Nuclear Rogues and US National Interests

In the long winding history of nuclear nonproliferation, a stand-out irony is Israel, the original nuclear rogue state, threatening to drag the US into war over Iran’s potentially becoming the ninth or so rogue state.

Israel planted the seeds of its current dilemma by becoming the first state to successfully develop nuclear weapons after the 1964 conclusion of the Nuclear Nonproliferation Treaty (known as the NPT).

The US planted its own seeds by failing to make Israel do pretty much what Israel wants the US to make Iran do today: back off weapons technology.

But here we are in 2012, stuck with the result. And the overriding question: Can Iran be brought to see what other bomb holders, and ex-holders, already know: that nuclear weapons are essentially useless? Or do the politics of weak governments in Israel, Iran and the US doom us all to another war with incalculable consequences?

Back in the late 1960s, the US government realized Israel had built a bomb, but the US was helpless as the US has been since with, say, North Korea. The Israelis correctly figured that they could defy the US.

Israel, for its part, has never acknowledged its nuclear arsenal, but there’s always a wink in the non-responses. Global nuclear experts have said for years the country probably has about 200 warheads, about the same as the UK and France.

But the US toleration of Israel’s arsenal has fractured US credibility when the nation’s diplomats try to convince other countries that a bomb program isn’t in their best interests.

The NPT is inherently discriminatory, arbitrarily cutting off official nuclear weapons countries at the five that had them in 1964 – the US, Russia, UK, France and – barely under the wire – China. The NPT includes a commitment by the five to disarm, and every five years at the NPT review conferences, the other nations of the world remind the five that they’ve made little or no progress.

But it’s hard to overstate the value the NPT has brought to the world: a long-term global consensus that nuclear weapons are in no one’s interest. Despite the rogue states, that agreement makes nuclear weapons useless. Any country that used them would become an immediate international pariah, with the rest of the world ranged against it.

Look at the history of rogues.

India never signed the NPT, insisting it needs to defend itself from China. India in 1974 tested its first nuclear device, prompting most western nations to cut off all nuclear-related trade.  President George W. Bush negotiated a compromise for civilian technology in 2005, based in part on India’s record of nonproliferation and guarding its arsenal.

Pakistan says it needs a bomb to defend itself from India. In the mid-70s, Abdul Qadeer Khan, a young Pakistani scientist working in the Netherlands, stole key secrets to enriching uranium, a step in obtaining bomb material.

While experts through the 1980s debated whether Pakistan was developing a bomb, the Reagan administration certified annually that Pakistan was not. The administration priority was using Pakistan to smuggle arms to the anti-Soviet fighters in Afghanistan. Only after the end of the Soviet incursion in Afghanistan did the first Bush administration acknowledge that Pakistan was secretly pursuing a bomb, and by then it was too late. Pakistan proudly proclaims itself the holder of the “Islamic bomb.”

Unlike any other rogue, however, Pakistan hosted Qadeer Khan’s black market in bomb technology that sold to North Korea, Libya, Iraq and Iran. Who in Pakistan was involved in the sales is still a matter of dispute.

In Iraq, Saddam Hussein’s clandestine program was uncovered after the first Gulf War. Libya’s program ended shortly before the 2003 Iraq invasion, when Moammar Ghaddafi decided to improve relations with the US and voluntarily dismantled his program, which had long been plagued with costly technical problems.

North Korea has, according to expert estimates, not only built bombs but worked on missile technology to deliver warheads, though it’s unknown whether its scientists have been able to build warheads small enough to fit on missiles.

Other nuclear weapons programs were pursued in Argentina, Brazil, South Africa, South Korea and Taiwan. In the latter two nations, early secret work was aborted by US pressure, effective because both depended on US protection. Argentina and Brazil saw each other as the potential enemy, and came to a mutual agreement foreswearing weapons. South Africa gave up its bombs at the end of the apartheid government to keep the technology from the non-white majority.

But in the 67 years since Nagasaki, no bombs have been used. Rather, bombs have proven costly, difficult, and useful only to deter invasion, or possibly stop one by a suicidally inclined foe. Even North Korea’s leaders seem to realize that they can bluster behind a bomb, but not use it.

If Iran had nuclear weapons, what would it do with them? Keep out invaders? Who is planning to invade?

Israeli leaders argue a nuclear-armed Iran is an “existential threat.” How? Because it means the end of Israel’s nuclear monopoly in the region? Iran doesn’t yet have one nuclear device – it would be suicide to attack Israel, with 200. And if Iran’s leaders were crazed and wanted to commit suicide – and there’s no evidence of that – they could do it now, without all the fuss and cost of building a bomb.

The worry of nonproliferation experts for years has been that each additional rogue makes other nations think they just might need a bomb, too, and at some point someone will actually be stupid enough to drop one.

So the scenario runs that a nuclear-armed Iran will provoke the Arab states to turn to bombs – even though a nuclear-armed Israel has not.

Some Arab states unquestionably have the financial and technical resources to do that. So do any number of other countries, like Canada and Japan, which have chosen not to build weapons.

Which brings us back to the NPT and the recognition by most countries that their self-interest lies in abjuring nuclear weapons.

Can other nations construct a case that makes it attractive for Iran to give up its weapons ambitions? All the focus has been on punitive measures, but in fact most of the world has given up weapons ambitions because nations found it in their own interests to do so, not because they were forced into it.

Approaching Iran’s leaders with the bluster and bombast we’ve seen in recent weeks is incentive only for them to accelerate weapons development.

Put yourself in their shoes: they have US troops on both their eastern and their western borders, and the US orchestrating their cut-off from the world. Their country has seen the result of US interference before, in 1953. They have called us the Great Satan since 1979, and we’ve returned the favor. We’re nuclear armed – what logic would make them give up trying to be?

With US politicians trying to outdo each other in claiming to be Israel’s ally, the interests of the US seem to get lost.

We are not Israel – the Israelis know their interests sometimes overlap with ours but sometimes don’t, else they wouldn’t have had Jonathan Pollard spying for them. We need to be just as clear-eyed about our interests as the Israelis are about theirs.

For one thing – we’re in debt to our eyeballs. Who do we think is going to pay for this next adventure?

For another – who will fight it from our heroic but way overstretched military?

And will a shooting war accomplish our ends, or only convince not just Iran but other nations that they actually need nuclear weapons to deter unpredictable US adventurism? North Korea, they can’t help but notice, gets treated with much more respect.

All three countries involved here – Israel, Iran, and the US – have divided electorates and weakened governments, which is a formula for mutual disaster. Politicians in the past have tried to save their careers and instead lost their countries.

The US has a long-time ally, Israel, contemplating what could be suicide. When a friend talks suicide, we do our best to talk them out of it. One thing we don’t do is say, “If you do it, I will, too.”

But our politicians are getting perilously close to that approach today. If they step off the cliff, they’ll take the rest of us with them.

 --- Copyright 2012 Margaret L. Ryan

Highly recommended reading: http://www.washingtonmonthly.com/magazine/marchapril_2012/features/we_can_live_with_a_nuclear_ira035772.php

Safety Culture’s Roadmap for a Troubled NRC

Is the Nuclear Regulatory Commission living up to the safety culture standards the agency demands of the regulated industry? And if not, what answers can safety culture suggest for schism that was showcased in pre-Christmas congressional hearings?

The question was raised after four commissioners’ issues with the conduct of the fifth – presidentially appointed Chairman Gregory Jaczko – were spotlighted by two competing hearings, one in the House dominated by Republicans and one in the Senate dominated by Democrats.

Since Jaczko is a former staffer of Senate Majority Leader Harry Reid, the issue was immediately cast in polarized politics. Democrats claimed a “witch hunt” against a leader trying to toughen nuclear safety, while Republicans backed the two Democratic and two Republican commissioners who claim Jaczko is disrupting agency functioning.

Leaving politics aside, it’s fair to ask how NRC would react to finding management at a nuclear site in the sort of disarray now affecting its own top echelons. In nuclear, more than many industries, it’s accepted that poor management is in itself a risk – a substantial risk – to safe operations.

Safety culture concepts were pioneered in nuclear, forced by a common recognition that the industry has only conditional social permission to profit from potentially deadly technology. An accident at any plant brings everyone else’s operations into question.

Two deadly submarine disasters honed the culture in the nuclear Navy, where the captain is responsible for everything on the ship. So it’s safety culture dogma that an operation simply can’t be safe if the CEO is not personally fully committed. And the CEO
must effectively lead his executive team in a common safety vision.

The NRC’s commission structure complicates applying this template, because legally each of the commissioners is one equal vote. The chairman serves at the President’s pleasure – the title can be moved at any time – but all commissioners are confirmed for five-year terms and can only be removed by impeachment.

Jaczko has, however, been aggressive in asserting the chair’s prerogatives to administrative powers provided the chairman in the law, more so than several recent predecessors who viewed their chairmanships as more team leadership. With that aggregation of power, Jaczko has claimed for himself a CEO level of authority, and hence holds that level of responsibility.

So – politically fair or not – Jaczko’s reaction when faced with his colleagues’ criticism is a crucial issue. Safety culture requires self-criticism and teamwork. A CEO’s first job is to understand the problem and identify objectively his own share in it.

But Jaczko told the Senate panel he just didn't know about serious problems his "management style" and “passion” for nuclear safety were allegedly causing until shortly before the hearings. He even said he was learning new specifics right then.

The hearings were held two months after Jaczko was sent a memo, with a copy of another memo sent to the White House the same day, by the other four commissioners – Democrats William Magwood and George Apostolakis and Republicans Kristine Svinicki and William Ostendorff. The memos detailed their issues with Jaczko, including his personal and professional conduct with them and senior staff, and alleged attempts to compromise the scientific independence of the staff. In the safety culture world, that memo should have set off seismic alarm bells and galvanized Jaczko into a whirlwind of action.

Instead Jaczko spoke, two months later, of wanting to sit down with his fellow commissioners to find out what the “miscommunication” was about. No one asked why he hadn’t done that for two months – a question NRC would most certainly ask a licensee CEO.

Moreover, Jaczko didn't seem to realize that, in a safety culture world, his defensive claim of ignorance was in itself an admission of leadership failure.

Second, safety culture requires some flattening of hierarchy and a team-oriented approach that values the skills of every person in the organization.

Normal 0 false false false MicrosoftInternetExplorer4

This should be a natural fit with NRC, an agency whose staff pride themselves on their scientific credentials (a high percentage of the staff have PhDs). Failing to respect and value this reservoir of expertise would be, for any management, an incredible waste of resources.

Yet there have been increasing complaints about how the chairman treats people since he was elevated from commissioner to chairman. This treatment, crucially, involves not just behavior like screaming fits but also alleged attempts to compromise the staff’s scientific independence by forcing officials to change recommendations to ones the chairman personally agreed with – behavior NRC would never accept on a nuclear site.

So it's encouraging, in a safety culture view, to note that the other four commissioners testified, in both the House and the Senate, that the major factor in their decision to seek White House intervention in October was Jaczko's alleged attempt to muzzle professional staff.

All four said their worries climaxed when senior staff returned from an early October retreat, where the chairman spoke. Senior staffers told commissioners, individually, that the chairman had directed the staff to support policies he wanted, not give their independent opinions, which is the staff’s historic and legal role.

