Regulatory Capture: Flying on the Small Modular Reactor
/A Real Example of Regulatory Capture
By Arnie Gundersen
Yes, Fairewinds tracks nuclear safety issues, and no, Boeing will not build Small Modular Reactors that fly.
However, when most of my colleagues and I look at the Nuclear Regulatory Commission (NRC) and its supposedly thorough technical review of an allegedly different and newly designed Small Modular Reactor (SMR), we are very disturbed by the NRC’s pending regulatory changes. Quite simply, where the SMRs are concerned, severe regulatory changes are being made within the NRC to facilitate growth within the atomic power industry. As a former nuclear whistleblower, I have spent my life looking at the risks and failures of nuclear reactors. I find many parallels between the recent fatal crashes of two newly-certified Boeing 737 Max airplanes and the spate of NRC nuclear waivers and fast-tracked reactor designs. The industry-wide effort to massage scientifically based engineering analyses is alarming and a poignant symbol of Regulatory Capture in both industries.
What is Regulatory Capture? The American Institute for Economic Research (AIER) defines regulatory capture as the theory that regulating agencies created by the federal government to protect public rights and health and safety forms a close relationship with the industries they regulate. When this occurs, the regulators make decisions that benefit corporations and entire industries instead of protecting people and the environment as federal law requires.
First, let’s look at the Boeing 737 Max
The Boeing 737 model has been flying since the 1970s, meaning the initial 737 was designed back in the 1960s. As times changed, Boeing came under extremely competitive pressure from Airbus, which had designed and built an airplane that is more fuel-efficient and much cheaper to fly than Boeing’s worn-out design. In its competition for customers and sales over Airbus, Boeing rushed to catch up using its old 1960s-based blueprint for the substructure in the newly named 737 MAX.
“Do not fear flying on the Boeing 737 Max.” By Ingram Pinn, Financial Times
Therefore, without a new, fresh design, Boeing has simply rebranded the older 737 models naming it the 737 MAX. Boeing then added new, more massive, and more modern jet engines on the old 737 body and sent it directly to production. In the bargain of adding more massive and more powerful engines, a host of other changes were speedily implemented into the MAX design and placed for review before the captured and therefore compliant federal regulator, the Federal Aviation Administration (FAA).
Following an 18-month-investigation emphasizing how Boeing’s production pressures jeopardized public safety, the U.S. House of Representatives issued the Final Committee Report on the Boeing 737 MAX on September 16, 2020. In its report, Congress said there was tremendous financial pressure on Boeing and the 737 MAX program to compete with Airbus’ new A320neo aircraft. This pressure resulted in Boeing's extensive efforts to cut costs while maintaining the 737 MAX program schedule and subsequent production line. According to the Congressional Analyses and Report, the crashes were due to several root causes:
Production pressures jeopardized the flying public's safety: There was tremendous financial pressure on Boeing and the 737 MAX program to compete with Airbus’ new A320neo aircraft. Among other things, this pressure resulted in extensive efforts to cut costs, maintain the 737 MAX program schedule, and avoid slowing the 737 MAX production line.
Boeing’s influence over the FAA’s Oversight Structure: Multiple career FAA officials have documented examples showing that the FAA's management overruled the FAA’s technical experts' determination with Boeing's pressure. These examples are consistent with the results of a recent draft FAA employee survey regarding the ‘safety culture’ at the FAA. This report also delineated that many FAA employees believe their senior managers are more concerned with helping the airplane manufacturing industry reach its goals rather than putting safety first. Moreover, management at the FAA must be held accountable for non-safety-related decisions.
Even though Boeing’s corporate home offices are based in Seattle, Washington, The Seattle Times lambasted both Boeing and the FAA in a September 16 journalistic investigation entitled U.S. House Probe of 737 MAX Finds’ disturbing pattern’ of Boeing failures and ‘grossly insufficient’ FAA oversight. The paper’s headline for the intensive investigation by the U.S. House committee into the causes of the two Boeing 737 MAX crashes revealed a litany of new details documenting “a disturbing pattern of technical miscalculations and troubling management misjudgments made by Boeing,” along with “grossly insufficient oversight by the FAA.”
