CRS Report: 98-207 - Appropriation for FY1999: Energy and Water Development

Environmental Management. DOE's Environmental Management Program (EM) is responsible for cleaning up environmental contamination and disposing of radioactive waste at DOE nuclear sites. The conferees voted to provide $5.58 billion for EM activities at defense-related sites, and $431 million for non-defense sites, both about the same as the DOE request. The defense-related funding includes $228 million for the "privatization" of DOE waste management projects, such as the solidification of high-level radioactive waste at Hanford, Washington -- less than half the DOE request.

The FY1999 EM budget request was the first to reflect the program's new accelerated cleanup strategy, which attempts to maximize the number of sites that can be completely cleaned up by 2006. DOE managers contend that substantial long-term savings can be gained by focusing on completing work at those sites, allowing the earliest possible termination of infrastructure costs. Based on that strategy, the budget request was divided into three major segments:

The accelerated cleanup plan has drawn opposition from some environmental groups because of concerns that its focus on 2006 might result in insufficient cleanups. In the program's FY1999 budget justification, DOE maintained that the requested funding would be sufficient to meet environmental requirements at most sites, although it added, "At some sites, there is a small gap between compliance requirements and available funding. EM therefore is striving for additional efficiencies and other measures to close this gap."

Two-thirds of the EM privatization funding request would go for Phase 1 of the Hanford Tank Waste Remediation System, consisting of a pilot vitrification plant that would turn liquid high-level waste into radioactive glass logs for eventual disposal. Other major privatized projects include a project to treat "mixed" radioactive and hazardous waste at the Idaho National Engineering and Environmental Laboratory, and waste treatment, storage, and disposal facilities at Oak Ridge, Tennessee.

The EM privatization effort is intended to reduce costs by increasing competition for cleanup work and shifting a portion of project risks from the federal government to contractors. Profits to contractors would depend on their success in meeting project schedules and holding down costs; potentially, profits could be substantially higher than under traditional DOE contracting arrangements.

In a typical non-privatized DOE project, a contractor would be hired to build and operate a facility with government funds. DOE would approve and pay all the contractor's costs, and then award the contractor a profit based on performance. Under the privatization initiative, a contractor would be expected to raise almost all funding for necessary facilities and equipment for a project. The contractor would recover that investment and earn a profit by charging previously negotiated fees to DOE for providing services under the contract, such as solidification of radioactive waste. The contractor could earn higher profits by reducing costs, but the contractor could lose money if project costs were higher than expected or the required services were not delivered.

DOE requested more than $1 billion last year for privatized projects, but Congress provided only $200 million. The strong congressional resistance to the request stemmed largely from concerns about providing such a large amount of up-front funding for contracts that had not yet been fully negotiated in many cases. The contracts are to spell out such crucial details as how much risk for project cost overruns and other problems that DOE would continue to bear.

In response to such criticism, DOE promised in the FY1999 budget justification to submit proposed privatization contracts to Congress for review at least 30 days before they are signed. Contract information submitted for such reviews is to include anticipated costs and fees, performance specifications, activities to be carried out, project schedules, goods or services to be delivered, and estimated cost savings. DOE also promised to establish its own review teams to examine requests for proposals and contracts for privatization projects, to procure and disseminate independent cost-savings estimates, to increase training for DOE oversight of privatized contracts, and to assure that contractors hire sufficiently experienced personnel. Nevertheless, the conferees cut the DOE privatization request by more than half.

Civilian Nuclear Waste Disposal. The conference report provides $358 million in FY1999 for developing a disposal site for highly radioactive spent fuel from nuclear power plants and weapons-related high-level waste -- about the same as the FY1998 level. The Senate had voted to cut the request by $5 million, while the House, citing "severe budget constraints" held the program to level funding.

The FY1999 budget request was issued shortly after DOE missed a statutory deadline of January 31, 1998, to begin taking waste from nuclear plant sites. The Department currently expects to begin receiving waste at an underground disposal facility at Yucca Mountain, Nevada, by 2010 if the site is found suitable. Nuclear utilities and state utility regulators, upset over DOE's failure to meet the 1998 disposal deadline, have won two federal court decisions upholding the Department's obligation to meet the deadline and to compensate utilities for any resulting damages.

The House and Senate passed similar bills last year (S. 104, H.R. 1270) to require DOE to build an "interim" waste storage facility near Yucca Mountain that could begin operating within the next few years. The Clinton Administration has threatened to veto the legislation, contending that Yucca Mountain should not be selected for waste storage until the site has been determined to be acceptable for permanent disposal. DOE plans to complete a "viability assessment" of the site in 1998 and, if the site is found suitable, submit a license application to the Nuclear Regulatory Commission in 2002. Passage of the nuclear waste legislation in the 105th Congress was blocked by the Senate's rejection of a cloture motion on H.R. 1270 on June 2, 1998.

