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Full text of "United States Export-Import Bank and the environment : hearing before the Subcommittee on International Development, Finance, Trade, and Monetary Policy of the Committee on Banking, Finance, and Urban Affairs, House of Representatives, One Hundred Third Congress, second session, February 23, 1994"

Co 

UNITED STATES EXPORT-IMPORT 
BANK AND THE ENVIRONMENT 




Y 4. B 22/1:103-119 

United States Export-Inport Dank an... 

HEARING 

BEFORE THE 

SUBCOMMITTEE ON 

INTERNATIONAL DEVELOPMENT, FINANCE, TRADE 

AND MONETARY POLICY 

OF THE 

COMMITTEE ON BANKING, FINANCE AND 

URBAN AFFAIRS 
HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRD CONGRESS 

SECOND SESSION 



FEBRUARY 23, 1994 



Printed for the use of the Committee on Banking, Finance and Urban Affairs 

Serial No. 103-119 







U.S. GOVERNME>rr PRINTING OFFICE 
76-695 CC WASraNGTON : 1995 



For sale by the U.S. Government Printing Office 
Superintendent of Documents, Congressiona] Sales Office, Washington, DC 20402 
ISBN 0-16-0472A1-5 



^ UNITED STATES EXPORT-IMPORT 
BANK AND THE ENVIRONMENT 




Y 4,B 22/1; 103-119 

United States Export-Inport Bank an... 



HEARING 

BEFORE THE 

. SUBCOMMITTEE ON 
INTERNATIONAL DEVELOPMENT, FINANCE, TRADE 
AND MONETARY POLICY 

OF THE 

COMMITTEE ON BANKING, FINANCE AND 

URBAN AFFAIRS 
HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRD CONGRESS 

SECOND SESSION 



FEBRUARY 23, 1994 



Printed for the use of the Committee on Banking, Finance and Urban Affairs 

Serial No. 103-119 iHmBvmi... 







U.S. GOVERNMENT PRINTING OFFICE 
76-G95CC WASHINGTON : 1995 



For sale by the U.S. Government Printing Office 
Superintendent of Documents, Congressional Sales Office. Washington, DC 20402 
ISBN 0-16-047241-5 



HOUSE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS 



HENRY B. GONZALEZ, Texas, Chairman 



STEPHEN L. NEAL, North Carolina 
JOHN J. LaFALCE, New York 
BRUCE F. VENTO, Minnesota 
CHARLES E. SCHUMER, New York 
BARNEY FRANK, Massachusetts 
PAUL E. KANJORSKI, Pennsylvania 
JOSEPH P. KENNEDY II, Massachusetto 
FLOYD H. FLAKE, New York 
KWEISI MFUME, Maryland 
MAXINE WATERS, California 
LARRY LaROCCO, Idaho 
BILL ORTON, UUh 
JIM BACCHUS, Florida 
HERBERT C. KLEIN, New Jersey 
CAROLYN B. MALONEY, New York 
PETER DEUTSCH, Florida 
LUIS V. GUTIERREZ, Illinois 
BOBBY L. RUSH, Illinois 
LUCILLE ROYBAL-ALLARD, California 
THOMAS M. BARRETT, Wisconsin 
ELIZABETH FURSE, Oregon 
NYDIA M. VELAZQUEZ, New York 
ALBERT R. WYNN, Maryland 
CLEO FIELDS, Louisiana 
MELVIN WATT, North Carolina 
MAURICE HINCHEY, New York 
CALVIN M. DOOLEY, California 
RON KLINK, Pennsylvania 
ERIC FINGERHUT, Ohio 



JAMES A. LEACH, Iowa 

BILL McCOLLUM, Florida 

MARGE ROUKEMA, New Jersey 

DOUG BEREUTER, Nd)ra8ka 

THOMAS J. RIDGE, Pennsylvania 

TOBY ROTH, Wisconsin 

ALFRED A. (AL) McCANDLESS, California 

RICHARD H. BAKER, Louisiana 

JIM NUSSLE, Iowa 

CRAIG THOMAS, Wyoming 

SAM JOHNSON, Texas 

DEBORAH PRYCE, Ohio 

JOHN LINDER, Georgia 

JOE KNOLLENBERG, Michigan 

RICK LAZIO, New York 

ROD GRAMS, Minnesota 

SPENCER BACHUS, Alabama 

MIKE HUFFINGTON, California 

MICHAEL CASTLE, Delaware 

PETER KING, New York 

BERNARD SANDERS, Vermont 



Subcommittee on International Development, Finance, Trade and 

Monetary Poucy 



BARNEY FRANK, 
STEPHEN L. NEAL, North Carolina 
JOHN J. LaFALCE, New York 
JOSEPH P. KENNEDY II, Massachusetts 
MAXENTE WATERS, California 
LARRY LaROCCO, Idaho 
BILL ORTON, Utah 
JIM BACCHUS, Florida 
HENRY B. GONZALEZ, Texas 
PAUL E. KANJORSKI, Pennsylvania 
BOBBY L. RUSH, Illinois 
CLEO FIELDS, Louisiana 
MELVIN WATT, North Carolina 
ERIC FINGERHUT, Ohio 



Massachusetts, Chairman 

DOUG BEREUTER, Nebraska 

ALFRED A. (AL) McCANDLESS, California 

BILL McCOLLUM, Florida 

MARGE ROUKEMA, New Jers^ 

SAM JOHNSON, Texas 

MICHAEL HUFFINGTON, California 

PETER KING, New York 

RICHARD H. BAKER, Louisiana 

JIM NUSSLE, Iowa 

MICHAEL CASTLE, Delaware ' 

BERNARD SANDERS, Vermont 



(ID 



CONTENTS 



Page 

Hearing held on: 

February 23, 1994 1 

Appendix 23 

WmSfESSES 

Wednesday, February 23, 1994 

Brody, Kenneth D., Chairman, Export-Import Bank of the United States 3 

Barnes, James N., Director, International Department, Friends of the Earth .. 8 
Bramble, Barbara J., Director, International Programs Division, National 

Wildlife Federation 4 

Manheim, Bruce S., Jr., Attorney 6 

APPENDIX 

Prepared statements: 

Brody, Kenneth D 24 

Barnes, James N 51 

Bramble, Barbara J 35 

Manheim, Bruce S., Jr 39 

Additional Material Submitted for the Record 

McCandless, Hon. Alfred: Embassy of the Czech Republic, "Position paper 
on the Temelin Nuclear Power Plant," with letter of transmittal dated 
March 3, 1994 68 

Brody, Kenneth D., written responses to questions submitted by Rep. Doug 

Bereuter and Rep. Michael Huffington 67 

Special delegation of the Government of Austria, "Technical Memorandum 

regarding the Temelin Nuclear Power Plant" 82 

Friends of the Earth, "Russian Roulette: Nuclear Power Reactors in Eastern 
Europe and the Former Soviet Union" (executive summary); "Reoort on 
the US Export-Import Bank's Errors in the Analysis of The Temelin Nu- 
clear Power Plant" (executive summary) 105 



(HI) 



UNITED STATES EXPORT-IMPORT BANK AND 

THE ENVIRONMENT 



WEDNESDAY, FEBRUARY 23, 1994 

House of Representatives, 
Subcommittee on International Development, 

Finance, Trade and Monetary Poucy, 
Committee on Banking, Fes^ance and Urban Affairs, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 10:03 a.m., in room 
2128, Rayburn House Office Building, Hon. Barney Frank [chair- 
man of the subcommittee] presiding. 

Present: Chairman Frank, Representatives Watt, Fingerhut, 
McCandless, Huffington, Nussle, and Castle. 

Chairman Frank. The hearing will come to order. 

This is a hearing of the Subcommittee on International Develop- 
ment, Finance, Trade and Monetary Policy on the environmental 
procedures of the Export-Import Bank. 

This subcommittee spent a good deal of time last year addressing 
the question of the environmental performance of the World Bank 
and its affiliated institutions. That focus was occasioned by the fact 
that there was a requirement that we deal with the replenishment 
request for the International Development Association, which is the 
soft loan window of the World Bank. 

As a result of discussions which this subcommittee engaged in — 
with the support of the chairman and others from the Full Commit- 
tee — and I should point out that these were wholly bipartisan with 
the full support of people on both sides — a set of events occurred 
in which steps were taken by the World Bank which we think will 
improve its environmental performance. In particular, they will in- 
crease the ability of people in nongovernmental organizations con- 
cerned with the environment, with poverty, with the role of women, 
and with several of the other important issues that have not al- 
ways gotten the attention in the international development financ- 
ing process that they deserve, all of these groups will have greater 
access to information, and they will have an independent review 
panel to which appeals can be made. 

We then turned our attention to the Export-Import Bank, be- 
cause historically the Export-Import Bank was insufficiently at- 
tuned, in my judgment, to the environmental aspect. Concern for 
the environment was not a significant part of its activity when it 
started. Indeed, concern for the environment wasn't a significant 
part of anybody's activity when the Export-Import Bank started. 
And I don't think enough attention has been given over the years 
to making sure that this awareness developed. 

(1) 



So our focus now is to have the discussions begin — ^they aren't be- 
ginning, they have begun. We have had some conversations, mem- 
bers of the subcommittee staff, myself, and others, with Mr. Brody 
of the Export-Import Bank, and we have talked with some of the 
environmental groups. This is the beginning of the formal part of 
the process in which we are going to talk about what the Export- 
Import Bank has been and should be doing about its environmental 
issues. 

Let me add, obviously, there is a great deal of interest in one 
particular project, the plant at Temelin. These hearings were 
planned without specific regard to that. Obviously, witnesses are 
free to talk about whatever they want to talk about. 

Once the Supreme Court decided in the Chadha case in the early 
1980s that the legislative veto as a device violated the Constitution 
of the United States, they vitiated the ability of the Congress to ap- 
prove or disapprove specific projects other than by passing laws 
which are the same as any other law. I mention that because there 
has been some, I think, lingering uncertainty about that. 

As I said, people are free to talk about what they want to talk 
about, but the focus of this hearing is the general issue of the envi- 
ronmental performance of the Export-Import Bank and, in particu- 
lar, what kind of procedures we can have in the future to improve 
it. 

I should add as a general matter, there will be people here who 
are interested in the general subject, people interested in Temelin, 
people from the Czech and Austrian embassies I know, who have 
expressed concern. 

Our procedure here is to leave this record open. So if anvone 
hears something he or she does not like, he or she may then submit 
to this subcommittee any statement in rebuttal or in further expla- 
nation or in counterrebuttal. I think we serve the process best by 
keeping it open. 

So if you have anything you like to add, we have at least a cou- 
ple of weeks between the end of this hearing and when we will 
close the hearing record; and if you get in touch with Dr. Key or 
Mr. Shaul at the subcommittee, we will be glad to arrange to in- 
clude any of your information. Other than that, we expect to pro- 
ceed in an orderly fashion. 

We will hear from all the witnesses. We will then have questions. 
And I want to thank Mr. Brody for agreeing to the procedure that 
we have instituted here. I know the norm is sometimes to have the 
executive branch witness testify in splendid isolation, be ques- 
tioned and depart, and then to allow the rest of the world to testify. 
We have found it is very useful to have a collegial situation in 
which people can exchange ideas and comment on each other's is- 
sues, and that is what we have here with Mr. Brody and several 
people who have been leaders in the environmental field. 

So, with that, we will begin with Mr. Brody, the chairman of the 
Export-Import Bank. The normal rules apply. We all know why we 
are here, we all like each other, we all admire each other, and we 
will get right down to the subject. 

Mr. Brody. I am sorry, excuse me, Mr. McCandless, do you have 
an opening statement? 



Mr. McCandless. Mr. Chairman, I think this is an appropriate 
subject for our subcommittee. It is timely, and I look forward to the 
testimony. 

Chairman Frank. Thank you. Mr. Brody. 

STATEMENT OF KENNETH D. BRODY, CHAIRMAN, UNITED 
STATES EXPORT-IMPORT BANK 

Mr. Brody. We have a new environmental mandate in the Ex- 
Im Bank charter. In addition, the Clinton administration is com- 
mitted to global environmental leadership. We take our environ- 
mental responsibilities seriously. 

The environmental procedures that were in place when I came 
to the Bank were seriously outdated. They have to be substantially 
strengthened, and we are in the process of substantially strength- 
ening them. 

We have spent a significant amount of time learning about envi- 
ronmental review procedures from other Federal agencies and 
multilateral institutions. We have retained an expert environ- 
mental consulting firm to help us develop sound environmental re- 
view procedures. The work has already begun, and we expect it to 
be completed within a few months. In addition, we have started a 
dialog with a number of environmental groups so that they can 
help us become more knowledgeable. 

We are also actively participating in an ongoing interagency ef- 
fort to upgrade the environmental procedures for Federal actions 
having significant environmental effects abroad. In the meantime, 
we have put interim environmental procedures in place which dif- 
fer significantly from what was done before. 

Our engineers now are preparing brief environmental evalua- 
tions identifying the principal environmental effects for each case 
involving financings of $10 million or more. These are the general 
procedures that we expect to follow when we develop our new envi- 
ronmental procedures. 

We have to obtain essential environmental information about 
proposed cases without taking so long to collect it and review it 
that we jeopardize U.S. exports. We need to develop streamlined 
procedures that provide us with the necessary information, despite 
our limited staff resources. This will mean that we will be looking 
to exporters and borrowers, as well as to environmental groups, to 
provide us with relevant environmental information early in the 
decision-making process. 

Congress has told us that we may withhold financing on environ- 
mental grounds. There are some projects that are so environ- 
mentally bad that we will say, no, even if some other country is 
willing to step in and support the project, because the U.S. govern- 
ment should not be associated with it. The Mount Apo geothermal 
facility in the Philippines is a recent example of a project that, 
based upon the environmental information we currently have avail- 
able, seems to fall into this category. In short, we're taking a new 
approach at Ex-Im. 

At the same time, we need to work actively with other export 
credit agencies to create a level playing field in the environmental 
area. 



The best way to safeguard the environment without sacrificing 
U.S. exporters is to make sure that all major exporting countries 
apply similar environmental procedures and standards. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Brody can be found in the 
appendix.] 

Chairman Frank. Thank you, Mr. Brody. Who is next? Ms. 
Bramble. We are not doing alphabetical order totally. 

STATEMENT OF BARBARA J. BRAMBLE, DIRECTOR, INTER- 
NATIONAL PROGRAMS DIVISION, NATIONAL WILDLIFE 
FEDERATION 

Ms. Bramble. Well, maybe I should do something quite radical 
here and just say I absolutely agree with what Mr. Brody just said, 
and stop. But 

Chairman Frank. But you are not under oath, so it's OK. 

Ms. Bramble. We have had some very good discussions with 
both him and other officials of the agency. I am reallv pleased 
about the progress, the things they are thinking about aoing, and 
the new approach that they are taking. We have a few ideas that 
might be useful for that, but most of them, of course, will require 
some further development. I will just outline a couple of them here. 

As we have looked at the functions and the operations of the 
Export-Import Bank, most of the people that I know who have been 
looking at this from the environmental point of view do not think 
that there is a fundamental difference between the way that the 
Export-Import Bank goes about doing its business and other insti- 
tutions who have different but maybe analogous problems in com- 
plying with environmental impact assessment requirements. So we 
do think that it will be entirely possible to fashion appropriate pro- 
cedures that will work within the context of what this agency does 
that will allow it to look at the relevant information. 

I think a lot of the problems that we have looked at and seen 
as the history of this agency are, hopefully, not relevant anymore, 
so I am not going to go through any long indictment of the way this 
institution in the past has really looked at environmental assess- 
ment maybe as a side show or as a nuisance instead of part of the 
job it is supposed to do. As I understand, that era is over and the 
Bank, under new leadership, is taking a really responsible view to- 
ward what its goals are. 

But I would urge the subcommittee to consider whether it would 
be useful to actually define that in the legislation. If environmental 
review is seen as guidelines for operations, that is one thing, but 
it would be very different if the Export-Import Bank's very charter 
explained that its goal was to promote exports of equipment, mate- 
rial, technology, goods and services, which support or promote sus- 
tainable development. That makes an entirely different kind of goal 
for the agency, and I would like to recommend that that be looked 
at by the subcommittee as a future legislative proposal. 

The reason I say that is that we should really be considering all 
of our work now as we review what government agencies are doing, 
as this is a new era. It is the post-UNCED era; it is not just the 
post-cold war era. And I would like to suggest that 

Chairman Frank. Post what? I missed a word. 



Ms. Bramble. Excuse me? Post-UNCED, post-Earth Summit. 

We have now, all nations, agreed to promote Agenda 21, to be 
paying attention to the sustainable development consequences of 
everytning we do, and therefore I think a bald export promotion as 
a goal for an agency is no longer appropriate. 

Just a couple of points on the mechanics of how to achieve this. 
We have wrestled with the question of who should actually be 
doing the down-and-dirty environmental impact assessment work 
with the World Bank and with the other multilateral development 
banks, those who fund operations in other countries where there 
are other competent bodies who are supposed to be looking at the 
environmental impacts for their own purposes. And it has become 
quite normal amongst those institutions to use — depend on the 
work that is done by the competent authorities in the relevant 
countries, and only fill in the interstices around the edges. 

So it is my view — I may not have the agreement of other organi- 
zations, but I will at least put it out as one possibility — that the 
Ex-Im Bank can have rules which make clear the minimum re- 
quirements for environmental impact assessment. 

I have outlined some of those in a written piece of paper which 
I will give you, Mr. Chairman. But, essentially, they have to deal 
with looking at alternatives and taking puolic comments into 
account. 

If those requirements are fully satisfied by the competent author- 
ity in the relevant country, then the Ex-Im Bank's job may be only 
to assure that those requirements have been fulfilled. At that 
point, that job has been done and there is no conflict between that 
agency's work and the government authority's in the relevant coun- 
try. But if they haven't been done; or if they have been done really 
badly; or if there are enormous public protests to show that they 
have been inadequately carried out, or the procedures are quite 
clearly inadequate themselves; or if it is known that the actual im- 
plementation of the studies was not fulfilled in a competent man- 
ner and the papers should reflect that and public comments can 
show that, then you have a job to do to fill in the spaces. But I 
would think that would be in very much the minority of cases, and 
the extent of the work can be tailored to the importance of the im- 
pacts of the project. 

There is a concept in environmental impact assessment of signifi- 
cant environmental import. It requires a reasonable standard. You 
take a look at the project. Someone who knows something about 
the issues makes a judgment about how really serious this is likely 
to be, and you tailor the detail, the depth, tne extent of the work 
to the reality of the thing you are dealing with. And that has been 
worked out over decades amongst millions of experts all over the 
world; and I don't think it is beyond the capability of the officials 
of the Ex-Im Bank to clearly make categories for which kinds of 
projects will have which kinds of review. 

The last point I will make is that there are cases — and I think 
Mr. Brody alluded to this — where no matter what the procedures 
are and no matter how well they were fulfilled, that the projects 
are so damaging to the environment or perhaps to other aspects, 
like certain social issues having to do with human rights, or that 
the consequences of a mistake are so irrevocable, that the United 



States should simply make a judgment that we do not wish to be 
involved in those projects. 

We don't have to intervene and stop the government from doing 
them in whatever country we are talking about, but it is not in our 
interests to help them along; we don't want to use our money to 
finance them. There will be very few of those cases. 

It is arguable — and I am going to suggest that it should be 
looked at — that the Temelin case is one that should have been 
looked at in that light, should be on the list of the kinds of projects 
that should be studied for that particular aspect. 

But with those kinds of exceptions where the Export-Import 
Bank should be making its own judgment that our money should 
not be used, aside from those kinds of cases, I am sure that the 
procedures that were on track for developing in cooperation with 
Mr. Brody and the Ex-Im Bank, once they are in place and once 
they are being implemented, will make this agency a very different 
place. 

Thank you very much. 

[The prepared statement of Ms. Bramble can be found in the 
appendix.] 

Chairman Frank. Thank you, Ms. Bramble. I will be asking Mr. 
Brody afterwards to comment on that. 

I did want to mention one more thing. The hearing notice also 
mentioned we would be specifically covering H.R. 2096, sponsored 
by my colleague, Mr. Kennedy, which would amend the act to pro- 
mote specifically the export of pro-environmental goods and serv- 
ices. We will be having a separate hearing on that; so that won't 
be up today; as Mr. Brody knows, I have a particular interest in 
one special example of that. We will be pursuing that a little later 
on. 

Next we will hear from — and I should have added that Ms. 
Bramble is here in her capacity, I believe, as Director of Inter- 
national Programs, National Wildlife Federation. 

Mr. Manheim, we will listen to you now. 

STATEMENT OF BRUCE S. MANHEIM, JR^ ATTORNEY 

Mr. Manheim. Thank you, Mr. Chairman. It is quite refreshing 
to, as Barbara just mentioned, hear the chairman of the Ex-Im 
Bank indicate that they do in fact have a new charter. One of the 
questions this subcommittee may wish to address is whether that 
charter should, in fact, be codified in new legislation as opposed to 
regulations issued by the Bank, because, unfortunately, an enlight- 
ened individual like Mr. Brody may not be in office forever. 

As far as that new charter goes, I think we would like to con- 

fratulate Mr. Brody and the Bank generally for denying funding or 
eciding not to participate in the Mount Apo geothermal project. I 
think that reflects a sincere attempt to address problems of the 
past which, like Barbara, I will not dwell on here. 

As far as the 1992 statute goes, the Export Enhancement Act, in 
my view, Mr. Chairman, falls short of what Mr. Brody, in fact, 
seeks to do; and it certainly falls short of what other agencies 
under U.S. law are currently required to do. 

Specifically, that legislation only requires the Bank to consider 
the environmental impacts of projects seeking financial assistance 



where those projects do not involve a country participating in the 
action. That is an incredibly narrow mandate. That fact I think, at 
least in part, explains why between 1979 and October 1991 only 20 
environmental assessments were done for some 3,600 transactions 
reviewed by the Bank. It also contrasts sharply with the Foreign 
Assistance Act and with legislation that currently governs OPIC, 
where they, unlike Ex-Im Bank, have a substantive standard that 
they must meet, as well as more comprehensive procedural guide- 
lines that they must meet before insuring projects. 

Moreover, it contrasts with the mandate that the Agency for 
International Development is under with respect to compliance 
with the National Environmental Policy Act. That mandate origi- 
nates from a lawsuit that the Environmental Defense Fund filed in 
1976 and where AID ultimately agreed to promulgate regulations 
implementing NEPA for its overseas activities. While NEPA is 
something that virtually every administration is hostile to applying 
overseas, I feel that it is sufficiently flexible that, at least as a 
starting point, the Bank may wish to consider pursuing environ- 
mental assessment under the umbrella of that statute. 

Moreover, as far as substantive standards go, the legislation 
adopted in 1992 essentially is discretionary. It only provides au- 
thority to the Bank to deny funding where a particular project is 
particularly egregious. That again contrasts with the substantive 
standard that OPIC has. 

A second point I would like to make, Mr. Chairman, involves the 
export of environmental technology. Putting aside the Kennedy bill, 
which you will consider at a subsequent hearing, I think it is clear 
that the Bank's mission of exporting environmental technology can 
be enhanced by the Bank itself beefing up both its procedural 
guidelines and its environmental assessment procedures, as well as 
adopting substantive standards that g^de its own lending as well 
as the lending of other export credit agencies. 

The key question will be what happens in the interim. I think 
everyone at this table supports the notion of Ex-Im Bank applying 
or seeking international standards both substantively and proce- 
durally in the context of the OECD. That may take a number of 
years, however, to reach; and a key question will be what happens 
in the interim as far as lending on projects. 

I will stop there and get into more detail with questions. 

Thank you. 

[The prepared statement of Mr, Manheim can be found in the 
appendix.] 

Chairman Frank. Thank you, Mr. Manheim. As I should have 
said, any written statements any of the witnesses have, or any sup- 
plementary material, will, of course, go into the record. 

Finally, we will hear fi*om Mr. James Barnes, who is director of 
International Development of Friends of the Earth. And then we 
will have time for questions. I note that we have been joined by 
several of our colleagues. Mr. Barnes, please go ahead. 



8 

STATEMENT OF JAMES N. BARNES, DIRECTOR, 
INTERNATIONAL DEPARTMENT, FRIENDS OF THE EARTH 

Mr. Barnes. Thank you. I have six major points tx) make, Mr. 
Chairman, three about the Export-Import Bank in general, and 
three about the Temelin nuclear reactor. 

I associate myself strongly wdth the remarks of my colleagues, 
Ms. Bramble and Mr. Manheim, but I would like to just go a little 
bit further in what I hope is a positive vein. It seems to us that 
the Export-Import Bank could be and should be playing an impor- 
tant role in promoting the best U.S. technology and services avail- 
able, with an emphasis on investments that protect the environ- 
ment and promote sustainable development. And like Mr. 
Manheim, we think that some of these policy directions should be 
codified and then left to the agency to work out the details. 

We think that the agency should adopt proactive policies on 
major global environmental problems, such as climate change, 
ozone depletion, and biodiversity, to name three. And we think that 
a lot of jobs would flow from that kind of policy objective. 

There are lots and lots of jobs associated with industries — ^for ex- 
ample, with ozone depletion, where the United States is absolutely 
in the lead in the world; and we are not promoting those industries 
and not promoting those jobs. So we see a large positive potential 
there. 

In terms of the environmental assessments question, a little 
twist on this the subcommittee might want to look at is that, for 
example, last year there were two cases where the United States 
executive director to the World Bank was actually voting against 
a project, the Yacyveta Dam in Argentina in one case, and abstain- 
ing and lobbying against another project, the Hopewell coal-fired 
thermal powerplant in the Philippines, at the same time as Ex-Im 
was approving projects. I suggest that it is a bad idea for us to be 
taking what is always a tough road in the World Bank to try to 
persuade colleagues to oppose a project at the same time that we 
are funding components of that same project. 

Third, given the existence of the competing export agencies — and 
we have had good discussions with Mr. Brody's staff about this in 
recent weeks — it is obvious that a concerted diplomatic effort is re- 
quired to move those institutions along a similar path, because 
otherwise we are shooting ourselves in the foot. We are putting our 
own agency at a competitive disadvantage. I don't think any of us 
want to see that happen. 

Several of us have been discussing this with the administration 
and have been urging that, in fact, they use the G^7 Economic 
Summit this year as the opportunity to launch a multilayered ini- 
tiative to "green," if you will, all of those export agencies so that 
they are not working to our disadvantage as we try to put our 
agency in what I can call a leadership position. It is important for 
it to be in a leadership position. 

It is important to demonstrate, in fact, as a catalyst that these 
things can be done and should be done, but again if we don't have 
this concerted diplomatic effort with the G^7 and the OECD coun- 
tries, we won't really accomplish our overall objectives here. 

