Appeals court stops short of suspending nuclear waste fee

A federal appeals court panel on June 1 stopped short of suspending the nuclear waste disposal fee that power plants must pay to the Department of Energy (DOE) but did order Secretary of Energy Steven Chu to do a federally-mandated review of such fees within six months.

The decision from the U.S. Court of Appeals for the D.C. Circuit involves litigation brought by the National Association of Utility Regulatory Commissioners (NARUC) over DOE’s failure to do a review of the fee paid by nuclear generators after the Obama Administration’s dropped plans for the Yucca Mountain spent fuel site in Nevada.

The annual fees amount to roughly $750m per year under the 1982 Nuclear Waste Policy Act. The act made the federal government responsible for disposing of spent nuclear fuel and high-level waste from both civilian power generators and defense activities. DOE was originally supposed to begin disposal in 1998.

“Today’s decision by the court is an important victory for nuclear-power consumers,” NARUC President David Wright of South Carolina said in a statement. “The court made clear that the Energy Department has not justified continued payments into the Nuclear Waste Fund. Although the court did not suspend these payments, the Energy Department is on notice that they must do a thorough and complete assessment within six months as to whether the fees—charged to nuclear utilities and passed through to their consumers—are necessary.”

To date, nuclear power customers have nothing to show for their multi-billion-dollar investment but “a hole in the Nevada desert,” Wright went on to say.

By the end of 2012, the federal Nuclear Waste Fund balance is expected to exceed $28bn, although DOE still has not met its obligation to take control of spent nuclear fuel from U.S. power plants, the appeals court panel said.

The Secretary of Energy is supposed to regularly review the fund and decide if any adjustment is warranted for the nuclear waste fee paid by the nuclear power generators. DOE has never proposed a change to the fee.

“The [appeals court] panel will retain jurisdiction over this case so that any further review will be expedited,” the three-judge panel said in its 13-page opinion. The panel, in the decision, appeared unimpressed with the administration’s handling of the proposed Yucca Mountain nuclear waste repository in Nevada, or administration directions given to the much-publicized Blue Ribbon Commission on America’s Nuclear Future.

Shortly after taking office, the Obama Administration announced that Yucca Mountain “was not a viable option.” It directed the Blue Ribbon Commission not to consider any particular site – whether Yucca Mountain or elsewhere. “They estimated that selection and evaluation of a site would take another 15-to-20 years (the cliché’ ‘kick the can down the road’ seems inadequate),” the panel said.

After the administration abandoned Yucca Mountain in 2009, DOE apparently did not issue a fee evaluation or determination that fiscal year, but the department did announce that all the fees being paid by civilian nuclear generators and owners were still considered “essential” to meet the government’s waste disposal obligations.

“The Secretary’s inaction gave rise to an initial suit by petitioners dismissed as moot only when, after briefs were filed, the Secretary issued the 2010 determination, the subject of this suit,” the appeals court said. As a result of lengthy litigation before this appeals court and the Federal Circuit the government has paid about $1bn in retrospective damages to cover some of the costs of storage since 1998, on claims of $6.4bn, the appeals court panel noted.

Petitioners argue that the Secretary violated his statutory obligation to annually “evaluate whether collection of the fee will provide sufficient revenues to offset…costs” because he neither conducted a cost evaluation nor accounted for the disposal program’s uncertain schedule. NARUC also objects that the DOE’s alternative approach, using Yucca Mountain to estimate future costs, was arbitrary and capricious.

The government responded that the Act’s only requirement is that the Secretary review the fee annually; he has complete discretion as to the manner in which he identifies and evaluates costs.

The appeals court, in an opinion drafted by Judge Laurence Silberman, left no doubt that it didn’t buy this argument. “There is certainly some discretion given to the Secretary in the manner in which he calculates costs, but the government’s argument suggests the Secretary has no affirmative obligation to conduct the sort of inquiry and analysis done in the past. He may, like an ostrich, put his head in the sand; so long as he is unaware of any information that questions the existing fee structure, he is not obliged to propose an adjustment. That interpretation is farfetched, almost absurd.”

“The Secretary has not said why Yucca Mountain was rejected, nor has he indicated what characteristics of Yucca Mountain might make it typical of any site,” the D.C. Circuit said. Chu has failed to provide a “thorough analysis” of the waste fee, the panel concluded.

“His 2010 determination falls far below the Department’s own previous standard. Of course, it may well be that, despite the public statements, the Department and the Administration really believe that it will eventually turn back to Yucca Mountain, but if that is so, it must be acknowledged,” the court said.

The case was argued in April and the opinion was issued June 1. No. 11-1066. NARUC v. U.S. Department of Energy (consolidated with 11-1068).

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.