But it leaves wide open the role of nuclear power in building "a new economy powered by clean and secure energy" – and the question of what to do with existing, highly toxic nuclear waste.
"The nation has already accumulated 60,000 metric tons of spent nuclear waste, and the material is going to have to be isolated from the environment for hundreds and thousands of years," says Edwin Lyman, senior scientist at the Union of Concerned Scientists in Washington.
"There's no way to make the waste disappear. No matter what the French say, there's no alternative to having a mined geological repository," he says. The challenge is to find one that is technically and politically acceptable.
The president, who campaigned against the Yucca Mountain site, could have withdrawn the license application, currently before the Nuclear Regulatory Commission (NRC).
Instead, he opted to scale back funding to cover only those costs "necessary to answer inquiries" from the NRC.
Moreover, the budget document released by the White House last week makes no mention of nuclear power as an element in a transition to a low-carbon economy. Instead, it cites the need for increased support for solar, biomass, geothermal, wind, and low-carbon-emission coal power.
For Senate majority leader Harry Reid – who battled the Yucca Mountain project against long odds from his first year in the Senate, and who is up for reelection next year – it's a career victory.
"It was very easy working with the Obama administration to bring about these cuts," he said. "In the future, people will say that President Obama kept his promise to the people of Nevada."
"It's a vote of no confidence for a plan and a process that has been flawed from the beginning," says Anna Aurillo, director of the Washington office of Environment America.
The 1982 Nuclear Waste Policy Act gave Washington responsibility for setting up a permanent, high-level nuclear waste repository. Eight proposed sites were narrowed to three, then to one.
Over the strong objections of Nevada's congressional delegation – and controversy over flawed studies – Congress voted in 1987 to approve Yucca Mountain as the sole candidate for a permanent nuclear waste repository. In 2002, President Bush designated Yucca Mountain as the site, and in June 2008, the Department of Energy submitted its license application to the NRC.
Since 1994, ratepayers have contributed $10.8 billion to help pay for it, according to the Nuclear Energy Institute, an industry group. Moreover, nuclear provides most of the nation's carbon-free electricity generation, company officials say.
"We have 104 reactors in 31 states providing one-fifth of the nation's electricity generation overall," says Steve Kerekes, an NEI spokesman. "When you look at carbon-free electricity generation – hydroelectric power plants, wind, solar, geothermal, nuclear – of those sources, nearly 75 percent comes from nuclear power plants. We are far and away the leading source of carbon-free generation."
The decision to abandon Yucca Mountain leaves the administration and the Congress with big questions to resolve.
"My own view is that we should continue to keep Yucca Mountain as an option," including allowing the application process to continue, he says.
"The budget can be a pretty heavy-handed tool for eliminating programs, but I'm really troubled about the decisions made with Yucca," she says.
Since failing to complete a storage facility by 1998, as provided in the contract, the US Energy Department has faced open-ended court challenges over billions in liability payments to utilities now having to store toxic waste on site.
"The government is going to pay one way or another. You can get rid of Yucca, but you can't get rid of the government's contract obligations," says Jerry Stouck, a Washington attorney who represents several utilities in this dispute.
To date, courts have awarded utilities more than $1 billion, with appeals pending. But those suits typically cover costs through 2004; a second wave of lawsuits is already under way for subsequent costs.
"What we're going to have if the government does nothing is 50 mini-storage facilities, which the government is going to have to pay for. The cost of consolidating that in one place or two places will be a lot less," Mr. Stouck says.