If you look at the amount of capital, for example, that all the ex- 
port agencies have at their disposal, it is a large, large number. 



9 

And, as Barbara Bramble mentioned, we need to be putting all the 
resources we can toward achieving progress on Agenda 21 of the 
Earth Summit declaration. 

Now, turning to the Temelin case, Mr. Chairman, in our view, 
the Bank's proposal to provide a $317 million guarantee for the 
Westinghouse contract is a badly flawed decision, and although we 
take cognizance of what the chairman has noted — ^that there is no 
more legislative veto — we do feel that Congress should, after re- 
viewing these facts very carefully, take the steps that are in Con- 
gress' power to reject the project and help the administration 
decide to do that. 

I am not going to repeat all the details that are in the testimony, 
but I do just want to say a few specific things about this. 

It is, in our view, a dangerous hybrid combination of technology 
that has never been tried before. It contains many serious design 
flaws that appear not to be corrected by Westinghouse's proposed 
modifications to the safety system. I know that the chairman is 
aware that there is a special governmental delegation from Austria 
led by Professor Manfred Heindler here, and they prepared a de- 
tailed technical memorandum regarding this plant, which we dis- 
tributed copies of yesterday for the subcommittee — this document 
here, dated February 1994, and the associated aide memoire. In 
our view, this rebuts many of the assumptions on which the Ex- 
Im Bank and the National Security Council relied. 

I would direct the subcommittee's attention in particular to the 
section detailing the Halliburton NUS Study. We urge every Mem- 
ber of Congress to read this technical memorandum. We also be- 
lieve that they will find that this verifies the independent analysis 
made by Friends of the Earth/Czech Republic and other groups. 

I have colleagues sitting behind me from Friends of the Earth/ 
Czech Republic today if the chairman cares to ask them any par- 
ticular questions. 

In short, for a financing package of this magnitude involving 
something as sensitive as a nuclear powerplant, and with the 
strong concerns being advanced by citizens in several countries, 
there can be no doubt that Ex-Im should require a thorough, inte- 
grated impact assessment that includes a fiill analysis of alter- 
natives; and this has not been done. 

Temelin continues, Mr. Chairman, to be strongly opposed in the 
very area where the plant would be and is being constructed. Ac- 
cording to the latest information I have, 58 of 65 towns and vil- 
lages in the area, many filled with Temelin workers, have asked 
the government not to build the plant and have demanded that the 
government prepare an environmental impact statement with pub- 
lic participation, as Czech law requires. 

In the Czech Republic, there have been no public participation 
activities in the decisionmaking process. There has been no public 
hearing. And as I said, there is no public EIA process that has been 
followed. According to the technical memorandum that I referred 
to, prepared by the Austrian team, there is a serious lack of normal 
open procedures for technical and public review of this project. 

In our view, this case presents an interesting and difficult, and 
we think ultimately justifiable, case where we nave an obligation. 



10 

really, not to use U.S. taxpayer facilities, guarantees, whatever 
they are, to build this project. 

We have a fledgling democracy in place in the Czech Republic. 
It is in the transition phase, that is clear. Many democratic proce- 
dures have not been set up or implemented. The old energy bu- 
reaucracy remains largely intact. This project was inherited by the 
new government which has candidly stated it would not have initi- 
ated the project had it been up to it. 

We also think that — this is my third point in this section — ^that 
Temelin should be evaluated in the broader context of the scores 
of aging Soviet-designed nuclear reactors scattered around Eastern 
Europe and the States of the former Soviet Union. One of the other 
documents that I attached to the testimony is this report called 
"Russian Roulette: Nuclear Power Reactors in Eastern Europe and 
the Former Soviet Union," I wrote this report last year for the 
G-7 Economic Summit, Mr. Chairman, and it has details about all 
of the reactors in the whole region, which is important so that we 
see the pattern here. 

In our view, the policy of the government should be not to pro- 
vide — ^that is, our government — any assistance for expansion of nu- 
clear power in this region; and instead, we should be focusing on 
how to get rid of these aging and dangerous reactors. There are 
many, many alternatives which are well documented, not just in 
my report but in other reports by the World Bank, the EBRD, and 
other institutions. There are many options available. 

That concludes my formal statement, Mr. Chairman. I will be 
glad to take any questions. 

Thank you. 

[The prepared statement of Mr. Barnes can be found in the 
appendix.] 

Chairman Frank. Thank you, Mr. Barnes. Let me say, we want 
to put all that we need of these documents in the record. Things 
that were specifically Temelin we can put in. I might ask people 
who have lengthy stuff if they would work with the staff, so we 
might be able to do some appropriate excerpting and don't over- 
print. But we certainly want to get the substance of it all. 

I will begin my questions. 

Mr. Brody, first of all, I want to congratulate you on the obvious 
success you are having and congratulate the environmental organi- 
zations simply on the success you appear to be having in getting 
some principles agreed to. Mr, Barnes is pointing out that we don't 
want to be at a competitive disadvantage; you are acknowledging 
that we have a record that must be substantially improved environ- 
mentally; that represents the kind of common ground that I think 
is hopeful for the future. 

But I was impressed by Ms. Bramble's suggestions and Mr. 
Manheim's as well, that we really need to codify this beyond where 
it was. That, certainly, seems feasible to me, and I would think, 
working together, we could come up with language that would cod- 
ify these principles without overly rigidifying them. But I would be 
interested in your response to this suggestion that codification of 
some basic principles beyond where we are now would be useful. 



11 

Mr. Brody. I have not given a lot of thought to the issue of codi- 
fication, generally preferring to defer to Congress on issues that it 
chooses to legislate. 

Chairman FRANK. OK We will write it, if you want us to. 

Mr. Brody. Given there are a lot of ramifications to codification, 
I would be glad to think about it and give you a response. 

Chairman Frank. I appreciate it. What I am going to ask, I will 
ask Dr. Key and Dr. Brown and others to begin working with 
whomever you want to designate and people from the group, be- 
cause I am persuaded that is something we ought to move on. And 
the best thing, I think, is to start exchanging drafts, put it on 
paper; and I would hope, before the end of this legislative session, 
we could do something. 

Yes, Mr. Brody. 

Mr. Brody. I didn't mean to imply by my answer that I think 
that we should. 

Chairman Frank. Right, I understand that. We are always open. 
There are two things: One, we are always open to the possibility 
that maybe this was not a good idea on second thought. That seems 
to be unlikely. It's also possible that we might decide that this is 
something that we can't write. I hope we can and I want to try. 
You know, we will be open to it. 

You make a good point, and I congratulate you on the extent to 
which you have obviously conveyed to people your willingness to do 
this in a serious way. But, we are talking about the future, and we 
are talking about not being in the kinds of situations you — we have 
gotten ourselves in. So I think there is a strong case for codification 
which I want to go forward. 

Mr. Barnes, I was fascinated by the example of our executive di- 
rector at the World Bank voting or abstaining in each case, voting 
against and abstaining on projects that Ex-Im was financing. Was 
the ED voting no in pursuance of some statutory mandate? Have 
we got sort of contradictory mandates or was it an administrative 
decision? What were those situations? 

And was the ED saying, no, on economic grounds or environ- 
mental grounds in those two cases? Those fascinate me. 

Mr. Barnes. Well, in both those cases, as there is in any case 
where there is a serious question about what the U.S. position 
should be at the World Bank or one of the multilateral regional 
banks, there is an interagency process. My understanding is that 
Ex-Im isn't part of that interagency process, at least not formally 
speaking. Normally, it involves the State Department and AID, 
EPA and Treasury; those are normally the players that meet to dis- 
cuss these things. 

In any event, pursuant to the detailed legislation that Congress 
has passed over the last 8 or 9 years on multilateral banks and to 
the guidelines which the Treasury Department has developed — I 
think there are five sets of guidelines on energy, on a number of 
different issues — forests and so forth — the Treasury Department, in 
consultation with the working group and, obviously, with a lot of 
consultation with NGOs, comes to a decision as to how it will vote 
on these World Bank projects. In each of those cases, the decision 
was taken on a mixture of economic and environmental grounds 
not to support the proposed project. 



12 

Chairman Frank. Well, encountering, as we did last year, the 
skepticism about the United States as we tried to take some envi- 
ronmental initiatives at the World Bank, that sounds to me like a 
self-inflicted wound that is avoidable. So, Mr. Brody, I would urge 
you to apply for membership in that interagency group at the very 
least, and probably OPIC as well. I would be glad, if we need to, 
to support that. 

I mean, leaving aside the merits, what this does to our ability 
to be environmental advocates, if we are telling other people to vote 
against something we are funding, that is just awfiil. I hope we will 
be able to take the appropriate administrative steps to avoid that. 

Mr. Manheim. 

Mr. Manheim. Thank you, Mr. Chairman. I just wanted to add, 
on that case, the Pagbilao coal-fired plant in the Philippines is a 
perfect example of the need for the Bank's procedures to be sub- 
stantially revised. The very reason the Bank didn't look at that 
project is because it produces sulfur dioxide. And their 1979 proce- 
dures have a categorical exclusion for any projects that produce 
SO2. As I understand it, that is the very reason that at least our 
executive director of the World Bank or some of these other institu- 
tions denied funding for it. 

Mr. Barnes. It is not the only reason; there is also the commu- 
nity. The communities there are strongly opposed to the project. 

Chairman Frank. In the recipient country? 

Mr. Manheim. The very reason Ex-Im Bank missed it is 
because 

Chairman Frank. There is a statutory exclusion that anything 
that produces 

Mr. Manheim. Sulfur dioxide, as well as there is something like 
seven or eight, maybe nine 

Chairman Frank. I would like to get the legislative history of 
that provision. 

Mr. Manheim. Well, it is not the legislative history, it is in the 
Executive Order that was adopted in 1979 and that is now codified 
in Ex-Im Bank's current procedures. 

Chairman Frank. All right. Well, not statutory. Go ahead, Mr. 
Brody. I notice several of my colleagues have some interest, so we 
will listen to you and turn to Mr. McCandless. 

Mr. Brody. Mr. Chairman, as you might well expect, we have al- 
ready established completely different lines of communication with 
the World Bank and executive directors, so we have a process in 
house to find out what they do and can take into account what the 
thinking is there. 

Chairman Frank. That is reassuring. We will, as I said, be glad 
to. Although we don't have jurisdiction, it would seem to me OPIC 
ought to also be involved because they have a similar role. 

Mr. McCandless. 

Mr. McCandless. Thank you, Mr. Chairman. 

Mr. Brody, I have a copy of a letter that you wrote the Speaker 
of the House on January 27, 1994, obviously, in response to the 
areas of safety, environment, and considerations through which ul- 
timately the loan was approved to Temelin. I am using Temelin as 
an example of the subject matter that we are discussing here today 
and what most of us consider to be the responsibility of a public 



13 

agency when funds are agreed to for purposes of constructing some 
public project in another country. 

In your letter, you talked about the review of the project and par- 
ticularly the safety aspect of it and you said Ex-Im Bank's engi- 
neering division conducted a thorough review and concluded that 
the project — I am paraphrasing it here — concluded that the project 
participants in the Czech government are exercising due diligence. 
This runs somewhat contrary to other testimony and information 

that we have. 

To what degree would the engineering division of Ex-Im Bank m 
this particular case, on this simject, have the expertise necessary 
to be able to come up with this conclusion? 

Mr. Brody. Ex-Im Bank has looked at nuclear facilities in the 
past. Ex-Im Bank's lead nuclear engineer, Mr. Jennings, has over 
two decades of experience in looking at nuclear facilities. He is an 
engineer and he has a nuclear license. So, I think it is pretty clear 
that from Ex-Im's standpoint he has the expertise required to lead 
the kind of effort which he did. 

In addition to that, after my confirmation in May, one of the first 
acts that I took as chairman was to seek technical guidance to aug- 
ment what we have at Ex-Im fi-om the U.S. government as a whole. 
Following through on this request, the National Security Council 
led an interagency review and sent us a memorandum laying out 
the results of their review. 

We have also opened ourselves completely to listening and then 
following up on virtually every issue raised by interested groups. 
And there were a number. This process, which, under the past ad- 
ministration, looked as though the work had mostly been completed 
by last summer, took us through January to complete. 

In addition to that, we met with the chairman of the Nuclear 
Regulatory Commission to discuss this project specifically, and 
then, of course, the Engineering Division consulted with many, in- 
cluding the International Atomic Energy Agency and many, many 
others who have the knowledge and expertise on this subject. So, 
the expertise that we have at Ex-Im Bank has been augmented by 
the assistance of others. 

Mr. McCandless. The project — again I am using this as an ex- 
ample of the process — ^the project has been characterized by some 
as a model A frame with model A suspension in a V-8 world with 
turbochargers; the only thing that it has going for it is the fact that 
Westinghouse is installing a new set of brakes. So the idea here is 
we have got an old car, out of date, with a good set of brakes; 
therefore, the car can stop. How would you respond to that kind 
of characterization? 

Mr. Brody. Well, I really haven't thought of comparing the nu- 
clear facility to a model A. 

Mr. McCandless. You can characterize it any way you would 
like to. I am talking about old technology being brought up to date 
by certain devices of control. And so brakes control an old car to 
a large degree, so that is my characterization. 

Mr. Brody. Well, I will talk about, then, old technology that I 
know something about, so I can be on sound ground. 

For a period of time, upon graduation from college, I worked with 
the Chesapeake and Potomac Telephone Co., here in Washington, 



14 

DC. One of the marvels that the telephone system had to bring to 
bear was the ability to use very, very old technology in a system 
that had very, very new technology. In technical terms, you saw 
crossbar offices witn electronic switching offices getting along quite 
fine. 

I think that is at least one rather straightforward, simple exam- 
ple out of my own experience, to indicate that old and new are not 
necessarily a misfit. 

Mr. McCandless. Thank you. I have one more question, Mr. 
Chairman, with your permission. 

Mr. Barnes, you spent a great deal of your prepared testimony 
discussing the Temelin plant, again using it as an example of the 
subject for which we have convened this subcommittee hearing. On 
page 7, one could interpret this one way, and I would like you to 
give me an expansion relative to your interpretation. 

The last paragraph says, in essence, "U.S. support for the com- 
pletion of reactors in this region," comma, "or indeed anywhere in 
the world," comma, "opens up very serious questions of liability 
should a plant explode." 

Does this mean that if we were to, through one of our national 
public resources, approve the funding or, in some way, participate 
in a properly designed facility — that is, properly engineered and 
constructed with competent management and properly trained peo- 
ple, that that is something that you would also oppose? 

Mr. BARlsfES, Well, I would say, in general. Friends of the Earth, 
which has 52 affiliates all over the world — North, South, East and 
West — is opposed to the use of nuclear power, no matter how it is 
characterized, whatever qualities it has. 

But the point I was getting at here is that if we take the experi- 
ence with the Chernobyl disaster, where we had liability really of 
a magnitude we have never come to grips with 

Mr. McCandless. You compared it to the savings and loan 
bailout. 

Mr. Barnes. Yes, it is many, many scores, maybe hundreds of 
billions of dollars. 

But more than the dollars, we had people's lives affected, we had 
croplands affected, we had many things affected. I think they had 
to slaughter two-thirds of the reindeer in the Nordic countries, for 
example, because their diet was adversely affected by the radio- 
active fallout. It had all kinds of repercussions on the cultural and 
economic aspects of those indigenous peoples. 

So my point is this. The concept of liability needs to be very 
broad it we are going to be honest with ourselves about the risks 
that we are facing when there is a serious accident at a plant like 
this. 

And the point of view of our "Russian Roulette" report — again, if 
I could just add this comment — is that we think that there are sev- 
eral dozen of these dangerous reactors in this particular region and 
that the priority of our government and the G—V should be to close 
them down as soon as possible. Our views are shared by many peo- 
ple in the International Atomic Energy Agency establishment and 
working for many of the governments, but so far it hasn't risen to 
the level where the governments, as a group or individually, have 
taken that on seriously. 



15 

In our opinion, it is foolish to be investing in more of these model 
As, model As with good brake systems as you characterized it, you 
know, when we are faced with literally dozen of these reactors al- 
ready operating without proper safety equipment. Our priorities 
are just misplaced in that regard. 

Mr. McCandless. I appreciate your expansion. I guess I am 
somewhat opinionated here when there is something like back in 
1977, when I was involved in the development of a plant in the 
area that I represented as an elected official, we did quite a bit of 
research on this and there were at that time — in the 1970's, there 
were 256 operating nuclear powerplants in the world, of which — 
nobody had any idea there were that number— of which 11 were in 
or near the greater Chicago area. And we don't hear much about 
those. 

Mr. Barnes. That is true. 

Mr. McCandless. So when we talk in terms of nuclear energy, 
I am reminded of these things; and that is why I asked the ques- 
tion I did. Thank you. 

Thank you, Mr. Chairman. 

Chairman Frank. Thank you, Mr. McCandless. We have copies 
of these memoranda; we will be putting them in the record in ap- 
propriate form. 

[The material referred to can be found in the appendix.] 

Mr. Fingerhut. 

Mr. Fingerhut. Thank you, Mr. Chairman. Let me begin by say- 
ing that the broader subject matter of this hearing is relatively new 
to me and I appreciate the education I am getting on how we go 
about 

Chairman Frank. It is new to the Export-Import Bank, too. 

Mr. Fingerhut. Well, then you are saying, I am not so far be- 
hind the curve; is that it? And so my specific interest is on 
Temelin, but I am cognizant of the fact that we are really talking 
about a broader set of questions of how we approach this issue in 
the future. But I do have a couple of questions I want to clarify 
about it. 

As you know, Mr. Brody, I wrote you a number of months ago, 
and you were kind enough to respond on this issue before the deci- 
sion was made. Let me start in a different order than I expected, 
because Mr. McCandless just raised the issue of liability, which 
was down my list, but we might as well stay on his point. 

I was — perhaps I am simply rephrasing the same question, but 
what I was concerned about is what precisely is the liability of the 
Ex-Im Bank, or this country, or Westinghouse, or any of the par- 
ticipants in this project if there should be an accident; if this 
project were to go forward and were to be completed and if the ex- 
pectations of some of the experts who are saying that this isn't sci- 
entifically sound were to prove correct? What is your understand- 
ing of the liability situation? 

Mr. Brody. Well, I don't know that I want to speak for everybody 
else, but I would like to speak for the United States' potential li- 
ability. And very clearly, I personally would not have nor would I 
vote for this if there was any appreciable chance of any significant 
liability to the United States arising out of Temelin. 



16 

Mr. FiNGERHUT. And on what basis are you confident that there 
is no, I think — what did you say, "appreciable risk of significant 
liabihtv"? 

By the way, there are probably those who would wish for a lower 
bar on that, like "no liability," not just "no significant liability." 

Chairman Frank. One-adjective restriction rather than a two-ad- 
jective. 

Mr. Brody. The basis for the conclusion is a very thorough re- 
view directed by the General Counsel of Ex-Im. 

Mr. FiNGERHUT. Is that a document that we can review? 

Mr. Brody. I received my review orally. I do not know the extent 
of the actual documents. 

Chairman Frank. Let me say, I would want to support Mr. 
Fingerhut's request. It seems to me entirely reasonable for a mem- 
ber of the subcommittee to be able to read that. We don't have to 
make it part of the record. You don't want to invite potential liti- 
gants by giving them a map to use against you, but I do think it 
is very reasonable for a member of the subcommittee to be given 
a chance to look at it and discuss it with whoever prepared the 
position. 

Mr. FiNGERHUT. Thank you, Mr. Chairman. 

And so I would 

Mr. Brody. One other comment. The reason I didn't mention this 
to start out with is, I don't want to get into technical consider- 
ations, and I would rather leave things with our conclusions. 

But one of the keys to the liability issue is the fact that the 
Czech Government has concluded that it is joining the Vienna 
Convention. 

Mr. FiNGERHUT. Well, I appreciate that. But I think I would, as 
the chairman said, like to see what the full range of considerations 
were. 

Is it your understanding then — and I recognize you may not be 
the ultimate expert, because you are protecting the interests of the 
Ex-Im Bank and the United States — but is it your understanding, 
then, that the partners to this project think Westinghouse is where 
they would go to seek redress if there were an accident, or do they 
think it is tne Czech Republic, or who do they think is the party 
liable if there were to be an accident? 

You made clear to them, I am sure, it is not the Ex-Im Bank. 

Mr. Brody. Once again, I don't want to try to opine to you in 
legal matters. I am not a lawyer. The major focus is the protection 
of the United States. 

Mr. FiNGERHXJT. I try and pretend I am not. 

Mr, Brody. But my general understanding is that the Czech 
Republic steps up for liability issues when it joins the Vienna 
Convention. 

Mr. FiNGERHUT, On any of these questions, anyone who wishes 
to jump in, please do. Mr. Barnes. 

Mr. Barnes. Well, I just wanted to say that it is mv understand- 
ing that, assuming that the Czech government goes ahead with the 
ratification process which they announced a few days ago for the 
Vienna Convention, that it still only governs liability for trans- 
boundary damage between contracting parties. So I think there 
still are some valid questions that need to be looked into about if 



17 

there were an accident at this plant, would Czech citizens them- 
selves have rights of any sort. 

I am not saying I know that they do, but I think there are a lot 
of open questions there about who has what liability. And in the 
aftermath of the Chernobyl accident, lots of people were discussing 
that very seriously. 

But just because you sign the Vienna Convention, that is not the 
last word on the subject. 

Mr. FiNGERHUT. The — I guess that leads to the question of what 
exactly is happening in the Czech Republic on this proiect. 

You said, Mr. Brody, I think, that you had listened to every in- 
terested group on this project — and I am sure you have, and that 
doesn't imply you agreed with every interested group; it simply 
means you listened. What is your impression, because we on this 
subcommittee have been getting lots of information about what the 
views are within the Czecn Republic, both from citizens' groups and 
from government officials, such as the Prime Minister, what is your 
impression of what you are hearing from the people, the elected of- 
ficials of the Czech Republic on this project? 

Mr. Brody. Let me try to be more specific in my statement that 
I listened to every interested group. 

We, Ex-Im Bank, listened to every interested group who came 
forward to talk to us. And we welcomed these groups. Much of the 
conversation over the period of time since the Board sent this case 
up to Congpress has been conducted by those who did not come be- 
fore us. So you should understand that. 

It is my understanding that the Czech Republic is going forward. 
The vote in their Parliament to join the Vienna Convention was a 
unanimous vote. 

The Czech Republic is a democracy — as such, has, in my under- 
standing, quite a free press. There has been a good bit about 
Temelin, over time, in the press. But, I think the simple answer 
is that the Czech Republic is going forward as we understand. 

Mr. FiNGERHUT. One of the materials provided by Mr. Barnes' or- 
ganization. Friends of the Earth, quotes a letter to you from the 
Czech Prime Minister in which — again, this is taking the quote 
from their documents, I don't have the letter, and that is why I ask 
the question — in which he says — they quote him as saying, the 
question of the Temehn facility was not evaluated and discussed in 
my country in a way which would enable any responsible person 
anj^where in the world to support its completion. 

Is that an accurate quote from the letter to you? And if so, what 
was your response to that? 

Mr. Brody. I think it is pretty hard to ask me if it is an accurate 
quote in the letter when I don't have the letter. 

Chairman Frank. But I will ask you then, since it was referred 
to, if you would make it available, we would put it in the record. 

Mr. Brody. Sure. The letter that was received 

Mr. FiNGERHUT. I am not trying to put you on the spot; I am just 
trying to see what information 

Mr. Brody. No, I just don't have it in front of me. The letter that 
was received was received just in the past few days. 

Mr. FiNGERHUT. I see; aft«r the decision was made, after the Ex- 
Im Bank decision was made? 



18 

Mr. Brody, After Ex-Im decided to pass the case on to Congress, 
yes. 

Mr. FiNGERHUT. OK. So we can — so we can evaluate that, but 
that wasn't something you had in making your decision? 

Mr. Brody. That is correct. 

Mr. Flngerhut. If I could, Mr. Chairman, just very briefly, one 
or two other questions. 

On the question of disposal of the waste, we obviously, have had 
a nuclear industry in this country for a number of years, and we 
still haven't quite figured this question out yet. It seems that there 
is a great deal of concern surrounding this project, that the method 
of disposing of waste that the Soviet Union had engaged in, how- 
ever one might characterize the environmental safety of that proc- 
ess, is not available to the Temelin reactor. 

Was this a consideration, and how did you deal with that, with 
the question of the waste disposal? 

Mr. Brody. As I think you correctly pointed out, disposal of 
waste continues to be an issue all over the world. It is no surprise 
that it is an issue here. We have been advised that there are a 
number of different satisfactory ways to deal with this problem. 
Therefore, we looked into it and received expert advice. We are 
comfortable with the advice that we were given. 

Mr. FiNGERHUT. We do in this country, as you know, on projects, 
environmental impact statements and extensive documentation of 
what those impacts might be. Is that something that was done in 
connection with this project? And if so, was there a report that you 
were able to review, that we are able to review? 

Mr. Brody. We did not do an environmental impact assessment, 
and we were not required to do one. 

I would like to emphasize that we did obtain the key information 
about the safety of tne Temelin project that would have been pro- 
vided by an environmental impact assessment. I have also talked 
a bit about our licensed nuclear engineer on staff and some of the 
processes that we went through anasome of the consulting that we 
did while reviewing the transaction. We also reached the conclusion 
that the actions to which the Czech authorities have committed 
themselves will allow the Temelin facility to obtain a level of safety 
that would be comparable to the level required of a nuclear power- 
plant in the United States. 

Mr. FiNGERHUT. Have — though it doesn't qualify as an official en- 
vironmental impact statement, has that information been made 
available to this subcommittee for its review? 

Mr. Brody. What we have done 

Mr. FiNGERHUT. The information on which you relied, that was 
comparable? 

Mr. Brody. What we have done, which I think is a first in Ex- 
Im's history, is to provide Congress with the engineer's report, 
which was attached to the letter that Congressman McCandless re- 
ferred to earlier. 

Mr. FiNGERHUT. I thank you, Mr. Chairman. I know I have gone 
way over my time. 

Chairman Frank. Thank you. 

Let me just ask — we will get to Mr. Huffington in a second — but 
the questions that Mr. Fingerhut asked about your having to deal 



19 

with the question of waste disposal and environmental impact as- 
sessment, I understand that under the procedures you inherited 
that procedure was not required. 

One of the logical questions is — it occurred to Dr. Key, to myself, 
and I am sure to many others — what about under your new proce- 
dures; will you be treating Temelin differently under the new pro- 
cedures you are talking about? 

