The Ohio Public Utilities Commission (PUCO) approved a scheme Wednesday that will force FirstEnergy's customers to hand over approximately $200 million annually to the company and its shareholders for the next 3-5 years. Customers will receive virtually nothing in return for this massive subsidy, which could ultimately reach $1 billion.
A coal-fired power plant on the Ohio River. Robert S. Donovan
Under Wednesday's order, FirstEnergy will begin to receive hundreds of millions of dollars, with effectively no strings attached. Although characterized as a "distribution modernization rider," nothing in the commission's order requires that these customer dollars be invested in modernizing Ohio's electrical grid or in any way be spent to benefit Ohio customers. Instead, the dollars can be siphoned off from FirstEnergy's Ohio utilities and used to bail FirstEnergy Corp. out of its poor coal investments while boosting the profits of corporate shareholders.
"Today's decision takes hundreds of millions of dollars out of customers' pockets in order to create a massive slush fund for FirstEnergy Corp. and its shareholders," said Shannon Fisk, attorney at the non-profit environmental law firm Earthjustice.
"And the fact that FirstEnergy asked for billions more does not make this decision any less unreasonable. Rather than forcing customers to prop up profits for a corporation that made a bad bet on aging coal plants, the commission should be looking after customers and ensuring investments in job-creating renewable energy, energy efficiency and smart grid initiatives."
Through Wednesday's decision, the commission has aided FirstEnergy's efforts to sidestep a recent order of the Federal Energy Regulatory Commission (FERC) that raised serious questions about FirstEnergy's previous bailout proposal. Under that proposal, customers would have directly assumed all of the financial risk of financially struggling coal and nuclear plants owned by FirstEnergy Corp.'s unrelated competition generation business.
In late April, FERC ruled that FirstEnergy's previous bailout proposal—which PUCO had approved a month earlier—may violate federal safeguards concerning transactions between public utilities and their unregulated affiliates. FERC blocked FirstEnergy's bailout scheme pending a federal review. Rather than submit its proposal for FERC review, FirstEnergy concocted a new scheme intended to bypass the FERC order. Although the bailout ultimately approved by PUCO is structured a bit differently and Wednesday's order mentions grid modernization in passing, the fact remains that this bailout poses the same risk to customers that the FERC order sought to prevent.
"In this long-awaited and complicated decision, PUCO missed a critical opportunity to seriously focus FirstEnergy on the more diversified, cleaner energy future that tens of thousands of customers wrote the commission asking for," said Dan Sawmiller, senior representative for Sierra Club's Beyond Coal Campaign in Ohio.
"A few months ago, FirstEnergy took an important step in moving beyond coal when it announced closure of four units at its Sammis coal plant. With PUCO's decision now issued, we hope to be able to work with FirstEnergy to accelerate its path beyond coal and nuclear and toward new investments in clean energy, energy efficiency and other modern grid initiatives like infrastructure for electric vehicles."
Wednesday's order marks the latest development in a more than two-year effort by FirstEnergy to obtain a customer-funded bailout. Throughout that time consumer groups, industrial customers, independent power producers and environmental non-profits have united in challenging FirstEnergy's efforts as contrary to law and bad for customers. Challenges before the Ohio Supreme Court and FERC to the commission's approval of the bailout are expected.
EcoWatch Daily Newsletter
The coffin lid on USEC's Un-American Centrifuge project near Piketon, Ohio, has more nails driven into it than a reshingled roof in Rainstorm Alley. The proverbial last nail might have been the Department of Energy denial of a loan guarantee in 2009, or the multiple test-centrifuge crash of June 11, or the second denial of a loan guarantee in the fall of 2011, or the refusal of Congress to grant USEC a bailout in the omnibus appropriations bill for 2012.
But USEC, dead dinosaur of the uranium enrichment industry, is still thrashing its tail. Its agents, recipients of large USEC campaign contributions who occupy seats in Congress, have introduced new legislation to dump federal cash toward their corporate sponsor. Bills in the House of Representatives are scheduled for mark-up on Jan. 18.
“This thing has got more than nine lives, and none of them are worth living,” said Henry Sokolski to the New York Times, about USEC's proposal. “It will not do to whine about Solyndra and wink at this." Sokolski directs the Nonproliferation Policy Education Center, which along with the National Taxpayers Union and Southern Ohio Neighbors Group has led opposition to any federal bailout for the alleged uranium enrichment company.
