With Senate Majority Leader Harry Reid (D-Nev.) staunchly opposing the Yucca Mountain nuclear waste repository project, and funding for Yucca being dramatically cut, is there hope for this project? What impact does the future of Yucca have on the expansion of nuclear energy in the United States? During today's OnPoint, James Curtiss, chair of the energy practice at Winston & Strawn and a former commissioner of the Nuclear Regulatory Commission, previews the year ahead for nuclear and Yucca Mountain. He discusses the challenges facing the nuclear industry in convincing Wall Street to invest in new projects and explains why international support for nuclear is rapidly increasing.
Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is James Curtiss, chair of the energy practice at Winston & Strawn and a former commissioner of the Nuclear Regulatory Commission. Jim, thanks for coming on the show.
Jim Curtiss: Thank you.
Monica Trauzzi: Jim, Senator Harry Reid has vowed to kill the Yucca Mountain nuclear waste repository project. Earlier this month DOE had to fire about 63 employees at Yucca Mountain. All things considered, what are the prospects for this project in the year ahead?
Jim Curtiss: Well, it's clearly an important project for the industry as a whole. We have spent 25 years focused on the science of Yucca Mountain. In fact, this month is the 25th anniversary of President Reagan signing the Nuclear Waste Policy Act, so we've been at this for a long time. Fully funded by utilities and the spent nuclear fuel is continuing to accumulate at plants around the country. And I think the consensus in the scientific community, in the public policy community, is to find a permanent location for the deep and safe disposal of this material. And that's what Yucca Mountain is all about and it's important to this industry, both today and in the future. At the same time, everyone recognizes that there has been significant controversy around Yucca Mountain, including the views of Senator Reid, which presents a very real challenge. What I expect in this coming year, based upon the funding level that's been authorized, is that at some point during 2008 the Department of Energy will move forward with an application to the NRC for the licensing of this project, which several years ago was found suitable by the Congress, not withstanding the opposition of some members of Congress including most of the Nevada delegation. And that will be an important step as the NRC then determines whether this is a safe location for disposal of spent nuclear fuel from our commercial nuclear plants.
Monica Trauzzi: If the Yucca Mountain project doesn't survive, what does that mean for nuclear in general?
Jim Curtiss: Well, I think nuclear clearly is focused on moving forward with Yucca Mountain, but the Nuclear Regulatory Commission has also said that in the interim it's safe to store used fuel on site at our 103 operating nuclear plants for an extended period of time. So this isn't a safety issue. At the same time, as we look at the future of this industry, which is very exciting at this point, there are 18 companies that have proposed to go through the permitting process for 32 new nuclear plants as we look at responding to the challenges of increased energy demand and global warming. And as those companies are looking at the possibility of building new nuclear I think they'd like to have a long-term solution to the waste disposal issue. And Yucca Mountain is where we've invested a lot of time and attention and the NRC will now determine whether the site is acceptable from a safety standpoint. But those plants are moving forward understanding that the government has committed to a solution to this problem and those companies expect it and are paid for it.
Monica Trauzzi: But there still remains a lot of opposition, not only to Yucca Mountain, but the expansion of nuclear in the United States. And obviously we're heading into a year where we're going to see presidential elections and there are several candidates who do not support both Yucca Mountain and the expansion of nuclear, some who do. How closely are you watching this race to see who gets into the White House in 2009 and what that's going to mean for the nuclear industry?
Jim Curtiss: Well, it's clear I've been involved in this industry for almost 30 years and in my experience this industry, which is controversial in some respects, has been controversial in years divisible by four. And as you note, this is a presidential election year and statements are made and positions taken. I think most of the candidates in the race, on both the Republican and Democratic side, recognize that nuclear needs to be a part of our solution going forward and particularly as candidates look at the impact of global warming and responding to that. The interest in nuclear is driven by several things, including about 25 years of safe and increasingly reliable operation since Three Mile Island, where the industry has performed from a safety and reliability standpoint very effectively and very efficiently. That in turn, has led to a level of confidence in the American public that in the surveys that have been taken show strong support, particularly in areas around plants that are being proposed, for building new plants. So the public confidence in nuclear is increasing as we see both a safe and reliable history of our 103 operating plants, but also as the Congress and others grapple with the future in a climate change context.
Monica Trauzzi: There still remains a lot of public opposition to this though, because a lot of people remember back to three decades ago and they remember the bad of nuclear. So how do you convince those people who are still opposed to it?
Jim Curtiss: I think there's still going to be a core group of opposition to any construction at all of any energy source. One only need to look off the coast of Massachusetts where the wind farm has been proposed or to look elsewhere in the country at any energy project, coal, nuclear, wind, solar, hydro, all of the energy options are going to be controversial. I do think as you look at nuclear as an option that has to be part of an overall mix of nuclear, clean coal, and renewables, there is a recognition that's starting to emerge with the public generally, members of the environmental community, Patrick Moore, the founder of Greenpeace, who has been very supportive of nuclear. So we see a noticeable move in the direction supporting nuclear as an important way to supply our energy in the future and in a climate change context going forward.
