On September 4, 2020, the Internal Revenue Service (IRS) and the US Department of the Treasury (Treasury) published in the Federal Register final regulations under section 468A of the Internal Revenue Code (the Code) that address three issues raised by the nuclear electric industry concerning qualified nuclear decommissioning funds (“qualified funds”). These final regulations conclude a many years-long regulation project to clarify the rules relating to decommissioning costs and self-dealing rules. McDermott submitted multiple sets of comments throughout the process, and Marty Pugh provided vital testimony during an IRS hearing on the proposed regulations.
D.C. Circuit Orders DOE to Stop Collecting Nuclear Waste Fee
The D.C. Circuit issued an opinion this week in National Association of Regulatory Utility Commissioners v. United States Department of Energy ordering the Secretary of Energy to submit a proposal to Congress to change the nuclear waste fee to zero. Tuesday’s decision was the most recent in a string of court cases following the Obama Administration’s decision in 2009 to defund the Yucca Mountain repository.
Nuclear utilities have been paying statutorily mandated fees into the Nuclear Waste Fund since 1983. The fee is 1 mill per kilowatt-hour of electricity generated, and the Department of Energy collects approximately $750 million annually. In January, the fund was valued at $28.2 billion.
Under the Nuclear Waste Policy Act, the Secretary is obligated to review the adequacy of the nuclear waste fee annually. Prior to 2010, the Secretary’s adequacy determinations were based on the expected costs and projected revenues of the Yucca Mountain repository. However, in its 2010 review, after the decision to abandon Yucca Mountain, the Secretary did not identify any expected costs or revenues, but concluded that the uncertainty regarding future costs did not provide a basis for adjusting the fee.
On June 1, 2012, the D.C. Circuit held that the Secretary’s 2010 Fee Adequacy Determination was arbitrary and capricious and “legally inadequate.” The Secretary responded in a new determination in January, finding that continuation of the fee could result in a final fund balance as low as negative $2 trillion or as high as $4.9 trillion. The Secretary concluded that its assessment did not demonstrate that either insufficient or excess revenues are being collected.
In this week’s decision, the D.C. Circuit again rejected the Secretary’s adequacy determination, calling the Secretary’s determination of the range of possible final fund balances “absolutely useless” and the position of the Secretary “disingenuous.” The court also noted several conflicts between a strategy report issued by DOE and relied on by the Secretary, and current statutory law. Instead of remanding again, the court ordered the Secretary to submit a proposal to Congress to change the fee to zero, concluding that it was unfair to force the utilities to pay fees for hypothetical options, the costs of which might already be covered. The court noted that fee payments could resume when the Secretary is able to issue a legally adequate fee determination.
In response to an earlier D.C. Circuit decision, the Nuclear Regulatory Commission (NRC) directed agency staff on Monday to resume work on DOE’s construction authorization application for Yucca Mountain with the $11 million of remaining funds appropriated for the review. That announcement responds to a decision of the D.C. Circuit in August that ordered the NRC to continue its review of the Yucca Mountain application following DOE’s attempt to withdraw it in 2010.
Jessica Bayles, a law clerk in the Firm’s Washington, D.C., office, also contributed to this article.
Nuclear Regulator Announces Temporary Suspension of Licensing Decisions
by Ari Peskoe
On the heels of a recent decision by the U.S. Court of Appeals for the D.C. Circuit, the U.S. Nuclear Regulatory Commission (NRC) issued an order last week suspending final decisions in reactor licensing cases. The recent court ruling struck down elements of the NRC’s Waste Confidence Decision (WCD), which, according to the NRC, “undergirds certain agency licensing decisions.” The suspension affects issuances of both new construction licenses and reactor license renewals that are dependent on the WCD or temporary storage rules. The NRC did not rule out taking action with respect to waste confidence on a case-by-case basis.