A more apt analogy than Sokolski's cat with nine lives would be to the ghoulish "Freddy Krueger refusing to stay dead," in the words of one Ohio politician who prefers to remain anonymous on this subject. Or a vampire nightly returning from the grave. It sucks the blood from the half-living economy of southern Ohio, it can't bear sunlight, and holding a mirror up to it yields no reflection, because it lurks in the shadow-world of top-secret nuclear stuff.
On Dec. 16, as Congress scrambled to cobble together its smorgasbord 2012 spending deal, you will recall that funds for USEC's phantom non-performing project turned up missing from the legislative language (See part 6 in this continuing series). Nobody claimed to know exactly what had happened, and finger-pointing started immediately. The Piketon district's congresswoman, Jean Antediluvian Schmidt, blamed the White House; the White House blamed Congress; the Senate blamed the House; and not a living soul on Capitol Hill blamed the party actually responsible for the orgy of unaccountability, which is USEC, the company doing its best to go bankrupt, with the U.S. Treasury along for the ride.
USEC's Uncivics Lesson
What did happen in the back-room dealings of the omnibus process is now more or less clear and it makes for a good lesson in the uncivics of American government. For full understanding, turn the clock back to October, when the Department of Energy (DOE) informed USEC for a second time that it couldn't qualify for a federal loan guarantee under program regulations anytime in the foreseeable future.
That had a number of immediate consequences for USEC, including that USEC would not be receiving $50 million in Phase 2 investment from Toshiba and Babcock & Wilcox (B&W), overdue for payment but contingent on USEC's receipt of a conditional commitment on a loan guarantee from DOE. Nor would USEC be getting the $75 million payment of Phase 3, also due but contingent on the closing on a $2 billion loan. That's $125 million in total, which USEC had been counting on to pay its lavish living expenses, while the company made arrangements to either secure the larger haul of $2 billion, or skip town and live on the lamb. Remember the figure, it's a clue to the caper now unfolding in Congress.
USEC had been exerting tremendous pressure on DOE and the White House to make a conditional commitment, even without a near-term prospect of meeting DOE's conditions for closing on a loan, just so that USEC could get its hands on at least $50 million of immediate cash from its so-called investors. In Michael Millikan circles that would be called a scam—asking the federal government to provide a meaningless piece of paper for purposes of extracting "investment" funds from third parties under false pretenses.
At this point in the story, I will disclose that I informed DOE during these shenanigans that I believed USEC was engaging DOE in a scheme to defraud investors by asking for a "conditional commitment" unsupported by the facts of USEC's application. I then did receive a phone call from an agent in DOE's Office of Inspector General (IG), asking me the rather odd question of what information I thought DOE was obligated to disclose to Toshiba and B&W. The question was odd because I am not an attorney, nor do I have access to the proprietary information in DOE's files. I interpret that odd question from the IG's office, which was nearly the entire content of the conversation, to mean that DOE was well aware of what USEC was trying to pull off, but DOE wanted to know how much I knew.
So in October, USEC learned that it would be going without the $50 million to $125 million, which the company had acknowledged it needed to make payroll and pay bills, a need dated to the original financing "deadline" of June 30. And USEC has some staggering bills. The Paducah, Kentucky, gaseous diffusion plant—federally owned but operated by USEC—has the largest "single-meter" electricity usage on planet earth. (The coal-fired TVA plants that power Paducah are major contributors to global warming and acid rain, and Paducah is also the largest single-site emitter of ozone-depleting freon gas.)
The Paducah situation is rather dire, because the plant has less than six months left on its clock; if USEC is going to commit to new power contracts and keep Paducah running, it must act with haste. WARN notices of potential plant closure were sent to Paducah employees as a Christmas bonus on Dec. 22. If you suspect that the impending Paducah closure might be behind the congressional funny-business, what with Kentucky's Mitch McConnell as Senate Minority Leader and Kentucky's Hal Rogers as Chairman of the House Appropriations Committee, you'd have the beginnings of a G.U.T. or Grand Unified Theory, to borrow a term from particle physics. The pressure to float USEC some large amount of Treasury funds is intense, no matter how gutless the politicians or gut-wrenching the corruption.