Additionally, Chair of the U.S. House Transportation Committee, Rep. Peter DeFazio, D-Oregon, called it “mind-boggling” that the Boeing 737 MAX has already had two crashes, which killed 346 people in less than five months. Yet, the 737 Max was initially certified by both Boeing and the FAA as compliant with all applicable safety regulations.
The House investigation and report concluded that “excessive FAA delegation to Boeing has eroded FAA’s oversight capabilities … Obviously the system is inadequate.” Moreover, the report severely reprimanded FAA leaders as being “overly concerned with achieving the business-oriented outcomes of industry stakeholders and are not held accountable for safety-related decisions.” [Emphasis Added]
Lastly, in this crucial and industry critical report, Congress pointed out that between 2013 and 2019, which were the critical years that Boeing was developing the 737 MAX, Boeing spent $60 billion on shareholder dividends and stock buybacks as part of an investment strategy for the corporation. Money paid to corporations for shareholders rather than to protect people “may have played key roles in Boeing not spending enough money on issues critical to the safe design and development of the MAX.”
“Boeing’s hubris brought failure to the 737 Max.” By Ingram Pinn, Financial Times
In summary, according to the Congressional Investigation, the Boeing 737 MAX debacle, in which Boeing let competitive pressures place profits before safety, enabled Boeing to create a quick to market but unsafe design. Had the FAA simply done its job, it would never have approved the 737 Max planes plan, and almost 350 people would not have died. Boeing pressured and then relied upon the compliant FAA regulator to support its flawed design.
Regulatory Capture, the NRC, & SMRs
Since Fairewinds Energy Education now has an office in Charleston, South Carolina, and Boeing is a significant manufacturer right here in the Charleston area, it has made me too aware of Boeing’s role in the design and development of the deeply flawed 737 Max. I believe that the relationship between the nuclear industry and the NRC, which has the regulatory authority of all nuclear power plants, fuel and weapons manufacturing, and most radioactive therapy facilities, is flawed. My 45+ years of studying and critiquing the atomic industry make it very clear that the nuclear power industry has co-opted the NRC.
Let me discuss the three similarities of regulatory capture I am most concerned about at the NRC:
First, while the NRC is a federal government commission, it can promulgate (create) its regulations within the Code of Federal Regulations. The NRC employees are federal employees and are brought in under federal employee hiring processes. The President appoints the Chair of the five-member Commission, and there is usually a mix of Republican and Democratic appointees for specific terms. All five Commissioners are politically appointed, so they are beholden to the party that appointed them.
When I was a nuclear whistleblower in 1990, Ivan Selin, the Chair of the Commission, had donated more than $300,000 to the Republican Party, so he received the NRC appointment he desired. It's five politically appointed Commissioners control the regulatory focus of the Commission and the entire NRC, and therein lies the problem. The Nuclear Energy Institute, the lobbying group that promotes nuclear power’s interests in Washington DC, vets every Commissioner before any appointments are made to the NRC. Unless NEI approves the applicant’s credentials, the Commissioner is not appointed. This political favoritism effectively gives five foxes oversight of the proverbial chicken coup of 2,000 nuclear engineers who make up the technical staff and other positions within the NRC.
Years ago, when Maggie and I lived in Burlington, VT, we lived on the same street as Vermont Senator Bernie Sanders. I would frequently see him there in or around town. Bernie knew me well because he had asked Maggie and me to explain and discuss nuclear safety violations and nuclear power regulatory issues with him and his staff, which we did. When Bernie saw me, he said hi and asked me how things were with the NRC. And, I said, “Bernie, I want to be considered for the open seat of an NRC Commissioner.” If you know Bernie and we do, you would see that he has an amazingly funny and down to earth sense of humor. Bernie just laughed out loud and said, “Are you kidding! There is no way in hell they would let you have that job! They dislike you more than they dislike me.” That is something Bernie and I both agreed upon and probably still do.
