How Did the MOX Project Get So Expensive?

Over the past week or so, I’ve engaged in a “root cause analysis” project to determine why the US is having so much difficulty implementing a plan to take 34 metric tons of nearly pure plutonium 239 — a fissile isotope with virtually the same energy value as uranium 235 — out of our nuclear weapons program and beneficially use it as a source of fuel for commercial nuclear power plants.

It’s a fascinating tale with several branches, but here is the spoiler up front. The root cause seems to be encapsulated in the following quote from a recent article in the Bulletin of Atomic Scientists titled Can the US-Russia plutonium disposition agreement be saved?

Many experts were skeptical about the MOX option, not least because it would provide a significant boost to the plutonium economy, eventually leading to wider acceptance of plutonium in the civilian nuclear industry.
(Emphasis added.)

Resisting the Plutonium Economy

Long-time readers of Atomic Insights will recall several posts over the years about the pitched battle against the “plutonium economy” that started sometime in the early 1960s. The battle began after the Glenn Seaborg-led Atomic Energy Commission issued a report pointing out how fast breeder reactors–along with thermal breeder reactors using U-233 and Th-232–could provide enough fissile material to fuel nuclear power plants for hundreds to thousands of years. Those plants would be able to provide as much power as human society could ever desire.

For most of the scientists and engineers involved in producing the report, and for many of the far-sighted optimists that read it, that was a tremendously exciting and positive prospect.

It didn’t please everyone. Though Seaborg’s report did not predict fission would replace all combustion — recognizing that there are a number of specific power consumers that are not well suited to using fission reactors — its message still must have scared the bejesus out of people that were prospering in the existing Hydrocarbon Economy.

They had to recognize that a plutonium economy could both flood the energy markets they considered to be “theirs” and would relegate hydrocarbon fuels to shrinking niches of the lucrative enterprise of powering society.

Of course, resisting the plutonium economy by clearly stating that it would harm the fossil fuel business was, even in the early 1960s, a strategy that would fall on deaf ears. Though people appreciated the mobility, indoor climate control, refrigeration, manufactured goods and other capabilities enabled by the power released by burning hydrocarbons, they did not love the gigantic multinational corporations that already dominated the system.

Replacement strategies using various tactical elements needed to be devised and employed.

One ingredient used in fighting the plutonium economy was to demonize plutonium, characterizing it as one of the most deadly substances known to man. Though there is an element of truth to that statement if the plutonium is used explosively to rapidly destroy a large city, it is a false claim if simply comparing the material’s chemical or radiological toxicity.

Another ingredient was actively seeking to make plutonium as commercially unattractive as possible. That effort continues, especially among a certain aging clique of Northeast US nuclear “non-proliferation” academics headquartered at Princeton and MIT. Several of the usual suspects signed a letter in September 2015 expressing their continued opposition to using plutonium to produce power.

The latest was mailed Tuesday [September 8, 2015] by more than a dozen prominent former arms negotiators and senior diplomats supporting the conclusions of a report completed last month by the Red Team, a group of industry experts assembled by Moniz to evaluate cost projections and alternatives to the MOX project.

The signatories included former nuclear arms negotiators Robert Einhorn and Robert Gal­lucci; former ambassadors Thomas Picker­ing and Joseph Nye; former White House director for arms control and former Pentagon and intelligence official Henry S. Rowen; former head of the Carnegie Endow­ment for International Peace Jes­si­ca Matthews; former Nuclear Regulatory Commission members Peter Bradford and Victor Gilinsky; National Medal of Science winner Richard Garwin, a designer of the first hydrogen bomb; and nuclear policy experts Henry Sokolski, Frank von Hippel, S. David Freeman and Plough­shares Fund president Joseph Cirincione.

Amusingly, the letter was addressed to one of the longtime thought leaders of the Northeast non-proliferation clique — Dr. Ernest Moniz. He is currently serving as the U.S. Secretary of Energy. Moniz, who has been testifying for the past several years that the MOX project is too expensive, was deeply involved in creating the framework that made the current MOX morass almost inevitable.

