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Analysis of Energy and Tax Proposals in the 2018 Budget Proposal

President Trump released his budget proposal for the 2018 FY on May 23, 2017, expanding on the budget blueprint he released in March. The budget proposal and blueprint reiterate the President’s tax reform proposals to lower the business tax rate and to eliminate special interest tax breaks. They also provide for significant changes in energy policy including: restarting the Yucca Mountain nuclear waste repository, reinstating collection of the Nuclear Waste Fund fee and eliminating DOE research and development programs.

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D.C. Circuit Orders DOE to Stop Collecting Nuclear Waste Fee

The D.C. Circuit issued an opinion this week in National Association of Regulatory Utility Commissioners v. United States Department of Energy ordering the Secretary of Energy to submit a proposal to Congress to change the nuclear waste fee to zero.  Tuesday’s decision was the most recent in a string of court cases following the Obama Administration’s decision in 2009 to defund the Yucca Mountain repository.

Nuclear utilities have been paying statutorily mandated fees into the Nuclear Waste Fund since 1983.  The fee is 1 mill per kilowatt-hour of electricity generated, and the Department of Energy collects approximately $750 million annually.  In January, the fund was valued at $28.2 billion.

Under the Nuclear Waste Policy Act, the Secretary is obligated to review the adequacy of the nuclear waste fee annually.  Prior to 2010, the Secretary’s adequacy determinations were based on the expected costs and projected revenues of the Yucca Mountain repository.  However, in its 2010 review, after the decision to abandon Yucca Mountain, the Secretary did not identify any expected costs or revenues, but concluded that the uncertainty regarding future costs did not provide a basis for adjusting the fee.

On June 1, 2012, the D.C. Circuit held that the Secretary’s 2010 Fee Adequacy Determination was arbitrary and capricious and “legally inadequate.”  The Secretary responded in a new determination in January, finding that continuation of the fee could result in a final fund balance as low as negative $2 trillion or as high as $4.9 trillion.  The Secretary concluded that its assessment did not demonstrate that either insufficient or excess revenues are being collected.

In this week’s decision, the D.C. Circuit again rejected the Secretary’s adequacy determination, calling the Secretary’s determination of the range of possible final fund balances “absolutely useless” and the position of the Secretary “disingenuous.”  The court also noted several conflicts between a strategy report issued by DOE and relied on by the Secretary, and current statutory law.  Instead of remanding again, the court ordered the Secretary to submit a proposal to Congress to change the fee to zero, concluding that it was unfair to force the utilities to pay fees for hypothetical options, the costs of which might already be covered.  The court noted that fee payments could resume when the Secretary is able to issue a legally adequate fee determination.

In response to an earlier D.C. Circuit decision, the Nuclear Regulatory Commission (NRC) directed agency staff on Monday to resume work on DOE’s construction authorization application for Yucca Mountain with the $11 million of remaining funds appropriated for the review.  That announcement responds to a decision of the D.C. Circuit in August that ordered the NRC to continue its review of the Yucca Mountain application following DOE’s attempt to withdraw it in 2010.


Jessica Bayles, a law clerk in the Firm’s Washington, D.C., office, also contributed to this article.

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Presidential Commission Recommends Nuclear Waste Management and Funding Reforms

by Ari Peskoe

The Blue Ribbon Commission on America’s Nuclear Future released its final report detailing a new strategy for managing the nation’s nuclear waste.  The Commission’s key recommendations include removing nuclear waste management from the purview of the Department of Energy (DOE), creating a new federally chartered corporation to implement the waste management program and immediately overhauling how utilities fund the nation’s waste management activities.  The Commission submitted its report to Secretary of Energy Chu on January 26 and urged the Secretary to appoint a senior official at the agency to coordinate prompt implementation of the Commission’s recommendations.

President Obama formed the Commission following his decision to halt work on a geologic storage facility at Yucca Mountain, Nevada.  Despite more than two decades of work on developing that site, the United States still lacks a central repository for civilian nuclear waste, and nuclear waste remains at power plants around the country.  Since the early 1980s when Congress created the Nuclear Waste Fund (NWF), utilities have paid the federal government 0.1 cents per kilowatt-hour of nuclear electricity sold in order to fund nuclear waste management activities.  Much of that money collected from utilities, however, has been used by Congress to fund unrelated programs or to reduce the annual budget deficit.

Concluding that the DOE’s record in managing nuclear waste has “not inspired widespread confidence or trust,” the Commission recommended creating a new single-purpose organization to implement the nation’s nuclear waste management program.  The federally chartered corporation would site, license, build, and operate facilities for interim storage and permanent disposal.

The Commission highlighted that reforming the NWF is critical to the success of the new organization.  The report details “a web of budget rules” that have made the approximately $750 million in annual fee revenues and the $25 billion balance in the NWF “effectively inaccessible” for their intended purpose.  The Commission noted that pending legal action against the DOE aimed at suspending the collection of annual fees until a new waste management plan is in place underscores the “sense of outrage that the only aspect of the waste management program that has been implemented in full and on schedule is the part that involves collecting fees.”

The Commission recommended that utility fee payments into the NWF each year match actual spending on waste management activities.  Under this recommendation, the DOE would amend existing contracts with utilities to require utilities to retain the balance of annual fees in irrevocable trust accounts, which would be similar to qualified nuclear decommissioning funds.  According to the Commission, DOE and utilities could implement this proposal without new Congressional legislation.

In 1998, then-Secretary of Energy Frederico Pena proposed a similar scheme.  Under that proposal, utilities would have been allowed to invest the retained portion of fee payments at “market rates of return,” but pay the government in the future the balance of the fees at the Treasury rate.  The difference in interest would have been retained by the utilities to offset the costs of the [...]

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