* Current EU nuclear waste plans "not satisfactory" - draft
* Legally binding EU rules needed to safeguard citizens
* Deep depositories offer best available option - draft
* Nuclear industry must pay for disposal, not taxpayers
By Pete Harrison
BRUSSELS, Oct 28 (Reuters) - A leaked European Commission draft report says Europe should solve the problem of handling nuclear waste by making industry pay to stash it deep underground, where it will be overseen by independent watchdogs.
"The current situation of spent fuel and radioactive waste management in EU member states is not satisfactory," says the draft, seen by Reuters on Thursday.
EU Energy Commissioner Guenther Oettinger will propose new, legally binding rules on Nov. 3 designed to pave a safer path for the renaissance of nuclear power generation in countries such as Britain and his homeland, Germany.
The best option for disposing of spent nuclear fuel is in "deep geological repositories" -- caverns in clay or granite rocks between 100 metres and 700 metres underground -- says the draft, which feeds into the EU's future nuclear waste directive.
The region produces about 50,000 cubic metres (1.77 million cu ft) of radioactive waste EU each year, of which about 500 cubic metres (17,700 cu ft) are highly active, says industry group Foratom.
Anti-nuclear campaigners welcomed planned measures to ensure greater public scrutiny, independence of waste watchdogs and payment of costs by nuclear operators, not by future taxpayers.
But they accused Oettinger's advisers of glossing over serious doubts about the safety of deep disposal.
"There are gaps in the science, and no disposal site currently exists, yet the Commission is claiming this is a proven method," said Greenpeace campaigner Jan Haverkamp. "We fear a disposal facility could rupture high-level nuclear waste into the water table for hundreds of thousands of years."
Foratom countered that 30 years of research into developing deep sites had proven the method to be feasible.
"As a natural barrier, the rock formation will ensure safety even better than human beings could do," said Foratom's Christian Taillebois. "Why should we wait any longer before implementing what is described by scientists as the safest option for waste management?"
PUBLIC MISTRUST
Current international rules for nuclear waste carry little legal clout, and most such waste is currently kept in interim storage sites, waiting for a permanent solution.
Public mistrust runs high, with the Chernobyl nuclear accident in 1986 still fresh in many Europeans' minds and with widespread concerns about terrorist sabotage.
Nowhere is the issue more tense than in Oettinger's homeland, where demonstrators took to the streets of Berlin in September after the government extended the lifespan of Germany's 17 nuclear power stations.
"Without EU action there is an increasing risk of a negative environmental impact over time," says the draft. "Geological disposal is the only end-point option that is being actively pursued."
Sweden, France and Finland are on track to have deep disposal sites operating by 2025, with Germany, Britain and Belgium making rapid progress, says the draft, but some of the other 14 EU countries with nuclear plants are taking a risky wait-and-see approach.
"This will place undue burdens and threats on future generations," it adds.
Companies will have to stash away billions of euros to pay for disposal of spent nuclear fuel, ensuring that future taxpayers are not left with the bill and to keep competition fair versus other power generators, who already have to pay for their pollution.
It cited Germany as an example. Taxpayers may have to pick up a bill of around 3.5 billion euros ($4.8 billion) for dealing with waste dating back to the sixties, stashed underground in the Asse salt mine.
"These funds should be properly managed and protected in order to make sure that they are available when costs arise," says the draft.
Disposal costs could range between 0.14-0.16 euro cents per kilowatt hour or 3.5-4 percent of the assumed total generating costs of 4 euro cents per kilowatt hour, it says, citing Finnish and Swedish estimates.
(Reporting by Pete Harrison, editing by Jane Baird)