1. Very good synopsis. One sentence needs clarification: “If Entergy gives up the option to restart, it eliminates the potential for substantial revenues if market conditions change while failing to eliminate any of the potential liabilities and distractions associated with continuing to own the plant.” Does the “failing to eliminate” part actually mean “being stuck with”, as there is not much Entergy can do, other than sell the dead plant. And why wouldn’t they if they want to reduce future liability exposure…. unless they just want to get their hands on the decomm fund?
    Maybe we should make them an offer (hey, don’t laugh, Shoreham sold for a buck); I can come up with half of that.

    1. @mjd

      I have the other 50 cents.

      Your interpretation of “failing to eliminate” is spot on. Even if Entergy gives up their operating license, they are stuck with all of the potential liabilities and annoyances that come with being the owner of a shutdown nuclear power plant that must maintain the protection of a large used nuclear fuel inventory.

      I can’t see any potential upside to giving up the license other than saving something less than $5 million per year.

      Heck, even my short-sighted, “activist investor” dominated former employer is spending three times as much as the cost of an operating license to maintain the optionality of someday building a 360 MWe mPower 2 pack.

  2. This is America in the 21st century. It’s all about money these days. These guys own a big chunk of Entergy:


    They are big financial companies like T Rowe Price and J P Morgan. It seems to me that these guys have to be appeased that spending 4 million dollars on an ill defined investment is going to be OK. When would they restart it? What other costs are anticipated for the restart? Browns Ferry was not cheap to restart. (but well worth it) In a fiduciary sense, why would this be a good investment? What kind of return is expected on the 4 million dollar investment?

    I don’t think these kinds of companies care if it’s nuclear power, wind, coal or burning garbage. It’s numbers on a sheet of paper. What’s the risk and what is the potential return?

    Bean-counters always win. The rest of us lose our jobs sometimes.

  3. Skimming the site and reading only the title of this thread, one assumes that a fact has been cited. Rod, it is only after arriving at the third paragraph that one realizes that the title is based on an assumption. I usually find your comments fair and based in integrity. I’m not sure you devoted much thought to this title.

    1. @poa

      I don’t understand your comment. The word “would” is in the conditional tense. The title as written does not state that Taleb provided any counsel, it suggests what he “would” counsel if asked. There shouldn’t be any doubt that the conditional statement is based on the author’s conjecture and interpretation of what Taleb might advise based on his published work.

      1. “…..it suggests what he “would” counsel if asked”

        It reads as an assertion rather than a suggestion. Not a big deal. It just suprised me, coming from you.

        1. @poa

          It is, after all, a headline. The purpose of that part of any article is to encourage people to read more. I’m not going to get into the deception business, but a headline that catches someone’s eye with an unexpected proposition is not meant to deceive.

          1. I agree with POA this time. Usually your headlines have a stronger connection to the article. And they do encourage to read on. Your articles don’t need spectacular or tenous headlines, informative ones are better.

  4. You said; “Once an operating license has been converted to possession only, the available path to restoring the license is a new license application, which would be evaluated as if the plant was a new design. That would make it virtually impossible for a new license to be awarded to a 1960s vintage Mk-1 boiling water reactor because all of the rules that have been imposed in the past 40-plus years would be applicable.”
    Neither of us are expert (or even semi-fluent) in nuke law, but it is not obvious to me that this would have to be the case. And who am I to expect common sense to apply in nuke regulation, but maybe a real expert can weigh in. If the license to operate can be removed by a letter, why can’t it be restored with a letter? After all, VY was “safe to operate” and in regulatory compliance the day it shut down, despite the existence of all the new regs. If nothing has physically changed, to change the plant license design basis, it seems to me it could be a simple “executive action” decision to restore the operating license. If nothing has changed and it was OK before, it is OK now on whatever basis it was OK before. The same thing applies to Kewaunee. SONGS and CR3 are different because they both have a current open technical issue under the current regs, and that would have to be resolved.
    The legal issue also may be dependent on the current regs interpretation for Watts Bar 2 and Bellefonte, as both of those are 40 year old design certifications (but neither has an operating license, only a CP). I admit I don’t know the status of those two plants wrt current regs. But if WB1 is OK to run under to old rules, why would WB2 not be OK to run under the old rules as they are the same design? I see VY as the same case if they ask for their Op license back. Is OK not really OK? Or does the NRC have two versions of OK?
    Maybe I’m just easily confused.

