Priest Rapids Project No. 2114 from May 9, 2001
through this summer's migration season. The project is located on the
Columbia River in Washington and is comprised of the Priest Rapids and
Wanapum developments. The application was noticed for public comment on
May 10, 2001. On June 1, 2001, the Commission issued an order approving
a spill flow exchange, an alternative to Grant County's proposal
offered in comments from the Bonneville Power Administration (BPA).
Under the spill exchange, BPA will provide spill during the spring of
2001 at the Bonneville and Dalles dams, foregoing up to 300 MW-months
of generation, in order to increase the downstream survival of various
salmon and steelhead species, some of which are listed under the
Endangered Species Act (ESA). Later, during the summer, if necessary
for BPA to meet its reliability criteria, Grant County will eliminate
spill at Priest Rapids and Wanapum dams for up to sixteen hours per day
(during daylight hours), thereby providing generation to be delivered
to BPA to offset BPA's generation lost as a result of the spring spill.
The spill exchange would allow Grant County to produce an additional
219,600 MWh. Increased generation by Grant County from suspended summer
spills would be used to offset reduced generation by BPA from increased
spring spill. The Commission staff's analysis determined that
suspension of spills by Grant County in accordance with the spill
exchange would result in a four percent decrease in project passage
survival for less than half the outmigrating non-listed summer/fall
chinook salmon, and would have no effects on other salmon and steelhead
species, including those listed under the ESA.
When deliberating whether to license, relicense or amend a
hydropower license, the Commission has the responsibility to consider
all aspects of the public interest. Amendments to the Federal Power
Act, enacted as the Electric Consumers Protection Act of 1986, require
FERC to give equal consideration to environmental resources and energy
conservation, as well as developmental values such as power production.
Thus, the ultimate responsibility for determining the proper balance
between the development of hydropower as a renewable energy source and
environmental protection rests with FERC.
On May 8, 2001, the Staff of the Commission, pursuant to Section
603 of the Energy Act of 2000, submitted to Congress a comprehensive
review of policies, procedures and regulations for the licensing of
hydroelectric projects, with the goal of reducing the cost and time for
obtaining a license. As the Staff report notes, the views of individual
Commissioners were not incorporated into the document, nor was it
presented to the Commission for approval or disapproval. However, the
document does serve as a useful platform for discussion of my role as a
decision maker on items presented for formal Commission action.
At the outset, it must be noted that the Chairman of the Commission
is the administrative officer with responsibility for directing the
agency's hydropower program (Office of Energy Projects). Internal Staff
concerns with available resources, relationships with sister agencies,
non-governmental agencies or state resource agencies, come to the
attention of individual Commissioners primarily in the context of
internal debate regarding particular orders.
The Staff report's primary recommendation is that Congress should
establish one-stop shopping at the Commission for all federal
authorizations. This proposal has some immediate appeal. An argument
can be made that the agency with the authority to determine the
ultimate outcome of a particular proposal should drive a single
administrative process in conjunction with a single NEPA document. The
Staff report recommends that federal agencies with mandatory
conditioning authority retain that authority, subject to a statutory
reservation of Commission authority to reject or modify the conditions
proposed by other agencies if they are found to be inconsistent with
the Commission's overall public interest determination. Other federal
agencies bring to the table valuable expertise and historical insight
that should be given its proper weight, however. The concept that the
Commission should ultimately be able to reject or modify another
federal agency's condition should be tempered by a recognition of that
agency's particular expertise. If the agency's condition is based on
substantial evidence and there is a rational connection between the
facts and the policy recommendation, the condition should be given
substantial deference by the Commission. I agree, however, that federal
agency conditions should be sensitive to cost impacts, and that costs
should bear a thoughtful relationship to the environmental return. I
agree that the Commission should not be placed in the position of
having to accept a ``Cadillac'' condition or not license a project.
Closely related to the report's recommendation of a ``one-stop
shopping agency'' is its discussion concerning the effect of three
court decisions on the Commission's ability to incorporate or reject
state water quality certifications and FPA Section 18 fishway
prescriptions in balancing developmental and environmental concerns. A
proposed environmental action may also adversely affect other
environmental resources. For instance, in a recent case involving an
interpretation of the Endangered Species Act, a proposal for fish
ladders upstream to a reservoir were opposed by resource agencies
concerned that the introduction of a new species could adversely affect
existing fish stocks. These three judicial decisions are as follows:
PUD NO. 1 of Jefferson County v. Washington Department of
Ecology, 511 U.S. 700 (1994), where the Court held that a State
imposing a condition under the Clean Water Act could regulate
not only water quality, such as its chemical composition, but
also the method by which water is released by a project.
American Rivers I v. FERC, 129 F.3d 99 (2nd Cir. 1997), where
the court held that the Commission lacked authority to
determine whether conditions submitted by state agencies
pursuant to Section 401 of the Clean Water Act were beyond the
scope of that section.
American Rivers II v. FERC, 187 F.2d 1007 (9th Cir. 1999),
where the court ruled that the Commission lacked authority in
individual cases to determine whether prescriptions submitted
under Section 18 of the FPA are in fact fishways.
I agree with the Staff report that the Commission may be hampered
in performing its balancing obligation if section 401 Clean Water Act
certifications and Section 18 fishways prescriptions continue to
hamstring our ability to weigh competing choices and values. This is at
the heart of my decision making role as a Commissioner of this agency.
Congressional intervention may be necessary to refocus and underscore
the Commission's role as the ultimate authority in balancing competing
concerns in hydroelectric license matters.
Thank you for the opportunity to submit this written statement, and
I will be pleased to respond to any questions.
______
Prepared Statement of Donald Sampson, Executive Director, Columbia
River Inter-Tribal Fish Commission
Thank you for the opportunity to offer testimony regarding National
Energy Policy and Hydroelectric Power. My name is Donald Sampson; I am
the Executive Director of the Columbia River Inter-Tribal Fish
Commission (CRITFC) in Portland, Oregon. I believe we share common
desires to find solutions to our national energy problems that are
affordable and environmentally sound. The CRITFC tribes are developing
a tribal energy vision and have the expertise and the resources
available in the Northwest to alleviate the region's energy shortages.
Additionally, tribes and tribal lands across the nation hold vast
resources and stand ready to offer solutions to the nation's energy
problems. At the same time, the tribes are prepared to be good stewards
of the land and plan for the long-term sustainability of the national
economy through wise energy planning.
Formed by resolution of the Nez Perce Tribe, the Confederated
Tribes of the Umatilla Indian Reservation, the Confederated Tribes of
the Warm Springs Reservation of Oregon, and the Confederated Tribes and
Bands of the Yakama Nation, the Columbia River Inter-Tribal Fish
Commission (CRITFC) provides coordination and technical assistance to
ensure that the resolution of outstanding treaty fishing rights issues
guarantees the continuation and restoration of our tribal fisheries
into perpetuity. Since 1979, CRITFC has contracted with the BIA under
the Indian Self-Determination Act (Public Law 93-638) to provide this
technical support. The tribes' technical experts have identified where
federal and state resource managers have fallen short in protecting and
restoring the habitat and production of all salmon stocks. Wy-Kan-Ush-
Mi Wa-Kish-Wit, the Spirit of the Salmon, the tribes' restoration plan,
the only gravel to gravel salmon restoration plan in the Columbia
Basin, identifies threats to salmon, proposes hypotheses based upon
adaptive management principles to address those threats, and provides
specific recommendations and practices that must be adopted by natural
resource managers to meet treaty obligations. Wy-Kan-Ush-Mi Wa-Kish-Wit
can be viewed at www.critfc.org. These four tribes have rights reserved
by treaties with the United States of America 1 to take fish
destined to pass the tribes' usual and accustomed fishing places. This
right covers fish originating in the Columbia River Basin. Protection
and enhancement of those streams that provide spawning and rearing
habitat and migration corridors for these fish are of critical
importance to the tribes and the region. The CRITFC provides technical
and legal support to the tribes to carry out those goals.