It’s discouraging that Jaczko, in the hearings, did not loudly, strongly, strenuously, absolutely deny wanting the staff to bend to his opinions. The charges of intimidation of individual staffers got more question time from lawmakers, but the allegation that Jaczko tried to subvert staff independence was the most serious charge made by his colleagues. It should have elicited passionate outrage from any safety-conscious leader.

Instead, Jaczko’s testimony showed someone who seemed to believe he has been blameless and the fault lies with others. When asked by one Congressman to name one thing – just one – he had done wrong and would change, Jaczko was utterly at a loss for words.

Safety culture requires ability, on the part of everyone but especially leaders, to self-criticize and learn from mistakes. Anyone who wants to be a leader must also elicit that behavior in his team, and then turn group performance around. Traditional management with a boss issuing orders does not work in a safety culture.

The nuclear industry has shown, after decades of trial and error, that safety culture challenges can be confronted successfully. The plants with the safest records also happen to be the most profitable long-term.

Safety is a process maintained by a constant striving for excellence. That means recognizing that no matter how good each of us is, we can always do better. Anyone who stops striving starts sliding downhill. It’s not a comfortable or easy way to work or live, but it’s a requirement in a risky technology like nuclear.

The safety culture principles that NRC's leaders demand for safe operations in the nuclear industry demand that NRC's leaders confront their own differences with the same values. Commitment to safety – self-criticism – mutual respect – team leadership.

A good safety culture eschews blame and focuses on identifying problems and their root causes and crafting fixes. That refocusing is the next, if uncomfortable, step for the NRC commission.

There appears little chance of some political fix from outside – it’s up to NRC’s leaders to seize the challenge and turn things around, to maintain effective regulation. It’s fortunate that the industry’s safety culture offers a map through the minefield.

Copyright 2011 Margaret L. Ryan

Occupy Wall Street: Time to Grow Up

Occupy Wall Street has got to be about more than the right to camp out.

OWS struck a nerve nationwide, electrifying many who are just as alienated by current politics as the Tea Party, but are appalled with the Tea Party’s solutions. The spontaneous demonstrations presented an opportunity for the non-Tea Party to articulate a different vision of America, and develop a strategy to get there.

But the “movement” has stalled, and seems to be devolving into a messy and unproductive standoff between scrufty demonstrators and health departments. With OWS members refusing to identify leaders or coherent agendas, they’re losing their opportunity to become players.

And that would be a loss. America needs OWS voices to emerge as leaders, and as activists to galvanize people to do more than complain.

Polls show a huge proportion of people agree the country is headed in a seriously wrong direction, even as they disagree about solutions. Politicians in Washington, and often in state capitols, seem helpless at best and part of the problem at worst.

But when elections are held, it’s hard to get as much as a third of the electorate to turn out. If that proportion rises to two-thirds in a Presidential election, pundits are amazed.

That means the politicians stay in charge. The average person doesn’t vote to change the government. He preserves it from change by staying home. He makes elections cheaper to buy, for people he professes to despise, by giving away his vote for free.

Moreover, the average person may grouse and carp, but few of even those who vote take the time to understand what the problems are. Increasingly, in the wired world where we can filter out versions of reality we don’t like, we grab at slogans that conform to our preconceptions, and we look for Messiahs.

We want someone to come along and magically make it all the way we want – whatever that is. When the person elected turns out to be just a human being, the magic fades and we turn on him viciously. Being a Messiah is usually not a good career move.

That phenomenon has happened to Barack Obama, and now we see Republican voters going through the same Messiah-anointing process as they seek the miracle-maker of the right.

Unfortunately, humans with all their imperfections are the best we have to work with. And humans do not thrive as individuals, we thrive as groups. Our government is one of the ways we as a group organize and develop shared norms that enable us as individuals to go about our daily lives.

Casting “government” as an alien and hostile entity loses sight of the fact that government is us. Casting “Wall Street” as an enemy entity commits the same oversight – the financial and business community is made up of humans, and they follow incentives the same as anyone of the rest of us.

When the net result of government, Wall Street, or any other entities turns out to be poisonous to society – when increasing numbers see no way to participate in the economy, and the wealthiest prosper not because they create new wealth but because they siphon it from every one else – it’s our organization that needs changing. Throwing a few people in jail may be satisfying, but it doesn’t change the system’s incentives – it just distracts the mob and leaves everything in place for the next set of crooks.

Figuring out how to organize better, to shift incentives so that business produces both profits and positive social outcomes, to value people as a business asset – all are part of a debate with no “right” answer. Every generation tries out different approaches, and nothing has been perfect. The balance of power between government and private entities shifts back and forth.

Confronting our deep social issues and seeking resolutions is, in other words, daunting and unsatisfying. It really, really does take more than “common sense,” it really is the quest of a lifetime not a Congressional term, and as more people compete globally for resources and power, it’s not going to get any easier.

Rallies and occupations are fine as quick attention-getters. But unless they translate into longer-term approaches to grappling with thorny dilemmas and participating in the search for solutions, OWS will fade into a footnote about unsanitary squatters. It will lose the opportunity to birth a grassroots change movement that could make a long-term difference.

And that will be the country’s loss.

Copyright 2011 Margaret L. Ryan

Innovation in electricity: It’s here.

Get ready for sticker shock. Electric bills are going up soon. But Steve Corneli, senior vice president of NRG Energy, says “a wave of creative destruction” is breaking over the electricity sector and what you pay for in a decade may look nothing like what you pay for now.

Bills have to rise – the aging, and usually polluting, power plants that utilities across the country have been relying on are going to be replaced.

The issue for utilities and their regulators, says Duke CEO Jim Rogers, is whether they use this opportunity to just replicate Thomas Edison’s electric system, or embrace new technology that’s already transforming their business model.

And that game-changing technology – that will do for electric grids what the cell phone has done for land lines and personal computers – is being developed now, former Secretary of State George Schultz told a forum on distributed power systems at the Brookings Institution October 31 (http://tinyurl.com/43g3k4d)

Speakers agreed that the federal government and state regulators need to get incentives right to encourage innovation, but much of “getting it right” involves getting out of the way.

Distributed power includes ways to use less power as well as ways to get power locally, lessening dependence on long transmission lines, like solar, small wind, microturbines, and combined heat and power systems. California already counts about 3,000 megawatts of distributed power, much of it solar panels, on its 60,000 MW system, said Robert Weisenmiller, chairman of the California Energy Commission.

Pedram Mokrian, principal of the Mayfield Fund, said venture capitalists only have about $2 billion, of some $211 billion in play, invested in distributed generation now. Rogers and Alexander Karsner, chairman of Manifest Energy and former Assistant Secretary of Energy, agreed that the key is to mobilize that private capital.

The “national imperative” to do so is energy security, Karsner said, and the best incentives will choose outcomes, not specific technologies, in this fast-changing environment.

Rogers said the delivery system of the future will likely consist of “microgrids” with local backup capability and computerized controls. That will minimize the potential for a disruption in one area to cascade into massive regional blackouts, since microgrids will be able to isolate themselves but keep power coming to local consumers.

That capability will become increasingly important as cybersecurity threats to the integrated grid multiply, speakers said, but right now, security isn’t priced when utilities and regulators weigh electric system choices. They said it needs to be.

One sector keenly aware of the vulnerabilities is the US military, which sees lengthy fossil fuel supply lines and aging grid dependence as hindering its war-fighting capability.

Assistant Secretary of Defense Sharon Burke said military bases around the US are dependent on civilian grids and want to partner in making those grids more resilient and secure.

The Navy has been a leader in developing more efficient ships using less fuel and ways to limit the need for convoys of fuel trucks in combat zones, where the Marines experience frequent attacks. The Marines have pioneered in lightweight solar strips, that can be carried in packs and unfolded at remote sites, and one elite Seal team is working on becoming a net-zero energy user.

Rear Adm. Philip Cullom, Navy director of Energy and Environmental Readiness, said the effort also involves “behavior change,” getting everyone to realize the strategic importance of efficient energy use.

Customer behavior is also key to civilian energy saving. Karsner warned “customer value is a cold beer and a warm shower,” and customers tend to become aware of electricity only when those two are reversed.

But Rogers said that’s because electricity is, on average, only 1.9% of disposable income. There’s “huge pressure” from state regulators to keep power costs down, he said, but as age and environmental rules force reinvestment, rising bills will get consumer attention – and encourage more innovation.

For utilities, the issue will be whether to try to lock in the old system, or find opportunities in the new.

The Gunk in the Oil Tax Debate

In the debate over tax breaks for the oil and gas industry, there are two big canards being circulated that – like dirty oil in a crankcase – serve only to gunk up the works. One concerns what industry companies will do if they’re assessed more taxes, the other is the industry’s conflation of cost and price.

Industry apologists and advertising say, basically, that if the U.S. reverses any historic tax breaks, the industry will take its ball and go elsewhere. Good-bye, American jobs!

And, at least as bad for politicians, they say the new costs will drive up the price of gas.

The message is clear: government hands off our tax breaks! But neither argument stands up to scrutiny. Here’s why.

Recall that, before Standard & Poor’s downgraded U.S. Treasuries a notch, much ink was spilled over what would happen as investors fled these degraded investments. Then S&P made its dramatic move – and investors flocked to Treasuries.

The flaw in the original angst: Where else could investors go? In fact, many analysts had looked at just this angle and concluded that even if U.S. credit-worthiness slipped a notch, there simply weren’t a lot of better alternatives.

So if the tax landscape changes, where do oil and gas companies take their money and jobs to get better deals and profits than the U.S.? Oil wells take years to locate and drill, and their output gradually declines. Oil producers can never slack off looking for new resources to develop.

U.S.-based and other oil majors aggressively invested in other countries in the past – but in the last five decades, they’ve been progressively frozen out by national oil companies (or NOCs).

Mexico and Venezuela, for instance, have huge reserves but national policies that restrict foreign investment. Ditto Saudi Arabia and other Middle Eastern countries. All went through periods when investor-owned oil companies (IOCs) like Exxon, Shell, and BP controlled some or all production, and they have all opted for national control.

Emerging nations have looked at history and aren’t about to turn their reserves over to foreign IOCs. Check out Brazil, where development of its huge new off-shore reserves is being controlled through NOC Petrobras. Foreign money may be welcome, but foreign control is not.

Other areas with more latitude for IOCs also tend to be unstable, such as Nigeria or Colombia. Look at Exxon and Shell experience with oil theft and insurgent sabotage of pipelines in the Niger Delta.

And IOCs have new competition for resources to develop from government-backed Chinese oil companies, which are also combing the globe for opportunities as Chinese oil demand soars.

The search for new reserves is tough enough that Exxon just signed onto a venture with Russian oil company Rosneft. Exxon is giving Rosneft shares in Gulf of Mexico and Texas wells and is using its drilling technology to develop Rosneft fields in the Arctic and the Black Sea. Rosneft doesn’t have the Arctic technology – yet, anyway. Rosneft is 75% owned by the Kremlin

How risky is this venture? Consider Shell, which invested a reported $20 billion in Russia’s Sakhalin 2 offshore fields before it was forced to sell out to Russia’s Gazprom in 2006. Or look at BP’s experience with TNK-BP, a joint venture with four Russian billionaires, which has spent years in courts fighting customs, tax, and shareholder disputes. In both cases, original contracts favoring the IOCs didn’t protect them in the long run.

The U.S. is among the few places were oil investors can be certain their contract and property rights will be sustained by the court system. And it has substantial reserves off its shores – and perhaps in oil shales, which are beginning to boom with new extraction technology.