Mr. Brody. Well, it is hard to judge what the new procedures 
will be, since we are iust in the process of developing them. But, 
what I would say is tnat the amount of effort and consulting that 
Ex-Iim has put into Temelin is at a level unheard of before in the 
Bank's history. Not that that is any particular mark. But, I think 
as a case of first impression, it gives us a lot of good guidelines to 
goby. 

Chairman Frank. I am impinging on Mr. Huflfington's time; he 
is very patient. 

I am interested in that subject. But that is something I ask you 
to keep in mind. The kind of questions people are asking here is 
what would the procedures be for the future; the kinds of things 
Mr. Fingerhut is talking about. 

Mr. Huffington. 

Mr. Huffington. Thank you, Mr. Chairman. 

Chairman Brody, could you answer a couple of questions for me? 
How much is this total project valued at? 

Mr. Brody. The total project value is difficult to get at, because 
it was started so long ago. Construction of Temelin began in the 
1980's and has been added on. Our portion of the guarantee is 
slightly over $300 million. 

Mr. Huffington, Do we have an order of magnitude for the en- 
tire project? 

Mr. Brody. I do not have an order of magnitude now because I 
have not seen any reason in particular to get it. I would be glad 
to see if we can come up with some sort of guesstimates for you 
after consulting with Czech utility company. 

Mr. Huffington. I am all in favor of Ex-Im helping our Amer- 
ican businesses sell their goods overseas. How much of the $317 
million is going for U.S. goods? Is that all going for U.S. goods? 

Mr. Brody. Our policies are to finance 85 percent of the export. 
So $317 million is 85 percent of the export sale, all of which is a 
U.S. export. 

Mr. Huffington. And how much of that is Westinghouse? 

Mr. Brody. Well, I don't know to what extent Westinghouse has 
any subcontracting in here, but this is a Westinghouse order 
completely. 

Mr. Huffington. OK Let me ask you, on a scale of 1 to 100 on 
technology, if 100 is the best technology available todav for nuclear 
powerplants, where does this project fall, since you have the ex- 
perts in house that can tell us? 

Mr, Brody. Let me try to answer that in a slightly different way. 

At our Board meeting, I asked our engineer on a scale of zero to 
10 how comfortable he was with the review that concluded that the 
technology produced a safety level comparable to U.S. standards. 
And his answer, if I remember it correctly, was something of a 
qualified 10. 



20 

Mr. HUFFINGTON. So he would unequivocally say and recommend 
that we would build a facility like this near Boston or Los Angeles 
or Washington or New York; he would have no problem rec- 
ommending that we build that type of facility in America. Would 
you have no problem? 

Mr. Brody. Well, I haven't considered the question. 

Mr. HUFFINGTON. It is one I would like you to consider, because 
the fact is we have people next door to these plants; we do want 
to make sure they are safe, no matter where they are built. 

Mr. Brody. I understand that. That is why I asked the question 
and why the whole amount of our work was going toward deter- 
mining safety. 

The Czech Republic is a democracy. I think that it is making de- 
cisions that are its decisions. Its decisions might be different from 
the decisions that the United States might make here, but I think 
that is different from our doing the work necessary to be com- 
fortable that the safety level is at a level comparable to U.S. safety 
standards. 

Mr. HuFFDSfGTON. I would respectfully disagree with that. I 
think, with American taxpayer funds, that when we are providing 
dollars to build nuclear power facilities, they should be of the best 
design, not necessarily — if, in fact, it is a model A — a model A. I 
would hope that the Export-Import Bank, given the new interest 
in this project, would reexamine its intent to lend funds for this 
plant. 

And I have a list of questions, Mr. Chairman, I would like to ask 
unanimous consent to submit to the Chairman of the Export- 
Import Bank. 

Chairman Frank. Is there objection? 

The Chair hears none, so the gentleman may submit them. 

Mr. HUFFINGTON. Thank you, Mr. Chairman. 

[The questions referred to, and Mr. Brod/s responses, can be 
found in the appendix.] 

Chairman Frank. You had some people who would like to 
respond. 

Mr. Brody. I would like to respond to your last point. 

As I have made clear to groups who have come before us since 
the date of our Board meeting, which passed this case on to Con- 
gress, if there are new facts that have not come to us before, we 
will clearly look at those new facts. And if those new facts would 
cause a change in decision, I am, for one, as one of five Board mem- 
bers, very clear that if new facts in the case indicate that new deci- 
sions should be made, that would be the case. 

Having said that, given the thoroughness of the process that was 
undertaken, I would be very surprised and very disappointed in the 
process if new facts came to us which indicated that a different de- 
cision should be made. 

Mr. HUFFINGTON. Thank you very much. We open this — ^yes, Mr. 
Barnes. 

Mr. Fingerhut. Would the gentleman yield on that one point 
just for a second? 

In answer to one of my questions about the letter from the Prime 
Minister of the Czech Republic, and in light of your heavy reliance 
on the nature of the democracy in the Czech Republic for your con- 



--^ 21 

fidence in this decision, would you consider that letter that you re- 
ceived in the last few days a new fact that might lead you to begin 
the process of reconsideration, the fact that the elected Prime Min- 
ister of the Czech Republic says we didn't have a substantial 
enough debate on this discussion, on this issue? 

Mr. Brody. That letter in and of itself is, in my view, not enough 
to hit at the technical review that was done and at the operation 
of the Czech Republic government, 

Mr. HUFFINGTON. Mr. Chairman, Mr. Brody, let me ask you this, 
though. 

You just said they were a democracy. Here is an elected official 
saying it is a problem. I would think that is a good enough reason 
to start an examination again. 

Mr. Brody. As I said, we looked at all the facts and as I was say- 
ing this is not an elected official. This is a former elected official 
at a time when the Czech Republic was one of two states of Czecho- 
slovakia, as I understand it. I found the information contained in 
the letter not compelling enou^ to change my view. 

Chairman Frank. Can I get his status clarified? He was the 
Prime Minister of the Czech Republic when it was part of what 
was then Czechoslovakia, but he does not currently hold public of- 
fice in the Czech Republic? 

Mr, Brody. That I believe is correct, sir. 

Mr. Barnes. From 1990 to 1992 he was the Prime Minister. 

Chairman Frank. Nineteen hundred and ninety-two, so if he left 
office in 1992, if they have a post-employment restriction, he is no 
longer subject to it; so he is free to lobby. 

Any other questions? 

Mr. HUFFINGTON. Mr. Barnes had a point. 

Mr. Barnes, I just wanted to respond to a couple of the points 
that were made. Our best information, which we tnink is based on 
official figures and therefore quite accurate, is that the total 
Temelin cost right now is projected to be $2,3 billion, and that ap- 
proximately $900 million is required to finish the project; that is, 
if there are no cost overruns, and that would be a rare case, if 
there were never cost ovemms. 

In terms of the new information, new facts, so to speak, again, 
I just want to point in particular to the technical memorandum 
which the Austrian governmental advisers have tendered to the ad- 
ministration and to Congress. I think if you put the National Secu- 
rity Council memorandum side-by-side with that document, there 
are probably a dozen or so questions which just leap out, that re- 
quire more elucidation and more attention. But in my view, it con- 
tradicts and provides additional information about a number of key 
questions. 

So I hope people in Congress and elsewhere will take a hard and 
close look at that document. 

Chairman Frank, Ms, Bramble, I am told you wanted to say 
something. Somebody saw your 

Ms. Bramble. I did, but it has been covered. Thank you, Mr. 
Chairman. 

Chairman Frank. Oh, what rare restraint. 

The record will remain open for a period of a couple of weeks if 
anyone wants to either elaborate on or respond to anything that 



22 

was said. And I understand there are some people here who have 
some petitions they want to present to me as soon as the hearing 
is adjourned, because these would come to me in my individual 
capacity. I would be glad to receive them. 

The nearing is adjourned, and I appreciate the participation of 
everybody. 

[Whereupon, at 11:19 a.m., the hearing was adjourned.] 



APPENDIX 



24 



STATEMEKT OF 
KENKETH D. BRODY 
PRESIDENT AND CHAIRMAN 
EXPORT- IMPORT BANK OF THE UNITED STATES 
BEFORE THE 
SUBCOMMITTEE ON INTERNATIONAL DEVELOPMENT, FINANCE, TRADE, 

AND MONETARY POLICY 
COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS 
U.S. HOUSE OF REPRESENTATIVES 

February 23, 1994 

Mr. Chairman, Members of the Subcommittee: 

Thank you, Mr. Chairman, for the opportunity to meet with you 
and the S\ibcommittee to discuss the environmental activities of the 
Export- In^jort Bank of the United States (Ex-Im Bank) . 

As you are well aware, the Export Enhancement Act of 1992 
modified Ex-Im Bank's charter in two respects regarding the 
environment. First, it provided that Ex-Im Bank should encourage 
increased exports of environmentally beneficial goods and services . 
Second, for the first time, it mandated Ex-Im Bank to establish 
environmental review procedures and specifically authorized the 
Board of Directors to withhold fineuicing of a project solely on 
environmental grovuids . 

Promoting Environmentally Beneficial Exports 

Although the primary focus of my comments today will be our 
efforts to develop responsible environmental procedures, I would 
like to mention our cosmion interest in increasing Ex-Im Bank 
support of environmentally beneficial exports. There is no 
question that increasing the export of these products will help 



25 



- 2 - 

create high-wage jobs for Americans at the same time that It helps 
Improve the global environment. The size of this market Is 
enormous. Current estimates show the worldwide market for 
environmental goods and services to be $350-400 billion, and It Is 
predicted to grow to $600 billion by the end of the decade. 

The developed world, with Its more advanced regulatory 
requirements, will continue to be a very large and Isiportant market 
for U.S. exporters of environmental goods and services. However, 
the countries of the developing world, the emerging markets that 
Ex-Im Bank serves, may present the greatest prospect for long-term 
growth for the industry. 

American con^anies have the technology and expertise to 
capture large segments of the world market for environmental goods 
and services. However, our companies already face strong 
international con^etition, particularly from Germany amd Japan. 
The National Export Strategy annovmced by President Clinton last 
September reflects the Administration's commitment to helping 
ccxapaniBB cos^ete in the international market and to increasing 
U.S. jobs through increased exports of all types of goods and 
services. Moreover, the unique opportiinities presented by the 
environmental industry led the President to call for a specific 
strategy to promote environmental technology exports. 

The Environmental Technologies Export Strategy developed by 
the Trade Promotion Coordinating Committee (TPCC) Environmental 
Trade Working Group was released in December 1993 and identifies 
key market trends and opportunities for environmental exporters. 



26 



- 3 - 

It recommends ways to better coordinate and focus U.S. Government 
export programs and reso\irces and it recommends creating more 
partnerships between government and the environmental industry. 

As you know, Ex-Im Bank' s primary mission is to increase 
American jobs by supporting the sale o£ U.S. products in situations 
where ordinary commercial financing is not available or where U.S. 
exporters face subsidized con^etition. In Fiscal Year 1993 Ex-Im 
Bank authorizations were a record $15 billion in U.S. exports. Of 
that, $400 million was attributed to 19 environmentally beneficial 
projects such as: five water/sewage treatment facilities in 
Venezuela, a geothermal power project in the Philippines, £Uid 
combined cycle power plants in Indonesia and Thailand. 

So far in FY 94, we have provided support for more wastewater 
treatment facilities in Venezuela, biomass power generation at a 
Russian factory, gas condensate recycling in Uzbekistan, and a 
wastewater treatment system in the Czech Republic. 

While Ex-Im Bank has supported exports of various pollution 
control equipment over the years, the fact is that, \intil recently, 
Ex-Im Bank has given no special attention or effort to exporting 
environmentally beneficial goods auad services. We are changing 
that. Our approach to increasing these exports is two fold. 
First, we plan to do more outreach to the environmental industry to 
make them more aware of Ex-Im Bank services. And second, we are 
making a special effort to understand the unique needs of this 
industry. We are committed to being flexible and creative with our 



27 



- 4 - 

current progrzuns and, where necessary, we may adapt ovir programs to 
meet their needs. 

Dxiring 1993, Ex-Im BanX staff participated in n\unerous 
environmental meetings with industry representatives, bankers and 
environmental groups at trade fairs and conferences around this 
co\intry and overseas. This year, we have been talking extensively 
with U.S. con^anies and Mexican officials, both here and in Mexico, 
about how we might get more involved in financing environmental 
infrastructure projects in Mexico. 

I am personally involved in these outreach efforts. 1 have 
met with environmental exporters in Boston, Seattle, Chicago and 
Washington. I also have spoken at several major environmental 
conferences in New York and Washington and will speak to a Trade 
Development Agency sponsored conference next week zibout our 
interest in supporting Mexiczui environmental infrastructure 
projects. In a few weeks, I hope to be meeting in China with 
government officials charged with prioritizing that country's 
environmental efforts, so that we can provide more support to 
exporters in that growing market. 

We have learned from companies that many, particularly small 
and medi\im- sized environmental firms, do not know about Ex-Im 
Bank's services or how they work. It is also clear that many of 
these companies cannot afford the time and money needed to 
investigate far-away market potential, so they never reach the 
point of seeking our services . We hope that our own outreach 
efforts, coupled with those outlined in the TPCC Environmental 



28 



- 5 - 

Technologies Export Strategy, will help bring more environmental 
projects to Ex-lm Bank for support. 

For companies that have immediate prospects for environmental 
export sales and come to us for financing, we are trying to be 
especially responsive and flexible in meeting their needs. Clearly 
the global shift toward democracy and privatization is leading to 
a shift in the nature of our business. There is a movement away 
from sovereign borrowing to municipal and state borrowing and 
structured project financing. 

One good excunple of this can be seen in the financing of 
Mexican environmental infrastructure projects. Environmental 
improvements in wastewater treatment and solid zind hazardous waste 
management are high priorities for the Government of Mexico. 
However, the Mexican government is committed to building these 
facilities without incurring extensive foreign debt. Instead, they 
plan to rely, as much as possible, on limited recourse project 
financing. We are proposing to create a new project finance group 
within the Ex-Im Bemk. The goal is to develop quickly the 
expertise requisite for supporting limited recourse project 
fineuicing, including environmental projects. We also are 
evaluating other means of helping environmental exporters, such as 
providing the maximum allowable financing terms and allowing 
certain local cost components to be included in environmental 
projects. We look forward to reporting to the Subcommittee in the 
near future about these issues. 



29 



- 6 - 

Ex-Im Banlc Environ? "*" <•»"> Procedures 

As you know, when Ex-Im Bank's charter was reauthorized near 
the end of 1992, Congress Included a new section on environmental 
policy £uid procedures. Ex-Im Bank Is required to establish 
procedures to take into account the potential beneficial and 
adverse environmental effects of the U.S. exports that it is asked 
to support. In addition, the Ex-Im Bank Board of Directors is now 
authorized to turn down an export financing application for 
environmental reasons . 

Ex-Im Bank' s new leadership welcomes this environmental 
mandate. In my opinion, Ex-Im Bank' s past record with respect to 
considering the environmental impacts of projects has been 
inadequate. The Clinton Administration is committed to U.S. 
leadership on global environmental issues, and we plan to be a part 
of that effort. 

As a first step, our people have been investigating the 
environmental review processes used by other Federal agencies and 
multilateral lending institutions. Ex-Im Bank staffers have met 
with experts from the Environmental Protection Agency (EPA) , 
Overseas Private Investment Corporation (OPIC) , International 
Finance Corporation (IFC) and the World Bank, to discuss the 
environmental assessment process. Several months ago, the EPA 
presented a two -day seminar for our engineers on environmental 
assessments. We are reviewing the environmental procedures of the 
World Bank, IFC, European Bank for Reconstruction and Development, 
emd OPIC, as well as those of our foreign competitors' export 



76-695 0-95-2 



30 



- 7 - 
credit agencies. We also have met with a variety c£ Ex-Im Baixik 
customers, private sector environmental specialists, and 
environmental advocacy groups about ways to upgrade our procedures 
and obtain relevant environmental information. 

It was clear that Ex-Im Bank's environmental policies and 
procedures had to be substantially strengthened. 0\ir existing 
' regulations were written 15 years ago. Under these regulations, 
. Ex-Im Bank is required to conduct environmental reviews in only a 
small fraction of our large-scale, long-term transactions. Ex-Im 
Bauik is required to consider environmental is^acts on the global 
commons and on affected third coiintries. Ex-Im Bamk is required to 
look at environmental effects in the host country only if a highly 
toxic substance, such as arsenic, benzene or mercury, is involved. 
This meeuis that Ex-Im Bank's environmental procedures did not 
require us to look at inpacts on the host country such as air 
pollution, water pollution, solid waste disposal, deforestation, or 
soil conttuoination. 

This is obviously unsatisfactory. We are in the process of 
developing new environmental procedvires that will enable the Board 
to make well-informed environmental decisions. We have retained an 
expert consulting firm, which has recently worked with OPIC on 
environmental projects and IPC on their environmental proced\ires, 
to review our application portfolio and case processing. They will 
be working with us on efficient, effective environmental 
procedures . The work has already begun and we expect it to be 
con^leted in the next month or so. 



31 



- 8 - 

In the meauxtime, since last October, our engineers have been 
following interim environmental procedures designed to alert the 
Board to the principal environmental effects in cases seeking Ex-lm 
Bank loan and guarantee commitments of $10 million or more. In 
each of these cases, the decision memo presented to the Board has 
a separate environmental evaluation attached to the engineering 
report. The environmental evaluation identifies the potential 
environmental effects not only of the specific items being exported 
but of the larger project in which the exports will be used. It 
discusses the applicable environmental requirements in the host 
country and comments on emy meas\ires that are proposed to mitigate 
the environmental effects. The members of the Board have found 
these environmental evaluations to be very informative in the 
decision-making process. 

These interim procedures will be followed until our new 
environmental regulations are in place. As I have mentioned, the 
consultants are still working with us on our new procedures. The 
new procedures will be shaped by the results of the ongoing 
interagency process, and, as is the case with all Ex-Im Bemk policy 
changes, we will not finalize the proposed procedures without first 
consulting with our customers. Congress, and other interested 
parties. Therefore, I cannot tell you precisely what the new 
procedures will be. I can give you some of the general principles 
that we expect to follow. We will be requiring U.S. exporters to 
provide us with environmental information, in addition to technical 
and financial information, so that we can include environmental 



32 



- 9 - 

factors In our decisions. We will specify precisely what kinds of 
environmental Information we need, and we will try to set forth 
some basic standards of environmental soundness so that the 
exporting community will know what to expect from us. 

Although Ex-Im Bank is fully committed to adopting procedures 
that are environmentally responsible, we also must ensure that 
these new environmental procedures are sensible. Our basic mission 
is to promote U.S. exports and to assure that U.S. exporters can 
obtain financing on fully cos^etitive terms and conditions. The 
environmental section of Ex-Im Bank's charter specifies that our 
environmental procedures must be consistent with that mission. 
Quite singly, we could not carry out our mission if we had to 
conduct full scale, time consximlng environmental impact statements 
for every transaction. We must not shut our eyes to the reality 
that our foreign competitors will support projects without engaging 
in stringent environmental reviews. 

With the help of the consul tzmts, we are in the process of 
developing methods of categorizing cases so that appropriate review 
procedures are applied for each category of projects. I want the 
proced\ires we adopt to be streamlined, efficient and 
environmentally responsible. Our goal will be to obtain essential 
information we need without taking so long to collect and review it 
that we jeopardize U.S. exports. The international market is 
increasingly competitive; time is often of the essence in clinching 
a deal for a U.S. coa^any. One way to balance the realities of 
global con^etitlon with our commitment to environmental soundness 



33 



- 10 - 
is for Ex-Iffl Bank to assemble environmental information on 
particular types of exports before, not after, we receive time- 
sensitive applications. 

We also plan to seek information from interested environmental 
groups early in the review process, so that serious environmental 
defects in a project can be identified early. This may make it 
possible for the project to be changed in order to mitigate the 
harmful environmental impacts of the project. 

After all is said and done, there will be times when we will 
say no to financing U.S. exports because the proposed project is 
too damaging to the global environment for us to approve the use of 
U.S. taxpayer' resources to support it. An exas^le of our new 
approach to looking at the environmental is^acts of projects we 
support is the Mt. Apo geothermal facility in the Philippines. 
Before I became Chairman of the Bank, Ex-Im Bank issued a 
preliminary commitment to finamce this project. We s\ibsequently 
learned from environmental groups that the project raised serious 
environmental concerns. The Ex-Im Bank staff investigated these 
concerns carefully. It reviewed docximents and consulted with a 
variety of sources, including the EPA, the Department of Interior, 
the World Bank, the Environmental Defense F\md, the World Wildlife 
Fluid and Greenpeace. Because of unanswered concerns eibout the 
potential environmental damage that could be caused by this 
project, Ex-Im Bank staff has indicated that it is not prepared to 
recommend an extension of the expiration date of this transaction. 



34 



- 11 - 

However, as I dlecussed earlier, Tinilateral action will not 
effectively accoaQ>lish oxir environmental goals. The British, 
French, Germans, Japanese, Italians, and others export credit 
agencies also must decline to support their countries' exports to 
those projects. We have begun a dialogue with a number of 
environmental groups and others in the government to begin moving 
this multilateral effort forward. This will not be a quick 
solution, but in the long run, if we succeed, it is a win-win 
situation: the global environment will be much better protected, 
and the risk of competitive disadvantage to U.S. exporters will be 
alleviated. 

In short, environmental procedures are a big challenge for all 
of us at Ex-Im Bank. But we have to meet it in order to fulfill 
our responsibilities both to the environment and to the U.S. 
exporting community. 

Conclusion 

This Administration is strongly committed to strengthening the 
U.S. economy and our international competitiveness. And exports 
are a key to this economic growth. Ex-Im Bank is keenly aware of 
the export potential of the U.S. environmental goods and services 
industry and of the growing need for U.S. financing assistance in 
this area. At the same time, we are working hard to develop 
environmentally responsible methods of analyzing projects that come 
to Ex-Im Bank for support. 



35 



Working for the Nature of Tomorrow^ 

0[^ NATIONAL WILDLIFE FEDERATION 

^M^^^ 1400 Sixteenth Street, N.W., Washington, D.C. 20036-2266 (202) 797-6800 



Statement of Barbara J. Bramble 

Director of International Programs 

National Wildlife Federation 

before the 

Subcommittee on International Development 

Finance, Trade and Monetary Policy 

Committee on Banking 

U.S. House of Representatives 

THE ROLE OF THE EXPORT-IMPORT BANK IN FINANCING SUSTAINABLE 

DEVELOPMENT 



February 23, 1994 



I. The new Administration is wrestling with an old problem: for 
decades the Export-Import Bank did not appear to consider 
environmental impact to be an important or legitimate factor in its 
decisions and operations. 

* The National Environmental Policy Act has existed since 

1970. 

* Executive Order 12114, requiring agencies to prepare and 
comply with special procedures for assessing environmental impacts 
of actions abroad, has been in place since 1978. 

* The Export Enhancement Act, requiring the Bank to 
establish specific procedures to "take into account the potential 
beneficial and adverse environmental effects" of some of its 
programs was passed in 1992. 

* The Bank does in fact have environmental impact 
assessment procedures in place, but they suffer from both gaps in 
coverage and failure of implementation. As a result, impact studies 
are rarely done. 

II. Consequences of the Bank's failure to take environmental 
impacts seriously: 

* Opportunities to promote energy efficiency or clean 
technologies may not be aggressively pursued. 



36 



* U.S. financial support may be given to projects which 
other funders, which are required to assess the impacts and 
presumably have more knowledge of the situation, have refused to 
fund. 

* U.S. export financing supports projects which increase 
pollution, use inefficient technology, or divert investment from 
clean-up, all of which make more difficult the long-term goal of 
conversion to environmentally sound energy and industrial 
production worldwide. 

III. A fundamental change in the mandate of the Export-Import Bank 
is needed: 

* The Bank already has the authority to withhold financing 
from projects for environmental reasons, and to encourage 
beneficial projects. 

* The Bank is already required to establish procedures for 
environmental assessment of a narrow range of projects. 

* Procedures will be prepared by the new leadership which 
we expect will overcome the Bank's historical view of environmental 
considerations (as a side show and a nuisance which impede the Bank 
from achieving its "real" mission) . The new procedures should 
cover a wide range of Bank projects — those which could have 
significant environmental impacts. 

* But this is not sufficient. 

* In the post-UNCED world, all nations have agreed (in 
Agenda 21) to promote sustainable development — development which is 
ecologically stable, economically viable and socially equitable. 

* New procedures for Exim may not be enough. The Congress 
should make it clear that promoting sustainable development 
(including consideration of the environment) is part of the Bank's 
basic purpose, to be included in the definition of what the Bank 
does. 

IV. Meanwhile, what should the Bank do to improve its 
consideration of environmental and social impacts? 

* There is no functional difference that sets ExIm apart 
from the general obligation of agencies to take responsibility for 
the consequences of its decisions. (All government agencies, since 
the dawn of NEPA, have sought one kind of exemption or other, 
because their circumstances were "special.") 

* Therefore, the general requirement to ensure that 
appropriate environmental studies are done, and to take the results 
into account, must apply to all of the Bank's work. 

* This general requirement can be adapted to the specific 
operations of the Bank. As we understand the Bank's situation, 
most applications for financing arrive long after the basic project 
decisions are already made. But the Bank can require, as part of 
the applications process, evidence that the full environmental 
review, including open participation, was done by the relevant 
authority in the purchasing country. If this new requirement is 
announced well in advance, it should cause no delay in ExIm 
processing. 



37 



V. The basics of environmental review have been internationally 
agreed, and are contained in UNEP Guidelines: 

— screening of projects, by category, to decide on the 
level of detail needed for adequate analysis; (see World Bank 
Environmental Assessment Procedures for example of such 
categories. ) 

— for full scale environmental analysis, preparation of 
studies by a competent body that does not have a conflict of 
interest (i.e. do not use a contractor which might bid for work on 
the project itself) ; 

consideration of all relevant alternatives to 
accomplish the goals of the project; 

— opportunity for public review and comment on studies, 
including in most cases, a public hearing; 

— if relevant, consideration of mitigation measures that 
could reduce the impacts of the project, and ensure their 
implementation ; 

— explanation of basis of decision, including how public 
comments were taken into consideration. 

* If documentation shows that this was all carried out 
by the competent authority (most countries now have some sort of 
environmental procedures in place) , then in the vast majority of 
Exim applications, the requirements would have been satisfied. 

* Full documentation about Bank projects, including 
compliance with environmental requirements, should be available to 
the public in both the U.S. and the country where the exports are 
going. 

VI. Two exceptions to normal procedures: 

* When the required studies and procedures (particularly 
for public participation) are manifestly inadequate, or public 
protests show that they were not implemented properly; 

* In the case of certain projects that are severely 
damaging, and the consequences irrevocable; 

In these cases, the Export-Import Bank must exercise its own 
judgment about whether to proceed. Current law authorizes the Bank 
to turn such projects down. 

