House of Commons - Trade and Industry

Select Committee on Trade and Industry Written Evidence

APPENDIX 6

Memorandum by Greenpeace

1. Greenpeace welcomes the opportunity to give evidence to the House of Commons Trade and Industry Select Committee's investigation into the progress made by the NDA since its establishment and the arrangements made by the DTI for the transfer of responsibilities and assets to the Authority. Greenpeace notes that the Committee's review will include:

— funding arrangements;

— capital expenditure and running costs;

— operation of commercial installations and facilities;

— R&D; and

— the development of the nuclear industry skills base.

SUMMARY

Greenpeace's concerns with the NDA are that:

— the NDA's primary objective of dealing with the UK's legacy nuclear waste is undermined by the Authority's dependence on waste creating activities (eg spent fuel reprocessing) for a large proportion of its funding;

— the reliance on funding from waste creating activities creates a conflict of interest for the NDA;

— the NDA's planning process does not meet the Legacy White Paper's commitment to justify operations of nuclear facilities that will come under the Authority's control eg the Sellafield MOX plant and THORP;

— funding arrangements between the NDA and New BNFL are confused and could lead to monies which should go to clean-up being used to subsidise commercial, waste creating activities;

— in a number of areas it is extremely difficult to distinguish between the roles and responsibilities, funding and accounts and decision making processes of BNFL and the NDA;

— the transfer of liabilities from BNFL to the NDA constitutes illegal state aid; and

— the Energy Act 2004 does not answer some of the recommendations of the Trade and Industry Committee's 17th Report.

2. Greenpeace wishes to note from the outset of this submission that due to the closed accounts of BNFL and the NDA that its comments are limited in scope. That notwithstanding, Greenpeace has the following comments to make.

NDA'S OBJECTIVES—AND FUNDING MECHANISMS

3. The raison d'etre of the NDA—as given in the Legacy White Paper—was that the Authority is to be focused "squarely on [dealing with] the nuclear legacy".[2] That the NDA would become so financially dependent for a significant proportion of its income from commercial nuclear activities such as reprocessing, the operation of loss-making reactors or the commissioning of the Sellafield MOX plant, was not indicated in the White Paper. The NDA, through the wording of the Energy Act, now has responsibilities that were never made explicit when the Authority was initially mooted. For example, the Act provides not only for BNFL to be relieved of its liabilities and for the possibility of British Energy being given aid beyond the original restructuring amounts, but also that future private nuclear operators could be bailed out by the Government if they fail to meet their liabilities.[3]

4. The Draft Annual Plan published by the NDA also gives cause for concern. It is predicated on a "business as usual" approach with commercial activities at Sellafield being ongoing and—it appears—with little challenge to those commercial activities. That leaves the NDA in a position in which it might make short-term gains from commercial activities but it might also lead it to continue questionable operations for revenue generation rather than undertaking a review and justification of those activities. Because of what Greenpeace believes to be inherent problems with the NDA's functions, it has challenged the changing role and purpose of the organisation[4]—from the publication of the Draft Nuclear Sites and Radioactive Substances Bill in June 2003[5], through the debates on the Energy Bill, to the passage of the Energy Act into law in 2004.[6]

5. Greenpeace also raised concerns with Parliament and the European Competition Commission that the NDA and BNFL funding mechanism amounts to illegal state aid.[7] In this respect Greenpeace does not believe that the cost implications of the Energy Act (as they relate to the NDA) have been fully set out (see Recommendation 1 of the Committee's 17th Report).

ISSUE

6. The Committee needs to question whether there is a conflict of interest for the NDA in being reliant on waste creating activities for revenue generation when its main objective is meant to be decommissioning and clean-up. The Committee also needs to decide whether the funding arrangements amount to illegal state aid to BNFL.

ROLES AND RESPONSIBILITIES: HOW WILL BNFL AND THE NDA WORK TOGETHER?

7. The NDA will take ownership of substantial assets owned in the UK by BNFL on 1 April 2005 but it will also become a "client" of BNFL's.[8] The DTI's Explanatory Note (December 2003) provided some information on how BNFL would be broken up into a clean-up division (now British Nuclear Group—BNG) and "other holdings".[9] That Review seemed to be based on proposals from BNFL, rather than Government initiated proposals. The restructuring was subsequently changed and is now as appears in a BNFL news release.[10] This shows BNFL reorganised into four separate business groups:

— a clean-up and decommissioning company, British Nuclear Group (BNG);

— Westinghouse;

— Nuclear Science & Technology Service (NSTS); and

— Spent Fuel Services.

