1998 Congressional Hearings
Special Weapons
Nuclear, Chemical, Biological and Missile

 Page 1       TOP OF DOC

ENERGY AND WATER DEVELOPMENT APPROPRIATIONS FOR 1998

WEDNESDAY, MARCH 12, 1997.

ENVIRONMENTAL MANAGEMENT AND NUCLEAR WASTE DISPOSAL BUDGET OVERVIEW

WITNESSES

ALVIN L. ALM, ASSISTANT SECRETARY FOR ENVIRONMENTAL MANAGEMENT

LAKE H. BARRETT, ACTING DIRECTOR, OFFICE OF CIVILIAN RADIOACTIVE WASTE MANAGEMENT

HOWARD R. CANTER, ACTING DIRECTOR, OFFICE OF FISSILE MATERIALS DISPOSITION

Opening Remarks

  Mr. MCDADE [presiding]. The Committee will come to order.

  We're happy to see a familiar face around the corridors of the Capitol, and we're delighted to see you, Al, and delighted to have you here, accompanied by Lake Barrett. We're delighted to have you here, Mr. Barrett.

  May I say to you that we would suggest that you file your formal statement with the committee, and for the record it will be well-studied, and that you summarize in your own fashion informally what you want us to hear.

 Page 2       PREV PAGE       TOP OF DOC

  Mr. Alm, you're recognized, please.

Oral Statement of Mr. Alvin Alm

  Mr. ALM. Thank you, Mr. Chairman and members of the committee.

  First, I wanted to indicate how much I appreciate the support this committee has given to the EM program over the years, and I'd also like to compliment the very quality of the staff who have been really very good to deal with.

  Our fiscal year 1998 budget is a transitional one. We're shifting from a program that was projected to span many decades to one focusing on cleaning up most of the sites within a decade. What I'd like to do briefly this morning is to describe where the program has been and where it's going.

  The EM program exploded in the late 1980s and early 1990s. It grew from, I believe, $2.2 billion to $5.5 billion over that period of time. At one time the program was estimated to rise to $10 billion annually, but then a period of fiscal stringency came in and people realized that those levels wouldn't be possible.

  From 1993 to 1996, a series of reforms were initiated. Incentive-based contracts were completed at all the major sites, Oak Ridge being the last, and that proposal is in draft right now.

 Page 3       PREV PAGE       TOP OF DOC

  There have been substantial reductions in costs by working with regulators and contractors, and real progress in getting work done in the field. This allows us to begin to think about completion of cleanup at our major sites.

environment management challenges

  Now let me mention the three challenges to the DOE program. First of all, we have extremely hazardous materials; for example, high-level radioactive wastes in hundreds of large underground tanks, plutonium scattered around many, many buildings in some of our facilities. Secondly, we have extremely high fixed costs, and these fixed costs are necessary in order to conduct our operation safely and securely. And we have a series of regulatory agreements between DOE and the State and EPA at each of our sites. In addition, we have a Defense Nuclear Facilities Safety Board. So we have a lot of people involved in the program, and State and EPA agreements are enforceable. So from time to time, we face some penalties.

  In order to achieve the 10-year goal, three elements are going to be necessary. One is stable funding over a substantial number of years; second, substantial efficiency improvements, and, third, privatization. The purpose of this hearing is to talk about funding. So I'd like to focus on that and the other elements that are necessary to achieve our goal.

  First is productivity. We're initiating a whole series of efforts which are described in my testimony, and I won't go through them now, but they're all designed to make our program more efficient. We are going to be setting two bottom-line goals. One is, to the extent possible, we're going to try to reduce support costs at each one of our facilities, the contractor support costs at 30 percent of the total. In other words, we will be moving people out of support, nonproductive work, into cleanup.

 Page 4       PREV PAGE       TOP OF DOC

  We're also going to be setting overall efficiency targets based on industry learning curves at the site. So for each of the 10 years we'll be looking for continuous improvement in efficiency.

PRIVATIZATION

  Let me turn now to privatization. Privatization is key to our total program. Of the dollar amounts of the budget authority requested for 1998, 75 percent of the $1 billion is related to compliance, near-term compliance agreements. Privatization, as we define it, represents a form of project financing that's used increasingly in other fields to finance power plants, waste water treatment, et cetera.

  In DOE, under privatization, the private sector will finance and construct projects under competitive conditions. The government does not pay until a product or service is actually delivered.

  There are two major advantages to privatization. First, privatized projects will be cheaper than the projects that would have been conducted if the management and operating contractors conducted them. That's merely because of competition.

  Second, privatization allows us to initiate projects earlier, thereby helping reduce mortgages. If we did not have the privatization program, many of the projects that we're requesting to be privatized would have to be added back into our base budget. That would mean that a number of other compliance activities would fall off the table, and it would also mean that we'd have to allocate funds among the sites. Privatization really allows us to move ahead with some substantial projects. It would be very difficult without it.

 Page 5       PREV PAGE       TOP OF DOC

  The appropriations and authorization requested is an amount sufficient to cover termination, if termination occurred at the convenience of the government. The outlays occur in the years when the product or services are actually delivered.

  All the steps I've talked about are designed to allow us to accelerate the program. As they're successful, then we will be able to invest funds by moving projects up and reducing the fixed costs in the new projects. So it has a spiraling effect.

THE FISCAL YEAR 1998 BUDGET

  The fiscal year 1998 budget includes $5.8 billion for regular conventional budget authority, $477 million to forward-fund or completely fund a number of construction projects, and $1.6 billion for the privatization projects. I should add that, although that looks like a big increase, if one looks at the outlays, the actual program level, our program budget is going down since 1996. The outlays in that year were $7.2 billion, and we're looking at roughly $6 billion for 1997 and 1998.

  Our budget has really three goals for 1998. First is reduce the most urgent risks, and these include the two spent fuel facilities, moving ahead on the Hanford tanks, all designed to deal with real risk; secondly, reduce mortgage and support costs. The B Plant at Hanford, by accelerating that program, we will save $75 million in surveillance and maintenance costs by accelerating that for three years. At Rocky Flats, by cleaning out the buildings, we will reduce the long-term babysitting cost of that facility. And, third, compliance and safety, we have a series of compliance agreements that we're legally committed to. We work with the States continually on modest provisions, but, in total, I expect the Department to meet its legal obligations. Second, we have obligations arising out of safety, needs identified by the Defense Nuclear Facilities Safety Board.

 Page 6       PREV PAGE       TOP OF DOC

  Let me just conclude by saying that I think funding this program is very important for one reason, and that is that it will have a real impact on reduction the obligation on our children and grandchildren. I'm a strong proponent of deficit reduction, and I think that controlling the deficit is absolutely critical. But one of the major purposes of deficit reducing is to reduce this burden, and I feel that the extent to which we pass on the burdens of a deteriorating system with high fixed costs, while it is working, it is counterproductive to our deficit-reducing goals.

  Thank you very much for this opportunity, Mr. Chairman. I'm willing to answer any questions you may have.

  [The prepared statement of Mr. Alm follows:]

  "The Official Committee record contains additional material here."


  Mr. MCDADE. We'll probably have a flock of them for you. We thank you for a fine statement and for your efforts at bringing both competition and innovation into the system. We appreciate it very much.

  Mr. Barrett, we'll be delighted to hear from you now.

Oral Statement of Mr. Lake Barrett

  Mr. BARRETT. Thank you very much, Mr. Chairman, and good morning to members of the committee. I appreciate the opportunity to appear before you today to discuss our 1998 budget request and our plans to maintain the momentum toward the development of a federal radioactive waste management system to effectively and responsibly manage the spent nuclear fuel and high-level radioactive waste in our country today.

 Page 7       PREV PAGE       TOP OF DOC

  I'm pleased to report that within our existing authorities we made significant progress since we last reported to this committee. We have put forth and are implementing a credible plan that maintains the progress toward a national decision on the geologic disposal option. Almost all of our funding for fiscal year 1997 was allocated to, and is being utilized by, the Yucca Mountain Project, which is expected to achieve all of its annual targets.

  As directed by Congress, we did not provide funding for oversight to the State of Nevada and affected local units of local government, and we reduced the program management costs by eliminating work not directly associated with our site-characterization efforts at Yucca Mountain for non-site-specific storage activities.

FISCAL YEAR 1997 ACCOMPLISHMENTS

  Now I'd like to describe the progress we have been making with our fiscal year 1997 appropriation. At Yucca Mountain, we have nearly completed construction of the five-mile underground exploratory studies facility, which is providing scientists with access to the repository setting, where they can directly observe the geologic and hydrologic features of the Yucca Mountain site and conduct tests in the rock under simulated repository conditions. Thus far, we have found nothing to indicate that the Yucca Mountain site would be unsuitable for a permanent geologic repository. The tunnel-boring machine has passed through the repository horizon, has made the turn, and is proceeding up the south ramp, and is now approximately 200 meters from the south portal. We expect to break out of the mountain within the next four weeks.

  The emphasis of the underground work now shifts to investigations of the Ghost Dance Fault, a principal geologic feature in the repository setting, hydrologic testing, and thermal testing, which simulates the heat of spent nuclear fuel in a repository environment. Construction is now underway on the northern and southern Ghost Dance Fault alcoves, which will provide important information about that fault.

 Page 8       PREV PAGE       TOP OF DOC

YUCCA MOUNTAIN VIABILITY ASSESMENT

  We're also placing considerable emphasis on the completion of the Yucca Mountain viability assessment. The viability assessment will provide policymakers information about the probability that a repository is a viable undertaking. By drawing on a decade or more of data-gathering and by placing emphasis upon the most significant remaining issues, we can provide a better understanding of the repository design and its performance in a geologic setting, a better appreciation of the remaining work needed to prepare a license application, and more accurate estimates of the cost of repository construction and operation. When completed in 1998, the viability assessment will be an early and integral step in the path to preparing a repository Environmental Impact Statement and a license application. This committee's support of our fiscal year 1998 budget request will enable us to complete this important activity.

COMMERCIAL WASTE ACCEPTANCE

  Now I'd like to address the area of waste acceptance. Last summer the U.S. Court of Appeals held that an obligation has been created for the Department of Energy in return for payment of fees by utilities that contracted for disposal services, to start disposing of spent nuclear fuel no later than January 31, 1998. We formally notified standard contract-holders by letter on December 17, 1996, that the Department would be unable to begin acceptance of their spent nuclear fuel in either a repository or an interim storage facility by that date and invited contract-holders to provide their views by March 14 on how the delay can best be accommodated. Once we've had an opportunity to analyze those views and conduct a dialog with the contract-holders, we will be in a better position to determine our next steps.

 Page 9       PREV PAGE       TOP OF DOC

  In the non-site-specific interim storage area we have also made considerable progress. In accordance with direction from the administration and the Congress, we started to conduct non-site-specific safety design and engineering analyses for a possible interim storage facility to reduce the facility licensing time once a site is designated.

  An example of this activity is the generic topical safety analysis report. The report is on schedule to be submitted to the Nuclear Regulatory Commission this May and will contain the necessary required analyses and evaluations to demonstrate that the operation of the facility would not endanger the health and safety of the public.