For all the complaints about slower leasing in the Gulf of Mexico after the Deepwater Horizon disaster, U.S. oil reserves are being made available to oil companies, drilling is happening, and U.S. production is rising.

If these companies can make better profits elsewhere, they’ll go. That’s true at any time. But weighing costs, risks and profit projections, where can they do better with their investment dollars? Will the loss of a few tax breaks suddenly reverse the financial projections for their U.S. drilling?

The fact is there just aren’t that many alternatives where resources are available to IOCs and the government and laws are stable enough that investment risk isn’t stratospheric. The loss or dimunition of a few tax breaks is not likely to be the deciding factor in decades-long investment strategy.

Which leads to the other canard: the confusion of cost and price.

We’ve seen multiple advertising campaigns that warn raising taxes means energy will cost more. For oil particularly, this isn’t true.

In markets, cost and price are not the same unless one producer, or a cartel of them, holds a monopoly. Otherwise, the producer takes a risk that the price at which his product sells will be higher than his cost of producing it. If he’s right, his business prospers; if he’s wrong, he goes bust.

The difference between cost and price is profit. If the cost goes up but the price doesn’t, the producer’s profit margin is squeezed. But in a market, competition keeps the producer from raising his price to compensate for cost increases – people won’t buy his product, they’ll go to a competitor.

There’s a highly liquid world market in oil. The price of crude here is part of that market. It doesn’t matter where oil is pumped – it goes first where the highest price is being paid. If the Chinese will pay a higher price, that’s where Texas oil will go. For decades, the US paid the highest price and got all the oil it needed. Now, consumers elsewhere are buying cars and competing for the oil, and the price everywhere is going up.

But the price moves independently from the cost of extraction. No producer can go to the market and say, “This barrel cost me $100 to produce so you have to pay me that.” If the world price is $80, that’s what he’ll get.

So when we’re talking about removing tax breaks, we’re talking about increasing producer cost. There is no automatic translation into fuel market price.

The industry itself is so aware of this fact that one of the most actively traded market indicators is the crack spread.

No ordinary consumer buys crude oil – we buy refined products. Crude is bought by refineries, they process it into products like gasoline, diesel and heating oil, and they recoup the costs of crude and processing by selling those products.

The crack spread is the difference between the spot price of crude and the spot price of refined products, and it sometimes goes negative – meaning the refineries are losing money. They’re paying more for crude than they can charge us for gas. They are in a competitive market – if Americans don’t drive as much as expected, the price of gas goes down, and it doesn’t matter if the world price of oil has gone up. The reverse is also true: big driving demand can mean higher gas prices even if the crude price drops.

So the arguments that removing tax breaks will mean either less U.S. investment or higher fuel costs are disingenuous at best. Neither is an automatic result.

What removal does mean is a lower profit margin for producers. There may be valid arguments for retaining the tax breaks, especially for smaller producers. But right now, those arguments aren’t being made.

Human Value, Sustainable Capitalism and Energy

Safety culture may hold a key to making post-industrial capitalism work.

The wreckage of industrial capitalism lies all around us. The most successful (in dollar terms) part of our economy is finance, which increasingly consists of betting on short-term price movements rather than investing in the long-term growth of companies. “Capital investment” too often consists of buying other companies, not longer term infrastructure building. “Vulture capitalists” bleed and discard successful companies, leaving the employees whose skills created company value with nothing.

As the U.S. labor force is gradually whittled down, with layoff after layoff, so is the collective buying power of the U.S. consumer. The fault lines between skilled and unskilled labor, between those who earn their income from labor and those who earn their income from money, between those who believe they can move up in social standing and those increasingly convinced they can’t, are widening dangerously.

Too much discussion of “the economy” tends to proceed as though it were divisible from society at large. Of course it isn’t – neither is the form of government we choose.

Both economy and government are ways we as a people choose to organize ourselves so we can earn livings and nurture the coming generation. When those forms fail to accomplish or even support one or both of those goals, societies change them.

But to what? An efficient economy should make the best use of every input – and that includes its citizens. An economy – such as we’re experiencing now – that can’t find a way to utilize a growing segment of the population, especially the younger segment, has no future. A business culture that sees human beings as fundamentally unprofitable and disposable can’t make society prosperous.

American business over recent decades has prided itself on cutting costs by cutting labor. It tends to view people as a drag on the bottom line – an expense to be minimized wherever possible – except in the executive suite, of course.

That myopic view misses valuing workers as company assets – a mistake made far less often by high-tech companies which know they depend on employees’ cutting edge skills to innovate and thrive.

The same dependence exists in high-tech companies whose profitability depends on painstaking control of low-probability risks with enormous consequences – the airplane that crashes, the nuclear plant that melts down.

This is where safety culture comes in. Safety culture is anathema to the hierarchical management paradigm developed in the industrial revolution. Safety culture requires each person to be an educated and thinking member of the workplace team, sharing responsibility for identifying risks and devising better ways of doing things.

Management’s job is to maximize constructive team input, not minimize it. “Shut up and go back to work” is an internally contradictory statement.

The word “culture” is the vital point – this is an all-encompassing mind-set, and for industries facing high-tech risks, it’s required of everyone in the workplace, CEO to clean-up crew. It isn’t locked in a desk at the end of the workday. It certainly does not mean never taking risks. It does mean continually evolving awareness of the risks being taken.

And it’s definitely not the classic cliché of labor and capital battling over industrial wealth in a zero-sum game. Safety culture inherently recognizes that neither will thrive, long term, without recognizing and valuing each other.

Now, industries most likely to recognize the value of their human capital are those which must invest extensively in training and education. Nuclear power is one example in which employees’ deep knowledge of a power plant and its technology can make multi-million – or in a crisis, multi-billion – dollar differences to an operator’s bottom line.

But consistently valuing employees as assets is a long-term management practice at odds with short-term profit demands. Even in industries where the value of skilled workers is well understood, pressure from the financial side to plump up that bottom line can be irresistible. Experienced people with knowledge and skills are invited to retire, or laid off, for short-term profits – and sometimes, quickly brought back as consultants.

When replacing an employee means losing tens or hundreds of thousands of dollars in investment, the business benefit of having that employee stay and work productively should be obvious. But too often businesses neglect to internalize those costs, and end up making decisions destructive to both human beings and the bottom line.

If market capitalism is to propel the U.S. economy in the 21^st century, it has to benefit more than a tiny slice of the super-rich. A stable social system doesn’t have to benefit everyone equally, but it does have to allow enough people to gain enough benefits that the dispossessed don’t form a large enough minority to destabilize it.

The last 30 years of income trends are pointing us dangerously in the opposite direction – a very few super-rich, a very large number losing ground.

Adding people to the asset base of companies – instead of the loss column – is a first step toward making capitalism and its free markets a living path to the future instead of a failed relic of the past.

The energy sector, where investments have to be made for decades into the future and high technology frames huge new opportunities and risks, can lead in showing how to value human assets, and why it makes eminent business sense to do so.

Will the energy sector step up to the plate?

What the economy needs from the government

As the politically manufactured debt crisis approaches denouement on Capitol Hill, it’s worth stepping back and considering what the government’s role should be in the national economy.

We hear conservatives – or people who style themselves that way -- assert that the smaller the government, the better for the economy. We hear liberals – or people who style themselves that way – say the government needs to play a larger role in cushioning the blow of recession to citizens and jump-starting the economy out of recession.

Where’s the right balance?

Let's recall: neither the economy nor the government is magical. Each is a way human beings organize needed activities within societies. A “market” is nothing more than the result of collective economic and government activity, and it’s no smarter than the people who make it up. We see patterns of wisdom in markets at our peril.

It’s obvious that going to extremes isn’t workable. Anarchy may require a certain level of enterprise to survive, but it has never produced prosperity. Places like Somalia have, in much of the country, no functioning government. If “no government” were the answer, money managers would be clamoring to invest in Somalia.

Planned economies where government controls everything haven’t worked either. No one is holding up, say, the former Soviet Union as an exemplar of economic wisdom, or of personal freedom.

But we tend to overlook, here in the US where we’ve had peaceful transitions of power for an astonishing two and a half centuries, how government and economic power check each other. Kings and emperors historically were looked to by common folk to balance the power of barons and wealthy elites. “The King’s justice” was sometimes the only hope for the powerless.

Some arguments we are hearing now assume that if government would only go away, personal freedom would blossom. History tells us that’s not the case – instead, the Bernie Madoffs and gang chieftans would blossom. Lack of government means less, not more, personal freedom.

But other arguments blow past the real problems created by red tape and bureaucratic ineptitude, as though they have no merit – but they do. Bureaucratic regulation ends up overwhelming small businesses and favoring the large and well-lawyered – ask any medical doctor who’s been forced to give up single practice due to the paperwork, government and private. Well-intentioned political appointees to, say, the Department of Energy have found it virtually impossible to cut through paperwork and give away stimulus money in less than two years.

And there’s the problem: while current-version conservatives and liberals have been haggling over the size and reach of government over the last 20-30 years, they’ve neglected to see to it that the government we do have is functioning properly.

And there is a proper function. Perhaps there are some Tea Partiers who would get rid of the Nuclear Regulatory Commission on grounds George Washington never heard of it, but traditional conservatives recognize that there is a reason for some government – that there are things a responsible, aware citizen cannot do for himself. Food safety, radiation safety, clean water, clean air and law enforcement come to mind.

Conservatives can object to liberal calls to ban some ingredients in processed foods, for instance, but requiring accurate and informative labeling, which enables individuals to choose their foods responsibly, accords fully with conservative tenets espousing a well-informed citizenry making its own choices based on adequate information. The balance for traditional conservatives is having society protected, where merited, with minimal interference with legitimate business, but firm enforcement against the illegitimate who harm everyone.

Inadequate regulation hurts industries in the long run, and not just with paperwork. Poor regulation was a factor – far from the only one, but a factor – in disasters like the Deepwater Horizon, the Big Branch mine explosion, and the credit default swap meltdown. Public reaction was swift and costly: Ban offshore drilling! Ban coal mining! Ban derivatives!

Responsible regulation – cooperative but not co-opted – could have alleviated that cost and industry-wide black eyes, and perhaps helped the industries avoid these disasters altogether.

Importantly for business, the US legal system has also been thrown into political play, with judicial appointments left vacant for years in haggles over belief systems, dockets backlogged, and disgusted judges quitting. Yet one of the strengths of American free enterprise has been the legal framework under which business has thrived. Its consistency has made the US a superior place to do business, for investors around the world.

Governments with inconsistently enforced frameworks, unreliable courts, or chaotic definitions of property and ownership are countries where investment becomes risky and undesirable – except for companies so powerful that they control the social framework in the absence of a government that protects ordinary people.

That’s pretty much the definition of a banana republic – a country where a (usually corrupt) government gives private companies free rein to profit, at whatever cost to the environment and society. While a few companies benefit, new or competing investment isn’t welcome – and can be discouraged brutally. Prosperity eludes all but the favored few.

Unfortunately, we can look back over the last century and count numerous times when a rigged economy like this was defended as “free enterprise” and necessary to counter “communism.”

The result, too often, when these governments finally fell, was de-legitimization of real “free enterprise,” a public boost for communism, and popular pressure to take collective control of national resources, sometimes destroying productive parts of the economy.

In the US, the neglect of the mechanics of governing while partisans fight over their belief systems has resulted in a government that doesn’t work for anyone.