Monica Trauzzi: The story is a bit different internationally though. The IAEA estimates nuclear energy could double within the next 20 years and countries are seemingly flocking towards nuclear. France has gotten a lot of attention for their use of nuclear. Why is there such a disparity between the U.S.'s approach and the international approach?
Jim Curtiss: Well, you look at some countries that have, as you point out, France relies for 80% of their electricity on nuclear, Japan, Finland, a whole range of countries that have relied to a significant extent on nuclear. In a sense, we've had an abundance of resources in this country that have allowed us to look to other alternatives, hydropower, coal, options that countries like Japan simply don't have. Having said that, I think the move in the direction that we're seeing internationally with the plans of China and India and many of the major countries that are going to expand significantly in the nuclear arena is really a significant shift in what we've seen over the years. Other countries that haven't relied on nuclear historically are also looking at the option and, again, I think in the context of global warming and the safe history of this program. The United States has really been at the core of all of that because we pioneered the use of commercial nuclear power. We got away from it for several years with the controversies of the late 70s and early 80s. And fortunately we're coming back to recognize, as many of the companies that are now looking at the permitting process say that nuclear has to be part of their solution.
Monica Trauzzi: But what about the countries that are new to nuclear? How much of a risk do they pose because of the learning curve associated with this form of energy?
Jim Curtiss: Well, it's clearly an important issue. There are countries that are examining the nuclear option that haven't had any history with nuclear. And it's important that from the standpoint of that option, that those countries recognize the challenges associated with nuclear, including having an independent and forceful regulatory process to ensure that the operation and construction of those plants is done safely, what you see in many of the advanced countries, from Japan to France to the United States to Canada, countries that rely on nuclear. So the regulatory framework is an important component. In addition, countries that haven't used nuclear in the past, haven't relied on nuclear and are just starting out, need to be able to rely on designs that are certified around the country for use in other countries. You mentioned the design in France; the EPR design is being pursued by a number of countries around the world. So there are designs that are available for use and those countries are, with the care and attention that they'll require on the regulatory side, I think looking seriously at new nuclear.
Monica Trauzzi: So, let's follow the money trail in the U.S. How hopeful are the financial prospects for the expansion of nuclear, looking towards what's being offered right now for research and development?
Jim Curtiss: Well, I think there are a number of dimensions of that. The financial community, in terms of funding new nuclear, has in recent years understood that plants can be operated safely and efficiently. Thirty years ago I don't think you would have had that kind of view right after Three Mile Island until we saw the improved operation of the plants. But from a financial standpoint, the ability to bring plants online and fund those plants is a key part of this next generation of plants. Of the 18 companies that have announced plans to go through the permitting process for 32 plants none of those companies has yet decided to build a plant. So there's a lot of attention with Wall Street talking with the industry about the importance of some of the things that Congress has done, the establishment of the loan guarantee program in the 2005 Energy Policy Act is an important piece of this. The Department of Energy recently published guidance on how they're going to implement that program that's very positive and has a loan guarantee program that will provide for the risk support that we're going to need as we get back into nuclear construction. The U.S. Congress just in the appropriations process, here before they left town in December, authorized $18.5 billion for loan guarantees for nuclear projects. So there's a lot of support with some key financial issues that will need to be addressed going forward.
Monica Trauzzi: So do you see it as an uphill battle when it comes to Wall Street and encouraging investors to invest in this form of energy?
Jim Curtiss: I wouldn't characterize it as an uphill battle. I think it's a significant challenge, particularly in the environment that we have now. The sub-prime credit challenges that we've seen make it difficult for any major, new construction activity and in fact more generally for any general merger activity, the type that we've seen before the relies on those credit markets. A nuclear plant that's going to cost in the range of $4 billion or $5 billion is not an insignificant investment. The combined market capitalization of the companies that are looking at new nuclear, by way of example the 18 companies, which are large companies within the utility business constellation and Excelon and Entergy and Southern, Duke, those companies, by comparison they're less than one half the market cap of an Exxon Mobil. So they are relatively small companies and to undertake a project that in some cases may be as large as the market cap of those companies in a $4 billion to $5 billion project needs to be appropriately financed and the risks need to be allocated in a way that I think we're seeing a lot of progress on. The financial community is coming around to understand that this is an important option that's available to us and that discussion, I think, this year will lead to some interesting structural arrangements.
Monica Trauzzi: All right. Well, it will be interesting to watch. We'll end it right there. Thanks for coming on the show.
Jim Curtiss: Thank you, Monica.
Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.
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