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It was a dark and stormy night, except it wasn't, a full forty minutes before sunset. Last Friday, March 2, darkness came in curtains of rain, whipping winds, and a vengeful cloud front, punctuated by lightning flashes. The horses stabled on my farm fled to shelter, and Mweowa, my white German Shepherd, whimpered at my thigh, afraid to even look outside. Lethal funnels spun off the mother-storm had already wreaked devastation through southeast Indiana, northern Kentucky, and southwest Ohio, moving in a wedge that pointed distinctly at its cyclonic kin—the USEC uranium centrifuge facility south of Piketon, Ohio.
Yes, it's spooky. The death toll from the tornado flock has reached 38, concentrated in the energetic west, before the projectile point crossed the Ohio River at Moscow, site of a long-abandoned nuclear construction project. Afterward, the trees of Moscow-on-the-Ohio were reportedly draped with homeless rugs. A southern prong of twisters obliterated the town of West Liberty in eastern Kentucky. The easternmost tornado of the Ohio swarm cut a two-mile, 100-yard wide swath through the backwoods community of Camp Creek in Pike County—named either for its choice location as an Indian campsite, or for Christian camp revivals, or both. If it had continued eastward just a few more miles, the tornado would have hit "the American Centrifuge Plant" dead-on.
That is indicated by the National Weather Service report of a "March 2, 2012 Tornado SW of Piketon, OH" six miles southwest of the town. The tornado proceeded on a due easterly course for two miles, right on the 39th Parallel. A few miles to the east, that course travels along Hewes Street, an internal road on the Department of Energy (DOE) "reservation," a road that traces the 39th Parallel, the southern utility road of what is now the alleged test facility of the centrifuge uranium enrichment complex leased by USEC, Inc.
In other words, Mother Nature's lead storm cascade aimed right at the USEC buildings that house its test facility, called the "Lead Cascade." The Lead Cascade was intended to be the prototype for an 11,000-machine array of forty-foot tall centrifuges, until that project ran into monumental problems of financing and technology. A political football, the project is still kicked around, and I attended a "roundtable" at the site exactly two weeks prior to the tornado, hosted by U.S. Sen. Rob Portman (R-OH) of the "No More Solyndras Party." Portman is still angling to secure a $2 billion federal loan guarantee to enable USEC to build its forlorn plant, now proven to be a brave-new-climate tornado target.
One year ago, at a forum hosted by the Fluor Corporation, which has been contracted to clean up the adjacent site of the old shuttered enrichment plant (and is also a subcontractor on USEC's centrifuge misadventure), I wound up discussing Hewes Street with Jamie Jameson, head of Fluor's Piketon project. For some odd reason I couldn't pinpoint even at the time, I tried to explain that Hewes Street was the kind of historic feature the community might want to preserve as the reservation is redeveloped. The 39th Parallel is steeped in Masonic mysticism in these parts. George Washington viewed the parallel with esoteric reverence (the northern corner of the District of Columbia was planned to rest on the parallel, so the ultimate apropos target of the 2012 tornado spear might have been Washington, D.C.), and he can be considered the founder of the numerological cult of 39. While a British officer, Washington surveyed the latitude through Ohio, and he later designed a sundial to work only within one degree. The parallel nearly touches the northern edge of a twenty-acre prehistoric Indian earthwork enclosure just west of the DOE reservation, and local Freemasons of the pioneer generation planned eternal repose in graves set on latitude 39.
Whether the atomic planners who mapped out Hewes Street were part of this Masonic conspiracy I cannot say, nor can I speak for the Higher Power behind the Tornado of 2012. But if signs are had, I think we have one. Take a look at the eastward path of the northern prong of the March 2 tornado front, according to the National Weather Service Storm Map. It hones in on the DOE reservation, which is located just north of the Route 23 marker on the map, between Piketon and Lucasville.