DOE's big mistake in October, repeating the same mistake it's made in the past, was to give USEC advance notice of the decision, rather than simply make a public announcement. That allowed USEC to get a jump with the media, framing the closed-door discussions with DOE however the company wanted, which it did in a news release on Oct. 21. That news release made DOE's denial of a loan guarantee sound like an approval, with the added step of an "RD&D" program (Research, Development & Demonstration) framed as a measure for certain commercialization, rather than as a final long-delayed test to see if the technology bears potential for future development or not. Every indication is that DOE intends the latter, not the former. USEC had failed to meet numerous deadlines for demonstration of its centrifuge technology, going back to 2005.
USEC also announced a "cost-sharing" agreement with DOE for the new program, as if it were a done deal, not contingent upon congressional appropriation, suggesting that DOE already had the funds and the authority to initiate the program. Moreover, the first stage of the program, as announced by USEC, would involve an 80-20 split of $150 million, with the larger piece paid for by DOE. In subsequent statements from USEC and its agents, including Ohio and Kentucky politicians, it was made plain that the first stage of federal funding was expected and indeed needed as an immediate payment from "existing funds," in order to avoid layoffs in Ohio and at Oak Ridge, Tennessee—layoffs that, in fact, began in early December.
Now let's do some math. Eighty percent of $150 million is $120 million, very close to the amount that USEC had been expecting and needing—but would not be receiving because of the denial of a loan guarantee—from the Phase 2 and 3 investments of Toshiba and B&W. In other words, USEC is saying that since DOE stiffed the company for a fraudulent conditional commitment that USEC needed to collect on contractual payments, DOE somehow owes USEC an equivalent amount of money, required to keep USEC from defaulting on lease commitments at two sites that are owned by DOE.
I suggest that the phony numbers of the proposed "cost-sharing agreement" have nothing to do with actual planning for a thought-out national program of technology development. Centrifuge technology is already outmoded for commercial uranium enrichment, and DOE's sponsored reviews of USEC's technology indicate that it has no commercial potential whatsoever.
Rather, I think that the budget for the "RD&D" program was back-calculated from the urgent cash requirements of USEC Inc., and I think the secretive DOE-USEC negotiations ended with a very stinky trade-off of $120 million in near-term federal funds for $125 million in lost private investment, with the idea of covering all asses, and elephants. The jerry-rigged "RD&D" program serves a national need only from the perspective of avoiding the embarrassment of shutting down facilities on federal land in Ohio and Kentucky precipitously at the start of a presidential election year. Neither the empty-shell facility in Ohio nor the decrepit plant in Kentucky serves any legitimate national purpose, at least none that has been spoken about in public.
If I'm wrong, let DOE produce its paperwork detailing the planning and cost calculations for a centrifuge RD&D program, and let's check the dates, rationale, and authorship of the proposals.
DOE did buckle to USEC's October surprise of a cost-sharing arrangement that DOE would mostly pay for. But it didn't completely buckle. Inquiries to DOE in October as to the source of the alleged "existing funds" drew responses that there indeed were no "existing funds"—Senators Sherrod Brown and Rob Portman had been speaking out of their USEC. Secretary of Energy Chu sent letters to Congress asking for a 2012 appropriation of $150 million, but Chu left it entirely ambiguous as to whether that would be for the second part of the program (with the first $150 million paid immediately from "existing funds") or for the first part of the program, with an additional appropriation requested later.
Chu's intentional ambiguity actually represented an on-going dispute between DOE and USEC. DOE, already caught in multiple scandals involving unaccountable funding, wanted to initiate a program that was legally legit, involving the gradual and controlled disbursement of funds appropriated by Congress. But such a program could not keep USEC out of bankruptcy or the centrifuge project from immediate and permanent termination. USEC needs CASH NOW, as they say on TV, and its conceptualization of a bailout was a $100 million plus dump of uranium from government stockpiles, as had been done before (see part 2 of this series), with no reporting requirement for how the proceeds of sale are spent.
The ambiguity allowed USEC to sell different versions of the bailout to Congress through its lobbyists during the omnibus back-room deliberations, confusing reporters who could not discern whose descriptions of the proposed bailout were accurate. Chu was prevailed upon by the Senate side to clarify, which he did only as the omnibus bill was in final drafting. Chu relayed to Senators that, contrary to USEC lobbyist demands, the DOE request of Congress involved two sequential appropriations of $150 million each, one for 2012 and one for 2013. That became the final Senate proposal, which by all reports elicited no response from the House negotiators.