It too often resembles a company whose employees know they’re ripe for takeover, where they can’t get clear decisions from management, hear management talking about how wasteful and inept the employees all are, and know they may be laid off soon.

There are no incentives to take career risks, like facing down a moneyed and powerful lobby. Instead, government agencies generate paperwork that too often does no good, and sometimes does harm.

This is no good for the economy, but it’s not an argument against having a government at all.

In fact, government agencies still have an amazing number of people who are knowledgeable, idealistic and committed to their jobs. That’s an enormous resource that Congress is frittering away. There’s nothing wrong with politicians debating political philosophies, but there is something wrong with their neglecting the basics of governing while they do it.

Our economy is sputtering and our government facing credit downgrade because of decades of increasing neglect. Now we have the most vocal group ever claiming, “See? It doesn’t work! Get rid of it!”

Government doesn’t work because those elected to make it work have failed to do their jobs. The economy needs a government that does well the tasks only government can do. The economy needs the politicians to buckle down and get to work.

Electric Shock: The End of the US Free Ride?

Are we facing the end of three decades of a free ride in electricity?

I’m going to posit that, since the U.S. decided to follow Thatcher’s Britain in the ideological belief that markets would always bring the lowest prices in the long term, we’ve been feeding off surpluses accumulated in the past – and lately, we’re eating the seed corn.

After a generation that didn’t think very much about where resources were coming from (surveys show we have high-schoolers who believe electricity comes from walls), we’re about to face empty storehouses, and the bill coming due to refill them will shock our still-fragile economy.

This issue affects more than electricity, but let’s focus there.

In the early 1980s, UK Prime Minister Margaret Thatcher’s government faced deep deficits, fed by depressed industry, long-term government social costs, and an oil-shocked economy. One way Thatcher’s Conservative Party saw to snag some additional income while promoting its free-market ideals was to get (somewhat) government out of businesses like energy and transportation.

UK taxpayers over decades had paid to build national electricity and gas systems. These were sold off, netting billions for the hard-pressed government. In electricity, the government kept control of the high-voltage transmission system, and thereby the wholesale power market. Electricity prices initially dropped, but rose again over time – a pattern subsequently repeated in European countries embarking on “liberalization” of power systems.

In effect, the UK took fully amortized generating facilities that had been paid for by ratepayers, sold them to private entities, and spent the receipts for other purposes. Not all the receipts, however – these sales required the intercession of a legion of attorneys, accountants, consultants and bankers. By some credible estimates, about a quarter of the value of these facilities was simply cashed out by market intermediaries.

It left the generating facilities with new mortgages, because of course buyers financed them. That meant ratepayers were charged all over again for facilities they had paid to build.

In 1990, as the Central Electricity Generating Board was phased out of existence, its last chairman, Lord (Walter) Marshall, told me the flaw he saw in the new privatized system: reliability. Under the old system, he said, the CEGB had a legal duty to keep the power flowing. Under the new system, no one did. No one had any obligation to plan ahead and build new generation. The new system assumed the market would incentivize someone when the price was high enough.

No one would notice this assumption, he said, until cheap North Sea gas ran out – Britain was then in the midst of a “dash for gas” in which new high-efficiency generating plants were being built. About 2015, he predicted, the UK would face diminished gas flows, aging generators, and the need for new generation with no cheap answers – and the flaw would become apparent.

He was overly optimistic.  The gas is already declining, the flaw is already evident, and the government is scrambling to figure how to meet ambitious carbon cutting goals and get new facilities built before old facilities, especially old nuclear ones, phase out.

A government panel is slated to issue reform recommendations in July, but there’s little doubt that more government spending will be part of the formula. Electric generators have no requirement to bank part of their profits to ensure the country has capacity for the future. No one does.

The U.S. is coming to a similar junction. From the Great Depression, electric utilities grew under a system of monopoly territories, granted on condition they service everyone on the same rate basis. Utilities had to string wires to all comers, and a homeowner on a distant ranch couldn’t be charged more per kilowatt-hour than a homeowner in town. To make that feasible, the utility was guaranteed a rate of return on its spending, with customer rates set by state regulators.

In the late 1970s and early 1980s, fuel prices soared and expensive nuclear plants began coming on line just as industries they were built to service collapsed across the Rust Belt and the economy hit recession. Consumer advocates sought ways to keep the lid on utility rates.

Social experiments, carried out by state regulators with fees added to electric bills, included two market phases: subsidizing independent power producers (IPPs), which didn’t lower prices, and then “privatization.”

State regulators, especially on the coasts, forced vertically integrated utilities to split up into still-regulated distribution companies that bring power to homes and businesses; independent generating companies that make the power; and high-voltage transmission grid operators who connect generators and distributors under a patchwork of state and federal regulations.

The theory: markets would bring competition among generators, and thereby low power prices. Returns were no longer guaranteed, and some rates were de-controlled. Pushing the theory, not least, were financial players who saw big bucks in all the power plant sales.

California showed the theory still needed some work, when out-of-state generators figured how to drive its market power prices through the ceiling. That experience stalled a lot of plans in the rest of the country to pursue markets, but “privatization” had already taken place in New England and the Mid-Atlantic. (Strangely, nominally liberal states rushed to embrace markets, while nominally conservative areas were the slowest.)

Now, public power companies – often small not-for-profit municipal systems dependent on large generators for power – are joining some state regulators in realizing that they’re in the UK bind – no one is responsible for reliability, markets aren’t getting new generation where it’s needed most, and power prices are rising from a host of causes, all beyond their control.

For the last few years, predictions have been accumulating about how much money is needed to build, and rebuild, our aging electric infrastructure, much of it pushed far beyond original plans. A 2008 study done for the Edison Electric Institute predicted $1.5 to $2 trillion would be needed for generation and transmission by 2030, and that was with no new federal edicts, for either pollution or renewables.

The grid was essentially full in 1980. Over the last 30 years, operators have been incentivized to get more mileage out of whatever exists, not to build new. Generators push plants to their limits with uprates, keep operating polluting plants grandfathered under environmental laws, and buy and sell power among themselves in markets – some of which have derivatives markets built on them and are trading profit centers. New facilities are built either with government subsidies and/or in still-regulated states.

As in the UK, privatized generators have no obligation to sock away profits to invest in costly new facilities based on projections of future need. To risk their capital, especially if a project takes more than Wall Street’s three-year rule of thumb, they insist on government “incentives.” And nobody has to build.

Now a series of long-delayed EPA air and water rules are coming down the pike, and they could force some of the oldest generating plants shut and even newer plants to make major retrofits. They will cost billions, and provoke a firestorm over whom to blame.

But let’s not delude ourselves: while we’ve been getting a free ride, we’ve come to think cheap energy is our birthright. We’ve had relatively cheap power because the industrial collapse that began in the late 1970s left us with a surplus of generation, mostly nuclear.  For a variety of reasons, demand grew slowly, even with an increasing population.

Regulators have operated our electricity system as a giant social lab – IPPs were going to save us, then power markets. Neither has wrought a miracle.

At some point, those old facilities just won’t keep going, and we won’t want them to. And then we’ll realize – without long term planning and paying – our current system is unsustainable. To keep our prices down now, we’ve eaten our seed corn. The free ride will be over.

U.S. Oil May Lower Fuel Prices -- In Europe

The Obama administration decision to release crude oil supplies from the Strategic Petroleum Reserve (SPR) in coordination with the International Energy Agency (IEA) may help Europeans more than U.S. consumers.

That’s because the U.S. has huge reserves of low-sulfur crude needed to make fuels that meet strict European standards. European refineries’ normal source is Libya.

In the U.S., the release probably won’t do much to lower prices, but some experts say it could keep prices from rebounding to the levels we saw this spring – both the release itself, and beyond that, the perceived willingness of consumer nation governments to release more stocks if world market prices start to soar.

The danger? Reserves are healthy, some 1.6 billion barrels in governments’ control alone, 727 million of that in U.S. hands. But compared to world consumption running between 80 and 90 million barrels a day (20% of that in the U.S.), they’re a drop in the bucket, and production disruptions in supplier countries could still send prices soaring.

The Libyan civil war has cut off supplies of very low sulfur crude to European refineries. Saudi Arabia has spare oil, but none that's as low sulfur as Libya's. The SPR, according to the Congressional Research Service, is sitting on about 293 million barrels of that coveted "light, sweet crude."

J.P. Morgan analysts say they expect the U.S. releases to include more of the sweet crude that Europe needs, and U.S. refineries don't. That would help avert any shortages for European transportation fuels.

The IEA’s June 23 announcement that major oil consuming nations will release 60 million barrels in the next 30 days, half of it from U.S. reserves, sent oil futures tumbling in London and in New York. The U.S. benchmark crude dropped briefly below $90 a barrel for the first time since February.

Recent Commodity Futures Trading Commission reports show many traders have been betting that oil prices would rise again in the coming months, though the latest report shows traders shifting those bets to a downward price trend just in the last two weeks. The CFTC is looking into possible insider trading.

But most analysts were puzzled at the timing of the decision. Oil prices worldwide have been coming off highs hit after the Libyan civil war began. As recently as two weeks ago, Saudi Arabian officials insisted the world was well supplied with oil but promised, along with Kuwait and the UAE, to increase pumping of a lower-sulfur “blend” to help Europe.

U.S. gasoline prices have been declining for a month, and with the Federal Reserve cutting its economic forecast yesterday, were expected to keep dropping, though the world is still on track to consume record amounts of oil in 2011.

So why did the IEA make its release decision now? The IEA says analysts believe the Libyan situation will keep its crude out of the market for the rest of the year. European and U.S. refineries are exiting spring maintenance outages and gearing up to produce summer driving fuels and replenish depleted refined product stocks, and need crude now, the IEA said. Saudi Arabia can't gear up production fast enough in the next 30 days, the IEA said, asserting the reserve releases will "bridge the gap."

But there’s still little effect for U.S. consumers. U.S. refineries have been running below capacity and domestic crude prices have been more than $20 cheaper than European crude because of a surplus at the major Midwestern pipeline terminal.

Charles Ebinger, director of the Brookings Institution's Energy Security Initiative, says it takes about 75 days for crude to move from release through refining and reach consumers. He called the decision "a political gambit that will not lower prices" in the U.S.

Elliott Gue, analyst and editor of the Energy Strategist (http://www.energystrategist.com/), agrees that the few reserve releases in the past have had, at best, only short-term impacts.

But he notes oil prices had appeared to touch bottom in the last few weeks despite negative economic news, and he said possibly both U.S. and EU leaders feared that prices might bounce upward again.

Gue adds another thought: the release shows the politicians really don’t believe their own claim that “speculators” are raising prices above what oil “should” cost. Rather, he said, the decision is “a tacit admission that the oil markets have tightened due to Libyan supply constraints and the inability of OPEC to fill the gap.” In other words, prices went up because there really was less oil available.

Neil Fleming, a London-based oil expert who has directed oil market coverage at ICIS and Platts, said the move also covers over the question of whether Saudi Arabia can gear up spare capacity to end-run its OPEC compatriots, Venezuela and Iran. At OPEC’s latest, and messy, meeting, those nations blocked any increase in OPEC production to compensate for Libya, leading to the three Gulf nations’ promise to increase output on their own.

Fleming warns that if the Greek crisis is sorted out and the euro stabilized, oil prices will again tend upward as the dollar loses relative value.