---------------------------------------------------------------------------
\1\ Treaty with the Yakama Tribe, June 9, 1855, 12 Stat. 951;
Treaty with the Tribes of Middle Oregon, June 25, 1855, 12 Stat. 963;
Treaty with the Umatilla Tribe, June 9, 1855, 12 Stat. 945; Treaty with
the Nez Perce Tribe, June 11, 1855, 12 Stat. 957.
---------------------------------------------------------------------------
In 1855, the United States entered into treaties with the Nez Perce
Tribe, the Confederated Tribes of the Umatilla Indian Reservation, the
Confederated Tribes of the Warm Springs Reservation of Oregon, and the
Confederated Tribes and Bands of the Yakama Nation to ensure the mutual
peace and security of our peoples. For the four tribes' cession of
millions of acres, the United States promised to protect and honor the
rights and resources the tribes reserved to themselves under those
treaties. Those resources, among them our most treasured resource, the
salmon, are being destroyed largely by hydroelectric projects on the
Columbia and Snake Rivers. The salmon are also imperiled by relicensing
processes at those dams that seek to delay necessary environmental
analysis and changes to hydro structures and operations under the
Federal Power Act. Existing license holders, who use process and delay
to short change environmental protections necessary to insure the
continued existence of salmon, are trampling upon our rights, our
culture and our religious beliefs that are tied to the salmon.
The Treaty Tribes grow weary when our expertise to protect our
treaty resource is ignored, when our input in public processes is
ignored, when our negotiations lead to settlements and those
settlements are ignored, when our good faith efforts to cooperate and
participate in decision-making forums are ignored, and when the
treaties signed by the United States Government are ignored in order to
protect the unreasonable economic interests of dam owner/operators. The
Columbia River Treaty Tribes will strongly oppose any effort to
expedite the dam relicensing process that will lessen environmental
analysis and protection of salmon at hydro projects, as well as any
effort to diminish tribal and public input during relicensing. The
Columbia River Treaty Tribes will oppose any effort to cripple the
jurisdiction of the federal agencies that have the trust responsibility
to protect reservation lands and fish and wildlife through mandatory
license conditions. Any compromise of the Department of Interior's
authority under section 4(e) of the Federal Power Act to protect
reservation lands and treaty resources will obstruct the obligation of
the United States to ``secure'' our treaty rights. Any compromise of
fish and wildlife agencies' authority under section 18 of the Federal
Power Act to prescribe fishways to protect treaty resources will also
be seen as an attempt to interfere with our treaty rights. Reducing
cost and time in relicensing at the expense of the public, the natural
resource or the federal agencies with jurisdiction will be seen as an
abrogation of the trust responsibility and the treaties entered into
between the tribes and the United States government.
With that said, the CRITFC tribes are developing a Northwest Tribal
Energy Vision that will simultaneously provide the region with
affordable energy solutions while taking energy policy and development
off the backs of salmon and off the Columbia and Snake Rivers. Our
energy solutions complement the national recommendations of the Inter-
Tribal Energy Network. Tribes currently have twenty percent of the
Nation's energy resources on their lands. However, on average, tribal
citizens spend more of their income on energy, have the highest
percentage of homes without electricity, have the least control over
quality of service, and are experiencing two to three times the
national population growth. Northwest Treaty Tribes, along with the
aforementioned impacts, are losing their treaty-reserved salmon
resources to poor energy planning and policy.
Through the national Inter-Tribal Energy Network, draft legislation
will be introduced that will help the nation address its energy
shortages through development of tribal energy resources that are cost
effective and offer opportunities for joint partnerships. This will
also help tribes to serve tribal members with reliable energy and will
foster economic development on tribal lands and promote sovereignty and
self-sufficiency. The draft legislation envisions establishing an
Office of Indian Energy in the Department of Energy. Critical to this
recommendation is significant funding made available to the Office of
Indian Energy for tribes to ascertain their energy resources and the
best way to develop those resources. Also vital is the ability to bring
resources on-line in an expedited fashion using interagency cooperation
while protecting environmental quality.
The Northwest Tribal Energy Vision is premised on the idea of
promotion of energy development that will serve Northwest energy needs
while protecting the tribes' treaty-reserved resources. It allows for
faster siting of projects with enhanced value on tribal lands; allows
for distributed generation opportunities to meet rural loads; allows
for opportunities for transmission siting on tribal lands; and
addresses key fundamental concepts to protect the tribes' treaty
rights. Energy policy and development must not continue to diminish the
tribes' treaty-reserved resources. Energy policy and development should
no longer excessively rely on the Columbia and Snake Rivers. Energy
policy must get off the backs of salmon. Our treaty-reserved resources
continue to be sacrificed for the sake of bad energy planning.
The current energy problem exists because of poor planning.
Conservation and alternative energy development aggressively pursued in
the 1980's was abandoned by the region and FERC in the 1990's. Poor
planning has pushed salmon to the brink of extinction and will cause
further environmental degradation. The salmon's precipitous decline has
been known for decades and yet new energy development from sources off
the river to meet demand has lagged. Substantial generation in
California has been curtailed in order to drive up prices, but it could
alleviate immediate pressures to run the Columbia River without regard
to salmon if that generation was made available at a reasonable price.
Power generation from the Columbia River hydrosystem is completely
dependent upon the uncertainties of precipitation and runoff timing and
is, as has been shown this year, not reliable. The lack of adequate
precipitation is always a potential limiting factor and contingencies
have not been developed to adequately mitigate for that risk.
general comments
Anadromous fish stocks continue to decline. Current reports
estimate that Snake River salmonids will be extinct by the year 2016.
Recent analysis by the National Marine Fisheries Service indicates the
Mid-Columbia River stocks are declining at a rate greater than Snake
River stocks. Most of the salmon stocks in the Columbia River Basin are
listed under the Endangered Species Act (ESA) as threatened or
endangered. More stocks are on their way to being listed under the ESA.
Hundreds of dams and impoundments on the Columbia and Snake Rivers and
tributaries have been the major factor in this decline. While
hydropower has brought energy benefits to the country, there was very
little foresight as to the environmental consequences when the dams
were built. Dams cause significant damage to aquatic and riparian
environments by altering the physical, chemical and biological
processes of river systems. We have learned much since these dams were
first licensed. And now that dams are in the relicensing cycle, we must
apply what we have learned to make the dams more suitable to what we
now understand. Reducing cost and time in the licensing process must
not make it more difficult for federal and state agencies to ensure
that the managers of hydroelectric power facilities adequately mitigate
for or minimize their impacts.
