NEI is responsible for developing policy for the United States nuclear industry. NEI's 270 corporate and other members include every United States energy company that operates a nuclear plant, as well as a wide variety of organizations and businesses involved in the use of radioisotopes for beneficial purposes. NEI's membership also includes nuclear fuel cycle companies, suppliers, engineering and consulting firms, national research laboratories, and manufacturers of radiopharmaceuticals, universities, labor unions and law firms.

The 103 reactors in the United States are among the world's most efficient and reliable. Nuclear energy is the largest source of emission-free electricity in the United States and the nation's second-largest source of electricity after coal. The U.S. nuclear energy sector is also the world's largest, generating more electricity than the nuclear sectors of France and Japan-the next two largest-combined. On a percentage basis, nuclear energy provides electricity for 20 percent of American homes and businesses. Globally, 18 nations generate a higher percentage of electricity from nuclear energy that the United States, including France at 78 percent, Japan at 35 percent. Nuclear energy is growing rapidly in the burgeoning economics like China and India.

This testimony addresses:

1) actions needed to preserve this vital energy resource

2) essential steps needed to enhance progress toward a long-term, stable regulatory approach in the United States

3) essential Nuclear Regulatory Commission funding issues

4) changes needed in the Atomic Energy Act

5) industry initiatives toward preserving the integrity of materials, including metals that comprise components and equipment used in nuclear power plants

6) the need for resolution of conflicting radiation protection policies

7) advances in nuclear power plant security.

NUCLEAR POWER PLANTS CONTINUE TO OPERATE AT RECORD SAFETY AND PERFORMANCE LEVELS

During the past decade, U.S. nuclear power plants have achieved record levels of production and efficiency while maintaining the highest levels of safety in the electricity sector. U.S. nuclear power plants produced 767 billion kilowatt-hours of electricity in 2003, a 25 percent increase compared to 1993 output and the third best production year ever. Although no new U.S. plants have been built during this period, this increased production is equivalent to adding 19 new 1,000-megawatt (MW) plants over the 10-year period.

U.S. nuclear plants achieved a capacity factor of about 90 percent in 2003. This average is approximately double the capacity factors of 20 years ago and is the highest of any generating source in the United States. In 2002, coal-fired power plants had a capacity factor of about 69 percent; combined-cycle natural gas power plants, 40 percent; hydropower, 35 percent; and wind, 29 percent. Overall nuclear plant performance has been increasing steadily over the past decade as measured by the Institute of Nuclear Power Operations.

Nuclear energy continues to be the most affordable baseload source of electricity for businesses and consumers. Average production costs in 2002 of 1.71 cents per kilowatt-hour (kWh) were lower than those for coal (1.85 cents per kWh), natural gas (4.06 cents per kWh) and oil (4.41 cents per kWh). Preliminary production costs for 2003 show that low-cost trend continuing.

Throughout this period of record production and efficiency, the industry has maintained a steadfast commitment to safety. The level of significant events— equipment malfunctions or operational anomalies—is 30 times lower than it was at the end of the 1980s. The industry average is currently 0.03 annual events per reactor, which is equivalent to three reportable events per year.

With productivity and reliability on the rise and production costs falling, the profitability of nuclear plants also is improving. The industry expects incremental gains in profitability to continue for several more years. In addition to improving profitability, companies plan to increase revenue through power uprates. With these uprates and the restart of the Browns Ferry reactor in Alabama, the industry expects to add approximately 10,000 megawatts to the U.S. electricity system over the next decade.

The efficiency and competitiveness of nuclear power plants are driving factors in the decision by U.S. energy companies to seek renewal of operating licenses from the Nuclear Regulatory Commission. One-quarter of U.S. reactors already have been approved by the NRC to extend their reactor operating licenses from 40 to 60 years. Seventeen other reactors are in the queue for NRC review of their license renewal applications, and the industry expects that nearly all reactors will pursue license extensions. The Department of Energy’s Energy Information Agency is recognizing this trend in its most recent energy forecast.

NUCLEAR ENERGY: AN ESSENTIAL COMPONENT OF OUR NATION’S CLEAN AIR GOALS

Nuclear energy plays a vital role in U.S. energy security and diversity, producing electricity safely and cleanly for one of every five U.S. homes and businesses. Before the oil shocks of the early 1970s, nuclear power provided just 4 percent of our electricity supply, and oil provided about 20 percent. The situation is now reversed, as nuclear energy essentially has phased out oil use in the electricity sector.