VII. The Bank should also take a positive approach by setting up a 
special approval track for environmentally beneficial projects, 
(with screening to prevent "greenwashed" lemons from slipping 
through) which expedites processing. 

VIII. The Export-Import Bank operates in a competitive environment, 
in which export credit agencies of other countries may not feel 
bound by the same rules. 

* The United States must take the lead to build a consensus 
on new rules. 

* Japan has already announced a new policy to include 
environmental considerations in its export credit decisions. 



38 



IX. The United States Government has concerns about certain 
projects as a policy matter, which Exim has in the past undercut. 
See the examples of the Yacyreta dam (Argentina) and Pagbilao coal 
fired power plant (Philippines) . There must be a better 
coordination mechanism among State, EPA, AID, Treasury, OPIC and 
the Export-Import Bank, to focus our nation's limited development 
and export credit resources on sustainable development. 



39 

STATEMENT 

OF 

BRUCE S. MANHEIM, JR.* 

BEFORE THE 

SUBCOMMITTEE 

ON 

INTERNATIONAL DEVELOPMENT, FINANCE, TRADE AND MONETARY POLICY 

OF THE 

HOUSE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS 



ON 



ENVIRONMENTAL DECISIONMAKING BY THE EXPORT- IMPORT BANK 



AND 



PROMOTION OF EXPORTS OF U.S. ENVIRONMENTAL PRODUCTS AND SERVICES 



FEBRUARY 23, 1994 



* Of Counsel, Fox, Bennett & Turner and Vice President auid 
Mcuiaging Director for Life Sciences, The Novus Group (a venture 
strategy firm that is, among other things, exploring ways to 
assist environmental businesses in exporting their products and 
services), 750 Seventeenth St., N.W., Washington, D.C. 20006; 
formerly Senior Attorney-Scientist, Environmental Defense Fund 
("BDF") . Institutions included solely for the purpose of 
identification. The views expressed in this testimony are my own 
amd do not necessarily refiect the views of EDF, Fox, Bennett & 
Turner, The Novus Group, or any client of the latter firms. 



40 



Mr. Chalrmam and Members of the Subconsnittee : 

Thank you for the opportunity to testify today on 
environmental decisionmaking by the Bxport-Inport Bank 
("Bximbank") and promotion of exports of U.S. environmental goods 
and services. During the past few months, much attention has 
been focused on the extent to which the Bamk evaluates the 
environmental consequences of its decisions to provide financial 
assistance. That attention has been particularly intense for 
highly controversial and problematic projects, such as the Mount 
Apo Geothermal Project in the Philippines amd the Temelin Nuclear 
Power Plant in the Czech Republic, where the Bank has been asked 
to provide sxibstantial financial assisteuice. Rather than 
concentrating on these particular projects and others, however, 
my testimony summarizes the environmental record of the Bank. It 
then offers recommendations for revision of the Beuik's policies 
and procedures, which the new Director has committed to 
strengthening. My statement concludes by suggesting that 
stronger environmental review by the Eximbank amd other export 
credit agencies will ultimately enhance federal efforts to 
increase exports of U.S. environmental goods smd services. 

I. ENVIRONMENTAL ASSESSMENT BY THE EXPORT- IMPORT BANK 

In Jamuary 1979, the Eximbank established procedures for 
environmental assessment of certain overseas projects seeking 
financial assistance. See 12 C.F.R. Part 409 amd B.O. 12114, 
"Environmental Effects Abroad of Major Federal Actions," 
reprinted in 44 Fed . Reg . 1957, (Jam. 9, 1979) . Although these 
procedures, euid the Executive Order on which they were based, 
were meant to increase environmental review, they have in fact 
been a dismal failure. For exan^le, it is now clear that: 

Between August 1979 and October 1991, Eximbemk 
processed requests for financial assistsmce for at 
least 3,600 transactions. While mamy of these 
transactions involved projects with significant 
environmental in^acts, the Bamk determined that only 20 
(less than 1%) required amy type of environmental 
review . 

Of the thousands of projects supported by the Bank, not 
one was found to have a significamt effect on the 
environment of a foreign nation or the global commons 
(e.g., oceans). Yet, the Bank has routinely supported 
actions involving mining, hydroelectric development, 
geothermal production, and oil and gas development on 
land and offshore. 

Although Executive Order 12114 requires federal 
agencies to review actions significantly affecting 
"natural or ecological resources of global inportance, " 



41 



Exlmbank has never had to determine whether any of its 
actions afiect such resources. That is because no such 
resources have ever been so designated under the Order. 

The 26 environmental assessments undertoUcen by Bximbank 
during the past 14 years have all been triggered by the 
release of chemicals that are strictly regulated under 
federal law. However, just over the past 4 years, 
Eximbank actually excluded 61 projects from review 
because they too release a strictly regulated pollutemt 
-- sulfur dioxide. 

Indeed, while the Order called for review of actions that 
may produce an emission, effluent, or principal product strictly 
regulated under federal environmental law, Eximbank' s procedures 
limit review to projects releasing federally regulated substances 
whose "toxic effects on the environment create a serious public 
health risk." 12 C.F.R. § 409.4(a)(3) Although the number of 
compounds falling within that category may still be significant, 
the guidelines set out a list of just ll compounds that trigger 
such reviews. This list is only meeint to be "illustrative," but 
only once during the past 14 years has Eximbank prepared a review 
for substeuices not on the list (lead and chromium) . In fact, 
Eximbcmk's illustrative list falls considerably short of the 
hundreds of substamces that are strictly regulated under federal 
environmental statutes and it does not include particularly 
problematic compounds such as lead and dioxin.^ 

Moreover, Bximbemk's guidelines actually exclude certain 
projects from environmental review because they release 
particular substomces. 12 C.F.R. Part 409 (Appendix A). Many of 
these substances, including chlorine, ammonia, sulfuric acid, 
phosphoric acid, nitric acid, sulfur dioxide, nitrogen oxides, 
euid sulfite liquors, are strictly regulated under federal law. 
Hence, just between October 1992 amd June 1993, the Bcuik actually 
excluded 18 projects from review because they release sulfur 



^ Such confounds include, but are not limited to, those 
designated \inder the Clean Water Act (priority pollutsmts, 40 
C.F.R. Part 423, App. A; toxic water pollutcmts, 33 U.S.C. § 
1317(a) and 40 C.F.R. S 1129.1; hazardous water pollutants, 33 
U.S.C. § 1321(b)(2)(A) and 4 C.F.R. § 116.4), Clean Air Act 
(hazardous air pollutants, 42 U.S.C 7412(b)(1); extremely 
hazardous substances, 42 U.S.C. S 7412(r)(3); class I euid class 
II ozone-depleting substances, 42 U.S.C. § 602 (a, b)). Resource 
Conservation and Recovery Act (hazardous substances because of 
their acute toxicity, 40 C.F.R S 261.33(e); hazardous substemces 
because of their chronic toxicity, 40 C.F.R S 261.33(f)), and 
Safe Drinking Water Act (chemicals for which maximiun contaminant 
levels have been promulgated, 40 C.F.R. §§ 141. ll, 141.12, 
141.51, and 141.61) . 



42 



dioxide. In one instance, this exception resulted in a situation 
where the Bamk formally approved finaincial assistance of $185 
million for a project (the Pagbilao Coal Fired Power Pleuit in the 
Philippines) even though the U.S. Executive Directors to 
different multilateral lending institutions had either opposed or 
abstained from supporting that project for environmental reasons. 
Eximbemk did not prepare an environmental assessment of this 
project because it releases sulfur dioxide. 

In recognition of these problems, Congress adopted certain 
environmental provisions in the 1992 amendments to the Export- 
In^jort Bank Act of 1945, 12 U.S.C. S 635 ££ seq . See S 106, 
Export Enhancement Act of 1992, P.L. 102-429. 106 Stat. 2186, 
2189-2190. In pertinent part, those amendments declare: 

[T] he Beuik shall esteiblish procedures to take into 
account the potential beneficial and adverse 
environmental effects of goods auid services for which 
support is requested under its direct lending amd 
guarantee programs. Such procedures shall apply to euiy 
treuisaction involving a project -- (A) for which long- 
term support of $10,000,000 or more is requested from 
the Bank; (B) for which the Bauik's support would be 
critical to its iitplementation; euid (C) which may have 
significsmt environmental effects upon the global 
commons or any country not participating in the 
project, or may produce em emission, an eluent, or a 
principal product that is prohibited or strictly 
regulated pursuemt to Federal environmental law. 

Yet, a year following enactment of this provision, iir^ortant 
sections of Eximbank's assessment procedures remain inconsistent 
with the Act. For exait^jle, while the Act calls for environmental 
review of the Beuik's loam guaramtee program, the Bamk's current 
procedures limit the "actions" subject to review to those 
"involving Bximbank finamcing under the direct lending program 
regarding a physical project." 12 C.F.R. § 409.4(a). Indeed, the 
guidelines categorically exclude from environmental amalysis amy 
financing decision made under the Discount Loam amd Cooperative 
Financing Facility prograuns, amd the Exporter Credit Insurance 
amd Guarantee programs. 12 C.F.R. § 409.12(c). 

At the same time, while Eximbank's existing procedures may 
be consistent with the Act in limiting environmental review to 
projects where the Bank's support would be critical to 
implementation, the guidelines are arguably inconsistent with the 
Act's $10,000,000 criterion. That is, they may potentially limit 
the actions subject to environmental review if that amount does 
not constitute a significamt percentage of Bximbamk finamcing of 
the total cost of the project or is a relatively low percentage 
of Bximbank finamcing of the total financing of U.S. goods amd 
services being purchased. 12 C.F.R. § 409.8(b) Moreover, 



43 



although the 1992 legislation called for review of actions that 
may produce an emission, an effluent, or a principal product 
strictly regulated under federal environmental law, Bximbank's 
procedures continue to exclude projects from analysis if they 
release certain of these substances and the guidelines narrowly 
define the types of compounds that trigger such reviews in the 
first place. 

II. EFFORTS BY THE EXIMBAtJK TO REVISE ITS ASSESSMENT PROCEDURES 

Portvinately, the new Director of the Bank has acknowledged 
the failures of the past and committed to revising amd 
strengthening the Bank's assessment procedures substantially.^ 
To that end, it will be useful for the Bank to observe various 
provisions that currently govern decisions by other federal 
agencies heavily involved in financing projects abroad. For 
exan^le, under the Foreign Assistance Act, the Overseas Private 
Investment Corporation ("OPIC") must undertake an environmental 
review of projects involving requests for insurance. 22 U.S.C. S 
2199(f). In addition, OPIC must prepare environmental 
assessments of projects where the host country is participating. 
22 U.S.C. § 2199(f) and 22 U.S.C. S 2151p(c) (1,2) . OPIC must 
also consider amy comments it receives on a project before it 
agrees to support it. 22 U.S.C. S 2197(m)(l) And, where OPIC 
decides to support a project, it must notify appropriate 
government olcials in the host coxintry of relevant guidelines 
and standards adopted by the World Bank and other international 
organizations, amd of amy U.S. restriction that would apply to 
the project if it were undertaken in the United States. 22 U.S.C. 
§ 2197 (m) (1) 

Of course, another authority the Bamk would be well -served 
in reviewing is the National Environmental Policy Act ("NEPA") 
amd the iit^jlementing regulations of the Council on Environmental 
Quality ("CEQ") . Enacted in 1970, NEPA requires all federal 
agencies to disclose the harmful impacts of projects they 
xindertake, fund, or approve and it requires them to consider 
alternatives that avoid or reduce such in^jacts. Although 
Eximbamk may dispute the need to con5)ly with NEPA' and it may 



' In a November 10, 1993 letter to the Environmental 
Defense Fund, Kenneth Brody, President and Chairman of the Bauik, 
stated that "Eximbamk' s environmental policies amd procedures 
must be substantially strengthened" amd that his goal was to 
"reshape Eximbank practices to reflect the Clinton 
Administration's commitment to protecting the global 
environment . " 

' Historically, the Eximbank has taJcen the position that 
NEPA does not govern its decisions about finamcial assistance to 
projects overseas. That interpretation was grounded in the State 



44 



raise concerns about its ability to comply with the statute, it 
should be noted that the Agency for International Development 
("AID") overcame similar questions after issuing regulations 
applying NEPA to its actions abroad. Those regulations resulted 
from settlement of a lawsuit that the Environmental Defense Fund 
brought against AID over its failure to coolly with NEPA. As 
part of the settlement of that lawsuit, AID agreed to promulgate 
regulations applying NEPA to its overseas actions. See 
Environmental Defense Fund v. Aoency for International 
Development . 6 Envtl. L. Rep. 20,121 (D.D.C. 1975) Following 
issuance of these new rules, the agency's Administrator declared: 

Our overall experience is a positive one .... The 
practical experience of AID has been that it is 
possible to undertake detailed environmental analyses 
of U.S. supported projects abroad amd that the results 
obtained are useful to us, as well as host country 
pleumers, in making project decisions. AID'S 
experience, moreover, has demonstrated that, in 
practice, none of the four potential negative inpacts 
hypothetically associated with the conduct of 
environmental analyses . . . constitutes a significant 
problem for agency operations .... In summary, AID 
has no significant reservations eOsout the preparation 
of environmental analyses for programs conducted 
cQsroad. See Letter from John Gilligan, Administrator, 
AID to Charles warren. Chairman, CBQ, Dec. 9, 1977, 
reprinted in The Environmental Impact Statement Process 
under NEPA, III at iii 33 (1978) . 

Inasmuch as NEPA affords federal agencies sufficient flexibility 
to underteJce environmental reviews, Eximbank should seriously 
consider conducting its assessments under the umbrella of the 
statute. Moreover, even if it chooses not to do so, the Bank 
should closely review the CEQ guidelines. Indeed, as set out 
below in some detail, they go well beyond Eximbank' s current 
procedures : 

Categorical Exclusions : CEQ's procedures provide that 
federal agencies need not prepare environmental documents 



Department's conclusion shortly following enactment of NEPA that 
the Act does not apply to federal projects in foreign countries. 
In reaching that conclusion, the State Department invoked the 
"presun5)tion against extraterritorial application of United 
States law." Most recently, however, a unanimous panel of the 
Court of Appeals for the District of Columbia Circuit rejected an 
interpretation of NEPA based on the presuii^tion against 
extraterritorial application of United States law. See 
Environmental Defense Fund v. Massev . 986 F.2d 528 (D.C. Cir. 
1993) . 



45 



for a "category of actions which do not individually or 
cumulatively have a significant effect on the human 
environment." 40 C.F.R. § 1508. 4. Such "categorical 
exclusions" must be identified in an agency's regulations 
implementing NBPA and such regulations must provide for 
■extraordinary circumstances" in which a normally excluded 
action may have a significant effect recjuiring environmental 
analysis. In its procedures implementing the Executive 
Order, Eximbank does not include an "extraordinary 
circumstances" exception and it categorically excludes from 
environmental euialysis, among other things, any financing 
decision made under its Discount Loan amd Cooperative 
Financing Facility programs, and its Exporter Credit 
Insurance and Guarantee programs. 12 C.F.R. § 409.12(c) 

Major Federal Action ; Under CEQ's regulations, the term 
"major federal action" is defined to include "projects and 
programs entirely or partly financed . . . .by federal 
agencies; new or revised agency rules, regulations, plans, 
policies, or procedures; and legislative proposals." 40 
C.F.R. § 1508.18(a). On the other hand, Eximbank's 
procedures limit the term "actions" to those "involving 
Eximbauik financing under the direct lending program 
regarding a physical project." 12 C.F.R. S 409.4(a). At the 
same time, while the CEQ regulations do not delimit "major 
federal actions" through an analysis of the degree of 
federal involvement, Eximbank's procedures set out five 
factors for determining whether an action is a "major" one. 
12 C.F.R. § 409.8(b) Accordingly, Bximbarnk's procedures 
potentially very narrowly circumscribe the actions subject 
to environmental review. 

Significant Impact : Under NEPA, every federal agency must 
prepare an environmental impact statement ("EIS") for any 
action that may "significantly impact the quality of the 
human environment." 42 U.S.C. S 4332(2) (C). In fleshing out 
what constitutes a significant impact, the CEQ regulations 
do not delimit the term environment and they specify a 
number of factors that agencies must review in determining 
significant in^jact. 40 C.F.R. S 1508.27. Much more 
narrowly, and without spelling out such factors, Eximbamk's 
procedures provide that an environmental document will only 
be prepared for major actions with significant effects on 
the: (1) global commons; (2) "environment of a foreign 
nation not participating or otherwise involved in the 
action"; and (3) "natural or ecological resources of global 
importeuice designated for protection" under E.O 12114. 12 
C.F.R. § 409.8(c). (emphasis added) 

Determinations Not To Prepare an Environmental Document : The 
CEQ regulations provide that a federal agency must prepare 
an "environmental assessment" ("EA") where it is unclear 



46 



whether an action may have a significeuit intact on the 
environment. 40 C.F.R. S 1501.3 An KA is a "concise public 
document" that contains "sufficient evidence and euialysis 
for determining whether to prepare an EIS. 40 C.F.R. § 
1508.9(a). It must include a discussion of the need for the 
proposal, of alternatives to the proposed action, [and] the 
environmental impacts of the proposed action emd its 
alternatives." 40 C.F.R. § 1508.9(b). On the other hand, 
Eximbank's procedures call for a review of the proponent's 
application to determine whether a project would have a 
significant effect. 12 C.F.R. § 409.8(c) Such applications 
need only include a description of the project and its 
purpose and location. 12 C.F.R. § 409.6(a). However, 
applicamts may be requested to provide additional 
information about proposed alterations to the environment; 
emissions, effluents, or products resulting from the 
project; efforts that will be taken to mitigate degradation; 
and relevant technical information and laws or regulations 
in the project area. 12 C.F.R § 409.6(b). On the basis of 
whatever information is supplied in the application, the 
Engineer then makes a determination as to significant 
effects. If the Engineer concludes that the project will 
not have a significant impact, he need only include a "brief 
statement of supporting reasons in the Board Memorandum." 12 
C.F.R. § 409.8(c) . 

Contents of Environmental Documents for Actions with 
Significant Effects : Where a federal agency determines under 
NEPA that cui action may significantly affect the 
environment, it must undertake a comprehensive euialysis of 
impacts and alternatives to the proposed action in an EIS. 
In contrast, Eximbank's procedures provide that an 
environmental document need only "concisely review the 
anticipated significant environmental effects of the 
physical project." 12 C.F.R. § 409.10(a). Where 
"feasible, " such docximents will include a summary of the 
major findings and conclusions of any environmental review 
underteJcen in the foreign nation; a brief review of the 
existing environment that would be affected by the physical 
project; a statement as to the sicpnificant foreseeable 
environmental effects; a statement as to whether there are 
in effect any relevant environmental regulations or laws in 
the physical project area .... 12 C.F.R. § 409.10 
Consequently, Bximbauik's procedures do not require a level 
of euialysis consistent with NEPA of the in^jact of the 
project on the environment. 

Analysis of Alternatives : As stated in the CEQ regulations, 
the "heart of the environmental intact statement" is the 
section addressing alternatives to the proposed action. 40 
C.F.R. § 1502.14 In this section, agencies must "rigorously 
explore and objectively evaluate all reasonable 



47 



alternatives," including the alternative of no action and 
alternatives not within the jurisdiction of the lead agency. 
Agencies must then present the environmental in^acts of the 
proposal amd the alternatives in con^arative form, "thus 
sharply defining the issues and providing a clear basis for 
choice among options by the decisionmaker and the public." 
In contrast, Kximbeuik' s procedures governing preparation of 
"environmental documents" for major actions with a 
significant iiqpact on the environment do not call for any 
evaluation whatsoever of alternatives to the proposed 
action. 12 C.F.R. S 409.10. 

Notification of the Availability of Final Environmental 
Documents : The CEQ regulations require each agency to 
provide public notice of the availability of environmental 
documents "so as to inform those persons euid agencies who 
may be interested or affected." 40 C.F.R. S 1506.6(b) 
Environmental documents include KA's, FONSI's, BIS's, amd a 
Notice of Intent to prepare an BIS. 40 C.F.R. S 1508.10. 
In all cases, an agency must mail a notice to those who have 
requested it on an individual action. 40 C.F.R. S 
1506.6(b) (1) . In the case of an action with effects of 
national concern, notice must include publication in the 
Federal Register and notice by mail to "national 
organizations reasonably expected to be interested in the 
matter." 40 C.F.R. S 1506.6(b)(2). On the other hand, 
Eximbank's procedures provide only that, " [p] romptly upon 
completion of am environmental document, the Engineer will 
notify where feasible auid appropriate all Federal agencies 
with relevant expertise and any aiffected nation of the 
availaibility of such document. 12 C.F.R. S 409.11. 

Federal Agency Review ; The CEQ procedures require an agency, 
after preparing a draft BIS, to obtain the comments of amy 
other agency which has jurisdiction by law or special 
expertise with respect to any environmental iii5>act involved 
in the proposed action. 40 C.F.R. § 1503.1. In addition, 
under Section 309 of the Clean Air Act, the Environmental 
Protection Agency ("EPA") is directed to review amd comment 
publicly on the environmental inpacts of federal activities, 
including actions for which BiSs are prepared. 42 U.S. C. S 
7609. If, after this review and the agency's response to 
it, BPA determines that the matter is "unsatisfactory from 
the standpoint of pxiblic health or welfare or environmental 
quality, " BPA may refer the matter to the CEQ for evaluation 
amd recommendation for appropriate action. 40 C.F.R. Part 
1504. In contrast, Eximbank's procedures do not involve 
other relevamt agencies in the preparation of environmental 
doc\unents and Exirobank need only advise other federal 
agencies, where "feasible and appropriate," of the 
availability of final docviments. 



48 



Judicial Review ; It is well established that interested 
members of the piiblic have a right to seek judicial review 
of agency actions under NEPA and the Administrative 
Procedure Act. Indeed, the CEQ regulations themselves 
provide that "the President, the federal agencies, and the 
courts share responsibility for enforcing the Act." 
(en^hasis added) 40 C.F.R. S 1500.1. In contrast, 
Eximbank's procedures state that Section 3-1 of the 
Executive Order "the provides that it is solely for the 
purpose of establishing internal procedures for Federal 
agencies to consider the significant effects of their 
actions on the environment outside the United States, it 
territories and possessions. Nothing in these procedures 
shall be construed to create a cause of action." 12 C.F.R. 
S 409.14. 

Of course, beyond existing domestic legislation, it will be 
extremely in^ortant for Eximbamk to shape its guidelines based on 
its review of environmental review procedures now established by 
most international financial institutions, including the World 
Bank, International Finance Corporation, InterAmerican 
Development Beuik, Asian Development Bank, and African Development 
Bank. At the same time, Bximbemk would be well -served in 
evaluating the environmental procedures ouid policies of certain 
commercial banks, including the Bank of America, National 
Westminster Bank, cuid the Royal Bank of Canada. These bcuiks, and 
others, have incorporated environmental considerations into their 
lending practices. Using such initiatives as starting points, 
Eximbank will be in a good position to strengthen its assessment 
procedures and ensure that it makes environmentally responsible 
decisions. 

III. BOOSTING EXPORTS OF U.S. ENVIRONMENTAL PRODUCTS AND SERVICES 

Ultimately, while stronger assessment procedures will lead 
to better environmental decisionmaking by the Bouik, they will 
also create larger opportunities for exporters of U.S. 
environmental goods euid services. On this latter point, the 
Export Enhancement Act did "encourage" the Bemk to use "its 
programs to support the export of goods auid services that have 
beneficial effects on the environment or mitigate potential 
adverse environmental effects." At the same time, the 
legislation directed Eximbamk to appoint em official to determine 
ways that the Bomk's programs can be used to support the export 
of such goods and services. The officer was also directed to act 
as a liaison between the Bank euid other federal agencies, 
including those agencies whose representatives are members of the 
Environmental Trade Promotion Working Group of the Trade 
Promotion Coordinating Committee. 

Although these are useful and necessary steps, they 
nonetheless fall short of actively creating demand for 



49 



environmental products and services. Inevitably, that demand 
will be driven by the need for foreign entities to coitply with 
more stringent environmental standards. The Bximbank can 
influence such standards in several significant ways. First, by 
sin?)ly increasing the number of projects for which it prepares 
assessments, the Bamk could create demand for U.S. environmental 
technology. Indeed, it is clear that the increased scrutiny an 
assessment attaches to a project has led, in most cases, to the 
U.S. exporter auid/or the foreign purchaser agreeing to design the 
project (i.e., incorporate certain environmental technology) so 
that it would comply with relevant regulations and stauidards 
established by the Environmental Protection Agency.* 

Second, because environmental assessment is essentially a 
procedural safeguard, adoption of substeuitive standards by the 
Bank to govern its lending decisions will also enhance exports of 
environmental technology. On this point, the Export Enhancement 
Act declares: 

The [assessment] procedures estedslished under paragraph 1 
shall permit the Board of Directors, in its judgment, to 
withhold financing from a project for environmental reasons 
or to approve financing after considering the potential 
environmental effects of a project. 

Yet, in contrast to that discretionary mandate, the Foreign 
Assistance Act directs OPIC to "utiliz [e] broad criteria, in 
undertake [ing] ... to refuse to insure, reinsure, guarantee, or 
finouice amy investment in connection with a project which the 
Corporation determines will pose an unreasonable or major 
environmental, health, or safety hazard, or will result in the 
significant degradation of national parks or similar protected 
areas. 22 U.S.C. S 2191 (n) At the same time, OPIC must 
"especially ensure" that the project seeking assistauice is 
consistent with provisions of the Foreign Assistance Act 
"relating to the environment and natural resources of, emd 
tropical forests and endemgered species in, developing countries 
. . . ." 22 U.S.C. S 2191(3) Although I have not evaluated 



* This occurred when the Bamk prepared assessments for a 
polyvinyl chloride plant in Colombia (Dec. 29, 1980) (vinyl 
chloride); chlorine -caustic soda plant in Israel (Nov. 24, 1980) 
(mercury) ; a polyvinyl chloride manufacturing complex in 
Indonesia (June 16, 1983) (vinyl chloride); linear alkylbenzene 
processing conplex in Algeria (Feb. 23, 1988) (benzene); 
polyvinyl chloride manufacturing facility in China (Sept. 22, 
1988) (vinyl chloride); the Barrancas Water Reservoir in 
Venezuela (April 6, 1990) (lead and chromium) ; ethylbenzene 
manufacturing plant in China (Sept. 15, 1992) (benzene); and a 
polyvinyl chloride plant in Colombia (April 27, 1993) (vinyl 
chloride) . 

