LAY OF THE LAND

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Free-Market Fallout

Deregulation may finish off an industry built on taxpayer subsidies

by Dashka Slater

Given all the other ’70s icons that have come back into fashion in recent years--bell-bottoms, platform shoes, muscle cars, ABBA--perhaps it’s not surprising that the wasp-waisted nuclear reactor cooling tower has lurched back into political vogue. According to President George Bush and Vice President Dick Cheney, nuclear power is the solution to everything from high energy prices to global warming. “American electricity is already being provided through the nuclear industry--efficiently, safely, with no discharge of greenhouse gases or emissions,” Cheney said at a May gathering of nuclear industry lobbyists. “We want, as a matter of national policy, to encourage continued advancements in this industry.”

As it happens, national policy has been encouraging nuclear power for more than 50 years--at a cost of hundreds of billions of dollars. That includes subsidies for nuclear reactor construction, uranium enrichment, nuclear power research and development, and radioactive-waste disposal-- issues no less intractable today than they were in the ’70s. Add in the generous terms of the Price-Anderson Act, which caps the industry’s liability in case of an accident at $9.5 billion (the Nuclear Regulatory Commission estimates that a single worst-case nuclear accident could cost more than $300 billion), and you start to wonder how much more encouragement the industry needs.

Despite this lavish nurturing, nuclear power provides less than 20 percent of the nation’s electricity. The industry has been in a steady decline since 1979, when the accident at the Three Mile Island nuclear power plant near Harrisburg, Pennsylvania, caused the evacuation of 140,000 people. In the past two decades, not a single utility has applied to build a new nuclear power plant.

Bush and Cheney would have you believe that nukes were the victims of environmentalist hysteria and government interference. “We must seriously question the wisdom of backing away from what is, as a matter of record, a safe, clean, and very plentiful energy source,” Cheney said in May. The vice president and other promoters of the nuclear power industry argue that nuclear energy is inexpensive, because the uranium that fuels the reactors is cheap and relatively abundant. And reactors, once they’re up and running, don’t cost much to maintain and operate. Nuclear power, concludes U.S. energy secretary Spencer Abraham, is “astonishingly efficient.”

But saying nuclear power plants are efficient is a bit like saying moon rocks are free for the taking. Sixty percent of the cost of nuclear power occurs before the reactor ever opens. Utility executives estimate that building a new nuclear power plant would cost between $3 billion and $4 billion--about twice as much as a coal- or gas-fired power plant with equivalent output--and take seven or eight years, compared with two years to bring a natural-gas plant on line. “From a utility planner’s perspective, [nuclear power] is a very risky choice,” says Christopher Sherry, research director for the Safe Energy Communication Council, a nuclear-power watchdog group. “You’re basically taking a big gamble on the future price of electricity and what electricity demand will be when the plant is finished.”

In the heyday of nuclear power, utility companies didn’t have to worry about financial risks--ratepayers did. Before deregulation became all the rage, electricity rates were based on production costs (operating, construction, and capitalization expenses), which is one reason that electricity prices zoomed 60 percent between 1978 and 1982, right after a bevy of nuclear power plants came on line. Most of these plants were much more expensive to build than their backers had anticipated--the last round of nuclear power plants was collectively responsible for $120 billion in cost overruns. California’s Diablo Canyon nuclear power plant, for example, was originally supposed to cost $320 million and be up and running by 1972. It finally opened in 1985, $5 billion over budget. This expense--among others--was eventually passed on to California consumers, who are still paying off $25 billion in “stranded costs” incurred by the state’s three investor-owned utilities.

Deregulation changed the nuclear power equation for good. “In this new competitive generation market, investors don’t have any guarantees that the construction costs will ever be recouped,” explains Jerry Taylor of the Cato Institute, a libertarian think tank. “No matter how many subsidies we throw at this technology, we’re not going to tempt many investors to build nuclear power plants when cheaper alternatives are in front of them.”

Taylor is not someone you’d expect to see dissing nuclear power; his bio on Cato’s Web site notes that he is an outspoken critic of federal regulations, environmental“doomsaying,” and energy-conservation mandates. But as a strict free-marketeer, he thinks conservatives have “a soft spot in their heads” when it comes to nukes. “If nuclear power can pay for itself over time, then it doesn’t need any government help, welfare, subsidy, or anything else,” he says. “It seems clear to me that were it not for large and historically important federal subsidies, there wouldn’t be a single nuclear power plant in the United States.”

So can the Bush administration’s love affair with the atom persuade investors to ignore the technology’s inherent financial liabilities? Most observers don’t think so. “Show me the orders for plants,” says Sherry. “Show me a utility or an unregulated power producer willing to risk capital of the magnitude we’re talking about. I’ll believe it when I see it.”

Who Owns Water?

