Jul 8, 2014

By Tim Jones
Bloomberg News

The Kewaunee Power Station, Wisconsin
Photographer: AP Photo

The best jobs and the biggest employer are disappearing from the town of Carlton, Wisconsin, leaving behind a site that should be ready for a new employer to move in, perhaps a half-century from now.

That’s the legacy of the 2013 shutdown of the Kewaunee Power Station, which generated nuclear energy for 39 years along the shoreline of Lake Michigan. The plant is being dismantled, or decommissioned, a potentially decades-long clean-up that could remove as much as 900 acres from the economic development base of rural Kewaunee County.

"Probably 60 years for sure," said David Hardtke, the chairman of the town of about 1,000. "All I know is I won’t be around. I guess my kids will have to fight that one out."

The Wisconsin facility is part of what Moody’s Investors Service describes as the largest wave of U.S.-based nuclear and coal electric-plant retirements in the past 35 years. The closings stem from abundant supplies of cheaper natural gas and changes in environmental policies. The consequences can be sudden and drastic, affecting school funding, real-estate values and economic development that were linked to the facilities.

Unlike abandoned industrial plants, which can be retooled for another manufacturer, nuclear plants leave another legacy: radioactive waste, which at the Kewaunee site sits in concrete canisters about 100 yards (91 meters) from Lake Michigan.

"The challenge that local officials have to face is large," said Julie Beglin, one of the report’s co-authors.

Economic Power

Sixty-four nuclear plant sites are spread across the country, with 100 operating reactors, according to the Nuclear Energy Institute. About half those reactors are comparable in age to the Kewaunee facility, having been built between 1968 and 1979. The plentiful supply of less-expensive energy, such as natural gas, increases the risk to local governments that are financially reliant on the plants, Moody’s said.

"These places are located in largely rural communities and so they are often the biggest taxpayer in the locality," said Daniel Lipman, executive director of the Nuclear Energy Institute, the Washington-based nonprofit advocate for the nuclear power industry.

Hot Gas

Dominion Resources Inc. (D), a Richmond, Virginia-based power company, closed the 556-megawatt Wisconsin plant in May 2013, citing economics that worked against it.

"It was cheaper to purchase energy on the open market than to produce it at Kewaunee," said Mark Kanz, a company spokesman. "I’m sure it won’t be the last to close. There will be other plants that go through decommissioning, whether it’s economics or from equipment-related issues."

Moody’s said natural-gas supplies are influencing decisions to "retrofit or extend the life" of plants. While the economics of power generation can change, two factors work against the nuclear industry, said David Lochbaum, director of the Nuclear Safety Project at the Union of Concerned Scientists.

"The cost of non-nuclear electricity is trending down," Lochbaum said, "and the cost of maintaining aging nuclear power reactors is trending up."

The Vermont Yankee nuclear power station, in the southeast Vermont community of Vernon, is to close by year-end. Moody’s said the town of 2,200 receives 48 percent its operating revenue from operation of the plant, which is owned by Entergy Corp. (ENT)

Six Decades

The aftermath of a nuclear power plant’s leaving a community is more complicated and lengthy than the end of a conventional industrial facility. Federal regulations governing the decommissioning of sites are designed to protect the public.

The process must be completed within 60 years, according to the Nuclear Regulatory Commission. Seventeen plants, including Kewaunee, are in some phase of decommissioning, the NRC said on its website.

The Wisconsin facility was the largest employer in Kewaunee County, a rural expanse east of Green Bay, where dairy cows outnumber the 21,000 people by a ratio of more than 2-to-1. About 630 people worked at the plant before it closed last year. Now, about 260 work on mothballing it. By October, only 140 will.

"They were the highest-paying jobs in the county, and a big chunk of that was flowing through the economy," said Ron Heuer, chairman of the county board of commissioners. "What the hell do we do now?"

Linda Sinkula, Carlton’s clerk and also a county supervisor, said the town will have little choice but to raise taxes.

"It’s just a mess," she said.

Empty Booths

Carlton will lose about $360,000 in annual revenue, roughly 70 percent of its $515,000 budget, said Hardtke, the town chairman. The county will lose about $730,000 a year, Heuer said.

At the street level, Kunkel’s Korner, a diner in downtown Kewaunee, about 5 miles north of the plant, is less busy.

"People we used to see three times a week we now see only once a week," said owner Mark Kunkel. "We’d average 100 to 125 a day. Now it’s down to 80 to 85."

There’s a glut of homes for sale, with a 25 percent to 30 percent increase in houses on the market, said real-estate agent Jack Novak.

Yet to be determined is the taxable value of the Kewaunee plant site and how much revenue Carlton and the county could anticipate. Hardtke said an appraiser is evaluating the land and that his report should be submitted in weeks.

Fallow Ground

The experience of Zion, Illinois, a Lake Michigan community of 24,000 about halfway between Chicago and Milwaukee, suggests the value will be a fraction of the taxes generated when that town’s nuclear power plant was operating.

The Zion nuclear power station, built in 1973, closed in 1998 after an equipment failure led to a yearlong shutdown. At its peak in 1996, the plant on about 200 acres paid the town $19.6 million, according to Finance Director David Knabel. That was roughly half the tax base, he said.

More than 16 years later, the plant is still being dismantled. The cooling towers remain, and nuclear waste is stored in a bunker. Taxes collected on the site amounted to only $1.5 million in 2012, Knabel said.

"There’s 200 acres of lakefront property that is completely undevelopable, unusable until they are done decommissioning the site," Knabel said.

"I’d love to be able to put condos and restaurants there, but they’d be overlooking a bunker filled with nuclear waste," Knabel said.

In the meantime, Scott Bortolini, who chairs the Kewaunee County Economic Development Corp., said the search is on for new jobs. Dairy cows represent 25 percent of the county’s economy, "but they don’t pay a lot of taxes," he said.

(A previous version of this story spelled Daniel Lipman’s name incorrectly.)

To contact the editors responsible for this story: Stephen Merelman at smerelman(at)bloomberg.net