    1. The difference between Watts Bar and VY is that Watts Bar maintained a construction permit which to some degree locked the license into previous requirements. Termination of license for an operating plant and than seeking to reinstate it would result in a full license hearings and the need to meet current regulations. Although the Mark I Type 4 is eminently reliable and safe (possibly and optimum design) regulations have changed considerably in the intervening 40 years in order to continuously improve safety.
      I’m not saying that the changes in regulations have really resulted in real safety improvements as opposed to perceived improvement but it really doesn’t matter.

      1. “Termination of license for an operating plant and than seeking to reinstate it would result in a full license hearings and the need to meet current regulations.”
        That’s the premise I’m questioning. It has never been done before, so it is really something to be decided by a court. It is clear that NRC regs are not adaptable to new things, ideas, or conditions. They “grew around” LWR technology and reaction to events. This is an unanticipated case. That plant already went through the entire license hearing process, so there really is no actual technical reason to re-do that. The regs don’t cover a case of putting a license “inactive” and later re-activation. In the case of an NRC shutdown order, it’s done with a letter and undone with a letter, without licensing hearings. But while under that order you are functionally a “possession only” license. So when the shoe is on the other foot there is a way. Most of the economic aspects discussion about what exactly to do with VY/License, etc are side fluff, including selling the plant.
        None of it really matters, the picture is clear, the plant has become a puppet to a complicated non-identifiable set of puppet masters, including an extremely caustic political environment in the state of VT. And they don’t want that plant or any remnant of it to remain in VT. That is their goal.
        The real message to be taken away by any business considering expanding or start up in VT is “buyer beware.” Today it is nukes, tomorrow it could be you.

  5. This is what Taleb said in response to a largely pro-nuclear letter posted by Brian Eno:

    “In large quantities we should worry about an unseen risk from nuclear energy. In small quantities it may be OK —how small we should determine, making sure threats never cease to be local. Keep in mind that small mistakes with the storage of the nuclear are compounded by the length of time they stay around.”

    My impression is that his risk assessment for nuclear power is not based on the actual science of radiation health effects, but skews more towards popular views and fears of radiation.

    If Entergy drops down to a possession only license, wouldn’t that effectively kill the option of selling VY? I’ve never been clear on why Entergy felt it would be more profitable to shutter and decommission VY than to let it go to someone else.

  6. I agree with poa here. I have no idea what Taleb would think here, and I don’t especially care. My guess is that like almost everyone, he would vastly overestimate the downside risk of nuclear power and worry about “meltdowns” and imaginary black swans that only David Lochbaum can see. I’ve read his books and generally been unimpressed by his knowledge of engineering. Like many in finance, he likes to draw analogies to other professions, but he does not have understanding of any other profession.

    Buying VY might be described as a real option, which is something Taleb might appreciate. It’s like a call option on natural gas prices, where you continue to pay a premium for the right to restart the plant when the cost of natural gas exceeds a strike price. Of course this right becomes more valuable as the volatility of natural gas prices rises.

    1. @perdajz

      I’m confused. You start off by saying you agree with poa.

      Your second paragraph indicates that you agree with the thesis of my piece. My intended point was that it makes financial sense to invest something on the order of $5 million per year to maintain the option of running Vermont Yankee in the future if the electricity/gas market in New England changes dramatically. Such an option could provide impressive returns compared with the certain negative returns of never again operating the plant.

      1. The soundness of the fiscal argument stands independent from the issue of whether Taleb would have made it. The latter seems speculative and pointless. It’s not like the argument would have been improved by any association with Taleb, and if you guessed wrong, that would only tend to distract from its merits.

        Perhaps you felt the argument needed a name with more stature than yours. My own view is that it didn’t.

  7. Nassim Taleb is quoted as saying:
    “Keep in mind that small mistakes with the storage of the nuclear are compounded by the length of time they stay around.”

    The mistake that Mr. Taleb makes here is that used nuclear fuel (unlike hazardous chemicals) becomes less hazardous as times goes on. It eventually becomes no more hazardous than the natural deposits of uranium from whence it came originally.

  8. Rod – you haven’t commented lately on the benefit to Entergy of getting grasping palms on the decommissioning funds then deferring the actual expenditures years into the future. Looks to me like a $billion cash addition to Entergy’s books.

    Obviously a US government that was looking after the interest of its’ citizens, would simply confiscate these plants with compensation determined by net scrap value , and operate them as a federal corporation like TVA, Bonneville, or Hoover.

    Unfortunately both Democrats and Repugs are owed by their Big Oil lobbyists – the interest of citizens is a bottom of their list of concerns.

    1. I’d be careful of what I prayed for. In this country at least, one can look at the (roughly) half cent / kWh on one’s monthly bill that goes into the decommissioning fund of one’s friendly neighborhood nuke. One can inquire as to the health of the investment portfolio into which that fund is stashed. At the end of the day one can tally up that fund and say how close it comes to covering cost of decommissioning, and if its close enough, admit that the utility customers have paid for the decommissioning as part of their on-going fixed cost.