Boehner explained his non-response as due to House objections that the bailout would violate an Appropriations Committee rule against earmarks. That was a lot of hullabaloo as a rationale for House behavior. If it were accurate, then the rule should have been enforced from the start of negotiations, and no USEC bailout language would have been pursued or expected as part of the omnibus bill.
The real reason that Boehner nixed the home-field bailout was that the clarified language of the Senate proposal would not have met USEC's immediate cash requirements. The company would still have gone bankrupt, before any DOE-supervised RD&D program had gotten off the ground. (And that might suit DOE just fine. USEC has been such a total non-performer, DOE might be pleased to find another contractor to perform the non-commercial work it wants at Oak Ridge R&D facilities.) In other words, it was USEC that killed the proposed centrifuge development program—not the White House, Congress, or DOE.
By the end of the day on Friday, Dec. 16, while the completed omnibus bill was being voted on in the Senate, Boehner was already telling reporters that he would support legislation to provide USEC the bailout funding, done "the right way" through committees, rather than as an omnibus rider. But what Boehner failed to clarify for the media was that his "right way" funding would be for something completely different from what DOE had proposed—not a technology development program to meet national requirements under the accountable supervision of DOE, but some form of material or cash disbursement to USEC Inc., which the company could use to pay its proprietary bills.
And unlike other industry bailouts, the federal government could acquire no control or equity stake in the company as security or recompense, because that would violate the USEC Privatization Act, the gargantuan mistake that Congress has yet to acknowledge, much less rectify.
By Christmas, the evil elves of the Ohio congressional delegation had already rushed to introduce legislation in answer to the company's wish list for Santa, probably drafted by USEC's own lawyers. Jean Recrudescence Schmidt, says she has already introduced a bill which, according to her would give DOE the "authority to assess the viability of technologies associated with the American Centrifuge Plant." But DOE already has that authority and has performed two very detailed assessments, concluding that the technology is NOT commercially viable. By other reports, the Schmidt bill would simply hand over $300 million in cash or material to USEC.
Meanwhile, the U.S. Senators from Ohio, Democrat Sherrod Brown and Republican Rob Portman, spoke with one voice less than 24 hours after the mysterious disappearance of the USEC bailout from the omnibus bill. Together they are introducing legislation that would rectify the delayed-payments problem by "reprogramming $106 million of existing DOE funds" while transferring uranium tails worth $44 million to USEC under the discredited barter arrangement. The total of $150 million in federal assets would again be given to USEC to meet its immediate needs, in the lifestyle to which it has become accustomed.
The House Energy and Commerce Committee has scheduled a January 18 mark-up on the various USEC proposals, including a last-ditch effort by Kentucky legislators to prolong the life of the Paducah plant by instructing DOE to "re-enrich" depleted uranium tails at Paducah, a proposition that would surely lose money for the government under existing market conditions, all to keep one of the world's worst contributors to global warming, acid rain, and ozone depletion belching its gasses for a few more years. (Where are the environmental groups calling for Paducah's rapid closure?)
The USEC bailout proposal, as it stands, is full of contradictions. For example, the uranium tails that Ohio legislators want to use to pay the USEC payroll in Ohio are actually the same tails that Kentucky legislators want to use to keep Paducah in operation. The tail is clearly wagging the dog here, but it can't wag more than one dog at a time. Flooding the uranium market with new USEC bailout material also acts to depress world prices from already low post-Fukushima levels. That has feedback effects, which further erode USEC's profitability. Such problems were the reason that the Privatization Act aimed to remove politicians from the business in the first place.
Whether the combined strength of the Ohio, Kentucky, and Tennessee delegations can push through this corporate welfare monstrosity remains to be seen. The anti-earmark principles of the House freshman class will be sorely tested, and there will be opposition from the other side of the aisle. Consider this blithering assault on USEC by Congressman Ed Markey (D-MA), a member of the Energy and Commerce Committee during the Solyndra hearings:
Ultimately, I must say that Markey gets it wrong. It appears to him in Washington, DC, as if the forces for USEC are pushing nuclear power against competing renewable energy. But USEC in no way represents the nuclear industry; not a penny put toward "the American Centrifuge Plant" will help generate any wattage from nuclear fuel on a commercial basis, and the leadership of the nuclear industry knows this. The point is that USEC's centrifuge technology is NOT commercially viable, and can't be made so. The taxpayer funds dumped toward USEC have nothing to do with energy policy; it is pure wastage, and it wouldn't matter if USEC called itself a solar company, a lollipop company, or anything else. The USEC bailout is a form of pure corruption. It must be exposed and combated as such.