Gue cautions that the oil supply situation is tighter than many people think. The reserve releases could give a bit of breathing room this summer, but the long-term outlook is still for rising prices – constrained supply in the face of rising consumer demand – fundamentals that will challenge economies and governments everywhere.

Why Yucca Mountain Is a Never-Ending Story

Everyone involved will readily admit that figuring out where to bury US nuclear waste has proven a daunting task.

Congress authorized the search for a national repository site, where both Cold War military waste and civilian spent fuel could be safely buried, in 1982. Some $20 billion later, there’s a closed-up hole in the ground in Nevada … and engineering studies, consultant evaluations, policy tomes, procedural filings, and litigation that could probably fill the hole to overflowing.

But over three decades, there’s one thing very hard to find: anyone involved with a real incentive to resolve this problem.

Continuing an endless series of studies, research, litigation and debate, on the other hand, is very much in virtually everyone’s interests – except, of course, the general public which is paying for all this through electric bills and taxes.

Those are the two sources of money for this venture. General federal taxes pay for the portion of the waste problem attributed to bomb research, manufacture and maintenance, while a mil – a tenth of a cent – levy is added to every nuclear kilowatt-hour generated in the US to cover the future disposal of the fuel making the power.

The levy is supposed to ensure nuclear fuel pays for its own disposal, and so far it has been wildly successful. U.S. nuclear plants have been generating around 800 billion kilowatt-hours a year, and the trust fund where the levies go has received more than $30 billion over the years. There’s no end to that levy – the trust fund keeps getting money till the last nuclear generator shuts.

It has been so successful that Congress hasn’t wanted to appropriate from the trust fund. While the money can’t legally be spent for anything else, federal budget officials (across multiple administrations) have “scored” the trust fund as part of the overall budget. Money sitting in the trust fund masks money spent elsewhere. So as the trust fund has accumulated, DOE has struggled annually to get Congress to appropriate money out of it for spent fuel disposal programs.

Overall about $20 billion has been spent on waste disposal siting since 1982. According to the Government Accountability Office, spending to study whether to build a spent fuel repository at Yucca Mountain alone over the last 29 years has cost us some $15 billion, about $9.5 billion from our electric bill levy and $5.5 billion in taxes.

Other sites were considered from 1982 to 1987, when Congress picked Yucca Mountain, near the Nevada Test Site where bombs had been tested both above and below ground. Congress has not changed that designation, and the law orders DOE to apply for an NRC license for the facility, which DOE did in 2008. Nevada asserts the site is unsuitable, and has fought the facility at every step.

Current Senate Majority Leader Harry Reid built his career on trying to get the Yucca decision reversed. With Reid’s ascendancy in the Senate, President Obama’s agreement to kill Yucca in 2009, and Obama’s appointing former Reid aide Gregory Jazcko to chair the Nuclear Regulatory Commission, the Yucca plans have ground to a halt. DOE tried to withdraw its application, but NRC’s independent licensing board cited the law and balked. Jazcko single-handedly stopped NRC staff work on license, though the work was essentially done. Questions have been raised at the House Energy & Commerce Committee about whether Jazcko’s tactics were proper, or even legal.

No matter – work has been halted. And what’s the option? There seems little chance Congress will reopen the law naming Yucca Mountain, since that opens the chance another state could be anointed.

A presidential Blue Ribbon commission is about to make its recommendations, and whatever it says, there’s one certainty: it will call for more research, more studies, more … spending. Just as the last 29 years have seen a steady flow of dollars for research, engineering, and policy studies surrounding Yucca Mountain, the reversal on Yucca opens the door to more of the same.

And it is being paid for with your money, because … well, because the money is there. Most of the public has no idea they’re paying monthly for this.

So who has an interest in resolving the issues and getting something done?

Not DOE bureaucrats, scientists at national labs, contractors of all stripes with waste expertise – they’ve built careers and companies on the issue being open.

Ditto for nuclear opponents. As long as they can point to waste as a complex unsolved problem for nuclear power, they have what has proven a powerful argument to make the public question the wisdom of nuclear power.

And don’t forget lawyers for all sides, whose long-term prospects depend on continuing litigation over thorny issues.

While nuclear power plant operators want disposal resolved, they’re losing little in the meantime. Back in the 1980s, all the utilities signed fuel disposal contracts with DOE, in which DOE promised to start taking spent fuel on schedules beginning in 1998. That hasn’t happened, so courts have ruled DOE in breach of the contracts and ordered DOE to pay damages to utilities for costs of storing the fuel.

How much more tax money? GAO says just under $1 billion as of last Sept. 30 – plus $168 million in lawyers. The total liability by 2020 will be at least $15.4 billion – probably more, says GAO. Note this is general tax money, because DOE was found legally at fault. DOE can’t take the money from the trust fund.

Waiting in the wings: states with legacy facilities, many with DOE consent decrees committing the department to clean up the Cold War sites and move the worst of the waste to … where else? Yucca Mountain. They can also claim damages if DOE doesn’t meet court agreements.

The National Association of Regulatory Utility Commissioners is attempting to get a court order suspending collection of the levy, on grounds DOE is not meeting its statutory responsibilities. It has tried unsuccessfully in the past to have the money put in an escrow account.

Nobody is saying finding a permanent high-level waste repository is going to be quick or easy – but then nobody saying that has any financial interest in a quick or easy solution. And with Congress deadlocked and unlikely to intervene, there’s only one certainty about nuclear waste disposal: we’re going to keep paying.

Germany: Ready for an Electric Shock?

How much more than 33 cents a kilowatt-hour would you pay to eliminate all nuclear plants? How much less electricity would you use to achieve that goal?

Those are the real questions facing German consumers and industry with the government’s decision to force all nuclear plants to shut by 2022.

The government says it can close the plants, which produce about a quarter of the country’s electricity, and either replace their power with renewables or reduce demand with more efficiency – and do it without increasing carbon emissions or eviscerating Germany’s export-oriented economy.

Energy markets are giving the German plan few chances of succeeding as touted, in no small part because Germany wants to substitute intermittent wind and solar power for baseload nuclear power. That won’t work with current technology, but a lot of money is expected to be spent trying to make it happen – and more when it doesn’t.

Witness the bump in stock prices for companies expected to profit from Germany’s Fukushima fears: utilities (many nuclear) in surrounding countries, LNG and coal interests, and renewables and transmission vendors who foresee a rapidly growing market.

The electric distribution grid has to keep power coming at all times to match demand at a controlled voltage. Digital appliances, like computers, are particularly sensitive to voltage variations. Renewables feed power to the grid when the wind and sun permit.

The ideal would be massive storage capacity so electricity could be stored when renewables generate it and discharged to the grid when it’s needed. No such practical capacity exists yet. So grid operators have to pay backup power sources to stay on standby to compensate for flickering renewables. That usually means keeping low-efficiency (but fast-acting) natural gas turbines spinning to connect as needed.

In Germany, however, generous feed-in tariffs (FITs) offered over the last 20 years have already brought so much solar and wind to the grid – unpredictable power that the grid companies must take by law – that grid operators have had to use even nuclear plants to load-follow and balance. Industry experts say the German grid is already fragile and has come close to blackouts, especially as operators try to accommodate wind power at night. This is more than a German issue. European grids are interconnected, and blackouts aren’t confined by national boundaries.

Germany got 6.5% of its total power from wind in 2009, and 1.1% from solar. The subsidy numbers have shifted over the years, but wind operators now get a basic 9.2 euro-cents (13 U.S. cents) per kilowatt-hour for on-shore wind and 13-15 euro-cents/kWh for off-shore wind. Solar operators were getting around 55 euro-cents/kWh for rooftop solar panel output and 46 euro-cents for ground-mounted facilities (79 to 66 U.S. cents); the current government has pared that to 29-21 euro-cents (despite predictable howls from the solar industry).

But subsidy levels are locked in when facilities begin operating, Germany’s committed subsidies to renewables owners were €10 billion in 2009 and are estimated to exceed €20 billion in 2012.

The latest government plan will also require speeding investment in new transmission lines to bring more wind power from the north, where it blows, to the industrial south. Moreover, more renewables means more backup power has to be generated – or bought from other countries.

All this has already helped push the average German consumer’s electricity costs to three times what the average American pays. German householders average 33 US cents/kWh, with 41% due to taxes and other levies. In the continental US, electricity averages 10-11 cents.

German industry will be a key determinant of the nuclear phase-out’s success. About half of German electricity goes to industry, which is heavily export-dependent. Business observers say higher energy prices, especially with the strong euro, could hurt Germany economically. German industry already prides itself on production efficiency – the latest government decision demands even more.

How much more will the nuclear withdrawal cost? Enormous numbers are being batted around. The government anticipates about a €2 billion (US$2.9 billion) loss of revenue per year; the industry federation estimates costs to the economy of about €3.5 billion (US$5 billion) annually, and think tank German Energy Agency forecasts consumers will see their bills rise 20%. Green politicians dispute that, claiming renewables will really save money and the changeover will cost households only about €1.50 a month. Other economists are talking €10-20 per month.

Some political observers are asking whether this decision is just – for all the rhetoric – a clever political strategy by Chancellor Angela Merkel to sideline the contentious nuclear issue and keep some nuclear plants operating for the next decade while the political landscape shifts and the fiscal realities sink in.

But government officials now insist this decision is genuine and irrevocable. Expect to keep hearing from nuclear opponents that Germany is trailblazing for all industrial economies. If Germany can eliminate nuclear power, so can everyone else, they’re saying.

The risk of that kind of talk: remember California in the late 1990s, which blazed a much-ballyhooed trail on electricity markets. A few pessimists warned California's market design ignored some basic realities. They were ignored, and in a few years, California's trail led straight to economic disaster and stopped the momentum for power markets cold.

© 2011 Margaret L. Ryan

Post-Fukushima: Will NRC Reopen the Backfit Rule?

Thirty years of nuclear safety regulation are on the table.

That’s what Nuclear Regulatory Commission members signaled May 12 during their first briefing from the nuclear safety task force looking at US nuclear plants in the wake of Japan’s Fukushima disaster.

The years right after the 1979 accident at Three Mile Island-2 saw a frenzy of regulation to cover the gaping safety holes made evident by TMI. The years since have been occupied with efforts to rationalize – or, according to nuclear opponents, water down – much of that frenzy.

But in light of Fukushima, NRC commissioners have signaled they will reconsider virtually everything from the last 30 years. And that signals uncertainty, and potential expense, for the nuclear industry.

Perhaps the biggest item raised: the backfit rule.

NRC Chairman Gregory Jaczko signaled he is concerned the current rule can “hinder” NRC. Are costs and benefits being properly accounted for, or is the analysis preventing “the right kind of backfits,” he asked.

The backfit rule was the first brake on the TMI frenzy, passed in 1985 and rewritten after a court battle to specify that it didn’t apply to rules required to ensure “adequate protection” of public health. It was among Reagan-era initiatives to limit federal regulations. The rule says a regulation’s costs should not outweigh its benefits without a proven safety need, and so a cost-benefit analysis is undertaken for all proposed rules.

Cost-benefit isn’t a last-minute test – it’s part of the NRC staff’s process for writing rules. Ideas that don’t meet the test up front have little chance of getting to first base. Over the years, the rule has been key in blocking or reshaping a lot of bright regulatory ideas that would cost operators a bundle but couldn’t be proven to provide commensurate safety benefits.