This steady growth of nuclear power over the past three decades has produced enormous environmental and clean air benefits. Nuclear energy now generates three-fourths of all emission-free electricity generation in the United States and is making significant reductions in harmful emissions into the atmosphere from the industrial sector. Between 1973 and 2001, U.S. nuclear power plants avoided the emission of 70.3 million tons of sulfur dioxide (SO2) and 35.6 million tons of nitrogen oxide (NOX), compared to fuels that otherwise would have produced electricity.

The value of the emissions prevented by using nuclear power is essential in meeting clean air regulations. In 2002, U.S. nuclear power plants avoided the emission of about 3.4 million tons of sulfur dioxide and about 1.4 million tons of nitrogen oxide. The requirements imposed by the 1990 Clean Air Act Amendments reduced SO2 emissions from the electric power sector between 1990 and 2002 by 5.5 million tons per year and NOX emissions by 2.3 million tons per year. Thus, in a single year, using nuclear power plants to generate electricity has eliminated nearly as much in emissions than has been achieved over a 12-year period by all other sources combined.

To put these numbers into perspective further, the NOX emissions prevented by U.S. nuclear power plants are the equivalent of eliminating the NOX emissions from six of every 10 passenger cars on our roads today. The carbon emissions prevented by U.S. nuclear power plants are equivalent to eliminating the carbon emissions from nine of every 10 passenger cars on our roads.

According to a report issued last year by the U.S. Environmental Protection Agency and the Ozone Transport Commission, nuclear energy was one of the most significant compliance tools for reducing NOX emissions in Northeastern and mid-Atlantic states. The EPA assessment found that energy companies have been shifting electricity production from fossil-fueled power plants to emission-free nuclear power plants to help comply with federal air pollution laws.

Nuclear energy also is an environmental imperative for reducing greenhouse gases. New York is a good example of this phenomenon. New York’s greenhouse gas emissions from fuel combustion have decreased 1 percent from 1990 to 2002, despite a growth in population and the number of automobiles on the road. The increased production from the state’s six nuclear power plants offset the need for electricity production at other power plants and therefore reduced greenhouse gas emissions during that period.

In 1990, the FitzPatrick, Ginna, Indian Point and Nine Mile Point nuclear power plants generated more than 24 billion kilowatt-hours of electricity in New York. By 2000, nuclear energy production increased by 60 percent to more than 40,000 billion kilowatt-hours. This increase in nuclear production allowed for a decrease in the use of other fuels and offset an increase in emissions from the rising use of natural gas. The result is an overall 23 percent reduction in greenhouse gas emissions from the electricity sector.

Two reactors at the Indian Point Energy Center near New York City produced 15.7 billion kilowatt-hours of electricity in 2003, approximately 11 percent of New York’s power and enough for 1.5 million households. Some are recommending closure of the Indian Point Energy Center because of security concerns, but such a move would sacrifice a critical source of power for the state and needlessly reverse progress that New York has made in reducing greenhouse gas emissions. EPA has determined that all five counties that surround Indian Point already do not comply with federal air rules. Taking Indian Point off the New York electricity grid would worsen air quality and unnecessarily drive up the cost of electricity to consumers and businesses.

As the New York example shows, nuclear energy is vital to our nation’s clean air programs. Expanding nuclear energy production through continued efficiency gains and building new nuclear plants would further enhance the role of nuclear energy in our environmental goals. Recent studies by the Earth Institute at Columbia University and the Massachusetts Institute of Technology underscore the importance of nuclear energy and renewable energy sources in meeting energy and environmental goals that are inextricably linked.

A STABLE, EFFECTIVE, EFFICIENT NRC IS VITAL TO THE OPERATION OF EXISTING REACTORS AND THE FUTURE EXPANSION OF NUCLEAR POWER

Nuclear power plants are a strategic national asset that contribute the fuel and technology diversity that is the foundation of our electric supply system. Together, large coal and nuclear power plants produce 70 percent of our nation’s electricity, with a mix of hydroelectric, natural gas and renewables providing the balance. But this energy diversity is at risk because today’s business and market conditions hamper investment in new large capital-intensive technologies, such as advanced design nuclear power plants and clean coal power plants. Although the industry expects that most reactors will be relicensed, the nuclear industry’s potential obviously is severely limited if new nuclear plants cannot be financed.

