Monday, April 30, 2007

AEHI sends letters to Idaho green groups

Environmentalists see red over proposed Idaho nuclear power plant

Here's a bright idea. Say you want to build a nuclear power plant. Then decide before you've so much as made a phone call to the NRC to begin the licensing process, send a letter, no send a dozen letters, to every environmental group you can think of who will make it their mission in life to stop your project dead in its tracks.

Think this is the start of a tall tale? Think again. Last week Alternative Energy Holdings Inc. (AEHI) sent letters to a dozen Idaho environmental groups asking them to support a proposed 1,600 Mw nuclear reactor in southwestern Idaho. The Twin Falls Times News reports the reactions couldn't have been more predictable.

The letters went to the region's most prominent environmental groups - including Snake River Alliance, the Idaho Conservation League and the Northern Rockies chapter of the Sierra Club - asking the organizations to support the project. Here's a sample of the reactions . . .
  • "It's hogwash," said Katie Fite, a spokeswoman for Western Watersheds Project, a Hailey-based green group. "I mean, they're incredibly dangerous, and the last thing we need is a nuclear power plant."

  • "These guys (at Alternate Energy) are making irresponsible and forward-thinking statements that should raise some serious concerns," said Jeremy Maxand, executive director of Snake River Alliance. He told the Times-News Idaho has no need for nuclear power because other forms of power production, namely wind and geothermal, have yet to be fully tapped.
With that political meltdown well underway, along comes Martin Johncox. He's a former reporter for the Idaho Statesman and now in the public relations business out of Boise. Johncox has hired on as a spokesman for the company. Despite the fiery opposition generated by AEHI's letters, he said the company will submit applications to Owyhee county and the NRC.

Give AEHI credit they understand the game they are in. Johncox said the NRC license application could cost $78M and the complexities of the project could push the start date for operations to generate electric power to 2025. These are actually realistic estimates.

That's also plenty of time for the seeds planted by AEHI's letters to turn into a forest of opposition to the proposed nuclear power plant. What's next with AEHI? This one is a real head scratcher.

Sunday, April 29, 2007

Nuclear loan guarantees in another fine mess

GAO says the Energy Dept. spent money it didn't have on the program

According to a report by the General Accounting Office (GAO) and testimony by that agency to Congress, the Department of Energy spent money developing loan guarantees for new nuclear and coal power plants that it did not have the authority to spend. GAO says the Energy Dept. violated the law by spending money writing implementing regulations for the loan guarantees under the Energy Policy Act of 2005. Legislation gets implemented in agency regulations. The devil is in the details and the feds need money to get them down on paper.

This is bad news for the loan guarantee program and certainly is another headache for the nuclear energy industry in its dealings with the government. Worse, the Department of Energy has until July 2007 to actually get the implementing regulations out the door. Energy Secretary Samuel Bodman doesn't think the agency is going to make it.

The loan guarantees are a creature of the Energy Act of 2005. According to the Nuclear Energy Institute (NEI), the program has the following elements.

The bill authorizes the energy secretary to provide loan guarantees to support the development of innovative energy technologies “that avoid, reduce or sequester air pollutants or anthropogenic emissions of greenhouse gases.” These technologies include nuclear energy facilities, renewable energy, coal gasification and hydrogen fuel-cell technology. The loan guarantee can be up to 80 percent of the project cost. The secretary sets the rate, and full payment must be made within 30 years or 90 percent of the project’s life.

The legislation creates a self-financing Energy Loan Guarantee Fund that minimizes the potential costs to the federal government. The legislation provides two alternatives to finance the cost of a loan guarantee:
  • The project developer can pay the cost of the loan guarantee into the fund.
  • The secretary of energy can request an appropriation for that amount, and the project developer pays back that amount over time.
The cost of a loan guarantee is a small percentage of the face value of the amount being guaranteed, much like the loan origination fee charged by a bank when it provides a home mortgage.

So far the nuclear industry has indicated it will need $27B in loan guarantees the first year the program has them available and possibly as much as $40B over the life of the program according to an industry trade newsletter. That's way more than the $9B authorized in the Energy Act. NEI is tracking proposals for 20 new US nuclear power plants.

Here's where it gets complicated

DOE's budget request for 2008 asks for $8M to operate the loan guarantee office and $9 billion in loan authority. The funds would be split into two large pieces; $4B for nuclear and coal plants and $4B for biofuels such as ethanol. Another $1B would support renewable energy power such as solar, wind, and geothermal.

GAO threw a big rock in the pond on April 24th in testimony before the House Appropriations Subcommittee on Energy & Water chaired by Rep. Peter Visclosky (D-Ind). GAO's general counsel, Gary Kepplinger told the committee that the Energy Act specifically prohibits DOE from spending money on the loan program unless appropriations are enacted for it. DOE finally got $7M in program management funds and authority to issue $4B in loan guarantees in February 2007.

The problem is DOE worked on the loan guarantee program in 2006 when it had no funding to do so thus violating the law according to GAO. The oversight agency says that DOE set up a web site, published policies and guidelines, issued a solicitation announcement inviting pre-applications, staffed the office and did all the other things a government agency normally does running this type of program.

Total costs so far are peanuts in the world of federal spending, a mere $500K, but it is big news when it is money DOE didn't get from Congress. That brings up a nasty business for the feds called the "Anti-deficiency Act" which says federal agencies cannot spend money they don't have. While Congress may engage in deficit spending, federal agencies cannot.

DOE is defending its spending saying the work was "preparation activities reasonably necessary" to implement the law. GAO disagrees saying the law specifically prohibits "the use of any funds . . . to implement or finance the loan guarantee program" unless Congress OKs it.

Is DOE in a squeeze play?

The Department of Energy is under pressure from Congress and the nuclear industry to get the loan guarantees out of the door. Yet, Congress blew up the appropriation process for 2007 by failing to enact any of the major bills, including the one for the Energy Dept. Instead, Congress put the entire federal government on an continuing resolution in November 2006 finally getting a funding bill out the door in February 2007.

The Energy Act requires the loan guarantees to be implemented by July 2007. Either Congress is going to have to extend the deadline in the Energy Act or the loan guarantees could be dead thus putting a choke hold on funding for new nuclear plants. Investors won't come to the table with utilities unless the federal loan guarantees cover their very big bets.

GAO is blaming the Energy Dept. for breaking the law, but Congress is really the culprit here demanding the agency to do work it specifically failed to fund. In the world of political hypocrisy which passes for reason in Washington, the only conclusion one can draw is the sage advice of the comedy team of Laurel & Hardy who said more it once,"Well, there's another fine mess you've gotten me into."