It has fed into an increasing use of probabilistic risk assessment – an engineering analysis approach that tries to determine what parts or processes in a complex plant are most likely to cause problems, so those vulnerabilities can be fixed. In the last decade, NRC has embraced a “risk-informed” regulatory approach, aimed at focusing attention and resources on the areas most crucial to safety.

But all risk and cost-benefit calculations are based on probabilities. How much damage is an accident likely to do, what would that likely cost, and what’s it worth spending to avoid the likelihood of an accident? If an event is very unlikely, there’s little benefit to spending a lot to avoid it. That applies even if an accident would mean extensive damage and expense if it happened. Since it probably won’t happen, the calculation says put the money elsewhere. It’s the same calculation we all make when deciding when deciding how much insurance to buy – what’s risky enough that we’d pay to avoid it? What’s rare enough that we’ll take our chances?

At the May 12 meeting, Jaczko asked how the monetary costs of cleaning up the region around a plant after contamination from a severe accident should be included in the cost-benefit calculations. Clean-up costs can easily be figured to amount to billions, depending on key assumptions like how many people live in affected areas and how much land is contaminated – look at the wide-ranging cost estimates for impacts from last year’s Gulf oil spill. Nuclear accident costs include theoretical health effects to exposed individuals and compensation to residents and businesses if their land is made temporarily unusable, as is happening now at Fukushima.

Till now, such scenarios were low enough probability that they didn’t add much to the “benefit” side of the cost-benefit analysis. But Jaczko’s question suggests NRC could reconsider that calculation. Throw in a higher probability due to what’s actually happening at Fukushima, hike up some assumptions about how many people are affected, increase the potential radiation escaping, and you can get a “benefit” of avoiding an accident that can justify nearly any spending.

And Fukushima is forcing NRC to reconsider some pretty pricy decisions, like hydrogen control and use of spent fuel pools.

After TMI, where a hydrogen explosion did occur but did no damage to containment, NRC ordered control measures at all plants. But some of those measures proved costly to maintain, and in the last 20 years, plant operators have used the low likelihood of such explosions to argue, successfully, that some control equipment isn’t needed.

At Fukushima Daiichi, four reactor buildings were badly damaged by hydrogen detonations, and one or more containments may have been breached.

After the 9/11 attacks, NRC considered ordering older spent fuel out of the fuel pools and into dry casks, which can be stored outside, away from the plant proper, to reduce the amount of fuel at risk. The industry successfully argued that the additional cost of casks wasn’t worth changing NRC policy, which now allows more used fuel to be crammed into the pools.

Moreover, spent fuel pools are deep and it takes days for their shielding water to boil off. NRC hasn’t analyzed for accidents that take days to regain control, so the pools aren’t part of most accident scenarios. Their radioactive load isn’t considered when engineers figure how much material can leak out of a nuclear plant.

At Fukushima, the pools did run low and their spent fuel is believed to have leaked radioactive material to the atmosphere.

Assumptions about that radioactive load will also rise as NRC reconsiders potential releases from more than one reactor on a site. Till now, NRC has assumed no more than one unit would be in trouble at a time. At Fukushima, all six units were disabled at once.

And commissioners are even questioning the historic structure of NRC’s regulation, which is divided between “design basis” events – the challenges any plant has to withstand – and “beyond design basis” events, which might happen but are, in principle, too rare to spend much effort on. The Fukushima earthquake and tsunami both qualified as beyond design basis, and they hit the site an hour apart. That has commissioners asking what meaning that distinction has, whether the current “design basis” is what it should be, and whether beyond-design-basis measures should be left to cooperative industry initiatives, as much of it has been, or written into regulation.

Commissioners are questioning the fundamentals of NRC’s regulatory approach, and whether its last three decades’ evolution has been in the right direction.

Fukushima shows the worst can happen. Nothing is sacred.

High Gas Prices: It’s Not Manipulation – It’s The Market

That was the message this week from several experts about the rising prices we’re all paying at the pump.

The market – that efficient capitalist distributor of resources worldwide – is doing what it’s supposed to do, and right now, that’s driving up prices.

We love the market when it drives prices down, but now many people, starting with our leaders, are looking for someone to blame for prices going up. President Obama told federal regulators to look for market speculators. Congressional Republicans say look at President Obama.

People who watch the oil market for a living, however, say it’s none of the above. It’s the market at work.

See, for instance, this April 29 story in the Los Angeles Times (http://www.latimes.com/business/la-fi-oil-refineries-20110429,0,7502154.story). Prices go up when supply is lower than demand. US refiners are only running their refineries at about 80% of capacity, and they’re exporting record amounts of their output, both gasoline and diesel. Why? Because consumers elsewhere will pay an even higher price than in the US, due in some part to disruptions in supply from Libya. And the combination of lower supply to the US and higher prices elsewhere drives up prices here, which is driving record profits for the companies.

What can we do? Very little. That’s because we have no ready substitute for petroleum products, according to Adam Sieminski, chief energy economist for Deutsche Bank in Washington, DC. He told the Energy Information Administration (EIA) annual conference April 26 that supply and demand are both what economists call “inelastic” – neither side can quickly and easily substitute other products.

That means any disruption on either side shows up in price right away. It’s not market manipulation – it’s supply and demand.

On the supply side, crude oil has to be refined into products like gasoline and diesel in order for us to use it. But refiners often can’t quickly substitute one crude oil source for another if a disruption occurs. For instance, Sieminski said, refineries using very low sulfur Libyan crude to make gasoline for Europe cannot easily switch to Saudi crude. There is a low-sulfur Saudi product, but it’s not low enough to substitute directly, without adjustments to the refining process, involving cost and delay.

On the demand side, American consumers can’t readily switch to some other fuel, said Sieminski and Ernest Moniz, director of the Massachusetts Institute of Technology’s Energy Initiative. We use the bulk of our oil in transportation. Consumers’ choices are limited to driving less or paying more. Many Americans are locked into driving by homes distant from public transportation, as well as locked into whatever car they own.

Moniz said one “game changer” for the US consumer would be a widespread switch to flex-fuel vehicles and installation of blender pumps. That would require no innovation, just adoption.

Flex-fuel engines are already available for some models, and Moniz said adapting all new internal combustion engines, even in hybrids, can be done cheaply. Blender pumps, which let consumers choose their desired mix of gasoline and a domestic biofuel, usually ethanol, are already in widespread use in Brazil, where consumers can vary their mix depending on prices. If those were available, drivers of flex-fuel vehicles could opt for more domestic ethanol when oil prices rose – they’d have a market choice.

Another option: more vehicles fueled with domestic natural gas. Compressed natural gas (CNG) can power cars and other light-duty vehicles while liquefied natural gas (LNG) can power long-haul trucks. But the vehicles remain more costly here than in other countries where they’ve proven more popular. And like blender pumps, CNG and LNG refueling stations are limited because gas station owners can’t afford to install them without assurance of lots of customers.

And of course, there are electric vehicles. A new generation of EVs is now selling, but they are still relatively costly and their batteries, limited.

But with alternatives to gasoline and diesel so limited, each time something disrupts supply, auto-dependent American consumers are nakedly exposed to price hikes.

Many European countries have had high fuel prices, through taxes and other devices, since the 1970s oil shocks. Their governments decided to try to insulate their economies from oil price swings, with varying degrees of success, by keeping the cost high enough to encourage alternatives.

That idea didn’t sell here, and the world market indeed brought low oil prices in the 1980s and 1990s. That lulled US manufacturers into building, and Americans into buying, hugely inefficient vehicles, which continue to help lock in US oil demand.

Many developing nations subsidize the street price of petroleum fuels, in an attempt to spur economic development, so the governments act as shock absorbers for their economies and keep the retail price constant. That’s an approach free market advocates deplore.

The upshot is that we have essentially no planning for what to do when oil prices go up worldwide. Worse, we have no planning for what to do when other nations become wealthy enough to outbid us for petroleum products – which will happen soon if it’s not happening right now.

The rising exports from US refineries showcase the crux of our vulnerability: no matter how much oil we let the oil companies drill, pump, and refine, we still have to buy it from those companies at the world market price. The US is the world’s third largest oil producer but we don’t own any of it – under our free market system, private companies do – and we still have to import as much oil as we produce to supply what we consume.

That leaves us dependent on forces beyond our control, forces which shape the world oil market. So we have pundits and politicians searching for pernicious manipulators to blame. Witch-hunting may be temporarily satisfying, but it won’t change what sets the price: the competition for oil resources on a rapidly growing globe.

To change that equation, the free market offers a simple solution: we either rein in our demand, or pay up.

© 2011 Margaret L. Ryan

Follow me on Twitter: @energyrider6

Is Nuclear Power Dead?

With fears of radiation fanned by reports from the Fukushima events, that’s the energy question being asked around the world.

If Japan can’t run nuclear power safely – who can? And if countries want to stop using nuclear power – what then? What’s the alternative for our ever-more-crowded globe?

That’s the problem: we know of no source of electricity that doesn’t have a downside. To stop using nuclear power, we’re going to have to choose among other sources with different and very real risks.

Not least of those risks is electricity supply itself. Electricity is the defining energy of a modern society. Whether it comes from a solar panel or a coal plant, access to electricity is the difference between living, or not, in the modern world.

The globe’s population is surging toward 7 billion – a wholly unprecedented event. Before 1800, there were never more than 2 billion humans on the globe at any time. Today, an estimated 1.5 billion of our fellow humans don’t have access to electricity, and most of them want it.

Doing without electricity carries its own risks – look anywhere people live without it. No running water, primitive sanitation, the constant search for fuels for cooking and heating. Unhealthy fuels like animal dung are burned; forests are depleted for their wood. There’s nothing inherently good for the environment about people living without electricity.

So what are our alternatives for electricity? Look at the Energy Information Administration’s latest numbers for the US: in 2010, we consumed 4.12 billion megawatt-hours. That’s the most power since 2007 when a record of nearly 4.16 billion MWh was consumed. The average household uses just under 10 MWh a year – less in the north, more in the south where air-conditioning runs longer.

Where did that electricity come from? Forty-five percent, some 1.85 billion of those 4.12 billion MWh, came from coal. To put that in perspective: US coal generation alone was larger than the total electricity consumed by any other single country except China (which has a fifth of the world’s population; the US has a twentieth).

Nuclear contributed 19.6% of US power, some 807 million MWh. Besides China, only Japan and Russia consume more electricity than that, from all sources annually.

For the rest of US power, 23.8% came from natural gas, some 982 million MWh, and oil produced just 0.9%, the latter concentrated in Florida, Alaska and Hawaii.

Adding the 0.3% contribution from fossil fuel byproducts, the EIA says the US got 89.6% of its electricity from fossil fuels and nuclear power.

Of the remaining 10.1%, 6.2% came from hydropower, and 1.4% from wood and waste burning. Wind contributed 2.3%, solar 0.03%, and geothermal 0.4%.

What are the risks of non-nuclear power?

Coal involves mining, which averages 30 fatalities a year in the US. Coal emissions are implicated in a range of public health ills involving respiratory diseases, as well as ecosystem problems like lake acidification. Even with stack controls, coal plants still emit some level of pollutants, and climate-change causing carbon is still unregulated. Coal presents, not a risk of pollution, but an ongoing certainty that some level of pollution is being released. Worried about radiation? Coal plants routinely release radioactive elements that are in coal. The amounts are very small, but they’re unregulated and more than nuclear plants are allowed to emit.

