Select Committee on Environment, Food and Rural Affairs Minutes of Evidence

Examination of Witnesses (Questions 97-118)




  97. Gentlemen, welcome to the Committee. I am conscious that we are likely to have a vote at half-past six; if we can finish by then we will do, if we clearly have many more questions we will come back. But I just wanted to flag up that we may well, I may make for that deadline, if possible, knowing how difficult it is, when people are given 15 minutes between the end of the dinner and the beginning of the speeches, you always know, in 35 minutes, you will still be hoping the blighters get back from the loo; but there we are. Mr Robert Armour, you are Director of Corporate Affairs and the Company Secretary. Mr John Luke is the Head of Fuel Cycle and Liabilities, and Mr Tony Free is the Liabilities Manager.
  (Mr Armour) And, for completeness, Chairman, I would say that, Mr Luke, we have a minority shareholding in Nirex and he is a Director on the Nirex Board.

  Chairman: It is all very incestuous here this afternoon.

  Diana Organ: The same people around the table.

  Chairman: It is a good job you do not breed, is it not?

  Diana Organ: Maybe they do.


  98. Why have we taken so long to get to the stage where we are talking about how we should talk about having a successful policy like nuclear waste?
  (Mr Armour) That is a very good question. I think we take the view that this debate has been around for 25 years, and it is an important debate which perhaps merits greater attention, or greater expedition, than has been shown in the past. The good thing is that we are now back on the road and engaged in that debate and going forward, and hopefully learning from the issues and the failures of the past.

Mr Breed

  99. Can we look at what we might say are the failures of radioactive waste policy, if you feel they have been, but what are the reasons that you think that past failures have failed to make effective decisions on the way in which we manage those; have there been any lessons that we have learned, in dealing with it, if so, what are we doing about putting that into place? And perhaps you can give us, as a commencement of our review here, your thoughts on the way in which perhaps we should be looking at the incestuous way that you operate, perhaps you could give us some idea of how you look at those conflicts of interest, which have become very apparent to us this afternoon, of how you deal with the way in which you wear the various hats which you sometimes occupy around different tables?
  (Mr Armour) It is inevitably a small industry, and the limited number of companies involved in it are clearly focused on tackling the same issues, and that is why we all occasionally appear together, in that sense. Clearly, following the RTF repository inquiry, and the decision by Mr Gummer, the industry has looked at what it did wrong, at how it approached matters and how it needs to address them differently in the future; it has also looked very extensively at what has happened abroad and how other people have tackled this same issue, because we are by no means alone in our process. And, peculiarly, as British Energy, we operate now in the US and in Canada, as well as the UK, so we are looking at the same issues being debated there as are being debated in the UK, and people earnestly trying to find solutions to the same issue of radioactive waste. Tony Free, who has been extensively involved in the stakeholder dialogue process of the industry, I think I will ask him to comment. Last time round, the industry, as you heard from Nirex, had focused on a solution and wanted to get that solution through and did not take enough time to engage in the public debate. We have seen exactly the same in Canada, where the House of Commons report there notes that, while the industry made the technical case for the deep repository in Canada, it did not sufficiently engage the public to achieve public consensus to the solution. I think the UK has the same issue.

  100. But is not that part of the problem; if you are a very small industry and you are the same people sitting round different tables, you do not get the dynamics of the debate going, to ensure that you do what we would think would be pretty obvious and essential things, like including the public in such consultation exercises?
  (Mr Free) And I think that is why we very much welcome the Government's consultation process, the DEFRA consultation process, here, because it is an opportunity to do exactly as you have just described; and we heard a lot from Chris Murray, earlier on this afternoon, about the sorts of lessons that we have learned from the Nirex process. But I think there is a key thing that has really come out of that, for us, and that is, the old approach of decide, announce, defend, which characterises, if you like, most of the decision-making that we do within this country, has not worked for this particular exercise, and there is no way that I think it is going to work for this. So what we are in the process of doing now is very much a fresh approach to that; the old approach has not worked.


  101. Consult, consult, er...
  (Mr Free) It could end up in there, and British Energy does have some concerns about the way in which the consultation process is structured. One of the things we have said in our evidence to you is that we think there could be a lot more focus on that consultation process, that we need to get very quickly into looking at the options that are there and evaluating those options, rather than going on for years and years just asking people what they think.