8. All of these will become stand-alone companies on 1 April 2005. All will be held by a parent holding company. The parent company will also continue to own a 33.3% share in Urenco, a uranium enrichment company.[11]

9. British Nuclear Group will operate as a separate business with its own brand and logo and become a stand-alone company on 1 April 2005. BNG employs 15,000 of BNFL's 23,000 employees. BNG will also receive a fee from the NDA for continuing to run four operating Magnox stations. In addition the "clean up" group contains a number of operations which are commercial in nature (eg THORP) which also create radioactive waste.

10. BNFL Inc: This company comes under BNG. There is a concern with this division as it is an area in which BNFL's clean up work crosses over with the NDA's clean up work and there may therefore be a risk of subsidisation of commercial work between the organisations. For example, the DTI's Explanatory Note, in discussing BNFL Inc (which undertakes clean up work overseas), comments:

"The review has concluded that BNFL should continue to seek routes to reduce significantly its exposure to the US clean-up market, and should manage BNFL Inc. in a way that minimises the risk to the UK taxpayer."

11. But while there is talk of minimising risk, there is no explanation of the mechanism through which that might be achieved. It was recently announced BNFL has settled for a US$500 million payout on a clean up contract in the US.[12] But the total amount of losses is US$1 billion. Who will make up the shortfall in funding? Given that BNFL has said it will continue to bid for clean up work in the US how can we be sure that there won't be significant losses on BNFL work overseas in the future? Will BNG be forced to bear the cost of these losses? Just how will the Government effectively monitor and control all the risks to which BNFL might expose taxpayer funds?

SPENT FUEL SERVICES

12. SFS has around 500 staff. It manages commercial reprocessing and mixed-oxide contracts with international customers and includes BNFL's international nuclear transport business. In a section of the Final Report from the BNFL National Stakeholder (Clean up and decommissioning page 33) it is noted that that:

"the business (BNFL) has been re-structured accordingly, British Nuclear Group established May 2004. Spent Fuel Services will manage commercial business."

13. The DTI's original note said that no final decision had been made on SFS but the BNG press release of 4 May 2004 shows the new BNFL structure with SFS sitting as a separate company from the BNG. BNFL's Corporate Social Responsibility report also shows the same structure. However, Greenpeace has been told that SFS might be incorporated into BNG (there has been no pubic announcement to that affect). Given that BNG will operate the Sellafield site it would seem bizarre if SFS did remain a separate entity, making commercial decisions over plants run by a different division of New BNFL with ownership resting with yet another party—the NDA. With regard to this is it worth noting that the DTI's Note of December 2004 stated:

"The THORP and SMP plants at Sellafield will also be designated to the NDA. They will be operated by British Nuclear Fuels plc as the Sellafield site licensee company and were outside the terms of the review.

14. It is not known if the issue of THORP and SMP has now been fully settled. Taken with the lack of clarity over the situation with SFS—particularly its decision-making powers—all of the above raises a number of questions. For example, will it be the NDA or SFS that will make the decision to spend tens of millions on new nuclear waste ships?[14] Which organisation will make the final decision on reprocessing contracts? Will commercial business decisions be made at the behest of the NDA, or will the NDA be told what is considered best by SFS/BNFL?

15. A DTI response to questions on the decision-making processes involved in the NDA's planning gives some insight into the current situation[15]

"As you know, the current draft Annual Plan is based on data from UKAEA and BNFL with little or no strategic input from the NDA. The same can be said about any current forward forecasts in terms of annual income and expenditure and this will not really change until we see the NDA's Strategy during the course of next year."

16. At present the position is unclear and unsatisfactory and naturally gives rise to concern over which organisation is in the lead in terms of making decisions about Sellafield. Thus, despite the supposed separation of function, it is extremely difficult to draw a line between the activities of the NDA and BNFL.

FUNDING AND ACCOUNTING

17. When the NDA takes ownership of the liabilities and assets of BNFL it will become a "client" for BNFL, which will operate a number of facilities on a commercial basis on behalf of the NDA, eg the THORP reprocessing plant. The NDA will receive the profits from these activities (money in) but will also have to pay BNFL to operate the plant (money out).

18. There is the potential for a significant amount of cross-subsidy between the various "linked" activities at Sellafield. The Committee should establish exactly how the money will flow through BNFL's accounting system to and from the NDA, particularly in complex areas such as the THORP plant. Exactly which organisation stands to benefit from income and or which might lose through outgoings is not clear. What's not been answered is exactly how the whole accounting system will operate in order to protect taxpayer money:

— Will money for reprocessing, from customer utilities, go directly to the NDA, or will be it channelled through BNFL?