How a corporation got the rights to life’s most basic necessity

by Jennifer Hattam

In the poorest neighborhoods of Cochabamba, Bolivia, there is no indoor plumbing. Residents draw from communally owned wells, while their rural counterparts save rainwater in tanks for the dry months. Two years ago, gathering water in these traditional ways became illegal without a permit. Under pressure from the World Bank, the Bolivian government privatized the water system of Cochabamba--a city of 600,000 people--and the outlying countryside. This move gave sole distribution rights to Aguas del Tunari, a consortium led by a subsidiary of San Francisco–based engineering and construction giant Bechtel Enterprises.

Cochabamba's water system had been badly mismanaged in the past, but activists see another motivation behind the sale, which followed the transfer of the national airline, railroad system, and electric utilities to corporate hands. “The government privatized water to benefit the interests of multinationals,” says Gabriel Herbas, an economist and member of the Coalition in Defense of Water and Life (known locally as La Coordinadora), a broad-based group of Bolivians fighting for equitable water-delivery systems.

Corporations see opportunity in selling basic services. More than one billion people lack access to fresh drinking water, according to a 1999 United Nations report, and burgeoning urban populations in poor countries are overwhelming the distribution systems. For developing nations like Bolivia, this is a calamity in the making. For corporations like Bechtel, it’s a potential financial bonanza.

Once Aguas del Tunari took over Cochabamba’s water system in November 1999, rates soared by as much as 300 percent, according to Jim Shultz, the Bolivia-based director of the Democracy Center. (Aguas maintains that the increases were no more than 35 percent.) For residents with a monthly minimum wage of less than $100, the $20 water bills were unbearable. After a series of protests led by La Coordinadora--one of which shut down Cochabamba for a week--the Bolivian government canceled the Aguas del Tunari deal in April 2000, returning the water to local control.

“The coalition tried talking to politicians and going to the media, but it wasn’t until we took to the streets by the thousands that the government began paying attention,” Herbas says. (International groups took notice too: This April, Oscar Olivera, the leader of La Coordinadora, won the prestigious Goldman Environmental Prize, which honors grassroots activists around the world.)

Under the new public ownership, water distribution in Cochabamba has improved by about 10 percent (it previously reached only 55 percent of the population), and once-common shortages have largely become a thing of the past. But further progress has been hampered by the huge debt incurred years before by corrupt government managers, which led the World Bank to promote privatization in the first place. (To sweeten the deal, Aguas del Tunari had to shoulder only a portion of the debt, but the public owners were offered no such perks.)

Handing waterworks over to corporations has proven dangerous in more-industrialized countries too. After the Thatcher administration privatized the United Kingdom's system in 1989, prices skyrocketed, water quality decreased, jobs were lost, and the number of households disconnected for nonpayment tripled in the first five years. "Water distribution based on the profit motive means that not everyone gets served," says Jamie Dunn of Canada's Blue Planet Project, which hosted the first global citizens' summit on water in Vancouver in July.

Since the World Bank began encouraging privatization of water in 1993, it has been pushing developing countries to sell off their publicly owned systems, often by making its loans contingent on the transfer. In Bolivia, the Bank favored an alternative privatization option, but opposed any public aid to consumers. In an April 2000 press conference, World Bank president James D. Wolfensohn defended this policy, saying, “The biggest problem with water is the waste of water through lack of charging.” The European Union has also suggested that all World Trade Organization member countries should open up their water systems to competition and foreign ownership.

The terms of such ownership are usually very favorable to corporations: Aguas del Tunari’s $200 million contract, for example, guaranteed an 18 percent average annual return. When a privatized water-treatment facility in industrial Hamilton, Ontario, spilled 180 million liters of raw sewage into Lake Ontario in 1996, the contract left the city responsible for cleaning up the mess. “The really insidious thing about these public-private partnerships is that the companies make a profit without having to assume any of the risk of ownership,” says Dunn. “Once it becomes impossible to make a profit, they leave--and leave the problems.”

W watch: Keeping Tabs on George W. Bush

The science of stalling

by Reed McManus

All George Bush wants, he tells us, is “sound science.” The phrase sounds measured, and, well, presidential, but the commander in chief’s piety about scientific certitude is exercised only sporadically--and most zealously when industry activity might be curtailed. “[T]he president and his top officials are trying to have it both ways,” writes New York Times science reporter James Glanz. “On the one hand, they cite the lack of conclusive research on climate change to argue against the Kyoto accord on global warming. At the same time, they are eager to push ahead with the development of a national missile defense despite even greater scientific uncertainties.”

Here’s what’s behind three of the scientist in chief’s recent pronouncements:

“We’re going to make decisions based on sound science, not some environmental fad or what may sound good.”
--George W. Bush at an April 24 White House ceremony honoring young people for their service to the environment. Only problem is, few scientists agree with the administration. “What’s extraordinary about this moment in time, on both missile defense and the greenhouse effect,” Dr. Hugh Gusterson, a cultural anthropologist at the Massachusetts Institute of Technology, told the New York Times, “is the substantial consensus against the White House policy.”