And the spear-point pattern is not happenstance. It generally follows the route of the Ohio River Valley, which in turn follows a line of geologic faults that emanate northeast from the New Madrid earthquake focal point in Missouri. It is conjectured that this geologic fault line has electromagnetic properties conducive to intense electrical storm activity along a recurrent path. That is, Piketon, at the midpoint of the wall of the lower Scioto Valley, sits at the consistent cul-de-sac of one of America's most potent Tornado Alleys.
But there is something very strange about that Storm Map. The easternmost tornado, marked with a red balloon, is the Otway tornado in northwestern Scioto County. The Camp Creek tornado, just northeast of it—the one aiming straight for the USEC facility—is not marked, though it is listed as the last tornado in the time-sequence. Pike County has been preserved on the map, as it is in Department of Energy documentation, as a virtual tornado-free zone.
This might be written off as a chance error, were it not for a very long list of such errors in federal government documentation, including:
- Obvious spring-fed wetlands on the southwest boundary of the DOE reservation (mostly on my property) have never been recognized as wetlands, which would merit special environmental assessment and protection. An official of the Ohio Department of Natural Resources (ODNR), while staring at the marsh grass with me, told me the problem was that they were too close to the atomic site, implying that an official designation might be a hindrance to development. DOE documents have so far declared that "there are no wetlands" within a mile of the DOE site, which is patently false.
- A letter from the U.S. Fish and Wildlife Service (FWS) declaring the USEC project site to be habitat of the Timber Rattlesnake, listed as an endangered species by the State of Ohio, was mysteriously missing without indication of its absence, from the circulated draft Environmental Report for the American Centrifuge Plant, prepared by USEC and provided by the Nuclear Regulatory Commission (NRC). By the time the crucial document was produced, by way of snail mail in an unmarked envelope, the deadline had passed for licensing intervention on grounds of endangerment to the species. Though the FWS letter was produced to the NRC, the Department of Energy has yet to acknowledge the letter's existence. The letter now can be found in Appendix B of the final revision of the Environmental Report.
- The DOE reservation is ringed by properties listed on or eligible for the National Register of Historic Places, including numerous prehistoric earthworks and pioneer-era homes (including mine), but DOE did not conduct an official survey of such properties as required by law until 2011, and prior documentation including that produced for USEC's NRC license, affirmed the absence of nearby historic properties, even though they were known to exist. One unacknowledged geometric earthwork is 300 feet long, perhaps 2,000 years old, and it sits at the western highway entrance ramp to the DOE reservation.
- Before 2001, during operation of the old uranium enrichment plant, which emitted large quantities of fluoride to the air and water, ODNR staff discovered fluoride poisoning in local wildlife, but were instructed not to file reports of the discovery, for fear of impeding new projects at the site, including the centrifuge venture.
These are only examples of a persistent paranormal phenomenon at Piketon. Projects have been authorized, licensed, and federally funded on the premise of no wetlands, no endangered species, no impacted historic properties, and no serious tornadoes. In plain fact, there are wetlands, endangered species, impacted historic properties, and serious tornadoes. And if they had been recognized in timely fashion, the monumental wastage of funds on USEC's little twisters could have been averted.
But this is Appalachian Ohio, and federal law is assumed inapplicable. The USEC Environmental Report used to obtain expedited NRC licensing downplayed the risk of tornadoes thusly on page 3-52:
Tornadoes do occur in Southern Ohio; however, specific analyses of the frequency of tornadoes in the region show that they are rare...The site had an average of 3 days per year between 1950 and 2002 with severe storms with winds exceeding 58 mph.
Prior environmental reports for Piketon projects had been even more dismissive of tornado threat, conveniently citing the lack of record of severe devastation in Ohio for 50 or 100 years. That was particularly galling to students of history, since the removal of Indians from most of Ohio was accomplished by General "Mad" Anthony Wayne at the infamous Battle of Fallen Timbers in 1794. The battle site acquired its name because a horrendous tornado had felled the trees, removing the Indians' usual camouflage, and though that site is far to the north, another community named Fallen Timbers for like reasons lies close to Piketon toward the southeast.