The United States faces a critical need for investment in energy infrastructure, including advanced nuclear designs. Nuclear plants are the most reliable of our sources of electricity and offer the greatest degree of price stability. Yet, since the passage of the Energy Policy Act of 1992, our nation has built approximately 284,000 megawatts (MW) of natural gas-fired generating capacity— more than 90 percent of the new capacity added during this period. Only 4,355 MW of new nuclear capacity and 9,500 MW of new coal-fired capacity have been added to the electricity grid during that same period.

The nuclear energy industry is committed to the construction of new nuclear plants when the business conditions are appropriate. However, most of the factors involved in building new reactors—the structure of the industry and markets, the technology itself and the federal licensing process—have changed since the last nuclear power plants were built.

The industry has been working for several years on regulatory, financial and legislative initiatives that encourage investment in new nuclear plants. For example, recognizing that the construction of large power plants has a high degree of business risk, the industry proposed legislative initiatives that provide federal financial support for the first few new nuclear plant designs. In addition, the industry supports the DOE’s Nuclear Power 2010 program aimed at developing, in partnership with companies, detailed design and engineering on advanced reactor designs and demonstrate the early site permit and combined construction and operating license process.

More pertinent to the jurisdiction of this subcommittee is the prospect that companies would pursue new nuclear plants would be greatly enhanced by continuity and stability in the regulatory processes and regulatory environment at the NRC. Regulatory uncertainty is the largest perceived risk with new nuclear plant construction, so any reduction in stability of the regulatory process will damage industry and financial community prospects for new nuclear plants.

Regulatory stability and continuity also are vital for the continued success of current nuclear plants. As I have previously noted, that fleet continues to operate at high levels of safety and efficiency, and the NRC should regulate the industry commensurate to this excellent record of performance.

THE NRC REACTOR OVERSIGHT PROCESS HAS PROVEN SUCCESSFUL

The NRC now has four years of experience with its revised reactor oversight process, first launched in April 2000. The new oversight process focuses on those areas of the plant that are most important to safety. The new approach is successful in improving the transparency, objectivity and efficiency of regulatory oversight. It is an enormous improvement over the agency’s previous approach to evaluating nuclear plant safety.

The revised oversight process combines the results of performance indicators in 18 key areas and findings from an average of 2,500 hours of inspections per reactor to determine the appropriate allocation of inspection resources across the fleet of operating plants. The results among the nations 103 operating reactors after the first quarter of 2004 were as follows:

· 77 reactors had all green performance indicators and inspection findings and will receive the baseline level of NRC inspection (approximately 2,500 hours per year).

· 20 reactors had a single white performance indicator or inspection finding and will receive supplemental inspection beyond the baseline effort.

· Five reactors had more than one single white indicator or finding in a performance area or had white indicators or findings in different performance areas and will receive more in-depth inspection.

During the past four years, there have been 83 performance indicators and 114 inspection findings across the industry that are less than the highest NRC level. Given that the four years encompass about 400 reactor operating years and over 1 million hours of NRC inspection, these results demonstrate that the industry continues to operate at excellent levels of safety. Although an internal NRC report expressed concern about the declining number of “non-green” performance indicators, the industry views this trend as achieving success and a strong example of the soundness of performance-based regulation.

THE NEED FOR CONTINUED REGULATORY CHANGE

The NRC, however, has struggled to implement safety-focused insights into federal regulation fully. The agency has made admirable progress in employing safety-focused principles that properly apply probabilistic risk assessment to apply regulation where it is needed. Although the NRC has applied the safety-focused approach to the reactor oversight process, it has yet to incorporate this into the actual regulations. This would result in a vastly more effective and efficient regulatory process, but much work remains to codify the safety-focused principles as part of the rules themselves.

Rulemaking initiatives have been under way for several years to apply the safety-focused principles to 10 CFR Part 50, which deals with regulation of nuclear facilities. Successful promulgation of these rules is critical to the effective and efficient regulation of nuclear facilities. These rules also could aid in establishing a more stable and predictable regulatory process that supports both current and future nuclear plants.

This approach is particularly necessary to address issues such as the integrity of plant materials—metals and alloys used in plant components and equipment. In addition, the application of the safety-focused principles is essential to the regulation of programs related to the structural integrity of reactor systems and components.