— If BNFL is simply paid to operate the THORP plant, but the profits go to the NDA which is classed as the commercial venture—and how does this relate to state aid matters?

— How will financial transfers be covered—and what kind of oversight will there be from the Government?

client

owner

19. As the House of Commons Public Accounts Committee and the National Audit Office (NAO) reports revealed, the DTI failed to keep a close eye on the financial situation of British Energy when it was privatised.[16] Accordingly, provisions should exist in order to remedy that defect between BNFL and the NDA's accounting system, but at present no such provision exists (certainly if these arrangements are in place they have not been made public).

GOVERNMENT FUNDING AND BNFL

20. The issue is complicated further still by the DTI's Strategic Review which discusses the future for BNFL but does not make a clear its financial links with the Government (in the form of the NDA). Indeed, in a number of instances it seems the distinction has not yet been resolved by the DTI.

21. The NDA will receive money from BNFL's operation of THORP. In relation to this, the NDA's Draft Annual Plan[17] notes, on waste and nuclear material management (page 45), that:

"Representing approximately 24% of the Sellafield budget, this major work area encompasses historic legacy waste retrieval plus conditioning and treatment of new waste arising from commercial and decommissioning operations to support ongoing operations.

22. The Plan notes that the total monies in from the operations listed on page 46 (including reprocessing, storage, MOX production) etc will amount to £860 million. Outgoings for the site, will amount to £1,017.9 million.

23. What is not clear is how much of the NDA's money is going into treating "legacy" waste and how much is going to support treatment of new waste arisings and ongoing operations. There is no indication as to whether or not the NDA will be expected to set aside monies from its income to pay for liabilities arising from new waste creation—yet it clearly expects to benefit from such activities. If it does not, then clearly future taxpayers will be expected to fund liabilities being created today, in breach of the sustainable development principle. The issue of THORP's funding is discussed in more detail in the attached briefing from Cumbrians Opposed to a Radioactive Environment (CORE).[18]

24. The funding arrangements appear contrary to what the Government implied it would do on NDA funding in terms of a segregated fund (see recommendation 15 of the TISC's 17th Report). The Government's original proposal was that the NDA would operate under a segregated fund into which decommissioning funds would be placed—in order to allow the NDA to budget in 10 year cycles (a necessary requirement for confidence from the businesses investing in long term decommissioning contracts). That position now appears to have changed to a limited three year cycle.

25. With regard to this we reproduce the relevant part of the response from the DTI to NGO questions on the matter of the NDA's annual budget:

"The current Spending Review settlement sets out the NDA budget for 2004-05, 2005-06 and 2006-07 and the last figure is indicative only. These are the only numbers that have been committed to thus far, although there are financial commitments that are covered by the Energy Act (see below). The figures agreed with Treasury (£2.2 billion, £2 billion and £2 billion) do assume a reduction in revenue from commercial assets even in this three year spending envelope (roughly from £1 billion in year one to £500 million in year three) and that will obviously reduce further each year thereafter, subject to the conditions set out in the White Paper on THORP and SMP business.

26. It is estimated, in the case of THORP for example, that reprocessing will stop around 2010—depending on whether or not new reprocessing contracts are obtained and sanctioned by the Government. That would mean that, beyond three years hence, a substantial amount of money may go into the NDA's coffers from reprocessing (depending on reprocessing contracts)—but there is no indication of where this will go (unless the budgets reflect the fact that overseas reprocessing will end in three years). If there is additional income, will some money be set aside for liabilities arising from operations between 2005 and 2010? Or is there a risk it will go to subsidise commissioning of the MOX plant?

— How much money might have to be "found" by the Government in the future to pay for decommissioning operations—from both historic and new activities—if the NDA spends profits now on other activities?

— Will the proposed funding arrangements mean that the Nuclear Liabilities Investment Portfolio (NLIP) will be drawn down more quickly than the Government originally planned?

— What are implications of this over the long term on the availability of decommissioning funds if the funds are being "raided" now?

27. There is a certain sense of déjà vu about the lack of transparency over the accounts in relation to BNFL and the NDA and liabilities. In 2002 a report for an Irish MEP looked at how BNFL's accounts had underestimated liabilities, overestimated profitability and also how the company's liabilities funding is highly questionable. That noted that:

— Nuclear liabilities are continuously underestimated by the industry, with a constant need for upward revisions—for example BNFL increased its estimate for liabilities for which it has management responsibility by £7 billion in 1999-2000 alone, an increase of 26% over the previous year's estimate. Underestimation of future liabilities overstates the profitability of reprocessing operations. Further underestimation of liabilities arises because separated plutonium and reprocessed uranium have now been shown to be liabilities and not assets. The costs of managing and disposing of these materials should be included in BNFL liability estimates. This Report also identifies other areas where BNFL accounting practice may lead to overstatements of profitability.

provisions

liquid

funds

28. Will the same hold true for how the NDA accounts for liabilities and profits and how might this affect the flow of State aid in supporting operations which would be closed under the criteria used by purely commercial ventures? The current position is unsatisfactory and entirely lacking in transparency.

