Select Committee on Trade and Industry Appendices to the Minutes of Evidence


APPENDIX 6

Memorandum by Greenpeace

INTRODUCTION

  1.  In BNFL's Annual Report and Accounts (2001-2), the Company's Chief Executive, Norman Askew says the Liabilities Management Authority (LMA) ". . . will remove a substantial proportion of our net liabilities from the balance sheet. We therefore stand on the threshold of fundamental change within our company." The report makes it clear that the Company now plans to concentrate on building new reactors, designed by its subsidiary Westinghouse, in Britain and around the world. "Specifically we expect our expertise in new reactor design to pave the way for our participation in the resurgent global nuclear energy market," says Askew.

  2.  Clearly the LMA will free BNFL to fulfil its ambitions to become a major player in any new UK reactor building programme, creating yet more nuclear waste, whilst a solution to the problem of what to do with the waste remains elusive.

  3.  Greenpeace believes that the LMA will fail to inspire the public confidence it requires when one of its effects could be the re-start of a reactor building programme in the UK—even if this is an unintended side-effect. BNFL should be concentrating on building its business in clean-up and decommissioning, not adding to the problems it has been so prominent in creating. BNFL's Westinghouse division, for example, is ideally placed to supply nuclear waste storage systems to nuclear utilities around the globe.

  4.  If the LMA's aim is to develop "competitive markets for clean-up contracts [and] to stimulate innovation and improvements in safety", the structure of the new BNFL should reflect this too. A company owned (or perhaps eventually partly owned) by the UK Government, should have no truck with "the resurgent global nuclear energy market." Under the current proposals, the new BNFL, instead of having responsibility to clear up the nuclear mess will now be profiting from it as being one of the few contractors available in the short term to the LMA to provide clean-up services. As it stands, this proposal for an LMA restructuring provides all the legal and institutional framework to provide a further financial platform for BNFL to perpetuate nuclear waste creation.

  5.  The establishment of the LMA threatens to be a missed opportunity by the Government to rectify the problems caused by the nuclear industry over the last 50 years by breaking the cycle of "nuclear entrapment" whereby new nuclear projects are promoted in the hope of solving problems caused by earlier mistakes. But in their turn these projects end up losing money and increasing liabilities. This industry self-perpetuation and the associated secrecy must end.

  6.  Greenpeace is opposed to both the reprocessing of spent nuclear waste fuel and the unnecessary taxpayer subsidisation of the nuclear sector. While we see the establishment of the LMA, as an ideal opportunity to end this dangerous and environmentally damaging process, we would oppose any moves by the LMA to subsidise, directly or indirectly, the unnecessary perpetuation of reprocessing or the continued operation of uneconomic Magnox reactors.

  7.  Poor throughputs in BNFL's two reprocessing plants over recent years and the poor performance of the waste vitrification plants have cast serious doubt on Sellafield's future business plans. There is growing evidence that there is no use for plutonium—the main product of reprocessing. In fact, in the words of the House of Commons Trade and Industry Select Committee, plutonium ". . . is increasingly regarded as a positively dangerous waste product"[6].

  8.  The Magnox cycle appears to be losing money at an alarming rate. Urgent efforts need to be made to stem this outflow of funds, by closing down the Magnox reactors as soon as possible. Payment of a management fee as proposed by BNFL to British Energy is not an acceptable solution. This would likely increase the running costs and further delay the implementation of the only rational solution.

PRINCIPLES

  9.  The LMA's remit should be formulated along the lines suggested by the PIU's new energy policy ie where decisions about waste management involve trade offs with other objectives, environmental and sustainability concerns must take precedence. All LMA activities should be directed by environmental and sustainability concerns, rather than commercial or economic ones. The LMA should operate solely in the public interest—in ensuring a sustainable long-term strategy for waste management. It should not subsidise or in any other way support the nuclear power industry. The LMA should have full control over all the existing assets as well as existing liabilities.

  10.  All decisions about the future direction and development of the LMA should be made openly and transparently. There should be a radical transparency policy, which allows for complete transparency in the accounts, public access to information and influence on the future programme. There is no excuse for any sort of commercial confidentiality in the public sector. This must include complete transparency for all current operations at Sellafield and the Magnox sites.

  11.  The LMA's operation should be geared towards on site above ground storage at the site of production. Issues relating to the dumping of waste (or not) should be outside the LMA's remit. Including waste disposal in the remit would create an organisation with too little transparency, too many unaccountable vested interests, and a tendency to only look at the short-term. A separate organisation, entirely independent of the nuclear industry will be required to look at the long-term issues connected with how best to contain and isolate nuclear waste.

