September 20, 2011

Dear congressional appropriators and other colleagues --

Thank you all very much for meeting with me last week.  I find our meetings extremely valuable.

There are several analyses of NNSA and wider Energy and Water priorities I would like this organization to prepare for you, but circumstances press.  This email will have to suffice for the week.

After absorbing the Energy and Water markups and meeting with some of you I have been pondering one or two questions about the Chemistry and Metallurgy Research Replacement Nuclear Facility (CMRR-NF) above all.  Especially this one: given what I think we know about CMRR-NF, UPF, and their wider context in National Nuclear Security Administration (NNSA) modernization and national security budgeting overall, why would we want to start up construction and procurement in FY2012?

The short answer is that the only reasons I can see to fund construction and procurement now are purely political, having to do with parochial state and electoral interests.  Fiscal responsibility and sound management strongly suggest not starting construction and procurement now.  Reasons for this are given below.  A longer explanation, with references, is at Reasons Not to Build, or to Delay CMRR-NF, (May 22), updated with some bigger-picture budget concerns and shortened in this CMRR talk in Los Alamos, (July 19).

1.  I think many of us share at least part of the following views, which bear on the question of whether or not to provide CMRR-NF construction and procurement funds to NNSA for FY2012.  I have added what I think are some obvious truths that are not being much discussed, as far as I know.

• There is not going to be enough money over the next decade to accomplish all of NNSA's ambitious modernization goals.

As the Governmental Accountability Office (GAO) has written (pdf) regarding the FY2012 Stockpile Stewardship and Management Plan (pdf) (quoting selectively from pp. 21-23, with emphasis added):

• Previous GAO work has documented NNSA's poor record of project and contract management
• NNSA continues to struggle to meet cost and schedule goals on major projects (GAO-09-406T)
• NNSA lacks reliable information on its capital improvement projects (GAO-10-199)
• NNSA remains on GAO's High Risk List for project management.  NNSA's cost estimating policies and procedures need improvement (GAO-11-278)

• NNSA's two major construction projects, CMRR and UPF, comprise about 85% of construction funding included in the FYNSP but do not yet have firm cost and schedule baselines.
• FYNSP funding requirements for these two projects reflect cost estimates made early during project design and may not represent valid total project estimates.

• While DOE and NNSA have recently taken steps -- such as updating important guidance -- to improve project management (GAO-11-278), project cost growth and schedule slippages will adversely affect NNSA's operations and modernization plans.

             ...

• ...deferred maintenance will continue to accumulate through FY 2016. [footnote omitted]
• NNSA expects deferred maintenance to grow at about $70 million per year throughout the FYNSP and the remainder of the first decade.
• To stop the growth in deferred maintenance, NNSA will need to dedicate additional resources beyond the $88 billion planned over the next decade.
  
  
• NNSA's plans to maintain its existing infrastructure, while an improvement compared to its past record, do not align with, and may negatively affect, the agency's modernization plans.

                           ...

• Future cost increases and schedule delays with ongoing and planned LEPs will adversely impact NNSA's modernization plans.

• NNSA cannot complete CMRR-NF and UPF at the same time in the coming decade without damaging its core programs and its scientific workforce, and/or failing in its LEP deliverables.  It is staggering to think that CMRR-NF and UPF comprise 85% of NNSA's modernization budget for the coming decade, and yet NNSA is plunging forward, into construction in the case of CMRR-NF, without a baseline cost or schedule estimate for either one, even after years of design -- in CMRR-NF's case, design that has cost hundreds of millions of dollars.
  
  The low cost projection for these two facilities alone averages $787 million per year during the 6 highest years (2014-2019), and reaches a peak of $960 million in 2017 (FY2012 SSMP, p. 67).  It is hard to imagine that this expense stream would not very negatively impact other NNSA programs -- which are also complex, slated to grow, tightly scheduled, and in many cases far more important than CMRR-NF to NNSA's mission.

• Negative budget and other security contingencies are greater than at any time in the last two decades.  The fiscal realities expressed in the Budget Control Act of 2011 and the stark processes it places into motion are only the beginning of the fiscal challenge to NNSA.
  
  I would also say that there is also a very real and growing crisis in the U.S. economy, with both short-term and long-term components.  The causes of this crisis can be enumerated variously; opinions about it, and what to do about it, vary widely.  This intractable economic crisis is already affecting NNSA's modernization plans fiscally, a process of which we have not seen the last.
  
  Beyond this, the present crisis may also affect NNSA's modernization plans in other ways -- even directly, through markets for labor and materiel.  The point here is that of contingency, the lack of certainty as to the future.  The skies are filling with "grey" and "black" "swans."  The very nature of national security is changing, in ways that are difficult to understand and even harder to control.  One upshot is that NNSA may not be able to spend its way out of these problems -- and not just because there may not be enough money provided in the narrowest sense.
  
