NPT calculations change after 3 months

Publish date: September 6, 1999

Written by: Thomas Jandl

NPT is unsure over costs and expenses, second draft in three months shows significant differences in estimates. A lease by any other name?

The Non-Proliferation Trust (NPT), the U.S. non-profit entity that proposes storage of 10,000 tonnes of nuclear fuel in Russia, seems to have difficulties figuring out infrastructure and storage costs. These changes provoke doubts over the rest of the project’s estimates.

In the May 5, 1999, draft, NPT estimated that the required infrastructure for the nuclear fuel storage project would cost a total of $2 billion. Revenues from the utilities trying to rid themselves of their nuclear waste would in this scenario amount to between $6 billion and $12 billion.

An NPT White Paper from July 7, 1999, presents a number of minor changes in the proposal. Among these, the amount of fuel to be shipped to Russia has increased. Now, 10,000 tons of nuclear fuel are supposed to be stored in Russia, for total revenues of up to $15 billion. The costs, on the other hand, have risen overproportionally to the increase in nuclear fuel to be transported and stored.

While the amount of fuel increases by 66.6%, infrastructure and storage costs increase to $3.75 billion (87.5%). That is particularly surprising as without any doubt not all costs are fully variable, or dependent on the amount of spent fuel to be stored. The transportation ship, for example, should be able to transport the extra spent fuel with only a marginal price increase. The same is true for the rail infrastructure. Hence, costs should rise at a lower rate than the amount of spent fuel, not a higher one.

NPT’s Thomas Cochran explained that after reviewing the first proposal, some people felt that the estimates were not conservative enough. To assure that indeed all projects can be carried out as planned, increases in the cost estimates were implemented, and some parts of the project are now included in the infrastructure budget.

These varying infrastructure cost figures confirm doubts about other estimates as well. The long-term effects on Russia’s environment and public health depend largely on the accuracy of estimates of costs after the contract period ends, such as the total cost of a study for a permanent repository and the construction costs of that repository itself. If the estimates are off by even a small percentage, Russia could easily end up with insufficient funding to manage the imported problem that will stay (and stay deadly) in Russia for hundreds of thousands of years.

Given that not a single repository is in operation today world-wide, it is dubious how NTP could so confidently come up with an estimate on whose accuracy the health and future of hundreds of generations of Russians depend. The fact that much easier-to-calculate figures are already swaying in the wind does not instil confidence in anyone with a long-term view of this project.

In May, NPT’s experts estimated that site selection and feasibility studies for a permanent repository would cost $100 million. Cochran says the latest estimate is $300 million.

NPT is a group of German and U.S. industry, an NGO and several well-connected former government and Navy officials have set up a company with the goal to take title of 10,000 metric tons of spent nuclear fuel from various countries (excluding the United States and Russia), with the aim to lease storage space in Russia for up to 40 years. The proceeds are supposed to pay for design and construction of the central Russian radwaste and spent fuel repository, for remediation of radioactively contaminated areas in Russia and for social projects.

A lease by any other name …
When Russians are asked to approve of a 40-year lease for storage of spent nuclear fuel from a number of wealthy foreign utilities, they may get more than they bargained for. While NPT offers a lease, in reality Russians are asked to sell a parcel of land for good.

NPT’s "lease" arrangement foresees usage of storage space in Russia for 40 years. Subsequently, the nuclear materials either move out of Russia, the "lease" is renewed or the nuclear materials stay in Russia for permanent storage, at NPT’s sole discretion. NPT’s Cochran confirms that Russia will not obtain additional leasing fees after the 40-year contract ends, even if the land remains in use for nuclear fuel storage.

A lease, however, is characterized by a lessor, who grants (generally exclusive) use rights of an object, i.e.: a piece of land or a car, to a lessee for a predetermined period of time in return for compensation. After the lease period expires, the lessee returns the property, which has never changed ownership. The generally lower worth of the property due to customary usage is compensated for by the leasing fee.

In the NPT "lease," the lessee stops paying leasing fees after 40 years, but continues to enjoy all the contractual benefits of the "lease." Hence, the contract is, legally speaking, in all relevant aspects not designed as a lease but as a purchase with the purchase price paid over a certain period of time in predetermined installments.

While that is not in itself unlawful or unethical, calling this agreement a "lease" with the associated connotation of a specified, short-term responsibility is misleading, potentially to help sell it to the skeptical Russian public. Under a real lease agreement, NPT would have to return the leased property and refrain from drawing benefits from it. (The benefit being the use for storage, in this case.) In reality, Russia is selling its land for permanent storage of radioactive substances.