  In the area of transportation during the past year, we have begun development of a market-driven approach that will rely on the maximum use of private industry capabilities, expertise, and experience to accept and transport commercial spent nuclear fuel to the federal receiving facility.

  In the program management area we have restructured our program management funding allocation in 1997 and our request in 1998, in accordance with congressional guidance in the Fiscal Year 1997 Appropriations Act. Since last year we have completed a realignment of our program management organization, strengthened our capabilities at headquarters and in the field to more effectively monitor and maintain our progress. We have provided greater management attention to key scientific and engineering issues relating to the repository viability assessment.

FISCAL YEAR 1998 BUDGET REQUEST

 Page 10       PREV PAGE       TOP OF DOC

  Now I would like to turn on how we plan to use the 1998 budget request. The President's budget request is $380 million for fiscal year 1998 and is consistent with the policy that this committee and the Congress directed in the Fiscal Year 1997 Appropriations Act. Of the $380 million request, $325 million will be used by the Yucca Mountain Site Characterization Project. Of the remaining funds, $10 million would be to fund the waste acceptance storage and transportation activities and $45 million for required program management activities.

  The source of the funds requested is to be equally divided between $190 million from the Nuclear Waste Fund and $190 million from the Defense Nuclear Waste appropriation.

  The $325 million we are requesting for Yucca Mountain will be used to address the remaining scientific and technical uncertainties regarding the construction and operation of a repository at Yucca Mountain. We will apply most of the fiscal year 1998 funding toward completing the repository viability assessment and continuing work on the Environmental Impact Statement and license application.

  In fiscal year 1998 our budget request includes resources to initiate additional underground exploration in an east-west excavation to further reduce the technical uncertainties about the site and to improve our understanding of the processes in Yucca Mountain that are important to the performance and construction of a repository.

  The 1998 budget request also includes funding for the State of Nevada and affected units of local government that are affected by our site characterization activities at the Yucca Mountain site. These payments are provided for in section 116(c) of the Nuclear Waste Policy Act. We continue to believe that such support is important to enable local governments most directly affected by the activities at the Yucca Mountain site to remain informed and to participate in a meaningful way in the day-to-day program activities that may affect them.

 Page 11       PREV PAGE       TOP OF DOC

  The fiscal year 1998 request of $325 million will allow us to maintain momentum toward a national decision on the geologic disposal option by funding activities that are necessary to do the following:

  Number One, complete the viability assessment in 1998.

  Number Two, update the regulatory framework to focus the Yucca Mountain site suitability evaluation on safety and environmental performance and to reduce redundant activities.

  Number Three, publish an environmental impact statement in the year 2000.

  Number Four, recommend a repository site to the President in 2001, if the site is suitable, and submit a license application to the Nuclear Regulatory Commission for construction of a repository in 2002.

  And, Number Five, begin placement of nuclear waste in a geologic repository in 2010, if the Commission grants the license to proceed with operations.

  Now shifting to the area of waste acceptance, storage, and transportation, the budget request is $10 million and includes funding for our ongoing generic responsibilities concerning commercial spent fuel and long-lead-time activities that must precede the removal of spent nuclear fuel from reactor sites once a federal facility becomes available.

  During the year we will seek to work with the standard contract-holders to discuss and develop strategies to mitigate the consequences relating to our inability to accept waste in January 1998. We will continue the effort to develop our market-driven approach for waste acceptance, storage, and transportation. We will work with the Nuclear Regulatory Commission to address any safety questions they may have regarding the interim storage topical safety analysis report that we will submit this coming May, and we will continue to plan for the provision of technical and financial assistance under current law to States and Indian tribes for emergency response training for public safety officials, through whose jurisdiction shipments of nuclear fuel and high-level waste will be transported.

 Page 12       PREV PAGE       TOP OF DOC

  In the program management area, our request reflects the continued response to your direction to reduce budget elements related to general and project management activities not directly associated with the performance of site characterization or waste acceptance planning. Consequently, the program management request of $45 million is $2 million less than what we have in 1997.

conclusion

  In conclusion, I would like to make the following remarks. Your approval of our 1998 budget request will allow us to maintain the momentum we have gained over the last two years toward completion of the viability assessment. At the proposed funding level, we will also be able to maintain the capability to respond to any new policy direction that results from the debate on interim storage. And, finally, we will be able to complete and fully benefit from the significant changes we have made to strengthen and reduce the cost of the program management activities.

  I thank you and I'm pleased to answer any questions the committee may have.

  [The prepared statement of Mr. Barrett follows:]

  "The Official Committee record contains additional material here."


TEN-YEAR PLAN

  Mr. MCDADE. Mr. Barrett, thank you for a fine statement, and no doubt we'll be back to you before the morning of the day is finished.

 Page 13       PREV PAGE       TOP OF DOC

  Mr. Alm, let me begin by asking you what you estimate the total cost of the cleanup program to be, how many years it will take, and what the impact on those estimates might be from the 10-year plan.

  Mr. ALM. Well, Mr. Chairman, we are in the process right now of evaluating our field submissions. The field provided us submissions on February 28, and we hope to get the draft 10-year plan out around March 30.

  What we're doing right now is taking a look at two things. One is, can we sequence the projects better? And, two, we must begin to set the efficiency goals that I talked about. I can say in general terms I think that most sites will be able to meet the 10-year period. I think the exceptions are Savannah River, Hanford, Idaho—all of which have high-level waste problems—and Oak Ridge, which has just so many different activities.

  I do think it's very important, though, that we have a couple of elements managed. One, of course, is that, from our management point of view, we manage these funds in a way that we get continuous improvement, just like you'd see in the private sector. And, secondly, as I mentioned, the privatization will be of great help to us in achieving the overall objective.

  Mr. MCDADE. What do you estimate the cost to be, the total cleanup cost?

  Mr. ALM. I think if I gave you an estimate now—if I could, as soon as we come up with a number, I'd be glad to get back to the committee.

 Page 14       PREV PAGE       TOP OF DOC

  Mr. MCDADE. And that would be about the end of the month? Is that what you're thinking?

  Mr. ALM. Yes.

  Mr. MCDADE. All right, you can furnish it for the record, if you would, and also communicate directly, if you will, with the staff.

  [The information follows:]

TOTAL CLEANUP COST

  The most-recently released Department of Energy estimate for the total cost of cleanup was the 1996 Baseline Environmental Management Report, which estimated life cycle costs between $189 and $289 billion over a 75-year period. The Department is now in the process of compiling and evaluating draft Ten-Year Plans submitted by our Operations Offices on February 28, 1997. These plans will be rolled up into a Draft National Ten Year Plan, to be released for public comment this Spring. We anticipate significant reductions in total costs and acceleration of cleanup project dates as part of this ten-year planning effort.

  Mr. MCDADE. What about length of time for completion of cleanup?

  Mr. ALM. Well, as I indicated, with most sites we'll be able to meet the 10-year period. The ones that will take the longest dates are for the high-level facilities at both Hanford——

 Page 15       PREV PAGE       TOP OF DOC

  Mr. MCDADE. Give us an estimate of the number of years to clean up those high-level sites.

  Mr. ALM. At Idaho and Hanford it could be halfway through the next century. That's a long period of time. There are some major choices that have to be made on exactly how we are going to do this. At Idaho it's a question about whether we continue calcining or putting the waste in one stable form, which then would require them to dissolve then to vitrify. So we've got some major issues, but in general terms, when you think about most of the things that can be done, you can get an awful lot done within 10 years, and certainly a great deal done after that. I would expect Oak Ridge to be done within 15 years. And it's a high-level waste program, and I could give you estimates now, but there are so many decisions to be made down the road that are going to change things——

  Mr. MCDADE. Well, we're just trying to get a handle on what it looks like, your crystal ball looks like today as we meet here at 10:25.

  Mr. ALM. That's the reason I think a 10-year plan is so important, because we'll lay this out to the public.

  Mr. MCDADE. Okay, let me ask a question. Is this data that's coming in about the end of the month, is that based on the 10-year plan being in place or is it based on just the generalization in terms of the cost and the time, et cetera?

  Mr. ALM. It is based on, for most sites, how they would achieve cleanup within 10 years. We've used two funding scenarios, one at a constant $6 billion a year and one at $5.5 billion. So we will be able to get a feel for how much that funding difference will make in the program in terms of reducing mortgages and lowering the total cost.

 Page 16       PREV PAGE       TOP OF DOC

  Mr. MCDADE. And we all agree with that general objective of trying to get those fixed costs down.

  Mr. ALM. Can I just make one last comment?

  Mr. MCDADE. Please do, yes.

  Mr. ALM. In the past there was a tendency to merely add up all the ''requirements,'' but I think we have an obligation to manage the program. One way to make history is to affect history, and we really want to manage this program, get it efficient enough that we can move everything. You can talk about some substantial differences, if you're aggressive.

ACCOMPLISHMENTS OF ENVIRONMENTAL MANAGEMENT PROGRAM

  Mr. MCDADE. And let me say to you that the committee is highly interested and commends you for your efforts at trying to, as I say, introduce the competition, get this thing speeded up, put the money into the cleanup rather than in, as you call it, the mortgage costs. We have some questions about how we're going to get there.

  Let me ask you this, and this is one that I hear a lot from colleagues. Since 1992, $34 billion has been invested in this program. What's been accomplished? What can we tell the public, the taxpayers, and our colleagues on the floor has been accomplished by the expenditure of this money?

 Page 17       PREV PAGE       TOP OF DOC

  Mr. ALM. Mr. Chairman, I think the best way, actually, to get a feel for this is to go to the sites, and we always love to have Members, if they have that opportunity. But let me take a few sites. Let's take Hanford. We are finishing immobilization of the Purex facility, which will save around $35 million a year. We moved some areas off the National Priorities List at Hanford. We've got a huge waste disposal cell developed, and that's helping the remediation program move ahead. We have about finished a dry storage facility, and that will allow us to take the spent fuel rods from the K Basin and put them into a stable configuration.

  At Savannah River we have the world's largest vitrifier at the Defense Waste Processing Facility, DWPF. It's amazing, you use acronyms and you forget what they stand for.

  Mr. MCDADE. It happens to us all the time. [Laughter.]

  Mr. ALM. That's the largest vitrifier, and although it's not without problems, we are vitrifying a lot of logs. Likewise, we have a vitrifier working at West Valley. At Rocky Flats we've stabilized a very large amount of plutonium liquids. At Idaho we will have finished calcining the non-sodium waste in 1998. At every one of our sites you see a lot of activity.

  In 1995 we had a crossover. Prior to that, in the remediation program we had more studies than cleanup. That crossed over in 1995 and we continue to do more of our work in the field and not in the office.

  Mr. MCDADE. For which we offer you our commendation and our thanks.

  You can amplify, if you like, that statement for the record, so that we can be rather precise about how we respond to that question from a lot of different quarters. As you can imagine, we hear it a lot.

 Page 18       PREV PAGE       TOP OF DOC

  [The information follows:]

  "The Official Committee record contains additional material here."


OUTYEAR FUNDING

  Mr. MCDADE. Do you think this program is going to run along at $6, $7 billion a year?