  12.  Funds already accumulated by BNFL for decommissioning and waste management must be segregated and completely ring-fenced so that they cannot be used in any way that contributes to current operations.

  13.  There should be no subsidies from the LMA to support BNFL's existing operations. There must be no incentive for BNFL to sign new contracts for reprocessing or MOX fuel fabrication. The LMA should initiate discussions with BNFL's existing reprocessing customers, including British Energy, to evaluate the potential for renegotiating the contracts. This should not be left to BNFL.

  14.  The rump of BNFL must not be "freed" to concentrate on selling new reactors. If the LMA is to inspire public confidence, its structure should not be one which gives BNFL a new lease of life to start a new reactor building programme in the UK or elsewhere. It should develop instead its clean-up and decommissioning business, and make the most of its Westinghouse division's expertise in the storage of waste.

  15.  We believe that any departure from these principles would seriously undermine the public acceptability of the LMA.

MAGNOX REPROCESSING

  16.  BNFL has "made a commitment to cease reprocessing through the Sellafield Magnox reprocessing plant by about 2012 in order to meet national OSPAR commitments"[7]. BNFL insists that Magnox spent nuclear waste fuel must be reprocessed. As a consequence:

    "The operation of Magnox reactors is inextricably linked to the associated fuel cycle"[8].

  17.  The company has, therefore, also announced a timetable for the closure of its Magnox stations, which would see them all closed by 2009[9].

  18.  There is currently a stock of around 7,000 tonnes of Magnox spent fuel, either in the station cores, the station ponds or at Sellafield. Continuing to operate the stations according to BNFL's programme will produce around an additional 4-5,000 tonnes. The total amount expected to be reprocessed between now and 2012 is projected to be around 11-12,000 tonnes[10]. This means that the reprocessing plant will be required to reprocess over 1,000 tonnes per year between now and the end of 2012.

  19.  Throughputs in B205 since 1996 have averaged less than 500 tonnes per year. In 2001-02 the throughput was 786 tonnes, and a target has been set for the current year of 800 tonnes. In contrast, a February 2000 BNFL submission to the Environment Agency projected that B205's throughput would have increased to 1,200 tonnes per year by now[11].





  20.  Cash is haemorrhaging from the Magnox cycle at an alarming rate[12]. As a result of issues raised by Greenpeace, the Environment Agency, during its review of Magnox station discharge authorisations, asked BNFL to seek an opinion from independent financial experts. BNFL refused. The Agency described this situation as not "fully resolved to its satisfaction".

  21.  These reactors need to be closed down as soon as possible. Continuing to operate them according to BNFL's programme is simply adding to the liabilities which the LMA will have to deal with. BNFL is already in danger of failing to meet its own deadline for the closure of the Magnox reprocessing plant, because the throughput at the plant has been so poor.

  22.  In addition to the economic arguments, the Magnox reactors are all suffering from a string of safety problems, mainly due to ageing, which should also require their closure[13].

  23.  Payment of a management fee as proposed by BNFL to British Energy is not a solution, would surely increase running costs, and further delay the implementation of the only rational solution.

  24.  The deal has been presented as a way of settling the dispute between British Energy and BNFL on reprocessing contracts. It appears to be simply a way of subsidising BE's reprocessing contracts, which may amount to illegal state aid. This is exactly the kind of transaction which the LMA must avoid. In addition, as BNFL is a publicly owned energy undertaking, it may well be subject to the Public Utilities Procurement Regulations and related EC public utilities procurement directives and therefore should put service contracts out to tender.

  25.  The UK is committed to achieving concentrations in the environment "close to zero" by 2020. This doesn't mean that discharges have to be "close to zero" by 2020, it means that concentrations in the environment have to be "close to zero" by that date. The UK should therefore be making dramatic reductions in discharges now, not in 10-15 years. Any increase in discharges from B205 as a result of increasing throughputs is likely to be strongly opposed by other OSPAR states.

  26.  Likewise, any delay beyond 2012, in the closure of B205 is also likely to elicit protests, especially since there is a five-year time lag before some discharges cease. Earlier closure of the Magnox reactors, would allow earlier closure of B205, and would have the added advantage of improving the UK's image with neighbouring OSPAR countries.

THORP REPROCESSING

  27.  If the LMA's remit were the environmental and sustainable management of nuclear waste, it would become clear very quickly that the storage of spent nuclear waste fuel is a far better option than continuing with reprocessing. In addition, the customers and the LMA/BNFL would probably make financial savings by moving to storage. The history of THORP also illustrates the need for the LMA's exposure to BNFL liabilities to be severely circumscribed—limited to past liabilities and not covering future commercial blunders.


