On tree-lined bluffs overlooking the Chesapeake Bay, where anti-nuclear activists won a landmark environmental victory 36 years ago, Constellation Energy Group Inc. is engineering atomic power's comeback.
This time, even if there are protests, bulldozers will roll.
That's because the Baltimore-based utility and its allies have found a way around a longstanding regulatory policy they say added a year or more to construction times for nuclear plants.
In April, the U.S. Nuclear Regulatory Commission agreed to industry demands that it reduce its oversight of initial work at reactor sites. By narrowing its definition of the word “construction'' in agency rules, the NRC put off the required public hearings and permits that have waylaid past projects.
The untold story of how the energy lobby and the federal government worked to clear a path for new reactors — backed by an NRC commissioner seeking a job in the industry — reveals one way pro-nuclear forces have stolen a march on environmentalists.
“It was a very smart, strategic move to work in the background before ever submitting a new proposal for a plant,'' says Steve Warner, 42, founder of the anti-nuclear Chesapeake Safe Energy Coalition, who says he was caught flat-footed.
Utilities and the administration of President George W. Bush say they want new reactors on line by 2015. Power companies are rushing to take advantage of federal tax credits and loan guarantees in the Energy Policy Act of 2005, some of which begin to expire next year. The NRC says it expects to receive as many as 21 applications to build 32 new reactors, the first of which will be filed today by NRG Energy Inc. of Princeton, New Jersey.
$4 Billion
Constellation, the largest U.S. shareholder-owned electricity wholesaler, proposes building as many as seven new reactors through a joint venture with Paris-based Electricite de France SA, Europe's largest electricity utility.
The first of these would be on a rural tract near Calvert Cliffs State Park in Lusby, Maryland, an hour's drive from Washington. Constellation already operates two 1970s-era nuclear generators at the site.
In June 2005, Constellation CEO Mayo Shattuck III hosted Bush and NRC commissioners on a tour of the existing plant, where Bush promoted the new energy legislation. The company declined to comment on whether Shattuck, who serves on the executive committee of the industry's trade group, the Nuclear Energy Institute, played a role in winning government support for a change in the construction rule.
Building a new reactor will take $4 billion and seven years, including 42 months of regulatory reviews, according to industry and government estimates.
`Unnecessary Barriers'
To save time and expense, utilities have been working with the NRC through the NEI trade group to streamline agency licensing.
The new construction rule is only the latest such initiative. In 2004, the NRC limited the public's ability to gather evidence and question witnesses during hearings.
“We recognized that we did have these unnecessary barriers that were not allowing people to move forward,'' says former NRC Commissioner Jeffrey Merrifield, who voted for the change in the construction rule while seeking a new job under an unusual arrangement designed to avoid conflicts of interest.
In July, Merrifield, a 43-year-old lawyer and former Republican congressional staffer, joined the nuclear plant builder Shaw Group Inc. as a senior vice president.
Environmentalists, belatedly, are realizing what they lost.
“Streamlining is a pseudonym for confiscation — it's Orwellian,'' says Michele Boyd, the recently departed legislative director of the energy program at Public Citizen, a consumer lobby in Washington. “They're streamlining it for the industry, which requires that the public is not involved.''
Environmental Consequences
The construction limits on nuclear power plants date to 1971. That year, Chesapeake Bay conservationists trying to protect the Calvert Cliffs area won a federal appeals court decision that forced the NRC's predecessor, the Atomic Energy Commission, to consider the environmental consequences of a reactor's construction as part of its oversight.
At the time, Johns Hopkins University scientists warned that cooling water discharged from a reactor into the bay might harm Maryland's famous blue crabs and oysters.
The efforts to block construction eventually failed.
Yet to carry out the court's ruling, the Atomic Energy Commission decided that, beginning in 1972, it would require a public hearing and a reactor construction permit before the first shovelful of dirt could be moved.
The stricter reviews slowed licensing, and, after the meltdown accident at Three Mile Island in 1979, all but derailed the process. It took almost a quarter-century for the most recent U.S. reactor to be built and licensed in 1996.
“We were concerned that it was just too lengthy of a process,'' says Steven Frantz, an energy lawyer at Morgan, Lewis & Bockius LLP in Washington who works for the nuclear lobby.