The disingenuousness of official denials of tornado hazard were revealed to me most poignantly on a site tour aimed at locating "artifacts" for display at a future "atomic museum." Among the rusted paraphernalia of outdated nuclear ingenuity, I spied off to the side the steel door to a room marked in big stenciled letters: TORNADO SHELTER. Also, it bore the funnel-shaped international icon of a tornado, in case non-Anglo migrants might be wandering around the atomic site. I want that door displayed in the future museum—right next to the highlighted passage from old environmental reports, denying that there is any tornado danger at the site.
What might a severe tornado, of the type that struck on March 2, with winds ranging from 75 to 175 mph, mean for a hypothetical commercial-scale centrifuge plant, spinning uranium hexafluoride gas? Neither USEC nor the NRC bothered to conjecture. But on June 11, 2011, in fair weather, a simple power outage initiated a cascade of consequences that included failure of backup power, the crash of six of thirty-eight centrifuges, at least one breached casing, and the disabling of two safety systems. Inspectors noted an atmosphere of employee confusion and improvisation. [see article on the June 11 crash]
Now add hundred-mile-per-hour winds and a cyclonic storm hitting a Portman-pumped facility of eleven thousand super-fast uranium centrifuges. And pray.
That's what I did on the early evening of March 2, looking out over tempest from the cover of my back porch, as the USEC sirens blared non-stop. (Both DOE and NRC officials—none of whom have visited—concluded that they could envision no "visual, auditory, or atmospheric impact" of USEC's project on my historic property. Would that they had stood there with me on March 2.)
My home was secure. The family that built it, and rebuilt it after a partial collapse circa 1870, obviously knew of the tornado danger, for the outer brick walls are twenty-four inches thick and the roof is reinforced with industrial steel. I braved the outdoors to try to make out what the announcer over the USEC PA system was saying. The house is a mile from the USEC buildings, but the company's PA system comes through loud if never clear. (They say the former occupant of my house, a man named Fonzo, went bonkers thinking that the atom-plant voices were speaking to him personally, but never able to make out what they said.)
On March 2, o'er the sweep of rain and through the ionized atmosphere, I listened intently for emergency instructions from on high. But I only heard garble. I suspect the muddle of the message would only have increased had I gone straight to the source.
Late-breaking—a possible second tornado near Piketon on March 2 awaits confirmation by NWS as of Tuesday, March 6.
For background on USEC and the American Centrifuge Plant, see Geoffrey Sea's article series by clicking here.
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.
EcoWatch Daily Newsletter
Congressional appropriators are collectively like the notorious Soup Nazi from Seinfeld. Special-interest lobbyists dole up for the dole-out, to face judgment both capricious and fascistic, impossible to predict. For the 2012 omnibus spending bill scheduled for a vote today, Dec. 16, one big surprise verdict has been rendered: "No soup for USEC!"
That's right, the alleged in-the-can $300 million bailout for my favorite non-performing nuclear company won't be leaving the can, or perhaps we should say it's been flushed down the can—it isn't in the bill being introduced in the House. "Left on the cutting-room floor," is how one breaking press account describes it. The "American Centrifuge Plant" or ACP as they called it, is now kaput.
There are few winners in the energy sector. Time-warp manufacturers of incandescent light-bulbs are one, as Congress would block implementation of the Department of Energy's lighting efficiency standards. Why not go whole-hog and rescind the rural electrification program, so to revive the beeswax industry? A coalition of manufacturers, energy industry groups and environmentalists has assembled to bash the move.
Virtually all programs of the Department of Energy (DOE) face cuts from budgets requested by the Administration. Renewable energy suffers more than nuclear and fossil fuels. The $181 million in unallocated authority for renewable energy loan guarantees is rescinded, terminating that whole program, but everybody knew that was coming. And, $233 million has been cut from the U.S. Environmental Protection Agency.