  28.  Poor throughputs have also plagued the THORP reprocessing plant, and are causing a growing disquiet amongst BNFL's overseas reprocessing customers. There is now serious doubt over the profit projections originally used to justify THORP. On the other hand, if throughputs were to increase, so would the environmental impact of reprocessing.

  29.  In documents leaked to Greenpeace, BNFL customers recently stated that: ". . . the next business plan will result in another increase of more than 10 per cent in operating costs, mainly due to the projected eleventh year of operation of THORP. . . such cost increases and uncertainties are commercially highly unsatisfactory and make it impossible to manage our own fuel cycle business economically, given the cost pressures we are under".[14]

  30.  It is highly unlikely that THORP will complete its baseload contracts within 11 years. The NII reports that BNFL's Business Plan shows completion of the baseload contracts in 2006-07 ie after 13 years[15]. THORP's average throughput since it opened has been around 450 tonnes—yet it was supposed to reprocess 7,000 tonnes during its first 10 years of operation. The Sellafield Newsletter of 15 March 2002 reported that the plant has met and exceeded its 734 tonne target for the 2001-02 financial year. The NII has confirmed that THORP has been forced to reduce throughput because high level waste tanks were in danger of being filled to above the maximum legal level[16].

  31.  The original THORP cost-plus contracts, written in the 1970s, were designed to provide a profit to BNFL even after providing for full decommissioning costs over the first 10 years of operation. However, it is clear that baseload customers will not be paying the full cost of the extra years of operation at THORP. Having expressed their displeasure at increasing costs in spring 2001, the foreign customers were reported in October 2001 to have agreed on new contract terms. Although the customers will pay more than originally anticipated, the extra cost has been described as "not unreasonable", suggesting that BNFL must have agreed to pay some of the costs of operating THORP for extra baseload years. Above all, customers were said to be satisfied to have limited their exposure to delays in vitrification of high-level waste at Sellafield, and clarified that they would not be billed for THORP decommissioning costs[17]. What is not clear yet, is whether the customers have been told that the baseload period will almost certainly extend to 13 years or more, or what proportion of the 30 per cent increase in operating will be funded by BNFL. BNFL's proposals for funding three extra baseload years of THORP's operation urgently need to be clarified, and it should be made clear that this will not fall to the LMA.

VITRIFICATION PROBLEMS

  32.  In January 2001, the Nuclear Installations Inspectorate issued BNFL with a specification requiring the current 1575m3 stock of Magnox and Oxide derived High Level Liquid Waste held in tanks, to be reduced by defined annual reductions to a "strategic stock" of around 200m3 by the year 2015[18]. In practice this means BNFL can add no more Highly Active Liquid (HAL) to the tanks from reprocessing than they can extract by vitrification, whilst also observing the annual reduction figure imposed by NII. Meeting the reduction targets will depend on the Waste Vitrification Plant (WVP) working properly.

  33.  BNFL is commissioning a third vitrification production line which is expected to increase throughput capacity by approximately 50 per cent. BNFL has projected that WVP will produce 600 cans of vitrified product per year. The NII, however, believes a figure of 475 is more realistic[19]. In their latest Sellafield Quarterly Report (1 October-31 December 2001) the NII has confirmed that THORP's reprocessing throughput is being severely limited by poor performance in Sellafield's Waste Vitrification Plant. Commenting on THORP's operations, the NII report that:

    "We are of the view that unless performance of the vitrification plants improves, the future THORP reprocessing throughput will be significantly affected"[20].

  34.  In view of the substantial threat arising from the storage of high-level waste, particularly in the post-September 11 security environment, the LMA should take urgent action to reduce stocks much more quickly than the NII's 2015 deadline. The quickest way to do this would be to end reprocessing.

ENDING OXIDE REPROCESSING

  35.  The projected economic benefits, which were originally used to justify THORP, are now very unlikely to materialise. However, Sadnicki et al estimate that the early ending of THORP reprocessing would most probably save all parties a substantial sum of money, varying between £224 million and £526 million for the German contracts alone, depending on the precise form of the new storage arrangements and their timing[21].

  36.  BNFL's customers cannot exactly be described as enthusiastic consumers of the services for which they have contracted. Unfortunately, their contracts were signed in the late 1970s, before the economics of reprocessing became clear.

  37.  Sellafield's second largest customer, after the Japanese utilities, is British Energy. BE recently called for an end to reprocessing. A BE spokesman stated that

    "We simply do not believe in reprocessing because of its huge costs and we want to renegotiate this contract. We are paying six times as much to deal with our spent fuel as American generators do at a time when electricity costs have fallen markedly"[22]. BE has also stated that reprocessing ". . . has left us with a service we don't need, for a product we don't want, and at a price we cannot afford"[23].