The Columbia River Treaty Tribes have greatly suffered under the
effect of hydropower development and operations for many decades. Our
lands have been diminished by hydropower. Our cultural resources have
been diminished by hydropower. Our fisheries have been diminished by
hydropower. Our very way of life has been diminished by hydropower. Our
fishing bands have been displaced from their usual and accustomed
fishing villages and struggle under very poor living conditions in
extreme poverty. Socioeconomic studies funded by the Northwest Power
Planning Council indicate that Columbia River tribal members have per
capita incomes of 40-60% of non-tribal members, have rates of
unemployment and poverty three to four times higher than non-tribal
members and have mortality rates that are twice as high as non-tribal
members. Much of this disparity in the tribal standard of living and
health and well-being is due to the loss of the salmon resource. In
effect, in less than 100 years much of the salmon wealth of the
Columbia River has been conscientiously taken away from tribal people
and transferred to non-tribal people in the form of hydroelectrical
generation.
The Columbia River Treaty Tribes signed treaties in 1855 by which
the United States agreed to secure the right to take fish at all usual
and accustomed fishing stations. The fishing right means more than the
right of Indians to hang a net in an empty river. The Columbia River
Treaty Tribes have adopted a salmon recovery plan entitled Wy-Kan-Ush-
Mi Wa-Kish-Wit, the Spirit of the Salmon, that comprehensively
describes the actions that must be taken to restore fish and wildlife
and make progress toward meeting the tribes' reserved Treaty rights.
Reducing the cost and time of relicensing must not block the federal
agencies that have the legal authority and trust responsibility to
protect the tribes' treaty rights and resources.
Federal fish and wildlife agencies were given authority under the
Federal Power Act (FPA) to use their expertise during dam licensing to
protect the resources in their charge. Section 4(e) and 18 authority
was given to the federal agencies precisely because they have the
expertise to deal with the particular resources at issue and the
ability to develop the specific environmental analysis necessary to
protect that resource. The resource agencies' authority to protect the
uses of reserved lands is an integral part of the FPA licensing scheme.
While the FPA allowed licensing of private hydro facilities on federal
lands, it also contemplated that the resource agencies would possess
the necessary expertise to ensure that those facilities would not
interfere with protection and use of those lands.
The mandatory authority of the resource agencies is crucial to the
protection of federal lands and resources these agencies are charged
with administering, including the protection of tribal trust resources
consistent with established federal Indian law and policy. The federal
agencies play a critical role in protecting Indian resources and
ensuring adequate compensation for the use of tribal reservation lands.
A threat to the federal agencies' authority to protect the Columbia
River Treaty Tribes' treaty resource threatens our treaty rights,
threatens tribal sovereignty, and undermines the agencies' ability to
meet their federal trust responsibility. We rely on the Department of
the Interior in its fiduciary role to protect our treaty resources in
relicensing. We also rely on the fish and wildlife agencies to protect
the resources in their charge. Reducing time and cost in relicensing
must not deny Interior and the other agencies the ability to meet their
trust obligation to protect our rights and resources. The tribes will
consider reduction of time and cost that hinders the jurisdictional
agencies to protect the treaty resources as an attack on our reserved
rights.
The current attempts to expedite hydroelectric dam relicensing
characterize the need as an energy issue and a need to improve the
hydroelectric licensing process. However, we all know the issue is
different and much broader. It is a natural resource issue and must be
looked at as comprehensively as possible. The natural resource at stake
will be locked up in new hydropower licenses for 30 to 50 or more
years. If we don't get it right now, the natural resource may be gone
before we have the opportunity to revisit the issue as witnessed in the
coming Snake River extinctions. We have the moral and ethical duty to
respond to this issue in the public interest to protect the natural
resource. The Columbia River Treaty Tribes believe attempts in Congress
to reduce the time and cost of relicensing will make protection of the
natural resource and tribal concerns more difficult or impossible.
The Columbia and Snake Rivers and their tributaries as well as all
navigable waters of the United States are public resources. A license
to operate a hydroelectric project is a privilege, not an entitlement
or a right. It is the responsibility of the federal government and its
agencies, including FERC, to protect the public resource using the
public interest standard articulated in the Federal Power Act and by
the Supreme Court.2 A license holder will make millions if
not hundreds of millions of dollars over the term of the license. The
Grant County Public Utility District in Washington State made $88
million last year alone from the operation of two dams on the Mid-
Columbia. While it is important to insure that the licensing process is
cost efficient and time conscious, it is inappropriate to do so at the
expense of the public resource or public input. The Treaty Tribes
depend on the federal agencies to insure the treaty resource will be
recovered, restored and maintained throughout the term of each hydro
license. It is the obligation of the license holder to maintain a
healthy river system that supports the ecological processes necessary
to sustain the treaty resource.
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\2\ Udall v. Federal Power Commission, 387 U.S. 428 (1967). ``The
test is whether the project will be in the public interest. And that
determination can be made only after an exploration of all issues
relevant to the `public interest,' including future power demand and
supply, alternate sources of power, the public interest in preserving
reaches of wild rivers and wilderness areas, the preservation of
anadromous fish for commercial and recreational purposes, and the
protection of wildlife.'' Udall, at 450.
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While license holders have complained about the length and cost of
the licensing process, nearly all hydroprojects need upgrading to
protect the public resource. Dams and reservoirs degrade water quality,
reduce water quantity, displace fish and wildlife habitat, kill fish
and wildlife, create barriers to migration, provide for the invasion of
non-indigenous species and generally wreak havoc on the riverine
ecosystem. These actions curtail the economic viability of each river
by negatively altering the biological characteristics necessary to
maintain a healthy river system and anadromous fish. Healthy rivers
support sustainable, healthy economies with teeming wildlife, natural
beauty and the promise of a high quality of life.
All dams need to be modernized to accommodate for damage caused to
the public resource by hydro operations. We cannot continue to
sacrifice our rivers for the sake of our insatiable desire for cheap
hydropower. Our current energy problems are due to misguided energy
policies that do not take into account the environmental externalities
of the dams. A short-term fix to increase hydroelectric power
generation now will have long-term environmental consequences that will
last for generations. As sovereigns, we must distinguish between
managing for these short-term inconveniences and preventing the
realization of the true potential for long-term losses. We need a long-
term comprehensive energy policy that protects our environment through
the full development of conservation measures and renewable energy
sources. The Northwest Tribal Energy Vision will accomplish the long-
term energy needs of our nation while protecting the environmental
heritage of future generations. Free market deregulation will not
address environmental externalities. Reducing the time and cost of
licensing must not come at the cost of the environment.
specific comments
The question has been posed: how can the cost and length of
hydroelectric relicensing be reduced? Relicensing is a major
undertaking that needs to be afforded maximum effort by the license
holder and maximum input from federal agencies, states, tribes and the
public. There are a number of aspects concerning relicensing that could
be changed to afford a more complete and comprehensive process while
likely reducing time and cost.
Currently, license holders are often reticent to perform analysis
and studies concerning the impacts of dams on the environment and fish
and wildlife due to cost and because the analysis will show the need to
modernize the dam at the owner's expense. These studies are necessary
to provide a complete picture of the present and future impacts to the
public resource. License holders create delay while refusing to do the
necessary analysis or by providing insufficient information for
agencies to develop terms and conditions in a timely and complete
manner and often must be persuaded through costly and time consuming
legal action. There is little incentive for the license holder to do
the right thing by performing environmental analysis early in the
process. FERC should set specific standards and timelines for study
designs and implementation and enforce them, including those studies
necessary for other agencies to develop their conditions,
prescriptions, and recommendations. This will ensure that dam owners do
not prevent or delay effective license conditions by not providing
needed information.