“[W]e must be very careful not to take actions that could harm consumers. This is especially true given the incomplete state of scientific knowledge of the causes of, and solutions to, global climate change.”
--Bush in a letter to Republican senators Chuck Hagel (Nebr.), Jesse Helms (N.C.), Larry Craig (Idaho), and Pat Roberts (Kans.) on March 13. The president suspended new limits on carbon dioxide emissions, despite three assessments by the U.N. Intergovernmental Panel on Climate Change backed by 17 international scientific academies. In June, the National Academy of Sciences again confirmed the existence and threat of global warming in a study commissioned by the Bush White House.

“We pulled back so that we can make a decision based on sound science.”
--Bush explaining on March 29 why he delayed implementing rules on arsenic levels in drinking water invoked in the last days of the Clinton administration. These regulations were based in part on a 1962 recommendation by the U.S. Public Health Service that arsenic levels be prohibited above ten parts per billion (which is also the level recommended by the World Health Organization since 1993 and adopted by the European Union in 1998) and on a 1999 National Academy of Sciences report that arsenic can cause bladder, lung, and skin cancer, and may cause kidney and liver cancer.

Bold Strokes

by Marilyn Berlin Snell

Home Sweet Mall
There’s a plan afoot to turn those meccas of consumerism, American shopping malls, into refuges of livability. A study by the Congress for the New Urbanism concludes that failed regional shopping malls can be transformed into vibrant new neighborhoods. One of the study participants, architect Mark Falcone, did just that with a mall called Cinderella City in Englewood, Colorado. Once the largest mall west of the Mississippi, Cinderella City had 275 shops, 7,000 free parking spaces, and two miles of shopping area. But by 1997, the mall’s final tenant, Montgomery Ward, had pulled up stakes. The new project, CityCenter Englewood, has mixed-use housing, a multi-screen theater, and a Wal-Mart, along with other shops. The Congress for the New Urbanism found that more than 100 enclosed malls around the country are in financial straits and ripe for architectural redefinition. For more information on the study, visit www.cnu.org/malls.

Atomkraft? Nein, Danke
While the Bush brigade is marching ahead with plans to build nukes all across the United States, Germany is pushing just as hard in the opposite direction. In June the government of Chancellor Gerhard Schröder sealed a deal with the nation’s energy providers to shut down all 19 plants that produce nuclear power, or “Atomkraft.” The reactors, which generate one-third of Germany’s electricity, will be phased out by 2025. To meet the Kyoto Protocol’s emission-reduction targets, research and development in renewable energy such as wind and solar will get an infusion of deutsche marks from the government. Once enamored of nukes, Germans have become increasingly opposed since the devastating reactor accident in Chernobyl in 1986. Government support, however, remained firm until the election of Schröder, a Social Democrat with strong ties to the Green Party, in 1998.

For the Birds
The urban jungle is murder on migrating birds, but Chicago has figured out a way to lower the death toll. As many as 7 million fowl cruise along the Lake Michigan shoreline in spring and fall. Unfortunately, for reasons not quite clear to scientists, birds are attracted to skyscraper lights and smash into windows--especially at the upper elevations--putting an unpleasant end to their journeys. In the spring of 2000, Chicago launched its voluntary “Dim the Lights” campaign along the lakefront. “Some of the buildings are known for distinctive lighting, so there was some resistance at first,” says city spokesperson Jessica Rio. “But building managers also have cleanup crews who were picking up a lot of dead birds.” At least 19 buildings now participate during the twice-yearly migrations. Scientists estimate that having lights off in one building saves thousands of birds a season--as well as a lot of energy.

UPDATES

MANATEES GET A BRAKE. Just four months after winning new federal protections for the West Indian manatee, Florida environmentalists have notched another victory for the endangered sea cow. In May the state Fish and Wildlife Conservation Commission set new go-slow zones in some of the manatee’s favorite Brevard County waterways. Thanks to an April settlement with the Save the Manatee Club and 17 other groups, including the Sierra Club’s Florida Chapter, the state must also assess eight other boating areas and establish additional safe havens for manatees, with even tighter restrictions. (See “Home Front,” May/June 2001.)

BOTTLED UP. When Perrier announced plans to build a water-bottling plant in Adams County, Wisconsin, its neighbors-to-be weren’t pleased. Concerned about the environmental problems the industry has created in other communities--including overpumping of springs, saltwater intrusion in groundwater, and sediment disturbance--area residents joined a nationwide boycott of the Nestlé-owned corporation. In May, Perrier took the hint, declaring that it would table the project, for now. The victory was tempered by the company’s announcement that it would seek to build its plant near Big Rapids, Michigan, instead. (See “Lay of the Land,” May/June 2001.)

COW FACTORY FOILED. While central California’s San Joaquin Valley is one of the richest agricultural areas in the world, it also has some of the worst air quality in the nation. Last year, the Sierra Club and the Center on Race, Poverty, and the Environment filed suit against Borba Farms to halt plans for a 28,000-cow operation near Bakersfield. The facility would have produced a million gallons of liquid manure per day and thousands of tons of air pollutants each year. In May, a judge put the kibosh on the bovine behemoth, declaring that Kern County had not adequately considered its environmental impacts. (See “Meat Factories,” January/February 1999 and “Home Front,” November/December 2000.)