TEXAS COMPACT FACILITY LEGISLATIVE OVERSIGHT REPORT RELEASED

On December 1, 2018, the Joint Compact Facility Legislative Oversight Committee (Joint Committee) submitted its report on the Texas Low-Level Radioactive Waste Disposal Compact (Texas Compact) facility to the Senate Committee on Natural Resources and Economic Development and the House Committee on Environmental Regulation.  

The Joint Committee was established pursuant to House Bill (HB) 2662, which was passed by the 85th Legislature during the regular session.  The Joint Committee heard invited and public testimony during a scheduled hearing on September 6, 2018.

Charge

Since opening in 2012, Waste Control Specialists (WCS) has operated at a loss.  According to the Joint Committee’s report, “there is continued concern that the current regulatory scheme, including fee allocation, is prohibitively cumbersome and that it may prevent any owner of the Facility from operating at a profit.”

The following is the charge for the Joint Committee pursuant to HB 2662:

Assessment of the Texas Low-Level Radioactive Waste Disposal Compact facility to include recommendations relating to costs, fees, and any other matters the legislative oversight committee determines are relevant to the compact facility and oversight of the compact facility. Report must include the results of the assessment.

Recommendations

The following overview of the Joint Committee’s recommendations includes detailed excerpts from the report.  Interested stakeholders seeking additional information should review the report in its entirety. 

•     Waste Disposal Rates for In-Compact Generators  The Joint Committee recognized the intent of the rate rule, while acknowledging that current compliance regulations pose a risk to the financial viability of a private operator.  The Joint Committee expressed a desire to retain the spirit of the rate rule by providing low prices to in-compact generators, but recognized that the contract review process has proven to be an impediment to WCS’s desire to participate in the free market for out-of-compact waste.  In the Committee’s discussion of the rate rule and pricing issue, a number of possible solutions were developed to the issues posed by the rate rule. The proposals included accepting WCS’ request to untether non-compact waste from the rate rule; creating a floating rate that is more adaptable to market conditions; and, developing quicker mechanisms to ensure compliance.

•     Contract Review  The Joint Committee expressed concerns with allowing private companies to audit another private company with whom they are actively negotiating contracts due to the inequitable negotiating position in which WCS would be placed.  The Joint Committee further expressed concerns with adopting an alternative compliance mechanism without specificity in how it would be implemented.  Absent a sufficient regulatory framework, if in-compact generators and WCS ever disagreed on compliance with a contract, a potential for routine litigation may be created.  The Joint Committee recognized that untethering the out-of-compact rates would eliminate the need for a cumbersome contract review process.  The Joint Committee also discussed statutory changes that would allow TCEQ to review an aggregation of contracts rather than reviewing them on an individual basis.  Practically speaking, TCEQ would review both in-compact and out-of-compact contracts over a certain period of time and compare the average rates for each to verify compliance.

•     Fees and Surcharges  The Joint Committee discussed the amount and purpose of the fees and surcharges assessed on both in-compact and out-of-compact waste.  The Joint Committee recognized that the default surcharge levels of 36.25% and 16.25% are excessive, especially in light of WCS’s competitor’s surcharges, and found that a reduction in fees may be reasonable.  The Joint Committee further recognized that reducing the surcharges would result in an increase in both in-compact and out-of-compact waste because WCS would be able to offer more competitive rates.  The Joint Committee considered that despite reducing the surcharges, the state might actually receive a greater financial benefit due to the increased volume of waste disposed that would be incentivized by lower surcharges.

•     Waste Disposal Capacity  The Joint Committee recognized the balancing that is needed to ensure there is capacity for in-compact generators while also allowing WCS to accept imported waste to finance the operation and expansion of the facility.  In discussing this balance, a number of suggestions were made.  One suggestion was to aggregate the 275,000 annual curie limit over ten years, meaning the limit on imported waste would be 2.75 million curies over ten years.  This would provide WCS with the flexibility to bid on potential larger contracts without eliminating or increasing the average annual curie limit.  The Joint Committee noted that ARDT is requesting that capacity be guaranteed for in-compact waste without a guarantee that the in-compact generators will use the CWF instead of the alternative disposal and storage options.  Furthermore, imposing such a requirement necessarily requires a capital investment by WCS, while at the same time impeding their ability to compete for profit generating contracts.  In light of this, the Joint Committee also discussed imposing “take or pay” provisions.  This would require the in-compact generators to either use the facility or pay a fee for not meeting certain disposal quotas.  This would likely be based on ARDT’s suggested operational trigger that considers average historic volume disposed.  Requiring the in-compact generators to prepay for capacity was also an option discussed.  This would provide WCS with the capital necessary to build out capacity and also serve to incentivize in-compact generators to use the facility.

•     Fixed Costs/Costs of a State-Operated Facility  The Joint Committee discussed alternatives to having a private operator for the CWF as it currently exists.  The Joint Committee unanimously expressed concerns regarding the potential cost if the state were to operate the CWF.  Furthermore, when specifically asked if TCEQ possesses the requisite expertise to manage and operate a CWF, TCEQ acknowledged that they do not.  The Joint Committee recognized that no existing state agency or office has the requisite expertise or ability to maintain and operate a CWF.  The state would thus need to appropriate funds to secure a contractor to operate the site on the state’s behalf.

•     Contingency Plan  In response to the testimony provided by the Texas Compact Commission, the Joint Committee expressed serious concerns that a comprehensive contingency plan has yet to be developed, notwithstanding the Commission’s reservations about directing the state to take prescribed actions without input from a designated state office or agency.  While the Joint Committee recognized that the Texas Compact Commission does not have authority to access funds to implement the plan, it stated that the legislature could appropriate those funds separately, should the need arise to implement the plan.

Background

Texas and Vermont are currently members of Texas Compact for the purposes of assuring that each state is able to efficiently and safely dispose of low-level radioactive waste.  Per the terms of the Texas Compact, the State of Texas serves as the host state, meaning that Texas is responsible for providing a CWG to dispose of low-level waste generated within each state.  In exchange for serving as the host state, Texas received $25 million from Vermont.  The Texas Compact created the Texas Compact Commission whose primary responsibility is to ensure capacity at the CWF is available for the in-compact generators.

By far the largest generators of low-level waste are the nuclear power plants in each state.  There are two operational plants located in Texas and one plant in Vermont, the latter of which is expected to begin decommissioning in late 2019.  Other generators include universities and hospitals and research facilities.  The in-compact generators are represented by ARDT.

The Texas Compact creates a distinction between “in-compact waste” and “imported waste” or “non- compact waste.”  In-compact waste refers to waste generated from within the member states of Texas and Vermont.  Imported waste, or non-compact waste, is waste generated in any other state.  There are currently 34 states that are not in a compact or do not have a facility at which they can dispose of certain classes of low-level waste, namely Class B and Class C waste.

In order to satisfy Texas’ obligations under the Texas Compact, the state initially took steps to develop a CWF known as the Sierra Blanca site in Hudspeth County.  The site was ultimately unsuccessful in obtaining a license from the Texas Natural Resource Conservation Commission (TNRCC).  Subsequently, the legislature created a regulatory structure that allowed for a private operator to receive a permit to construct and operate the CWF.  WCS applied for, and was granted, a permit from the TCEQ – the regulatory agency responsible for permitting radioactive waste in Texas. WCS then financed the construction of the CWF, understanding that the state assumes legal liability for the waste buried at the CWF.

For additional information, please contact Texas Compact Commission Executive Director Leigh Ing at (512) 305-8941 or at (leigh.ing (at) tllrwdcc (dot) org) leigh.ing (at) tllrwdcc (dot) org