DOE contends that under current law it has no authority to take waste for temporary storage, so the FY1999 budget request did not include funding for near-term waste acceptance activities, despite the recent court rulings on the missed disposal deadline. Instead, storage and transportation funds were requested only for "long-lead time activities that must precede removal of spent nuclear fuel (SNF) from reactor sites once a Federal facility becomes available."

The conferees directed that $165 million of the nuclear waste program's funding come from the Nuclear Waste Fund, which holds fees assessed on nuclear power generation to pay for spent fuel disposal. Another $189 million would be appropriated from general revenues, under "Defense Nuclear Waste Disposal," to cover disposal costs for high-level radioactive waste from nuclear weapons production. The remaining $4 million would come from general revenues to pay for research on treating high-level radioactive waste with advanced particle accelerators. Such treatment would be intended to transmute long-lived radioactive waste into shorter-lived isotopes.

The conference agreement rejected all but $250,000 of DOE's nearly $5 million request for funds for the State of Nevada to monitor the Yucca Mountain Project. Congress denied all such funding for FY1998 because of concerns that the state was using it to fight the waste program. The conferees provided $5.5 million to be disbursed directly to local governments near Yucca Mountain to monitor the project.

National Security Programs -- Russian Plutonium and Uranium. The FY1999 Omnibus Appropriations Act (P.L. 105-277) added $525 million for DOE's "other defense activities" to address the issue of uranium and plutonium from excess Russian nuclear weapons. The uranium is to be purchased for DOE stockpiles, while the plutonium funding would help pay for facilities in Russia to begin converting plutonium components from warheads into fuel for nuclear reactors.

The bill provides $325 million for purchasing natural uranium that is associated with ongoing purchases of highly enriched uranium (HEU) from Russian warheads. Under the HEU agreement, the U.S. Enrichment Corporation (USEC) buys the enriched Russian uranium and gives back an equivalent amount of natural (unenriched) uranium, which the Russians can then sell. However, the Russians have complained that the price for natural uranium has been depressed by USEC's plans to sell large amounts of natural uranium on the world market. USEC, formerly a government corporation, received that uranium from DOE stockpiles as part of its recent privatization.

To keep the Russians from backing out of HEU agreement, the new funding would allow DOE to purchase the natural uranium associated with Russia's 1997 and 1998 deliveries of enriched uranium deliveries to USEC. However, the DOE natural uranium purchases cannot be made until Russia reaches a long-term agreement for the commercial sale of natural uranium associated with all enriched uranium deliveries after 1998.

Regarding Russian plutonium, the bill provides $200 million to begin implementing a U.S.-Russian accord on disposition of plutonium from surplus nuclear weapons. Presidents Clinton and Yeltsin signed a joint statement of principles on the issue in September 1998, with the goal of reaching a detailed bilateral agreement by the end of the year. The funding is expected to help Russia design and construct facilities to convert plutonium weapons components into mixed-oxide fuel for nuclear reactors, but the details of the program will not be known until the U.S.-Russian agreement is finalized. As a result, the bill withholds the plutonium funding until DOE submits a detailed budget justification and receives approval from the House and Senate Appropriations Committees.

Table 7. Energy and Water Development Appropriations Title IV: Independent Agencies
(in millions of dollars)

Program	FY1998 Approp.	FY1999 Request	S. 2138	H.R. 4060	P.L. 105-245
Appalachian Regional Commission	170.0	67.0	67.0	65.9	66.4
Nuclear Regulatory Commission (Revenues) Net NRC	472.8 (454.4) 18.0	486.9 (152.3) 334.5	466.0 (416.0) 50.0	462.7 (444.7) 18.0	465.0 (444.8) 20.2
Tennessee Valley Authority (gross)	70.0	76.8	70.0	--	0
Defense Nuclear Facilities Safety Board	17.0	17.5	17.5	16.5	16.5
Nuclear Waste Technical Review Board	2.6	3.0	2.6	2.6	2.6
Total	277.6	498.8	227.1	103.0	105.7

Tennessee Valley Authority. The Tennessee Valley Authority (TVA) was established as a federal corporation in 1933 to bring electricity and development to a region encompassing the entirety of Tennessee, and portions of Kentucky, Virginia, North Carolina, Georgia, Alabama, and Mississippi. The agency's electric power operations are entirely self-supporting and receive no appropriation.