  Mr. ALM. Mr. Chairman, I'm not sure I'm the person to ask that question to. I think, seriously, I think that stability for the program is very, very important. The $7 billion is a little misleading because of the large budget authority for privatization and the forward funding. But I think deciding on a stable funding level and then managing against that has a lot of attractiveness.

  Mr. MCDADE. Yes, well, what—casting aside the people you have to contend with at OMB and other places, what is your personal opinion of what the effective level has to be on an annual basis?

  Mr. ALM. I think the level in the 1998 budget—I'm not just saying this—is an adequate level. I mean, you can moderate that between privatization and nonprivatization, but——

  Mr. MCDADE. Yes, so assuming you have a number like that, and thanks to your initiatives, a 10-year goal out there, after the $60 or the $70 billion, what does your crystal ball tell you then? Where are we going to be in 10 years?

 Page 19       PREV PAGE       TOP OF DOC

  Mr. ALM. At that time we'll have, for many of the sites, continued low-level surveillance and maintenance. We can't just walk away from these sites. We'll still have the bulk of the high-level waste program to go. We will have about half the TRU-wastes into the Waste Isolation Pilot Plant. Low-level waste will be generated some from time to time. All the mixed low-level waste should be taken care of by then.

  Mr. MCDADE. What would you estimate—the ratio now, as you've described it, is about 70 percent fixed cost of the budget, about 30 percent cleanup, or somewhere in that——

  Mr. ALM. Well, no, it's not that bad, but it varies by site. It's certainly over 50 percent, and at some sites——

  Mr. MCDADE. That's a generalization.

  Mr. ALM. Yes. At some sites it's as high as 70 percent.

  Mr. MCDADE. After 10 years, if that degree of funding occurs, what would you expect to be the fixed costs and the ratio of your fixed costs and cleanup?

  Mr. ALM. Well, actually, they'd be higher, because that's all you'd have is fixed cost, low level of maintenance. In other words, if you're done and all you have to do is monitor, that might all be——

 Page 20       PREV PAGE       TOP OF DOC

  Mr. MCDADE. That's the low level, but not the high level.

  Mr. ALM. Okay, on the high level, I think that 30 percent we think is about as far as you can go. Thirty percent supports 70 percent direct.

  Mr. MCDADE. Well, that's a reversal kind of where we are today?

  Mr. ALM. We're about 26 percent support today.

GAO REPORT ON END LAND USE

  Mr. MCDADE. GAO is arguing that there are assumptions made on end-land use that are made too late and it affects the project costs very substantially. Would you respond to that? I'm sure you've seen that GAO report.

  Mr. ALM. We've talked about that internally. The way this program has worked, and it's working right now in terms of the 10-Year plan, land use and the cleanup set of activities go hand-in-hand. And let me give you some examples because the land use is very, very different, depending on where you are.

  Mr. MCDADE. Yes.

  Mr. ALM. At Rocky Flats, 19 miles from Denver, the idea is to get most of the buildings, and maybe all the buildings, off the site. At the other extreme, Savannah River would continue to be a federal reservation. So the goal there is mainly to decontaminate these buildings so they're very cheap to keep up and not necessarily demolish them.

 Page 21       PREV PAGE       TOP OF DOC

  I'm not sure I know of anywhere where the land use is a serious problem impeding our ability to move ahead. The one site where there's no clear land use decision right now is Oak Ridge. In Oak Ridge, the State, DOE, and the stakeholders are working together to come up with a longer-term use plan for the facility and also cleanup standards.

  Mr. MCDADE. I'll tell you what I wish you'd do. The GAO has a number of $600 million in potential savings, depending upon how this problem is worked out, and if you would take a look at it and give us your additional reply for the record, we would be appreciative.

  Mr. ALM. I'd be delighted to, Mr. Chairman.

  [The information follows:]

  "The Official Committee record contains additional material here."


  Mr. MCDADE. I'd yield at this time to the gentleman from Indiana, Mr. Visclosky.

  Mr. VISCLOSKY. Mr. Chairman, thank you very much. Mr. Chairman, I have a couple of questions I would appreciate if I could submit for the record.

  Mr. MCDADE. Without objection.

WASTE VITRIFICATION

 Page 22       PREV PAGE       TOP OF DOC

  Mr. VISCLOSKY. Mr. Alm, could you tell me what is involved in vitrifying waste? What is that?

  Mr. ALM. Well, vitrification is a thermal process where you basically take a waste, usually in a sludge-like composition, and you mix it with frit, which is crushed-up glass, and you heat it together, and what comes out is a borosilicate glass, and then you take that glass and you put it into a huge stainless steel container, which you then cover, weld, and store temporarily onsite. Ultimately, these casks or vessels will go to the Yucca Mountain site for permanent disposal.

  Mr. VISCLOSKY. Let me ask, then, is there a difference between how you're approaching dealing with the waste at Savannah River and the waste at Hanford?

  Mr. ALM. At Savannah River the vitrification facility was designed by the M&O contractor and then constructed and built by the M&O contractor. At Hanford we have a major privatization effort, where we have a phase 1A for two contractors, Lockheed Martin and British Nuclear Fuels, Limited. Each will receive $27 million to do a pilot study, actually develop a pilot facility and a conceptual plan to go ahead. At that point, then, there will be a bid for one or two possibilities for treating low-level hazardous waste and treating high-level hazardous waste. So we could have one plant, two plants, and even three plants.

  The difference between what we did at Hanford compared to Savannah River, at Hanford we had a competitive contract, a privatization effort.

  Mr. VISCLOSKY. At Savannah River?

 Page 23       PREV PAGE       TOP OF DOC

  Mr. ALM. At Hanford.

  Mr. VISCLOSKY. At Hanford, okay.

  Mr. ALM. At Hanford.

  Mr. VISCLOSKY. So you had a competitive process at Hanford. Which technique is going to be more expensive, Hanford or Savannah River?

  Mr. ALM. We think that per unit that Hanford will be considerably cheaper. We had a previous estimate by an M&O to build a vitrification plant in Hanford. And it's hard to generalize because they're all different sizes, and et cetera. But that study indicated that the estimates we have now from the privatized contract are cheaper, and we've got better estimates at Idaho at the Advanced Mix Waste Treatment facility, where we have firm bids for the cleanup and a relatively recent estimate of what it would take for an M&O to do the work.

  Mr. VISCLOSKY. Are you going to vitrify low-and high-level waste at Hanford?

  Mr. ALM. Yes, sir.

  Mr. VISCLOSKY. And are you saying that, on a unit basis combining the two, the process will be cheaper at Hanford than it was at Savannah River?

  Mr. ALM. Yes, sir, that is our intent. I mean, we haven't got a firm bid yet. So I can't promise you, but that is the presumption.

 Page 24       PREV PAGE       TOP OF DOC

  Mr. VISCLOSKY. You mentioned the competitive process at Hanford. Was there not a competitive process at Savannah River?

  Mr. ALM. No, sir. The traditional approach from the early days of the Manhattan Project was to have large management and operation contractors. They conducted a lot of the work themselves or through their subcontractors without competitive bids. I can't swear that parts of it weren't competitive for some of the components, but the design and much of the work was done by the M&O.

INTERIM STORAGE AND TRANSPORTATION

  Mr. VISCLOSKY. Mr. Barrett, are there any significant technical obstacles that you're facing as far as transportation and the interim storage of the spent fuel? I'm especially interested on the transportation side.

  Mr. BARRETT. The technology for transportation is well understood across the world. So I don't believe there are any substantial technical challenges on transportation. In this country there is not sufficient hardware presently built, designed or built, to sustain a large transportation initiative like we would have of nominally 3,000 extra tons per year. So several hundred million dollars worth of hardware would need to be built, but, from a technological point of view, no, I don't see anything that's a major issue there.

INTERNATIONAL DISPOSAL OF SPENT FUEL

 Page 25       PREV PAGE       TOP OF DOC

  Mr. VISCLOSKY. Would you compare for me our national nuclear waste disposal program with that of other nuclear-producing countries? Highlight any particular differences.

  Mr. BARRETT. They're fairly similar in that they all have the basic concept of deep geologic disposal. That is the end result in all the programs in all the world. Various nations have different schedules that they're proceeding along with the deep geologic disposal option. Many countries also have an interim storage concept in their national policies; Sweden comes to mind. Some countries also have reprocessing, such as the UK and the French, in their programs. But, basically, they're all, as far as the end result, pursuing geological repository.

  Mr. VISCLOSKY. There's no country considering a permanent solution other than the deep geological repository?

  Mr. BARRETT. None that I'm aware of.

  Mr. VISCLOSKY. Mr. Chairman, I would thank you for the time.

  Mr. MCDADE. Thank you. I yield to the gentleman from Michigan.

TEN-YEAR PLAN

  Mr. KNOLLENBERG. Mr. Chairman, thank you very much. I appreciate that. It has been an experience to get out and see some of these. I've been to Savannah, to Rocky, to Hanford. Until you see, I don't believe you really get a feel for what is taking place.

 Page 26       PREV PAGE       TOP OF DOC

  I want to, first, thank both of you for agreeing to meet with me in my office on different occasions and to also just say I appreciate the hard work that you're both doing in terms of trying to bring to closure some of these sites. Now in your opening remarks, Mr. Alm, you mentioned, I think when the chairman questioned you about which of the major sites would not fit within the 10-year plan, I didn't hear you say Rocky. I assume Rocky Flats, then, is doable within the 10 years?

  Mr. ALM. In my opinion, it is, and I would certainly make every effort to make sure that Rocky finishes within a 10-year period. You've got a political consensus. You've got high risk and you've got very high fixed costs. So, for all those reasons, I think Rocky has very high priority.

  Mr. KNOLLENBERG. I think the stars are lined up pretty well for Rocky Flats. So I appreciate hearing that.

  One of the things about the 10-year plan, I know it's frustrating to you because you've been very much involved in the architecture of this 10-year program, and one of the questions I have for you, though, is it's fine to have a 10-year program, but when does the program start? In other words, when does the clock start ticking? Or, maybe more importantly, when does DOE start counting? Can you help us out just a little bit with how soon you expect the hammer to come down and we're off and running?

  Mr. ALM. Mr. Knollenberg, let me talk about end date first. The end date is 2006. So the 10-Year plan, in a sense, would cover the years 1997 and 1998. But in terms of a heavy lifting, I think we're going to really start with the 1998 budget, which is mainly pushing very hard to get our efficiency targets in place and beginning to sequence the projects in the most sensible way. So those activities are prospective.

 Page 27       PREV PAGE       TOP OF DOC

  Mr. KNOLLENBERG. So you still think it is doable within that timeframe that you just talked about.

  Mr. ALM. I do. It's not easy. It's going to take a lot of work, but——

PROJECT CLOSURE FUND

  Mr. KNOLLENBERG. In regard to that, let me question you on the closure. There's a provision in the report language of last year's bill that announced the closure fund. There is some $15 million in that fund. The idea, obviously, is to accelerate precisely along the lines of what you've projected to clean up those sites in a priority fashion that appear to be the likely targets, Rocky being, obviously, one of the first in that regard.

  Do you have any views about—and I know that money was allocated this last year in certain sites, and Rocky was one of those; I believe Fernald was another; I think Hanford and Savannah were also involved. I guess my question is: why didn't you ask for, why didn't the administration ask for, more than $15 million this time, or are you looking elsewhere for that money to accelerate closure?