10 



50 



OPIC's lending practices in great detail, in^osition of similar 
substamtive standards on the Eximbank should enhance exports of 
environmental technologies . 

Fortunately, Eximbank has recognized that it will need to 
esteiblish substcuitive environmental stemdards governing lending 
decisions. So as not to place U.S. exporters at a con^etitive 
disadvantage, the Bank has indicated that it would like to pursue 
adoption of uniform procedural guidelines and stouidards among the 
export credit countries in the context of the Organization for 
Economic Cooperation and Development ("0EC3D") . Clearly, this 
initiative, if successful, would create an even larger market for 
U.S. environmental goods and services emd will result in better 
environmental decisionmaking by all export credit agencies. 
Accordingly, I would strongly support such efforts, although I 
would encourage the Bank to take the lead in the interim by 
estedslishing stronger assessment procedures auid standards for its 
own lending decisions. 

That completes my testimony. I would be happy to suiswer any 
questions that you may have. 



11 



51 




February 23, 1994 

STATEHEHT OF JAMBS N. BARNES 

on behalf oC 

FRIENDS OF THE EARTH 

before the 

SOBCOWKTTBE ON INTERNATIONAL DEVELOPMENT, FINANCE, TRADE 
and MONETARY POLICY 

of the 

HOOSB COMHITTBB ON BANKING, FINANCE and URBAN AFFAIRS 

I. Introduction and Suoaary 1 

II. Overview of the Export- Import Bank's Portfolio 3 

III. Proposed Changes in the Bcport-Iniport Bank's Mandate 4 

IV. Nuclear Power in Central and Eastern Europe (CEB) € 

V. The Teaelin Case.... 8 

A. National Security Council Review 9 

B. The Teaelin Reactor 10 

C. Liability 12 

D. Mo Comprehensive Bnvironiiental Impact Assessnent 12 

B. Involvement of the World Bank, BIB and EBRD. ........... .13 

F. Conclusion 15 



52 



I rii;nds 



^■>^'> 



February 23, 1994 

STATEMENT OF JAMES N. BARNES 

on behalf of 

FRIENDS OF THE EARTH 

before the 

SUBCOMMITTEE ON INTERNATIONAL DEVELOPMENT, FINANCE, TRADE 
and MONETARY POLICY 

of the 

HODSE COMMITTEE ON BANKING, FINANCE and URBAN AFFAIRS 



I. Introduction and Summary 

I am James N. Barnes, Director of the International Department 
at Friends of the Earth. Friends of the Earth has 52 affiliates 
around the world, all part of FoEI family, including a member group 
in the Czech Republic, location of the Teroelin nuclear reactor. 

Friends of the Earth is pleased to have the opportunity to 
testify today about the U.S. Export-Import Bank, an institution that 
ought to be playing an important role in protecting the environment, 
promoting sustainable development, and helping sell the best U.S. 
technology available. We appreciate the Subcommittee's interest in 
this subject. 

The U.S. Export-Import Bank, under its new President Ken Brody, 
has begun to reach out to the environmental community in this 
direction. Based on the meetings that have been held in recent 
months between senior Exim Bank officials and representatives of 
Friends of the Earth and other environmental organizations, we 
believe the time is ripe for Congress and the Administration to 
jointly forge a new course for the Bank. At the same time, given 
the existence of other export agencies similar to the ExIm Bank in 
other donor countries, a concerted diplomatic effort is required to 
move those institutions along a similar path. 

A review of the ExIm Bank's existing portfolio reveals that 
some loans ought not to have been made if environmental protection 



53 



and sustainable development were among the guiding criteria used to 
evaluate potential investments. At present it does not follow a 
rigorous policy of evaluating proposed loans and guarantees for 
their environmental impacts. If it did have such a practice, we 
believe that the problem loans would not have been made. 

Many loans and guarantees in the portfolio are at best neutral 
in terms of their environmental implications. There are very few 
really "good" loans in the portfolio. The Exim Bank does not have 
affirmative policies on global environmental issues that are dealt 
with in the Montreal Protocol on Ozone Depletion, the Climate Change 
Convention, the Biodiversity Convention, or other aspects of what 
emerged at the Rio Earth Summit in Agenda 21. Thus, it is no 
surprise that its loans, guarantees and other economic activities 
are not oriented toward the furthering of the goals and obligations 
of those important international instruments. 

The Export- Import Bank could play a major role in leading 
international finance away from the funding of typical development 
schemes and in the direction of resolving some of the serious 
natural resource problems confronting the world. The ExIm Bank 
needs to adopt a broad goal in its overall lending so that it has a 
rationale for choosing among competing loans. The Exiro Bank is 
missing tremendous opportunities for helping create jobs in these 
areas, for example by focusing on the needs of other countries in 
phasing out ozone depleting substances, which require the building 
of new factories and use of new equipment where the U.S. is a 
leader . 

By adopting a broad vision of helping to build sustainable 
economies worldwide, the Bank could then formulate more specific 
goals in particular areas. For example, we would hope that the Bank 
would agree that one of its most crucial roles is to assist 
developing nations in using energy more efficiently, and that this 
could be done by supporting exports of the best U.S. technology and 
know-how available. 

For fiscal year 1995 we would like to see the beginning of a 
fundamental shift in the U.S. Export-Import Bank's programs, be they 
in the form of direct loans, guarantees or insurance. As mentioned 
above, given the competitive nature of the various export agencies 
with which the ExIro Bank is "competing" it will be essential for the 
Administration to launch an initiative to "green" those agencies, 
using the G7 Economic Summit as an initial opportunity. We look 
forward to working closely with the Administration, officials at the 
ExIm Bank and Congress to achieve these objectives. 

We believe that it also is important for the ExIm Bank and its 
sister export agencies to develop a common approach to reviewing the 
environmental implications of proposed projects. Now that the World 
Bank and the regional Multilateral Development Banks have 
implemented environmental assessment procedures, and OPIC has agreed 
to meet World Bank requirements, there is no reason for the ExIm 



54 



Bank to lag behind. Indeed, we believe that Exiiii should be fully 
subject to the requirements of NEPA, and that the specific 
procedures developed for compliance can be a model for other 
countries to follow. 

This testimony also addresses the Export-Import Bank's proposal 
to provide a guarantee for a Westinghouse contract for the Temelin 
nuclear reactor in the Czech Republic. The guarantee would be for 
at least $317 million for loans to the Czech Power Company by 
Citibank, in support of Westinghouse supplying control systems and 
fuel rod assemblies. Friends of the Earth submits that this is a 
badly flawed decision by the Exim Bank. Advisors to the Special 
Delegation from Austria have prepared a detailed Technical 
Memorandum Regarding The Temelin Nuclear Power Plant, which outlines 
the case against Temelin in detail. I am asking that this Technical 
Memorandum be included in the record of today's hearing, as an 
appendix to my testimony. I urge every Member to read the Technical 
Memorandum. 

Friends of the Earth is asking Congress to take a series of 
steps that will lead to a reversal of the ExIm Bank decision to be 
involved with Temelin. We are calling on Congress to do so before 
March 3, which is the deadline prescribed by the statute giving 
Congress oversight regarding the Temelin case. Although a vote by 
the Banking Committee may not, in strict legal terms, compel the 
ExIm Bank to reverse its decision, a clear statement by Congress 
about this project will have a significant political impact. 
Ultimately, Congress could take steps to block the project by using 
the power of the purse. We hope that such a step does not become 
necessary. We are confident that after reading the Technical 
Memorandum and considering all of the facts. Congress and the 
Administration will agree that this is not the sort of project the 
U.S. should be involved with. 

We also ask Congress to be vigilant about the possibility of 
any U.S. agency, including especially the Export-Import Bank and the 
Army Corps of Engineers, being involved with financing or technical 
assistance regarding the proposed Three Gorges Dam project in China. 
This mega-project would displace more than one million people and 
cause huge environmental impacts. Our understanding is that the 
Bureau of Reclamation is in the process of establishing a firm 
policy against any such involvement, but that thus far neither the 
ExIm Bank nor the Corps are in the process taking similar steps. 

II. Overview of the Export-Import Bank's Portfolio 

According to its 1993 Annual Report, in FY93 the Exiro Bank lent 
$1,721 billion for 73 projects and provided guarantees amounting to 
$9,084 billion for 441 projects. The list of projects includes 
numerous manufacturing facilities in basic industries, many aircraft 
deals, and lots of investments in mining, oil drilling and energy 
generation . 



55 



The Bank approved funding for 22 energy sector projects in 
FY93, six loans totaling $744 million and 16 guarantees totaling 
5691 million. Not a single loan or guarantee had as its primary 
purpose the support of end-use efficiency improvements among 
electricity consumers. Many Exim projects in recent years have 
involved large-scale energy investments. in FY93 the Bank lent S378 
million for two petroleum refining projects and provided 5447 
million in loans for five others. It lent $121 million for five oil 
and gas extraction projects and provided $775 million for 26 other 
similar projects. 

Although the ExIm Bank claims on page 11 of its Annual Report 
that it supported $424 million in environmentally beneficial exports 
in 1993, that list includes a controversial geotherroal plant in the 
Philippines that has been strongly opposed by the local community 
for many years, and a large hydro dam in Mexico that was opposed by 
many environmental groups. Even the World Bank refused to lend to 
the Philippine project because of the intense opposition of local 
indigenous people. In general, ExIm has been counting large hydro 
projects as environmentally beneficial, a proposition with which we 
and many NGOs would strongly disagree. Last year, as the U.S. 
Executive Director to the World Bank was voting against the Yacyreta 
Dam in Argentina, the ExIm Bank was providing a loan for the 
hydroelectric turbines for that dam. Thus, the ExIro Bank acted in 
disregard of the concerns being expressed by the U.S. Treasury 
Department about that project. ExIm approved funding for the 
Hopewell coal-fired thermal generating plant in the Philippines at 
the same time as the U.S. Executive Director to the World Bank 
abstained from voting, citing environmental reasons. These types of 
cases clearly demonstrate the need for strong environmental 
guidelines, environmental assessment requirements, and a fresh 
approach . 

In funding these types of projects, the Bank is missing the 
opportunity to help developing nations meet their power needs in the 
roost cost-effective and environmentally sound way possible: by 
funding projects designed to improve energy efficiency. 

III. Proposed Changes in the Export-Import Bank's Mandate 

Friends of the Earth is putting forward a number of specific 
proposals for what the Congress should require the ExIro Bank to do. 
A similar list of proposals should be promoted by the Administration 
at high levels, with the goal of having them adopted by the other 
export agencies. In our view, this important initiative should 
begin immediately and should be incorporated into the 
Administration's goals for this year's G7 Economic Summit. Our 
proposals are that the ExIm Bank should be required to: 

(1) promote environmental restoration and pollution 
prevention lending as a priority; 



56 



(2) implement its existing mandate to promote lending for 
energy conservation, solar, energy efficiency, 
renewable energy, demand-side management and Integrated 
Resource Planning, and other least-cost approaches; 

(3) explicitly adopt a policy against loans for nuclear, 
large-scale hydro, and coal power projects; 

(4) pursue special outreach initiatives so that smaller 
companies with expertise in solar and efficiency can 
get a fair and growing share of the Agency's funds; 

(5) focus on investments in basic societal infrastructure 
such as schools, health clinics, clean water, sewerage, 
justice systems, libraries and mass transit, which will 
better help people and societies with the tools 
allowing them to live productive and decent lives; 

(6) promote sustainable agricultural technologies, 
including Integrated Pest Management; 

(7) adopt basic environmental procedures requiring 
environmental assessments, public participation and 
openness, and consideration of a range of options; 

(8) act as a catalyst or a leader among the export-import 
agencies of developed nations to produce significant, 
changes in the loan portfolios; 

(9) publicize the fact that the Bank is eagerly seeking 
applications in these areas and conduct seminars for 
interested parties; 

In short. Congress should instruct the Export-Import Bank to 
pursue many more opportunities to promote U.S. involvement in 
projects overseas that have the characteristics outlined above. 

Improving energy efficiency is now widely accepted as the 
cheapest way to meet increasing demand for electricity. Pacific Gas 
and Electric, the largest private utility company in the U.S., plans 
to meet 75 percent of the increased demand it will face in the next 
decade by increasing its customers' energy efficiency. Many 
developing nations have the potential for energy efficiency gains 
even greater than the U.S. because much of their technology base is 
significantly outdated and inefficient. Efficiency improvements not 
only provide the least cost means for developing countries to meet 
their growing energy needs, they also strengthen the industrial 
sector in the developing world by making its industries more 
productive and competitive in global markets. Energy efficiency is 
a strong growth market both domestically and internationally. 
Investments in energy efficiency and conservation create many more 
jobs than investments in conventional energy projects. 



67 



Improving energy efficiency is also the key method of meeting 
expanding electricity demand that has a positive impact on the 
environment. Improved efficiency allows an economy to produce more 
goods that people need without requiring additional generating 
capacity. This conserves limited non-renewable energy resources for 
the future and avoids impacts associated with thermal, 
hydroelectric, and nuclear power generation. In short, increased 
efficiency not only leads to a healthier economy, but a healthier 
environment as well. 

Since many developing nations already have crushing foreign 
debt burdens, it is critical that they meet their energy needs in 
the least costly way possible. Increasing efficiency not only 
provides this least cost solution, it also increases local 
industrial competitiveness while protecting the overtaxed natural 
resources of the developing world. 

Congress should take note of the existence of the Business 
Council for a Sustainable Energy Future, which is positioning itself 
to assist in promoting exports of their members' technologies and 
services. It is working closely with the Committee on Renewable 
Energy, Commerce and Trade (CORECT) , an interagency government 
working group that promotes exports of U.S. renewable energy 
technologies. Although CORECT has existed since 1984, it has not 
been notably effective. However, with the Administration's 
National Export Strategy for Environmental Technologies having been 
announced last year, there appears to be a focus now in seriously 
and consistently promoting clean and efficient energy technologies, 
pollution prevention and other positive things. 

We urge that the Exim Bank be assisted by Congress and the 
Administration in changing its priorities. We greatly appreciate 
the willingness of President Brody and his staff to consider new 
options. Through the internal Task Force on environment, the Bank 
has been exploring how its environmental policies and procedures can 
be strengthened. We note with approval the statement in the Annual 
Report that "Our goals are to take into account the environmental 
consequences of Bank-financed transactions and to promote increased 
exports of environmentally beneficial U.S. products and services. 

IV. Nuclear Power in Central and Eastern Europe (CEE) 

One of the roost pressing environmental issues in Central and 
Eastern Europe is the fate of the Soviet-built nuclear power 
reactors that could well produce another Chernobyl-type disaster. 
Indeed 15 Chernobyl-design reactors are still operating in the 
region, and all of the old Soviet-designed facilities suffer from 
serious flaws. In our view, U.S. and multilateral policy towards 
these ecological time-bombs has been notably complacent. 

Friends of the Garth-England completed an analysis of Western 



58 



aid to the nuclear power sector in CEE as of 15 November, 1992. The 
report reveals that: 

(1) The total sum of money provided by Western 
governments to the CEE nuclear sector is tiny compared 
to the mul t i -bi 1 1 i on dollar needs to close down and 
decommission the region's chronically unsafe reactors, 
including as an initial priority the 15 of Chernobyl 
design ; 

(2) Twice as much of the money that has been committed by 
the West has been for expanding nuclear power 
generation as is going towards improving reactor 
safety; 

(3) The U.S. contribution exemplifies this imbalance. 
While a paltry $15 million was going into reactor 
safety through AID in 1992, the NRC, the DoE, and the 
Export-Import Bank decided to get involved in a large 
guarantee package for Westinghouse to complete a 
partially constructed reactor at Temelin in the Czech 
Republic. Although this is being justified as a 
"nuclear safety" upgrade, the bottom line is that it 
will allow expanded nuclear power generation. 

For last year's G7 Economic Summit, Friends of the Earth-U.S. 
published "Russian Roulette: Nuclear Power Reactors in Eastern 
Europe and the Former Soviet Union" (July 1993) , a report 
demonstrating that closing Soviet-built nuclear power plants 
throughout CEE is ecologically imperative and economically sensible, 
given that energy efficiency measures and safer gas-fired power 
stations could comfortably cover the region's energy needs. CEE 
countries are between one half and one fifth as efficient in their 
use of energy as the countries of the West. World Bank analysis 
indicates large efficiency improvements coming with the introduction 
of market economics. Over time, the region should need less, not 
more, electricity generating capacity. A copy of "Russian Roulette" 
is being submitted as an exhibit to this testimony, and we ask that 
it be made part of the Record of this Hearing. 

U.S. support for the completion of reactors in this region, or 
indeed anywhere in the world, opens up very serious questions of 
liability should a plant explode. It should be kept in mind that 
the Chernobyl disaster's economic costs have been of a magnitude 
comparable to the U.S. Savings and Loan bailouts. 

This situation points to three important policy changes that we 
are asking Congress to consider: 

(1) It should be a policy of the U.S. Government not to 
provide assistance for expansion of nuclear power in 
Central and Eastern Europe through either bilateral 
bodies such as the Exim Bank or multilateral 



59 



institutions such as the EBRD. 

(2) The U.S. needs an aggressive national policy to close 
these reactors. in case of another major accident, not 
only will the human and environmental costs be 
devastating but the economic losses could well upset 
one or more nations' whole economic recovery plans. 
The State Department, AID, DoE, EPA and other relevant 
Agencies should bring forward a plan to close down and 
decommission the dangerous reactors in Central and 
Eastern Europe. At the same time through both 
bilateral and multilateral assistance the U.S. should 
be promoting efforts to improve the region's energy 
efficiency, which would not only allow for the shutdown 
of the nuclear plants, but would also cut other energy- 
sector related pollution. 

(3) The Exlm Bank should prepare and/or require 
Environmental Impact Statements in accordance with the 
National Environmental Policy Act (NEPA) for the 
projects it funds, when those projects involve 
significant environmental risks. Otherwise, there is 
no way to know the true environmental and social costs 
and benefits of a proposed project. 

V. The Temelin Case 

Turning specifically to the Temelin case. Friends of the 
Earth is calling on Congress to review the record carefully and to 
take steps in the Banking Committee, in the Senate Banking Committee 
and if need be through an act of Congress, to reject the EKim 
decision. We recognize that the statute's language is ambiguous 
about the legal impact of any particular vote by the Committees. 
But at the same time. Congress holds the power of the purse and has 
ultimate oversight authority over the Exlm Bank. The statements, 
resolutions and votes of Congress concerning the Temelin project 
will be listened to very carefully by the Administration and the 
EKim Bank. Ultimately, there is no doubt that Congress could vote 
to stop U.S. involvement with this project. 

Submitted as an appendix to this testimony is a detailed 
dossier compiled by the advisors to the delegation from Austria that 
is now visiting the U.S. to discuss Temelin with officials. Friends 
of the Earth aCfiliates in the U.S., Austria and the Crech Republic, 
along with many other organizations such as Greenpeace and the 
Natural Resources Defense Council, fully endorse this Technical 
Memorandum. It clearly catalogues in full detail the many 
outrageous aspects ot this proposed project. We urge Congress to 
carefully consider this dossier. After doing so, we feel certain 
that Congress will agree that it Is simply unconscionable for the 
O.S. to be involved with Teaelin. 



60 



We urge Congress to meet with the delegation from Austria that 
is here in Washington, and to listen carefully to their legitimate 
concerns. The Temelin reactor is about 40 miles from the Austrian 
border. Their concerns are fully legitimate. 

Based on the materials and a review of the record that is 
available to Friends of the Earth, we submit that providing a 
guarantee for this loan is against the interests of both the Czech 
people and the people of the U.S. The U.S. Exim Bank should not be 
allowed to guarantee the Citibank loan to West inghouse . There are 
other, much better ways for the Clinton Administration to assist the 
Czech Republic move forward on energy, which are articulated in the 
alternatives section of our report "Russian Roulette: Nuclear Power 
Reactors in Eastern Europe and the Former Soviet Union" (July 1993) , 
as well as in various World Bank and EBRD reports. 

A. National Security Council Review 

At the outset, I would like to express our very serious 
disappointment at learning only a few weeks ago that the U.S. 
National Security Council undertook a Government-wide review of the 
Temelin proposal last year without any consultation with public 
interest organizations here. In spite of the fact that Friends of 
the Earth and many other organizations were publicly raising serious 
questions about the project, and about the question of these 
dangerous Soviet-designed nuclear reactors in general, we were not 
even informed about the NSC review, much less given an opportunity 
to comment. We obtained a copy of the NSC review not from the 
Administration but from Congress. This is not the sort of 
democratic approach that one would hope for from this 
Administration. We ask Congress to make it clear to the NSC that if 
in the future such a case were to be considered, it should not be 
carried out in secret. 

The NSC Review ignores many important facts, and is seemingly 
fixated on justifying the ExIm guarantee for Westinghouse. There 
are reports that other similar projects are also under review by 
DoE, the State Department and NSC, and we ask that Congress require 
such reviews to be conducted on the basis of full public information 
and involvement. There is simply no basis for this secrecy, 
particularly when we are requiring the MDBs to be transparent 
regarding their projects. 

The NSC did not require ExIm to request that an environmental 
impact assessment or its functional equivalent be done, with an 
opportunity for public comment in the Czech Republic and the U.S. 
For a financing package of this magnitude, involving something as 
sensitive as a nuclear power plant, there can be no doubt that ExIm 
should require a through, integrated impact assessment that includes 
a full analysis of alternatives. 



m 



We believe that the Memorandum from the National Security 
Council to the Exim Bank dated September 29, 1993, which includes a 
ten-page Technical Analysis on safety and environmental issues, is 
badly flawed and indeed misleading. The Technical Memorandum 
prepared by the advisors to the Austrian delegation provides 
accurate information about many issues that were ignored or avoided 
in the NSC materials. 

B. The Temelin Reactor 

The ExIm loan guarantee would cover Westinghouse controls and 
fuel rod assemblies for the plant, a VVER 1000/320 design, which is 
a flawed Soviet shell. Despite what the NSC paper says, this is a 
dangerous hybrid combination of technology that has never been tried 
before. The Soviet WER 1000/320 model contains a number of serious 
design flaws that will not be corrected by west inghouse' s proposed 
modifications to the safety systems. The IAEA released a report in 
April 1993 that identified 16 areas where the VVER 1000/320 design 
standards and codes are deficient as compared to U.S. and IAEA 
standards. .They include: 

(1) Because of the design, there is a likelihood of 
accelerated erobr i tt leroent of the containment vessel 
walls. This means higher maintenance costs, shorter 
expected operating life {and thus poorer economics) and 
also a greater risk of an accident. The containment is 
more vulnerable in an emergency than Western-designed 
containment vessels, despite the soothing assurances in 
the NSC report. 

(2) Temelin is using components of known faulty design. The 
steam generators are of the same design as the VVER- 
1000 's in the CIS and CEE, even if they are machined 
in the Czech Republic. In those plants, 36 of 64 have 
prematurely failed. 

(3) The software planned for Temelin was recently tested by 
Rolls Royce for the British Nuclear inspectorate and it 
failed in 52 percent of the 50,000 tests. This does 
not raise confidence that this safety software will 
operate the plant flawlessly, as is necessary for 
nuclear plant. 

(4) A fundamental construction defect in the design of the 
reactor core causes the reactor, like the RBMK, to 
exhibit positive temperature feedback and xenon flux 
flucturation at certain operating levels. (See 
Permanent Monitoring Group on Plant Safety: Control 
Report No. 13, November 1988.) So far as we know, this 
has not been addressed by the IAEA. 

(5) The plant layout results in fire hazards (same cite as 

10 



62 



above), and even the NSC report notes that this is 
"significantly deficient by western standards" (P. 6) . 
Note that there have been several fires at the Czech 
Dukovany nuclear plant during the past year. 

The Temelin plant could not be built and licensed in the 
U.S., an issue avoided by the NSC. It does not and will not meet 
U.S. safety standards in numerous areas, including containment and 
fire safety, and couldn't be licensed here. Although one hears that 
the IAEA has approved the proposal, we are unaware of any formal 
proceeding on the subject or a vote of any sort, and in any event it 
must be kept in mind that the IAEA is in favor of nuclear power. In 
any event, it is clear that the IAEA has never, as an official body 
or an official matter, said that the WER-1000 can be upgraded to 
Western safety standars. 

In Germany, continued construction of a WER1000 reactor in the 
former East Germany was halted by the Government after no contractor 
was willing to undertake the risk of completing the plants. It is 
reliably reported that Germany will not guarantee loans for Sieman's 
competing proposal for the Temelin plant. Germany canceled all 
plants to build VVER 1000 plants after concluding they could not be 
upgraded to appropriate safety standards. 

Contrary to the glib statements in the NSC report, the CEZ has 
a poor history of operating plants in terms of safety and 
environmental problems. For example, its Dukovany NPP has repeatedly 
released unexpected and dangerous levels of radiation into a 
neighboring river. On February 3 this year, a serious fire broke 
out at the plant. In the period 1987-1992, there were 47 emergency 
shutdowns. 

Temelin will produce pollution even during "safe" operation. 
CEZ plans to release waste water contaminated with tritium 
continuously into the Vltava River, which provides 60 percent of 
Prague's drinking water. Also, the heat releases from Teroelin's 
cooling towers would contribute to inversions and smog in the 
winter, and heavy precipitation in the summer. 

The power to be produced is not needed for Czech industry in 
the near future. The World Bank studies and others show that the 
Czech economy will not require additional generating capacity for 
the foreseeable future, well into the next century, because of the 
restructuring of the economy -- particularly if investments in 
energy efficiency and conservation are pursued. On overall cost 
grounds, the plant will end up being devoted substantially to export 
of electricity to countries which have all halted their own 
nuclear programs (Austria, Italy, Switzerland). Already more than 
15% of the output has been contracted for export, and we understand 
that aggressive marketing efforts are planned to export much of the 
power. 



11 



63 



We believe that there is a high likelihood of cost overruns. 
Westinghouse has a history of nuclear cost overruns both in the US 
and abroad. Westinghouse built 52 NPPs in the US, which on average 
were 420 percent over the signed contract price and five years late. 
Currently, there are no orders for nor any construction of 
Westinghouse NPPs in the US. 

The Czech Republic has no solution for the problem of longer 
term high-level radioactive waste, and does not even have a 
currently operating off-site short-term facility for handling any 
type of waste. Previously, waste was shipped to Slovakia or Russia, 
but this is no longer feasible. 

C. Liability 

There remains a significant concern about potential lender 
liability. Although the Czech Republic has recently signed the 
Vienna and Paris Conventions on Third Party Liability for Nuclear 
Damage, that covers only transboundary liability. 

In the event of an accident, the Czech government or individual 
Czech people could sue those responsible for the construction of the 
plant, which could include the US Exim Bank. Likewise, if citizens 
of Austria were injured, they could sue in the U.S. 

