(Corrects spelling of NNSA spokeswoman's name in 5th paragraph to "Israeli," not "Israel")

By Andrea Shalal

WASHINGTON, Dec 7 (Reuters) - Critics of a multibillion-dollar program to convert excess U.S. weapons-grade plutonium into fuel for commercial nuclear reactors under a 2000 treaty with Russia have seized on a newly disclosed report to renew calls for an end to the project.

The fiscal 2016 defense authorization law includes $345 million in funding for a plant under construction at the DOE's Savannah River site in South Carolina, which will take 34 metric tons of plutonium and mix it with uranium to form safer mix-oxide (MOX) fuel pellets for use in commercial nuclear reactors.

Congress must still appropriate the funding authorized in the law, but supporters say they do not expect any issues.

Critics argue the MOX project should be halted after years of delays and cost increases, even though any changes could jeopardize one of the few agreements with Russia that is still running smoothly.

Francie Israeli with the National Nuclear Security Administration said the U.S. Department of Energy (DOE) was continuing work on the project for now, but several analyses had shown that diluting the plutonium and disposing of it at a site in New Mexico would cost less than half of the MOX approach.

Russia has its own program to eliminate 34 metric tons of plutonium.

A previously undisclosed report completed by privately-held Aerospace Corp for DOE in August concluded that diluting and disposing of the plutonium - or downblending - was the least technically complex of several alternatives and had the lowest cost risk since no new facilities were required.

"This report confirms that ... the downblending option is clearly less complex, less risky and cheaper," said Edwin Lyman, senior scientist at the Union of Concerned Scientists, urging Congress to end its parochial support for the MOX program.

Lyman said DOE would likely seek to end funding for the project as part of its fiscal 2017 budget proposal.

Aerospace concluded in an April report that it could cost $30 billion to complete the MOX facility, nearly 10 times the estimate of the company, CBI-Areva MOX Services.

CBI-Areva MOX Services, a joint venture of U.S.-based Chicago Bridge & Iron NV and Areva SA, a French state-owned nuclear group, argues that the U.S. project is already 68 percent complete and it will be done in 5 to 9 years. The company says it will cost $3.3 billion to complete the work, on top of the $4.5 billion already spent.

A Nov. 16 review completed by High Bridge Associates, a project management firm, for CBI said the downblending option was risky because cramming too much nuclear material into the New Mexico facility could result in a fission reaction.