  38.  British Energy's executive chairman Robin Jeffrey announced in February that the company was putting on hold a move to refer its reprocessing contracts with BNFL to the Office of Fair Trading[24]. It does not, however, mean that BE would not welcome a switch from reprocessing to storage of spent nuclear waste fuel.











  39.  In view of the pressing need for a reduction in the stocks of high-level liquid waste; the escalating costs of reprocessing; the lack of demand for, and hazardous nature of plutonium; and the reluctance on the part of many customers to continue with reprocessing; the LMA should initiate discussions with BNFL's existing reprocessing customers, including British Energy, to evaluate the potential for renegotiating the contracts. This should not be left to BNFL. In the run-up to the establishment of the LMA, no new deals between BNFL and BE which trade-off a management fee for running the Magnox stations against an agreement to continue with reprocessing should be allowed to go ahead and pre-empt options for the LMA to seek renegotiation.

THE SELLAFIELD MOX PLANT

  40.  The disagreements between Greenpeace and the Government concerning the economics of the Sellafield MOX Plant have been well rehearsed during recent public consultations and in Court.

  41.  Nuclear utilities with reprocessing contracts with BNFL are bound by those contracts to take back their plutonium. This does not necessarily mean they will be enthusiastic purchasers of MOX. The only options which BNFL offer to its customers are to receive their plutonium back as plutonium oxide, or in the form of MOX fuel. An alternative way of dealing with the plutonium we have already created would be to immobilise it as a proliferation-resistant waste-form, and store it in secure stores which meet with strict anti-proliferation and security requirements. The LMA should continue the work started by BNFL on plutonium immobilisation and offer immobilisation as a service to BNFL's customers who have already had their spent nuclear waste fuel reprocessed.

  42.  MOX will not "use up" the existing stockpile of plutonium at Sellafield. Most of the plutonium that BNFL wishes to turn into MOX has not yet been separated in THORP. The economic case BNFL has claimed or the SMP rests on future reprocessing in THORP separating yet more plutonium from foreign nuclear waste fuel. BNFL expects its biggest customer to be Japan.

Table 3:  Separated Plutonium Stocks held at Sellafield (Te) [25]

DateBNFL Other UKOverseas Customers TOTAL
December 199953.55.0 11.069.5
Projected from contractual commitments to reprocessing 902737 154

  43.  As can be seen from the above table, ending reprocessing now would reduce the total amount of plutonium requiring storage to around 50 per cent of the projected stockpile.

  44.  As a result, partly of the data falsification scandal, BNFL has failed to secure any contracts for MOX fuel in Japan. Despite dropping the portion of our Court action concerning the lack of Japanese contracts, Greenpeace still belives BNFL is unlikely to secure any contracts with Japan. Satoshi Azumi, manager for nuclear fuel engineering at Kansai Electric, the company which took delivery of the faulty MOX from BNFL in 1999, told the New York Times on 5 July 2002, that ". . . we have no plans for a return shipment from BNFL. BNFL destroyed the trust between us, and until their reputation is restored and the people can trust them, there are no more plans to buy more MOX pellets from them"[26] .

  45.  The estimated £200 million profit also relies on customers signing contracts that do not yet exist. BNFL describe an agreement with a Swedish nuclear utility as a "contract" in its Press Release of 8 May 2001—yet the reactor in question does not even have government permission to use MOX. BNFL will need Japanese contracts if SMP is to make a profit—even after the capital costs of building the plant have been disregarded.

  46.  BNFL is set to lose at least £270 million from building and operating the SMP. With only its existing firm contracts it will lose far more. These costs probably do not include the full costs of dealing with the nuclear wastes that will be produced, since details of these costs have been kept secret.

  47.  The prospect of British Energy using Sizewell B to burn 30 per cent MOX is poor. Sadnicki and Barker estimate that the conversion costs would make a negative return. Nor is there an economic case for 100 per cent MOX burn in a new generation of reactors[27].

  48.  SMP is rapidly turning into a financial blackhole. BNFL recently increased the amount it wanted to "write-off" on SMP from £300 million to £472 million, while increasing its estimate for decommissioning from £50 million to £92 million, an amount that is likely to rise further. Any losses should fall on BNFL and not the LMA.

POLICE AUTHORITY

  49.  We note that, in the first instance the risks arising from the material that the new police authority are guarding would be much reduced were the considerable quantities of plutonium (see above) eliminated by appropriate immobilisation technologies.