ISSUES RELATED TO OTHER BNFL BUSINESSES

29. The DTI's Strategic Review noted that:

"The new clean-up group

It will need to agree with the Government its future strategy and any proposals for partnering while the Government remains its owner."

30. The Strategic Review Note also states:

"The review has recognised that UK clean-up will be the principal focus of the new parent company. The Government has therefore asked the BNFL Board to manage the other businesses to deliver value and in a way that limits and controls risk to the UK taxpayer."

31. To date, there is no publicly available explanation as to how the Government intends to control the risk to the taxpayer from the "other" businesses—a significant concern given the DTI's failure in its oversight of British Energy's finances.

SPRINGFIELDS FUEL FABRICATION PLANT (WESTINGHOUSE)

32. Note is also made in the Strategic Review of Westinghouse's operations at Springfields in relation to clean-up funds and decommissioning activities. At the time the explanatory note was written, it had not been finally decided that the NDA would take over clean up of the site. This, however, has now been resolved and the NDA will pay for clean up at Springfields but, as the Note explains:

"The site is likely to continue to be operated by Westinghouse under transitional arrangements which ensure that clean-up funds are not used to subsidise commercial activities."

WESTINGHOUSE

33. On Westinghouse itself, the Review notes:

"The review has concluded that only limited synergies exist between Westinghouse and other BNFL business units, including those concerned with UK clean-up. Westinghouse does, however, rely heavily on its parent for guarantees and other balance sheet support in relation to both its site clean-up obligations and some contracts with its customers."

34. The Westinghouse Electric Company (WEC), with around 8,000 staff, has assets which include the Springfields nuclear fuel fabrication plant. WEC is an international supplier of nuclear plant products and technologies, including nuclear fuel and also owns the AP1000 reactor design, which is being considered as the design for new nuclear reactors should they be built in the UK. Westinghouse's global ambitions sit awkwardly with its state ownership.[22] The Strategic Review notes the:

"The Government has agreed with the BNFL Board that steps will be taken to enable the business to operate with greater financial independence from its parent, so that possibilities for private sector participation are opened up."

35. Is this to allow future share flotation or sale? Questions which arise are:

— How can Westinghouse be disentangled from the need for balance sheet support from the BNFL parent so that BNFL money isn't used for "guarantees" to support reactor bids?

— Will BNFL subsidise Westinghouse reactor bids either through direct use of NDA money or through indirect use eg using NDA money for an operation it would normally have funded, leaving it free to allocate that same money to Westinghouse?

36. There is little by way of comfort in the DTI's Explanatory Note in terms of providing clarity over funding and the continued interest in opening up the "other" divisions of New BNFL for greater private activity.

NUCLEAR SCIENCE AND TECHNOLOGY SERVICE (NSTS)

37. Will devote around 70% of its research efforts to supporting BNG, but will also support BNFL's manufacturing activities. In addition, it performs work for external customers, primarily British Energy and the Ministry of Defence.

38. This links to Recommendations 4 and 8 of the Committee's 17th Report as (on the issue of Westinghouse/BNFL and reactors) concerns were expressed during the debates on the Energy Act in both the Houses of Lords and the House of Commons that money for research for the NDA into clean up might be diverted into monies which keep the nuclear option open (as per the Government's policy outlined in the Energy Review 2003) or joint facilities could be used for this purpose. Could this, inter alia, feed into Westinghouse's work to sell reactors? This is raised in the Explanatory Notes, when BNFL's Research and Technology division is discussed:

In addition, it performs important work for external customers (primarily BE and MoD) and carries out broader, strategic activities that have relevance to keeping the nuclear option open in the UK. A new Nuclear Science and Technology Service (NSTS) will also be established, initially as a subsidiary of the new parent company, and will provide services to the NDA, site licensee companies and third parties on a commercial basis. NSTS will negotiate rights of access to the Research and Technology facilities at NDA sites."

ISSUE

39. The Committee should demand that NDA and DTI provide a full explanation of where NDA money will be used to either subsidise or support operations BNFL currently considers "profitable." It is only through full exposure of the accounts and state aid support for operations of plants under the NDA's ownership that the public and Parliament can make meaningful decisions on the cost-benefit of allowing certain operations to take place.

