Public Policy

Introduction
Thank you Chairman Alexander, Ranking Member Graham, and members of the committee and staff for affording me the opportunity to testify before you today. I am truly honored to be here.

My name is Jim Bernhard and I am the CEO, Chairman of the Board, and founder of The Shaw Group. With The Shaw Group corporate headquarters, and indeed my home of many years, located in Baton Rouge, I would particularly like to thank the Senator from the great state of Louisiana, Ms. Landrieu.

The topic for today’s hearing – Nuclear Power Generation — is one that is particularly important to me, the Shaw Group, and indeed the nation as a whole. Providing for the nation’s growing energy demands, safely, securely, at reasonable cost and with minimal impact to the environment is a challenging goal. Luckily, the nation’s 103 operating nuclear power plants are up to the task and performing at record levels. Just last year nuclear power provided over 20% of America’s electric supply or an estimated 762 billion kilowatt-hours of electricity. It did so with exceptional levels of safety and security and with near-record high capacity factors approaching 90%. The Shaw Group and its Stone & Webster subsidiary have played a leading role in helping the industry obtain those impressive numbers.

I founded The Shaw Group in 1987 in Baton Rouge as a small pipe fabricator dedicated to supporting the power and process industries. Through the years, The Shaw Group has grown, internally and through strategic acquisitions, to become the nation’s number one supplier of fabricated piping to the power, process and petrochemical industries. Shaw fabricates specialty alloy and standard carbon and stainless steel piping, fittings and pipe supports used throughout modern nuclear and fossil power plants. Our nine domestic shops and four international fabrication shops currently have the capability to produce an aggregate of 42,000 pipe spools (9,000 tons of product) per month using the latest manufacturing and pipe bending technology.

In 2000, The Shaw Group purchased the assets of Stone & Webster. As you hopefully already know, Stone & Webster is a recognized leader in the nuclear industry with over 115 years of experience as a premier Architect-Engineer to the power industry. Stone & Webster and Westinghouse were responsible for building the nation’s first commercial nuclear power station at Shippingport, Pennsylvania and Stone & Webster engineers were actively engaged in the Manhattan Project and the building of Oak Ridge National Laboratory. Since those early days, Stone & Webster has been involved in the engineering design or construction of over 17 nuclear power stations. We have provided services, in one form or another, to over 95% of the operating plants in America.

Following the Stone & Webster acquisition, Shaw acquired the former “IT Group” in 2002. This acquisition brought to Shaw consulting, construction and technology leaders in the environmental and government services arena. The IT Group was merged with other Shaw assets to form our Environmental and Infrastructure (E&I) subsidiary. Although you might not be aware of it, Shaw E&I has worked right here in the Senate office buildings, providing the anthrax cleanup services in the Hart Building next door as well as the extensive cleanup at the local Brentwood postal facility. Shaw is active throughout the government sector - supporting infrastructure at the nation’s military bases, homeland security efforts, various nuclear and non-nuclear cleanup activities such as FUSRAP and Chemical Demilitarization, and is working closely with the national laboratories and Corps of Engineers. We are actively supporting the rebuilding of Iraq and have recently opened an office in Baghdad.

Currently, the integrated Shaw Group employs over 15,000 employees worldwide. Our revenue in 2003 was over $3.3 billion, the majority of which, 85%, came from US operations. Power generation represented roughly 50% of our revenue for 2003 and comprises 30% of our future workload. Nuclear power-related activities were $1.1 billion of last year’s revenue. Needless to say, nuclear is a big part of The Shaw Group. I take great pride in Shaw being the world’s only vertically-integrated supplier of services to the power industry. Our services can take a plant from cradle to grave with permitting, engineering and design, fabrication of piping and steel, construction, commissioning, operation and maintenance and eventually decommissioning. The Shaw Group has achieved unprecedented growth throughout our history due in large part to technical innovation and an entrepreneurial culture.

Shaw remains committed to the nuclear industry. One of the challenges facing the nuclear industry today is maintaining a highly-skilled nuclear workforce. Through our varied involvement in nuclear projects, Shaw has been able to maintain, and indeed grow, a highly experienced cadre of engineers, designers and craft labor who support the industry. We are one of only a few who maintain the American Society of Mechanical Engineering (ASME) Section III N stamp qualifications and we are members of both the Nuclear Energy Institute (NEI) and the Institute of Nuclear Power Operations (INPO).

The nuclear industry today is more robust than it has been in many years. Part of that is the result of the exceptional high performance and safety levels attained by the operating nuclear fleet. As I mentioned, plant capacity factors have risen to nearly 90%, with refueling and maintenance outages being completed in record times. Nuclear-generated electricity is the low cost leader at an average cost of generation of only 1.7 cents/kilowatt-hour.