Natural gas has been viewed as a better alternative because, when used in highly efficient combined cycle plants, it has half the carbon emissions and few of the other emissions of coal. But it has to be handled carefully – last year’s explosion in San Bruno, CA, which killed 8 and destroyed a neighborhood, was a stark reminder of gas risks. Natural gas leaks are themselves potent greenhouse gases, and now environmentalists are questioning whether the means of tapping gas, hydraulic fracturing, harms water supplies. The answer to that is still murky.

Oil – Deepwater Horizon. The Texas City refinery explosion. Carbon and other pollutants are released in refining and burning. Radiation? Radium naturally occurs at the bottom of oil wells, so the older a well, the more radiation to workers. Like coal, since it’s “natural,” this radiation is not regulated.

Hydro – Dams don’t collapse often, but when they do, they have a long record of killing people downstream. No emissions – but not zero risk.

Why doesn’t the US have more generation from wind and solar, the best known renewables? Because they require large amounts of land in the right places weather-wise, they remain costly – no projects are built without government subsidies – and their power output varies with conditions, requiring grid operators to keep balancing power on standby to cover the moment-to-moment variations. Standby power costs, too. In some areas, this standby power comes from hydro, but much of it comes from natural gas.

So a nuclear power accident may feed lurid headlines that stoke public panic, but the technology’s actual record – radioactive releases sufficient to cause concern off a plant site three times in 41 years of commercial operation worldwide – stacks up well. Only at one site, Chernobyl, did the releases cause off-site fatalities.

Could we 308 million inhabitants of the US use less electricity? Undoubtedly – and building more efficient buildings and appliances were key provisions of last Congress’ climate change bills. But more efficient buildings are more expensive up front; in the current economy more expensive houses aren’t a government priority. And efficiency depends on turnover of housing and appliance stocks. It’s an answer for coming decades but not for next year.

Individual countries like France, Sweden, Japan and South Korea get more of their power from nuclear than the US does, but overall the globe is more heavily dependent on fossil fuels than the US. Only about 16% of global power comes from nuclear.

These numbers are why even advocates for renewables have been split over nuclear power. If climate change demands that we lower our fossil fuel use, particularly coal, we’re already talking about replacing up to two-thirds of US power use, some 2.88 billion MWh, which is about what the entire European Union uses in a year.

Take out nuclear as well, and … you see the problem.

That’s why, post-Fukushima, we hear world leaders talking about how nuclear can and must be run more safely. That’s why China, Russia, and even US leaders are not advocating immediate shutdowns, only immediate attention. With the vast power demands of the growing global population, the choice is between some risks and no electricity. We’ve chosen to base our society on electricity. The only remaining issue is the nature of the risks.

That’s why nuclear isn’t dead. To kill it off, we need a large-scale, baseloadable substitute that isn’t fossil fueled and that isn’t riskier than nuclear. We haven’t found it yet.

Shill, Baby, Shill

With predictions of $5 gasoline this summer, that “drill, baby, drill” chant is coming back, urging more production of “American oil” to slash the price.

Trouble is, it won’t work -- and not for the reasons you hear most about.

It’s true wells can’t be put into production soon enough to matter to next month’s, or even next year’s, price of gasoline. Putting new wells in service takes years. And it’s true that our resources aren’t large enough, even if we drill from sea to shining sea, to eliminate all our imports from hostile countries.

But the biggest reason drilling “our” oil won’t make a difference is: It’s not “ours.”

It’s “ours” only as long as it is in the ground underneath public lands, like the outer continental shelf. But we have no national oil company. Unlike, say, Mexico, Venezuela or Brazil, we do not have a company whose duty is to supply our nation first. The only way “our” oil comes out of the ground is when we sell that oil to an oil company via a lease.

Once that company pumps the oil to the surface, it is no longer “ours.” Instead, it goes into the global oil market, and the company sells it to the highest bidder.

For a century, that hasn’t been a problem. We have been the big kahuna of oil consumption, and so our demand largely set the world market price. If we wanted more gasoline to drive further in heavier, less efficient vehicles, we got it because we’d pay the price. If U.S. consumers decided to conserve, the world price dropped.

That’s gone on for so long, we don’t notice that oil drilled here does not have to be sold here. The only way to get “our” oil is to buy it back from the Exxons of the world, at the world price.

And that world is changing, as people around the globe strive for better living standards and thereby use more oil. That means more demand from places like China, which only began importing oil 19 years ago. Gradually, the price of oil is being set less by the U.S. market and more by a diversified global market.

That was visible in the world recession, when oil prices didn’t fall in concert with the U.S. economy, and rose ahead of its recovery. Even while demand was lower here – a situation that would have meant dropping world prices less than a decade ago – oil was going up because economies like China continued to grow.

Who benefits from “drill, baby, drill?” The big oil companies.

National oil companies are in control of the big new oil discoveries around the world, and the private companies can get in on the action only as minority partners – often wanted only until the domestic company can get its hands on advanced drilling technology. See the TNK-BP dust-up in Siberia, for instance.

The biggest untapped reserves that private oil companies can get their hands on are on the U.S. outer continental shelf, like the Gulf of Mexico.

More off-shore drilling will most certainly mean more business, and more profits, for oil companies. But with growing global oil demand, it no longer means more supply or lower prices for U.S. consumers.

“Drill, baby, drill” masks that stark reality: other than the emergency supplies in the Strategic Petroleum Reserve, “we” have no oil. Americans have created a market system that assumes we are and will always be the richest folks on earth, able to buy whatever we want, regardless of anyone else’s needs. Once those conditions are no longer true, we have no Plan B – just a lot of oil in the ground, and no way to keep it here once it’s pumped above ground.

“Drill baby drill” will make oil companies wealthier – but it won’t guarantee Americans cheap oil, or any oil at all.

Shill, baby, shill.

Will Fukushima Get the US Serious About Nuclear Waste?

That was the intriguing possibility raised April 6 at a Center for Strategic and International Studies program assessing nuclear safety after Fukushima (See: http://csis.org/event/nuclear-safety-after-fukushima).>

The Fukushima Daiichi accident has been enormously complicated by the spent fuel pools at all the reactors. As in the US, Japanese government plans for disposal of spent fuel have been controversial and slow-moving. That has left operators of aging plants packing the fuel ever more tightly into spent fuel pools.

Many older plants worldwide run out of storage space in their pools and have to offload at least some older fuel to storage casks, but operators also found economic ways to cram more fuel in the pools. The incentive is there to use the pools as much as possible.Trouble is, the more fuel, the more radioactive material at risk should anything go wrong.

But the pools are deep, the fuel is much cooler than it is in the reactor core, and it takes days for the pool water to boil off if it’s left unattended. Nobody thought an accident would ever last long enough for that boil-off to occur. Until now.

Nobody’s sure yet how much of the radioactive material being detected around Fukushima came from the spent fuel pools and how much from the reactor primary systems and cores. But there’s no doubt having the pools where they are in this plant’s design -- outside containment, above grade, and exposed to the environment once hydrogen explosions blew out the tops of the reactor buildings -- has proven a major complicating factor, and danger, for workers trying to get the accident under control.

The oldest U.S. nuclear plants were built when the government had promised to take the spent fuel (in fact, insisted on it because of proliferation worries). In the 1980s, Congress passed laws setting out a process for siting and building underground repositories for both spent fuel and the military’s bomb waste. In 1987, Congress designated a site at Yucca Mountain, Nevada.

Under both Republican and Democratic administrations, Yucca Mountain became a sizable DOE program that dragged on through bureaucratic mazes with no detectable sense of urgency until 2009. That’s when President Obama kept a promise to Senate Majority Leader Harry Reid (D-NV) and declared the project dead – though the executive branch’s legal authority to do that is still under fire. In its place, a year later, Energy Secretary Steven Chu named a “Blue Ribbon Panel on America’s Nuclear Future,” which is supposed to recommend ways of managing spent fuel without ever, ever mentioning a specific site. That panel is due to report in July.

At CSIS this week, Alex Flint, a senior vice president at the Nuclear Energy Institute, suggested that the Fukushima problems might convince Congress to take a serious look at whatever the Blue Ribbon commission recommends.

Those recommendations will address long-term management of spent fuel, but the commission may also address shorter-term issues like temporary storage. After 9/11, the US Nuclear Regulatory Commission explored ordering more spent fuel be put in dry casks as a security measure. The industry fought that – Flint said because there are multiple types of casks, the industry wanted DOE decisions on a final disposal method so operators could pick the right cask.

Given the record of Yucca Mountain, the chances of a final DOE decision like that anytime soon are pretty dim. But Fukushima has made the risks of continuing to cram spent fuel into crowded fuel pools immediately clear.

So, come July, watch this space – will the Blue Ribbon commission address the risks of spent fuel pools in light of Fukushima? And will Congress, or NRC, or the nuclear industry, act?

Can CEO Peer Pressure Keep Nuclear Plants Safe?

Peer pressure is a key weapon in the nuclear power industry’s arsenal for keeping U.S. nuclear plants running safely. But do nuclear operators have the courage to really use it?

Peer pressure is wielded – or supposed to be – by the Institute of Nuclear Power Operations. Once a year, INPO gathers the top executives of all nuclear operating companies behind closed doors for an industry reality check. INPO officials reveal how U.S. plants compare to each other on safety.

Peer pressure, runs the theory, makes CEOs compete to have their plants at the top of that list – or at the very least, not at the bottom. And if a CEO has to sit there and see his plants branded as losers in front of his fellow CEOs, he’ll go shake things up and demand changes for next year.

None of this is ever discussed in public. CEOs with iffy operations are not named or shamed outside INPO’s cloister. Is this system working?

The ratings come from individual plant visits, by INPO teams, which cover more territory than government regulators can. Regulators check whether rules are being met, and in nuclear power, the on-site Nuclear Regulatory Commission inspectors have often been knowledgeable and able to flag what they see as incipient problems. But INPO evaluations cover how plants are managed, their budgets, their corporate safety culture, and whether management has the systems in place to reach for excellence in safety, from the top down, or is only talking about it.

According to people who have sat through the end-of-inspection visits, the INPO evaluations are candid, far-reaching, and unsparing. INPO is typically headed by a retired Navy admiral, who presents final results to top executives and the board of directors, and demands pledges for needed changes. And at the next inspection, INPO evaluates plant operators on how well they responded to previous recommendations.

INPO doesn’t put out many press releases. Since its creation after the Three Mile Island-2 accident in 1979, its officials have insisted they need total confidentiality in order to get the information needed to really evaluate safety culture at each plant, and to give solid recommendations for improvements or even just better practices. And that means a lot of data isn’t shared even among INPO members.

So most of the time, the public has no idea whether the neighborhood nuclear plant got an A or an F grade. Individual utilities will sometimes put out press releases boasting about getting INPO’s top grade, but INPO doesn’t. U.S. nuclear plants have been averaging 90% capacity factors in the last decade, which means they’re running most of the time. With few incidents or failures, they get little news coverage.

One case that did come out in public was FirstEnergy’s Davis-Besse. Back in 2001-2, FirstEnergy was supposed to inspect the reactor head for a type of corrosion that had been found in other plants. The company complained that the inspection schedule would cost it needless millions to shut down the plant. It lobbied the NRC to delay inspections till the next planned outage, and it wangled permission out of the five-member commission. When the inspection finally was done, a football-sized hole was found in the reactor lid. Corrosion had eaten all the way through six inches of carbon steel down to a stainless steel liner. About half an inch of steel was all that stood between FirstEnergy and disaster. Those months of delay were nearly fatal.