Mr Breed

  102. How can British Energy ensure that is going to take place?
  (Mr Free) We can make our point to forums like this, we will be making that point very strongly to DEFRA.

  103. Are there any urgent operational decisions which need to be taken in advance of deciding that long-term policy, as far as British Energy is concerned? If this consultation goes on for some period of time, what are you actually doing at this moment in time, in terms of the operational side?
  (Mr Armour) I think the primary ones relate to the ones you have heard from BNFL and Nirex, in terms of, until you know how you are going to dispose of radioactive waste, it is difficult to know how to package it and therefore how to prepare it, at this point in time, you can go through multiple processes in order to re-treat it, if you do not know what you are going to do in the longer run. In terms of running the power stations, which is our primary role, the current arrangements of both storage and reprocessing do not require us to take any immediate and urgent decisions in relation to this; we think it is more important that we get the process right but get this process moving.

  104. But you sit on both parts of this, do you not, with Nirex as well, with a shareholding in Nirex, with people on the Board, and such; this is part of the problem, is it not, we have got people producing it, we have got people who are charged with the responsibility of it, but they are, in a way, in the same field, and, again, there is prevarication in the length of time this actually can be juggled between the two of you? How do we break that cycle?
  (Mr Armour) We are one of the stakeholders in this process, we are accepting the principle that `the polluter pays', we are going to be one of the custodians and funders of this process, and therefore we have an interest in making sure both that something is done about it but also that it is done in an appropriate and effective manner. And, therefore, I think, legitimately, we have a role in this process in both trying to take it forward and ensuring it fits our needs. But it is the question of how do you involve all the other stakeholders in the process, and that is probably what has not been done in the past, it has been too industry-centred and not wide enough.

  105. I suggest you are going to get very similar answers from all the different parts of the whole industry, you see, and I think this sort of overall agreement is helpful in one sense but it is actually stifling in another, and it is how we get this whole process moving at a speed which is actually going to deal with the backlog and ensure that we come to the right decisions and that the public agree. And, from what I have heard this afternoon, I find that extremely difficult to see how that is going to be done in any sensible time-frame?
  (Mr Armour) I think our worry is that it will not be done in a sensible time-frame. The reality is, the House of Lords evaluated the options fairly extensively several years ago; there have been various processes looking at the evaluation of this, over the last 20 years. I think we share the view that the House of Lords expressed today, in their announcement that it is time to move on; not so much that you do not go through the process of consulting on the process, but you can, in parallel, recognise that an awful lot of the options are already on the table, an awful lot of the work has been done, and this could be moved through at a faster pace, if there was a will to do it.

Mr Borrow

  106. This afternoon, we have had quite a few little chats around the issue of local communities accepting or not accepting radioactive waste in their areas and how the consultation takes place. I would be interested in hearing your views on how the consultation should take place, whether the whole list of potential sites, once they have been determined, before they are whittled down, should be made available to the public right from day one, whether or not local communities should have a veto on accepting radioactive waste, and whether or not local communities should receive some benefits in cash or kind for agreeing to accept radioactive waste within their communities?
  (Mr Armour) I will come to Tony in just a second on this. I think you have two stages in the process, and one is, as we heard earlier, you need to identify the national issue, ownership nationally of the problem, and say, `we've got to find a national solution.' You have then a second issue of how do you move that on to a local arena, and how do you compensate, create benefits for the local community that balance the issue that they are going to be the chosen site.
  (Mr Free) And I think, quite frankly, that the first stage of that is probably the easiest stage, and that is deciding, in principle, what it is that we want to do as a final solution for radioactive waste, what should be national policy. I think probably the most difficult part of it is actually taking that through to its implementation and where are we going to do that, because, as we heard earlier on this afternoon, people are much more likely to become involved in the issue when it means something very much to them in their local area. And, I think, between that first stage of actually deciding what it is that we are going to do and the second stage of actually sort of implementing a solution, there is an additional wide range of consultation that we need to do in order to see what is the best process for actually implementing that, to transfer that national issue, if you like, to local ownership. And there are some very important issues that we need to debate in that, and key amongst those, I think, is this issue of local community benefit, it is something, if you like, in this country, we have fought shy of, in the past, it is something that other countries have as a matter of course; but it is certainly something, I think, that we need to review and to see whether or not there needs to be a benefit to that local community. The other issue that you mentioned, about whether a local community should have a veto or not, that would be quite a radical departure for UK planning policy, because, of course, a local planning authority can take the decision on the part of the local community, but there is always, within the UK planning law, of course, an override, effectively, in terms of national policy issues. So it would be a very difficult one, I think, for us to call. Certainly, in Finland, they have that local veto; whether that applies across to the UK political situation, frankly, I do not know.