Note that billions of dollars of potential claims have recently 
been deposited against Westinghouse by Austrian citizens and local 
municipalities against that risk, including the City of Vienna. At 
least 100,000 Austrians are involved in this novel protest, which 
could lead to Westinghouse shareholders raising questions about the 
project, and to Westinghouse having to set aside reserves for the 
contingent liability. GLOBAL2000, an Austrian NGO, has presented to 
U.S. Embassy officials a copy of the Advance Damage Claim Form 
against Westinghouse. The campaign was initiated originally because 
the Czech Republic had not signed the international nuclear 
conventions that determine responsibility in the event of an 
accident . 

Westinghouse continues to assert that it would take no 
responsibility for the safety of the plant, even though it is 
building the safety systems. 

D. HO Comprehensive Environmental Impact Assessment 

Although there are references in various materials to some sort 
of environmental impact analysis having been done, if it exists it 
certainly has not been made public or subjected to public comment 
and scrutiny in the Czech Republic or elsewhere. Clearly no EIS 
that comports either with current U.S. or Czech standards has been 
done either for the original plant design or for the upgrade. Even 
the NSC Review admits this. This is the subject of Representative 

12 



64 



Frank's letter to Ken Brody dated November 8, 1993, with which we 
fully concur, and also has been referred to by Senator Leahy is his 
correspondence with the Exim Bank. 

The Exim Bank has submitted a 12-page Environmental Evaluation 
to Congress, dated January 26, 1994. The Technical Memorandum 
prepared by the advisors to the Austrian delegation addresses the 
many inadequacies of that Environmental Evaluation. 

Temelin continues to be strongly opposed locally; 58 of 65 
towns and villages in the area (many filled with Temelin workers) 
have asked the government not to build the plant. There has been 
no public participation in the decision-making process, no vote in 
parliament, no public hearings, and as noted above, no public EIA 
process. Several thousand Czechs nationwide have signed a petition 
demanding an EIA for Temelin. It is therefore ironic for the NSC to 
have cited the fact that a democratically elected Czech Government 
wants to pursue the project, when democratic procedures have not 
been followed. 

The Czech Free Democrats, led by former Foreign Minister Jiri 
Dienstbier, have raised their voices against completion of Temelin. 

In Austria, all five parliamentary parties are strongly opposed 
to Temelin. 

Some people say that since the Czech Republic now has a 
democratically elected government, whatever it wants should be 
dispositive. In this case, however, we have a fledgling democracy 
that is in a transition phase, and many democratic procedures have 
not been set up or implemented. The old energy bureaucracy remains 
largely ensconced, and is still wedded to the old approaches. This 
project was "inherited" by the new government, which has candidly 
stated that it would not have initiated it. Under these 
circumstances, and given the very serious technical and safety 
problems revealed by the Technical Memorandum, Congress should not 
be uncomfortable with deciding to state its opposition to U.S. 
taxpayers being asked to support the project. There are plenty of 
good things the taxpayers will wholeheartedly support. 

If the Bxln Bank had followed proper enviFonnental assessment 
procedures in this case, with a full opportunity for public coooent 
on the project, on its risks to the environaent and human health, 
and on the alternatives, we strongly doubt that we all would be in 
this position today. 

E. Involvement of the World Bank, EIB and EBRD 

It is worth noting that the World Bank, European investment 
Bank and EBRD all were asked to consider lending for this project 
and all refused. While these decisions may not all have been 
"formal" rejections, there is no doubt that they have refused to 

13 



65 



fund the project. We understand that the Czech Government's own 
records admit these rejections. The World Bank and EBRD both 
provided detailed reports to the Czech Government about other 
"least-cost" options that would be better economically and 
environmental ly . 



We strongly encourage Congress to review those alternatives; 

(1) The best investment in the energy sector in the Czech 
Republic (and the rest of Central and Eastern Europe) 
is in energy efficiency technologies. The Czech 
Republic consumes twice the energy per unit output as 
the OECD countries. Energy conservation costs (per 
watt saved) are approximately one tenth the per watt 
costs of building new capacity. We have provided some 
detailed illustrative figures in "Russian Roulette" -- 
particularly the chapters on alternatives. 

(2) The World Bank estimates that simple energy 
conservation measures can reduce Czech domestic 
electricity demand by 20 to 30%. SEVEn (an independent 
Czech energy efficiency think tank, funded by Batelle 
and the US EPA) has evaluated the energy savings 
associated with 4 sectors of the Czech Republic 
(switching to fluorescent lighting, improving 
industrial electrical motors, improvements to the 
technology used for melting metals and household 
appliances) . These changes in total could reduce 
electricity consumption by 52% of the total national 
installed capacity of 12,000 MW. This SEVEn program 
savings represents 3.4 times the total installed 
capacity of the Temelin plant (2,000 MW) . 

(3) Additionally, there are numerous small scale, 
decentralized energy generating capacities available in 
the region. From co-generation on the conventional 
side (approximately 2000 MW available at current 
heating plants), to small scale hydroelectric on the 
renewables side. Before WWII, 400 MW of micro-hydro 
capacity existed. Although this was abandoned by the 
communists, the rivers are still flowing and new 
technologies could double this capacity to 800 MW - 
almost half the installed capacity of Temelin. All of 
these substitute methods are safer, cheaper and faster 
to build than additional nuclear capacity, even when 
the costs already sunk into the plant are considered. 



14 



66 



F. Conclusion 

Supporting this loan is inconsistent with what we understand to 
be the Clinton Administration's policy of "no new civilian nuclear 
power stations". This policy, which we strongly support, is based 
on a multiplicity of factors, including the true, full costs of 
nuclear power such as decommissioning and disposal of the spent 
fuel, the risks to the public and the environment, and consideration 
of alternatives. Why should the U.S. be promoting this technology 
abroad? 

If the U.S. Exim Bank doesn't guarantee the loan by Citibank, 
there is no evidence to support the assertion that the German 
government will guarantee a loan for Siemens to do the upgrade. 

We call on Congress to take the necessary steps to formally 
announce its opposition to this project. Ultimately, it may be 
necessary for the full Congress to vote on the matter, or to 
withhold funding for the Exiro Bank. Even though a vote in the 
Banking Committee may not, in strict legal terms, overturn the ExIro 
decision, there is no doubt that such a vote will send a powerful 
signal to the Administration that it will most likely not ignore. 



15 



67 



REPLIES TO QUESTIONS OF REPS. MICHAEL HUFFINGTON AND 

DOUGLAS BEREUTER, HEARING ON H.R. 2 096 IN THE SUBCOMMITTEE ON 

INTERNATIONAL DEVELOPMENT, FINANCE, TRADE AND MONETARY POLICY ON 

MARCH 15, 1994 



Submitted by Rep. Michael Huffington 

Question: Could the Temelin nuclear plant planned for construction 
in the Czech Republic receive the necessary permits and be built in 
the United States? 

Answer: It is not within the mandate or authority of Eximbank to 
determine the licensability of a nuclear power plant in the United 
States. The Bank's position, as stated in the Environmental 
Evaluation which accompanied the Congressional Notification letter 
dated January 27, 1994, is that "In the staff's judgment, actions 
committed to by the Czech authorities will allow Temelin to attain 
a level of safety comparable to that required of a nuclear power 
plant in the United States." 



Siibmitted by Rep. Doug Bereuter 

Question: Mr. Brody referred in the hearing to the fact that 
Eximbank is planning to have a "small business entry point" as Mr. 
Bryen was suggesting. What exactly is that entry point for small 
business? 

Answer: Eximbank is being reorganized. The goal in this 
reorganization is a structure that will cause all divisions of the 
Bank to work together as a flexible and responsive unit that can 
help U.S. exporters meet stiff competition in a changed global 
trade environment. 

The Bank is being divided into three areas: Business Development, 
Export Finance, and Resource Support. The Business Development 
Group will be the "Small Business entry point." 

The Business Development Group is responsible for all outreach, 
intake and counseling services to widen and deepen penetration by 
the Bank's programs among exporters and potential exporters, 
especially small- and medium-sized business. 

In addition to outreach, training and market development functions, 
the Business Development Group is the interface with potential and 
early-stage customers, providing them with information on Exim 
programs and procedures, helping solve their problems, and 
generally walking them through the pre-application phases of doing 
business with the Bank. 



68 




The Czech llmba$sador 

5900 Spring of Freedom St.. N.W. 
Ufashlngtoa, D.C. 20008 



By Hand 



Washington, March 3 

The Honorable 

Alfned A. McCandiess 

U.S. House of Representatives 

2422 Raybum House Office Building 

Washington, D.C. 



Dear Congressman McCandiess, 



In the course of, and in connection with, a recent hearing of the House Subcommittee 
on International Development, Finance, Trade and Monetary Policy, regarding the 
environmental policies of the U.S. Export-Import Bank, some questions have been 
raised about the proposed loan-guarantees of the U.S. Export-Import Bank for the 
Temelfn Nuclear Power Plant project in the Czech Republic, with respect to the safety, 
public support for, and economic viability of the project. 

Although it may sound self-evident, I deem it necessary under these circumstances to 
emphasize that the safety of the Temelfn project can be of no greater concern to 
anyone than to the democratically elected government of the Czech Republic which is 
reponsible to its citizens and to the international community for the safe operation of 
the plant. This was the first and foremost consideration in the deliberations of the 
government on the project. It was precisely because of this concern that the original 
project was modified to accomodate Westinghouse nuclear fuel, instrumentation and 
control technology as the best way to increase the safety margin. The same concern 



69 



has led the government and the utility to commission a number of studies which have 
convincingly proven that the project can operate under the same strict standards of 
safety and environmental protection that are customary elsewhere in Europe and in the 
United States. Furthermore, the Czech Parliament has demonstrated the awareness of 
our responsibility by adopting the Vienna Convention on Civil Liabilities for Nuclear 
Damages. 

Many of the questions raised about the project have been based on insufficient 
information or misunderstandings. The enclosed position paper clarifies most of these 
issues, including the question of the public support for the project. 

As for the economic viability of the project as a least-cost option, this has been 
thoroughly examined by the government and confirmed on the basis of independent 
analyses. This fact is also corroborated in the position paper. While this consideration 
is certainly of much importance to the Czech Government and also of importance to the 
underwriters of the project, including the U.S. Export-Import Bank- and hence the 
Congress and the Administration -, it is hard to see of what concern rt could possibly be 
to third parties, let alone third governments. While I can understand genuine concern 
for the environment, the other arguments by third parties or governments, in my view, 
go beyond acceptable limits. Nor is it correct to say that with the Temelin loan, the 
Czech Republic has had to turn down two World Bank loans that would reduce 
dangerous emissions from existing power plants. There is no causal link between 
these two issues. In fact, our preferred course of action is to close at least some of the 
existing power plants down rather than trying to reduce their emissions at high cost, 
because the mining of lignite for these plants is in rtself a source of considerable 
pollution and its burning a source of doses of radioactivity much higher than any linked 
to the standard operation of a nuclear power plant. The completion of Temelfn will 
enable us to do just that. 

The Czech Government and other bodies have done their best to provide the 
necessary data and answer all legitimate questions on the subject Please, accept the 
position paper as the final proof of our determination to stand up to all the obligations 
and responsibilities associated with the project. I hope that the project can now go 
ahead without further delays and to the benefit of both our countries. 

Wth best regards, 

Sincerely, 




70 



J^aMi^n^. Sj.^. 20003 



POSITION PAPER 

ON THE TEMELIN NUCLEAR POWER PLANT 



Prepared by: 

Jiff MAREK, Advisor to the Minister of Industry and Trade of the Czech 
Republic and Chairman of the Supervisory Board of the ^EZ Joint Stock Co. 
(Czech Power Company) 



With the contribution of: 

Bfetislav HORAk, Karel KRI^EK and Josef VfTA, experts from CEZ. 

Washington, D.C., March 3, 1994. 



,^kofi»: (202) J63-63fS 
30^: f202j 966-&54i0 



71 



INTRODUCTION 

77ie Czech Republic as a part of former Czechoslovakia decided to rejoin Western 
industrial democracies more than four years ago after the "Velvet Revolution" in November 
1989. In the course of these four years the Czech people exerted a tremendous effort of 
unprecedented nature - to radically and irreversibly change both the political and the economic 
structure of the society. This change was accomplished against the background of political 
stability and social peace. The dissolution of former Czechoslovakia (sometimes called the 
"Velvet Divorce") serves as further evidence that our people can undertake even such a painful 
and difficult task in an orderly, lawful and non- violent way. By the end of 1993 most steps 
connected with the radical transformation of our society and economy were accomplished. The 
Czech Republic today is a parliamentarian pluralistic democracy and a country with all basic 
systemic elements of a market economy. Since we share the same values as our Western 
partners, the Czech Republic has expressed its interest in joining the N.A.T.O., the European 
Union and the O.E.C.D. 

The path towards achieving the level of development common to the O.E.C.D. countries 
is not an easy one. One of the many problems with overcoming the heritage of the Communist 
system and centrally planned economy is the fate of huge investment projects. The problems 
we are facing are manifold and they involve issues of economic, social, environmental and 
strategic importance. 

The construction of Temelin Nuclear Power Plant ("Temelin NPP") is perhaps the best 
known and most complex project of this kind. Temelin is located in South Bohemia, 
approximately 60 miles south of the Czech capital Prague. The construction permit for Temelin 
NPP was issued in 1986; the work on the site started in 1987. 

Due to the political and economic transformation in the Czech Republic after the 1989 
revolution, the Temelin project has been very thoroughly reexamined. A decision was taken to 
reduce the number of the previously planned four units Russian type WER-IOOO MW units and 
to construct only two units and to substantially upgrade and improve the design and operational 
safety of Temelin NPP. As a result of the recommendations of many audits, review missions 
and investigations ~ carried out during 1991 and 1992 by the International Atomic Energy 
Agency (IAEA), Vienna, and Halliburton NUS, Gaithersburg, Maryland, and many others - 
- a decision was made to implement many substantial technological improvements to make 
the plant licensable not only in accordance with Czech standards and regulations but also 
in general accordance with Western standards and regulations expected to be in effect in 
the mid-1990s. 

As regards the most relevant technological changes, tenders were opened for both 
Temelin NPP nuclear fuel supply and the instrumentation and control (I«&C) system. As a result 
of these tenders, the Westinghouse Electric Coiporation, Pittsburgh, Pennsylvania, was invited 



Position Paper on the Temelin NPP P»8'= 2 



72 



to submit contract proposals. Following extensive negotiations, Westinghouse, in May 1993, 
signed a contract with CEZ, the largest Czech power company. 

As a result of privatization, CEZ has been transformed into a joint stock company, where 
the Czech State at present retains the ownership of 67% of the shares. 

CEZ is responsible for at least 80% of the electricity production in the Czech Republic. 
Currently, electricity is generated mostly by lignite burning power plants (75% of CEZ 
electricity production). The rest of CEZ electricity is supplied by the first Czech NPP at 
Dukovany. Some of the coal burning power plants are obsolete and incapable of being 
economically retrofitted, and the whole process of lignite strip mining and combustion has 
produced serious environmental problems ~ air and water pollution and soil degradation. The 
so called "Black Triangle" between the region of Northern Bohemia in the Czech Republic and 
neighboring areas in Poland and in the former G.D.R. are among the most polluted places not 
only in Europe but in the world. The high levels of pollution pose a serious problem for both 
the environment and human health. 

It is also necessary to stress the crucial importance of the Temelin project from the 
perspective of the energy policy of the Czech Republic. Due to the composition of the Czech 
natural resources, coal - especially the lignite -- and uranium are the only domestic energy 
sources fit for electricity production. The Czech Republic still depends heavily on foreign 
natural gas and oil supplies, currently obtained almost exclusively from the Russian Federation. 
Large energy dqjcndence on foreign sources represents a certain degree of external vulnerability 
for the Czech Republic. Independence in electricity supply is thus a matter of national strategic 
importance. 

The completion of Temelin NPP is without doubt the only viable energy option ~ 
both economically and environmentally - for meeting the Czech electricity demand at the 
turn of this century and beyond. 

At present ahnost 90% of civil work and 60% of technological and engineering work 
at Temelin NPP construction site have been completed. The Westinghouse supplies of the 
I&C system and the nuclear fuel are necessary to complete the facility and to connect both 
units to the grid withm the period of 1996 to 1998. 

The financing of the Westinghouse supplies through commercial bank loans ~ guaranteed 
by the EXIMBANK ~ has been determined to be the best financial option for the completion of 
Temelin NPP. This issue was raised at the meeting between President Havel and President 
Clinton in April of 1993. The Czech Government provided its own guarantees for Temelin 
financing and it welcomed the additional support provided by the EXIMBANK. CEZ took the 
tentative approval of EXIMBANK on January 27, 1994 as further evidence of this support. 
Between January 28 and March 4, 1994, the U.S. Congress has been reviewing the 
EXIMBANK action. 



Poiition Paper on the Temelin NPP Page 3 



73 



The Czech Republic is convinced that the completion of Temelin NPP in cooperation 
with Westinghouse is a desirable and viable bilateral project, bringing state-of-the-art 
American technology to Central Europe. Both parties benent from this cooperation — 
better technology leads to a better and safe Project. 

The process of the U.S. Congressional review has been closely watched by some media 
and also by the opponents of nuclear power in general and of Temelin NPP in particular. 
During this review the Government of the Republic of Austria dispatched a special delegation 
to Washington to protest against the approval of the loan guarantees by EXIMBANK. The 
Czech Republic has conducted bilateral dialogue with the Republic of Austria on this issue 
on a continuous basis at all levels, including Heads of State and Heads of Government, and 
intends to do so also in the future. Our capitals — Vienna and Prague ~ are the most 
suitable places for such a bilateral dialogue. 

This document confirms the position of the Czech Republic towards nuclear power as an 
integral and essential part of our electricity production and concentrates on those issues that in 
our view deserve attention at this point of time. 



1. PUBLIC AND GOVERNMENTAL ACCEPTANCE OF NUCLEAR 
ENERGY IN THE CZECH REPUBLIC 

The Government of the Czech Republic approved by its Resolution No. 109 of March 
1993 the activity of CeZ to complete two units of Temelin NPP. The decision was taken as 
a follow-up of the "Energy Policy of the Czech Rq)ublic", adopted in February 1992 by the 
previous Czech Government of Prime Minister Pithart, where the completion of Temelin NPP 
was confirmed. The March 1993 decision was a result of a two-month-long discussion of Czech 
Ministers, during which all necessary adjects of the Project were evaluated, including public 
acceptance, operational saf«y, environmental aspects of electricity generation in the Czech 
Republic and economical efficiency of the Project. By its Resolution No. 606 of October 1993, 
the Czech Government gave its guarantees for the EXIMBANK-gxiaranteed commercial bank 
loans for the Westinghouse supplies of the I&C system and nuclear fuel for Temelin NPP. 

The Czech Government strictly observed the relevant legal procedur^. The 

Government approval of March 1993 rq)resents only an approval of the decision of CEZ as a 
private company to complete the nuclear power plant. The Govenunent approval is not a 
substitute for the issuance of any required permit (for which the Government is not authorized). 
The necessary permits have been issued by the appropriate local authorities in accordance with 
the law. While the Czech Government was discussing the issue of completion of Temelin, 
a wide and open public debate was going on concerning this subject. This debate was 
conducted both in the media (press, TV roundtables) and among the citizens and their 
political organizations and other interested groups. The Issue of completing Temelin NPP 
has also been discussed m detail in the presence of key Cabinet Members at a special 



Potition Paper oo the Temelin NPP 



Page 4 



74 



seminar in the Czech Parliament - a meeting open to Deputies from all political parties as 
well as to the public. 

Notwithstanding the openly expressed opposition from anti- nuclear groups and some 
environmentalists, the public support for Temelin NPP completion is very high. As a result of 
an opinion poll, conducted in March 1S>93 (i.e at the time of the Gk)vemment decision) by 
an independent agency (AISA), over 80% of the Czech population nationwide supported the 
completion of the Project. Even in the region of South Bohemia (1 million inhabitants), where 
Temelin is located, 65% of the population supported the completion of Temelin. The original 
resistance came -- not surprisingly -- mostly from the local communities. Their approach to the 
Project is at present more moderate -- CEZ established a mechanism for regular contacts with 
the local communities, especially with the "People's Commission" (27 members) and with the 
"Association of Cities and Towns of the Temelin Region" (SMOR). There are at present 84 
towns represented in SMOR. The meetings of mayors and other representatives with CEZ 
continue, and written answers by CEZ to their questions are being evaluated by the SMOR- 
selected experts. At these meetings a variety of issues concerning nuclear safety, environmental 
impact, and regional development have been discussed. The latest meeting took place on 
February 4, 1994. 

We believe that the above mentioned procedures respect the spirit of the requirements 
stipulated by the new Czech environmerual impact assessment Law No. 244/1992. There are, 
however, serious reasons why it is unacceptable to recognize retroactive validity of a law in the 
Czech legal system. 

2. SAFETY AND ENVIRONMENTAL ASPECTS OF TEMELIN NPP 

TTie safety of Temelin NPP will be comparable to the current Western nuclear plants. 
The Czech Government and CEZ commissioned several independent reviews and audits and using 
their results, created an extensive upgrading program to further enhance the design and safe 
operation of the Plant. 

CEZ initiated several major design changes, implementing state-of-the-art U.S. 
technology, and expanded the scope of the safety analysis so that it is comparable to the scope 
of safety analysis required by U.S. law. CEZ also reorganized project management following 
the recommendations contained in the reviews. 

The original safety design criteria for Temelin were defined in Soviet document OPB 82 , 
"General Safety Regulations of Nuclear Power Plants During Design, Construction and 
Operation". The current Temelin design goes well beyond satisfying the OPB 82 Soviet design 
criteria. The plant's design takes into consideration not only plant design and operational 
requirements, but also postulated severe external events and man-made threats. 



Position Paper on the Temelin ^^'P Page 5 



75 



Temelin NPP has implemented or is implementing, a significant number of 
modiflcations from the original Soviet design that will bring it into conformity with general 
Western design criteria. For example, Temelin NFP is committed to institute the safety- 
enhancement modincations developed by the U.S. NRC after the Three Mile Island 
accident. Likewise, a new instrumentation and control system, nuclear fuel, radiation 
monitoring system, equipment diagnostic system, and symptom-oriented emergency 
procedures are being provided that will meet applicable Western safety requirements. 

Upgrading and transfer of advanced technology during construction and operation 
is an ongoing process. That occurs on nuclear projects around the world. Russian reactors, 
particularly the Lovissa NPP, operated successfully for decades, and were upgraded in Finland 
(West European I&C), Slovakia (West European I&C), and Hungary (the bid invitation 
specifications are being prepared for many improvements). CEZ follows current world practices 
to upgrade existing nuclear power plants using suppliers selected on commercial basis and 
meeting specified technical and nuclear safety requirements. Therefore, it is not unusual that 
upgrading is accomplished by an organization different from the original supplier. This practice 
can in no way be considered as an artificial grafting of one technology to another. Also, it 
should be mentioned that Russian pressure water reactors (WER) are based on technology 
which was first commercially introduced by Westinghouse and represents the largest 
portion of energy generated by nuclear facilities. 

To further enhance safety culture in the Temelin project, CEZ voluntarily selected 
Halliburton NUS, a reputable independent company, to perform an audit of Temelin NPP in 
1991. While the principal focus of the audit was on nuclear safety and licensability, it also 
included other technical and management a^)ects of the Temelin project. Wherever appropriate, 
the audit resulted in fmdings and recommendations intended to improve Plant design and 
construction and operation. Based on the findings and recommendations, the audit drafted a 
corrective Action Plan. With the audit team's assistance, the utility elaborated a detailed Action 
Plan for the implementation of audit results. The Plant general designer and the original Russian 
designer have participated in the Action Plan implementation. Many tasks in the Action Plan 
have been accomplished and the remaining ones are in process in accordance with the current 
Plant schedule. The implementation of the Action Plan invalidates negative fmdings about 
the Temelin project made by preiious reviews and audits (1990 IAEA Mission and all 
Halliburton NUS audits). All references to these fmdings - which are now two years old - 
are thus no longer valid. 

Differences between Soviet WER- 1 000 reactors and Western standards were repeatedly 
reviewed for the last time by an extra-budgetary IAEA program in 1993. The fmdings and 
recommendations made by the IAEA program in 1993 are consistent with those of the 
Halliburton NUS audit. Regarxling Temelin NPP, the deficiencies identified earlier by IAEA 
missions and audit, were addressed by the Action Plan and the appropriate measures were taken. 
On the contractual bases the CEZ is continuously receiving the technical information from 
Russia Atomenergoproekt. A group of Russian engineers works at the Temelin site, supervising 



Position Paper on the Temelin ^fPP P*«* ^ 



76 



equipment installation, implementing design changes, and providing engineering support and 
design assistance. In addition, an agreement is being prepared at the governmental level on the 
nuclear cooperation with the Russian Federation which will create a framework for further close 
cooperation on improvements to the VVER-IOOO plants. Russia is extremely interested in having 
access to the upgrades because of the need to improve their own nuclear power plants. 

The licensing procedure in the Czech Republic is deflned by the law. It is in many 
aspects similar to the procedure used in the U.S. In addition, the supplies by Westinghouse 
have to comply with the U.S. NRC requirements and standards (contractual commitment). 
The licensibility of Temelin NPP is enhanced by the modiflcations implemented and 
supported by Westinghouse safety analyses consistent with US NRC Reg. Guide 1.70. The 
existing Czech legislation contains most of the requirements common to nuclear legislation 
of Western countries. 

Major components have been manufactured in the Czech Republic and in Western 
countries in compliance with quality assurance principles and standards. Compliance with the 
licensing requirements will be assessed by the appropriate regulatory body, with the cooperation 
of Western companies in the area of nuclear safety. The staff of the Czech nuclear regulatory 
body are being extensively trained by the U.S. NRC. 

Starting in April 1993, systematic examination of Temelin NPP for severe accident 
vulnerabilities - Probabilistic Safety Assessment Study (PSA) - by a U.S. company has been an 
integral part of the Project and will be completed before the fuel loading into the first unit. 



The evaluation of environmental impact is required by the Czech zoning and 
building law No. 50/1976. A preliminary environmental evaluation must be presented as 
part of the site license application. A full environmental report must be presented as part 
of the construction permit application. An environmental assessment within the scope of 
the preliminary safety report is required. 

CEZ elaborated the Temelin environmental impact evaluation study using U.S. 
Regulatory Guide 4.2 as a model. Topical reports prepared within the scope of the 
environmental study are listed in the Appendix. Each area was subject to the approval with 
appropriate licensing body and local government. Results and conclusions of the environmental 
study were included in the siting safety report submitted to the nuclear safety regulatory body 
(SUJB, formerly CSKAE) and as a part of the design documenution submitted to the local 
construction licensing authority. 