  Mr. ALM. The reason, Mr. Knollenberg, is that by the time we added up all the compliance requirements and Defense Nuclear Safety Board recommendations, the things that were more or less mandatory for safety, we didn't have a lot of room. But I will say this: that the $15 million will be very, very helpful.

 Page 28       PREV PAGE       TOP OF DOC

  Mr. KNOLLENBERG. It's money.

  Mr. ALM. Well, it's money, and——

  Mr. KNOLLENBERG. But it's targeted.

  Mr. ALM. [continuing]. It's incentive, too.

  Mr. KNOLLENBERG. Yes.

  Mr. ALM. It's incentive to get on with the job, and if you can show the sites where the contractors, the DOE people, the local constituencies want to move ahead, then there ought to be a reward for that.

DEFENSE AUTHORIZATION ACT: SECTION 3161

  Mr. KNOLLENBERG. Yes, the criteria has to be met, the criteria set, and those specifics have to be met in order for it to become operable.

  On the matter of the section 3161, if we could just turn to that for a bit. The interest that I have in that is the so-called—well, it's workforce restructuring, but it literally has to do with part of the Defense Authorization Act. We talked about before Cold War warriors, and we talked about how many of those Cold War warriors are still in the mix with all the folks out there, and has a reduction in so-called Cold War warriors reduced to a point now where it's kind of flat? What is the status of that?

 Page 29       PREV PAGE       TOP OF DOC

  Mr. ALM. I don't honestly know. Can I provide that for the record? I've got presumptions, but I don't have the actual figures. It would be better to provide that.

  Mr. KNOLLENBERG. All right, if you would.

  [The information follows:]

NUCLEAR WASTE MANAGEMENT AND DISPOSAL

  From a peak of 148,700 prime contract employees at the end of Fiscal Year 1992, the Department's contractors separated about 37,000 employees through the end of Fiscal Year 1996, an average of over 9,300 employees per year. The Department does not currently maintain a comprehensive listing of separated contract workers by Cold War status. Therefore, these figures include both workers employed during and after the Cold War.

  Mr. KNOLLENBERG. Do you believe that there may be a point to discontinuing the section 3161 program as it applies to this area?

  Mr. ALM. I don't have a firm opinion. I would say the 3161 was a useful tool for a number of years in helping us transition the program, and that was a period of time when the reduction of contract personnel was very, very substantial. We see that as being less of a problem. So it is assuming something that you need to continually—one needs to continually think about, and we will do so.

 Page 30       PREV PAGE       TOP OF DOC

  Mr. KNOLLENBERG. We may want to think about retailoring it, though, in light of what is taking place?

  Mr. ALM. That's a possibility. Again, I would have to think about it some more.

WASTE ISOLATION PILOT PLANT

  Mr. KNOLLENBERG. On the matter of WIPP, I'm very pleased that—I don't know why they call it the Waste Isolation Pilot Plant; WIPP sounds a lot simpler to me, but I know you've been very enthusiastic about—or at least you're optimistic about what you see as a realizable thing on the horizon. And my question has to do with the standards of the certification. I know we've talked about this before, but how long does EPA have to publish a final rule?

  Mr. ALM. Well, they are mandated to publish, I believe, a year after they've got a complete application, but my understanding——

  Mr. KNOLLENBERG. And that was submitted in the fall of what, 1996, was it or——

  Mr. ALM. We submitted it—yes, we submitted it in the fall of 1996. So it would be November of 1997 when, if the application was completed, I would think that they would have to approve the certification. Where we stand with EPA is we've been working very closely with them. My sense is that we can get approval in early calendar year 1998. Maybe it will slip a few months.

  Mr. KNOLLENBERG. Who authorizes the startup on that? Is that the Secretary or is that you?

 Page 31       PREV PAGE       TOP OF DOC

  Mr. ALM. I am presuming it's the Secretary, once we get the certification. We also need a RCRA, Resource Conservation and Recovery Act, permit.

  Mr. KNOLLENBERG. So there are other permits outstanding as well?

  Mr. ALM. That should be no problem. And then there's a final Environmental Impact Statement. Again, that's under our control. So the EPA certification is the major—not roadblock, but the major step to finishing this. Now the only other thing that one always has to think of in this day and age is litigation.

  Mr. KNOLLENBERG. Would that be considered a show-stopper, litigation?

  Mr. ALM. Yes, sir, it could be, but, hopefully, we're not going to have litigation, or if we have litigation, we'll be successful. I must say that we've gone to great pains to meet all the procedural and substantive requirements. We have and EPA has, and I'm confident that we'll do that. But it's certainly something we think about all the time.

  Mr. KNOLLENBERG. I want to ask you also—I'm sorry.

  Mr. ALM. I'm just saying that opening WIPP is absolutely critical to this program, to the credibility of the program, to meeting compliance agreements. If we don't open WIPP, we're out of compliance with the Idaho agreement; on the other sites, Rocky Flats, Los Alamos, we're expecting to ship waste. And, finally, what it does to the credibility of an effort to try and get this program moving would be devastating.

 Page 32       PREV PAGE       TOP OF DOC

FAST FLUX TEST FACILITY

  Mr. KNOLLENBERG. Let me ask a final question at the moment in this round. I know that the prior Secretary of Energy announced that the FFTF, the Fast Flux Test Facility—you really have to be careful when you pronounce that one.

  Mr. ALM. Right. [Laughter.]

  Mr. KNOLLENBERG. She announced that it would be at the Hanford site that they're going to maintain a hot standby condition. I'm not real sure what that means, and isn't the whole thing in a decommission mode rather than keeping it in hot standby?

  Mr. ALM. The Environmental Management Program had been in the process of decommissioning the facility. The Secretary made the decision to leave the FFTF open as an option, which meant that we would not drain the tanks. We are continuing to do some decommissioning work which would be necessary—excuse me, decontamination and stabilization work that would need to be conducted anyway. The money for so-called landlord costs we will transfer.

  Mr. KNOLLENBERG. What does ''hot standby'' mean, though? What does it really mean? It seems to me if you're decommissioning something, you've got to reverse field and reactivate—what does it mean?

  Mr. ALM. Hot standby is that it could be turned over for the purpose. That's my understanding of the term. Also, in this case there is a certain amount of real heat that's applied to the sodium. So maybe that's——

 Page 33       PREV PAGE       TOP OF DOC

  Mr. KNOLLENBERG. But to keep something in a hot standby condition or status, you're not decommissioning it then, are you?

  Mr. ALM. Yes, it means that it could be used for another purpose. For example, the Defense Nuclear Facilities Safety Board asked that we keep one of our Savannah River canyons in hot standby. The term in that case meant that it could be activated.

  Mr. KNOLLENBERG. Right, that's the one I was referring to.

  Mr. ALM. And in this case the FFTF is open as an option for producing tritium, along with two other options.

  Mr. KNOLLENBERG. Well, thank you, Mr. Chairman, and thank you, Mr. Alm. I have questions for Mr. Barrett, if we have time, but I'll more than certainly submit some other questions for the record, if that would be acceptable.

  Mr. MCDADE. Without objection.

  Mr. KNOLLENBERG. Thank you.

HAZARDOUS WASTE LEGISLATION

  Mr. MCDADE. The Chair recognizes the gentleman from Texas.

 Page 34       PREV PAGE       TOP OF DOC

  Mr. EDWARDS. Thank you, Mr. Chairman. Thank you both for being here today.

  Mr. Alm, let me ask some very basic questions. What law is it that specifically dictates what the end product must be at each of these cleanup sites? For example, let's use Hanford as the focus on my questions. Specifically, does it have to be so clean that you can build an elementary school on that site, or does it have to just be not a serious threat to the public in the vicinity? What law is it that sets the standards?

  Mr. ALM Well, first of all, we deal with a number of laws with respect to hazardous waste, and we have plenty of hazardous waste at our facilities. And this includes CERCLA, the Superfund Act, and RCRA. Then, as I indicated before, we are somewhat regulated by the Defense Nuclear Facilities Safety Board. They don't have regulatory authority, but they have strong recommending authority.

  But, beyond that, for portions of our activities, we're self-regulating, but we work very, very closely with the State and EPA—and these tripartite agreements in general are really the factors that govern the cleanup.

  Mr. EDWARDS. So do you have quite a bit of leeway in determining what the end product must be?

  Mr. ALM. Well, we have leeway to negotiate with the State and the EPA. Let me give you an example, because it was one of the most recent compliance agreements, and I signed it.

  At Rocky Flats, first of all, a contractor can develop a proposal to clean up much faster. That, then, was reviewed by a group that created a vision for the site, and these were the stakeholders, the outside citizens around the site, public officials, et cetera. The vision, then, was translated into a compliance agreement, and there was one issue that was not included in the compliance issue, which was the soil release standards which occurred under a separate regulatory approval.

 Page 35       PREV PAGE       TOP OF DOC

  But what I'm telling you is that, for every one of our sites, the final result relies heavily on interaction between the regulatory agencies and the stakeholders, and we've found that it's very difficult to proceed with any credibility without the support of stakeholders.

  Mr. EDWARDS. Let me ask—the point I want to eventually get to is this: I understand it could cost $30 to $40 billion for construction and life cycle costs at Hanford, and just assume that's a ball park figure. And this may be heretical to some, but I wonder if you look at the enormous cost to clean up at some of these sites, does there come a point at which we draw the line and literally build a fence around so many acres of property, and that what's left is not a threat to the public, but you certainly wouldn't want to build a schoolhouse there and then take the $10 billion you save and build the finest national park in the country, and give that money to that community or that State to use those funds. And I want to get a better understanding of just how much leeway we have in determining what the end product must be.

  Mr. ALM. Let me focus on the one example you gave, which is the Hanford tanks, which is the most expensive environmental project, if it goes to completion, ever conducted. The Hanford tank requirements were established in the tripartite agreement between the State Department of Ecology and the Environmental Protection Agency. But even though you've got these requirements, the approach the DOE's taken is a staged approach. The privatization contracts we're talking about can treat anywhere from 6 to 13 percent of the waste. So this is the first phase.

  The National Academy of Sciences suggests that a phased approach be taken to the tanks. By the time that's finished, there may be some technological alternatives. I mean, there may even be a different set of priorities. Who knows the things that are going to happen many, many years in the future?

 Page 36       PREV PAGE       TOP OF DOC

  Mr. EDWARDS. So, to summarize then, in your opinion, we still have the ability to look at different options of what the end product should be. In the real world of real budgets and trying to balance a budget under difficult circumstances, in your opinion, the law allows us some flexibility in determining just what clean is—is the final product for different projects within limits?

  Mr. ALM. That's correct. Again, with this program it would require a change in the compliance agreements. But I do think it's incumbent upon us for these very expensive, high-level waste projects to continually evaluate where we're going and whether there's a better, cheaper way of achieving the same amount of risk reduction and stability.

  Mr. EDWARDS. Thank you. Thank you, Mr. Chairman.

  Mr. MCDADE. We thank the gentleman from Texas. The Chair recognizes the gentleman from New Jersey.

GEOLOGIC DISPOSAL

  Mr. FRELINGHUYSEN. Thank you, Mr. Chairman. Gentlemen, good morning.