Additionally, delay works to the benefit of the license holder
because the termination of the original license period is followed by
annual licenses with the same terms as the original license. The
environment and invaluable natural resources continue to bear the
burden in these cases while the license holder is protected
indefinitely. By allowing annual licenses, the United States grants the
license holder a benefit at the tribes', the public's and the
environment's expense. As fiduciary to the tribes and the public trust,
this is unacceptable policy and must change. To eliminate this
incentive, FERC should set interim conditions to protect natural
resources on annual licenses in situations where applicants have
deliberately failed to complete studies in a timely manner.
Reducing cost and time in relicensing must not reduce environmental
protection. Above all, environmental needs as discerned by the
mandatory conditions of the federal agencies must form a floor above
which FERC may balance the need for power. The tribes' treaty rights
and the public resource must be protected first. The jurisdictional
federal agencies with mandatory conditioning authority have the
expertise necessary and the mandate to protect the public resource. The
mandatory conditioning authority of the jurisdictional federal agencies
must be preserved to protect the tribes' treaty rights, tribal lands,
and the public resources. A May, 2000 GAO report on relicensing
concluded that FERC does not have sufficient information to identify
which reforms are necessary either legislatively or administratively to
the relicensing process. Additionally, the report found FERC does not
have sufficient data to evaluate the effectiveness of recent reforms.
Recently, FERC compiled a list of actions it would be taking to
increase electric generation in the Western United States.3
Based upon this list of actions, on June 1, 2001, FERC issued an Order
Authorizing Temporary Increase in Generation in Light of Electricity
Exigencies in Western United States. The result of this order was to
suspend an existing settlement agreement between Grant County Public
Utility District and the Mid-Columbia Joint Fisheries Parties
4 that allowed spill protection for severely depressed
salmon stocks in the Mid-Columbia River in Washington State. This
decision was not based on good science or on input received from tribes
and federal and state resource agencies. FERC's decision was indicative
of the problems outlined in the GAO report. Meanwhile, numerous parties
have been engaged over the last year in the Electric Power Research
Institute effort to develop administrative solutions to this problem
and an Interagency Task Force also developed solutions to the
relicensing process. These solutions should be given an opportunity to
work. This is the right direction to determine the best path to reform.
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\3\ FERC issued these actions in Removing Obstacles to Increased
Electric Generation and Natural Gas Supply in the Western United
States.
\4\ The Joint Fisheries Parties consist of sovereign entities that
have mandated authorities for protection of fish and wildlife and
include the Yakama Nation, the Confederated Tribes of the Umatilla
Indian Reservation, the Colville Confederated Tribes, the Washington
Department of Fish and Wildlife, NMFS and the USFWS.
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In May 2001, FERC released a 603 Report, which responded to
Congress' requirement ``to undertake a comprehensive review of
policies, procedures and regulations for the licensing of hydroprojects
to determine how to reduce the cost and time of obtaining a license.''
The Report was a product of the Commission staff, not the Commission.
We note that the Commission itself, with its authorities, did not
endorse the Report. While not inclusive of all the Report
recommendations, we find the following as serious shortcomings that
reverse resource protection requirements called for in the Electric
Consumer Protection Act of 1986 and the Clean Water Act. The following
Report recommendations would compromise environmental protection and
treaty-reserved resources and are unacceptable.
The Report recommends ``one stop shopping'' at FERC for all
federal license authorizations. This would allow FERC to reject
mandatory license conditioning if they were inconsistent with
FERC's public interest determination. Recent attempts to change
the Federal Power Act's public interest standard goes against
decades of policy and administrative development as well as
previously noted Supreme Court rulings. This would override
mandatory license conditioning for natural resource protection
by the Department of Interior and the Bureau of Indian Affairs
on behalf of the tribes.
The Report recommends that the Departments with mandatory
license conditioning consider the full range of public interest
considerations when conditioning the license for resource
protection. This would require the Departments to ``balance''
resource protection with project economic gains. This is
redundant as FERC is already charged to balance project
economics with resource protection, with the floor established
by the Departments.
The Report recommends amending the Clean Water Act in license
proceedings. Specifically, water quality certification would be
limited to physical and chemical parameters--not biological
parameters. Instream flows would be given non-mandatory 10(j)
status. State and tribal water quality authorities would no
longer be mandatory.
The Report criticizes the recently developed definition of a
fishway and proposed fishway policy developed by the NMFS and
USFWS. The Report recommendations would restrict the agencies'
fishway definition which would diminish an applicant's
obligation to provide adequate fish passage.
Hydroelectric projects cannot and will not last forever. A license
holder must not be allowed to walk away from a hydroelectric project
when removal of the project is necessary. FERC must require each
applicant submit a plan that details how removal will be accomplished
if such an event is required. FERC must also require the applicant
create a fund to pay for such removal. This process is required for
nuclear power projects. Hydroelectric projects have caused significant
environmental damage that should not be left to the federal taxpayer to
bear.
Where the Alternative Licensing Procedure (ALP) is one possibility
for early input from interested parties, it is important to stress that
no collaborative process is successful without meaningful participation
by concerned parties. As relicensing is a long-term process requiring
intensive resource commitment, it is necessary for the applicant to
provide funding for tribes and other groups to fully participate in
order to expedite the process with full input. Otherwise, inadequate
input or input only from resource rich participants can bias the
process. This is not a satisfactory outcome and should be changed. FERC
should require funding for participation by tribes and public interest
groups either by the applicant or by FERC. Early participation will
lead to a faster relicensing process.
Where the Traditional Licensing Process is more appropriate, FERC
must perform environmental analysis in a timely manner. Final decisions
and rehearing requests must be expedited where delay would further harm
the environment. Deadlines must be consistent and adhered to within a
reasonable amount of time. Mandatory conditioning agencies should set
and follow strict guidelines and timelines with periodic opportunities
for review. Where a license applicant is the cause of delay, the
federal fish and wildlife agencies, states and tribes should document
such delay and be afforded further time to develop conditions.
As a federal bureaucracy, FERC could make institutional changes to
expedite relicensing proceedings. Currently, FERC staff is assigned to
cover project relicensing proceedings but is assigned to different
issues on the same project. Because of exparte rules, these staff
cannot confer on issues. For example, one staff member is assigned on
the Rocky Reach Hydroelectric Project relicensing proceeding in
Washington State, while another staff member is assigned to the Mid-
Columbia Habitat Conservation Plan process, which directly involves
Rocky Reach relicensing. The result is confusion among FERC staff on
complementary issues and prolonging decisions on necessary studies and
procedures.
FERC could significantly reduce license amendment and licensing
delays by expediting adoption of settlement agreements between
applicants, tribes, state and federal resource agencies and NGOs into
license terms and conditions. For example, FERC has delayed acceptance
of the Condit Hydro Project Settlement Agreement for twenty
months.5 FERC should establish firm timelines in reviewing,
conducting applicable environmental analyses, and approving consensus
settlement agreements to avoid delays in license modification and/or
licensing proceedings.
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\5\ After years of negotiation, a comprehensive settlement
agreement between the applicant, PacifiCorp, the Yakama Nation, CRITFC
and several federal and state resource agencies and environmental
groups was submitted to FERC for approval in October, 1999. In May
2001, FERC held a public meeting to discuss the settlement agreement,
but still had not accepted the settlement agreement, nor had FERC begun
environmental review on the agreement. The status of the agreement
remains uncertain within the FERC and has left the applicant and
intervenors guessing as to what action FERC will take. In the meantime,
salmon restoration for an entire river basin remains on hold.