  107. So, in your view, if you were to go down, if you like, the Finnish route, we would actually be setting up a separate set of planning policies, in relation to radioactive waste, from the planning approach for every other type of development?
  (Mr Free) It would be a very different planning approach, yes.

  Chairman: If you had only one site in view, in any case, it would be a bit of a blighter, would it not, then?

Mr Lepper

  108. Should the stockpiles of uranium and plutonium be declared waste, or not?
  (Mr Armour) Our view is, not.

  109. Why not?
  (Mr Armour) Because, potentially, you have a usable fuel resource. The uranium that has been reprocessed is usable, the plutonium is usable in MOX and we have just seen the go-ahead for the MOX plant at Sellafield, so there are potential uses for this energy source going forward. What we have said in our evidence is, however, that we, as a company, have not used these in the past because of the current availability of cheap uranium on the open market, fresh uranium, and, as a result, we are not desperate to add to that stockpile; but that does not mean that we do not take the view that the stockpile we have is a potentially usable resource.

  110. So which takes precedence there; is it present-day economics, so far as British Energy is concerned?
  (Mr Armour) We operate in a competitive electricity market where the cost of the fuel cycle determines the cost of our process and therefore whether we make a profit or not; and, clearly, at this point in time, it is cheaper for us, by a very substantial margin, to source our uranium from the world market, fresh uranium.
  (Mr Luke) Just to illustrate that. The current price for uranium in the market is about $9 a pound, that is pound unitary weight, that is the way it is expressed. Our estimate is that the price would have to go up to something like $60 a pound for MOX recycled to be economic, in the short term. So what we are saying is that the material is potentially a valuable hedge, if prices were to go up, and, obviously, all the money has been spent on the existing stockpiles to produce separated plutonium; but, in the short term, there is no economic case for recycling it. In terms of the uranium, the economics are pretty well marginal; it is likely that the uranium would be recycled over a relatively near-term period.

  111. What are the implications of that for this whole issue that we are considering, dealing with radioactive waste?
  (Mr Luke) One of the implications, as we said in our evidence, is that there is no point in adding unnecessarily to a stockpile of separated plutonium if there is no economic case for reusing it. The stuff that is there is a hedge and it is there at the moment, and it is for this reason, we think, that our contracts, which currently provide for ongoing reprocessing, should, at an appropriate time, cease, and be converted into storage contracts.

Mr Drew

  112. I am sorry to have missed the first bit of your evidence; if we can talk about the skills situation. I have always argued that the one thing that is absolutely crucial to this industry is the basic integrity of the workforce. If the industry itself cannot get its act together, in terms of where it is with reprocessing, or storage, and so on, how do you intend to attract younger people into this industry; because unless you get younger people in this industry, and we need younger people in this industry, all these other ideas are pretty unimportant because there will not be the people there to research, develop and, obviously, energise the sorts of things that all the sessions have been about?
  (Mr Armour) It is an issue we take very seriously. We are currently recruiting 50 graduates a year, we have no difficulty in getting good quality graduates into this industry, partly because we need to train through a feedstock for running our operations going into the future. I have to say, looking at the wider spectrum, there is a general problem in UK industry of engineers, particularly in heavy engineering, where the numbers going through the universities are very low indeed, and that will, in the longer term, result in a problem for wider parts of UK industry, not just the electricity sector, if it is not addressed. But the industry is engaged on this one, there is, indeed, a committee set up by DTI involving all the industry, looking at how do we encourage greater throughput of graduates with special disciplines in the nuclear sector to give us that feedstock for the future.