  I had an opportunity—and I want to thank the Department of Energy for the opportunity—earlier this year to visit Yucca Mountain. It certainly gave me a better knowledge of what's going on out there, raised some rightful concerns, and a greater admiration for the men and women who work on that site far outside Las Vegas at the Nevada Test Site.

 Page 37       PREV PAGE       TOP OF DOC

  I think the critical issue in this committee is the disposal issue. You can vitrify whatever you want, and that may be a proper way to contain things, but I think that the larger issue that needs to be discussed publicly is how we're going to dispose of low-level and high-level nuclear waste. I get a feeling, as a private citizen, as a Member of Congress, that there is not the sense of urgency that we should all be having as a nation—that you ought to be having as people who work in the DOE—that the President, for one reason or the other, isn't using his bully pulpit to talk about these critical disposal issues. I think there are some pretty critical issues on the table here. Would you both agree? And what is the DOE doing to sort of hone and sharpen public attention to these disposal issues? I sort of get a sense of paralysis around here, and I'm not sure what it is, but tell me what your feeling is.

  Mr. BARRETT. The administration's position I think is fairly clear: that geologic disposal is the basic goal of the high-level radioactive waste program, and that we are proceeding as quickly as science will allow us to go forward with the Yucca Mountain program. I believe we have a very aggressive program in place at Yucca Mountain, and we're implementing it as best as we can within the statutes as they exist at this time.

  Mr. FRELINGHUYSEN. But we're way behind schedule, isn't that accurate?

  Mr. BARRETT. Well, it depends on what schedule you're referring to with respect to the Yucca Mountain project.

  Mr. FRELINGHUYSEN. What's the significance of the acceptance date of January, late January 1998?

 Page 38       PREV PAGE       TOP OF DOC

  Mr. BARRETT. Well, there are two different issues involved here. One is the contractual relationship we have with the utilities to receive fuel, and that's the January 31, 1998, date you referred to. The other is the geologic repository program. When the act was passed, and all through the eighties, there was debate about two parts of the program: an interim storage aspect of the program and a deep geologic disposal program. The deep geologic disposal program was to implement what was laid out in the Act in 1982. But the due process of site selection, et al., was going to take longer, and no repository, therefore, could be online in 1998.

  So we are proceeding on the repository with all diligent speed in an effort to see if Yucca Mountain will be a suitable location for a deep geologic repository, and if it is, go forward through the processes.

  Mr. FRELINGHUYSEN. It appears on the surface that there's a strong probability it would be a proper site?

  Mr. BARRETT. We have found no technical reason why Yucca Mountain would not be a proper site at this time. But, we still do not have all the scientific evidence necessary to go before an independent regulatory body like the Nuclear Regulatory Commission and demonstrate, in the adjudicatory process, to a reasonable assurance standard that it would meet all the standards for many thousands of years. We do not have all that information yet so that we could make that case at this time.

INTERIM STORAGE

 Page 39       PREV PAGE       TOP OF DOC

  Mr. FRELINGHUYSEN. Tell me why the Department, and it appears the President, feels that the interim storage proposal is a bad idea. Given the fact that the deadline can't be met—and I understand there's some good reasons for it—why are people throwing cold water on the interim storage proposal? I know you've mentioned some things in your remarks, but I don't get a sense of optimism that it's ever going to be a viable alternative.

  Mr. BARRETT. Well, the Administration's position, I think, has been fairly clear: that the geologic disposal aspect of the program is an essential, a most essential part of the program. The debate has been going around about interim storage at this time. That is really about how interim storage plays into the program. So that is the debate that is going on between the administration and the Congress.

  Mr. FRELINGHUYSEN. But what's your feeling?

  Mr. BARRETT. Well, the——

  Mr. FRELINGHUYSEN. What's wrong with an interim site?

  Mr. BARRETT. I don't think anyone has said anything's wrong with interim storage. I don't believe the Administration is set against interim storage. For example, we are proceeding, as part of the Administration's proposal in our testimony, with a non-site-specific interim storage activity. So the Administration is not opposed to interim storage, per se. The debate that goes on is on the siting of interim storage, on when you do it, and under what circumstances.

  The Administration's position has been articulated in various letters to the Congress, indicating that the Administration is committed to resolving the complex issue of nuclear waste storage in a timely and sensible manner, consistent with sound science and the protection of the public health and safety and the environment. The basic goal is geologic disposal, and it should remain the basic goal of the high-level radioactive waste management policy.

 Page 40       PREV PAGE       TOP OF DOC

  The Administration believes that the decision of siting an interim storage facility should be based on objective, science-based criteria and should take into account the viability assessment for Yucca Mountain which will be completed in 1998, as I previously discussed. That is the essence of the Administration's policy at this time.

  Mr. FRELINGHUYSEN. Well, I read those words, and they do give me sort of a certain level of reassurance. And if you repeat them enough, you might believe that that's satisfactory.

  But, yes, excuse me?

  Mr. ALM. Well, Mr. Frelinghuysen, your comment was or question was what kind of a priority does the Administration give to geological disposal, and we have two projects, the Yucca Mountain Project, but we also have the Waste Isolation Pilot Plant. I can tell you that's one of my three top priorities; the same with the Under Secretary, and Secretary Pena has indicated that he considers this a very high priority.

  My staff is meeting weekly, following progress on the certification application. We're meeting frequently with EPA. So I can assure you that this has a very, very high priority within DOE.

  Mr. FRELINGHUYSEN. Relative to the lawsuit that a number of utilities have filed over—yes, Mr. Chairman?

  Mr. MCDADE. If I may, we have a vote on the floor, and it's my intention to recess for 10 minutes. I hope members will hurry back and we'll resume the hearing.

 Page 41       PREV PAGE       TOP OF DOC

  [Recess.]

  Mr. MCDADE. The committee will come to order.

  The Chair recognizes for further questions the gentleman from New Jersey.

UTILITY LAWSUIT

  Mr. FRELINGHUYSEN. Thank you, Mr. Chairman.

  Mr. Barrett, it's good to be back with you. I just have a few more questions that relate to Yucca Mountain activities.

  Relative to the lawsuit filed by the utilities, what if that lawsuit is successful and the utilities stop paying into the Nuclear Waste Fund? What effect does that have on the permanent repository?

  Mr. BARRETT. We hope to continue the permanent repository program independent of what may happen with the lawsuit. Utilities have paid a substantial amount already into the waste fund, and I believe the balance in the waste fund is around $5 billion that has already been paid in. So using your assumption, sir, that there is some withholding of payments or escrow, or whatever the case may be, we would still request of this committee to go forward with the Yucca Mountain program because we believe that is essential and vital to this Nation. We would certainly wish to continue the program.

 Page 42       PREV PAGE       TOP OF DOC

  Mr. FRELINGHUYSEN. I assume you're concerned about the lawsuit, though?

  Mr. BARRETT. Sure. Yes, we are very concerned about the lawsuit.

  Mr. FRELINGHUYSEN. You've given the balance in the Nuclear Waste Fund. What has been the investment to date in the Yucca Mountain Project?

  Mr. BARRETT. To date, through Fiscal Year 1996, we have spent in total, back to 1982, around $2.4 billion at Yucca Mountain.

YUCCA MOUNTAIN TECHNICAL UNCERTAINTIES

  Mr. FRELINGHUYSEN. All right. In your opening statement, this you may have said orally or maybe in your written statement on the background portion on page 1, you—and I quote—say, ''Consistent with Energy and Water Development Appropriations Act''—that's the second paragraph—''the Department plans to address the remaining technical uncertainties of the Yucca Mountain site and complete a viability assessment,'' et cetera, et cetera. Would you shed some light on those technical uncertainties?

  Mr. BARRETT. Certainly. We are gathering data and doing the necessary scientific and engineering work to determine what a repository would look like in the Yucca Mountain natural setting and how it would perform under heat, and what it would cost and what its performance would be over many thousands of years, and how well it would contain the radioactivity within the engineered barriers and how any contamination would behave in the natural environment over thousands of years into the future.

 Page 43       PREV PAGE       TOP OF DOC

  So the issues we're looking at are hydrology: how much water is in the mountain; what is its geochemical condition; the geology as far as the fractures and faults and how they would behave; and rock stability with increased temperatures. You would heat the rock up to over 400 degrees Fahrenheit in a real repository. So, we're gathering all this scientific data into a very large performance model, so we can model how the mountain would perform, and we can submit that evidence to the regulators in the Nuclear Regulatory Commission and go through a licensing proceeding.

  Mr. FRELINGHUYSEN. Yes, I did have an opportunity to sort of see firsthand the number of people that are on the site who I assume are performing a lot of these studies.

  Mr. BARRETT. Yes, sir, many of our scientists and our engineers are working there at the mountain.

  Mr. FRELINGHUYSEN. Quite a large and impressive contingent.

  I have some other questions, but I believe my time is up. Thank you, Mr. Chairman.

PRIVATIZATION

  Mr. MCDADE. Mr. Alm, let me chat with you a bit, if I may, about privatization. If there's a great hope in this budget for a silver bullet, it's the privatization process, and as I said at the beginning, you're to be commended for attempting to introduce competition and try to get this thing going.

 Page 44       PREV PAGE       TOP OF DOC

  A lot of us worry that we'll be in a tremendous pickle, should this process fail. Would you comment on that, please?

  Mr. ALM. Yes, Mr. Chairman. I would completely agree with you; we'd be in a pickle if these projects fail.

  Mr. MCDADE. You've got 10 of them——

  Mr. ALM. Right.

  Mr. MCDADE [continuing]. Proposed in the budget and a billion dollars startup.

  Mr. ALM. I would say in the beginning that we have evaluated the projects in terms of technical complexity, and only a handful—maybe two or three—are really technically complex. Some of them, like building a dry storage building, are probably no more risky than building an apartment building. So let's focus on the ones that are technically complex.

  We are going through a review of what it's going to take to completely manage this program. That includes what kind of people we need from within the Department, what kind of people we need from the contractors, and what kind of people we need in the field to monitor.

  In my experience, there are two things that are necessary to make these projects work. One is we need to draw tight technical scopes of work. We need to tell the contractors precisely what we want, so that can be clearly determined when the product or service is delivered. Secondly, we need good contracts to protect the government, but which are also fair to the contractor. The next thing we need is people in the field with the kind of experience, project management and project finance experience, to oversee the work. And, finally, we need the absolute best project managers from the contractors, people who have done projects of similar magnitude and have done them successfully.

 Page 45       PREV PAGE       TOP OF DOC

  Mr. MCDADE. Yes, you and I had a conversation about that, and you indicated the Department is going to focus on the project managers as one of the highest-priority items you'd look at.

  Mr. ALM. For example, I just happened to be talking to somebody yesterday at the British Nuclear Fuels, Limited about the project manager for the Tank Waste Remediation System, TWRS, Project, assuming that goes ahead, and the gentleman who will be the project manager is the gentleman who oversaw the design and construction of the Thorpe facility at Sellafield. I'm not sure of the exact figure, but it's heretofore a good project.

  Mr. MCDADE. Since you have the type person onboard that you believe is the kind of project manager that you want, would you at this point in the record give us some detail on why you think this man is highly qualified to do what we hope he will be able to do?