The requirements of the new Czech Environmental Impact Assessment Law 
No. 244/1992 are not retroactively applicable to Temelin NPP since its construction started 
in 1987. The application of the mentioned Law could practically destroy the legal 



Position Paper on the Temelin ^fPP Page 7 



77 



environment in the Czech Republic by introducing principle of retroactivity with an 
unpredictable impact on economic reforms and thus setting a dangerous precedent. 

As a problem of serious importance, the ultimate disposal of the radioctive waste is being 
solved within the Czech nuclear program. The solution does not differ from that employed by 
the U.S., Sweden, Spain and other countries with highly developed nuclear energy programs. 
Spent nuclear fuel is safely stored for the period of 50 years in an interim spent fuel storage 
facility and then ultimately disposed of into a deep underground repository. The period of 
50 years is sufficient for the selection of the best site for the repository, with the best available 
technology and engineering barriers. 

The interim spent fuel storage facility will be needed approximately in the year 2005, 
when the Temelin spent fuel has to be transferred from the TemeUn storage pool into the central 
interim storage facility (MRS). The site selection procedure was started last year and the 
construction of this facility for the Temelin fiiel will be started in the year 2000. As is the 
standard practice in the West, a portion of the operating costs of the plant will go into a special 
fund to cover the costs of the radioactive waste management. 



3. ECONOMIC VIABILITY OF THE TEMELIN PROJECT 

Wide discussion has taken place in the Czech Republic about the economic efficiency of 
the overall Czech electricity supply. Due to the newly imposed strict limits for off-gases 
releases into the atmosphere (as stipulated in the Law No.309/1991), the oldest lignite 
burning plants with the total output over 2000 MW will have to be shut down by the end 
of 1998. The rest of the power plants (over 7000 MW) will — by the same year -- have to 
install flue-gas-desulphurization technology or have to be retrofitted by fluidized bed 
combustion technology. A wide program of electricity savings is already being implemented. 
A successful implementation of energy-saving measures will result in a decrease of the demand 
for electricity at the end of the 1990s, but not to a level which would make building a new 
fwwer plant unnecessary. This conclusion has been confirmed by the analysis of a variety of 
plausible scenarios. The most probable scenario predicts that the electricity consumption in the 
year 2000 will be the equal to that experienced in 1990. 

Evidence that the completion of Temelin NPP represents the best economic option 
was substantiated by a study conducted by the independent Belgian company, 
TRACTEBEL, and funded from the FHARE program of the EU. It is important to 
emphasize two of the many findings of this study: 

• The completion of Temelin NPP has been evaluated as a cost-efficient option as 
compared to all other alternatives, including gas-combined cycle, etc; 



Position Paper on the Temelin NPP P*«e 8 



78 



• The electricity savings program based on the Demand Side Management method 
can save almost 1200 MW by the year 2010 -- a realistic estimate for the "high 
scenario" of electricity demand - or save 720 MW according to the "most 
probable" scenario. By the end of the 1990s, the potential electricity savings are 
not expected to exceed 400 MW. 

The "gas conversion" option, widely promoted by the opponents of Temelin NPP, 
has a number of flaws: 

• energy dependence of the plant on natural gas supplies from the Russian 
Federation, thus resulting in an increased level of the overall dependence of the 
Czech economy on that single source; 

• technological impossibility of utilizing most of the currently installed and 
completed equipment and structures of the Plant; and, 

• enormous operational expenses and unpredictable investment costs. In the case 
of Austrian Zwentendorf NPP (constructed but never connected to the grid), the 
owner, G.K.T. Ltd., unanimously decided in November 1993 to cancel the 
previously envisaged conversion of this nuclear facility to a gas-fired power plant. 

The claim that the Czech Government had to "abandon" its guarantees for a World 
Bank energy sector loan because it bad to concentrate all its guarantees on Temelin NPP 
is unsubstantiated. The Czech Government has enough reserves in the state budget to 
accommodate both the Government guarantees for Temelin and guarantees for other loans 
if guarantees for such projects are considered indispensable. A thorough review involving 
the Government and the potential borrowers is presently being conducted to determine the 
necessity for Government guarantees for some possible loans, including the so called "Energy 
n". The Government guarantees for a cumulative debt service on the guaranteed loans for a 
given year should not exceed an equivalent of S% of the expected budget receipts for that year. 
This law is being strictly observed. The Government guarantees for Temelin vary between 5 % 
and 8% of the overall volume of the state budget allocated for Government guarantees. 



CONCLUSION 

The Czech position on the completion of Temelin NPP is based on an in-depth technical, 
economic, and environmental analysis and reflects the results of lengthy discussions both at the 
Govemmeru and public levels. The Czech Republic provided all the necessary information to 
the EXIMBANK and hopes that both our views and documents will be taken into consideration 
in the final decision on the EXIMBANK guarantees for the Westinghouse exports. The American 
involvement in the completion of Temelin NPP might represent a "flagship" of U.S. -Czech 
economic cooperation in general and in the nuclear power field in particular. By bringing the 



Position Paper on the Temelin NPP P«ge 9 



79 



necessary staie-of-the-art technology to our country, this cooperation constitutes a further step 
towards improving the Czech Republic 's technological capacity, creating an up-to-date power 
facility and conditions for a gradual improvement of our badly damaged environment. The 

present level of political and economic transformation of the Czech society and the professional 
capability and maturity of our technicians give us the confidence that Temelin NPP can and will 
be successfully completed and safely operated. 



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Position Paper on the Temelin NPP 



Page 10 



80 \ 

APPENDIX 



LIST OF THE TOPICAL REPORTS 
ON THE TEMELIN ENVIRONMENTAL IMPACT 

Regional and historical monument survey of Temelin NPP Territory. 

SURPMO/1981 
Urbanistic and regional assessment of villages Brezi, Temelinec. 

VIDEOPRESS/ 1 982 , 1 983 
Survey of historical monuments in the JETE vicinity. 

VIDEOPRESS/ 1 982 , 1 983 
Archeological survey of Temelin NPP site. 

AU CSAV/1981-1986 
Natural historical survey of Temelin NPP sits. 

VTOEOPRESS/ 1982, 1983 
Analysis of Temelin NPP impact on the environment, the population radiation exposure 
implications. 

EGP/1980 
Climatic consequences of Temelin NPP cooling towers. 

HMU Bratislava/ 1981- 1983 
Influence of Temelin NPP on the environment, social and sociological implications. 

DRUPOS/1981 
Temelin NPP - survey of the contaminants spread in ground water. 

VUV/1983 
Influence of Temelin NPP on the environment. 

UR VJT Kosice/1983 
Temelin NPP - impact of the activity on the forestall vegetation. 

VTJLHM/1982 
Temelin NPP - impact of an increased humidity on the forestall vegetation. 

VULHM/1984 
Temelin NPP - the radwastes spread with surface and ground water. 

MFF UK/1983 
Temelin NPP - the acoustic study. 

EGP/1984 
Prognosis of the Vltava biological regime development due to Temelin related warming. 

PrF UK/ 1986 
Temelin NPP influence on the Vltava river water quality. 

VUV/1982 
Evaluation of the interaction between stacks and cooling towers plumes in nuclear facilities. 

KRB/1986 



Position Paper on the Temelin NPP Page 1 1 



81 

APPENDIX 



Temelin NPP - impact of low-activity effluent. 

EGP/1991 
Research of Temelin NPP influence on the atmosphere and waters. 

VUV/1992 
Research of the main processes and factors influencing the quality of water, bottom sediment 
and aquatics, focused on the change of water quality in the Orlik lake due to Temelin NPP liquid 
effluent. 

VUV/1992 

Research of the Vltava river cascade's thermal regime. 

VXr//1992 
Connections between Temelin NPP site and South Bohemia basins in view of ground water uses. 

VUV/1992 
Implications of Temelin NPP operation for the forestall ecosystems and their ecological effect. 

VLHM Stniady/1992 
Impact of the spent fiiel interim storage facility on the environment. 

UKECSAV/1991-1992 
Expert opinion on the spent fuel interim storage facility at the NPP Dukovany as required by 
§9 of the Act No. 244/1992 Code on environmental impacts. 

UJV Rez/1992 
Expert opinion on the influence of Temelin NPP operation for the alternatives of Vltava water 

treatment. 

VUV/1993 



Position Paper on the Temelin NPP P**' ^2 



82 

TECHNICAL MEMORANDUM 

REGARDING THE 

TEMEUN NUCLEAR POWER PLANT 



PREPARED BY Tffi 

ADVISORS 

ON THE 

SPECIAL DELEGATION 

OF THE" 

GOVERNNENT 

OF 

AUSTRIA 

TO THE 

UNITED STATES 



WASHINGTON D.C. - FEBRUARY 1994 



83 



OfTtO'Cuidy- €>^ S&id/rcO' 



3524 Intemational Coyrt. N. W. 
WashJngton. O. C. 20008-3035 
Telefax Consular Section 

(202) 805^750 (202) 895-0700 (202) 895^767 



TECHNICAL MEMORANDUM 

ON THE 

TEMELIN NUCLEAR POWER PLANT 



Prepared By 



Professor Manfird Heindler, Chief Advisor, Technical University of Graz; Nuclear 
Engineer. 

Professor Wolfgang Kromp, Technical Advisor, Institute of Solid State Physics, 
University of Vienna; Materials Scientist 

Geert Weimann, Technical Advisor Senior Researcher in Nuclear Safety, National 
Research Laboratory, Seibersdorf, Nuclear Engineer. 

Professor Peter Weish, Technical Advisor; University of Vienna; Ecoiogist 



With A Contribution From: 



Christoph Herfost, Legal Advisor to the Governments of the States of Upper and 
Lower Austria; Attorney. 



February 22, 1994 



84 



INTRODUCTION 



We are technical advisors on the Special Delegation sent by the Austrian Government to 
the United States regarding the proposed completion of the Temelin nuclear power plant 
in the Czech Republic. We have prepared this report to present our views regarding safety 
and environmental impacts of the proposed Temelin nuclear reactors. 

The Czech government now plans to complete construction of the Temelin Nuclear Power 
Plant • which was initiated by the former Communist regime • with the help of U.S 
technology, equipment, and financing. The facility, which is less than 40 miles from the 
Austrian border, consists of 2 partialty-constructed Russian-designed WER 1000 pressurized 
water reactors. 

In May 1993, the owner of the power plants, Czech Electric Utility ("CEZ"), contracted with 
Westinghouse Electric Corp. to supply (1) instrumentation and control equipment and 
services, and (2) advanced-design nuclear fuel, to complete and start up both Temelin units. 
A Citibank consonium agreed to issue a $400 million loan for the project 

On January 27, 1994, the U.S. Export-Import Bank ("Ex-Im Bank") notified the U.S. 
Congress of its tentative approval of a S3 17 million loan guarantee for the Temelin project. 
Ex-Im Bank submitted in support its 12-page Environmental Evaluation ("Exlm EE")' and 
a Memorandum from the National Security Council and accompanying 10-page 'Technical 
Analysis" on safety and environmental issues to the Ex-Im Bank, dated September 29, 1993 
("NSC Memo").- The U.S. Congress has a 35-calendar-day period to review this Ex-Im 
Bank action. 



^Export-Impon Bank of the United States, Engineering Division, Environmental 
Evaluation. Temelin Nuclear Power Station (January 26, 1994). 

National Seniriry Council, Memorandum for Mr. Kenneth Brody, President and 
Chairman, Expon-Impon Bank (September 29, 1993). 



85 



Temelin Nuclear Power Plant 



As a team, we have over SO years of experience working on nuclear safety, energy policy and 
environmental issues. Four of us serve as members of the Federal Chancellor's Nuclear 
Advisory Council Also contributing to this study is a legal expert who has represented two 
Atistrian states in extensive discussions with Czech ofBdals regarding nuclear matters. We 
have been involved in technical exchanges with our counterparts in the Czech Republic and 
have studied the safety of operating and planned nuclear facilities in the Czech and former 
Czecho-Slovak Republic and other neighboring countries.^ We are also involved in 
cooperative research on energy efGciency policy in the Czech Republic* 

Before leaving for the United States, we reviewed as much documentation and information 
as we could assemble from Czech, Austrian, and other sources regarding Temelin. We were 
able to gain access to parts of two of the key technical studies by HaUiburton NUS and 
Tractebel which are relied upon in the U.S. Government's consideration and review of the 
proposed exports as refleaed in the Ex-Im EE and the NSC Memo. 

In the first instance, we, as experts, remain very skeptical regarding all the assurances 
about Temelin's safety, benign or even positive environmental impacts, and solid economics. 
The reason is that relatively little information on these questions is publicly availnble. 
Moreover, the material we have reviewed, including the studies noted above, provide strong 
evidence of very significant hazards posed by the proposed facility. 



^ Evaluation of the Safe:>' of NPP Jaslovske Bohunice V-1, Sponsored by the Austrian 
Cnancellory, Vienna 1991, (updated edition in print. Springer Publishing Co., Vienna - 
New York ;; International Commission for Independent Safety .Analysis of the Nuclear 
Power Plant Krsko (ICISA), Ljubljana, November, 1993; Study on the Safety of the Dry 
Cask Interim Spent Fuel Facility at NPP Dukovany, The Academic Senate's Projea on 
Nuclear Safety of the University of Vienna, Spor.sored by the Austrian Chancellory, 
Vienna 1994. 

*M. Muehlberger, Opponunities to Improve Energy Efficiency in the Czech Republic, 
UN-ENERGY/SE.M. 1X1^.28, March 23, 1993; B. Vailance, Evaluation of the Energy 
Efficiency of the Czech and Slovak Iron and Steel Industries, UN- 
ENERGY/SEM.12/R.17, March 15, 1993. 



76-695 0-95-4 



86 



Temelin Nuclear Power Plant 



In this memorandum, we briefly describe the reasons for Austrian concerns about this 
reactor just across our border. We describe the lack of normal open procedures for 
technical and public review of such a project We describe Austria's bilateral cooperation 
on energy with the former Czecho-Slovak and the Czech Republic. We review the serious 
safety and feasibility issues associated with this novel attempt to graft U.S. technology onto 
Soviet-designed, partially-completed reactors. RnaDy, we outline the less costly alternatives 
available to meet ene^ needs. 

AUSTRIA'S INTEREST IN TEMELIN 

While Temelin is located in another country, its potential hazards to the people and land 
of both the Czech Republic and Austria are very similar, if not equal The reactors are both 
<S0 miles firom Prague and from Linz, Austria's third largest dty. Vienna is 120 miles 
southeast down the prevailing winds from Temelin. 

Aa accident at Temelin could result in devastating health, environmental, economic, and 
social consequences for ail of Austria's almost eight million citizens. The Cbemobjd 
experience has shown that nuclear hazards do not respect national borders. Although 
Chernobyl is some 700 miles away from Austria, the 1986 accident led to radioactive fallout 
in large regions of our country at levels higher than most other countries in Western 
Europe.* 

BACKGROUND AND STATUS OF TEMELIN 

In the 1970s, the Communist Govenunent of Czechoslovakia made a decision to build a 
nuclear plant at Temelin. In 1982. a number of governmental ministries participated in an 
environmental study of the suitability of the site. The Czechoslovak Atomic Energy 



^Report on the 1986 Chernobyl Nuclear Power Plant Accident and its Radiological 
Impact on Austria, Federal Ministry of Health (Vienna, 1987). 



87 



Temelin Nuclear Power Plant 



Commission ("CzAECT) issued a constniction pennit in 1986, licensed according lo the 1982 
Soviet regulations. 

Work began that year on the first of four planned units. Construction of Units 3 and 4 was 
suspended in 199a As of Fall 1993, it was reported that Temelin Unit 1 is 65 % complete 
and Unit 2 is 45 %.* According to CEZ, the level of completion was, as of spring 1993, 
96% and 80% for structures, respectively, and 60% and 30% for technology components, 
respectively. 

Unlike the United States where President Clinton is both Head of State and Head of 
Government, President Vaclav Havel is only the Head of State of the Czech Republic It 
is the Heads of the post-Communist Federal and Republic Governments which have the 
responsibility for decisions resarding nuclear power. 

The first post-Cotnmimis: Czech government of Premier Petr Pithart considered the Temelin 
issue in early 1991 According to Pithart, there was not enough reliable information to 
support a decision, particularly in regard to costs, need for power, and safety. The Pithart 
government urged the incoming Klaus government to make a thorough investigation of all 
relevant fects before deciding on Temelin s fate.^ Premier Pithart is critical of the Klaus 
Government, which "made it clear from the very beginning that its position [in favor of 
Temelin] was already fixed, thus it de facto refused public debate."* 

There is strong local opposition against the Temelin project Fifty-four of 60 city councils 
in the Temelin area, representing 76,850 inhabitants, have passed resolutions against 



*36 Nuclear News 45 (No. 11, September 1993). 

'Letter from Dr. Petr Pithart, former Prime Minister of the Czech Republic, to Kenneth 
Brody, President and Chairman, Ex-Im Bank, 1 (January 25, 1994). 

•Id. 



88 

Temelin Nuclear Power Plant 



eompletinc the nndear power plant* Tbqr have asked the Ctech government to prepare 
an environmental impact statement with poUic particqMtion.** 

The Klaus Govenunent decision was made in the absence of technical and public procedures 
used to assure the soundness of decisions regarding nuclear projects. There hat not been 
an environmental impact statement prepared on Temelin; nor has there been any 
independent public technical review of the safety and economics of the plant The Czech 
government has not ofBcially released any of the primaiy technical information underlying 
their decision. 



AUSTRIAN^ZECH COOPERATION ON ENERGY 

For several years, Austria has been active^ engaged in a dialogue with Czecho-Slovalda and 
its successor states, the Czech Republic and the Slovak Republic, on technical and economic 
energy matters. Nuclear power has been a focus of common interest 

Austria recognizes that the Czech Republic must rely for Uie time being on its existing 
nuclear plants to meet its current demands for electricity. Austria has sought to provide the 
Czech Republic with technical and other assistance. In 1991, after an in-depth safety study 
by Austrian and international experts," the Austrian Government offered to supply 
Czechoslovakia with the electric power needed to permit the shutdown for safety upgrading 
of two operating reactors at Jaslovske Bohunice V-1. This offer had a value of about S300 
million per year. 



^Letter of :he .Association of Cities and Communities in the Temelin Region to Mr. K. 
Dyba, Czech Minister of the Economy, 1 (March 1, 1993). 



" See footnote 3. 



89 

Temelin Nuclear Power Plant 6, 

Since 1992, Austria has been supporting a series of joint effoiis to develop alternatives to 
nuclear power. These continuing endeavors include upgrading fossfl-fiiel plants and district 
beating. Austria has been preparing a study with the Czecho-Slovak/Czech experts to 
identify options for energy efficiency and to develop an appropriate legal and policy 
firameworks.'^ 

In 1992, then Premier Pithart asked the Austrian Chancellor to assist the Czech Republic 
in addressing the Temelin issue. In response, Austrian experts prepared a study of the 
conversion of Temelin to a gas-fired combined cycle power plant. Similar conversions of 
nuclear plants have been carried out at Midland and Zimmer in the United States. 
However, resulting bilateral top official and expert discussions did not reach agreement on 
conversion." Austria has offered to fund further technical investigation of this option, but 
efforts to arrange additional bflateral expert meetings have not succeeded. 



"M. Muchlbcrgcr, supra n. 4. 

"Meetings in Prague, Februaiy 9, 1993, and in Vienna, March 29/30, 1993. 



90 



Temeltn Nuclear Power Plant 



CONCERNS ABOUT THE SAFEIY OF THE TEMELIN REACTORS 

Based upon our review of available data about plans to add U^ technology to the units 
Temelin, we have considerable doubts that the reactors can meet Western safety standards. 

The Temelin reactors are based opon the flawed Soviet VVER-KKNV320 reactor design. An 

April 1993 International Atomic Energy Agen<7 (IAEA) report'* identifies 16 areas where 
the WER-IOOO design standards and codes are defidem «dien compared to U^ regulations 
and IAEA standards. These include: 

(1) Severe Accidents; 

(2) Common Mode Failure; 

(3) Missile Protection; 

(4) Fire Protection; 

(5) Classification of Components; 

(6) Reactor Core Design; 

(7) Core Power Distribution and Xenon Oscillations; 

(8) Heat Transfer to an Ultimate Heat Sink; 

(9) Radiation-Induced Embrittlement of Pressure Vessel Steels; 

(10) Containment Design Basis; 

(11) Hydrogen Control; 

(12) Instrumentation and Control; 

(13) Overpressure Protection; 

(14) Safety Analysis Report; 

(15) Quality Assurance Program; 

(16) Component FaOures and Human Errors Data. 

The proposed upgrade of Temelin will purportedly address a number of these issues with 
re^rd to the NVER-IOOO design. However, it is not clear whether some of these safety 
concerns • particularly common mode failure causes such as fires, floods, and internal 
missiles • can be adequately addressed because critical structures have already been 
completed, .\nother critical upgrade problem invohres the flaws in Temeiin's existing steam 



"IAEA-SC-071, WWER-1000/320 Generic Safety Issues Developed from Codes and 
Standards Comparison, Ch. Lin auth., SAS/NENS/IAE.\ (Vienna, Apru 1993). 



91 



Temelin Nuclear Power Plant 



generator headers. They do not meet U^. or intemationa] safety standards and their 
upgrading would require extraordinary expense. 

The Ex-Im Bank relied on an interagency technical review, coordinated by the National ' 
Security Council (see NSC Memo) "of the design of the WER 1000 reactors"(Ex-Im EE, 
at 2). However, it appears that neither the \JJS. Department of Energy nor Nuclear 
Regulatory Commission (T^C") sought to perform a safety analysis of the specific design 
and plans for the Temelin project In brief, the only systematic Temelin specific study relied 
on by the Ex-Im Bank appears to be that performed by NUS HaUiburton (TIUS."). 
According to the NSC Memo, this report is "the only independent Western review of the 
licensability of WER-IOOO reactors." Attachment, p. 6) The Ex-Im EE (p2) states that 
NUS "found Temelin to be fundamentally sound and in conformance with US. safety 

principles save for the Russian Instrumentation and control systems." 

^? 

'^ 
We have been unable to secure access to all of the NUS reports in spite of promises from 4 

Czech authorities. However, the NUS Progress Report we have obtained shows that their 

Audit Team found serious design questions. '* Even more importantly, the NUS Progress 

Report found that there has been, and is, a lack of the basic information needed to 

understand the Soviet design. As NUS explains, if the information, and the experts needed 

to explain it, is not available, then it will remain impossible to understand the adequacy of 

the design, much less to correct safety flaws. 

The NUS progress report surprisingly concludes that the plant is licensable in the mid- 
199Gs." (Report, p. 2). This conclusion funher presumes that the "Audit Team's techiucal 



" We have access to the 'Trogress Report on the Audit of the Temelin Nuclear Power 
Plant" (August. 1992; Revised October 6, 1992). The introduction states (at 1): 

This Report 1) summanzes the results of the Audit of the Temelin Nuclear Power 
Plant conducted by the Hallibunon NUS Environmental Corporation; 2) describes the 
subsequent major follow-up actions taken by Hallfounon NUS on behalf of CEZ... and 3) 
presents Hallibunon NUS major conclusions and recommendations based on the Audit 
results and xhc follow-up tasks." 



92 

Temelin Nuclear Power Plant 



and programmatic recommendations are implemented." NUS itself immediately proceeds 
to state that "implementation progress has been, and continues to be slow. It must be 
accelerated if the current plant schedule is to be maintained." Moreover, the remainder of 
the NUS report shows why the implementation of the changes will be difficult 

First, NUS Progress Reports identify a number of specific design difficulties. For example, 
"TemeUn's reliance on a single containment sump located in an extension of containment is 
not consistent with Western practice. In addition, the design of the sump and associated 
piping exhibit several design weaknesses." (Report, p. A-4) These flaws could contribute to 
a failure of the emergency core cooling system under recogni zed a ccident scenarios^ 



Design flaws were also uncovered with respect to the Emergency Feedwater System. As 

stated by NUS, 

[t]he Audit Team could not reach a final conclusion as to the 
adequacy of the Emergency Feedwater (EFW) system, because 
all of the necessary design documentation was not avaOable. 
However, the conceptual design of the system is consistent with 
Western standards and includes considerable 
sirengrhs—Kowever, there is no documented evidence that the 
system can withsund a single failure, and Uie system exhfcits 
cenain design weaknesses including the lack of diversity in the 
power supply, availability ot flow insuiimentation and isolation 
capability for only two out of four steam generators, and 
potentially inadequate tank capacity for plant cooidown." 
(Report, pg. A- 13) 

Such system specific concerns can only be rectified with access to complete and accurate 
data on the underlying design. However, NUS found that "there is inadequate amount of 
imbrmation from the original Soviet reactor supplier concerning the technical basis and 
imderlying analyses of the plant design. Obtaining such information is considered to be an 
imponant factor in the successful economic completion of the plant and its future safe 
operation." (Report, pg. A2-A3) Ukraine is already experiencing severe problems in 
securing such information from Rosenergoatom and other Russian WER-IOOO equipment 
suppliers for its existing WER-IOOO reactors, which raises serious questions as to the data's 
future availability to CEZ. 



93 

Temelin Nuclear Power Plant ■__ lfl_ 

Tbc problems of meldinc Soviet construction processes with western standards -- coupled 

with the lack of necessary data - are descrilwd by NUS with respect to implementation of 

needed modifications. As stated by NUS: 

Implementation of the new fuel/core design and I & C replacement 
projects will require a major design integration effort, not only 
between these projects but with the remaining nuclear island and 
balance of the plant design. (Report, p. 5-3) 

NUS stated that this effort "would normally be assigned to the plant architect/engineer.* 

However, as NUS noted, changes in the Soviet Union make it unlikely that the original 

designers can be relied on in this case. Similarly, NUS notes that 

Important concerns raised by the I&C replacement are the need 
to assure adequate cooperation of the original Soviet design 
organization -.. The Audit Team was informed that in the past, 
the performance of the Soviets in responding to Temelin requests 
for technical information has not been good, either with respect to 
the timeliness of the responses or their technical content" (Report, 
p.A-15) 

Under Western practice, nuclear plants are not pennined to operate until a comprehensive 

Probabilistic Safety Analysis (PSA) has been prepared, reviewed, and approved. Regarding 

existing Temeiin WER-IOOO accident analyses, NUS reponed that the "assumptions made 

in the analyses appear to be conservative, but the analytical tools used are generally 

outdated and in many instances would be considered in the West to be unsuitable for a 

thorough accident evaluation." (Report, p. A-4) In addition, the proposed blending of 

Western technology will require substantial new design work, leading either to a substantial 

delay in the startup of the reactors or unexpected design flaws which could not be corrected. 