As for the Obama White House, it's clear that it had insight into USEC from the day the President took office. The USEC employees I talk to assume that Obama is stringing the company along, just waiting for the company to go belly-up by its own incompetence clock. More likely, the Administration conceived of the nonsensical "RD&D" program as a way of postponing the company's collapse until after the 2012 election. It was a way to kick the can, just as was done with the Keystone XL Pipeline. But in the USEC case, the can kicked back, and now another $300 million of Treasury funds are at risk of being blown on a company that will only amplify its extortion demands.
In this situation, the Administration does bear an obligation to end the game, tell the truth, and terminate the foolishness. And, oh yeah, there is still the matter of those southern Ohioans left waiting for real development of the Piketon site in a way that brings permanent jobs and revitalization. What about it, Mr. President?
That keeper of Mayan calendar secrets, Karl Rove, has just released "Political Predictions for 2012" in which he forecasts: "Scandals surrounding the now-bankrupt Solyndra, Fannie and Freddie, MF Global and administration insider deals still to emerge will metastasize, demolishing the president's image as a political outsider. By the election, the impression will harden that Mr. Obama is a modern Chicago-style patronage politician, using taxpayer dollars to reward political allies and contributors."
But USEC is the super-scandal still being dug, large and deep enough to swallow all the top brass of both major political parties. Hillary Clinton's husband is the one responsible for the disastrous privatization of USEC, with affirmative votes from congressional leaders of the 1990s, including especially Speaker of the House during privatization Newt Gingrich and Ohio's current governor, John Kasich. Mitch McConnell and John Boehner are deep in the USEC hole, as is 2016 White House hopeful Rob Portman, increasingly mentioned as a likely Mitt Romney running mate.
U.S. Senator Sherrod Brown, running for reelection in 2012, recipient of the first "Progressive Hero" award from Progress Ohio, named "Most Valuable Senator of 2011" by the Nation magazine, has, according to filings with the Federal Elections Commission, accepted more than $58,000 in corporate PAC contributions connected to USEC ($11,000), USEC partners like Babcock & Wilcox ($7,000), and large nuclear utility USEC customers like Duke Energy ($20,000). Quid pro quo, Brown has repeatedly called on the Department of Energy to forgo required financial and technical reviews, circumvent legal restrictions on the use of federal funds, and pump government money to USEC like a mainline supply of speed. With Portman, Brown is the co-sponsor of the USEC bailout legislation advertised as "bipartisan," when the word barbarous is more apt.
Why smart men like Senator Brown, who went to Yale, advocate the federal bailout of a small-cap company that is obviously failing, for a project already determined to have no commercial viability, is a subject for the new year.
So I'll make a political prediction for 2012 of my own. The USEC Scandal will make Solyndra look like a tempest in Teapot Dome, and the whole lot of politicians tarnished by their association with the most magnificent failure of privatization in U.S. history will have their reputations and aspirations ruined. But hey, it won't be the end of the world.
Geoffrey Sea is a writer and historian who has studied the uranium enrichment industry for thirty years. In the early 1980s, he served as a consultant to the labor unions at both the Piketon, Ohio, and Paducah, Kentucky, plants. He now lives on the southwest fence-line of the Piketon site and is a co-founder of Southern Ohio Neighbors Group.
Congressional appropriators of both parties are poised to approve a bailout of USEC Inc. in omnibus 2012 spending negotiations now underway. USEC being a notoriously GOP outfit that has employed neocon villains Richard Perle and Michael Armacost in leadership positions, congressional Republicans have engineered the bailout, Solyndra be damned. And here's a shocker—Democrats are capitulating. Who'd have thought?
Chalk this up to LaTourette Syndrome. Definition: the repetitive, stereotyped issuance of anti-social or obscene legislation, attributed by clinicians to a hereditary systemic defect in American political culture. It is named after the exemplar of the malady, Steven C. LaTourette, Republican Congressman from Ohio's 14th District, designated drum major of the bailout of USEC, which produces no useful product and which already has been pegged by government analysts as non-creditworthy.