  Mr. ALM. Right.

  [The information follows:]

NUCLEAR WASTE MANAGEMENT AND DISPOSAL

  Following the FY 1995 Multi-year Work Plan estimate of $40 billion to complete the TWRS Mission, DOE made a decision to privatize the TWRS treatment and immobilization project. On September 22, 1995 the Secretary of the Department of Energy issued a decision memorandum directing the Richland Operations Office to put in place a privatized approach to immobilize the Hanford tank wastes. Privatization, as defined by the Tank Waste Remediation System (TWRS) process waste contract, requires that DOE only buy a service, not technology, design, facilities or operations of facilities. DOE management of a privatized project requires almost no direct day-to-day management; involves a significant reduction in program deliverables such as reports and status meetings; and totally eliminates the DOE's role in defining prescriptive technical and programmatic solutions. Consequently, the TWRS privatization initiative required a significant managerial change from the typical DOE oversight role of a Management and Operations (M&O) contractor. Two key managers are responsible for this effort.

 Page 46       PREV PAGE       TOP OF DOC

  Jackson E. Kinzer is the Assistant Manager of the Tank Waste Remediation System, and has comprehensive understanding of private industry's role in accomplishing the DOE's Cold War mission after serving 35 years as a senior manager for Rockwell Corporation, a key DOE M&O contractor. During this time, his significant accomplishments included the restart of the Hanford Purex Plant in 1983; and then complete restructuring of the Program Office at Rocky Flats. Upon his retirement from Rockwell in 1989, Mr. Kinzer was hired by the Raytheon Corporation to start up the nation's first chemical weapons destruction facility on Johnson Atoll in the South Pacific.

  On September 25, 1996, two contracts were awarded to BNFL, Inc. and Lockheed Martin Advanced Environmental Services to perform the privatization work described in the Request for Proposal that had been issued in February 1996. The management of this work has been assigned to William Taylor, Director of the Waste Disposal Division of TWRS. Mr. Taylor was hired by Jackson Kinzer in July 1995 after he had served 27 years with Raytheon Engineers and Constructors, Inc. Mr. Taylor's previous assignments included the construction of two nuclear power plants in New Jersey in the 1970's, Seabrook nuclear power plant in the 1980's and the program development and initial construction of the Hanford Waste Vitrification Plant Project in the early 1990's. All of these assignments involved the management of hundreds of people and many billions of dollars.

  DOE considers the TWRS privatization initiative to be extremely successful. This success was made possible by the sound management skills of the Federal project managers and by strategically blending resources from both DOE and private industry.

PRIVATIZATION CONTRACTS

 Page 47       PREV PAGE       TOP OF DOC

  Mr. MCDADE. All these contracts are a fixed price, aren't they? There's a lot of R&D in them, is there not?

  Mr. ALM. What we try and do with the complex ones is to segregate that first phase and actually pay for that. That's what we did with the tank waste. We're going to pay $27 million each to the contractors for the design.

  Mr. MCDADE. What's the magic of the $27 million?

  Mr. ALM. It's really not magic. It was just the estimate of——

  Mr. MCDADE. It's an estimate that you're working under?

  Mr. ALM. Right. Let me talk about the two contracts because I think that's an important consideration. The BNFL approach would be to take an ion exchange, which is a well-used technology—they use it in their own facilities at Sellafield, England—and the vitrifier, which would be somewhat modified from what they do there, but that company has done vitrification. So they have experience. They've done it for some years.

  The Lockheed Martin approach is more innovative. Lockheed Martin would use molten metal as a way of substituting—not substitution, but separation——

  Mr. MCDADE. In lieu of the vitrification process?

  Mr. ALM. No, in lieu of the ion exchange, as I understand it; it would be the separations process.

 Page 48       PREV PAGE       TOP OF DOC

  Mr. MCDADE. Then it would be vitrified?

  Mr. ALM. Then it would be vitrified. So you've got these two different approaches, one of which I think is pretty standard. You've got someone who has run a project that's at least this big on a fairly standard technology, and the other is more innovative, and that's obviously a consideration as we move ahead.

  Mr. MCDADE. Yes, and you expect those to be—I mean, can you classify those as R&D projects or do you classify them differently?

  Mr. ALM. They're not R&D projects——

  Mr. MCDADE. The reason I'm asking is you've had some experience, as we've discussed, that fixed-price R&D doesn't work very well.

  Mr. ALM. Absolutely. These are not R&D projects.

  Mr. MCDADE. These are not R&D projects?

  Mr. ALM. No, these are projects where you've taken technologies and various stages of commercialization and applying them at the advanced waste treatment facility. Again, when British Nuclear Fuels won this project, they're going to use processes that they have used before.

  Mr. MCDADE. Well, the one we talked about, for example, with Lockheed, should that get somewhere into the chain or some approval, that's a pretty new process, isn't it?

 Page 49       PREV PAGE       TOP OF DOC

  Mr. ALM. The vitrifier itself is a new COGEMA vitrifier, which I believe is in use.

  Mr. MCDADE. So it's commercialized?

  Mr. ALM. The vitrifier I believe is. I will check that for the record.

  [The information follows:]

NUCLEAR WASTE MANAGEMENT AND DISPOSAL

  The Hanford Tank Waste Remediation System privatization contracts allow the contractors to select and implement either the technology identified in their proposal or an alternative technology. However, the contractors must demonstrate they have a viable approach that will work on Hanford tank waste as a ''Phase 1, Part A'' contract deliverable. Testing used to demonstrate that the approach is viable will include work on actual tank waste samples that have been delivered to the contractors. The contractors are taking the performance risk in TWRS privatization. If their technical approaches do not work, they will not be paid for treatment services.

  The Lockheed Martin Advanced Environmental Systems (LMAES) technology for processing High-Level Waste (HLW) includes calcination and vitrification. These technologies are proven and similar systems are operational in multiple countries. The LMAES facility would improve on these designs and implement a cold crucible melter to increase waste loading and throughput as well as minimize secondary waste. The cold crucible vitrification technology has been demonstrated on a small scale. Further scale-up work is required, which is not part of the DOE privatization funding but is the direct responsibility of the contractor.

 Page 50       PREV PAGE       TOP OF DOC

  LMAES will use proven Low Activity Waste (LAW) pretreatment technologies with relatively low risk in application at a commercial scale. LMAES has proposed use of the Molten Metal Quantum Catalytic Extraction Process (Q–CEP) to immobilize LAW. This technology has been developed but its application for Hanford Waste Processing will require further demonstration.

  LMAES will have to prove the business, regulatory, and technical merits of their approach in ''Phase 1, Part A'' prior to authorization to proceed into ''Phase 1, Part B.'' Part B is the final design, construction, and operational part of Phase 1.

  Mr. MCDADE. How about the separation process?

  Mr. ALM. Well, molten metal—there's a number of facilities where they're testing the applications, but I don't know whether they've—they probably have not tested the application of separation of radioactive as one of the techniques. I would think that, although this is the way it's been now, if they foresaw a lot of problems, they could obviously go to a more standard technology when they bid, and I'm just sort of second-guessing what they would actually bid.

  Next year about this time, after these conceptual designs are finished and the final plans are put together, we'll let them bid on the number of units and the price, and at that point in time——

  Mr. MCDADE. One of the concerns on this side of the table is that if we appropriate the billion that you're requesting for the 10 projects, we're committed to the tune of maybe $7 or $8 billion. Isn't that accurate? The taxpayers will have to pay somewhere around $7 or $8 billion, if we give you the billion to commit?

 Page 51       PREV PAGE       TOP OF DOC

  Mr. ALM. Well, the billion to commit would result in $3.3 billion in capital costs, and then if you take the operating and other costs to finish the projects, it would be $8 billion; that's correct, sir.

  Mr. MCDADE. Yes, and you described the 10 projects as having varying degrees of risk in them. Would you inform the committee which, in your judgment, Al, are the toughest technological projects?

  Mr. ALM. The Hanford tanks, the Advanced Mixed Waste Treatment Facility. There's one of the other treatment projects that was——

  Mr. MCDADE. You can put that in the record, if you would, so we have a feel about what it looks like from the standpoint of risk.

  Mr. ALM. I will provide that for the record.

  [The information follows:]

NUCLEAR WASTE MANAGEMENT AND DISPOSAL

  Of the privatization projects receiving fiscal year 1998 funding, the most technically challenging is the Tank Waste Remediation System at Richland. The next most challenging projects are considered to be the Transuranic Waste Treatment project at Oak Ridge, and the Low Activity Waste Treatment project at Idaho.

 Page 52       PREV PAGE       TOP OF DOC

  In general terms, technical complexity is defined as high, moderate or low. ''High'' indicates highly complexity projects with a scope of work that is very intricate and where limited (comparable) systems have been demonstrated in the private sector. ''Moderate'' indicates those projects with a scope of work for which systems are in place, however, some unknowns may exist. ''Low'' refers to those activities for which systems are in place and well established. The technical complexity for each of the fiscal 1997 and 1998 projects in shown below:

Table 1

PERMITTING PROCESS

  Mr. MCDADE. One of the things that we didn't discuss that was discussed tangentially, I think the gentleman from Indiana or Texas raised the issue of permitting. I would like you, if you would, to put into the record at this point the permitting process that you have to go through and the permitting process, not just Federal but all the way through, that the private contractor would have to go through, should we agree that this is a method that we think we ought to pursue.

  Mr. ALM. I will provide that for the record.

  [The information follows:]

  "The Official Committee record contains additional material here."


  Mr. MCDADE. I'm really concerned about the permitting process. I know you are, too. You say, ''litigation,'' and you get a little pale, and I think we all do, and we understand that that can have a tremendous effect on the timing of the project. It's kind of got to be my experience that everything in the world takes 10 years anymore, and that's the closeout date in your proposal.

 Page 53       PREV PAGE       TOP OF DOC

  I got a chance to look at the WIPP history, and I think that took something like 20 years, didn't it?

  Mr. ALM. It took a long time. Yes, I think that's right because I was in the Department when it was first being considered, and I was a young man then. So it's been a while.

  Mr. MCDADE. Well, you still are. [Laughter.]

  Address yourself, will you, to the concept of the permitting process and all the groups that have to approve on these privatization contracts in terms of getting them within the 10-year schedule, in terms of getting them financed, in terms of the risk if you were on the private side. And you've spent a lot of time on the private side, and you were kind enough to come back and make the sacrifice of public service again. If you're on the private side and you're going to have all this kind of risk, not just technological, but permitting risk, why would anybody commit capital to you?

  Mr. ALM. Well, it's very interesting. Your point is well-taken. For the Advanced Mixed Waste Treatment process, for example, we are putting in appropriated funds for the purpose of getting the permit. We want to get the permit—obviously, you have to have the permit before you get started, so you're not in a risky stage.

  Mr. MCDADE. What does that cost? What does it cost us? Do you expect——

  Mr. ALM. My recollection, I'll provide it for the record for sure, but I think it's $15 million.

 Page 54       PREV PAGE       TOP OF DOC

  Mr. MCDADE. Put it into the record for us, please.

  Mr. ALM. Yes, but I think that figure is correct.