NUS apparently shares our concern about practices foilowed in the construction of the 
Temelin reactor during the Communist past. There may already be problems due to poor 
practices and quality assurance which could compromise the safety of the plant NUS 

reported that: ' 



94 



Temelin Nuc lear Power Plant H. 

the Team firequently foun(L~two fiacton adverse to safety that 
appear to remain from work practices under the previous 
Chechoslovakian economic system: 

• the widespread absence of a questioning attitude, especially 
below the senior management level, which tends to result in the 
acceptance without challenge of safe^ decisions or representations 
by other parties; and 

• the lack of aggressive management action to investigate and 
control conditions adverse to the company's [CEZ's] objectives." 
(Report, pg. A-2) 

In the same vein, NUS found that the plant staff was mismatched to the needed functions, 
and that there was a lack of safety culture at the construction site. 

NUS*s Ondings with respect to constniction practices in the more recent ppst present a 

picture of a plant organization which remains out-of-touch with the most ba&ic nuclear 

management practices. While sound constniction management is a cornerstone of successful 

and safe plant construction, the NUS report makes clear that the requisite standard is not 

being met at Temelin. NUS states expressly that 

CEZ-ETE lacks a strong on-site eneineering organization to 
manage and control the overall design effort .... This is important 
on any technical project as complex as a nuclear power plant, but 
is especially imponant at Temelin — (Report, p. A-7) 



CEZ headquarters is insufGciently involved in overseeing, 
moniioring and reviewing the progress of the project. An 
organized program of independent safety oversight, similar to those 
found in Western utilities, has not been esublished at Temelin. 
This should be done to promote the development of an 
appropriate safer) culture. (Report, p. .\-7) 

Without firm management action to address these projea 
management issues, there is little assurance that the project can be 
effectively controlled. (Report, pp. A-7, A-8) 



95 



Temelin Nuclear Power Plant ] ^ 12_ 

In the same vein, NUS concludes that "[ejxisting technical and financial oversight of the 
Temelin project is not adequate." (Report, p. 6). 

Subsidiary inadequacies are idenUfied by NUS in many areas of plant construction 

managemenC For example, NUS concludes that the Temelin quality assurance (QA) 

organization is ^roefully inadequate: 

the QA procedures for the performance and inspection of 
construction work are inadequate to provide instruction on how 
the tasks should be performed, and there is no provision for 
analysis of deflciendes to determine their root causes and identify 
potential adverse quality trends. (Report, pg. 6) 

The faflure to identify "root causes" means that when a problem arises only the symptoms 
of that problem - not its underlying cause - are being addressed. The same can be said of 
the failure to identify adverse "trends." Thus, there is no assurance that significant, 
detrimental conditions are being identified and corrected. 

The NUS proposed remedy for this problem which is identified as a Priority A or 
"immediaie" action matter is to: 

Accelerate the completion and implementation of Temelin QA 
orograms with emphasis on self-audits. (Report, pg. C-1, Item No. 
4) 

With the plant half finished, it is long past the time when QA programs should have been 
adopted and implemented. Even more important, there is no assurance that work-to-date 
has niet the requisite quality standards. 

NUS determined in late 1992 that the plant lacked an adequate equipment qualification (or 

"EQ") program. In fact, as of that time the plant's EQ program was so deHcient that 

Halliburton/NUS recommended the performance of a separate audit just to identify all of 

the problems. NUS stated: 

the equipment program for Temelin does not meet Western 
standards. A number of potentially significant weaknesses were 



96 



Temelin Nuclear Power Plant ] li. 

identifled, bat a detailed aodit of the prosFam would be needed to 
detennioe the extent of the deficiencies. (Report, p. A<^. 

While obviously significant, this finding takes on even greater importance when it is recalled 
that there is a considerable amount of Soviet-supplied equipment in the focili^. As stated 

byNUS: 

Examples of the weakness found [in the EQ program] included a 
lack of definition of the environmental qualification program 
performed by the Soviett for the equipment they supplied, and the 
absence of any indication that age-related or potential accident- 

- caused equipment degradation were adequately considered in the 

design and specification of equipment (Report, p. A-7). 

The NUS Report calls for the establishment of a "program for the environmental 
qualification of safety related equipment," (Report, p. C-2, Item No. 14). However, it is not 
clear whether - and if so, how - this program would be applied covering all accident 
conditions to be considered with the equipment which has already been supplied. 

The findings made by NUS with respect to other subsidiary issues are no more assuring. 
Regarding a radwaste and radiation protection ALAR.\ concept (As Low As Reasonably 
Achievable), NUS finds that a "formal ALAR.\ program for system and plant design has not 
been instituted for any of Temelin 's radwaste management systems: its absence is particularly 
noticeable in the liquid radwaste management systems." (Report, p. A-12). 

It is tar firom certain whether the combination of Westinghouse and Czech built reactor 
components will work as planned. Westinghouse still has to do a great deal of engineering 
and analysis to attempt to adapt U.S. equipment and Soviet and Czech hardware to each 
other. These daunting problems of component interdependence may impair safety and lead 
to cost and schedule overruns. 

The FrTm EE points to Fmland's Loviisa Nuclear Power Station as a precedent for Temelin. 
(p. 6). Loviisa's 2 WER 440s were upgraded with western I&C technology in the 1970s and 



97 



Temglin Nuclear Power Plant ] 14 

have run safely since then, according to the Exlm EE.'* However, Loviisa involves a totally 
different situation from Temelin. At Loviisa, the western I&C was introduced in an 
extended design phase during the general redesign of these unique plants.'^ At Temelin, 
this task is to be carried out in an almost fully designed and partially completed plant 
IHnnish experts also evaluated the WER 1000 design in 1977-1980, but recommended not 
to build such a plant in Finland." 

Aside from a specific "Hot-Test", there will be no comprehensive review whether the 
combination of Westinghouse and Czech built reactor components will work as planned. 
The Westinghouse software will set certain technical criteria the Czech reactor hardware has 
to meet in order for the combination to work. Even Ex-Im Bank concedes that Westing- 
house still has to do a great deal of engineering and analysis to adapt U.S. equipment to the 
existirjg Czech hardware. These unresolved problems of component interdependence may 
impair safety and lead to cost and schedule overruns. 

The actual o>sts of completing Temelin remain uncertain. It is well known that the actual 
costs of nuclear reactors more often than not exceed the initially estimated costs by hundreds 
of aiilJions, even billions, of dollars.'' Tne NUS Audit, as quoted above, makes plain that 
the likelihood that ihe plant will be completed within budget is extremely remote. .According 
to CE2^ Temelin will cost $700 million to complete for a total of S2J billion for two 



'*Exim EE at 6 

"Loviisa Nuclear Power Station - Pioneer in East- West Cooperation, IVO Consulting 
Engineering Ltd. (Helsinki, 1983). 

'Id. 

**Experience shows an average 420% overrun and 5 year delay in completion for the 52 
nuclear plants built bj' Westinghouse in the US. The original plans for the Bataan NPP in 
the Philippines, also built by Westinghouse. priced the two reactors at S500 million. 
Construction costs on only one of the two reaaors totalled $2.2 billion. 



98 



Temelin Nuclear Power Plant IS 

plants." This figure appears to be too low since a sin^e comparable plant in the West 
costs $6-7 binioa' 

A German study estimated the cost to complete and upgrade to German standards the 
Stendal A WER-IOOO reactor (in the former East Germany) to be from $2J to 2.9 
billion.^ In light of this experience, it appears that upgrading the Temelin reactor may 
cost $1 billion or more than estimated by CEZ. It is notable that Germany cancelled 
construction of WER 1000s in the former German Democratic Republic after determining 
that safeQr enhancements would not be economically viable. 

CONCERNS ABOUT RADIOACITVE WASTE AND REGULATORY CAPABILITIES 

The Czech Republic does not have an interim storage facility for spent fuel or radioactive 
waste.^ Although a storage focility is curreutly under licensing at Dukovany, it is designed 
for 600 t waste from NPP E>ukovany only.^ Waste fit>m Temelin is explicitly excluded from 



^"Information Confirmed by the Czech GoveromentaJ Expen Group to the Austrian 
Government, March. 1993. 

^ If comparable international costs are applied for completion, with the assumption that 
5C% of the remaining equipment will be supplied by the Czechs at 30% of standard 
Western costs, rhe cost for complerion is S1.7 billion instead of S770 million. Additional 
costs may arise from delays, additional fundamental redesigns, or a lower stage of 
completion than claimed by CEZ. 

^icherheitstechnische Bewenung des Kemkraftwerkes Stendal, Block A, vom Typ 
WWER-lOOO/W-320, GRS-99; Supplementary Fac-.s to the Press Conference, March 20, 

1991, NPP Stendal Ltd, Management (March 27, :99:). 

^ Study on the Safety of the Planned Dry Cask Interim Spent Fuel Facility at NPP 
Dukovany, The Academic Senate's Project on Nuclear Safety of the University of Vienna, 
Sponsored by the Austrian Chancellory, Vienna 1994. 

-' From the ongoing licensing procedure for the dry cask interim spent fuel storage 
facHitj- a: NPP D-jkovany. Minutes cf the EIA Public Hearing, Roucho%-any, Oaober 29, 

1992, pp 9, 10, 77; Document from CEZ. Meeting of the Councils of Dukovany and 
Rouchovany, December 16 &. 17, 1992, pp 25, 26; Sitmg Decision of the District Councfl 
Ofjce, Trebic April 1. 1993, pp 3, 4. 



99 



Temelin Nuclear Power Plant . 16_ 

I 

this site, contraiy to the statement of the Ex-Im Bank." In addition, plans for interim waste 
storage facilities have met with strong local opposition. 

Any judgement as to the adequacy of Czech govenmiental capability to assure the safe 
construction of the Temelin Reactors must take into account the fict that substantial work 
at Temelin occurred under the supervision of the previous Communist Government The 
CzAEC did not follow international standards and was constrained in canying out its 
responsibilities. 

In January 1993, the new Czech Republic established the State Office for Nuclear Oversight 
to assume the responsibilities of the commissioiu Since this agency is so new, it appears that 
it would be difficult to determine whether it will be able to perform its functions properly... 

QUESTION AS TO WHETHER TEMELIN IS THE LEAST-COST OPTION 

The Ex-Im Bank relies upon a seven-volume energy study by the Belgian Tractebel Nuclear 
Consultants" for its conclusion that Temeiin's completion is the least-cost alternative. The 
study is seriously flawed and completely fails to consider measures to reduce electricity 
demand. 

Tractabel did not address the absolute least cost option which is no new construction, but 
assumed a need for additional electricirj'. However, a 1992 U.S. consultant prepared for the 
Czech Ministry of Economics and Privatization found that CEZ can meet demand easily 
for the next ten to fifteen years. The study concluded that "the continuation of construction 
[of Temelin] makes no economic sense",^ 



^Ex-Im Bank, OfSce of Public Affairs, "Ex-Im Bank Financing for Temelin Nuclear 
Power Plant Questions and Answers," January 27, 1994. 

^Nucleonics Week, 4 (June 25, 1992); Power International, Supponing Material for the 
Czech Republic Government Decision about NPP Temelin (I. Benes auth.) (May 23, 
1992). 



100 



Ttmelin Nuclear Power Plant 17 

Second, a World Bank economist has raised doubts about the acaxmcy of data on electrical 
demand and costs supplied by CEZ for use in the Tractebel study." The study employed 
an overly simplistic model of the relationship between economic growth and electrical 
consumption. Tractebel used a regression analysis for the five years ending 1991. This is too 
brief a period to provide meaningful results imder any circumstances and obviously so when 
Czechoslovakia was undergoing a major economic transformation. 



Third, in contrast to Integrated Resource Planning as practiced widely in the UJS., the 
Tractebel study does not compare demand-side with supply-side alternatives. This failure 
is critical because of the Czech Republic's substantial conservation potential Volume 6 of 
the Tractebel study finds that it is technically possible for the Czech Republic to save 3,500 
MW (and 15,000 GWh) by the year 2010— Le, more than Temelin's net capacity.* The 
study finds the "realistic" savings potential to amoimt to 1200 MW. The study states that the 
cost of these savings would be less than the long-term marginal cost of generating electricity 
firom any source, including TemeliiL However, the study foils to include this least cost option 
into its final conclusions. 

Independent analysts have ftirther confirmed that improved energy efnciency is the least 
cost solution to the Czech Republic's energy and air pollution problems. The SEVEn 
group, an independent research institute in Prague, found that the Czech Republic could cut 
its eiectricity demand in half if it implemented energy efficiency measures developed in 



^D. Gray, Aide Memoire with two Attachments, World Bank, Energy Sector Mission, 
November 2-14, 1992. 

"We were given access to this portion of the Traaebel study by the European Union's 
program PHARE, which funded it 



101 



Temclin Nudear Power Plant 18_ 

1991." Even a World Bank views as feasible a 30% reduction in electricity demand 
through low-cost efBciency improvements. * 

Fourth, while the study considers the alternative of buildinc new gas units, it bils to 
consider the alternative of retrofitting Temelln to operate as a gas-fired combined cycle 
power plant" The £aDure to consider the reuse of the existing structure is especially critical 
because, m nnt^-ri tvimy^ Trartf hrl't prrffrm^-f^n'"-'^^'' f^"^^^"""^'^**^* substantial- 
sums will otherwise be required to tear Temelin down (20.1 vs. 26.1 billion CZK for com- 
pleting the reactor). 

Hfth, the chosen inputs for the price of coal and other fuels are unreasonably high.'' This 
skewed the comparison since fiifel accounts for 70 to 80% of the total life-cycle costs. The 
costs for retrofitting coal-fired power stations with scrubbers have also been 
overestimated.'' External costs of emissions were included for coal-fired power stations, 
while costs of routine and accidental emissions associated with Temelin were ignored. 

Remarkably, even by its own limited tenns, the Tractebe! analysis found that the total system 
costs of a scenario without Temelin (i.e., if Temelin is completely demolished and replaced 
by gas imits) is only 8% higher than of one with Temelin. For the period 1994 through 
2010, the costs would be 223.7 billion instead of 210.8 billion CZK. A cost difference of this 
magnitude - which is only 65% of the assumed cost to demolish Temelin • is hardly enough 



^"Vladimir Prochazka, Potential for Electricity Savings in the Region of Former 
Czechoslovakia (SEVEn, Prague, 1993). 

*World Bank Study: Czechoslovakia: Transition to a Market Economy, May, 1991. 

" We have performed such analysis. Sec M Heindler, A. Koniak, H. Lechner: 
"Conversion of Temelin into a gas-fired combined cycle power plant." Vienna, February, 
1994. 

'^ray, supra n. 27. 



102 

Temelin Nuclear Power Plant 19_ 

to justify a reconunendation for or against the project This is especially clear in light of the 
uncertainties portrayed by the NUS Audit 

In feet, to arrive at even this margin in Teroelin's fevor, the study was required to assume 
that, if the nuclear project did not proceed, 20,1 billion CZK ($670 million) would be 
required to demolish the plant and restore the site.** This number seems extraordinarily 
high-much higher than is required in the U.S. to decommission a nuclear plant, and store 
the spent fiieL^ For example, an ofGcial statement by the Prague branch of Power 
International noted that the demolition of the \JS 1000-MW WPN-1 and WPN-3 reactors 
had been estimated at $3 to 80 million each. When these reactors were cancelled in the 
mid-80s, they had been 65% and 75% complete, respectively.* 

QUESTIONS AS TO WHETHER TENfELIN WILL REPLACE COAL-FIRED PLANTS 

CEZ states that Tcmelin is critical for diversifying the country's energy supply and meeting 
future electricity demand. 10.1 out of 15.2 GW of the total CEZ generating capacity comes 
firom thermal plants.^ These plants use lignite which has a low caloric value and high 



'♦CEZ, Temelin Nuclear Plant Material for the Meeting of Members of the Economic 
Committee of the Czech Parliament at Temelin, 17 (CEZ, Prague, 1992). 

" For example, in the NRC review of decommissioning costs. Battelle projected the 
radiological decommissioning costs of the reference PWR CTroian) at S124.6 million. 
Inside N"RC November 29, 1993, at 7. Labor and fuel storage costs are the two primary 
components of decommissioning costs. In the Czech Republic labor costs are far lower 
than in the VS. In the U.S., decommissioning cost estimates assume that produCTivity 
may be reduced by 50% or more, because of precautions that must be taken in the 
presence of radiation. If Temelin is demolished before completion, the radioactive hazard 
will not exist to decrease produaivity. 

*Ivan Benes, Statement of Power International on the Comments by the Directors of 
CEZ-ETE and Skoda Prague, dated May 26, 1991 (Prepared at the Request of the 
Spokesman of the Czech Government) (Prague, May 31, 1992). 

"CEZ, supra n. 34, at 4. 



103 



Temelln Nuclear Powgr Plant 20_ 

sulfur content Winter air pollution inversions in Northern Bohemia are greatly exacerbated 
by vast quantities of sulfur dioxide, ash, and particulate emitted by the coal-fired plants. 

The NSC Memo states that ■ Veiy Important oonsideratioa' for it was that the completion 
of Temelin might permit CEZ to decommission some of the coaNbominf plants." 
However, the Temelin foreign loans may in tad postpone^deanop of CEZ fossil plants and 
other environmental improvements. Facing a constitutional limit for granting state loan 
guarantees", the Klaus government discontinued negotiation of a $200 million World Bank 
loan. The main components of this transaction would have been (a) improvement of high 
voltage transmission and substations; (b) upgrading of load dispatching facilities; and (c) 
retrofit of several lignite fired power stations.* The government also discontinued 
negotiation of a $150 million loan for reclaiming strip-mined land and other environmental 
projects.** 



"International Envirc.iment Reporter, Feb. 9, 1994. See also NSC Memorandum to 
Kenneth Brody, President and Chairman, Ex-Im Bank, 9 (September 29, 1993). 

^Remarks of Czech Republic Prime Minister Vaclav Klaus to the Bretton Woods 
Committee, Washington D.C (Ortober 15, 1993). 

^International Bink for Reconstruction and Development (World Bank^ / International 
Development Association (IDA), Monthly Operational Summary of Bank and IDA 
Proposed Projects (as of January 15, 1994), Sec.M94-116, 79 (February 4, 1994). 

«Id. 



104 

TemriiB NoH gr Power Plant 21 

CONCLUSION 

The above review of the doounents and data now available amply demonstrates that there 
are still many significant safety, environmental and economic questions about the Temelin 
reactors. These matters should be addressed with full opportunity for open technical 
discussions and public participation. 



Professor Manfred Heindler 

Chief Technical Advisor 

Special Delegation of the 

Govenmient of Austria 



Feb. 22, 1994 



105 
June 23, 1993 



RUSSIAN ROULETTE: 

NUCLEAR POWER 

REACTORS IN EASTERN 

EUROPE 

and the 

FORMER SOVIET UNION 



Friends of the Earth 1993 
ISBN 0-913890-97-9 15 
Third Edition 



106 



Russian Roulette: 
Nuclear Power 

Reactors In 

Eastern Europe 

and the 

Former Soviet Union 

Executive Summary 

The April 26, 1986 Chernobyl disaster awakened the world to the dangers of 
nuclear power. The numerous Soviet-designed nuclear power plants became a matter 
of special concern, particularly to European governments. Seven years and numerous 
accidents later, however, Chernobyl-style plants and other dangerous plants of Soviet 
design continue to operate in Eastern European and former Soviet nations, threatening 
the health of millions of people. 

Though the continued operation of these power plants and the prospect of new 
plants being constructed have people and governments all over the world justifiably 
worried, very little has been done to address the problem. In response to this inaction. 
Friends of the Earth released this report. 

Key Findings: 

* The RBMK, the VVER 440/213, the VVER 440/230, and the VVER 1000 reactor 
designs pose serious threats to people and the environment. Because of the inherently- 
flawed design of these reactors, attempts to backfit the reactors with Western technology 
are prohibitively expensive: it is estimated that to render "safe" the VVER 440/230 and 
VVER 440/213 reactors, $22 billion will be needed. In the case of the RBMK reactors, 
the reactors cannot be brought up to Westem safety standards no matter how much 
money is spent. 

* The disregard for safety and the casual approach to nuclear power plant operation 
common under Soviet government persist into the present. These risks are compounded 
by the countries' reliance on nuclear electricity, to the point where safety violations are 
routine in order to avoid shutting down the reactors and losing electricity. 

* Though opposition to nuclear power is high in the Eastern European and former Soviet 
countries, the nuclear lobby has convinced people that the plants' continued operation is 
necessary. 

* The Eastern European and former Soviet nations are some of the least energy-efficient 
in the world: in order to produce a given unit of GNP, these countries must consume a 
tremendous amount of energy, between 3 and 7 times more than the US. As such, they 



107 



also have the potential for vast improvements in energy efficiency. Simple technologies 
such as compact fluorescent bulbs and high-efficiency electric drives could reduce 
electricity use by 50%. This could render possible the closure of the most dangerous 
nuclear reactors. The countries stand to benefit economically as well as environmentally 
from energy efficiency improvements. 

Other supply-side options are available, including natural gas-fired turbines, 
cogeneration, aeroderivative turbines, and altemative energies such as solar power, wind 
power, biomass, small-scale hydro, and geothermal energies. 

* The estimated cost of the Chernobyl disaster is approximately $300 billion. The cost 
of retrofitting just 24 of the 55 most dangerous reactors to dubious safety levels is $22 
billion. The plan proposed by Friends of the Earth in this report for reactor 
decommissioning, short-term power substitution and energy efficiency investments is 
about $18 billion. 

Policy Recommendations: 

* The Soviet-designed nuclear reactors in operation should be closed down immediately, 
beginning with the 15 RBMK Chernobyl-type reactors and eighteen pressurized water 
reactors of the VVER 440/230 and WER 440/213 types. The second phase of reactors 
to be closed should include the 16 WER 1000 reactors in Russia and Ukraine, and six 
more WER 440/213 reactors. These should be decommisioned as soon as substitutes 
for their electricity output can be brought on line. 

* G7 governments should provide at least $8 billion in grants for short-term supply-side 
energy options including rehabilitation and better use of existing thermal power plants, 
gas turbine combination cogeneration plants, and aeroderivative turbines. 

* Safe, sustainable energy alternatives and energy efficiency measures should also 
receive funding of at least $10 billion during the next five years. Construction of cleaner 
industries and factories to memufacture energy efficient products such as compact 
fluorescent lights and high-efficiency electric drives must be made a priority. Power grid 
improvements are needed. Public transportation systems must be constructed and 
improved to incorporate modem, energy-efficient technologies. 

* Market forces should be used to ease the transition from dependence on nuclear power 
to adoption of safe and sustainable energy policies. The adoption of Integrated Resource 
Planning, in which all options for providing an energy service are considered and ranked 
by cost, should be encouraged by the World Bank, the European Bank for Reconstruction 
and Development, the MDBs, Western governments, and bilateral aid programs. 



108 



REPORT ON THE US EXPORT IMPORT BANK'S ERRORS 

IN THE ANALYSIS OF 
THE TEMELIN NUCLEAR POWER PLAIVT 



Prepared by 

Hnuti DUHA (Friends of the Earth - Czech Republic) 

Paxus Adelova-Calta 

Honza Beranek V. 

Robert Laza 

Erikk Piper 

Martin Sedlacek 



February 22, 1994 



Hnuti DUHA/FoE CR, Jakubske nam 7, 602 00 Brno, Czech Republic 
Phone: 42-5-4221-0438 
Fax: 42-5-4221-0347 

e-mail: org.hduha@ecn.gn.apc.org 



Acknowledgements: This repon was compiled by the Nuclear Energy Group of Hnuti DUHA (Friends of the 
Earth - Czech Republic). However, il would not have been possible v.ithou! the input of several individuals who 
provided well-rcsr;irchs«i informatioc over a Ions penod of time. The opinions of the authors do not necessanly 

imply that all th.""-* v^ho assistcaJ in the repor. have exactly the same concerns aKiut Tcmelin. The authors 

would spec:fi--all) ";ikr to thank: Jin- Barnes (Friends of the Earth, L'S.A) Dave Batker iGrtampeace. USA) Ivan 

Dejmal (Ecolosivi! Society, CR; Mark Hibbs (Nucleonics 'A'eek, Germany: Petr Hlobil (Children of :'.ic Earth, 

CR) Vitezslav Jonas (.Mayor of Duko\any, CR) Wolfgang Kromp (Nuclear Safety Institute. Austria) 

Dalibor Strasky (Calla .Agency, CR) 



109 



EXECUTIVE SUMMARY 

On January 27, 1994 the board of directors of the US Export Import Bank (Exim) approved 
an application from the Czech power utility (CEZ) for some of the work to be done on the 
Temelin nuclear power station. This application is for loan guarantees on the CitiBank 
financing of $334 million for the US goods and services to be provided by Westinghouse. 

The public statement issued by ExIm at the time of this decision contains a number of serious 
errors. Most significantly: 

1 ) Improper analysis of safety problems with this reactor design 

2) Incorrect representation of the World Bank 0\'B)'s position on Temelin 

3) Inaccurate evaluation of the abilitj- of CEZ to operate NPP's 

4) Oversimplified comparison with the only other Soviet/Western NPP hybrid 

5) Understatement of irreversible design faults, especially premature aging 

6) Incorrect claims on the state of radioactive waste storage in the Czech Republic 

7) Misrepresentation of critical comments in expert reports commissioned by CEZ 

8) Improper analysis of Temelfn's effect on the CR economy 

9) Overstatement of Temelfn's positive effects on the environment 

10) Omission of the numerous issues of importance to decision makers (energy 
efficiency possibilities, lender liability issues, etc). 

The authors' sentiments are best reflected by the statement of the first freely elected Czech 
Prime Minister, Petr Pithan, who said in his letter to ExIm President Kenneth Brody: 

'The question of the Temelin facility was not evaluated and discussed in my country 
in a way in which would enable any responsible person anywhere in the world to 
support its completion. ' 

We must conclude that the ExIm bark has done a inadequate job evaluating the facts 
surrounding in the Temelin project. ExIm relied mostly on materials provided by CEZ and 
the Czech government and even used this material in a biased selected manor. Exlm, based 
on their defective study, has decided that US jobs are more important that the safety of 
innocent lives in central Europe. Further, the arguement often stated unofficially "that the 
US should grab it. or else France or Germany will" given the danger is morally 
reprehensible. Bast-d on the findings of this study, we call on the L'S Congress to halt 
ExLm funding guarantees of Temelfn. 



O 



BOSTON PUBLIC LIBRARY 



3 9999 05981 874 8 



ISBN 0-16-047241-5 




9 780160"47241 



90000