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Finally, federal energy policy has taken a back seat to the desire
of market driven forces. As mentioned, the market place does not deal
well with environmental externalities. Our current west coast energy
problems are due in large part to misguided energy policies. The
federal government must develop long-term solutions that steer us away
from environmental degradation and unilateral dependence on river
generated power. We need full development of conservation measures and
renewable energy sources. Energy policy must be comprehensive and
forward looking, not rooted in dependence on hydroelectric power that
has caused degradation to our public resources at our expense and that
of future generations.
conclusion
In conclusion, I ask that you work closely with the tribes to
insure their treaty rights are protected in this and all processes
where FERC has jurisdiction. There is an existing statutory framework
for hydroelectric dam relicensing that is sound, and workable. Wherever
shortcomings may exist in the current process, solutions should be
crafted administratively and with substantial public input. The federal
government must protect the treaty tribes and public resources of our
waterways. To do anything less would gravely dishonor the promises that
the United States Government made with the tribes over 150 years ago.
Further degradation is unacceptable and will be vigorously opposed by
the treaty tribes.
______
Prepared Statement of Hon. Ann Veneman, Secretary, U.S. Department of
Agriculture
Mr. Chairman and Members of the Subcommittee: Thank you for the
opportunity to comment on hydropower and the hydropower licensing
process.
As stated in the May 2001, National Energy Policy: Report of the
National Energy Policy Development Group, ``Hydropower has significant
environmental benefits. It is a form of low-cost electricity generation
that produces no emissions, and it will continue to be an important
source of U.S. energy for the future. Given the potential impacts on
fish and wildlife, however, it is important to efficiently and
effectively integrate national interests in both natural resource
preservation and environmental protection with energy needs''.
The Department of Agriculture (USDA) and the Forest Service (FS)
recognize the increasing national demand for energy and are committed
to assisting in the development of solutions to increase energy
production while protecting national forest resources. We have made the
licensing of hydropower projects on National Forest System (NFS) lands
a very high priority.
Of the approximately 200 federally licensed projects due for
relicensing in the next ten years, more than half are partially or
wholly within national forests, while most of the remainder lie in
watersheds that contain national forests. For projects on national
forests, the Forest Service must consider conditions in hydropower
licenses ``necessary for the adequate protection and utilization of--
the national forest (Section 4(e) Federal Power Act (FPA)), and Wild
and Scenic rivers (Section 7, FPA). In addition, all federal agencies
have a trust responsibility to Indian tribes. If tribal lands or
resources are affected by hydropower projects, license conditions may
also be required.
We recognize that hydroelectric energy production is a valid use of
NFS lands. Through careful coordination with Indian tribes, states, and
other affected parties, hydroelectric facilities can be operated to
mitigate potential adverse impacts upon water quality, fisheries, and
wildlife resources while meeting important public needs and
obligations. Also in many cases, hydroelectric development enhances
recreational opportunities such as fishing, boating, and whitewater
rafting.
Since hydropower licenses are for terms of 30 to 50 years, it is
important to consider necessary and appropriate conditions at the time
of licensing to insure that appropriate resource management measures
are included in the license. The Forest Service is very active in these
licensings, working with the licensees, Indian tribes, federal and
state resource agencies, the Federal Energy Regulatory Commission
(FERC), and other users of NFS lands in a collaborative and productive
manner.
We have created national and regional Hydropower Assistance Teams
that facilitate FS involvement with licensees, Indian tribes, national
forest stakeholders, and other agencies. The Forest Service is
determined to effectively participate in both alternative and
traditional licensings.
In addition, the USDA and the FS, along with other federal agencies
are taking an active role in a number of ongoing national processes
that are aimed at improving hydropower licensing, industry
relationships, protecting, and enhancing our natural resources.
National processes include the Interagency Task Force and its Federal
Advisory Committee, as well as the hydropower-industry sponsored
Electric Power Research Institute's National Review Group. We have met
with various members of the hydropower industry and attended industry
conferences around the country. During this year's review of our
regional hydropower programs, the FS invited licensees and other
stakeholders to participate and comment on the Forest Service's
performance in hydropower licensing.
In the interest of good communication and improved hydropower
licensing, the FS ensures at least three opportunities to comment on
its license terms and conditions before such conditions are finalized.
The first opportunity is provided through the FERC licensing process
when parties to the FERC licensing can comment upon the Forest Service
preliminary conditions in response to the license application. The
second opportunity for comments to FERC is upon draft conditions in
response to FERC's NEPA process. The third opportunity for comment is
offered to the general public in the established Forest Service NEPA
process.
We believe that early planning and innovative approaches will
insure that the hydroelectric licensing process will provide both
energy and appropriate resource management on our national forests.
______
Prepared Statement of William T. Hogarth, Acting Assistant
Administrator for Fisheries, Office of Protected Resources, National
Marine Fisheries Service, U.S. Department of Commerce
Mr. Chairman and Members of the Subcommittee, thank you for
inviting me to submit testimony for the record on hydro licensing as it
is related to fishery management. I am William T. Hogarth, Acting
Assistant Administrator for Fisheries in the National Oceanic and
Atmospheric Administration/Department of Commerce.
I would like to thank the Subcommittee for the opportunity to
address NMFS's role in the hydroelectric licensing process. Hydropower
is a clean, domestic, and renewable source of electricity. The
Administration seeks to increase electricity generation from hydropower
plants. NMFS is committed to accomplishing these gains in an
environmentally sound manner.
impacts of hydropower on fisheries
Hydroelectric dam construction and operation can have significant
impacts on anadromous fish species, including Pacific and Atlantic
salmon, shortnose sturgeon, and American shad. Changes in habitat, fish
passage, water quality, and downstream flows are the biggest direct
effects.
Fortunately, hydroelectric dam impacts can often be significantly
reduced through operational and structural modifications. Upstream and
downstream fish passage can be improved with fish passage facilities
such as fish ladders, fish screens, and trap and transport operations.
Temperature impacts can be reduced through releasing cool water when it
is needed, and habitat and migratory rates can be improved with
modified stream flows.
nmfs role in hydropower relicensing
Several statutory mandates provide the Department of Commerce (DOC)
with authority to protect anadromous fish affected by Federal Energy
Regulatory Commission (FERC) licensed hydroelectric projects. In DOC,
these responsibilities are delegated to NMFS:
Federal Power Act
Section 18 (16 USC 811)--The DOC and the Department of the
Interior have authority to require fish passage at
hydroelectric projects.
Section 10(j)(16 USC 803(j))--NMFS, Fish and Wildlife Service
(FWS), and state resource agencies can provide recommendations
to protect, mitigate damages to, and enhance fish and wildlife,
including related spawning grounds and habitat.
Section 10(a)(16 USC 803(a))--Resource agencies can provide
recommendations for ensuring that a project is best adapted to
comprehensive plans for developmental and non-developmental
resources.
Small Hydropower and Conduit Exemptions 16 USC 823(a) and 16
USC 2705--NMFS, FWS, and state agencies can provide conditions
to prevent loss of or damages to fish and wildlife.
Indian trust responsibilities, as outlined in various laws.
Endangered Species Act (ESA)
Under Section 7(a)(2) of the ESA (16 USC 1536 (a)(2)), if their
action may affect listed species, federal agencies are required to
consult with FWS and/or NMFS, as appropriate, to ensure that any
federal action is not likely to jeopardize the continued existence of
any threatened or endangered species, or adversely modify critical
habitat designated for those species.