The NRC Commissioners are political appointees who are beholding to the party and people who appointed them and the nuclear industry that vets all appointees to the commission well before the public is even involved. Such politicized appointments are an example of a quid pro quo – of one hand washing the other – and not the independent public body meant to protect the health and welfare of people and communities throughout the U.S.
This year, amid Pandemic 2020, the NRC has modified some of its regulations, claiming that the new rules are ‘more realistic’ than those they replace. Honestly now, who in the world can argue with a federal body claiming to be more realistic? Unfortunately, it is not valid. These new regulations are entirely unrealistic and create much higher nuclear risks to residents, their families, and the communities in which they live!
Again, we at Fairewinds get tired of saying it over and over: the NRC’s founding documents created an agency to protect people; it is why Congress separated the NRC from the Department of Energy (DOE) with one mandate: to promote public health and safety.
Look at every nuke plant in the U.S. and look at all the other NRC licensees from hospitals to cancer treatment centers to labs and nuclear fuel manufacturing. Quite simply, the NRC fails to perform its function to protect public health and safety. After technical review, my colleagues and I see essential conservative safety calculations entirely rewritten to unsafe, less rigorous standards.
When the NRC says it is now more realistic to protect the public, we know that it is giving away the keys to the kingdom, so the nuclear industry and its cronies make more money for investors and stockholders.
Fairewinds Energy Education is not the only organization that observes the competitive pressures the nuclear industry is under that cause the NRC to reduce its federally mandated regulation of the atomic industry. Dr. Edwin Lyman of the Union of Concerned Scientists (UCS) also has been chronicling the regulatory capture of the NRC by the Nuclear Energy Institute (NEI), a lobbying arm for the nuclear industry. Here is one of many of his tweets on this issue:
Second, many published reports created by banks and investment firms that finance the atomic power industry are talking about its troubles. Lazard Bank, with offices in New York, Paris, and London (formerly known as Lazard Frères & Co.), was founded in 1848. Lazard, which claims to be “the world’s leading financial advisory and asset management firm, advises on mergers, acquisitions, restructuring, capital structure and strategy.” Banks, investment firms, and asset management firms, and lead economists make it clear that the 95-operating nuclear reactors in the U.S. are losing money and are no longer competitive with renewable power sources. For that reason, nuclear plant owners, like Exelon, have resorted to threatening state legislatures with fear of imminent nuke closures in small rural communities unless their ransom demands for higher profits are met. There is tremendous graft, fraud, and outright money laundering by energy companies or utilities as they work tirelessly to sandbag under-educated or bribed legislators in state after state.
Today, I will leave the in-depth articles on money laundering and bribery in the nuke industry to another time. Did you know that almost every state in the country hosts atomic power plants, nuclear labs, atomic and nuclear fuel manufacturing, or decaying nuke waste? Today, let’s keep our eyes on the prize of protecting people, especially women and children, who are more radiosensitive [see Gender + Radiation Impact Project by our close colleague, Mary Olson] and on our fragile environment. Currently, there is no methodology for handling nuke was for more than 100-years. In many cases, casks, etc. are only safe to store such high-level waste for between 10 and 30 years, according to documents filed with the NRC and various state regulators by Holtec Corporation, other cask manufacturers, and some decommissioning firms.
The NEI recommends cutting nuclear fuel inspections and easing costs by cutting staff in a last-ditch effort to remain financially competitive against cheaper renewable alternatives. According to Power Magazine’s April 16, 2020 news article entitled U.S. Nuclear Industry Shaved Generating Costs by 7.6% Compared to 2018:
“The U.S. nuclear power fleet last year achieved its lowest recorded average total generating costs in two decades—$30.42/MWh… Total generating costs were 7.6% lower last year compared to the prior year and have fallen nearly 32% since 2012…. the industry has embarked on a concerted effort to improve bottom lines as markets are increasingly inundated with cheap gas and renewable power. Under its industry wide “Delivering the Nuclear Promise initiative,” for example, the industry has set (and now achieved) an ambitious goal of a 30% reduction in total generating cost, the report said.