  [The information follows:]

NUCLEAR WASTE MANAGEMENT AND DISPOSAL

  The cost for permitting is included in the total cost of the contract in most cases and may not be discretely identifiable. In some instances, support costs may be incurred by the Department of Energy or the site operating contractor. Many activities, such as conceptual design and safety and health planning must be performed before permits can be obtained. For example, the drafting of permit applications and associated conceptual design will be completed at the Tank Waste Remediation System (TWRS) for a portion of the $27 million to be paid to each of the two contractors in ''Phase 1 Part A.'' Cost for the final permit process at TWRS will not be established until award of the Phase 1 Part B contract. The payments to the contractor for the Advanced Mixed Waste Treatment (AMWT) facility permit applications and associated deliverables will be $16.3 million. For most of the FY 1998 projects, the permit costs will be much smaller than the amounts for the TWRS and the AMWT facilities.

  Mr. MCDADE. Go ahead. On that one, you're providing appropriated dollars to do the permitting?

  Mr. ALM. Right. I would make one comment that the risky, the projects of the highest level of risk, are the ones that both receive money and started in the 1997 budget. That includes both the tank waste——

 Page 55       PREV PAGE       TOP OF DOC

  Mr. MCDADE. Yes.

  Mr. ALM. [continuing]. And the Advanced Mixed Waste Treatment.

  Mr. MCDADE. They were design concepts, though, weren't they, pretty much?

  Mr. ALM. Well, the first step.

  Mr. MCDADE. Yes.

  Mr. ALM. Although the contracts were let—for example, for the mixed waste treatment, we do have a contract for the entire work, even though the early stages are design and permit.

  Mr. MCDADE. So we're committed on that project to completion?

  Mr. ALM. We're not committed. I'm just saying that the Congress did provide budget authority.

PRIVATIZATION

  Mr. MCDADE. I'm aware of that, but unlike the billion here, if we commit the billion this year, it's out to eight and it's operating costs, et cetera.

 Page 56       PREV PAGE       TOP OF DOC

  Mr. ALM. I would make two comments because I understand the concern you all have about the commitment. Let me indicate, first of all, with the projects we're talking about, 75 percent of that billion is tied to the regulatory commitments. In other words, these are projects that must be done. It's not the whim. It's not some project that——

  Mr. MCDADE. What do you mean by regulatory commitments?

  Mr. ALM. Well, for example, with the Hanford tanks, we are committed to a tripartite agreement that's been signed by the Washington Department of Ecology and the Environmental Protection Agency and DOE, and we have deadlines for when we begin moving wastes out of those tanks, with an ultimate goal of removing all the wastes and vitrifying them into both low-activity fractions and high-activity fractions.

  Mr. MCDADE. So 75 percent of the billion is for that process, getting the permits, getting——

  Mr. ALM. No, $427 million out of the billion is for that one project.

  Mr. MCDADE. For that one project?

  Mr. ALM. Right, in 1998.

  Mr. MCDADE. Just briefly run down the others for us, will you?

  Mr. ALM. Okay, I'll go down the regulatory ones and then the non-regulatory ones.

 Page 57       PREV PAGE       TOP OF DOC

  Mr. MCDADE. I'll tell you what let's do, in the interest of saving some time, why don't you furnish for the record what it looks like and inform the committee of anything you think we should know about complexities in that process on the 10 that you're asking that we start.

  Mr. ALM. I will provide that for the record.

  [The information follows:]

  "The Official Committee record contains additional material here."


  Mr. ALM. Now I was going to make one other comment, if I may, Mr. Chairman.

  Mr. MCDADE. Please.

  Mr. ALM. I think because of the nature of these projects and the complexity, the concern about the management, that we need to develop—we would be willing to, I think we need to develop a consultation process with the Congress where at the critical junctures of these large contracts we would come in—it, obviously, depends on how you all wanted to do it, either Members or the staff, or both——and go over what we're doing, go over the kind of technical reviews, independent technical reviews that we have undertaken, lay out our management plan. For example, in managing these projects, we planned in the big ones to have quarterly management reviews, which I would attend personally because they're so important to the program.

  And one last thing——

 Page 58       PREV PAGE       TOP OF DOC

  Mr. MCDADE. And I want to say, as you and I have said before, we want to stay in touch as you go through this process and others, as a matter of communication back and forth, so that we have an idea of what kind of resistance you're meeting, and what kind of successes appear down the road, and we can evaluate together. As you said just a minute ago, I think it's essential to the process.

  Mr. ALM. I couldn't agree more. I think that we have to be together on these projects or——

  Mr. MCDADE. Has anybody, any guru down at the DOE, estimated the amount of time in the permitting process from first application all the way through? You've got a budget figure; you must have some——

  Mr. ALM. I'll get that for the record. Permits are so variable in terms of how much time they take.

  Mr. MCDADE. Okay.

  Mr. ALM. We haven't had great problems with permits, to my knowledge.

  Mr. MCDADE. If you would amplify it, do it in the record.

  Mr. ALM. I will provide that for the record.

  [The information follows:]

 Page 59       PREV PAGE       TOP OF DOC

NUCLEAR WASTE MANAGEMENT AND DISPOSAL

  The time schedule for permitting will vary greatly depending on what permits are needed. Permitting can take anywhere from a few months to four years. The schedule will be better known after contract awards and development of milestones for the projects by the vendor. The Department provides our schedule requirements for start of services or completion of services, and the vendor will develop their specific implementation schedule, to include permit acquisition, as appropriate.

PRIVATE FINANCING

  Mr. MCDADE. And address for me the question of private financing on what appears to be complex and risky projects. What makes you so confident that XYZ company is going to get private financing to do one of these projects that's complex?

  Mr. ALM. Well, I've talked to a number of people. I've talked to people who are financial intermediaries, and I've talked to the companies about their financing plans. They'll be working, obviously, to make a final bank commitment on a number of factors, but I'm pretty confident that you can find money. As I indicated to you yesterday, people finance big shopping centers and other developments which I would consider more risky than a project that has a government contract behind it and some budget authority.

  Mr. MCDADE. Well, the problem is the degree of risk and the possibility of the failure that could take place, it seems to me, or even a termination.

 Page 60       PREV PAGE       TOP OF DOC

  Mr. ALM. I think the biggest concern the private sector would have—and I need to put this delicately—and that is the extent to which government can be trusted in an operational way. So one way to get around that mistrust—and we did it at Idaho. As we said, the contractor can retrieve the wastes. They don't have to depend on the government retrieving them. So they have access to the waste, and then they have a contract that they get paid for processing. That's one way which you can provide the certainty.

  I think in this consultation process and in the management process it's incumbent upon us to talk to the financial community, to talk to the contractors, and get a sense of what it is we can do to get the best deal for the government on this.

  Mr. MCDADE. A lot of people are saying the government ought to be involved in some way because they can get the money more cheaply than the private side and they'd save money in the long run.

  Mr. ALM. First of all, government money has an opportunity cost, and that is the extent to which you take money out of appropriated money; you're taking money out of the economy—I don't want to get into the economic theory, but government money is not free.

  Mr. MCDADE. Oh, I'm talking about a guarantee or some such thing, a government guarantee. If you've got them on the hook anyway—if these projects should go belly-up, we're stuck for $8 billion, or somewhere in that range—and heaven forbid that they do. But what would be the impact on the financial community if you threw in a government guarantee?

 Page 61       PREV PAGE       TOP OF DOC

  Mr. ALM. Let me answer the first part of your question, and then I'll come——

  Mr. MCDADE. Please.

  Mr. ALM. The capital portion of these programs is $3.3 billion. So if they all went belly-up at the same time, the liability would be $3.3 billion, although I think that chance is one in many millions.

  The second part was the question of a government guarantee. There is no doubt that if the government guarantee were provided, a strong, complete government guarantee on the project, that would reduce the cost of capital. Anything the government does that reduces risk and makes the government share more of the risk—in other words, the interest cost, it's a real tradeoff.

  Mr. MCDADE. Yes, and you've decided to go the other way?

  Mr. ALM. We've decided that we'll take some risks, but we think the contractor, to create all the incentives, proper incentives, ought to take the majority of the risk.

  Mr. MCDADE. Yes.

  Mr. ALM. But have we got it exactly right? I don't know.

ROLL CALL

 Page 62       PREV PAGE       TOP OF DOC

  Mr. MCDADE. If I might ask my friend, Mr. Fazio—we have a quorum present and we have to do some housekeeping. There's a motion that needs to be offered by Mr. Fazio which we have to vote on. I would appreciate it if you would offer it.

  Mr. FAZIO. Mr. Chairman, because the Subcommittee on Energy and Water Development will be dealing with national security and other sensitive matters at its hearing on atomic energy defense activities, I move that the hearing on April 9, 1997 be held in Executive Session.

  Mr. MCDADE. The clerk will call the roll.

  The CLERK. Mr. McDade.

  Mr. MCDADE. Aye.

  The CLERK. Mr. Rogers.

  [No response.]

  The CLERK. Mr. Knollenberg.

  Mr. KNOLLENBERG. Aye.

  The CLERK. Mr. Frelinghuysen.

  Mr. FRELINGHUYSEN. Aye.

 Page 63       PREV PAGE       TOP OF DOC

  The CLERK. Mr. Parker.

  [No response.]

  The CLERK. Mr. Callahan.

  [No response.]

  The CLERK. Mr. Dickey.

  Mr. DICKEY. Yes.

  The CLERK. Mr. Livingston.

  [No response.]

  The CLERK. Mr. Fazio.

  Mr. FAZIO. Aye.

  The CLERK. Mr. Visclosky.

  Mr. VISCLOSKY. Aye.

 Page 64       PREV PAGE       TOP OF DOC

  The CLERK. Mr. Edwards.

  Mr. EDWARDS. Aye.

  The CLERK. Mr. Pastor.

  [No response.]

  The CLERK. Mr. Obey.

  [No response.]

  Mr. MCDADE. The majority has agreed the hearing will be closed in accordance with the motion.

  Mr. Alm, thank you very much for your insightful comments on the dialog that we just had.

  And I yield now to the distinguished gentleman from California.

DIFFERENT BENEFITS TO PRIVATIZATION PROCESS

  Mr. FAZIO. Thank you, Mr. Chairman, and I want to thank both of you gentlemen for coming in, and apologize for not being here for the earlier part of the hearing.

 Page 65       PREV PAGE       TOP OF DOC

  Mr. Alm, you say that you think that privatization will result in cost savings, certainly compared to the traditional DOE approach, where we own the facilities and the contractors typically operate it and build it. Mr. Barrett also proposes privatization of transportation of spent fuel, but does not assert that the privatization is necessarily going to save the government any money. I wonder if the two of you could explain how we come to the same conclusion in terms of approach, but have different benefits that we ascribe to the privatization process. Is this a function of the task that you're privatizing or is this simply a difference of opinion in terms of what the outcome will be as a result?

  Mr. ALM. I'm sure there's some logical explanation—I'll begin. The precedence we took in looking at the privatization projects was to get an estimate of what it would take to do the M&O. We had to make sure that the privatization estimates did bring about savings. All studies that I've ever seen comparing level-of-efforts kinds of contracts or activities and competitive activities always show that it's substantially cheaper to go competitive. And from my own business experience, when you're in a fixed-price kind of contract, you sharpen your pencil because you know the other guy is going to be sharpening his or her pencil. So we see substantial savings.