In New York v. NRC, the D.C. Circuit held that it “cannot defer to the Commission’s conclusions regarding temporary storage because the Commission did not conduct a sufficient analysis of the environmental risks.” Petitioners challenged a 2010 update to the WCD, which has five findings about nuclear waste storage upon which the NRC based its rules on temporary storage. The NRC amended the WCD to state that a permanent repository for nuclear waste would be available “when necessary,” instead of “in the first quarter of the twenty-first century,” as the earlier draft stated. The NRC also extended the time horizon for safe storage of waste at reactor sites from 30 to 60 years beyond the licensed life of the plant. With regard to both amendments, the D.C. Circuit found that the NRC had violated the National Environmental Policy Act (NEPA). The Court determined that the WCD constituted a “major federal action” under NEPA and therefore the NRC must prepare an Environmental Impact Statement or an Environmental Assessment that makes a Finding of No Significant Impact.
This decision by the NRC comes less than one month after Dr. Allison Macfarlane was sworn in as the NRC’s Chairman. Macfarlane holds a Ph.D. in geology from the Massachusetts Institute of Technology, served on the Blue Ribbon Commission, and was most recently an associate professor of environmental science and policy. As an academic, Macfarlane was critical of the process that selected Yucca Mountain, a site that was long-considered to host a geologic repository until President Obama cancelled the project in 2010. For example, in 2003 Macfarlane wrote that “politics probably played as significant a role as science in the selection of Yucca Mountain” and argued that scientific studies and outcomes were oriented around the policy goal of approving Yucca Mountain.
Earlier this year, the NRC issued licenses for new reactors at the Vogtle site in Georgia, the first licenses issued for new construction in a generation, and also issued licenses for two new reactors in South Carolina. The NRC has 16 applications for new licenses pending and an additional fourteen license renewals awaiting decisions.
Has the Nuclear Renaissance Finally Begun?
by Ari Peskoe
The Nuclear Regulatory Commission (NRC) voted 4-1 on February 9 to issue Combined Operating Licenses (COL) for two new nuclear units at the Southern Company’s Vogtle site in Georgia. The two new reactors are the first to be approved since 1978. Their approval is the culmination of years of effort by the Federal government to reinvigorate the country’s nuclear industry. Environmental groups have promised to file a lawsuit challenging the permits.
A COL authorizes the licensee to construct and operate a nuclear power plant at a specific site. Seventeen COL applications are currently pending before the NRC, although four applicants have asked the NRC to suspend further consideration at this time. Most of the applicant projects are based in states whose laws and regulations guarantee recovery of the reactor’s multi-billion dollar construction cost in the sponsoring utility’s rate-base.
The NRC received the Vogtle application in March 2008, and the review process included assessments of environmental impacts, operational programs, and site safety. Like the new Vogtle reactors, nearly all of the proposed reactors in the U.S. are to be located at sites that already have at least one nuclear facility. Applicants hope that colocating reactors at existing sites will speed the approval processes.
The renewed interest in building nuclear reactors is partially due to the Department of Energy’s Nuclear Power 2010 program and the Energy Policy Act of 2005 (EPAct). Under the 2010 program, DOE provided funding for companies to submit COL applications. EPAct created a loan guarantee program, authorized a tax credit for nuclear electricity, funded research and development, and extended the Price-Anderson Act, which indemnifies the industry against damage claims arising from nuclear incidents. The owners of the new unit are benefitting from an $8.3 billion loan guarantee and may earn up to $250 million annually in federal tax credits if the reactors generate power by 2021. In addition, as the first licensee using an advanced reactor design, Vogtle can receive up to $500 million under EPAct to cover the cost of litigation or regulatory delays.
Environmental groups have already announced their intention to challenge the licenses. The Southern Alliance for Clean Energy (SACE) and eight other groups will claim that the Vogtle applicants must prepare a new environmental impact statement (EIS) that accounts for the lessons learned from the 2011 nuclear accident at Fukushima. The lawsuit will argue that the new EIS should include how the cooling systems and spent fuel storage pools will be designed to protect against floods, earthquakes and prolonged losses of power, as well as updated emergency plans for accidents affecting multiple reactors at the site. SACE is also involved in a Freedom of Information Act proceeding to obtain documents relating to the Vogtle loan guarantee.