Nuclear industry dreams for a revival of the Yucca Mountain spent fuel repository are dashed, as hoped-for funding to pursue the project did not materialize. That hits USEC at the back-end, since the company's one diversified subsidiary specializes in the storage and transportation of spent nuclear fuel.
No Soup for USEC!
I first heard of the disappearance of the USEC bailout from the DC deal of deals on Dec. 15, when sent a link to the published Energy and Water portion of the bill, which includes no mention of any special funding for USEC. That was soon followed by trade-press articles expressing astonishment that the ballyhooed bailout was gone, as if there had been some mistake. By the end of the trading day, USEC stock was moving in enormous blocks—about 1.5 million shares in the last half hour—to close at the all-time low of $1.16, and falling.
It's almost as if my jabs at Congressman LaTourette (R-OH), pusher of the bailout in the House [see part 4 of this series] had been taken seriously. The impression was reinforced by subsequent analysis of the vanishing bailout in Politico, which included claims that Senate Appropriations leaders, led by Democrats Feinstein and Reid, had forwarded proposed bailout language to the House side and never heard back.
But this explanation by way of accident represents journalistic ignorance, not congressional negligence. Whatever the public posturing, legislators backed away from the bailout for reasons, many of them elaborated in this series of articles on USEC. [see part 1 of this series and subsequent articles in this series] USEC had continued to characterize the needed assistance differently from what DOE was proposing: USEC needed cash to pay its bills, plus a massive loan guarantee; while DOE offered only "technical assistance" with controlled, delayed disbursement. USEC needed a heroine fix. DOE offered methadone rehabilitation.
Atomic Stink Bomb
USEC also had to hope that the congressional bailout would slide by before news of the company's partnership talks with the distinctly un-American AREVA were disclosed. And it almost happened that way, until the omnibus agreement was delayed and AREVA spilled the beans in Paris, in a crisis. The flirtation with the French may have been especially damaging to relations with the Francophobic Tea Party caucus in the House of Representatives.
In sum, the proposed USEC bailout had become an atomic stink bomb, a potential Solyndra Grande that no House Republican wants hung around his neck. And that may hold particularly true of House Speaker Boehner, from Too-Close, Ohio.
That interpretation is supported by reporting in the Columbus Dispatch, according to which, Boehner and other House Republicans considered the proposed USEC bailout as a potential violation of their pledge to include no earmarks—a point I made when the bailout idea was unveiled.
While it remains technically possible for the USEC bailout, or any other change, to be added to the bill in the final hours, nobody thinks that will actually happen. Congress intends to adjourn for the holidays, and USEC will be left with its threat to "demobilize" ACP permanently, in the absence of both a bailout and a loan guarantee.
The only total reality escapee is Rob the Poor Portman, U.S. Senator from Ohio, who has built his whole political career on USEC advocacy. “We can’t let it go. This would require us to come back later and spend far more of the taxpayers’ money," Portman is quoted as saying by Politico, on news of the missing bailout language. "You have to have it.”
No, Rob, we don't have to have it. Your White House ambitions are not a national security need.
A more accurate assessment of the "American Centrifuge Plant" was made also on Thursday afternoon by a regular commenter on a USEC investor message board: "Yes, it's over. It was never real anyway."
The big winners of the 2012 omnibus appropriations battle are the people of Ohio, who now can reclaim our public land from the political fiction that has passed.
Congressional leaders of both parties had rushed to provide an emergency bailout for the limping nuclear fuel supplier USEC Inc. But the bailout package, now stuck in the DC-standoff muddle, is too little and too late. USEC, hemorrhaging money, appears to be jumping ship to the arms of a French-government suitor.
Both former national nuclear companies of the United States and France, USEC and AREVA, are now quasi-privatized. Together they have driven the world market in nuclear fuel, and their axis of cooperation and competition has given definition to the global nuclear industry.