BNFL SOLD OFF?

40. BNFL's restructuring into four separate business groups, and proposals for possibly involving the private sector in the individual groups, could eventually see some of BNFL's businesses sold off or operate in partnership with the private sector in some other way. Recent press speculation suggests that the Government may be preparing to break up BNFL into its constituent parts.[23] That accords with part of the strategy review where it is noted:

"The Government does not intend that the parent company and its holdings will be privatised as a whole by flotation. The Government and the Board have also agreed that a sale of the entire group as an integrated structure is not an objective. However, proposals for involving the private sector in individual businesses will be examined on their merits, consistent with the Government's overall objectives of focusing on a more competitive market in UK clean-up, maximising the value and mitigating the risk of BNFL's businesses to taxpayers; and ensuring that safety, security and environmental standards are maintained."

41. There have been rumours for several months that Sellafield will be broken-up—that appears to be confirmed by comments made by the NDA's CEO, Ian Roxburgh, which were reported in an industry journal.[24] Yet the Government White Paper (Cm 5552, July 2002) explicitly states that Sellafield will be managed as a single whole. What sell off plans are the Government developing and how might other private companies benefit from subsidies if the sell-off goes ahead? What mechanisms are there, and how effective will they be, to prevent subsidies to private companies or "risk" to the taxpayer?

CONTRACTORISATION

42. Greenpeace notes the concerns over the speed and extent of proposed contractorisation by the NDA for BNFL's facilities (and other sites that will come under the NDA's control).[25] Greenpeace shares the concerns over the potential risk to health and safety—both off and on site from contractorisation leading to a drive for increased profits at the expense of decreasing costs on safe and environmentally acceptable decommissioning and clean-up.

STATE AID ISSUE: EUROPEAN COMPETITION COMMISSION INVESTIGATION

43. Despite many claims by senior DTI officials that there are no state aid implications for the NDA and its funding relationship with BNFL the European Competition Commission has made a decision to initiate the procedure under Article 88 (2) of the EC Treaty concerning the (NDA) and its relationship with British Nuclear Fuels Limited (BNFL) and, more particularly, with the company that will retain those activities of BNFL that are not transferred to the NDA (New BNFL).[26]

44. Greenpeace agrees with the Commission's preliminary conclusions that the notified measure on the NDA involves the grant of State aid contrary to Article 87(1) of the EC Treaty in that the State aid distorts competition and affects trade between Member States.

45. Greenpeace raised concerns over the potential for the NDA to be operating in breach of European Competition rules because of the potential for state aid funding to BNFL. In 2004 Greenpeace wrote to the European Competition Commission on this issue, providing a legal opinion on the State aid aspects of the Energy Bill with reference to those parts concerning the NDA.[27]

46. Greenpeace asks that the Committee takes note of the European Competition Commission's investigation into the State aid aspects of the NDA's relationship with New BNFL and its subsidiaries in undertaking its review of the NDA as, depending on the outcome of that investigation, the operation of a number of facilities may be radically altered, subject to what is or is not allowed as State aid from the NDA to support current operations.

LACK OF JUSTIFICATION FOR CONTINUED PRODUCTION OF NUCLEAR WASTE

47. As will be clear by now, one of the main criticism by environment groups of the Government's plans to establish the Authority is that the NDA will own and continue to operate, through its contractors, nuclear waste producing facilities, which will mean further unnecessary radioactive contamination of the environment. These facilities include:

— BNFL's ageing Magnox reactors until the last one, Wylfa, closes in 2010.

— The Magnox reprocessing plant at Sellafield until it closes around 2012.

— The Thermal Oxide Reprocessing Plant at Sellafield which reprocesses spent fuel from British Energy's Advanced Gas Cooled Reactors and foreign light water reactors.

— The Sellafield MOX Plant which is intended to manufacture plutonium fuel from weapons-useable plutonium extracted from spent nuclear waste fuel during the reprocessing process.

48. Greenpeace, along with many other environment groups, has challenged the assumption that reprocessing (in particular) should continue and whether it is in the best interest of radioactive waste management; a question also raised in the consultation process by the UK's Committee on Radioactive Waste Management[28] and in the BNFL Stakeholder Dialogue meetings.[29]

49. It is therefore a not "given"—nor indeed should it be a "given"—that there is consensus over the need to for magnox or oxide fuel reprocessing as the most environmentally sound method of dealing with the UK's spent fuel.