The NRC also has undertaken other projects of concern to the industry. With congressional approval of Yucca Mountain as the site of a national repository for used nuclear fuel, DOE in December is scheduled to submit a license application to the NRC for the construction of that facility. Having one federal agency review and approve the actions of another is relatively unique and represents a major challenge for both agencies. The NRC has been actively engaged with DOE in prelicensing activities. The industry supports the efforts of the NRC to date and believes that it is providing sound oversight of the project. It is in the interest of all parties that the repository be built and operated safely.

In reviewing the Yucca Mountain license application, the NRC will create multiple licensing boards. Creating and coordinating these various bodies will test the agency’s management. The industry strongly urges continued oversight by this and other congressional committees to assure efficient management of resources and to hold the NRC to its timetable of acting on the license application within three years of receipt.

The NRC also is active in licensing new nuclear facilities. Louisiana Energy Services (LES) submitted an application for the licensing of a new enrichment facility in January, and a similar license application is expected from the U.S. Enrichment Company within the next few months. The NRC responded to the LES application with an order that the application review be completed within 30 months, and the NRC appears to be keeping to that schedule.

The industry is following the management of the LES applications closely, given that prior efforts by the NRC to review applications for new facilities have taken many years to resolve. Unnecessary delays in the licensing process for nuclear facilities add significant business risk and hamper the development of the nuclear industry. The industry encourages congressional oversight of these license applications to ensure that they are processed in a timely and thorough manner.

NRC BUDGET AND STAFFING LEVELS REQUIRE REVIEW

The NRC’s budget has increased significantly over the past five years. The NRC’s proposed fiscal 2005 budget totals $670.3 million, an increase of $44.2 from the fiscal 2004 budget, and the highest ever for this agency. This is, in large part, due to expanded security programs and staffing for those programs. However, the industry believes that the NRC has failed to leverage opportunities to become more efficient.

Just as consolidation within the industry resulted in more nuclear plants being operated by a smaller number of companies, the NRC should review its regional structure and determine if changes are needed to respond to the new industry structure. In addition to the implementation of the revised reactor oversight process, the natural consolidation of the industry provides an opportunity for the NRC to reallocate existing resources.

About four years ago, the Environment and Public Works Committee approved legislation that renewed the NRC’s authority to collect user fees to offset its budget. That proposal was eventually passed into law in a slightly modified form. As a result, general revenues will be used to fund 10 percent of the NRC’s budget in the coming fiscal year. That legislation expires at the end of the fiscal year 2005, and the NRC’s budget again will be fully funded by user fees despite many programs that do not benefit the industry.

As some form of reauthorization of the user fee is likely to be passed next year, the industry urges the committee to review the current fee structure and to identify improvements for the NRC. The industry believes that the NRC should tie activities and fees together. We believe it is inappropriate to categorize about 75 percent of the agency’s budget in one “general” account (part 171). In addition, the committee’s action four years ago that resulted in 10 percent of the agency’s budget coming from general revenues was based upon a calculation of those services that do not directly benefit NRC licensees. The percentage of these services that do not benefit licensees should be reviewed, particularly in light of increased national security expenses that should be funded through general revenues. The industry supports legislative efforts that call for much of the security program at the NRC to be funded from general revenues and appreciates the committee’s support of that proposal.

THE INDUSTRY RECOMMENDS CHANGES TO THE ATOMIC ENERGY ACT

The industry continues to support several proposed changes to the Atomic Energy Act. These proposals will facilitate reform of the NRC and its regulatory processes to ensure the effective and efficient regulation of the industry.

· In order to provide the commission with the flexibility and discretion to manage and organize the NRC in the most appropriate manner, Sections 203, 204 and 205 of the Atomic Energy Act should be repealed.

· Congress should remove the restriction on foreign ownership of commercial nuclear facilities.

· When a combined construction and operating license is issued by the NRC for a new nuclear power plant, Congress should clarify that the license term begins when the plant commences operation rather than when the license is issued.

· Congress should remove the requirement that the NRC conduct antitrust reviews as other federal agencies, notably the Securities and Exchange Commission, the Federal Trade Commission, the Justice Department, and the Federal Energy Regulatory Commission, conduct such reviews.

The industry is aware of and appreciates the efforts of the committee to pass several of these proposals into law. In addition, the industry strongly supports, and also appreciates, efforts of this committee to ensure that Price-Anderson Act coverage will be available to companies that are considering building new nuclear power plants and other nuclear facilities. The industry supports the PriceAnderson Act reauthorization language included in the energy bill conference report.