After his 2013 appointment, Dr. Moniz selected another Cambridge, MA based non-proliferation proponent, Kevin Knobloch, formerly the President of the Union of Concerned Scientists, to be his office gatekeeper, a job with the formal title of Chief of Staff. Between the two of them, they have found wonderful positions from which to ensure the realization of a self-fulfilling prophesy. Among their other tasks, they’ve spent part of the past 30-40 years asserting that turning Pu-239 from weapons into MOX for light water reactors is more expensive than simply enriching natural uranium and producing conventional low-enriched uranium fuel.

They’ve also cooperated in the effort to push a potential more valuable reuse option — metal alloy fuel for fast reactors — off the table.

Since they have made sure that their often-repeated predictions over the years have come true they are now claiming that the only remaining plutonium disposition option is similar to one that they have wanted to pursue for more than two decades. Instead of abiding by the mantra of reduce, reuse and recycle, they want to mix the material with a diluent whose composition is classified and bury it deep underground without allowing any of the potential energy to enter into the world market.

Getting rid of the 34 tons covered by the 2000 vintage Plutonium Management and Disposition Agreement (PMDA) in this manner is just a beginning; it will establish a precedent for throwing away all plutonium, at least in the U.S. Obviously, the anti plutonium clique wants us to conclude that if it is too expensive to use plutonium that is already nearly pure before it is even put into a fuel cycle, then it would be even more expensive to devise and implement a fuel cycle that begins with used fuel.

Recycling used fuel would require several additional steps compared to using material that is already separated.

In 1998, DOE Adamant About NRC Regulation

Using the logic that the MOX facility would be producing fuel for NRC regulated commercial reactors, the Clinton Administration’s DOE leadership — specifically DOE Secretary Bill Richardson, Deputy Secretary Elizabeth Moler, and Under Secretary Ernest Moniz — made the case that a MOX facility should be built and operated to NRC standards and should undergo an NRC licensing process.

On April 3, 1998, they sent Howard Canter, Director of DOE’s Office of Fissile Materials Disposition, to a meeting with the Nuclear Regulatory Commission to explain the proposal. An experienced project manager would run and hide from an assignment to attempt to build anything under the regulatory framework that was discussed that day.

No contractor would touch it on anything but a “cost plus fee” pricing basis. Here are a few illuminating quotes.

Canter: Based on a great deal of internal discussion in the Department, which has included the Under Secretary and the Deputy Secretary, there is one major unresolved issue, and it really centers around whether or not we will get legislation this year. How do we get going in the event we do not have legislation, and do we need legislation? So there are many questions.

DOE wants to issue this RFP and desires to moves towards NRC regulation and licensing. The Deputy Secretary was very adamant upon this yesterday, that this will be a licensed facility. But we are in some difficulty because we can’t issue the RFP without reaching some agreement on the NRC regulatory role and how it will start. The RFP has been prepared and it was totally approved, ready to go out the end of February on the basis of NRC being the regulator on this. However, we have got to make sure that we allow for this period of transition in the start-up period, so we will have to make some changes to that.

The Department does want to go to NRC regulation on this. And the other things is we don’t want to mix it up with the much wider issue of external regulation of DOE. It is not — this is not a pilot project or something having to do with that program, although there will be a lot that is learned out of this from that program.

There are significant differences. Some of the reasons are that it is a private contractor, not a M and O contractor. We have even looked at such issues as who would own the facility. We have some options there. We can even consider the idea of leasing the facility, once it is created, back to the contractor, and a number of things to make this very clear how this would work, and very clear who has the NRC authority.

I agree with Commissioner McGaffigan that we do not want to end run the Congress on this thing. There is significant interest in the Congress. A number of the staff members have contacted me and they may be off writing their own legislation on this. In fact, I know, I think, of one case on the Senate side where they may be doing that right now.

One of the things that we are concerned about is dual regulation and dual oversight. In fact, there is even the potential for triple oversight here if we are not careful and plan this out properly between DOE exercising a degree of oversight, the NRC staff providing some oversight, and maybe even the Defense Board. And I think that would be a lot of confusion and, essentially, a disaster if we had that.

After substantial questioning by commissioners and attempts to answer by Mr. Canter, Commissioner Diaz summed it up pretty well.

COMMISSIONER DIAZ: And a second comment — you know, just for the record — there is probably, you know, one regulatory structure that can be created that is more cumbersome and more complex than the DOE and the NRC, and that is a mix — DOE and NRC.