Credit for the recent nuclear revitalization is to be shared among many parties. The utilities have made great strides at improving operations and maintaining their plants. NEI has also done much over recent years to support its member utilities and deserves credit. Furthermore, the NRC is to be acknowledged for streamlining its review process while maintaining the firm oversight role that is the heart of its mission.

The Shaw Group is also part of the nuclear success story. As the nation’s largest provider of craft labor to support maintenance and modification efforts at the plants – peaking at over 5000 employees – we have striven for and achieved great success in helping our clients meet their performance and safety goals.

Having provided that short background on The Shaw Group, I would like to take the opportunity today to touch upon three key aspects. First, I will address Shaw’s role in the restart of TVA’s Browns Ferry Unit 1 which I believe is of interest to the Chairman and committee. Second, I would like to mention some of the technological advances that have taken place since the nation’s last nuclear plant was built and the role of Architect-Engineers like Shaw in bringing those advances to bear to help revitalize the nuclear industry. Finally, I wish to hit upon other developments in the nuclear arena and some of the challenges, and more importantly, the opportunities that we face as we move forward with a revitalized nuclear power sector.

Restart of Browns Ferry Unit 1 and Supporting the TVA Fleet
Serving over 8.3 million customers in the Southeast, the Tennessee Valley Authority is a long-term and valued client of The Shaw Group. With five operating reactors at three locations providing over 5700 MWe of power, TVA plays a key role in the U.S. nuclear industry. Stone & Webster has provided maintenance and modification services to TVA for the past seven years and will continue in that capacity under a recently renewed contract. Just last week, Shaw had nearly 750 staff supporting TVA maintenance and modifications efforts at their Sequoyah, Watts Bar and Browns Ferry operating plants.

In 2002, TVA made the decision to restart the Browns Ferry Unit 1 boiling water reactor which had been shutdown since March of 1985. The $1.8 billion effort is slated for completion in the spring of 2007. The Shaw Group is providing the construction and construction management services for the restart. We are uniquely suited to the task, having successfully provided similar efforts during the Browns Ferry Unit 3 restart effort that ended in 1995.

Shaw currently has over 1300 staff working on the Browns Ferry 1 restart effort in the field. We expect the maximum number of staff to approach 1700 at the peak of the forecasted work. The majority of staff (80%) is local hire, greatly supporting the economy and small businesses of northern Alabama and Tennessee. Of all subcontracted work awarded by Stone & Webster Construction Inc. in the last quarter of 2003, 71% was awarded to local Tennessee Valley firms, 79% was awarded to small businesses and 49% was awarded to Disadvantaged, Woman Owned, or Veteran-Owned Businesses.

Our scope of work for the project includes for example asbestos abatement, re-tubing the main condenser, support activities to refurbish the main turbine, turbine generator and associated pumps and valves along with extensive control room panel and instrumentation upgrades and modifications Over 35,000 feet of large and small bore pipe is being replaced along with 674,000 feet of electrical cable and 142,000 feet of electrical cable tray and conduit. To date, the restart effort at Browns Ferry Unit 1 is on schedule and within budget, with the asbestos abatement and condenser re-tubing complete, and over a third of the large bore piping already installed.

I fully expect the Browns Ferry Unit 1 restart project to be a success and bring online much-needed additional generation capacity to the growing Southeastern US economy. I should clarify – to a very large extent “emission free” additional generation, since nuclear power plants avoid millions of tons of nitrous and sulfur dioxides and carbon dioxide from being introduced into the atmosphere.

Make no mistake about it, the Browns Ferry Unit 1 restart program is a large effort, and, any project of this magnitude and scope faces risks which are, to a large extent, outside the immediate control of the project team. Labor unrest, material shortages, and extreme commodity price swings, are examples of risks that have the potential for delaying a project. This far into the project, the availability of material and labor has had positive impacts on both schedule and cost. And, it is our mission to bring about the restart safely, with high quality and reliability, on time and on budget. The BF-1 restart team fully expects that these goals will be met.

One aspect of the Browns Ferry 1 restart is the attention to safety of those working on the project. Shaw prides itself on its safety program and it is an integral part of every employee’s job through our ShawSAFE program. The Shaw Group incident and lost-day rates are some of the best in our industry, far below industry averages, and we have won numerous local, state and nationwide awards for our commitment to safety. We will continue to work closely with TVA, and indeed all of our utility clients, to maintain our excellent safety record.

New Technologies, Industry Developments
TVA’s Watts Bar Unit 1 was the last plant brought into commercial operation in the United States in 1996. Since that date, no new plants have been brought online in the US and no new plants have been ordered since 1979. However, that doesn’t mean that the nuclear engineering and construction industry has stood still. It hasn’t.

