Rising construction costs to affect Yucca

Benjamin Grove

Tuesday, Aug. 16, 2005 | 11:08 a.m.

WASHINGTON -- Las Vegas home buyers aren't the only ones being pummeled by the skyrocketing cost of construction -- rising prices are likely to deliver a severe wallop to Yucca Mountain.

Rapidly increasing costs of labor, materials and fuel could drive the construction cost of the proposed high-level nuclear waste repository up at least 40 percent from badly outdated Energy Department cost estimates, experts said.

Some segments of the construction industry are experiencing some of the worst cost inflation since the 1980s, and that will translate to a higher Yucca price tag, UNLV construction management professor Neil Opfer said.

"You have to wonder if they (Energy Department) are getting whip-sawed by all these costs," Opfer said. "You're just seeing this huge inflation. Some of these costs are getting out of sight."

The Energy Department has said the total cost of Yucca Mountain would be about $58 billion by the time it is filled with 77,000 tons of nuclear waste, closed and monitored well into the next century.

The cost of actually constructing Yucca -- including excavating and developing miles of underground tunnels and constructing waste-processing and temporary storage facilities at the surface -- would be only about $4.5 billion, the department said.

But the department has not updated its Yucca cost estimates since May 2001, and officials now say even that estimate was based on a repository design the department is no longer planning to use.

Energy Department officials last week said they would not disclose a more up-to-date construction cost estimate until they have completed their design plan. And they won't unveil the design plan until they submit the application to the Nuclear Regulatory Commission early next year.

When pressed on why the department does not have a construction cost estimate this late in the process, department spokesman Allen Benson said, "We will not speculate on costs until the design is finalized."

The Energy Department can expect some sticker shock when it gets around to a cost estimate, experts said.

Construction costs around the nation have shot through the roof since 2001, with Nevada experiencing some of the steepest price jumps in some cases, experts said. To compound the Energy Department's problem, last year officials acknowledged Yucca faced at least a two-year delay -- two more years for prices to climb ever higher.

A 2001 cost estimate for a construction project such as Yucca is "woefully out of date," said Ken Simonson, chief economist for Associated General Contractors of America.

The department faces a number of material cost spikes, Simonson said. For example, steel mill products are up 54 percent since 2001, said Simonson, who studies government product price statistics. Concrete-related materials are up 16 percent since 2001, he said.

Notable increases in diesel fuel and petroleum products also would increase costs at Yucca, a remote desert site 90 miles northwest of Las Vegas, he said.

National increases in material costs are reflected in Southern Nevada prices for everything from PVC piping to lumber, said Steve Holloway, vice president of the Associated General Contractors' Las Vegas chapter. Competition from opening markets in China and others around Asia are driving those costs up, Holloway said.

And union labor costs are now increasing from 4 to 6 percent a year, he said. Nonunion labor costs have increased even more dramatically, Holloway said.

Construction worker salaries in Clark County have gone up from $765 per week in 2001 to $836 last year, according to the Nevada Employment, Training and Rehabilitation Department.

"They (Energy Department) would have some problems getting labor, given the shortage of skilled labor here," Holloway said.

Workers won't easily give up good construction jobs on and around the Strip to toil at the remote Yucca site, Holloway said.

"It's a heck of a commute," Holloway said.

When labor, materials and other cost factors are considered, the overall cost of construction has gone up 20 percent each year in the last two years, said Las Vegas real estate consultant John Restrepo. No contractor or agency has been immune to the price spikes, he said.

The plights of two major government builders -- the Clark County School District and the Clark County Public Works Department -- illustrate what a much larger government builder such as the Energy Department might face in Southern Nevada.

More and more, there are so many construction jobs that contractors can name their price, officials with the School District and Public Works said.

The School District in recent years had endured construction cost increases of 5 to 10 percent, but in the last year alone costs spiked 40 percent, district director of construction Fred Smith said. Part of that is due to unprecedented levels of competition for contractors with private developers, especially those constructing medium- and high-rise condos, Smith said.

"The amount of work in the Las Vegas Valley has outstripped the abilities of contractors, subcontractors and laborers," Smith said. "They are able to put some premium prices on bids for their work."

It's often difficult as a government entity to compete with private developers who have more flexibility to pay contractors more, Smith said. There is no relief in sight, Smith said.

"They just keep putting more and more of these (private development projects) on the books," Smith said.

The Clark County Public Works has been staggered by the price of three commodities -- concrete, steel and petroleum products, which are used to make asphalt, deputy director Les Henley said. A cement shortage about a year ago has mostly abated, but it left prices higher -- roughly 30 to 40 percent higher than two years ago, Henley said.

And "steel prices have just been ridiculous over the last few years," Henley said.

Yucca watchdog groups are demanding an updated Yucca price tag.

"We'd like to know the cost," said Tom Schatz, president of Citizens Against Government Waste. "Four years for the last estimate is fairly poor, even for government."

Increasing construction costs may just be one factor that ultimately could drive up the overall estimated cost of $58 billion, Nevada Nuclear Projects Agency director Bob Loux said.

"A lot of people in and out of government are saying that the overall cost is well over $100 billion," Loux said. According to a 2001 Energy Department estimate, it would cost roughly $4.5 billion to construct Yucca, including about $1.2 billion to excavate and develop the underground tunnels where nuclear waste would be stored in metal containers. It would cost another $1.7 billion to construct a facility at the surface opening of the repository for a waste acceptance and transfer station and temporary storage.

Other costs would include:

$200 million for waste containers and titanium "drip shields" to protect the containers from moisture.

$330 million for testing the performance of the repository

$940 million for other "regulatory, infrastructure and management support" costs.