As a matter of historical record, the construction permit for the MOX facility was issued in March 2005 and construction began in 2007 with a completely different contractor consortium than the one that won the design contract based on the 1998 solicitation.

MOX Project Status

No reasonable observer reviewing the current status of the MOX project could fail to conclude that the project is in trouble. Nearly $5 billion has already been expended; it costs about $350 million per year to keep the project treading water. Even at that level, the workforce is perpetually worried about continued employment.

Secretary Moniz likes to imply that the contractor has mislead the government about costs, that it continues to underestimate completion costs, and that the only remaining alternative to increasing spending to the level of a billion dollars per year for the next several decades is to terminate the project.

There have been a number of studies, some funded by the government, others funded by MOX services, the consortium of contracting companies building the facility. Here is a quote from the Executive Considerations section of the Plutonium Disposition Program Red Team Report.

The current lack of sustained funding for the MFFF project illustrated in Table 1, which shows planned (based on the MOX Services 2012 BCP) versus actual funding, has created an environment of intense uncertainty, ultimately manifesting itself through project inefficiencies and strained relationships between DOE and the contractor. This uncertainty has in-turn led to a lack of workforce confidence in program stability, resulting in low levels of staff retention (exacerbated by loss of the most qualified
workers), and low morale in the remaining workforce.

The downward performance spiral is accompanied by an upward cost escalation spiral that would eventually make DOE’s path-forward decision for them, but only after a great deal of money has been wasted. Project surety would instead lead directly to increased staff retention, resulting in reduced recruitment and training costs, increased ownership, and enhanced overall project performance. Should the MOX option be chosen for continuation, it is vital to create and sustain an adequate and stable funding profile. Indeed, consistent support will be vital for any path forward.

Aside: Dr. Moniz commissioned the Red Team (pg. A-3). It was largely made up of contractors employed in the DOE’s national laboratory system (pg. B-1) whose continued income depends partly on providing the answers that the Secretary wants to hear. Their August 2015 report is marked with “For Official Use Only,” which means that non governmental observers like me are not supposed to see it. I’ll leave it to the questioning attitudes of Atomic Insights readers to pose guesses about the source of the leaked document. Hint: Look at the URL where it is posted. End Aside.

Though DOE summarizes the Red Team’s conclusions by asserting that it supports their assertion that continuing the MOX program under the currently projected funding profile of ~ $500 million per year is significantly more expensive than the hypothetical costs of the dilute and dispose option, it doesn’t seem to recognize its own responsibility for creating the mess, first by establishing an onerous and complex licensing process.

Partly as a result of that process, the contractors produced an almost unworkably complicated design. The on-off-on-off mission and funding has helped to create a hostile, uncertain work environment that has been abandoned by many of the best workers. According to the Red Team report, the remaining workforce seems to spend more effort in oversight and project controls than in completing constructive tasks.

Contractual enhancements may also enable a reduction of burdensome oversight and indirect costs associated with this kind of counterproductive relationship between DOE and the contractor.

Implementing project management reforms, providing for incentive fees (based upon jointly negotiated performance outcomes) and ultimately reducing the amount of daily oversight and transactional interactions between the DOE field element and the MOX Services contractor could result in meaningful cost savings.

Final thoughts: As currently funded and overseen by DOE, the MOX Project is expensive and is at a high risk of failure. It might be salvageable, but only with a tripling or quadrupling of annual appropriations in the near term along with a major overhaul of the project management structure and environment to get the project completed and operating expeditiously. Small annual funding requests might be easier to get through Congress, but they invariably add cost and stretch project completion.

The Department of Energy helped to establish a situation that would guarantee that the project could not succeed.

The problem for the people who have to determine where to go from here is that the alternative solution being proposed would depend on the same kind of management, requires changes in law that have not yet been submitted, would require the agreement of at least two state governments that have no real incentive to accept the new plan and would require the Russian government to agree, in writing, to a disposal method that they have been opposed to accepting for the past 20 years.

Since the money that is being expended on MOX comes from the defense budget, the Russians have strong incentives to reject a new deal whose primary selling point is a lowered cost for the U.S.

Paraphrasing Senator Graham in his most ironic voice, other than those obstacles the alternative plan seems okay.

There are alternative courses of action that have the potential to provide a better outcome, but I’ll save those for another day.

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