RADIATION PROTECTION POLICY MUST BE SCIENCE-BASED AND CONSISTENT

As the industry works to increase energy production, it remains committed to maintaining the highest priority on safety. Achieving this goal depends in large part on the federal government’s setting a uniform radiation protection policy. The policy should be based on the best available science and should be applied equitably and consistently by every federal agency across all programs.

Duplicative and conflicting regulation by different agencies, using different criteria, must be eliminated. In this area, federal radiation protection policy falls short. Senator Pete Domenici requested in 2000 that the General Accounting Office (GAO) produce a report on this issue. The report—“Radiation Standards: Scientific Basis Inconclusive, and the EPA and NRC Disagreement Continues” (GAO/RCED00-152)—concluded that U.S. radiation protection standards “lack a conclusively verified scientific basis,” involve “differing exposure limits” due to policy disagreements between federal agencies, and “raise questions of inefficient, conflicting dual regulation.” A troubling conclusion of the GAO report is that the costs related to complying with such standards “will be immense, likely in the hundreds of billions of dollars” of private and public funds.

This situation has persisted for years, without any substantial resolution. For example, Senator John Glenn, as chairman of the Senate Committee on Governmental Affairs, asked the GAO to report on this issue in 1994. The GAO report, “Nuclear Health and Safety: Consensus on Acceptable Radiation Risk to the Public is Lacking” (GAO/RCED-94-190), concluded that “differences exist in the limits on human exposure to radiation set by federal agencies, raising questions about the precision, credibility, and overall effectiveness of federal radiation standards and guidelines affecting public health.”

What is particularly troubling is that the 2000 report requested by Senator Domenici, issued six years after the report requested by Senator Glenn, reflected that the situation was essentially unchanged. Now four years later, the nuclear energy industry still notes little substantive progress in resolving the issue of duplicative and conflicting radiation standards.

Although federal regulatory agencies contend this protects public health, it discourages enhancements to public health protection and the cost-effectiveness of doing so. In addition, this situation undermines public confidence in regulatory activities and, in the end, inhibits the availability the vast health and quality-of-life benefits from commercial applications of nuclear technology. This situation also creates significant uncertainties in projecting costs and schedules of licensing and building of new plants, the decommissioning of facilities that are no longer operational, and the disposal of radioactive waste.

Federal radiation protection policy must provide a foundation to protect public health and safety, make the best use of public funding and resources, and help build public trust and confidence in federal decisions. The current conflicting radiation standards and duplicative regulation work against those principles.

Recently, the NRC and EPA have pursued initiatives to resolve duplication and conflict in their regulatory programs for radiation safety. The NRC and EPA have agreed on a communication process that addresses their conflicting standards for decommissioning site cleanups. Also, the agencies are coordinating efforts to create a more integrated framework for regulating the safe disposition of low-activity radioactive material and mixed (radiological and chemical) waste.

However, the greatest impediment to resolving issues of duplicative authority and conflicting standards are the various laws that mandate the respective agencies’ regulatory programs. Congress should resolve the policy issues that the agencies cannot resolve on their own. We encourage this committee to provide appropriate, continued oversight to ensure that consistent radiation policy is established through legislation.

INDUSTRY HAS LAUNCHED A PROACTIVE, COMPREHENSIVE MATERIALS MANAGEMENT PROGRAM

The nuclear industry has long known that radiation could have effects on metals and other structural materials previously unknown to scientists or engineers. Because commercial nuclear reactors operate at high temperatures and pressures, it had to find materials able to withstand radiation, stress, wear and corrosion. Through experience, it has.

Some of the initial materials used to fabricate reactor and power generation components did not perform as well as predicted. In response, the industry, over the past 20 years, has formed four major programs related to boiling water reactor vessel internals, steam generator management, pressurized water reactor materials reliability, and robust fuels. Working with EPRI and the Institute of Nuclear Power Operators (INPO), these efforts have been successful in addressing many materials issues.

Despite these efforts, an inspection at the Davis-Besse nuclear plant in 2002 identified component damage stemming from two issues: reactor vessel nozzle cracking and boric acid leakage. Since 1988, all U.S. pressurized water reactors have had programs for preventing boric acid leakage. In the early 1990s, the NRC and the industry began examining the potential for reactor vessel nozzle cracking, after tiny cracks were found in nozzles at a French reactor.

