Tennessee’s Nuclear Energy Developments Spark Debate

In June 2025, Governor Bill Lee visited Paris and met with officials from Orano. The company had previously announced in September 2024 its intention to establish a multi-billion dollar uranium enrichment facility in Oak Ridge.

Tennessee officials had initially welcomed the contracts for uranium enrichment facilities in 2024, but a few months later, they chose to exempt the project from sales tax, which caught local leaders off-guard. This decision raised concerns over significant revenue losses stemming from the lucrative project.

Oak Ridge City Manager Randy Heman and Anderson County Mayor Terry Frank were taken aback to learn about the state and local sales tax credits linked to Orano’s $4.5 billion project. The Tennessee Legislature passed this exemption in April, something Frank noted wasn’t part of the Nuclear Advisory Committee’s recommendations.

Orano is close to finalizing a contract to build its uranium enrichment facility in Oak Ridge, a city historically significant for its role during the Manhattan Project and World War II.

Legislators approved Senate Bill 885 and House Bill 1133, which broaden the definition of “certified green energy production” to allow sales and use tax credits for nuclear facilities, like Orano’s project.

Alongside these tax exemptions, the company is set to receive $6 million in grants from the state’s economic development department. This funding is part of a broader $60 million government initiative aimed at revitalizing the nuclear sector over two years.

Additionally, $5 million will be allocated to Oak Ridge’s SSP-2 site due to the transfer of land from the U.S. Department of Energy to Orano USA, along with necessary licensing approval from the Nuclear Regulatory Authority.

Similarly, Type One Energy Group Inc. is investing $233.5 million to revamp Clinton’s Bullrun nuclear facility, supported by a $4.5 million state grant. An additional $715,000 grant will fund the BWXT enrichment project, which aims to produce centrifugal sectors at Oak Ridge as part of a long-range plan to bolster fuel production for the National Nuclear Security Administration’s defense program.

Orano has announced plans to establish a business office in Oak Ridge in June specifically for its uranium enrichment activities.

Mayor Heman mentioned that the city staff are engaged in the process and aren’t overly worried about the facility’s sales tax implications. He believes that future property taxes and economic growth will make up for any short-term losses.

“We see this as an incentive to attract more industries,” Heman said. He expressed satisfaction with the trajectory of the nuclear sector, which he credits to the governor’s efforts and economic initiatives.

However, uncertainty lingers among Tennessee officials regarding the sales tax exemptions. The Financial Review Bureau hasn’t provided a clear assessment of the financial implications.

Slate, another facility that has secured state grants totaling $19.5 million, is anticipated to support Tennessee Valley officials in seeking federal approval for a small modular reactor at Oak Ridge’s Clinch River site. Despite concerns about technology and rising costs similar to those faced by Georgia facilities, TVA president Don Mour believes these projects will position America as a leader in innovative energy solutions.

TVA’s Jeff Lyash noted that the utility needs 20 small modular reactors to effectively transition away from coal-fired energy production.

Tennessee does not allocate state funding to federally owned power providers that serve parts of seven states in the Tennessee Valley. Instead, TVA compensates the state instead of taxes related to its four nuclear power plants—Sequoyah and Watts Bar.

According to state assessments, the equipment and construction costs for such facilities are not subject to sales and use taxes, with some materials considered exempt as industrial machinery. However, the recent legislation introduces tax exemptions for the purchase of small modular reactor machinery, even when it isn’t manufactured by TVA, which is pivotal to the law.

Furthermore, the financial impact analysis suggests that future nuclear energy facilities may be exempt from “unknown amounts” of sales and use taxes. Oak Ridge officials remain uncertain about the potential tax revenue impact.

Political Dynamics

Republican Senators Shane Reeves and Clark Boyd initiated a bill that redefined the nuclear project as “green energy,” but they did not address any amendments impacting the sales tax exemptions until the close of the April session.

When the state’s nuclear advisory board concluded its work in October 2024, it made several recommendations, including the reclassification of nuclear facilities. Yet, Mayor Frank, a board member, stated that the sales tax exemptions were not part of the committee’s suggestions.

Still, Republican leaders were able to push these amendments through the Senate with relative ease, supported by Governor McNally and Senator Yager. They encountered opposition mainly in the House from Democrats.

A spokesman for McNally pointed out that he was aware of the tax credits included in the bill and noted that all four TVA nuclear power plants are already exempt from state sales and use taxes. Moreover, components and construction related to small modular reactors are also exempt as industrial machinery.

The state’s commitment to nuclear energy is emphasized as a priority, aiming to position it at the forefront of the industry. Kleinheider stressed the importance of maintaining incentives that present Tennessee as a reliable partner for the nuclear sector.

Yager, meanwhile, stated that the Senate bill aligns nuclear energy with other “clean energy sources” and will aid in enhancing production capabilities. Although Orano’s plans emerged months before the bill’s passing, he views the investment as a historical opportunity for Lone County, promising long-term economic benefits.

However, raising concerns about tax exemptions, Yager acknowledged that such benefits represent money that local governments would otherwise receive. He reassured that he is dedicated to working with local officials to secure the best outcomes for both the nuclear objectives and the hosting communities.

Reeves, chair of the Senate Energy Committee, noted that the bill originated from the Nuclear Energy Advisory Committee to draw more facilities and supply chain activity. He maintained that discussions on the tax revenue impact indicated no major concerns from local officials.

The House’s initial vote of 87-2 in support of the measure showed strong backing, but the Senate amendment faced scrutiny. After influential support from McNally and Yager, Boyd ultimately decided not to oppose the bill, despite his previous hesitations.

The Senate firmly supported the amendment, leading to a final House vote of 70-24 in favor. The governor signed the bill into law, which took effect on July 1st.

Democratic House Speaker John Ray Clemons voiced significant discontent among Democrats regarding what they view as a “legal fiction” that expands the definition of “certified green energy production facilities” for nuclear energy lacking scientific backing.

Clemons also expressed concerns that the Trump administration appears to be pushing for TVA privatization as part of a broader strategy. He advocated for separate tax credits for businesses rather than for working-class families, indicating a disconnect in priorities.

He pointed out that although TVA purchases are exempt from state sales and use taxes, the Senate amendment additionally exempts purchases not directly produced by TVA. This suggests that private companies also benefit from tax exemptions on industrial machinery and equipment used in uranium enrichment processes.

Clemons added that if private nuclear investment continues to escalate, he would argue that through these tax exemptions, both Tennessee and local governments could face significant financial losses.