Let’s look at an example in your personal life. As your car gets old, you expect higher repair costs, not lower ones. How does it make you feel to know that aging nuclear power plants are Delivering the Nuclear Promise by operating more cheaply than when they were new? This effort to run lean makes these reactors even more vulnerable for a Fukushima, TMI, or Chernobyl-style meltdown because they have aged and desperately need more repairs and infusion of capital rather than less!
Third, the nuclear industry knows that the competitive price pressure from reliable and economical solar, wind, and storage batteries is a threat to its future designs, as well as a threat to its old and risky reactors. Due to this economic pressure, the newest nuke marketing ploy is rapidly constructing thousands of smaller reactors (SMRs) instead of the hundreds of larger ones that NEI and nuclear manufactures previously claimed would save the planet. You, too, may end up with one of these little nukes in your community, village, right on your block, or in your development. These allegedly new designs (taken from the concept of the small submarine reactors are incredibly hyped as “newly-designed Small Modular Reactors (SMRs)”), and that is fake news.
Each of these SMRs still contains more radioactivity than was released by the bombs dropped on Hiroshima and Nagasaki during WWII. Let’s be clear here; there is nothing small about the consequences of an SMR failure! Having all that uranium and plutonium will make them a real terrorist target – not just for foreign terrorists but also for proliferating militia types like Timothy McVeigh or the proud boys.
The pressure is on the NRC to approve these new designs or have the nuke industry fail. Let me quote Dr. Ed Lyman again from UCS:
Framatome (formerly named Areva N.P.) was first founded to license the Westinghouse Pressurized Water Reactor (PWR) in France. Framatome is owned by Électricité de France (EDF) (75.5%), Mitsubishi Heavy Industries (19.5%), and Assystem (5%). When founded in 1958, Framatome was simply a licensing and construction business. However, it expanded to include many aspects of the fuel chain, including the European Pressurized Reactor (EPR) design, construction, fuel management, and waste reprocessing.
Here in the U.S., Framatome opened its new $20 million uranium recovery facility in Richland, Washington. No uranium recovery facility in the world has succeeded without extensive damage to the surrounding environment, releases of radioactivity, and at an outrageous cost to consumers. Despite the terrible record for fuel recovery facilities, in 2009, the nuke industry captured NRC granted Framatome’s Richland Facility an extension to its original operating license through 2049, marking it the industry’s first 40-year fuel fabrication license renewal from the NRC. New nuclear fuel fabrication for its expansion occurs when renewables, like wind, solar, and battery storage, are infinitely cheaper and safer than any form of atomic fuel energy production.
In conclusion, Boeing was under competitive pressure for a new design and thus created the 737 MAX. Ditto nuclear with its new rush to produce the SMR. Boeing cut corners to save money. Ditto nuclear. Boeing relied on a captured regulator to ignore safety issues as it rushed its new product to market. Ditto nuclear.
It is a tragedy of enormous proportions when 346 people die in two entirely preventable airplane crashes. As the tragic meltdowns at Chernobyl and Fukushima Dai-ichi prove, these are catastrophes that can bring entire nations to their knees. When a nuclear reactor blows apart, or any other major radioactive release occurs, radioactivity will be left in the environment for a minimum of 300 years and for as long as 250,000 years. That is the meaning of the half-life of radioactivity. If a nuke releases Cesium 137 and Strontium 99, they have half-lives of 30-years, so the site and the surrounding community is toxic to life for at least 300-years and more. And, this is a scientific fact, not fake news or an alternative reality.
The warning signals are not just flashing red; they are red! Corporations must stop poisoning our environment and capturing regulators and bribing their way into what they want. The NRC must hold accountable nuclear corporations to the national laws delineated in the federal code of regulations.
It begins with each of us. We must demand that the U.S. Congress and state legislatures wean themselves from nuclear lobbyists and place public safety before corporate profits.
Our futures and those of our children and grandchildren depend upon your efforts!
Fairewinds will keep you informed.
Note: This is the first installment in a series about Regulatory Capture.