Displaying remarkable self-consciousness of his affliction, LaTourette is quoted by Politico as saying: "I've moved the thing to the cliff, and if people want to jump off it then it's in position."
Yes, he actually said that. The specific reference is to the emergency bailout funding negotiated by LaTourette for USEC, a company that unworked itself to the edge of bankruptcy by engaging in multiple hoax projects involving the non-production of nuclear fuel, while unsuccessfully trying to extort a loan guarantee from the U.S. Department of Energy (DOE).
Lemmings don't really follow leaders off the edge of a precipice out of misguided herd instinct; it's a myth. But U.S. congressmen do it as a matter of course. So acknowledges Steve LaTourette. Though it must be said, he has only led people to the cliff—he suggests that he won't plunge into the abyss himself.
Thrown Under the Omnibus
According to reporting by Darius Dixon for Politico Pro (available by subscription) on Dec. 8, Senator Lamar Alexander of Tennessee, the state where USEC's R&D and assembly facilities are located, says he has convinced Senator Diane Feinstein, chairman of the Energy and Water Appropriations Subcommittee, to accede to the bailout in closed-door negotiations expected to conclude on Monday.
Speaker of the House John Boehner, who had received tremendous flak from Tea Party constituents for hypocritical support of a USEC bailout, has turned over drumbeat on the issue to fellow Ohioan LaTourette. Since Piketon, Ohio, is the advertised site of the jobs that would come from a hypothetical commercial-scale USEC centrifuge plant, LaTourette has made an Ohio patriot case for the USEC bailout.
But LaTourette's district, in the extreme northeast corner of the state, is as far from Piketon in Ohio as you can get. And the joke on Ohio workers and voters is that the "Research, Development & Demonstration" jobs produced by the bailout, if any, will be overwhelmingly or exclusively in Tennessee, not in Ohio. For the Piketon site in the Appalachian foothills, the bailout only means a blockade to productive redevelopment, while USEC spends its latest federal allowance.
Most Americans, it must be admitted, were educated about how bills become law by watching the classic cartoon from School House Rock. But Bill's long travail from an American hometown up through committee debate has no resemblance to what happens in the omnibus process, involving the year-end packaging of multitudinous items together. In omnibus negotiations, the leaders of both houses horse-trade in closed-door session, minus any niceties of hearings, committee votes, floor debate, or transparency. The current omnibus bill, which may combine the 2012 appropriations for nine cabinet departments, is being readied for completion by Monday, so it can be hurried through passage to make a December 16 deadline.
While most included items did work up through committee, debate, and mark-up, USEC inserted itself through lobbyists at the very end of the process. The Department of Energy, which denied USEC a $2 billion loan guarantee for a second time in mid-October, unwisely agreed to throw the issue of a USEC lifeline to Congress, just to keep the formerly national corporation from going belly-up. Privatized USEC, however, funded ultimately by public money, took over from there, employing its pull with key legislators from the involved states of Ohio, Kentucky, and Tennessee.
One of them, Harold Rogers, (R-KY) who chairs the House Appropriations Committee, opened the final joint meeting on the omnibus bill (only the introductory speeches were open) on December 8 by proclaiming: "We've lived up to our promise to include absolutely no earmarks in appropriations bills this year."
The glaring exception, as Rogers well knows, is the USEC bailout—a whopping special-interest budget-busting appendix to the normal appropriations process, cutting around every congressional pledge of accountability. LaTourette boasts that the requested $150 million—first installment on a planned $300 million in federal funds—has been whittled down. According to the Politico article, "LaTourette said he believes that the discussions have cut the funding to $123 million, but that negotiations are still fluid."
Lend Me Your Earmarks
The exact amount hardly matters for any public purpose, because even the nature of the payment is up for grabs. To justify further federal investment, USEC was contractually obligated to complete a demonstration centrifuge cascade in 2005, but didn't. When rejected for a loan guarantee in 2009, DOE offered USEC $45 million in compensatory "technology development" funding, along with a concocted no-bid cleanup acceleration contract for up to $200 million [see part two in this series]. When USEC still had not come close to completing its Lead Cascade while begging again for a loan guarantee in 2011, DOE then offered its endorsement of $300 million in new federal "Research, Development &Demonstration (RD&D) funding, but indications are that DOE did not actually think that Congress would take the bait.