      Go federal, and you end up with monies co-mingled with the general fund, in popular fantasy if not reality. Then the government is stuck with covering the “unexpected” decommissioning costs at end-of-life, at which point it becomes “yet another profligate nuclear industry subsidy” whether or not its already been paid for.

  9. A small note, however, about Vermont. VY was a big target for new Vermont taxes. Keeping up the license would keep it as a target IMO. At some level, though they won’t admit it, I think our legislators know that, in the current situation, more taxes and levies would just slow down the decommissioning.

    1. If ownership was transferred to the TVA, it would become exempt from state taxes.

      1. Would federalizing the plant also bypass the need to play Scumlin’s games of forcing a kangaroo court (the state PSB) to deny a Certificate of Public good? IIRC this was another gambit the state was using to end-run the federal purview of VY operation. There was also a threat to revoke or deny a water use permit.

        NY played these end-run games with Shoreham. The counties involved in the Emergency Plan (spurred by Mario Cuomo) refused to participate in the EP exercises, and refused to commit resources necessary for emergency response. So NRC did not approve the EP, therefore, no full-power operating license. I think that forced NRC to revise its approval of EPs, but too late to save Shoreham after Cuomo punched a hole in its RPV.

  10. Rod,
    There is much more to it than the simple NRC fee, although $5.2M is not inconsiderable. Without altering the license I believe VY would be required to maintain the current Emergency organization (ERO). In SAFSTOR this organization is greatly reduced by termination of license. Additionally, after ~April, 2016 the ERO will be reduced dramatically, essentially nil as a result of reduced heat load in the fuel reducing the potential for a Zirconium reaction.
    Altering the license and compressing the security area also results in very large savings in security. Each of these areas means many less employees and thus much less cost.
    Additionally, opting for SAFSTOR will allow Entergy to tap the decommissioning fund for most of these expenses. It simply is not financially practical to mothball the plant and maintain the license unless you have almost unlimited funds and do not have to consider the financial health of your corp. ala TVA.

    1. @Jim Rogers

      There is nothing automatic about the reduction in Emergency organization. The process for reducing the requirements is not based on the type of license, but on the plant condition. It would be just as easy to justify reduction to the NRC with a full operating license as with a possession only license. That might require making some kind of arrangement to increase the organization again if the owner decided to restart the plant.

      I may be wrong, but I believe the same statements are true about the security area – it is based on the plant conditions, not the specific type of license.

      Of course, the state might have more standing to request that the ERO remain fully operational, but it is already trying to assert the need to keep that organization fully functional even under current plans.

      The statement about “tapping the decommissioning funds,” however, might be exactly the point. Once again, that highlights the unintended consequences of ensuring that funds are available for decommissioning when the plant is at its real end of life. The size of the funds and the rules associated with protecting those funds from premature depletion conspire to encourage short sighted corporation to retire valuable, national asset-type facilities before their time.

      1. You hit the mark on decommissioning. But the ability to SAFSTOR also makes it more attractive. However, a National asset may be a corporate liability. Depends on where your sitting.

  11. When Entergy made its decision to shut down it did not have the knowledge of a new oil crisis. This crisis could affect energy markets in favor of nuclear. The delay in natural gas distribution may be another factor. Weather another. The next three or four months will give us some answers on the best course of action.

    1. But this crisis makes energy costs lower, and so reduces the interest in nuclear. It means that export of LNG will be delayed, keeping gas in US cheap.

      1. @jmdesp

        Energy prices are cyclic. A period of low prices will inevitably slow exploration and extraction activities while also reducing incentives to shift to alternate fuels or deprive oneself of the benefits of increased amounts of controllable power.

        My guess is that lowering world oil prices may actually result in higher US natural gas prices as there is less profit available from natural gas liquids and crude that is extracted from the same wells as “associated gas.” Another factor to consider is the highly leveraged status of many gas producers; their profits from liquid petroleum have been carrying their gas enterprises during the period of low prices. A few financial failures might also slow gas production and bring supply more in line with demand.

  12. I think Jim Rogers is right, the NRC license fee is just one item in the list of savings Entergy will see by giving up the license.

    Consider the payroll: Meredith reported “Entergy has announced that 165 Vermont Yankee workers will be laid off on January 19” (see:


    I don’t know what that saves the company but I’d expect it to be more (a lot more) than the $5M license fee.

    Beyond the payroll, all of the costs associated with all of the work those 169 people were doing goes away. Procedures, training, spare parts, tools, office supplies…

    And this won’t be the last layoff. Sad but true.

