By Geoffrey Sea
The Commonwealth of Kentucky may sue the federal government to compel cleanup of the now-closing uranium enrichment site at Paducah, according to the governor and the state attorney general. The quasi-privatized operator of the facility, USEC Inc., filed suit against the Department of Energy (DOE) in May. Shareholders and/or bondholders of USEC may sue the company for a third or fourth time over its current financial collapse, and the feds may have to sue USEC if it defaults on its obligation to properly restore the Paducah plant to safe status before it departs.
Whistleblowers allied with the Natural Resources Defense Council have filed suit against Paducah contractors over past fraud and legal violations in waste handling at the site, a new round of litigation after fraud claims joined by the federal government about a decade ago. Paducah workers will likely sue to recover their vanishing pension benefits, and heck, if you don’t sue somebody, then you’re just not a member of the Paducah nuclear club.
It’s a litigious self-sustaining chain reaction, a post-atomic parody of the old Tom Lehrer A-Bomb song “Who’s Next?” Yesterday I visited “Future City,” an empty developer’s dream town adjacent to the hulking Paducah Gaseous Diffusion Plant, and I saw the Paducah mural wall along the lovely Ohio River, which includes one depicting the incoming traffic of the “A-Boom” of 1952. But there’s an ominous empty mural space after it, ripe for depiction of the rear-ends of automobiles in the A-Bust of 2013, and it’s clear that Future City belongs now only to the lawyers.
The Week the USEC World Ended
USEC, the company whose bust-up operations and the cessation thereof included no serious planning for impacts on the community, is only midway through a nuclear week of woe.
On Monday, June 24, a special joint session of the Paducah City Council and the McCracken County Fiscal Court, chaired by mayor Gayle Kaler, was called to respond to the crisis of USEC’s precipitous departure, resulting in a joint resolution demanding federal insurance of safe power-down and recognizing united community opposition to a planned on-site 100-acre waste cell following plant demolition.
Representatives of Neighbors for an Ohio Valley Alternative (NOVA) attended, presented comments, and announced the launch of a nationwide petition-drive to transfer responsibility for nuclear cleanup from the Department of Energy to the U.S. Environmental Protection Agency. The NOVA petition also calls for a transfer of federal funds from USEC’s failed “American Centrifuge” program to urgent safety and cleanup work at the Paducah and Piketon, Ohio, sites. Media attention has focused on my revelation at the Monday meeting that for years USEC has been moving contaminated equipment from the Piketon site to Paducah, under the rubric of “spare parts,” but with many outstanding questions as to why contaminated spare parts would be required for a facility scheduled to be shut down.
On Tuesday, June 25, Kentucky Governor Steve Beshear came to Paducah for meetings with Mayor Kaler and other officials mobilizing community response, after which the governor announced that the state is contemplating a lawsuit against DOE. Such a suit would be modeled on the massive successful litigation brought by the states of Washington and Oregon against DOE, to increase the funding and alter the action plan for cleanup of the Hanford nuclear reservation, near the border of those two states.
At issue in the potential Kentucky case would be DOE’s failure to plan for and fund safe power-down at Paducah. Instead, DOE relied on a weak lease provision that requires USEC to accomplish that work, but DOE apparently failed to take cognizance of USEC’s financial collapse, rendering the company incapable of incurring additional expenses without pushing itself into bankruptcy. That eventuality would bring a raft of other problems of unanticipated consequence, including the potential disappearance of worker pension benefits at the same time workers lose the remaining value of their USEC stock holdings.
Enron All Under Again
USEC stock value has flat-lined at about 30 cents per share, creating a radioactive penny-stock, making a mockery of USEC’s “Stock Up” program of partial employee compensation. It’s Enron all under again, with economic impact highly concentrated in the communities of Paducah and Piketon, far less capable of absorbing the impacts than was Houston.
Also on Tuesday, Edward Markey was elected to the U.S. Senate in a special election in Massachusetts. Markey has been USEC’s arch-foe in the House, dubbing it “the United States Earmark Corporation,” a jab at the House Committee chairmen from Kentucky, Hal Rogers and Ed Whitfield, who claimed credit for the Republican “No Earmark Rule” even as they shoveled new federal subsidies to USEC. In its carefree days, the company would dutifully kick back some of those subsidies in the form of campaign contributions, with Rogers and Whitfield near the top of that list. They, along with Paducah point man Mitch McConnell, will have to explain to constituents, if not the Justice Department, why USEC took the federal money and ran.
This would be a propitious time to review just one of Congressman Markey’s prophetic anti-USEC rants in House committee deliberations, this one in opposition to USEC’s eligibility for a federal loan guarantee.
Now, Congressman Markey will move to the U.S. Senate, where he will caucus with the majority, just as USEC is preparing to submit a third revision of its loan guarantee application, or so the company says.