Magnuson-Stevens Fishery Conservation and Management Act
Federal action agencies must consult with NMFS if their actions may
adversely affect essential fish habitat; NMFS will provide EFH
conservation recommendations.
Fish and Wildlife Coordination Act
Federal action agencies must consult with NMFS and FWS if their
action modifies a water body; NMFS and FWS provide recommendations to
prevent adverse impacts on fish and wildlife.
National Environmental Policy Act
NMFS, other resource agencies, and other stakeholders may provide
comments on FERC Environmental Assessments and Environmental Impact
Statements prepared for hydroelectric project licensing decisions.
administrative reforms
NMFS has been working with FERC and the other federal resource
agencies to streamline and improve the hydroelectric facility licensing
process. These efforts include participating in the Interagency Task
Force to Improve Hydropower Licensing (ITF), developing a proposed
Interagency Policy on Section 18 Fishway Prescriptions, and
participating in the National Review Group of the Electrical Power
Research Institute.
interagency task force (itf)
In March 1998, NMFS, other resource agencies, and FERC established
the ITF in order to adminstratively reform the licensing process. The
ITF efforts culminated in the development of seven reports containing
recommendations to improve and streamline agency licensing practices.
These reports can be viewed at http://www.doi.gov/hydro. The reports
address such issues as: facilitating and streamlining noticing
procedures; coordinating the NEPA review process; improving the process
by which studies are identified and conducted; preparing trackable and
enforceable license conditions pursuant to Section 401 of the Clean
Water Act; and coordinating and streamlining FERC licensing with the
Endangered Species Act Section 7 consultation process.
The ITF implemented a two-phased outreach strategy through
interagency meetings in several locations across the country in order
to ensure integration of the ITF work products into agency licensing
practices nationwide. Phase I focused on making agency regional
directors and administrators aware of our commitments. Phase II
involved meetings throughout the country with regional and field level
staff, and was completed in May, 2001.
interagency policy on section 18 fishway prescriptions
On December 22, 2000, the Departments of the Interior and Commerce
published for comment a proposed Fishway policy that provides a
definition of fishways and agency guidance on developing fishway
prescriptions. The proposed policy is currently undergoing revision
based on comments received during the public comment period.
may, 2001 national energy policy, and executive orders 13211 and 13212
The new National Energy Policy provides recommendations to the
White House and Congress and addresses numerous issues that relate to
NMFS's trust resources, including hydropower licensing. Specifically,
the policy states that ``the President encourages the Federal Energy
Regulatory Commission and directs federal resource agencies to make the
licensing process more clear and efficient, while preserving
environmental goals.'' Three specific recommendations were included:
(1) support administrative and legislative reforms; (2) direct federal
resource agencies to reach interagency agreement on conflicting
mandatory license conditions before they are submitted to FERC; and (3)
encourage FERC to adopt appropriate deadlines for its own actions. NMFS
agrees that the process can be improved, and we have been working to
address all of these issues in the administrative reform efforts
described above.
On May 18, 2001, President Bush signed two Executive Orders that
implement recommendations from the National Energy Policy. Executive
Order 13211 requires federal agencies to evaluate if a new regulation
will adversely impact the current energy supply, distribution, or use.
It also requires agencies to include reasonable alternatives to the
regulation if the regulation will adversely impact the current energy
situation.
Executive Order 13212 requires all executive departments and
agencies to take appropriate actions to expedite projects that will
increase the production, transmission, or conservation of energy, to
the extent consistent with applicable law. Actions should be taken to
expedite energy-related projects while maintaining safety, public
health, and environmental protections. An Energy Task Force with a DOC
representative has been established to monitor and assist the agencies
in implementing this Executive Order. The process is just getting
underway, but NMFS is committed to working closely with the Energy Task
Force to implement its objectives. NMFS is prioritizing available staff
resources to the extent possible in order to improve interagency
coordination in critical geographic areas.
For example, NMFS contacted the California Energy Commission (CEC)
in order to explore ways to address the Governor of California's
Executive Order D-26-01, which directed the California Energy
Commission (CEC) to expedite the permitting of peaking and renewable
powerplants. Through this developing partnership, NMFS and the CEC are
crafting strategies for expediting environmental review. Measures
discussed to date include: 1) packaging or bundling proposed projects
to streamline cumulative impacts analysis and to reduce redundancy and
paper work; 2) mitigation strategies for bundled projects, such as
mitigation banking, conservation easements, and off-site habitat
restoration; 3) improved information sharing procedures; 4) increased
staffing, including assigning a single NMFS contact or liaison who
would be available to the applicants, governmental agencies, NGOs, and
the public; 5) making resources available to hire consultants to
conduct specialized analyses such as computer modeling; and 6) measures
to ensure an open and public process without impacting critical
timelines. To accomplish these tasks NMFS has assembled an
interdisciplinary task team and has jointly scheduled regular meetings
with the CEC that include the U.S. Fish and Wildlife Service, U.S.
Bureau of Land Management, Environmental Protection Agency, Western
Area Power Administration, and the U.S. Forest Service. Public
workshops have also been held.
Currently, the NMFS Southwest Region is consulting with the CEC
concerning the Potrero, Huntington Beach, Morro Bay, and El Secundo
thermal power plants. NMFS is also pursuing ongoing hydropower
relicensing activities on the Upper American River, Oroville Project,
Stanislaus multi-project collaborative, the Klamath Relicensing, the
Big Creek Complex multi-project relicensing and the Poe relicensing.
In the Pacific Northwest, the NMFS Northwest Regional Administrator
is working closely with her counterparts at the Bonneville Power
Administration, Bureau of Reclamation, and U.S. Army Corps of Engineers
to ensure that the Federal Columbia River Power System is operated in a
manner that maximizes available energy while protecting threatened and
endangered salmon species. The NMFS Northwest Region is also working
closely with state and local energy suppliers, making real-time
decisions that maximize energy production while minimizing
environmental impacts for non-federal hydroelectric projects throughout
the region during this year's historic drought.
conclusion
NMFS is working to ensure that anadromous fish resources receive
necessary protections, including those provided by the FPA. At the same
time we are working to ensure a reliable energy supply and to improve
administrative procedures.
The FPA requires FERC to make licensing decisions in the public
interest, and to balance the Nation's need for hydropower with the need
to protect important natural resources. We will continue our
collaborative efforts with FERC, the hydropower industry, environmental
organizations, tribes, and other stakeholders to ensure that the
hydropower licensing process provides a sound basis for the balancing
of societal priorities, including the need for healthy habitats and
productive fisheries. We will also continue our efforts to make
administrative changes that will make the process work more smoothly.
Thank you for the opportunity to provide testimony on these
important issues. For the record, we are also providing a copy of our
February 1, 2001 letter to FERC commenting on their report submitted to
Congress pursuant to Section 603 of the Energy Act of 2000 (Public Law
No. 106-469).
______
Federal Energy Regulatory Commission
August 3, 2001
The Honorable Joe Barton
Chairman
Subcommittee on Energy and Air Quality
Committee on Energy and Commerce
U.S. House of Representatives
Washington, D.C. 20515
Dear Chairman Barton: I was pleased to have had the opportunity to
testify at the House Energy and Air Quality Subcommittee's June 27,
2001 hearing on hydroelectric relicensing and nuclear energy.
Attached you will find my written responses to the questions that
were asked by you, and Representatives John Dingell and John Shadegg at
the Subcommittee hearing, to be included in the hearing record. Should
you need additional information, please do not hesitate to contact me.