50. Greenpeace believes the Committee should also consider the issue of the commitment by the Government, in the Legacy White Paper, for the NDA to justify the continued operation of plants which give rise to radioactive waste (Recommendation 6 of the Committee's 17th report). Clearly, if dealing with the nuclear waste the UK has already produced really is the main priority, a re-examination of environmental impacts and of the financial prudence of expenditure on activities which continue to produce nuclear waste would be the sensible starting point. 51. Yet, there is no mention in the Annual Plan of how the NDA plans to fulfill the commitment made in the White Paper to report annually on the "rationale for keeping [THORP, SMP and the Magnox reactors] open". [para 5.24 and 5.27]. The Energy Act (2004) does not translate this commitment into a very clear clause. However, the Explanatory Notes on the Act say:

Subsection (5) requires that the report must also deal separately with activities in respect of decommissioning and clean up and operational installations and facilities such as the Magnox stations, THORP and SMP. This reflects the commitment in the White Paper to provide specific information on the performance of Magnox, THORP and SMP and the rationale for keeping them open

52. It would be wrong if the process of justifying the continued operation of these facilities is restricted to the Annual Reports, rather than proper and open examination. Schedules 2 and 3 of the Act set out how the preparation and revision of Annual Plans, and the NDA's five-yearly Strategy must be done in "consultation with stakeholders". However, there is no such provision for the Annual Report which is merely an explanation of what has happened during the previous year. Greenpeace notes the Annual Plan does say:

The NDA is required, by the Government policy as set out in the July 2002 White Paper `Managing the Nuclear Legacy' paragraph 5.24, to set out in our Annual Report and Accounts `specific information, consistent with the requirements of commercial confidentiality, on the financial and operational performance of THORP and SMP and the rationale for keeping the plants open.

53. Greenpeace recommends that the NDA begins an open and transparent examination of the financial and environmental case for the operation of SMP, as well as the continued operation of THORP, and the Magnox cycle, as soon as it is established on 1 April 2005. Simply reporting the rationale for keeping these plants open in the Annual Report is not acceptable.

STAKEHOLDER INVOLVEMENT

54. The Committee may wish to note (reference Recommendation 9 of its 17th Report) that the "Draft Framework For Stakeholder Engagement and Transparency for the Nuclear Decommissioning Authority (NDA)"[30] identifies the case for continued operation of THORP, SMP and the Magnox Stations as a key issue which stakeholders would like to seek active engagement on.[31]

55. It may well be that arrangements are already in place for the required open and transparent examination of the case for the continued operation of waste producing facilities as part of arrangements to allow:

". . . stakeholders to input advice and comment on the NDA strategy . . . before [it is] submitted to the Secretary of State for approval".

Unfortunately, however, the current Annual Plan reads as though these issues have already been decided.

56. In its response to the NDA on its Draft Annual Plan, Greenpeace has said the Plan must be amended to reflect a desire not to pre-empt the outcome of the examination of the case for the continued operation of waste producing facilities. Failure to do so will, in the words of the White Paper, reflect badly on the credibility of the [NDA] as an open and transparent organization.

SPECIFIC FACILITIES

Sellafield MOX Plant

57. BNFL has not recently made any public statements on progress with commissioning the SMP. Last year BNFL was forced to subcontract a 4th MOX order to one of its European competitors because of difficulties in opening the plant.[33]

58. In a letter to Michael Meacher MP, Sir John Bourn, the Comptroller and Auditor General (Head of the NAO) says that SMP was originally estimated, in 1993, to cost £265 million. The latest figure given in BNFL's accounts for 2003-04 is £490 million. In the period between plant construction and commissioning with plutonium, BNFL had to carry out a substantial amount of remedial work. This accounted for approximately half of the increase in costs. The remainder results from the construction of additional facilities and the capitalisation of expenditure on commissioning. In addition the costs of the data falsification scandal to BNFL amounted to £113 million—making a total of around £600 million.[34]

59. Despite these ever increasing costs, and the difficulties BNFL has been experiencing getting the plant to work, the Company's assessment is that SMP has sufficient orders to enable it to remain viable, and that it would be much more expensive to close the plant immediately than to continue operating it. However, Sir John Bourne says this is subject to considerable uncertainty, and is particularly dependent on the satisfactory resolution of technical difficulties. He continues:

"From April 2005, the Secretary of State will be responsible for decisions on the future of the SMP on the basis of advice from the NDA. It is likely that the Government will wish to consider the case for continued operation of this plant as a result of the change in responsibilities

60. Rather than revealing the NDA's plans for the open and transparent re-examination of the case for the continued operation of SMP, the Authority's Draft Annual Plan simply states that Sellafield will:—". . . produce Mixed Oxide fuel (MOX) in line with agreed contracts".

