The Nuclear Energy Institute (NEI), on behalf of the nuclear energy industry, appreciates the opportunity to provide this testimony for the record regarding the Uranium Enrichment Decontamination and Decommissioning Fund and on Senate Bill S. 2203, a bill to reauthorize the Uranium Enrichment Decontamination and Decommissioning Fund.

NEI is the organization responsible for establishing unified nuclear industry policy on matters affecting the nuclear energy industry, including the regulatory aspects of generic operational and technical issues. NEI’s members include all utilities licensed to operate commercial nuclear power plants in the United States, nuclear plants designers, major architect/engineering firms, fuel fabrication facilities, materials licensees, and other organizations and individuals involved in the nuclear energy industry. NEI’s members are the commercial entities that have paid into the D&D fund since 1993.

Nuclear energy currently supplies twenty percent of our nation’s electricity supply, and is America’s largest source of clean-air, carbon-free electricity, producing no greenhouse gases or other air pollutants. Nuclear energy accounts for 71 percent of the nation’s clean-air electricity generation. In 2006, U.S. nuclear plants prevented the discharge of 681 million metric tons of carbon dioxide into the atmosphere. This is nearly as much carbon dioxide as is released from all U.S. passenger cars. The industry is committed to maintaining the benefits of nuclear energy to benefit the United States and the world.

Because of the growing need for additional baseload electricity in the United States, nuclear generating companies are currently planning to submit license applications for potentially 31 new plants that could be built in the 2015-2020 time period. Also, one new centrifuge enrichment facility is being built in New Mexico, and at least three other advanced enrichment technology facilities are being considered for deployment in the United States. The deployment of new advanced technology enrichment facilities in the United States will both enhance our energy security and increase the likelihood that the existing gaseous diffusion plants (GDP) will be retired and decommissioned.

The industry is committed to continuing to be a major contributor to meeting both the nation’s electricity demand and its environmental goals. In this regard, the industry fully supports the need to assure that the decontamination and decommissioning of the GDP’s is accomplished in a safe, environmentally responsible and economically efficient manner. The communities that host these facilities should expect nothing less from the federal government. The industry position is totally consistent with the responsibility each operator of a commercially licensed power plant or fuels facility has for providing adequate assurance of the protection of the health and safety of the public surrounding these facilities during operation and for safely and responsibly decommissioning the commercial facilities once they stop operating. In this regard, nuclear energy is unique as a source of electricity generation in that it internalizes all of its costs in the price of electricity. Nuclear reactor facilities and fuel facilities must provide dedicated decontamination and decommissioning funds as part of the terms of licensing. Nuclear generation pays for its regulation through licensing fees, and pays for waste disposal through the fee to the U.S. Department of Energy. No other energy source provides this explicit, cradle-to-grave full cost accounting.

From the first days of commercial nuclear generation through the mid 1980s, the U.S government was the sole source of enrichment services available to domestic utilities that operated nuclear power plants. Enrichment services were sold to utilities by the U.S. government under long-term, cost recovery contracts. The enrichment was provided by the three federally built, owned and operated gaseous diffusion plants (Oak Ridge, TN; Paducah, KY; Portsmouth, OH), the same plants that were created to and did provide uranium enrichment for the Governments post-WWII defense programs. These facilities were contaminated as a result of their use for defense programs about 15 years prior to the provision of any services to the commercial sector. As such, the D&D burden would have been the same for the government if the facilities were never used to service the commercial sector. Furthermore, the contracts signed by electric utilities with the federal government for the enrichment services provided by the GDP’s were required by law to include all costs, which should have included any perceived additional D&D cost. Given the above facts, the industry would have expected it has no future liability for the D&D of the GDP’s.

When the Congress decided to privatize the enrichment enterprise in the 1990s, the privatized company was not held responsible for decontamination and decommissioning needed as a result of activities that took place before privatization. That would remain the responsibility of the U.S. government. The government then decided that the utilities that had purchased enrichment services from DOE or its predecessors should be required to contribute to the clean-up, even though they should not have had any residual liability for the D&D.

The Energy Policy Act of 1992 created the Uranium Enrichment Decontamination & Decommissioning Fund (D&D Fund). The D&D Fund, managed by DOE, supports clean-up at the three government-owned gaseous diffusion plants. The D&D Fund also supports a reimbursement program for clean-up of uranium and thorium processing sites that sold their products to the US government. The utilities maintained that the prices paid for enrichment services prior to privatization of the government’s enrichment services had taken the cost of D&D into account, so the assessment in the EPACT was not justified. Further, the enrichment facilities were created for national security purposes and would have required D&D regardless of whether any enrichment was sold for civilian use. In the interest of moving forward with the restructuring of the enrichment enterprise, the commercial industry, working through the American Nuclear Energy Council and the Edison Electric Institute, ultimately agreed to a compromise in the EPACT that resulted in a special assessment of $2.25 billion based on pre-1992 purchases of U.S. government enrichment services by domestic utilities. The DOE had in fact estimated that an appropriate share for the utilities was $1.6 billion. The industry agreed to the higher amount in return for a cap on the total amount to be paid and a provision that the charges could be included in the nuclear fuel charges.