Sincerely,
Curt L. Hebert, Jr.
Chairman
Enclosure
cc: The Honorable W.J. ``Billy'' Tauzin
The Honorable John D. Dingell
The Honorable Rick Boucher
The Honorable John B. Shadegg
responses to questions from chairman barton, and representatives
dingell and shadegg
Question. Encourage the interagency working group to prepare its
conclusions for review and incorporation into our bill.
Answer #1: Chairman Barton requested that I and Federal Energy
Regulatory Commission (FERC) staff encourage the Interagency Hydropower
Committee (IHC) to provide language for consideration in the Energy and
Commerce Committee's energy legislation, the Energy Advancement and
Conservation Act of 2001.
As explained in my testimony, the IHC was recently established to
follow up on the work of the Interagency Task Force (ITF). The IHC did
hold its first meeting on July 24, 2001, after the Subcommittee's June
27 hearing. Currently, members of the IHC include senior officials from
FERC, the Departments of the Interior, Commerce, and Agriculture. The
purpose of the IHC is twofold. First, the IHC would monitor the
recommendations of its predecessor, the ITF, on improving the
hydroelectric licensing process. Second, the IHC would address issues
associated with hydroelectric licensing that remain or that may arise
later.
The July 24 IHC meeting was strictly organizational in nature. At
the meeting, representatives agreed to develop a charter, appoint co-
chairs, and create ad hoc committees to scope out the issues for future
discussions. Consequently, the IHC has no recommendations to include in
the energy legislation, since passed by the House of Representatives at
this time. However, we would be willing to provide the Committee with
suggested legislative improvements, if requested, in the future.
Question. Have any licenses been surrendered since FERC began
relicensing projects in the class of 1993? How many?
Answer #2: No projects have been surrendered for which the FERC has
issued new licenses since we began processing the applications for the
Class of 1993 group of relicenses.
Question. How many times has the Commission during its activities
taken the necessary steps to reopen an existing license to assure that
fish and wildlife protection activities were taken by the licensee
during the pendency of the one year extension?
Answer #3: Reopener articles reserve to the Commission the
authority to require licensees to, among other things, develop
recreational facilities, protect and conserve fish and wildlife
resources, and prevent water quality degradation. Almost 50 reopener
proceedings have been initiated over the past decade. These requests
include petitions to require the construction of recreational
facilities, modify reservoir levels, provide fish passage facilities,
release minium flow for protection of aquatic resources, and to address
threatened and endangered species issues. Requests to reopen a license
typically originate from state and Federal fish and wildlife agencies
or private citizen groups.
An annual license provides the Commission with no less and no more
authority to impose new conditions than did the prior license, inasmuch
as the annual license is required, by section 15(a) of the FPA, to have
the same terms as the prior license. It therefore follows that, with
respect to addressing changing environmental conditions and emerging
environmental concerns, an annual license holds no special
significance. The very purpose of a reservation of authority, sometimes
referred to as a ``reopener clause,'' is to enable the Commission to
deal--at any time during the license term--with environmental concerns
that may have been unforeseen when the project was originally licensed.
Attached is a table that identifies the individual reopener
proceedings initiated by the Commission over the past decade. For the
most part, these requests have not been processed by the Commission
when a relicensing proceeding is pending and annual licenses were being
issued. One reason for this is that resource agencies and citizen
groups are engaged in the licensing process and look to this process as
a means of addressing their particular environmental concern. Of the
requests received to date, all of the reopener requests have been
received during the term of the license in advance of the license
expiration date with the exception of the Platte River and the Clyde
River projects.
In the former case, the Commission was asked to include in the
annual licenses for the Kingsley Dam Project (P-1417) and North Platte/
Keystone Diversion Project (P-1835) conditions to protect the
endangered whooping crane and other listed species. The Commission
concluded that without interim measures, project operation would
continue to adversely affect Platte River habitat and impede the
recovery of the listed species. Since only the North Platte/Keystone
Project had reopener authority, the Commission required the licensee
for North Platte/Keystone Project to release instream flows and to
develop nesting habitat to protect listed species and asked the
licensee for the Kingsley Dam Project to voluntarily implement the
measures.
While the Commission was processing the relicensing of the Clyde
River Project (P-2306) and after two years of operating under annual
licenses, the Vermont Agency for Natural Resources (VANR), requested
that the Commission reopen the license to provide for the removal of
the Newport No. 11 Dam along with stabilization of the adjacent
embankment. The Newport No. 11 Dam had been breached by high river
flows causing the adjacent embankment to collapse. Ultimately, the
licensee agreed to remove the dam and stabilize the embankment to
improve downstream water quality and provide upstream passage for
landlocked Atlantic salmon.
In the majority of the cases processed to date, licensees generally
agree to modify the project structures or operation to accommodate the
request in full or in part and request an amendment of a license to
accomplish the requested change. In three different cases, licensees
have opposed, at least initially, implementation of environmental
protection measures. In these cases, a formal proceeding was initiated.
In two cases, the Commission required the licensees for the Comtu Falls
(P-7888) and New York State Dam (P-7481) Projects to operate downstream
fish passage facilities to ensure the protection of anadromous fish. In
another case involving the Lower Mokelumne Project (P-2916), after a
formal proceeding was initiated and Commission staff had prepared a
Final Environmental Impact Statement, the licensee reached a settlement
agreement with the resources agencies and requested a license amendment
that included salmon protection measures.
Reopener Proceedings Initiated by the Commission over the last Decade
----------------------------------------------------------------------------------------------------------------
LICENSE
PROJECT NO. PROJECT NAME ISSUE STATUS/ COMPLETION EXPIRATION
DATE DATE
----------------------------------------------------------------------------------------------------------------
P-309............................. PINEY............... MINIMUM FLOWS....... 12/5/96............. 10/12/02
P-935............................. MERWIN.............. ENDANGERED SPECIES.. PENDING............. 4/30/06
P-1403............................ NARROWS............. ENDANGERED SPECIES.. PENDING............. 1/31/23
P-1494............................ PENSACOLA HYDROPOWER WATER QUALITY....... 7/8/96.............. 3/31/22
PROJECT.
P-1835............................ N. PLATTE/KEYSTONE ENDANGERED SPECIES.. 2/14/90*............ 6/15/87
DIV. (PLATTE RIVER).
P-1971............................ HELLS CANYON........ ENDANGERED SPECIES.. PENDING............. 7/31/05
P-2071............................ YALE................ ENDANGERED SPECIES.. PENDING............. 4/30/01
P-2111............................ SWIFT NO. 1......... ENDANGERED SPECIES.. PENDING............. 4/30/06
P-2114............................ PRIEST RAPIDS....... ENDANGERED SPECIES.. 11/9/98............. 10/31/05
P-2150............................ BAKER RIVER......... ENDANGERED SPECIES.. PENDING............. 4/30/06
P-2157............................ HENRY M. JACKSON.... ENDANGERED SPECIES.. PENDING............. 5/31/11
P-2179............................ NEW EXCHEQUER....... MINIMUM FLOW........ S3/5/01............. 2/28/14
P-2183............................ MARKHAM FERRY....... RECREATIONAL 7/21/98............. 5/31/05
FACILITY.