    1. @gmax137

      Maintaining the operating license does not necessarily require maintaining a full operating crew. This post is about maintaining the option of someday restoring the plant to full operating status, not operating it during the next year or so.

    1. “Prices have doubled, to 11 cents/kWh,”

      My budget bill for natural gas was raised. The explanation given was that the cost of natural gas has risen. I am sure more increases will follow in time.

      Maybe the big investment companies that own and influence Entergy have wise people on their staffs that realize that this asset (VY) will increase in value if held. Other energy prices are sure to rise. The license fee is simply an investment fee that needs to be paid.

      Why should the license fee be as high for a non operating plant? An NRC resident inspector at a plant that is non operating should have a much easier job. What value would VY be receiving for its tax dollars (the license fee)?

  13. @ Rod

    The Boston Herald describes the economic reasons behind Vermont Yankee was shutdown by Entergy:

    Sunday, December 28, 2014

    … Entergy Corp. bought Vermont Yankee in 2002 from a group of New England utilities that had owned the plant since it opened in 1972. In August 2013, Entergy announced it would close the plant because it was no longer economical to operate. “This has been a bad investment for us,” said Barrett Green, an Entergy finance executive who recommended both that Entergy buy the plant and later that it be closed.

    The company was betting on a carbon tax, or some other hit on fossil-fuel-fired power plants, that would make nuclear power a clear winner. Instead … nuclear plants have been hit with increasing “regulatory costs” like beefed-up security post-9/11 and new safeguards against extreme events like the earthquake and tsunami that struck a nuclear station in Japan in 2011.

    A boom in construction of natural-gas-fired power plants around New England has helped make Vermont Yankee less competitive, but the Nuclear Energy Institute, an industry group, said the real problem is a regulatory system not working to keep nuclear plants open.


    Entergy did not want to incur the new costs of Fukushima lessons learned. Without a carbon tax, nuclear power is doomed by cheap natural gas power plants and increasing nuclear regulatory costs. A carbon tax would help both nuclear power plant operators and environmentalists. Such a simple fix would guarantee nuclear power continued profitable operation even with new regulatory costs for safety.

    1. @jaagu

      The problem with that analysis is that 70 – 95% of the cost of generating power from a cheap natural gas plant is buying the fuel. If fuel is cheap AND available, all is well.

      Unfortunately for the poorly-informed New Englanders, all those new gas plants were not accompanied by new gas pipelines. Cheap gas in PA doesn’t mean a thing to a power plant operator in NH or CT.

      1. There is a lot of noise in New England now about new pipelines. I am sure they eventually will be built and the costs will be socialized through electric rates. Just as we have supported lower electric rates in Canada by buying above market hydro. What I suspect will happen is that we will end up with a hybridized merchant/public utility where gas prices will go up and the politicians will say that the small increase for pipelines will only raise costs for consumers by pennies on the electric bill. This is essentially the model we have for solar and wind. They will remind us that natural gas is “Green” but conveniently ignore the contribution of leaked methane.
        What I’m saying is I have no doubt the fix is in. Oil and Gas never, never lose money.

    1. @John Tucker

      Lower world oil prices are going to result in lower US oil production. They are going to hammer highly leveraged extractors operating in wet gas areas that have been able to carry their debt loads by profitable natural gas liquids and crude sales while practically giving away the associated gas.

      The effect is going to be a rationalization of North American gas prices back to a rough equivalency between oil and gas on a heat content basis. The pattern over the last few years, with a huge discount from oil heat to gas heat, has been an historical aberration that cannot be sustained.

      New England residents should commit the following to memory – 600 MWe requires approximately 100 million cubic feet (0.1 billion cubic feet) of natural gas to be delivered every day. Since the region produces no gas of its own, that gas must come via pipelines or LNG tankers.

      1. Per day ??!! cripes. When the music stops (and its looking that despite, or because of all the rosy outlooks from this weird episode of cheap energy, we are in for some disappointing global industrial production numbers) they are not going to like where they find themselves sitting.

        Im a pessimist these days, so I have bad feelings about everything. But more around this kind of thing particularity.

        It seems crazy that hey wouldn’t keep this plant operational on the back burner.

        1. They can’t lock the region into their high-priced fuel if VY isn’t taken off the table.

          1. @E-P

            Who are you referring to as “they?” Unless Entergy is part of the target of that inclusive pronoun, why would that particular company cooperate? It has no gas assets in the area, AIFK.

          2. VY completed fuel off-load at approximately 0530 on 1/12/15. Notified NRC of fuel off-load and intent to cease operation. End game. By the way, all done very professionally and without incident – similar to the final Cycle 31.

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