Nozzle cracking and boric acid leakage at Davis-Besse combined to create a problem that the nuclear industry had not experienced before: significant corrosion on a reactor vessel head. The corrosion was caused by water that contains boric acid. The cracks developed over several years, ultimately permitting a small amount of water containing boric acid to leak and come into contact with the reactor vessel head.

As a result of this corrosion, the Davis-Besse plant was shut down for corrective measures. In March, the NRC approved FirstEnergy’s corrective actions and ongoing plant maintenance changes and permitted Davis-Besse to restart. FirstEnergy replaced the reactor vessel head at Davis-Besse and the NRC conducted a thorough inspection of the reactor. In addition, the company implemented, with NRC oversight, an overhaul of its management and management practices at the site.

The nuclear industry and the NRC have responded quickly and responsibly to the Davis-Besse event. As the NRC has also been invited to testify, the commissioners can best detail actions taken by the agency. However two of these actions merit special attention: additional inspections of all U.S. pressurized water reactors and changes in the agency’s oversight process to facilitate early detection of the type of corrosion that occurred at Davis-Besse.

The nuclear industry has also responded to the event. INPO investigated the event and issued a report with recommendations aimed at preventing a similar event. EPRI, the industry’s research organization, had previously developed a technical document on boric-acid corrosion inspection and leakage detection. The owners of pressurized water reactors have completed inspections recommended by the NRC. There are no indications at any other plant of corrosion on reactor vessel heads similar to that found on Davis-Besse. Small cracks were found on the nozzles at several plants and reactor owners have scheduled replacement of 30 vessel heads by 2007. To date, vessel heads have been replaced at eleven nuclear plants. In the meantime, all of these reactors will continue to operate safely.

Perhaps more importantly, the nuclear industry has also developed a integrated, coordinated, and proactive nuclear plant materials program. In 2003, a task force composed of senior industry executives with broad experience in materials issues, working with materials experts, completed a broad assessment of industry programs. Although materials integrity has long been a part of the industry’s research and maintenance programs, companies are now replacing more equipment and components more rapidly than expected. The task force found that the industry would benefit from a proactive program to assess and, when needed, replace plant components and materials.

Among the findings of the industry assessment is the recognition that when significant materials issues become known, they quickly consume all the attention, personnel and funding of diverse current materials groups. Current programs differ in levels of funding, scope, assessment processes, executive involvement, personnel resources and other areas. No industry group had looked holistically at the management of nuclear materials issues.

The recent industry assessment stressed the importance of funding and organizational commitment to oversee materials issues. The assessment concluded that consistent funding at the level required to resolve current materials issues is a prerequisite to remaining an effective nuclear plant operator. As a result, the industry will spend nearly $65 million annually on this effort. We have put new inspection protocols in place and have developed techniques to anticipate and detect potential problems.

NEI also has taken proactive action to address materials degradation at our nation’s nuclear power plants. With the unanimous support of the chief nuclear officer of each company that operates a nuclear power plant, NEI has established an industry wide initiative to integrate materials programs and to establish ongoing, comprehensive management of materials issues. This approach integrates existing activities by INPO, EPRI and reactor owners’ groups and refocuses them for future efforts. An executive-level oversight structure is in place to ensure appropriate resources and attention is given to ensure effective management of materials issues.

The Davis-Besse event prompted the NRC and the nuclear industry to reexamine its programs for materials management issues. The industry is committed to detecting and resolving materials issues before they challenge the safe operation of our facilities. The industry believes that the NRC has taken appropriate steps to address these issues. Additionally, the industry believes that a proactive industry-led program, supported with appropriate resources, is the preferred approach.

U.S. NUCLEAR POWER PLANTS ARE THE MOST SECURE INDUSTRIAL FACILITIES BEFORE 9/11 AND EVEN MORE SECURE TODAY

NEI has not had the opportunity, since the tragic attack of Sept. 11, 2001, to review with this subcommittee the actions that the industry has taken in response to increased security concerns created by that event. The nuclear industry fully recognizes that the health, economic and national security benefits from nuclear energy easily could be overruled if our plants cannot be operated safely, even in the current environment of concern over terrorism.