61. It is difficult to decide which is more absurd: (a) the cavalier way this statement rides roughshod over the NDA's commitments to an open and transparent process or (b) the way it ignores the technical difficulties being experienced in getting the plant to work. The Draft Annual Plan says efforts to commission SMP will continue, and the NDA hopes to secure consent to operate SMP in November 2005.

62. The Draft Annual plan also reveals that the NDA's projected income in the 12 months to 31 March 2006 includes £136 million generated by the manufacture of AGR and MOX fuel. Although the Plan fails to say how much of this is expected to come from MOX fuel, The Independent on Sunday puts the figure at £45 million.[35]

63. There is no mention of the amount the NDA may pour into getting the SMP operational—yet this should be set against whatever "profits" it is claimed the plant will make.

64. It is a sad day when an organization which the Government said it was hoping would gain wide public confidence and support must rely on one of the most controversial projects to be built in Western Europe in recent years to provide only around 2% of its budget.

The NDA should be directed to launch an open and transparent re-examination of the case for the plans to fully commission the SMP. Any plans to actually operate SMP must be made much more tentative and dependent on the outcome of such a re-examination. The NDA should be made to detail arrangements for developing alternatives to operating SMP as a MOX production facility. With regard to this, Greenpeace has attached a paper from Cumbrians Opposed to a Radioactive Environment on the current status of the SMP.

THORP

65. The NDA's Draft Annual Plan states that spent fuel will continue to be reprocessed until existing contracts with UK and overseas customers have been honoured. The White Paper stressed the importance of honouring the overseas contracts because:

to do otherwise would break existing contractual commitments and Government Undertakings. It could also invoke compensation payments which would outweigh the costs involved in meeting those commitments

66. If the need to "honour" contracts with overseas utilities is the main concern then the NDA should detail how much overseas and how much UK spent fuel it is hoped will be reprocessed over the coming year.

67. From around 1 April 2004 only around 1,435 tonnes of overseas spent fuel remained contracted to be reprocessed, plus around 2,910 tones of AGR spent fuel belonging to British Energy. As the Government will make a large contribution towards the cost of British Energy's decommissioning and nuclear waste management costs, the arguments to justify reprocessing British Energy's spent fuel are now completely different to those used to justify overseas spent fuel reprocessing.

68. This plant will run out of business by around 2010. It is clear THORP could complete its work for overseas customers before 2007. A technical and economic case for continuing with reprocessing at THORP after overseas contracts have been completed (probably by the end of 2006) has not been made. This needs to be done urgently with as much financial information being made available as possible otherwise it will be impossible for stakeholders to fully participate in the production of the NDA's strategy and Plan for 2006-07.

69. There should be an open and transparent examination of the technical and economic case for continuing to reprocess UK spent nuclear waste fuel. Alternatives to reprocessing are technically feasible and are employed in a number of countries—and will be used by BE for the PWR fuel from Sizewell. The NDA should demand BNFL provide a strategy for storing rather than reprocessing BE's spent fuel.

70. Greenpeace here refers the Committee to the attached paper from Cumbrians Opposed to a Radioactive Environment on THORP, which deals with the technical problems faced by the plant and associated financial issues.

MAGNOX REACTORS AND REPROCESSING

71. Section 2 of the NDA's Draft Annual Plan begins by stating that "four of the eleven Magnox stations built are currently operational, and by 2010 all of the stations will be closed". It says that the stations WILL continue to generate electricity until their planned shutdown dates between 2006 and 2010.

72. If the NDA was really planning to involve stakeholders in an open and transparent re-examination of the case for the continued operation of these reactors the wording would be much more tentative.

73. There are several reasons why the economics of continuing to operate Magnox reactors should be re-examined, in addition to the fact that the Government has committed the NDA to re-examine the case for the continued operation of the Magnox reactors in the White Paper.

74. Firstly the Environment Agency issued new discharge Authorisations for the Magnox reactors to be effective from 18 December 2002, despite the fact that Ministers were ". . . continuing to consider the matter of justification". A Ministerial decision on the justification of the Magnox sites is still pending in January 2005. Obviously such a justification exercise, which should have been carried out by the Secretary of State for Environment, Food and Rural Affairs, would have to include an economic examination of the case for continuing to operate the remaining four stations.