The nuclear engineering and construction business continues to incorporate new technology into the way it does business. Standing still in this respect is not an option – otherwise your competitors will overtake you. And let me assure you that the nuclear services industry is a highly competitive and dynamic marketplace.

A large part of any nuclear plant is “piping”. I mentioned earlier the manufacturing and bending technologies that Shaw utilizes. Our induction bending machines have the ability to bend a 66 inch diameter pipe with as much as a 5 inch wall thickness. The importance of induction or cold bending is the fact that this reduces welding in the field thereby reducing both cost and schedule on large projects. Advances in automatic or “orbital” welding have led to greater quality of critical piping welds along with reduced time and cost. Bar-coding of piping and other equipment allow for ease of tracking during manufacturing and construction. Advances in engineering and construction technology not only serve to reduce the cost and duration of a project but further improve the project’s overall quality and reliability.

Progress in the computer sector has likewise led to significant advances in engineering and design. Today, Stone & Webster is involved in the design of two 1350 MWe Advanced Boiling Water Reactors (ABWR) on the island of Taiwan. Before a single piece of concrete, steel or piping is put in place, our engineers built the turbine hall in three-dimensional virtual reality using sophisticated Computer Aided Design software. This ensures that everything fits together properly without interferences, further reducing construction efforts in the field. The software generates the design drawings from which the plant piping is manufactured and ultimately from which the entire plant is constructed. Furthermore, today’s designs are “intelligent” in that critical information from specifications, calculations and drawings are maintained and shared across databases affording us far greater access to information for tracking and control over the duration of the project. Today there is far greater coordination between the engineer, manufacturer, constructor and ultimately operator of power plants. The computer tools of today provide the information needed to better manage large projects. Needless to say, communications technologies have greatly improved in recent years and they are being adeptly put to use.

Another significant advance is that of “modularization.” Assembling the various parts of a large nuclear plant is a complex technical and logistical challenge. Any time that portions of the plant can be pre-assembled in a controlled environment and then shipped to the construction site for installation, cost and schedule savings are achieved. Shaw has extensive experience in modularization, with a dedicated 60 acre Gulf-Coast facility used for both power and petrochemical projects.

Shaw and the TVA Browns Ferry 1 restart team are bringing numerous technical advances to bear. Gamma scanning equipment has been used to locate high radiation sources so that we can eliminate them and lower overall radiation exposure. To the greatest extent possible we modularize our equipment purchases. The project utilizes special machining equipment to cut and prepare piping spools in the field along with state-of-the-art automatic welding equipment for critical piping welds. Ground penetrating radar equipment is used to locate rebar in the concrete walls and slabs prior to installing concrete anchors. Laser templating has been used to record as constructed locations and laser photogrammetry will be employed for critical piping needs. Three dimensional computer modeling and graphics are employed to display the design configuration of components within the containment drywell and further serves to assist in planning the work sequences necessary to implement plant modifications.

As we all know, the cost overruns and schedule delays of some plants built in the 1970’s and 1980’s are entirely unacceptable in today’s marketplace as they were then. The future of nuclear power in the U.S. demands that any new project be completed on schedule and under acceptable capital risk. Current expectations in the industry are that a large grassroots nuclear plant could be completed in less than 48 months and for overnight capital costs of under $1500 per installed kilowatt. All of the technological advances and innovations achieved over the past years, and an experienced and trained nuclear workforce, in both engineering and construction, must be brought to bear to meet those schedule and cost goals.

There is no single entity that can bring about the success of a new nuclear plant. It will require a dedicated team of utility, reactor vendor (NSSS), equipment manufacturers, and architect-engineer firms all working together with a common goal.

Current Nuclear Activities and the Role of the Architect-Engineer
Progress on the nuclear front is widespread; more power is being generated from our existing stations, new reactor designs are being developed, the co-generation of hydrogen from nuclear power is gaining momentum, new nuclear plants are being completed internationally, and the regulatory framework for new nuclear construction domestically is in place. Importantly, enrollments at the nation’s nuclear engineering programs are beginning to grow. A revitalized industry is poised to meet the nation’s energy and security demands.

Approved nuclear power uprates, for example, have already added 2035 MWe to the grid since 2000. Another 240 MWe are under review and over 1286 MWe in uprates are planned for implementation by 2007. That is the equivalent of adding three new large nuclear stations. Stone & Webster is at the forefront of nuclear power uprates with involvement at 38 units covering 24 different stations. Power uprates, reduced refueling outages and better performance, combined with restart of shuttered units such as Browns Ferry 1, are resulting in ever more megawatts being delivered from the already-licensed existing plants.