DOE and USEC have been sparring more than cooperating, but mostly behind the scenes. DOE has said adamantly that no loan guarantee for USEC is on the near-horizon, but USEC continues to advertise the new bailout funds as supplement to a near-term loan guarantee. USEC wanted the first installment of $150 million paid immediately, using the shady mechanism of uranium barter, but DOE demurred and insisted that the whole shebang be awarded by Congress. DOE and the Office of Management and Budget (OMB) have established a high credit subsidy cost—the fee paid to reduce taxpayer risk—for any potential loan guarantee to USEC, but USEC has rejected those calculations and lobbied DOE and OMB for a reduction. Beggars can't be choosers, unless the name is USEC, too rigged to fail.
USEC has not completed its Lead Cascade demonstration for a reason—the resulting data on commercial viability would sink the full-scale project. [see part three in this series] No rationale has been offered for how a lemon leftover technology from the 1970s can be made more commercially viable by additional years of "RD&D." Meanwhile, the next-generation of uranium enrichment technology is in its final run toward licensing at a GE-Hitachi facility in North Carolina, using lasers that will make centrifuges obsolete.
USEC apparently had trouble selling the RD&D Round 3 justification even to its agents in Congress, so it made up something else. According to an earlier report on the omnibus bill from Politico, "There remains some confusion as to how the $150 million would be applied."
USEC, you see, could not exactly say through its lobbyists that it needs the funding to pay for a technology demonstration that was due to be privately paid for six years ago. So the company apparently told lawmakers that it would apply the funds to pay the credit subsidy cost on a loan guarantee that DOE has clearly said would NOT be forthcoming any time soon. (Since that cost is designed to reduce risk of default, government payment of it would be self-defeating.) The result of the 2009 loan guarantee review was that any such award to USEC would explicitly violate the Title XVII regulations, and since 2009, USEC's market capitalization has declined by about 80 percent.
USEC has refused to disclose how much the credit subsidy cost established by DOE and OMB would be. But reliable sources in government have leaked that the number under discussion in 2009 was 32 percent, given USEC's extreme financial risk parameters. On a $2 billion loan guarantee, that would be a total of $640 million, an amount that USEC clearly could not afford to pay, as it exceeds even USEC's outstanding debt to bond holders.
Faced with that dilemma, USEC has apparently hoodwinked some congressmen into believing that if Congress appropriates a $300 million bailout, in total, those funds could be diverted to pay the loan-shark financing costs on a total $2 billion deal. But hey, this ruse seems to have swung the omnibus appropriation, and key Democratic leadership reportedly is going along.
If congressional Democrats do follow the LaTourette lemming Lead Cascade, environmentalists and community residents in Ohio need not despair. The wasted federal funds will be spent, if at all, on facilities in Tennessee, leaving the question of what will happen at the Piketon site open for contestation. And if our elected lawmakers don't see the light, we have here nearly 3,800 acres of mostly open federal land, just begging to be occupied by those who actually want to work.
Concerned citizens who may have been displaced from tent cities stretching from Wall Street to California, take note. Stay tuned.
You may wonder why Steve LaTourette was recruited to marshal the nitwit forces for a USEC bailout. Whatever happened to south Ohio's own indefatigable USEC-lovin' congresswoman, Jean Schmidt, recently silent on the question?
Well it seems that Ms. Schmidt is in a bit of boiling water of her own, shall we say. One day before the omnibus summit in Washington, that city's Roll Call carried the news that Schmidt is a deadbeat on payments mandated by the House Ethics Committee. The Cincinnati Enquirer also carried the story page 1. Perhaps this is a Jean Schmidt strategy to get onboard with the Gingrich ethics-violation bandwagon?
Meanwhile, on the same day as the Roll Call article, Schmidt's nemesis, David Krikorian, filed to run as a Democrat for her congressional seat. Krikorian has quite different views than the sitting congresswoman about USEC. Krikorian calls getting stuck on a non-materializing federal loan guarantee "political hope-ium."
The national Democratic leadership may wish to consider that capitulation to the USEC bailout caper undermines what will be the Democratic platform for the congressional race in this ever-critical corner of Ohio. It's not too late to pull back from the brink.