75. Secondly, BNFL has freely admitted that the Magnox stations are loss-making, but says it would lose more money if they were closed immediately.[36] BNFL claims that the income from continuing to operate these plants exceeds the "avoidable costs", but ignores unavoidable costs, which would continue to be incurred even if Magnox generation were to cease. However, economist, Gordon MacKerron concludes that:

there can be little public confidence in the idea that Magnox avoidable costs are definitively below the selling price of electricity. Testing this proposition again in a transparent and accountable way would seem to be a necessary condition for any future justification and approval of Magnox operation, and this would in turn require the appointment of genuinely independent experts to carry out the necessary work

76. The Agency asked BNFL to "seek an opinion from independent financial specialists on the matters raised by respondents".

"BNFL declined to do this but instead offered a meeting between the company's own senior financial executives and the Agency's Director of Finance and Chief Economist. However the Agency does not consider such a meeting to be an acceptable alternative to an opinion on the matter from independent financial specialists . . . the Agency does not regard this matter as fully resolved to its satisfaction" [emphasis added].[38]

77. It would hardly be an auspicious beginning for an organization committed to open and transparent working if it based its case for the continued operation of Magnox reactors on information which BNFL has refused to seek an independent examination of, despite a request from the Environment Agency.

78. Thirdly, as the report commissioned by Nuala Ahern from the late Mike Sadnicki noted (see page 7 this submission) it is almost impossible to fathom what is really going on from BNFL Accounts. An urgent review of Magnox costs is essential to avoid the possibility that the taxpayer may in fact be subsidizing the unjustifiable—and potentially unlawful—continued operation of these reactors.[39]

79. Finally, the environmental advantages to be gained from ending Magnox reprocessing as early as possible argue strongly in favour of keeping the quantity of spent Magnox fuel requiring reprocessing to the absolute minimum, by closing the remaining reactors as soon as possible.

80. BNFL has said that it intends to close the Magnox reprocessing plant (B205) around 2012, and this is a major "Strategy Target" of the UK Radioactive Discharges Strategy. Meeting this deadline is crucial to the aim of achieving "close to zero" concentrations of artificial radionuclides in the environment by 2020. The closure of B205 is inextricably linked to the closure of the Magnox reactors, because BNFL insists that spent Magnox fuel must be reprocessed.

81. For many years BNFL has insisted that spent Magnox fuel must be reprocessed for technical reasons yet has recently signalled there are alternatives to Magnox reprocessing. Barry Snelson, Director of Sellafield Operations, told BNFL World (March 2003) that:

We have started to look at insurance policies should the FHP or B205 fail for some reason. The options we have in hand are technically feasible and we know that if the worst happens there are possible alternatives such as direct disposal in grout, dry storage or even reprocessing through THORP. These options are not cheap and we would have to take into account the views of the regulators and other key stakeholders in assessing them".

82. In the BNFL National Stakeholder Dialogue document: BNFL Update to Recommendations and Responses to Working Groups—Main Group March 2004, alternatives to Magnox reprocessing are also discussed.[41]

83. It is beholden on the NDA to explain whether it has had discussions with BNFL on the alternatives to Magnox reprocessing—on both financial and environmental grounds. The results of these discussions should form part of the NDA's papers on justification for the continued operation of B205.

ATTACHMENTS (NOT PRINTED)

CORE briefing on THORP. January 2005.

CORE Briefing on the Sellafield MOX plant (SMP). January 2005.

2 DTI (July 2002) Managing the Nuclear Legacy: A Strategy for Action, paragraph 1.12. http://www.dti.gov.uk/nuclearcleanup/pdfs/whitepaper.pdf Back

3 The Energy Bill-Government set to repeat failure to protect public purse from nuclear liabilities bailout, Greenpeace UK briefing, March 2004. Back

4 See Greenpeace's evidence to the House of Commons Select Committee (http://www.parliament.the-stationery-office.co.uk/pa/cm200203/cmselect/cmtrdind/968/968we07.htmsee to Parliament, etc). Back

5 Draft Nuclear Sites and Radioactive Substances Bill, 2003.http://www.dti.gov.uk/nuclearcleanup/pdfs/print-05publication.pdf Back

6 Energy Act 2004, http://www.legislation.hmso.gov.uk/acts/acts2004/20040020.htm Back

7 For a copy of the legal opinion sent to the Commission see: http://www.greenpeace.org.uk/contentlookup.cfm?ucidparam =20040510144335&MenuPoint=D-E&CFID=1875016&CFTOKEN=22406706 Back

8 For the purpose of this submission Greenpeace will not be discussing the transfers of UKAEA facilities to the NDA. Back

9 http://www.dti.gov.uk/nuclearcleanup/ach/explanatorynote.doc Back

10 http://www.worldenergy.org/wec-geis/global/downloads/bea/BNGpr0504.pdf Back