  There also will be -- there already is -- strong downward pressure on DoD nuclear modernization plans, on plans to replace most nuclear delivery systems.  Of course I think this is terrific.  But the upshot, whatever our views, is that we don't know what the future stockpile will be.  Not larger, but possibly smaller in both number and type of warhead.  I mention this here because DoD budget pressures may become NNSA budget pressures.  At present there is DoD interest (manifest as future funding voluntarily foregone) in an immediate CMRR-NF.  But as our cousins in the Arms Control Association recently reminded us:
  

  These looming budget reductions appear to spell trouble for any military program that is seeking a large infusion of funds over the next decade, such as the nuclear weapons accounts. “We’re not going to be able to go forward with weapon systems that cost what weapon systems cost today,” Strategic Command chief Gen. Robert Kehler, who manages U.S. nuclear forces, told a Capitol Hill audience July 26. Referring to a proposed new generation of strategic bombers and submarines, he said, “Case in point is [the] Long-Range Strike [bomber]. Case in point is the Trident [submarine] replacement…. The list goes on.” As to how the budget situation would ultimately affect the nuclear force, Kehler said that ­“everything is on the table.”

  Some Republicans, like Senator Coburn on the right, are already talking about significant cuts in DoD nuclear weapons programs which would still provide a huge, diverse, modern, long-lived triad.  Numerous expert voices on the left have long expressed similar views.  Whatever one's views on nuclear deterrence, there is little doubt that highly-organized parochial interests inflate budgets above managerially-optimal amounts.  We can all name projects whose justifications are inflated by hot air.

• Pit production, the enhancement of which is the sole coherent purpose of CMRR-NF, is apparently not needed to maintain existing warheads indefinitely, as the JASON LEP study concluded, or at least not needed now.
  
  Most of you have seen this discussion of mine from March 2010 of this issue.  Frank von Hippel, Bob Peurifoy, and most if not all of you have come to the conclusion that even if CMRR-NF were ever needed to expand pit production, it is certainly not needed now.
  
  There are questions about the W-80 warhead to most of which I am not privy, but you are.  One question to which I am privy is this one, posed to me by Dr. Steve Younger, a lifelong nuclear hawk currently running the Nevada Test Site: why would the U.S. want to put a nuclear weapon on an slow-moving, air-breathing, low-altitude delivery system?
  
  All this leads to the next point.

• UPF is far more programmatically important than CMRR-NF now.  National policy (i.e. the 2010 Nuclear Posture Review) currently stigmatizes pit replacement, which would require special presidential and congressional authorization.  This policy is not the mere politics of the moment but rather is based on some clear technical concerns, primarily: successful certification of such warheads is just not assured.  UPF (in some form, not necessarily the present one) is however necessary to safely continue the LEP process.  So far (as I was told) each and every LEPed warhead or bomb has required a new-made secondary.   No LEPed warhead has used a new pit.  No such warhead is as yet approved.

• The national security and worker safety impacts of attempted CMRR-NF construction will be entirely negative from now until it is fully operational in 2023 or later -- a crucial 12-year period, assuming construction and start-up proceed as planned.  Indeed, these impacts have been somewhat negative since the beginning of the project.  For example, a relatively-inexpensive seismic and safety upgrade for the southern wings of CMR, the only ones which were seen as needed then or now, was abandoned in 2001.  Assuming the most optimistic schedule henceforth, almost two and half decades of unsafe operations will have followed the decision to pursue CMRR-NF by 2024.  CMRR-NF has been appropriated almost one-half billion dollars so far, with no national security benefit to show for it.  CMRR-NF construction would have negative security impacts as well for the coming decade.
  
  We don't know how negative the programmatic impacts will be of attempting to construct CMRR-NF at the same time as NNSA pursues a half-dozen or more other nuclear construction projects in the crowded Pajarito Corridor.

• Stretching out this project's construction will cost more money than not stretching it out, and will have other negative program impacts at this crowded site.
  
  There is a lot of overhead in construction at Los Alamos National Laboratory (LANL) -- overhead of various kinds.  Indeed it would be fair to ask if (financial) overhead is not actually the main meal ticket for LANL, which any working scientist there will tell you has long been the case.  Purchasing and installing equipment at the Radiological, Utility, and Office Building (RLUOB) is costing more than the building itself, including all its mechanical and other built-in systems.

