Billions of New Nuke Giveaways in Kerry-Lieberman Bill Exposed
Thursday,
June 17, 2010
For Immediate Release
BILLIONS OF DOLLARS IN TAX BREAKS FOR EACH NEW REACTOR
UNDER KERRY-LIEBERMAN WIPE OUT RISK FOR UTILITIES
ALREADY BENEFITING FROM MASSIVE LOAN GUARANTEES
Earth Track Analysis Finds That Just Two of the
Subsidies Add Another $1.3 Billion to $3 Billion in
Tax Breaks Per Reactor; May Make It More Likely
Taxpayers Will Face Downside Risk.
Washington, D.C. --
The
nuclear industry could end up facing no risk under
massive tax break subsidies in the Kerry-Lieberman
climate bill,
according to an important new analysis conducted for
Friends of the Earth by the research organization
Earth Track. These tax breaks totaling $9.7 billion
to $57.3 billion (depending on the type and number
of reactors) would come on top of the
Kerry-Lieberman measure’s lucrative $35.5 billion
addition to the more than $22.5 billion in loan
guarantees already slated for nuclear power.
Friends
of the Earth President Erich Pica said: “Doling
out an additional $1.3-$3 billion in tax breaks per
new reactor means the industry would be at the table
playing almost entirely with taxpayer money.
Industry will have little to lose when a reactor
goes belly up. While
taxpayers are bankrolling the industry’s nuclear
gamble they would share in none of the reactor’s
financial returns. In fact, all taxpayers will
receive if the reactors are built is responsibility
for disposing of the waste. By contrast, investors
stand to make billions with no risk should their
reactor gambit goes belly up and enter bankruptcy.”
Earth Track Founder
Doug Koplow said: “These substantial tax breaks
for new reactors greatly impede market access for
competing energy sources and worsen the already
substantial risks to taxpayers from a nuclear
build-out. As has clearly been shown in U.S.
mortgage markets, the likelihood of bad financial
decisions rises sharply if only other people’s
capital is at risk. Kerry-Lieberman’s nuclear tax
breaks do just this by replacing investor equity
with taxpayer money, and allowing investment tax
credits to be claimed even before the reactor is
operating. The provision to recover credits in the
event a reactor is cancelled or suspended is
unlikely to be effective in the most likely cause of
termination – a bankruptcy due to poor economics.”
The
memo evaluates
three tax break subsidies, describing how they work
and estimating their subsidy value to recipients in
the nuclear power sector:
·
5-year accelerated depreciation period for
new nuclear power plants (Kerry-Lieberman section
1121).
·
Investment tax credit (ITC) for nuclear power
facilities (K-L section 1122) and the related grants
for qualified nuclear power facility expenditures in
lieu of tax credits (K-L section 1126).
·
Modification of credit for production from
advanced nuclear power facilities (K-L section
1124).
According to the Earth Track analysis:
·
The
K-L tax breaks would be worth billions per reactor. The
new subsidies will be worth between $1.3 billion and
nearly $3.0 billion on a net present value per new
reactor. This is equivalent to between 15 and 20
percent of the total all-in cost of the reactors, as
projected by industry.In fact, the new nuclear tax
break subsidies would be worth 15 to more than 50
percent of the expected market value of power the
plants will produce. This is over and above
the many other subsidies the nuclear projects would
already receive.
·
The
new K-L tax breaks will undermine equity
requirements of the nuclear loan guarantee program. In
theory, the current rules require investors to hold
a 20 percent equity stake in the new project. A key
goal of this requirement is to ensure investors have
a strong interest in the long-term success of the
venture. However, the K-L bill would in effect allow
investors to recover funds equal to this equity
share within the first few years of plant
operation. Financial risks from project failure
would then rest almost entirely with taxpayers.
·
Total
tax subsidies to new reactors could reach tens of
billions of dollars from K-L's two main tax breaks
alone. The
national cost of K-L's tax provisions can be
benchmarked by evaluating two build-out
scenarios: six reactors, matching the number likely
to be supported under K-L's expanded nuclear loan
guarantee pool; and 22 reactors, matching the number
going through NRC licensing as of May 2010. As not
all reactors will be the same type, the calculations
assume half are AP1000s and half Areva EPRs. Under a
six-reactor scenario, K-L will add $9.7 billion to
$15.6 billion in tax subsidies to nuclear
power. Under a 22-reactor scenario, the net present
value of subsidies on offer just through 5-year
depreciation and ITCs reaches $35.7 billion to $57.3
billion. Neither of these other subsidies have any
national caps under Kerry-Lieberman.
The full
Earth Track analysis is available online at
http://www.foe.org/more-kerry-lieberman-nuclear-subsidies/.
ABOUT THE GROUPS
Friends
of the Earth and its network of grassroots groups in
77 countries defends the environment and champions a
more healthy and just world. The organization’s
progressive environmental advocates pull no punches
and speak sometimes uncomfortable truths to power.
It's an approach that for four decades has yielded
victories protecting the planet and its people.
Current campaigns focus on clean energy and
solutions to global
warming, protecting people
from toxic and new,
potentially harmful technologies, and
promoting
smarter, low-pollution
transportation alternatives. For more
information, go to
http://www.foe.org.
Doug Koplow founded
Earth Track (http://www.earthtrack.net)
in 1999 to more effectively integrate information on
energy subsidies. For the past two decades, Koplow
has written extensively on natural resource
subsidies for organizations such as the Global
Subsidies Initiative, the National Commission on
Energy Policy, the Organization for Economic
Cooperation and Development, the United Nations
Environment Programme (UNEP), Greenpeace, the
Alliance to Save Energy, and the US Environmental
Protection Agency. He has analyzed scores of
government programs and made important developments
in subsidy valuation techniques. Koplow holds an
MBA from the Harvard Graduate School of Business
Administration and a BA in economics from Wesleyan
University. He served on the United Nations
Environment Programme's Working Group on Economic
Instruments from 2001-2004; and the National
Recycling Coalition's Policy Workgroup from
1998-2003. He is currently serving as an advisor to
the Pew Center's Subsidyscope initiative. Prior to
founding Earth Track, Koplow worked with Industrial
Economics (Cambridge, MA); Temple, Barker and Sloane
(Washington, DC); and Sobotka and Company
(Washington, DC).
MEDIA CONTACT: Nick
Berning, Director of Public Advocacy and
Communications, (202) 222-0748 or nberning@foe.org.