Current efforts are now underway to develop the next generation of reactor design or Generation IV plant. Such a design will address the challenging goals of being highly economical, with efficiency levels comparable to that of combined cycle natural gas plants, minimum waste generation, walk-away safety features and proliferation resistant fuel.

Closely coupled to the Generation-IV effort is the growing technology related to hydrogen production. Fuel cells are rapidly gaining greater acceptance, both for stationary as well as transportation applications. New developments are taking place rapidly on this front. At their heart, fuel cells require hydrogen, either in pure form or from reformed hydrocarbon stocks. The infrastructure changes implicit with greater hydrogen use are no small challenge. New nuclear designs, particularly the emerging high temperature gas cooled reactor designs, hold great potential for being capable of not only producing electricity but also being co-located with a hydrogen production facility.

Recently, the Idaho National Laboratory has been designated as the Department of Energy’s epicenter for expanded nuclear energy activities. The Idaho lab has its roots in applying technology to meet the needs of society and, in particular, its energy needs. We are keenly interested in the success of the new INL, and indeed all of our national labs, since it is there and in the universities where tomorrow’s technology is developed. We are all very excited about the DOE’s plans to build a demonstration Generation-IV reactor at INL and to couple that with hydrogen generation. Just as the race to the moon in the 1960’s resulted in a myriad of offshoot technologies that we rely on today, it is this type of grand vision that will become the basis for our future energy infrastructure.

Also in the government sector, the design of the Mixed Oxide Fuel Fabrication facility at the Savannah River Site continues with the goal of turning the nation’s stockpile of surplus plutonium to useable fuel and thus electricity. Shaw continues to be a leader in this area through the Duke-Cogema-Stone & Webster consortium.

Progress is not only limited to the United States. New construction of nuclear plants continues in other parts of the world and many nations obtain an even greater percentage of their energy supply from nuclear than we do. Finland has recently decided to build a new nuclear station – its fifth. New construction in China, South Korea, and Taiwan continues. In Taiwan, Shaw is actively engaged in completing the design of the balance of plant for the two Lungmen ABWR plants. We also are providing consulting engineering services for the four new units, Shin Kori 1&2 and Shin Wolsong 1&2, in South Korea.

On the regulatory front, steps have been taken to reduce the capital and licensing risk aspects of new nuclear construction. The new “certified designs,” either those already approved by the NRC or those currently under review, will greatly reduce licensing uncertainty. The combined construction/operating license approach under 10CFR52 will also help and the DOE is requesting cost-share proposals on that front. As you likely know, three nuclear utilities have already applied for Early Site Permits in the hopes of banking a site for possible future nuclear expansion. All of these activities should serve to lessen the risk and enhance the potential for necessary new construction in the U.S.

The Congress has done much in past years to support Research and Development at our laboratories and universities through the yearly appropriations bills. This is vitally important to ensure the future of the nuclear workforce. These modest expenditures have re-invigorated the research community in recent years. As a company who already employs thousands with nuclear backgrounds, we will need this new supply of recruits to work hand-in-hand with our experienced staff and to become the next generation of nuclear professionals.

Closing Remarks
The role of the nuclear Architect-Engineer and Engineer-Procure-Construct contractor is a demanding one. While the researchers and scientists develop the concepts, it is the AE’s task to bring those concepts to physical reality. The detailed and exacting design of the plant and its subsequent equipment manufacture and construction is our role and it is a vital one – absolutely necessary to bring about the success of any nuclear facility project. We are excited about developments on the Generation IV designs and we look to the success of DOE’s Nuclear Power 2010 initiative. Shaw remains ready to support new nuclear development and construction and is uniquely qualified to do so.

It is important to realize the importance of nuclear power to our ever-growing energy supply. Again, over 20% of our electricity comes from this fuel. The restart of Browns Ferry Unit 1, nuclear power uprates and upgrades at existing plants, and the not-too-distant prospect of new construction all point towards greater energy independence and energy security for the nation. With growing concerns over climate change, nuclear power is one source of large baseload power that does not introduce greenhouse gases and other atmospheric pollutants into the atmosphere during operations

Although the road ahead looks bright, challenges and obstacles remain. It is critical that an energy bill with the right mix of incentives to promote new nuclear construction is soon passed. The nation needs a comprehensive energy plan – one that clearly addresses the importance and needs of the nuclear power sector. Members of this committee have been instrumental in the development and stewardship of the energy bill as it currently stands and I thank and commend you on your work so far. I urge your continued efforts in that respect.

Mr. Chairman, I would like to thank you and the committee for the opportunity to speak here today, and would be happy to answer any questions you may have.