  Mr. FAZIO. But they're pretty much premised on your experience, your philosophical premise that competition will——

  Mr. ALM. Well, not only that, but we have estimates which we provided, and some of them we called draft because the estimates are in fairly early stages—they're at different times and different sizes, but the most recent contract, the Advanced Mixed Waste Treatment contract, we have a firm contractor proposal, which is about $1.1 billion, and the M&O estimate a few years earlier was about $2.5 billion. That's at the extreme, but that's an incredible difference in cost.

 Page 66       PREV PAGE       TOP OF DOC

  Mr. FAZIO. So you've got more than a philosophical premise here; you've got evidence that this works and it drives down costs?

  Mr. ALM. Yes. We've also hired one of the KPGG, or whatever it is, Peat Marwick——

  Mr. FAZIO. AMPG/Peat Marwick?

  Mr. ALM. Yes, that's it.

  Mr. FAZIO. The latest merger of our major accounting firms.

  Mr. ALM. We've hired them to look at our cost-estimating methodology, and they've given us generally favorable comments.

  Mr. FAZIO. Lake?

  Mr. BARRETT. I think another way to look at it is that what we're buying is really quite different. Mr. Alm is dealing with a situation that he's trying to clean up facilities and the situation exists and there it is, and there is a history of the classical M&O approach to that. We're starting sort of with a clean sheet of paper as far as our transportation program, and we started off with some of the efficiencies with our fairly new M&O contractor. We were able to put together a more efficient situation, when we started with a fresh program. So when we looked at the cost, we didn't see any great savings.

 Page 67       PREV PAGE       TOP OF DOC

  Now we do hope that privatization and the spirit of competition will bring substantial cost savings, as Mr. Alm has mentioned, but we're not claiming credit for any of that yet. We will see how the bids come in when we go forward with the RFP.

  Mr. FAZIO. I assume that if you're pleasantly surprised, we will be, too, in next year's budget? Is that the idea?

  Mr. BARRETT. It would be a win/win situation for everyone, sir.

  Mr. FAZIO. Yes. When would you expect to have some sense of how much competition exists in the market? Are you getting feelers now from potential bidders that build confidence that there may be actually a higher estimate than we may need to fund?

  Mr. BARRETT. We have not gotten to talking about hard money yet. We have had several meetings where we've had 100 and 200 people in the room. There has been great interest, let me say, in the industrial and the financial community in what we're talking about, but no one has talked those type of estimates yet.

FEDERAL GOVERNMENT'S LIABILITY FOR PRIVATIZED PROJECTS

  Mr. FAZIO. What is the Federal Government's liability for privatized projects that, frankly, don't work out, that end up being a bust? Maybe you'd both want to respond.

  Mr. ALM. The Federal liability, contractually, there is no Federal liability.

 Page 68       PREV PAGE       TOP OF DOC

  Mr. FAZIO. If they run into cost overruns, technical difficulties, this is all at their risk? We don't have to step in at any point——

  Mr. ALM. At their risk——

  Mr. FAZIO [continuing]. And look out for the public interest?

  Mr. ALM. They can, obviously, make a claim that the government misled them or they weren't given proper information in the center, and you can evaluate the claim.

  Mr. FAZIO. So they'll blame you for their failure, typically?

  Mr. ALM. That's certainly a possibility.

  But one of the things that's really critical is that, as we move forward, we're going to pay a lot of attention to these projects at the very beginning. I'm going to watch them very, very carefully.

  As you know, the project at Pit 9 has run into problems.

  Mr. FAZIO. Right.

  Mr. ALM. And I would argue that this may seem like somewhat of a Pollyanna statement, but I've had some experience to bear it out—I think the fact that a project did run into these problems will translate itself into firms being more careful, DOE being more careful, and regulators being more careful. I've seen it in the private sector where a fixed-price overrun got everybody's attention, and then they began to focus on——

 Page 69       PREV PAGE       TOP OF DOC

  Mr. FAZIO. So it may clear the air as to what——

  Mr. ALM. That's right.

  Mr. FAZIO [continuing]. Will be the result of these kinds of problems? It's not business as usual, you would argue?

  Mr. ALM. I think the fact that a project had some problems lowers the probability of failure in the future.

  Mr. FAZIO. What if Congress cancels the project?

  Mr. ALM. If Congress cancelled the project, the amount of budget authority that the Congress had agreed to in earlier years would be used for terminating the project. In other words, that would be similar to termination at the convenience of the government.

  Mr. FAZIO. What if we get less than we're asking for? What if we get a performance that, in the view of the government, is less than we had anticipated and asked for in the bidding process? For example, less waste treated, less fuel transported—what is our remedy at that point?

  Mr. ALM. Well, one remedy is not pay them or not pay them the full amount. The whole purpose of a privatized contract is that we specify very clearly the requirements, and we do this with the two projects we have. The waste will be tested when it comes out, and it's got to meet certain specifications. And if it doesn't meet it, it's back to the—not the drawing board, but back to the vitrifier.

 Page 70       PREV PAGE       TOP OF DOC

  Mr. FAZIO. And our contracts make very clear that they continue to have the burden of responsibility to complete what they agreed to do, even if it eats into their marrow?

  Mr. ALM. Yes, that is the intent of our contracts.

  Mr. FAZIO. Thank you, Mr. Chairman. For now, I'll wait and go another round.

  Mr. MCDADE. Yes. The Chair would like to inform the members that Mr. Knollenberg is about to be recognized on our side. I sent him over to vote. Anybody who wishes may leave and go vote—we're going to resume when Mr. Knollenberg comes back; the Chair's going to vote at that time.

  The gentleman from New Jersey is recognized.

  Mr. FRELINGHUYSEN. Thank you, Mr. Chairman. I have a number of written questions that relate to the Yucca Mountain Project and I'd like to get those questions answered on the Yucca Mountain Project.

  Mr. MCDADE. Absolutely. Without objection.

  Mr. FRELINGHUYSEN. All right, thank you.

FORMERLY UTILIZED SITES REMEDIAL ACTION PROGRAM

 Page 71       PREV PAGE       TOP OF DOC

  Mr. FRELINGHUYSEN. Relative to the Formerly Used Site Remediation Action Program, as you may know, over the last two years I've been interested in this committee in the progress at the Wayne, New Jersey thorium site and the Maywood thorium site. Last year this committee provided $6.5 million specifically for the Wayne site. Can you tell me how the Department has used this funding and what's been accomplished by that investment?

  Mr. ALM Well, my understanding with respect to the Wayne project is that we will completely remove the pile in 1998, and then take action on the subsurface contamination. In Maywood, the pile's already removed, and what we need to do is now remediate the residential vicinity projects, and finally the commercial projects.

  As you know, as you may know, Mr. Frelinghuysen, we have increased the so-called Formerly Utilized Sites Remedial Action Program (FUSRAP) budget, by $100 million this year to speed up all those sites, and this is to be consistent with the President's general initiative to speed up cleanup of Superfund sites in urban areas. So this will be a great boost for the program. It is our hope with level funding that we can finish the FUSRAP program by the year 2002.

  Mr. FRELINGHUYSEN. Specifically to these sites, is there a specific departmental fiscal year 1998 request for Wayne?

  Mr. ALM We have a request for—right now we've broken them out by State, and the amount for New Jersey would be about $60 million, which knowing there's no other States represented, I can say is the largest allocation among the FUSRAP.

  Mr. FRELINGHUYSEN. At your convenience, could you provide the committee with information on when you might anticipate the site work would be finished and contaminants removed, and could you be good enough to provide me with how much we've spent to date on program costs and overhead costs on this construction project?

 Page 72       PREV PAGE       TOP OF DOC

  Mr. ALM I'd be delighted to.

  [The information follows:]

  "The Official Committee record contains additional material here."


  Mr. FRELINGHUYSEN. Thank you very much. I have a number of other questions relative to those sites, as well as, Mr. Chairman, some questions that relate to the ground water cleanup at Hanford and Savannah, and, most specifically, questions raised by the Inspector General's report that notes that there have been some problems down there relative to the management of the Hanford site.

  Mr. MCDADE. Without objection.

  Mr. FRELINGHUYSEN. Thank you.

  Mr. MCDADE. Let me say that the Chair is getting antsy; we're under 10 minutes to vote. So I'm going to vote, and Mr. Knollenberg should be back in the room in just a few minutes, and he is authorized—he's recognized as the next questioner. He's authorized to begin the hearing. He should be here in just a few minutes.

  [Recess.]

PROJECT CLOSURE FUND

 Page 73       PREV PAGE       TOP OF DOC

  Mr. KNOLLENBERG. [presiding] The meeting will come to order, and we'll be back into the question mode here.

  Let me just identify precisely the order of those that are in line to speak. I think I would be next, and then, as people come on back, we'll make a determination about how long this will be held open.

  Mr. Alm, when we met in my office, you were evaluating the two-track proposal, the $5.5 billion and the $6 billion scenario. I did a little arithmetic pretty quickly and realized there's a half a billion bucks there that is over and above what was in the original budget.

  My question has to do with these two budget cases. Would you support—I'm talking about the excess over $5.5 billion—would you support some move to place some of that in the closure fund? Because, again, what it does is it moves in the direction of where you want to go, and we've talked about that. We're on, I think, the same page when it comes to bringing these projects to closure. Would you consider allocating funding to that closure fund for the projects that are considered in your 10-year plan?

  Mr. ALM. I think what the most suitable arrangement would be the closer we get to the higher end of that range, the more possibility of expanding the closure fund.

  Mr. KNOLLENBERG. The fact is I think you've already prioritized pretty much what the projects are in that closure fund. You're trying to arrive at deciding and prioritizing and targeting monies that, I presume, that excess allocation. So there's a system already in place, a mechanization, or I should say machinery, in place to accommodate what you want to do and I think what all of us want to do, which is to lower those mortgage costs. So the closure fund would be a reason for that.

 Page 74       PREV PAGE       TOP OF DOC

  Some of my colleagues and the chairman have talked about privatization and the concerns that go along with that. I believe the Department is trying to set aside $1 billion, that you're proposing $1 billion——

  Mr. ALM. That's correct.

  Mr. KNOLLENBERG [continuing]. For privatization initiatives——

  Mr. ALM. That's correct.

  Mr. KNOLLENBERG [continuing]. Including the Hanford tank remedial system? And I know you and I have discussed this, and we know some of the dangers of what might occur along that path. And, by the way, I buy into the whole privatization effort because what it does do, of course, is it puts more risk than has ever been placed before on contractors, and you've already discussed some of that. I won't go into that, but I do want to talk about the NRC. Some of these efforts are going to be regulated, of course, by the NRC.

  Mr. ALM. That's correct.

NRC REGULATIONS

  Mr. KNOLLENBERG. How do you prevent the cost of complying with NRC regulations then from driving up costs on contractors for projects, for example, that cannot be completed. How do you prevent those costs from rising, with the NRC in mind?

 Page 75       PREV PAGE       TOP OF DOC

  Mr. ALM. Well, I think that's a very good questi