Financing, Rather Than Safety, Appears to Be Key Factor in Whether Plans Proceed
By Dan Morse
Washington Post Staff Writer
Wednesday, September 5, 2007
It's not the greenies who worry those aiming to build a new nuclear reactor in Southern Maryland. It's the green.
This seemed perfectly clear at a recent community meeting in Calvert County, where Constellation Energy has proposed the first new reactor project in the United States in nearly 30 years. The price tag: about $4.5 billion.
"Without the federal loan guarantees, this whole thing will come to a stop," George Vanderheyden, a Constellation executive, said while standing outside the hotel conference room where the meeting was about to start.
Ten feet from him, a row of environmentalists greeted Calvert residents with stacks of brochures. "Threatened Communities," from Greenpeace, showed rows of grave markers next to a nuclear cooling tower.
Vanderheyden showed little concern and later said his company could dispel such notions during the long approval process for the reactor.
What concerns him more -- and what appears to be the larger factor in whether the Calvert reactor gets built -- is taking place 55 miles away in Washington. There, nuclear companies such as Constellation, along with Wall Street bankers, are lobbying hard to get the federal government to help kick-start construction of a series of reactors.
Their argument: Nuclear power is clean energy that can reduce greenhouse gases. Wall Street investors could help finance new reactors. But they're skittish, remembering nuclear projects in the 1970s and 1980s dogged by regulatory delays, cost overruns and the Three Mile Island meltdown. The government, according to the nuclear industry, should protect investors if the initial projects go bad.
To nuclear's critics, the industry is trying to seize a limited government program -- energy loan guarantees -- and expand it to cover and lessen the costs of a series of massively expensive projects. It is the latest plea, they say, by an industry mature enough to try to sell projects on its own.
"This is among the most subsidized industries in the nation," said Ryan Alexander, president of Taxpayers for Common Sense, a budget watchdog group. "They're looking to get as much as they can in this political climate."
Calvert's political leaders, and many of its residents, want the new reactor. Residents have lived for three decades near two reactors at the Calvert Cliffs nuclear plant in Lusby, where the reactor would be built. That plant enjoys a reputation for safety and pays taxes representing 8 percent of the county government's operating revenue. Calvert's Board of County Commissioners has offered Constellation 15 years of tax breaks valued at $300 million to build another reactor.
President Bush chose Calvert's plant as the stage to deliver an energy policy speech two years ago.
"Some Americans remember the problems of the nuclear plants -- that the nuclear plants had back in the 1970s," Bush said. "We all remember those days. That frightened a lot of folks. People have got to understand that advances in sciences and engineering and plant design have made nuclear plants far safer, far safer than ever before."
That year, the federal government rolled out help. Under one program, the first two new nuclear projects to break ground would get insurance for up to $500 million for regulatory- and litigation-linked delays. The next four would get up to $250 million of such coverage. Once operating, the plants would get production tax credits.
It is another program, which involves the complicated world of loan guarantees, that the nuclear industry wants to broaden.
Under this program, if companies wanted to build cutting-edge, "clean" energy projects -- solar, biomass, nuclear or other -- they could seek loan guarantees to protect investors. The Bush administration sought authority this year to back $9 billion in such loans, $4 billion of which could go to nuclear and clean-coal projects, underscoring the administration's concern about a more open-ended program.
A House of Representatives energy appropriations subcommittee then eliminated loan guarantees for nuclear projects for the upcoming year. The panel's chairman, Peter J. Visclosky (D-Ind.), said the Energy Department's new loan guarantee program wasn't in a position to handle the $25 billion worth of coverage the nuclear industry wanted.
The move surprised the nuclear industry and underscored that Democrats might not be as pro-nuclear as the industry thought, said Kevin Book, an energy analyst at FBR Capital Markets Corp., an investment bank in Arlington County. He predicted things likely would move nuclear's way as energy legislation and funding gets hammered out in the House and Senate over the next two months. "This story is not over," Book said.
One notable Democratic supporter of nuclear power in Calvert: House Majority Leader Steny H. Hoyer, who represents the county in Congress. He cites a good safety and environmental record at Calvert Cliffs, a spokeswoman said. In a separate House energy bill, Hoyer worked to make loan-guarantee coverage available to nuclear power in the upcoming fiscal year.
In the Senate, legislation asserts the loan guarantee volume should not be subjected to appropriations caps.
As the debate unfolds, Constellation Energy is trying to make its presence felt. Through its political action committee, Constellation donated $314,500 to federal candidates for the 2006 elections, according to the Center for Responsive Politics, a collector and sorter of campaign finance data. Republicans got 55 percent of the money, and Democrats got 43 percent.
Hoyer's campaign received $10,000, the center reported. A spokeswoman for Hoyer said the contributions played "absolutely" no role in his nuclear decisions. (Hoyer's campaign received a total of $1.7 million from political action committees for the 2006 race.)
Constellation reported $500,000 in lobbying expenses last year, a 32 percent increase from the year before, according to the Center for Responsive Politics. The Nuclear Energy Institute, an industry trade group, reported $1.4 million on lobbying, nearly double its 2005 levels, center figures show.
Constellation's totals for PAC contributions are slightly different: $288,000 for the 2006 cycle, with 56 percent going to Republican campaigns and 44 percent going to Democratic campaigns. A company spokeswoman noted the company's growth in lobbying has occurred as the company has grown rapidly over the past five years -- from $3 billion in revenue to $19 billion. The lobbying growth "is commensurate with a need to engage in the national energy policy dialogue," she said.
In seeking the loan guarantees, nuclear energy companies say that they also would take on risk. In Calvert, under current plans, Constellation would put $800 million in equity for the new reactor and borrow the rest. "No company is big enough to take $800 million lightly," Vanderheyden said.
Under the loan guarantee program, companies such as Constellation would pay into an insurance-like program the government could tap if a project's financing went into default. There is debate, though, about how much protection this would offer.
In any case, the nuclear industry appears to be picking up gains. The Bush administration seems more willing to extend loan guarantees to cover all of the debt-financing part of a project, instead of an earlier proposal of 90 percent of that portion. And under one proposal in Congress, more energy companies would be able to classify a new design as cutting edge.
"They want the sun, the moon and the stars. The bottom line is they will probably get the sun and the moon," said Michele Boyd, legislative director of the energy program at Public Citizen, a critic of nuclear power.
Not getting the stars, though, could be enough to affect whether the new reactor goes up in Calvert.
Even if the amount of loan guarantee volume grows larger than it stands, a lot of nuclear companies have their eyes on the program. About 17 companies are considering constructing as many as 31 reactors, according to the industry. At perhaps $4.5 billion apiece, that is potentially $110 billion worth of financing that would have to be rounded up.
Even the complicated difference between 100 percent and 90 percent loan guarantee coverage on the debt portion of a reactor could make a difference.
Book, the energy analyst, hears the trepidation for nuclear projects from investors, which for starters haven't been tried in such a long time. "In the investment world," he said, "decimal points and fractions matter."
Staff researcher Meg Smith contributed to this report.
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