Beginning in Fiscal Year 1993, domestic utilities were assessed up to $150 million per year, adjusted for inflation, for 15 years based on their historic purchases of uranium enrichment services from the federal government, prior to the privatization of the enrichment enterprise. The EPACT language specifically provided for termination of the assessment against utilities after the earlier of 1) 15 years after October 24, 1992 or 2) the collection of $2,250,000,000 adjusted for inflation. Currently, based on an industry estimate, the fund has accumulated over $2.5 billion from the industry and the 15 year time period has expired on October 24, 2007. Therefore, the utilities have completed their contribution to the Fund, as specified by the law. The remainder of the annual deposit was to come from federal government appropriations. However, based on the best information available, the government still has not provided its full share.

Turning now specifically to S.2203, the “Uranium Enrichment Decontamination and Decommissioning Fund Reauthorization Act of 2007.” The industry is fully supportive of Congress taking appropriate action to assure that adequate funding is available for the safe and environmentally responsible D&D of the government owned GDP’s. In this regard, the industry recommends that S.2203 be modified as follows:

1. Extend the collection of D&D fund contributions from the federal government to require it to immediately contribute all money that is in arrears for the period 1992-2007.
2. Extend the collection of D&D fund contributions from the federal government prospectively to ensure adequate funding of the D&D fund.
3. Prohibit the use of D&D fund contributions for use in addressing cleanup requirements created by ongoing operations of the GDP’s.
4. Eliminate the reinstatement of the D&D fee on nuclear generators, since they should have no residual liability or obligation for the D&D.
5. Instruct the DOE to conduct a study on the most effective way to sell future U.S. government surplus highly enriched uranium (HEU) into the commercial market in the future, particularly given the end of the U.S.-Russian HEU Agreement in 2013.
6. Require the DOE to sell its existing supply of surplus nuclear fuel into the commercial market in a responsible way.
7. Instruct the DOE to enter into contracts for the re-enrichment of depleted uranium tails and to sell the resulting uranium into the commercial market in a responsible way.
8. Grant DOE receipt authority for the sale of surplus nuclear fuel into the commercial market and use the receipts for: (1) payment to re-enrich depleted uranium tails; (2) contributions to the GDP-D&D fund, if required to make up deficits; and (3) if available for use on DOE priority programs.

With respect to the sale of uranium that could be generated by re-enrichment of the substantial quantities of depleted uranium now stored at DOE sites, this approach is most effective if implemented in the near term rather than being studied for a year. Currently, the nuclear energy industry is expanding throughout the world and several applications for new nuclear plants have been submitted to the U.S. Nuclear Regulatory Commission. This resurgence of interest in nuclear power combined with the draw down on nuclear fuel inventory has resulted in considerable tightening of the nuclear fuel market. This has been most notably in the uranium market. Pursuing this activity in the near-term would both address the issue of disposing of the existing tails, by turning them into an asset, and would also allow the government to sell them into a market that is seeing its highest prices in decades.

Another significant consideration should be to ensure the effective and responsible management of the D&D efforts. Money in the D&D fund should be designated for D&D efforts only, and should not be available for diversion to unrelated projects. The D&D of the gaseous diffusion plants will be ongoing for several decades and the Fund has the potential for considerable interest earnings if it is appropriately set aside. Currently, our understanding is, the fund is being accessed for remediation of events which occur during the existing operation. The rational is that the spills would need to be remediated during the decommissioning phase. Events which occur doing current operations should be remediated out of current operating funds. Additionally, areas which are remediated through the use of the funds should then be excluded from any additional radioactive material involvement. If this is not the case the area will be recontaminated and require additional draw down of the fund to remediate again. Also, we encourage the DOE to pursue commercial proposals for the D&D that provide innovative and risk-sharing approaches, from imminently qualified organizations.

Finally, we commend this Committee for its active interest in pursuing effective D&D of the GDP’s and encourage the Committee to provide robust oversight to the overall situation, including the use of the D&D funds, the disposition of surplus government inventories and the actual activities to D&D the GDP’s.

NEI appreciates the opportunity to address the subcommittee and would be happy to answer any questions you may have.