However, TVA is also responsible for certain non-power functions that are intended to further the agency's mission to develop and conserve the region's natural resources. These include flood control, recreation, navigation, and an Environmental Research Center. Among these, TVA operates more than 50 dams and reservoirs and a 170,000 acre recreational area in Kentucky and Tennessee, Land Between the Lakes. The congressional appropriation for these programs was $106 million for FY1997, representing 2% of the agency budget.

In January 1997, TVA Chairman Craven Crowell proposed that TVA prepare to become a higher-profile player in a deregulated market for electricity. Crowell's proposal was that Congress no longer appropriate funds to TVA for non-power activities beginning in FY1999. An internal TVA task force would recommend which functions would be transferred to other agencies and which would be eliminated. The Administration proposed a reprogramming of FY1997 funds appropriated to the Corps of Engineers to jointly study with TVA how the agency's assets and functions should be reassigned to the Corps and other appropriate agencies.

Chairman Crowell's proposal not only stirred up considerable controversy, it also exposed the existence of TVA itself to challenge. While representatives from the Tennessee Valley region are averse to any risk to non-power programs, the Chairman's proposal to shed non-power programs, TVA opponents have argued, would be an abrogation of TVA's mission. If the mission is no longer appropriate, the argument extends, neither is the agency.

The unintended consequence of Chairman Crowell's proposal was that the conferees on the FY1998 Energy and Water Appropriations recommended an appropriation of $70 million for FY1998, but stipulated that TVA would thereafter absorb the entire cost of these programs through "internally generated revenues and savings." Despite the language in the conference report, and pending further consideration of the future of TVA and its non-power programs, the Administration requested $77 million for TVA non-power programs for FY1999.

The Senate funded TVA at $70 million while the House bill provided no funding. The conferees adhered to the House position and, in addition, provided no funding for Land Between the Lakes. Additionally, the conferees required that if, in the absence of an appropriation, TVA deemed a rate increase necessary to fund these programs, a report would have to be submitted to Congress assessing whether transferring stewardship of facilities along the Tennessee River to the Army Corps of Engineers would alleviate or eliminate the need for a rate increase. The conferees further required that this report be submitted 6 months before the rate increase would go into effect.

The FY1999 Omnibus Appropriation Act (P.L. 105-277) restored $50 million to TVA non-power programs. In addition, the Act includes a debt-refinancing plan that would enable TVA to prepay its obligations to the Federal financing Bank without penalty, estimated to save the agency $100 million in interest payments during each of the next 10 years.

The consequences of this turnaround for TVA when the 106^th Congress considers electricity deregulation legislation are difficult to predict. TVA's critics may continue to urge that TVA be extensively reorganized as part of any deregulation package. On the other hand, supporters suggest that if TVA takes full advantage of the opportunity to reduce its debt and operates more efficiently, the agency may come under less intense pressure in the next Congress.

Nuclear Regulatory Commission. The conference agreement gives the Nuclear Regulatory Commission (NRC) $470 million for FY 1999, about $20 million below the budget request. Major activities conducted by NRC include regulation of commercial nuclear reactors, licensing of nuclear waste facilities, and oversight of nuclear materials users. The funding also includes about $5 million for the NRC inspector general's office.

The Senate voted to appropriate $466 million to NRC -- $2 million below the FY1998 level. The Senate Energy and Water Development Subcommittee would have reduced the funding by $90 million, a cutback that would have eliminated 700 of NRC's approximately 3,000 employees over the next two years. Although the full Committee reversed that cut, its report strongly criticized NRC for allegedly failing to overhaul its regulatory system in line with improvements in nuclear industry safety. The Committee contended, among other problems, that NRC's regional offices were inconsistent with one another, that NRC was inappropriately interfering with nuclear plant management, and that numerous NRC review processes were outdated and unnecessary.

Slightly lower funding, $463 million, was supported by the House, whose report contained similar criticisms to those of the Senate panel. The House declared itself "strongly supportive" of the Administration's plans for NRC to eventually take over safety regulation of major DOE nuclear facilities, which currently are regulated by DOE itself. The conferees gave NRC $3.2 million for regulatory reviews of DOE facilities. Both House and Senate also provided $4.8 million for the NRC inspector general's office.

To ensure that NRC's budget would continue to be mostly offset by fees on nuclear power plants and other licensed entities, the conferees included a one-year extension of the agency's current fee-collection authority. As in the past, DOE would reimburse NRC for oversight of DOE's high-level nuclear waste disposal program.

Redistributed as a Service of the National Library for the Environment*



	National Council for Science and the Environment 1725 K Street, Suite 212 - Washington, DC 20006 202-530-5810 - info@NCSEonline.org