  50.  Further, although the institutional structure of the new police force may be an improvement on that existing, it remains of concern that the police authority to whom they are accountable will continue to have site licensees in the majority of positions. How will the constabulary respond when it identifies security problems that could only be remedied by significant interruption/cost to on-site operation? Whether these exist or not there is a perceived conflict of interest which will not allow public confidence to develop.

CONCLUSIONS

  1.  It is uneconomic to continue operating the Magnox reactors. For economic and safety reasons they should be closed down as quickly as possible.

  2.  For environmental reasons, B205 also needs to be closed down as soon as possible. Given the poor throughput of B205 in recent years, Magnox reactors need to be closed down urgently, rather than according to BNFL's proposed closure timetable. The proposed deal between BNFL and BE should not be allowed to pre-empt decisions by the LMA.

  3.  BNFL's contracts with its reprocessing customers should be renegotiated in order to facilitate the early closure of THORP. The LMA should initiate these discussions and not leave it to BNFL.

  4.  The LMA should continue investigations into plutonium immobilisation.

  5.  Ending reprocessing in BNFL's two reprocessing plants as soon as possible will:

    (a)  Facilitate the early vitrification of dangerous high level liquid waste stocks.

    (b)  Reduce plutonium stockpiles requiring expensive processing and secure storage by as much as 50 per cent.

    (c)  Assist the UK in meeting its commitments under the OSPAR Treaty and improve international relations, and

    (d)  Minimise the exposure of UK taxpayers to escalating costs.

  6.  The creation and remit of the LMA must be clearly confined to dealing with past liabilities not future ones: otherwise the setting up of the LMA will amount to little more than handing over a blank cheque to the nuclear sector.

  7.  If the LMA is to inspire public confidence, the rump BNFL must concentrate on clean-up and decommissioning work, and not be involved in new reactor build, whether in the UK or elsewhere.


6   House of Commons Trade and Industry Select Committee "BNFL Public-Private Partnership" (May 2000). Back

7   See for example "Responses from BNFL to specific questions and propositions in PIU nuclear scoping note" ie the UK Energy Review. Back

8   BNFL (2001) Responses from BNFL to Specific Questions and Propositions in PIU Scoping Note. Back

9   Originally announced May 2000 but modified by BNFL (2001) Annual Report and Accounts 2001. The announcement that Chapelcross and Calder Hall will close early brings the date forward by one year to 2009. Back

10   BNFL National Stakeholder Dialogue, Spent Fuel Management Working Group, Appendix 8 & 9 July 2002. Back

11   See CORE Briefing 27 June 2002 "Magnox Reprocessing Failures, Threaten More UK Power Stations". Back

12   Sadnicki (12 March 2002) Examination of BNFL Reports and Accounts. A report for Nuala Ahern MEP. Back

13   See for example "Review of Ageing Processes and their influence on Safety and Performance of Wylfa Power Station" Large and Associates, 14 March 2001. Back

14   See leaked minutes of meetings between BNFL and its Overseas Baseload Customers at www.britishnuclearfuels.com Back

15   HSE (August 2001) The storage of liquid high level waste at BNFL Sellafield. Addendum to February 2000 report. Para 114. Back

16   Sellafield waste tanks "pose an undue risk" Paul Brown, The Guardian, Wednesday July 3, 2002. Back

17   Nuclear Fuel 15 October 2001. "BNFL overseas customers agree on new reprocessing contract terms". Back

18   HSE News Release EO15:01 31 January 2001. Back

19   14 HSE Report (February 2000) "The Storage of Liquid High-Level Waste at Sellafield". Back

20   Quoted in CORE (14 Feb 2002) Briefing 02/02 "Calder Hall Accident and THORP Waste Problems". Back

21   Sadnicki, Barker and MacKerron, "THORP: The Case for Contract Renegotiation", Friends of the Earth June 1999. Back

22   Herald (2001) Nuclear Giant in Spent Fuel Switch. James Freeman and Catherine MacLeod. 15 November. Back

23   Nucleonics Week (2002) BE Blames Reprocessing Charges for Higher UK Operating Costs. Vol. 42 No. 46. page 6. 15 November. Back

24   See For Example Reuters (26 Feb 2002) "Brit Energy, BNFL look at replacing nuke reactors", By Matthew Jones. Back

25   Reproduced from BNFL National Stakeholder Dialogue, Plutonium Working Group (10 November 2000) Draft Interim Report. Back

26   "Japanese Shipment of Nuclear Fuel Raises Security Fears" by Howard French, New York Times, 5 July 2002. Back

27   Barker and Sadnicki, "The Disposition of Civil Plutonium in the UK", April 2001. Back


 
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Prepared 12 August 2002