Even prior to Sept. 11, 2001, our nuclear power plants were the most secure industrial facilities in the United States. They were built to withstand extreme natural events, such as earthquakes and hurricanes, and the NRC has for more than 20 years required that private security forces defend against an attacking force of saboteurs intent on causing a release of radiation. The facilities are even more secure today, with voluntary and NRC-required security and emergency response implemented since 2001.

In analyzing this changing global environment, the nuclear industry started with the firm knowledge that nuclear power plants—although robust and difficult targets to penetrate—nonetheless are considered by some to be potential terrorist targets. However, as stated by former NRC Chairman Richard Meserve:

It should be recognized that nuclear power plants are massive structures with thick exterior walls and interior barriers of reinforced concrete. The plants are designed to withstand tornadoes, hurricanes, fires, floods, and earthquakes. As a result, the structures inherently afford a measure of protection against deliberate aircraft impacts. In addition, the defense-in-depth philosophy used in nuclear facility design means that plants have redundant and separated systems in order to ensure safety. That is, active components, such as pumps, have backups as part of the basic design philosophy. This provides a capability to respond to a variety of events including aircraft attack.

As former Chairman Meserve noted, the industry’s “defense-in-depth” philosophy includes protection by well-trained, heavily armed security officers, fortified perimeters and sophisticated detection systems. The industry also assumes that potential attackers may attempt to achieve the help of a sympathetic insider, so the companies that operate nuclear plants conduct extensive background checks before hiring employees. Even then, to be conservative, our security plans assume that attackers are successful in obtaining insider help.

SECURITY AT NUCLEAR FACILITIES HAS INCREASED SIGNIFICANTLY SINCE SEPT. 11, 2001

Nuclear power plants were our nation’s most secure industrial facilities before Sept. 11, 2001, but new threats required the industry to take action to bolster security even more. The industry has increased well-trained, paramilitary security forces at the plants by one-third, to some 7,000 officers at 67 sites. The industry also has worked with the NRC to implement the security improvements mandated both in 2002 and 2003. Overall, the industry has invested more than $500 million in security-related improvements since September 2001, and the industry will invest another $500 million in security enhancements by the end of this year.

The industry’s security has been recognized as excellent in independent assessments conducted by the Progressive Policy Institute, a panel of security and infrastructure experts for The Washington Post and by current and former law enforcement officials. The Progressive Policy Institute, in a report issued last summer, gave nuclear plant security its only A rating. When The Washington Post reviewed security in several U.S. private and government sectors a year after Sept. 11, a panel of experts gave the nuclear industry a rating of “A-/B+”—the second-highest rating in the survey. More recently, the National Journal, in a bipartisan survey, gave nuclear plant security its third-highest ranking.

A copy of an NEI publication entitled “Post-Sept. 11 Improvements in Nuclear Plant Security Set U. S. Industry Standard” is attached. It provides additional detail regarding the many security changes that have been made at our plants since September 2001.

The nuclear industry has cooperated and worked with the NRC to review nuclear plant security completely, and many improvements have been implemented as a result. Changes include measures to provide additional protection against vehicle bombs, as well as additional protective measures against water- and land-based assaults. The industry has increased security patrols, augmented security forces, added more security posts, increased vehicle standoff distances, tightened access controls, and enhanced coordination with state and local law enforcement.

In April 2003, the NRC issued new security requirements that effectively revised the agency’s “design basis threat,” which defines the characteristics of the threat against which a plant must defend and is the foundation for the industry’s security programs. Since then, the nuclear industry has been working in cooperation with the NRC to resolve issues related to the new orders and in late April of this year, every company that operates a nuclear power plant submitted revised security plans to the NRC. These plans determine how each plant will be able to meet the new standards by the NRC-imposed deadline of October 29.

Regarding an issue that received a considerable amount of congressional concern, the industry has worked with the NRC to develop a revised program to constantly test the security at our facilities. This program includes “force-on-force” drills using advanced equipment. Although the tests were suspended for several months after Sept. 11, they are being conducted at plants throughout the nation. Every plant will conduct NRC-evaluated force-on-force exercises at least once every three years, in addition to exercises conducted by energy companies on a more frequent basis.

It is highly unlikely that attackers could successfully breach security at a nuclear power plant and produce a release of radiation that would endanger the residents near the plant. NRC Chairman Nils Diaz on May 15 said that facilities that shield reactor fuel—the containment building, spent fuel pools or dry storage containers—are protected from scenarios as extreme as an aircraft crashing into a nuclear power plant. “The NRC has conducted an extensive analysis of the potential vulnerability of nuclear power plants to aircraft attacks,” Diaz said. “While the analysis is classified, the NRC remains convinced that nuclear power plants are the most heavily protected civilian facilities in the United States.” Diaz noted that the possibility that such an attack would result in a radiological release is low.