Competing With Coal
Holding time-and-material costs in check is an essential element of the nuclear power industry's current effort to become more competitive with coal and natural gas. The cost of building an atomic plant — 41 percent greater than for a conventional coal plant, according to the U.S. Energy Information Administration — is balanced by lower fuel costs.
After accounting for all building and operating expenses, electricity from a new U.S. reactor will still cost about 13 percent more in 2015 than it would from one of today's coal plants, according to the EIA.
Constellation lawyer Carey Fleming was complaining about the regulatory obstacles to building during a meeting at NEI headquarters in Washington in April 2006 when a potential solution emerged, several participants say. Constellation declined to make Fleming available for an interview.
“My question was: What's the definition of `construction'? Can we look at that, and, in fact, redefine that?'' says David Repka, an energy attorney at Winston & Strawn LLP in Washington.
Draft by Lawyers
The NEI — whose members include nuclear utilities, manufacturers and builders — hired Winston & Strawn and two other Washington law firms to develop an argument that oversight should begin with construction of the reactor itself, not with the property and structures around it.
The chairman of Winston & Strawn's energy practice is James Curtiss, a Constellation director and former NRC commissioner.
The power of the lawyers' brief was in its simplicity: By redefining “construction'' to exclude excavation, road building and the erection of some cooling towers, the NRC could reduce its oversight without violating the 1971 court order.
On May 25, 2006, Adrian Heymer, the NEI's senior director of new plant development, conveyed the argument in a letter to the commission, saying the prohibition on pre-licensing construction was “excessive and unnecessary'' and “should be changed.''
Already grappling with a nearly decade-long overhaul of plant licensing, the commission in October took on the industry proposal as its own and expedited the adoption process.
`They Dug the Hole'
At a Nov. 1 public hearing, Geary Mizuno, a senior attorney in the NRC's Office of General Counsel, warned that agency objectivity might be vulnerable to a court challenge should the NRC consider an application after a site was partially developed.
“The question,'' Mizuno said, “is whether the reviewing judge is going to say: `Mr. NRC, you've got to be joking. They dug the hole. You didn't even determine whether this site is a suitable site for a plant, and yet you expect me to believe that the agency is going to act in an unbiased fashion?'''
Andrew Kugler, senior environmental project manager in the NRC's New Reactor Office, protested to the general counsel's office. Kugler said in an e-mail that the proposed rule would exclude from NRC regulation “probably 90 percent of the true environmental impacts of construction.''
The NEI pressed its case before the full commission on Nov. 9. Merrifield encouraged the lobbyists to expand their arguments in a written follow-up, saying that among agency streamlining measures he had “pushed on this one in particular.''
Allied Utilities
At the time, Merrifield had just announced plans to leave the commission and had begun one of his last assignments, chairing an agency task force on ways to accelerate licensing.
Several utilities wrote the NRC to support the proposed expansion of their authority, including Constellation; Dominion Resources Inc. of Richmond, Virginia; Duke Energy Corp. of Charlotte, North Carolina; Southern Co. of Atlanta; and plant designers Areva SA and General Electric Co.
On April 17, the NEI got what it wanted. The agency approved the new construction rule. And it did so in less than six months, compared with the 11 years it had needed to produce a new drug-and-alcohol testing procedure for nuclear plant workers.
The rule will go into effect 30 days after it is published in the Federal Register, probably later this year.
An NRC analysis supporting the change pointed out that any pre-licensing construction still would be reviewed before a final permit is issued.
Dissenting Voice
Commissioner Gregory Jaczko, a Democrat who was the lone dissenter on the five-member body, says he worries the rule will boomerang. “It raises a question about what is the baseline when you come in and do an environmental impact statement,'' Jaczko says. “We may find ourselves raising legal issues that are going to cause problems down the road.''
The National Association of Environmental Professionals — whose members consult for the NRC about its obligations under the National Environmental Policy Act of 1969, the law cited in the appeals court's Calvert Cliffs decision — says it was unaware of the rule change until contacted by Bloomberg.
“It didn't hit our radar,'' says Ronald Deverman, vice president of the Malden, Massachusetts-based group.
In a statement responding to the new rule, the association says the NRC must take special care to ensure that licensing reviews remain “objective and unaffected'' by utility investments in pre-licensing construction.
