As the U.S. electric industry is contemplating building new nuclear power plants for the first time in decades, the industry continues to be faced with uncertainty regarding the ultimate long-term disposal solution for the nation’s spent nuclear fuel (SNF).

Since 1982, when Congress passed the Nuclear Waste Policy Act, nuclear power plant owners and operators have been funding the development and construction of a national SNF storage facility that may never materialize—that funding amounting to $30 billion to date.

Under the terms of the 1982 legislation, nuclear utilities entered into mandatory contracts with the Department of Energy (DOE) under which the utilities pay the federal government one mill (one tenth of a cent) for every kilowatt hour of nuclear-generated electricity sold to their customers. In return, the government assumed responsibility for the development, construction, and maintenance of a facility that would be ready to accept the nation’s SNF beginning no later than January 31, 1998.

More than a quarter century after those contracts were signed, and more than a decade after the 1998 deadline has passed, nuclear utilities have provided the DOE over $30 billion – and counting – in fees and interest. Meanwhile, development of the proposed SNF permanent storage site at Yucca Mountain in Nevada is stalled amid political debate as to whether or not long-term SNF storage at Yucca Mountain is indeed the right course of action for handling our nation’s SNF.

To date, not one spent fuel assembly has been transferred to the DOE control for permanent disposal under the contracts. And the additional costs that nuclear utilities must bear to store SNF on their own plant sites are mounting for plant owners and ratepayers, who all still await the DOE to begin accepting the utilities’ SNF.

With the SNF contracts in place, nuclear utilities did not anticipate having to add storage capacity for SNF generated after 1998. Instead, they are collectively incurring, and will continue to incur, billions of dollars in added costs related to the installation and expansion of highly-technical, on-site storage technologies—primarily dry fuel storage facilities and casks that house the highly-radioactive waste.

Now, these added costs are the central focus of a legal battle that has been officially underway since the DOE first missed the 1998 deadline.

When litigation first began, the DOE initially argued that it was only obligated to perform if the repository in question (then Yucca Mountain) was actually in existence and ready to accept SNF. The U.S. Court of Appeals for the District of Columbia Circuit rejected that argument, finding that the DOE’s duty to perform was not subject to such condition. The DOE then turned to the contention that its performance delay was unavoidable – pointing to legal, political, and scientific obstacles that the agency claimed kept it from adhering to the Nuclear Waste Policy Act’s readiness date.

That argument was rejected early on, as well. But in 2007, a Court of Federal Claims trial judge challenged that ruling, and thus, the “unavoidable delay” issue is currently awaiting an en banc decision at the U.S. Court of Appeals for the Federal Circuit.

Nonetheless, nuclear utilities that have obtained trial decisions in their partial breach cases against the DOE are being awarded the vast majority of their claimed costs incurred for increasing and maintaining on-site SNF storage capacity. And furthermore, the utilities are permitted to periodically return to the Court of Federal Claims to recover continuing damages associated with ongoing on-site SNF storage.

The DOE reported in July of this year that seventeen cases have had judgments totaling $790 million (many of which are subject to post-trial motions, appeals or remands). Of course, these costs awarded to commercial nuclear utilities only covers on-site storage costs incurred to date – as do a number of settlement agreements that have been reached. The DOE reported that close to $600 million in claims have been paid to date under these settlements. However, the SNF still remains on the sites of the various nuclear plants that produce it—with no real expectation of being accepted by the DOE and shipped off-site any time soon.

And while the “unavoidable delay” issue remains unresolved, nuclear utilities and ratepayers will have to continue to wait for final rulings related to their claims for on-site SNF storage costs, as well as incur the very significant financing costs required to build and maintain the necessary incremental SNF storage capacity.

In July 2009, the Department of Justice reported to Congress that it had already spent over $150 million defending the DOE against the industry’s SNF claims to address the utilities’ additional on-site storage costs. And the longer it takes to develop a comprehensive, permanent solution to the question of what to do with America’s SNF, the higher those litigation costs are going to be. v But even with all of the dollars that are being incurred, that comprehensive solution seems unlikely to emerge anytime soon. A February 2009 Office of Management and Budget memo – entitled “A New Era of Responsibility; Renewing America’s Promise” – states that “The Yucca Mountain program will be scaled back to those costs necessary to answer inquiries from the Nuclear Regulatory Commission, while the Administration devises a new strategy toward nuclear waste disposal.”

Furthering speculation that the Yucca Mountain project has been all but abandoned, Energy Secretary Steven Chu testified before Congress on March 5, 2009 that the proposed Yucca Mountain SNF storage facility is “not an option.”

A Congressional Budget Office representative testified to Congress in July 2009 that the “Administration has announced that it intends to terminate the Yucca Mountain project and explore other alternatives for disposing of nuclear waste.” More recently, an October 2009 draft DOE budget document stated, regarding the Yucca Mountain project, “All license defense activities will be terminated in December 2009.”

Whether the ultimate solution is long-term DOE storage and disposal or continued on-site storage at the 104 active nuclear power plants in the United States and eventual reprocessing (or recycling) of SNF (a potential solution that has re-emerged even though the nuclear proliferation concerns of the early 1980s continue to be debated), the need for swift action on the part of the federal government is crucial to resolving the problem cost-effectively.

At the very least, President Obama, Congress, and Secretary Chu could work to establish a framework for settling existing lawsuits and moving past the adversarial posture that currently exists between the DOE and industry leaders on the SNF disposal issue. Building on this framework, industry decision makers and government regulators could begin to work together to resolve the nuclear waste issue. Certainly resolving the SNF disposal issue will overcome a major hurdle in building new nuclear power plants in the U.S. — a goal the administration seems to favor as part of the nation’s future energy mix.

Kimberly Reome is a vice president of The Kenrich Group, and Krista Haley is a principal of The Kenrich Group, both in the Chicago office. Kim and Krista provide litigation consulting services focused in financial, accounting, economic and damages issues in areas including the electric power, construction and government contract industries.

Reprinted with permission from Ecopolitology