• Operational and maintenance costs of CMRR-NF will be greater -- far greater -- than those being incurred at CMR today, and a significant drain on LANL's operating budget.  LANL has estimated annual maintenance costs for CMRR-NF at 2.5% of capital cost.  LANL: "In FY14 [sic: FY2023], the CMRR facility is planned to become operational. The CMRR maintenance budget is projected at approximately 2.5% of RPV [Replacement Plant Value] to sustain its condition. One of the challenges for the Laboratory and NNSA is to provide the funds necessary to meet this new maintenance funding demand." In FY07, total LANL maintenance spending was $88 M, of which $6 M was for the existing CMR building.  (See LANL, "Ten-Year Site Plan, FY2008-FY20017," LA-CP-07-0039, January 9, 2007, pp. 114-115. Study Group files.)
  
  Increased operational costs are in addition to this.  As the GAO has written, NNSA doesn't know what its facilities cost to maintain and operate (see GAO-10-582 and GAO-11-188).  Maintenance budgets for the coming decade are inadequate (GAO, cited above).
  
  Thus, quite unlike UPF at Y-12, CMRR-NF will be a significant addition to the LANL RTBF budget for decades to come.  Also, CMR D&D will cost significant amount of money as well -- very roughly four hundred million dollars, current estimates suggest.   Deferral of construction, operational, and D&D expense streams for, say, the decade of UPF construction would save more than a billion dollars in present value.
  
  The discounted present value of deferring these expense streams must be set against the remobilization costs which would be incurred by delaying CMRR-NF.  But that's not all.  A proper accounting would also include the benefits of adopting the less-risky conventional design-then-build approach, the value of capture of lessons learned from UPF construction, the benefits of lessened competition for nuclear vendors and workers, and other factors.

• I think we also all know that the Keynesian economic effects of this project are negative in comparison to middle-class tax cuts.There is a short discussion of the efficiency of CMRR-NF as a job "creator" here (see last bullet).  In sum, CMRR-NF creates no useful goods, services, or infrastructure, trains nobody, and attracts no private capital.  Average salaries are too high to provide net stimulus to the economy.  Much or most of the spending will take place in the wealthiest county in the western U.S.

So I think the conclusion we must draw is that the House approach, that of holding back construction for FY2012, is more prudent than the Senate's.

Indeed I think we should conclude from the above factors alone, which are apart from the ultimate value of a CMRR-NF project some day, that it would be prudent to withhold long-lead procurement as well as construction.  This would cut CMRR-NF appropriations for FY2012 to $80 million below the Senate mark and $40 million below the House mark, to $160 million.

I think the House acted relatively responsibly by the best lights available at the time (June).  Since June, the fiscal outlook has darkened considerably and appropriate adjustments now need to be made.

2.  There are other reasons, familiar to some of you if not yet accepted, why CMRR final design should be slowed or paused, and a portion of the funding current directed at final design used to explore alternatives to the project.

I am not going to repeat those reasons here; if you had time and were interested you could follow the links in Reasons Not to Build, or to Delay CMRR-NF.

There is another reason for delay, and for positive legislation requiring study of alternatives.  The National Environmental Policy Act (NEPA) requires an objective, accurate, and applicable environmental impact statement (EIS) to be written prior to any decision to implement a major federal project likely to have significant environmental impacts.  As you probably know the 2003 CMRR-NF EIS did not propose or review the CMRR-NF being designed today, or any alternatives to it.  The 2004 Record of Decision (ROD) which is the basis of NNSA's CD-1 selection of alternatives was a decision to build quite a different project than the one contemplated today.  The project and its impacts have grown by factors that typically range from 5 to 100.  Costs have grown by an order of magnitude.  Meanwhile the stockpile has declined by half, pits are known to last a century (JASON), refurbishment LEPs are known to be effective indefinitely (JASON), seismic concerns have dramatically increased (LANL), and the CMRR-NF schedule has fallen back to at, or near, the end of all the first scheduled LEPs.  These will deliver warheads with 2 or 3 decades of useful life.  Meanwhile NNSA proposes to cure its NEPA noncompliance by writing an ex post facto "supplemental" EIS which does not offer or analyze any, let alone "all reasonable" (the legal standard) alternatives to the present project.  The SEIS explicitly rejects the EIS alternatives and consequent ROD it would supplement, leaving NNSA with a hell-bent-to-leather approach to CMRR-NF, without a valid ROD.

Up to now Congress has not chosen to question the lack of alternatives examined, or NNSA's flagrant reversal of NEPA's procedures, which were devised by Congress to avoid precisely this situation.  Our litigation challenging this situation was eventually dismissed, after stimulating creation of the ex post facto SEIS, on what we believe to be a highly "creative" legal doctrine.  We are appealing, and we are exploring further litigation.  I hope Congress becomes interested in the questionable legality of NNSA's proposed action.  Much more than legal niceties involved; some of the real fiscal and policy reasons to care are above.  We have tried very hard to offer you all a hand up in this matter.

Thank you very much for your attention, and for all your hard, honest work.

Sincerely,

Greg Mello