P-2197............................ YADKIN.............. RESERVOIR ELEVATIONS 7/9/96.............. 4/30/08
P-2213............................ SWIFT NO. 2......... ENDANGERED SPECIES.. PENDING............. 4/30/06
P-2242............................ CARMEN SMITH........ ENDANGERED SPECIES.. PENDING............. 11/30/08
P-2246............................ YUBA RIVER.......... ENDANGERED SPECIES.. PENDING............. 4/30/16
P-2266............................ YUBA BEAR RIVER..... ENDANGERED SPECIES.. PENDING............. 4/30/13
P-2299............................ NEW DON PEDRO FLOOD CONTROL....... 12/23/99............ 4/30/16
PROJECT.
P-2304............................ BLUE RIDGE.......... ENDANGERED SPECIES.. 5/5/98.............. 12/31/12
P-2305............................ TOLEDO BEND......... RESERVOIR LEVELS.... PENDING............. 9/30/13
P-2306............................ CLYDE RIVER PROJECT. FISH PASSAGE........ 7/26/96............. 12/31/93
P-2496............................ LEABURG/WALTERVILLE. ENDANGERED SPECIES.. PENDING............. 2/28/37
P-2543............................ MILLTOWN............ ENDANGERED SPECIES.. PENDING............. 12/31/06
P-2580............................ TIPPY............... WETLANDS............ 5/1/98.............. 6/30/34
P-2597............................ FALLS VILLAGE....... MINIMUM FLOWS....... 7/19/96............. 8/31/01
P-2597............................ FALLS VILLAGE....... MINIMUM FLOWS....... 5/9/97.............. 8/31/01
P-2599............................ HODENPYL............ WETLANDS............ 5/1/98.............. 6/30/34
P-2631............................ WORONOCO............ FISH PASSAGE........ 1/12/98............. 9/1/01
P-2833............................ COWLITZ FALLS....... ENDANGERED SPECIES.. PENDING............. 5/31/36
P-2894............................ BLACK BROOK......... MINIMUM FLOWS....... 7/9/96.............. 12/31/20
P-2916............................ LOWER MOKELUMNE..... MINIMUM FLOW/WATER 11/27/98............ 3/31/31
QUALITY.
P-3021............................ ALLEGHENY RIVER L&D RESERVOIR ELEVATION. 8/19/99............. 2/28/35
NOS. 8&9.
P-3109............................ BLUE RIVER.......... ENDANGERED SPECIES.. PENDING............. 10/31/39
P-3131............................ BROCKWAYS MILLS FISH PASSAGE........ 9/26/96............. 12/31/32
HYDRO PROJECT.
P-3494............................ ALLEGHENY RIVER L & RESERVOIR LEVELS.... PENDING............. 6/30/34
D NO. 6.
P-4718............................ COCHECO FALLS....... FISH PASSAGE........ PENDING............. 12/31/22
P-6066............................ DERBY DAM........... FISH PASSAGE........ PENDING............. 2/28/26
P-6780............................ DEADWOOD CREEK...... ENDANGERED SPECIES.. PENDING............. 8/31/38
P-7481............................ NEW YORK STATE DAM.. FISH PASSAGE........ 7/13/01............. 9/30/37
P-7888............................ COMPTU FALLS........ FISH PASSAGE........ 6/1/95.............. 6/30/26
P-9195............................ STANLEY CANYON...... MINIMUM FLOWS....... 9/15/97............. 8/31/36
P-9648............................ FELLOWS DAM......... FISH PASSAGE........ 6/4/98.............. 6/30/26
P-9649............................ LOVEJOY TOOL COMPANY FISH PASSAGE........ 6/4/98.............. 6/30/26
P-9650............................ GILMAN DAM.......... FISH PASSAGE........ 6/4/98.............. 6/30/26
P-10898........................... SWEETWATER PROJECT.. FISH PASSAGE........ 11/4/97............. 2/28/31
----------------------------------------------------------------------------------------------------------------
*License was amended after the license expired to prevent irreversible environmental damage to the whooping
crane and other listed endangered species.
Question. How many dams has the FERC licensed new since 1978 on a
year-to-year basis?
Answer #4: In the context of the discussion on the issuance of
annual licenses, we are providing the number of licensed projects with
expiration dates from January 1, 1978, to present for which the FERC
issued annual licenses so that they could continue operating until the
Commission took final action on their application for new licenses
(relicenses). The Commission issued 251 annual licenses during this
period.
------------------------------------------------------------------------
Number
Issued
------------------------------------------------------------------------
1978........................................................... 3
1979........................................................... 3
1980........................................................... 5
1981........................................................... 1
1982........................................................... 1
1983........................................................... 2
1984........................................................... 8
1985........................................................... 2
1986........................................................... 6
1987........................................................... 0
1988........................................................... 10
1989........................................................... 4
1990........................................................... 1
1991........................................................... 5
1992........................................................... 2
1993........................................................... 12
1994........................................................... 123
1995........................................................... 3
1996........................................................... 7
1997........................................................... 5
1998........................................................... 8
1999........................................................... 6
2000........................................................... 21
2001........................................................... 13
------------------------------------------------------------------------
Question. How many new dams, large dams, have been licensed by FERC
since 1990? Also, between 1980 to 1990?
Answer #5: No projects have been licensed that would have
authorized construction of 32.8 foot high or higher (see 18 CFR Part
12) dams since 1990. Further, there are eight licenses that involved
construction of high dams licensed between 1980 and 1986 and none
between 1987 and 1990.
Question. Clarify the water quality certification process and the
burden on the states in light of the questioning that occurred before.
Answer #6: Congressman Shadegg asked if I needed to clarify the
water quality certification process in light of Congressman Dingell's
earlier questioning. Congressman Dingell had inquired about the
Commission's difficulty in implementing the Clean Water Act, given that
hydropower projects do not contribute to river pollution, with the
exception of perhaps affecting water temperature. The issue is the
broad scope of the state's authority to require measures beyond those
needed to protect the physical characteristics of water quality.
As discussed in my testimony, two court decisions have
significantly changed the nature of water quality certificate
conditions. In PUD No. 1 of Jefferson County v. Washington Department
of Ecology, 511 U.S. 700 (1994) ( Jefferson County), the Supreme Court
held that a State acting under the CWA could regulate not only water
quality, such as the physical and chemical composition of the water,
but water quantity as well, i.e., the amount of water released by a
project, for State-designated water uses (fishing, boating, etc.). In
American Rivers [I] v. FERC, 129 F.3d 99 (2nd Cir. 1997), the Court
held that the Commission lacked authority to determine whether
conditions submitted by State agencies pursuant to Section 401 of the
Clean Water Act were beyond the scope of that section.
The Commission must include those conditions in the license and
they cannot be evaluated as part of this Commission's comprehensive
development responsibilities. States do not have an obligation to take
into account the benefits of hydropower or other competing interests.
As a result of these court decisions, many of the recommendations
go beyond physical and chemical characteristics of the water (e.g.,
water temperature, dissolved oxygen, clarity) and deal with designated
uses (fishing, swimming, fish passage, recreation, instream flow
releases). The number of recommendations dealing with designated uses
has more than doubled from 1992 to 1999. This has led to increased
costs. Most troublesome are the conditions controlling minimum instream
flows, which have a direct impact on a project's power generation and
economic viability. In a sample of 24 projects, the median additional
cost related to controlling instream flows beyond those recommended by
staff was $27,000, excluding one project with an additional cost of
$290,000.
Aside from cost, delay is also a concern. Untimely issuance of
state water quality certifications is a significant factor in most
delayed license proceedings and is the most common cause of long-
standing delays. Of 129 currently pending licensing cases, 52 (40
percent) are currently held up by certification issues.