Mr Jack

  113. Does the lack of a solution to the whole question of the disposal of the various nuclear wastes we have discussed prevent you, as a company, making a decision about future new-build of nuclear power stations?
  (Mr Armour) I think, again, going to the House of Lords statement today, we have probably got it about right, in saying, `look, it is not, in our view, a show-stopper, it should not stop us thinking about the issues for the future.' Because, particularly in the context of the energy review, which we have been giving evidence to in the last few weeks, there are major issues facing the UK, radioactive waste is one of them, but security of energy supply is another, how we meet our environmental commitments is yet another. And we believe the nuclear industry going forward has a major role to play as the only large-scale source of generation that does not contribute to greenhouse gas and global warming; but, against that, it seems to us it will be very much better and it will make the whole issue of public acceptance and public consensus much more likely to be satisfactorily addressed. And if we have a clear process going forward, that does not mean we have built a repository before we build the next nuclear station, it means we have mapped out the road-map for the way we are going to deal with radioactive waste, we have a clear view of the process ahead, we have milestones mapped out that say `this is how you are going to deal with it, that is how they have done it overseas.' I think that would do an awful lot for public confidence and lead us to focus on what I think is the much more pressing imperative to the UK of the environment. And we are, to some extent, unable to focus on that one because we have not got a clear way forward on this.

  114. But, in money terms, we heard reference earlier to, what was it, the equivalent of a dollar a kilowatt, whatever it was, an hour, I think it was, payment, which exists in the United States and other locations, which cover some of the issues we are discussing; if that issue could be resolved, do you believe that the new designs of nuclear reactor would represent a commercially viable proposition for you, in your campaign to replace your existing nuclear capacity with new nuclear capacity?
  (Mr Armour) I think the answer is yes, and I do not know if, Mr Chairman, you have received a copy of our submission to the Energy Review, but it sets out clearly this—


  115. No, we have not, but if you would like to make sure we get copies we would appreciate that?
  (Mr Armour) I will make sure you get these. But, basically, it says, if we had the US approach, which was recently costed by the Department of Energy, to check but it was, broadly speaking, still fair, although it has been running for 20 years, if we had the `pay as you go' process that they have over there, whereby they pay a sum to a government or to a liabilities management agency, or whatever, for dealing with waste as you go through the life of a station, this gives a degree of certainty to the operator, as it pre-funds the arrangements. And we believe if that applied in the UK we would have a very much better system, and indeed our stations would be profitable in the UK compared with where they are at present.

Mr Breed

  116. I think we have got to the crux of where this conflict of interest is. Are you saying that, in fact, you do not really want to do any reprocessing because it actually costs you an enormous amount of money, you would prefer not to do that, because you are held by contracts to do that by BNFL, and yet you both sit round the same table with Nirex to keep that going? How are we getting these conflicts of interest, in economic, commercial terms, sorted, because you clearly do not want to carry on paying for something you do not need?
  (Mr Armour) That is indeed the case, and I think you have now identified that the industry is not entirely incestuous in its process there. The answer is, we have been discussing with BNFL how to address this issue for some time and will continue to do so.

Mr Jack

  117. Can I just take you back, we have got about a minute before a bell goes and we all disappear. Liabilities Management Agency; what does it mean? Have you not got in your balance-sheet money already accumulated to meet your liabilities for your AGR obligations, in terms of waste reprocessing?
  (Mr Armour) We have provision for all our liabilities going forward. We provide for the decommissioning of our stations, we provide for our contractual commitments. So the answer to that is yes.

  118. Is the Liabilities Management Agency a good or a bad thing?
  (Mr Armour) We have not yet, I am afraid, seen the proposals. I believe there is an announcement coming. But in the face of a common approach to managing the liabilities for the UK, we think that is, broadly speaking, likely to be a positive thing.

  Chairman: Gentlemen, thank you very much indeed. We have finished by the bell, as a matter of fact. Indeed, we cannot really compete against it. Thank you very much. We may wish to come back to you, obviously, in the course of this inquiry, but we have had a gallop across the course at quite a good canter today, and we thank all of you.

  Diana Organ: And we will see you all at Sellafield.

  Chairman: Thank you very much.

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