Even so, we recognize that the security programs at our nuclear power plants must not be static. We are constantly reviewing and reevaluating our security programs. In that regard, the industry is ready to work with this subcommittee to help you and the American public better understand our industry’s strong commitment to security and protecting public safety.

Mr. Chairman, the nuclear energy industry is proud of our efforts in security and emergency preparedness. We believe that no other industry can match or even approach the level of sophistication and commitment that the nuclear industry has exhibited in operating safe and secure power plants.

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We have enhanced security significantly since the Sept. 11 terrorist attacks and we continue to work with federal, state and local officials to ensure there is a seamless shield of protection at our facilities—both for our workers and for residents who live near our facilities. The industry also needs regulatory stability during this period of complying with the most recent NRC security requirements and thereafter. The industry’s plans to meet the new NRC requirements include costly physical improvements that will bolster plant security. Constantly changing the security requirements could delay current improvements or could result in the improvements being outdated even as they are being built.

NEI SUPPORTS NRC-ENDORSED LEGISLATIVE PROPOSALS AND URGES THE SUBCOMMITTEE TO SUPPORT COMPREHENSIVE ENERGY LEGISLATION

The nuclear energy industry has followed the legislative proposals of the Senate Environment and Public Works Committee closely over the past two years. The industry appreciates the cooperation that members and staff, on a bipartisan basis, have provided.

In general, the industry has supported several NRC proposals on security, and we appreciate the committee’s efforts in including those initiatives in legislation approved last year and in agreeing to include those proposals as part of the comprehensive energy bill conference report still be considered by the Senate. We were disappointed that language was not agreed upon to resolve the issue regarding when our security personnel may use deadly force. We continue to support efforts to assure that they can use deadly force under appropriate circumstances. Although the industry still has concerns regarding the proposals in the energy bill conference report, it supports passage of the legislation, along with those proposals included in a broad energy package for America.

Mr. Chairman, the nuclear energy industry has responded to many of the concerns that the full committee voiced regarding security at our plants over the past two years. The NRC has created a new security division. The industry’s security is being tested with force-on-force drills on a more frequent basis. The design basis threat has been increased to reflect today’s potential security threats after the NRC conducted a review of the requirements with other federal agencies. Our emergency response plans, already the gold standard for emergency planning, have been improved.

The industry remains hopeful that an energy bill, including nuclear security provisions, can be passed this year. Yet, we urge this subcommittee and the full committee to consider that this industry has maintained its long-standing commitment to security, is making the changes required to defend against new threats and is re-examining its emergency preparedness programs to ensure that our facilities continue to be the most secure in the nation.

By October 29, we will have spent approximately $1 billion industry wide on security enhancements, working with the NRC and Department of Homeland Security. The industry will continue its long-standing practice of re-examining security based on emerging global events. We take that initative as an industry— and we must do so in a climate of regulatory stability and certainty so that there is time to comply with the new requirements imposed by the NRC and bring stability to the programs that make America’s nuclear power plants the most secure industrial facilities in the country.

CONCLUSION

America’s 103 nuclear power plants comprise a critical element of our energy portfolio. Nuclear power is vital not only to our nation’s energy security and economic future but also to our environmental and clean air goals. The industry continues to operate nuclear plants safely and efficiently. During the past decade, performance and safety have been consistently at, or near, record levels. In addition, nuclear power plants also are the most secure industrial facilities in the country.

The nuclear industry has significantly increased the amount of electricity that it generates over the past two decades. But for the nuclear industry to continue generating three-quarters of our nation’s emission-free electricity, new nuclear plants must be built. The industry has made great strides toward its goal of constructing new nuclear plants and is committed to achieving this objective in the near term.

The NRC plays an important role in the nuclear energy sector. Achieving the goal of new plant construction depends on a stable regulatory environment, one that assures the safe operation of our plants. The NRC has made significant progress toward this end, yet more must be done. The NRC must continue to modernize its regulatory environment to incorporate safety-focused principles. For the nuclear industry to continue to play an important role in our nation’s energy and environmental future, the NRC must be more effective and more efficient.