`Valuable Experience'
Among the companies that stand to benefit from the expanded authority is Merrifield's new employer. Shaw Group, based in Baton Rouge, Louisiana, says it has worked on 95 percent of the nuclear power plants in the U.S. It owns 20 percent of Pittsburgh-based Westinghouse Electric Co., whose designs are employed in half of the world's reactors.
Shaw announced it had hired Merrifield on July 11. He reports to Executive Vice President Richard Gill, who is chairman of the NEI trade group's executive committee.
In an accompanying statement, Shaw Chief Executive Officer James Bernhard Jr. said, “Mr. Merrifield brings valuable regulatory and legislative experience to the Shaw Group as we expand our ability to engineer, design and construct advanced nuclear power generating facilities.''
`Firewall' Lawyer
Merrifield was paid $154,600 a year at the NRC. In Shaw's industry peer group, $705,409 is the median compensation for a senior vice president, according to ERI Economic Research Institute of Redmond, Washington. Shaw spokesman Sean Clancy said any comparison would be speculative and that the company and Merrifield had no further comment.
John Szabo, a senior attorney in the NRC's Office of General Counsel, says he authorized Merrifield to look for an industry job while continuing to make commission policy. Merrifield had told him prior to initiating the search that he was hiring a lawyer to conduct it for him, Szabo says.
In an interview, Merrifield said he structured the search that way as a “firewall'' that he described as “relatively unique.''
“I'm not aware of anyone else having done this,'' he said.
Merrifield complied with the agency's ethics policy so long as the outside lawyer handled the search and didn't share the names of prospective employers with the commissioner, according to Szabo. He adds that if Merrifield directly engaged in job talks, he had to recuse himself on related agency business.
Speedier Hearings
Szabo says Merrifield told him he was discussing possible employment with Shaw on May 17, a month and a half before he left the commission. That was after he voted on the construction rule yet during the time his efficiency task force report was being circulated for commission approval.
Merrifield's task force proposed further accelerating licensing procedures by reducing some public comment periods; creating a new working group to further overhaul agency environmental reviews; and ending mandatory hearings on so- called uncontested applications for new reactors. The NRC decides who can formally contest new plants.
On June 22, the commission agreed to speed up, and seek to end, the uncontested hearings. It opted not to reduce public comment periods or to further streamline environmental reviews.
Merrifield did not vote on his report's recommendations.
In an interview, Merrifield said he made no decision about his new job until after he left the commission. He did not respond directly to questions about when he became aware of Shaw as a prospective employer.
`Recused Myself'
“If there were a case where I had to have communication with the company, I went through the appropriate channels and recused myself,'' Merrifield said.
In a follow up statement provided by Shaw, Merrifield reiterated that his job search had been cleared by the NRC's Office of the General Counsel and its Inspector General.
NRC Assistant Inspector General George Mulley says he is reviewing Merrifield's departure to ensure that the commissioner's job search didn't conflict with his duties.
Danielle Brian, executive director of the Project on Government Oversight, a public watchdog group based in Washington, says she is skeptical.
“Even if Commissioner Merrifield followed the letter of the law, he clearly trampled the spirit of it,'' she says. “There is nothing more devastating to the public's confidence in the government, and to civil servants' morale, than to see senior policy makers cash in on their public service like this.''
Fortune 100 Customers
On July 13, Constellation revealed plans to take advantage of the new construction rule in a partial-license application it filed with the NRC. The 4,855-page document details the utility's plans to build a third reactor that would double its electricity output at Calvert Cliffs.
Constellation also owns the regulated utility Baltimore Gas & Electric Co., two nuclear power plants in upstate New York and fossil fuel plants in California, Maryland, Pennsylvania and Utah. Its customers include 75 Fortune 100 companies.
“We are trying to preserve our option to move as fast as possible,'' says Constellation Vice President George Vanderheyden, the top executive at the joint venture developing the new reactors, UniStar Nuclear Energy LLC.
He says excavation probably won't begin until 2009.
Environmental attorney Anthony Roisman, who sued and won the Calvert Cliffs lawsuit more than three decades ago, says the NRC has unraveled much of what he accomplished in court.
“There are a series of things that they have done — and are doing — in which they are turning back the clock,'' Roisman says. “It's all for the same reason: The nuclear industry has come to the agency and said, `If you don't make it easy for us to get a license, we are not going to apply for one.'''