Quadruple Back-Flip Split?
But the week is far from over. On Thursday, June 27, USEC shareholders are meeting at the company’s beltway-bandit hideout in Bethesda, Maryland. They will stare straight into the double-barrels of doomsday de-listing warnings from the New York Stock Exchange (NYSE), one because USEC’s stock price has failed to meet the one-buck minimum for over a year, and another because the company’s total market capitalization is only 75% of the $50 million minimum NYSE requirement. If USEC is de-listed for either or both reasons, half a billion dollars of bond debt becomes immediately due.
To ward off that Apocalypse, USEC shareholders will vote on a no-choice proposal for a reverse stock split, whereby current shares will be traded in for new ones at a ratio of between ten-to-one and thirty-to-one. It’s a Wikipedia understatement that “a reverse stock split is often an indication that a company is in financial trouble,” even when the swap ratio is lower than double-digits. But USEC has a number of additional problems. While the reverse split will likely cure the share price deficiency at least temporarily, it will also likely worsen the market capitalization deficiency, which USEC suggests in a disclosure statement. That’s not just because reverse splits have the stench of dead flesh, but because odd shares that cannot be swapped at the selected ratio must be cashed out. (If the swap ratio is thirty-to-one but you only own twenty-nine shares, the company has to buy your shares.)
NYSE just was not cut out for micro-cap companies that make a meager living by extorting illegal subsidy payments from corrupt politicians. Maybe USEC needs a quadruple back-flip split on the balance beam as its final substitution for a legal business plan?
And it gets worse for USEC. The company needed to cut its losses at Paducah, after paying about half a billion dollars each year just in power costs to TVA. However, the company banked on being able to pack-up and leave Paducah cost-free. It had intended to shut out the lights, and “de-lease” the facility, using any threat of nuclear safety calamity from a rapid power-down as a way to extract yet more federal payments for subsidized “extension.”
When the Department of Energy said no to that plan in May, according to reliable sources, it also informed USEC that it would hold the company to a lease provision that the plant be returned in “safe condition.” The possibility of federal aid for that project is negated by USEC’s own scheming that Paducah power-down costs not be included in the 2013 federal budget (even in theory, such funds will not be available until October at the earliest).
There is ongoing wrangling between the litigants even now as to what exactly “safe condition” means. USEC is meeting a minimal standard of its own determination, simply blowing air through the system as diffusion cells are powered down, but leaving substantial residues of solidified uranium and transuranic crap inside the pipes and compressors. That will be a costly nightmare for future cleanup workers. (Workers report about two inches of residue coating the insides of all process equipment). Imagine a gigantic sixty-year-old sewerage installation that’s never been Roto-Rooted.
That leaves a horrid legacy for future cleanup workers, as Terra Hays testified at Monday night’s governmental meeting. She is the wife of a Paducah worker who became seriously ill after only 23 months of removing and packaging contaminated materials at Paducah, and Ms. Hays cited the statistic that there are now 19,128 active claims for work-related illness compensation at Paducah.
DOE was able to compel USEC to take minimal safety precautions at Paducah because USEC’s continuing investment scam is to say that it will apply for and receive a $2 billion loan guarantee from DOE, a loan guarantee that is inexplicably supposed to enable USEC to build a new centrifuge plant with undemonstrated technology that will cost a minimum of $5 billion. Thus, USEC did not terminate its TVA power contract at the end of May as threatened, and to date has shut down about 60 percent of the Paducah cascade, with the remainder to be shut down over the next month or two. Power consumption has been reduced from about 1500 MW per year to about 350 MW or lower.
With USEC’s financial situation, however, that creates a whole separate set of issues. USEC did not anticipate having to pay the costs of that work, and so did not disclose those costs to its investors or the SEC. In a Form 8-K filed with the SEC on May 31, USEC says only that “USEC is in discussions with DOE regarding the timing of USEC’s de-lease of the Paducah GDP and is seeking to minimize its transition costs, which could be substantial.” By my estimation, the unanticipated power costs alone will total in the tens of millions of dollars.
And that raises the question of whether USEC has been forthcoming with its investors and federal regulators headed into its shareholders meeting on June 27. A cornucopia of new potential lawsuits!
Scores of World War II ammunition bunkers cluster around the Paducah plant. I think they may find a new use sooner than the gaseous diffusion plant, warehousing the litigation files about to be generated in a case of uncontrolled nuclear proliferation. As for the massively contaminated plant site itself, how could we do better than a new federal penitentiary for the white-collar perpetrators of these hazmat-orange crimes?
The security fences and guard stations are already in place for the nuclear chain gang, and the plant was prophetically organized by cell-block. Consider the government cost savings on convict transportation alone.