The case is relevant because, the year before, INPO gave FirstEnergy its top rating for safe operations at Davis-Besse.

The case raised questions still key: about NRC’s toughness as a regulator, about INPO’s ability to get bad operators to turn their plants around, or turn them over to someone who will run them safely.

As the slow-motion disaster at Japan’s Fukushima Daiichi unfolds, we’re hearing once again about inspections delayed, backfits deferred, and safety measures postponed, all by a Japan’s largest nuclear operator who said all the right things about safety. The threat of a double whammy of earthquake and tsunami is arguably low for U.S. plants, but the threat posed by corner-cutting management that believes it can slide another one by is not.

Worse, when utilities – like any other U.S. corporation – make money, they’re declared a success, and critics get ignored or worse. Look at all the “experts” who couldn’t get enough of Enron until it collapsed, and the analysts whose careers suffered because they wouldn’t believe the miracle of Bernie Madoff. As Davis-Besse showed, when operators cut corners, it isn’t out of a desire for a meltdown but a short-term focus on profit that blinds them to risks.

And indeed, for a while, operators can pare away at safety without the bottom falling out, and their bottom line may look great.

INPO is unique in that it’s supposed to be able to stop the nuclear equivalent of an Enron or a Madoff. That’s how it was sold in the 1980s – an industry organization that would root out or turn around the bad actors before they threatened everyone.

So after Fukushima, we need a new and hard look, by both regulators and the industry itself. Do we have a highly profitable company – or two –making enough money from nuclear plants to pressure regulators and silence safety warnings from peers? Can they be stopped by anything less than accident?

If INPO is ever going to stop a bad operator before disaster strikes, if the nuclear industry’s leaders are ever going to confront a peer over the risks his operation poses to them all, this would be a terrific time to do it.

Five Easy Lessons: What Japan has already taught us

Nuclear experts caution – rightly – that the Fukushima Daiichi accident is ongoing, and that no one has enough information from that chaotic situation to draw any final conclusions about the “lessons learned.”

But there are a few lessons that are already obvious – things that nuclear operators and regulators worldwide will need to confront and resolve if nuclear is to continue to be the major source of carbon-free electricity that its advocates foresee.

Lesson #1, look site-wide for what nuclear engineers call common cause failure modes. For Fukushima Daiichi, that turned out to be a five-story-high wall of water. That single event failed backup electric power the same way at every one of the six reactors strung along the seacoast. Engineers had combed through plant designs to root out single failure points that could fail multiple systems within an individual reactor unit, or fail a key system and its backup. Nobody had looked at that entire site and said, “Is there one external event that can fail the same safety system on every reactor?”

That question hasn’t been considered even a credible one to ask at most multi-reactor nuclear plants worldwide. In fact, some U.S. sites with two units were designed with “swing” emergency diesel generators, which could switch from one unit to another. The assumption was made that only one reactor would be in trouble at any time. That can’t continue to be a safe assumption.

Lesson #2, expand the backup electrical supply to the best available. The Fukushima reactors had eight hours of battery power, which was only designed to power limited amounts of machinery and instrumentation while operators fixed whatever ailed the unit. It wasn’t enough. Many US plants have only four hours’ supply. Nuclear plants should invest in the maximum available. Lots of research is being done on better batteries, for everything from electric cars to megawatt-scale backup for wind farms. Nuclear needs to join the better battery research effort – it could be the best money the industry ever spent.

Lesson #3, revisit what’s “safety related.” Nuclear operators and regulators tend to go round endlessly on this seemingly arcane subject. If a component is part of a safety related system, it’s more costly to buy, install and maintain. It has to meet initial quality standards, and be tested regularly to ensure it will work if needed. Emergency diesel generators were the second line of defense at Fukushima, but their fuel tanks were not. The tanks were outside the reactor building – and we know because they were washed away by the tsunami, disabling the generators and leaving the nuclear units dependent on batteries. Regulators and plant owners alike need to make sure that all parts of an emergency system are protected.

Lesson #4, hydrogen. It blows up. Free hydrogen is created when irradiated nuclear fuel heats up enough for its supporting metal structures to burn – which they do by scavenging oxygen from water or steam. Take away the oxygen from H2O, and you have free hydrogen. Hydrogen blew up at Three Mile Island, but inside a reinforced concrete containment that withstood the blast. Hydrogen blew out the less robust panels at the top of the Fukushima Daiichi reactors (which are a substantially different design than TMI), and may have damaged the primary containment in at least one unit as well. In the 1980s and 1990s, nuclear operators and the Nuclear Regulatory Commission wrangled about what was needed to protect different types of plants from hydrogen explosions. Fukushima ought to get everyone focused on ensuring hydrogen can’t reach detonable concentrations, in any plant design.

Lesson #5, move that spent fuel to casks. The NRC considered some years ago requiring utilities to move older spent fuel out of spent fuel pools and into casks. Spent fuel assemblies are stored in the casks a few at a time, which are parked on a concrete pad somewhere on the plant grounds. Operators fought hard, and successfully, against that requirement, saying spent fuel pools were just as safe and the cost couldn’t be justified.

Fukushima has upended that calculation. The alternative to casks is packing the fuel ever more tightly into the pools, using special storage racks that prevent criticality, which is cheaper. But packed spent fuel pools are believed to be the source of most of the radioactive material leaking out of Fukushima. It's not a total solution -- spent fuel assemblies can't go into casks until they've cooled for at least five years. But moving them out would reduce the radioactive inventory sitting in the pools. Regulators and operators need to take a whole new look at the risks of spent fuel pools.

And there’s a sixth lesson emerging from Fukushima, but smart nuclear operators already know it: Your people will make the difference. Fukushima operators stuck with their plant in the direst moments, refusing to panic and run. Dedicated workers from utility Tokyo Electric Power Co. and its contractors are risking their lives and health to get the wrecked reactors under control, and render them harmless to the rest of Japan. Without them, things would be so much worse. Engineer, analyze, plan for everything you can – but it’s your people who’ll count when the chips are down.

“Is Nuclear Safe”? Is the Wrong Question

You hear some version of this question on every news report about Japan’s crisis: “Is nuclear power safe?”

Trouble is – that’s the wrong question. Here’s why.

Safety is not a status – nothing is inherently “safe.” Safety is a process – a continuous process. A process failure can turn a good design into a disaster, and a great process can keep a poor design from becoming a catastrophe.

This is true way beyond nuclear technology. Ask yourself: Is a Boeing 747 safe? Well, lots of them fly and it’s very rare for one of them to crash, so most of us would say “sure.”

But that doesn’t matter to you as you are walking down the gangway. The only thing that matters is: Is this plane safe right now? Does it have a veteran pilot in the cockpit, or a rank amateur? Did the mechanics get all the bolts retightened, and put in enough fuel? Did maintenance catch whatever got loosened in the last air turbulence?

What gives the airline a track record of safe landings – the assurance you need to take your seat – is a continuous safety process in the building, operation and maintenance of its planes. That’s also what keeps nuclear plants running safely.

With complex advanced technology, a small slip can fail a whole system. So nothing can be taken for granted. Every part and every maintenance action counts, just like every operator action.

If this sounds daunting – it is. It starts with initial construction, in which every part must meet specifications and every weld or screw tightening or concrete pour must be safety-verified. When a nuclear plant is completed, the final drawings have to be exactly what’s built. The people who operate and maintain the plant have to know what they have. That’s one reason nuclear plants cost so much.

Then operators have to follow carefully drawn procedures, every single time. They are like the most experienced pilots, who are sticklers for following checklists. Even if it’s the millionth time, they know that human beings can get complacent and forget a step – and with advanced machinery with complex interactions, that can be fatal.

Safety processes also apply to maintenance. In a nuclear station, everything requiring repair or maintenance, however routine, is tagged in advance, and logged, and its maintenance procedure scheduled down to minutes. Before maintenance personnel loosen a screw, they doublecheck that they’re performing the right task on the right equipment. And they have with them a step-by-step procedure for that task, beginning to end.

Everyone involved in running a plant is trained, and trained again, as part of their regular shifts. The processes used are continuously re-evaluated. The more everyone knows about the plant and how it works, the more likely it is that any safety problem will be spotted. Homer Simpson need not apply.

And neither should Michael Scott from “The Office.” Maintaining this kind of attention to detail, and running the team-oriented organization with a flattened hierarchy that can successfully carry it off, year after year, requires its own special kind of management.

So the question isn’t “is nuclear safe?” Of course it can be – literally billions of megawatt-hours of electricity have come from nuclear power without a problem – just like lots of 747s have landed.

The meaningful questions are whether safety processes are in place, are being followed, and are continuously re-evaluated in light of new challenges that come along, like the events at Fukushima. It’s that continual questioning that is our real assurance of safety – and what we have to be looking for from nuclear operators and regulators when we want to know whether our nuclear plants are “safe.”

Japan: Nuclear Evacuation in a Humanitarian Crisis

News reporting on the unfolding nuclear situation in Japan keeps running up against missing and contradictory information. Is the Japanese government being less than candid about the dangers?

That question came up today when I was interviewed by Alex Witt on “Saturday Morning MSNBC,” and it’s a legitimate question. Why are we hearing things so differently from Japan and from experts in the US including the chairman of the Nuclear Regulatory Commission (NRC), who advised a precautionary evacuation out to 50 miles from the crippled Fukushima Daiichi plant?

The first source of confusion is the actual state of knowledge around the plant. Loss of on-site power means a lot of instrumentation in the damaged plants is knocked out. Most of what authorities are saying about radiation and the condition of the reactors comes from external monitors and dosimeters carried by plant and emergency workers.

That means experts are imputing the plant conditions from external observations and measurements. There’s no way to have someone stroll around these plants and tote up the damage – that would likely be a suicide mission.

But it’s from these indirect readings that plant and government officials have to take their best guess about what the danger to the public really is, and what it could become. And experts can legitimately disagree on those guesses.

The Japanese government has ordered evacuation of residents up to 12 miles away, and urged those 12-20 miles away to stay indoors to avoid any radiation passing overhead. Officials say this strategy will protect them should fallout be blown inland. But NRC experts say they’d order evacuations out to 50 miles from the plant (even though NRC rules only provide for evacuation to 10 miles in a US emergency). That has caused a lot of controversy – is Japan protecting its citizens?

Perhaps if there had been no earthquake or tsunami, Japan might have made the choice to evacuate further than 12 miles, just as a precaution. But there was an earthquake, and a tsunami. Somewhere between a quarter and a half a million Japanese are homeless, and many shelters are struggling with inadequate heat, water, food and sanitation. Would Japan really be prudent to send citizens lucky enough to still have homes into those shelters? Or would trying to avoid the least smidgen of nuclear risk actually expose the people to the very real risks of shelter privations?

And we are talking about low radiological risks – radiation experts say the expected health effects beyond 12 miles are diminishingly small. We are not talking about deaths or even radiation sickness – those are risks close to the plant, for workers and emergency personnel. For the general public, at a distance of 12 miles or more, we’re talking about the possibility of fractional increases in the lifetime cancer risks of exposed individuals, cancers that won’t show up for 20 to 30 years, if ever.

The Japanese government is balancing immediate critical needs for food and shelter for hundreds of thousands of people in the quake zone with worries about possible risks should the wind change direction and a radioactive plume be carried inland.

That’s the kind of decision no one ever wants to have to make. There’s simply no evidence Japanese officials are making it cavalierly