They were the only applicants for the fourth, forgotten, "front-end-nuclear"category of loan guarantees from the U.S. Department of Energy (DOE)—AREVA for its Eagle Rock centrifuge project in Idaho, and USEC for its "American Centrifuge" project or ACP near Piketon, Ohio. Both companies have suffered mightily from the global downturn in nuclear prospects and especially from the sudden market saturation in nuclear fuel, caused by the lingering shutdown of 44 of Japan's 54 nuclear reactors.
Many have believed it inevitable that USEC and AREVA would overcome their rivalry, and now the inevitable is happening. AREVA announced on Dec. 13 that the Eagle Rock facility, though now delayed, may be completed by a partnership of the two. The announcement would not be possible if discussions between the companies were not already at some advanced stage.
Significantly, on the same day, an expected congressional bailout of USEC, reported to be part of the omnibus 2012 appropriations package, evaporated in the most recent standoff between Reid and Boehner. USEC stock price plunged nearly 5 percent on that news, to $1.20, one penny higher than its historic closing low, reached just days ago.
Because the USEC bailout was structured in the form of federal "Research, Development & Demonstration" assistance for ACP technology [see part 4 in the series on USEC]—a poorly-chosen cover for the needed emergency cash infusion—the funds would not be spendable if USEC is pursuing project merger with AREVA. Even if the omnibus spending bill is salvaged, and it includes up to $300 million in ACP technology assistance, that provision would be immediately mooted by even the suggestion that USEC would abandon ACP for Eagle Rock.
(And to the Appropriations leaders reading this, the provision should be removed from the omnibus package, since the cat is out of the bag that USEC is pursuing another course).
USEC has made clear since the bailout was proposed in October that technology assistance would be insufficient to save the company or the project in the absence of a conditional commitment on a $2 billion loan guarantee. Meanwhile, the DOE has made clear that USEC has no chance of qualifying for a loan guarantee before at least two years of a technology development program not yet funded or begun.
Given the incompatibility of those positions, it was only a matter of time before ACP was acknowledged as over. How over is the American Centrifuge Plant? It's over like a flipped flapjack on the back of a turtle turned upside-down. And that, my friends, is over.
Around and Around We Go
While first reports provide few details of a prospective AREVA-USEC centrifuge partnership, the necessary parameters emerge from recent history. Almost as soon as he took office in 2007, Ohio Governor Ted Strickland, a hometown boy long familiar with USEC and its woes, pursued his own inspiration for an AREVA-led bailout of USEC, hosting talks between the companies at government offices in Columbus.
Strickland's conception, of course, was to substitute an AREVA centrifuge enrichment plant for USEC's unfinanced ACP, which was already foundering. That idea ran into a host of practical and legal roadblocks, including the impossibility of transferring USEC's NRC license to a different company using different technology, the straightjacket of USEC's long-term lease at the federal site, prohibitions of foreign ownership in the USEC Privatization Act, and, not least, the absence of any profit-incentive for USEC. Ultimately, it was USEC that ended the negotiation with insistence on a $2 billion federally-backed loan for its lonesome, and that pushed AREVA to Idaho, where it found a site on private land in sparse Bonneville County.
The last gasp of the failed Strickland initiative was a hoax event at the Piketon site in June of 2009, at which USEC and AREVA jointly announced, with an entourage of political parasites, that they would build an AREVA-design nuclear reactor at Piketon. But no one would say exactly where it would be built, or how it would obtain regulatory approval, or who would pay for it. Oops!
So let's see. AREVA has a private construction site, a centrifuge technology already proven and profitable around the world (licensed from URENCO), an NRC construction and operating license, and a conditional commitment on a $2 billion loan guarantee awarded in 2010. Despite the current downturn in its fortunes, AREVA is a diversified global giant with operations in dozens of countries.
USEC only leases the federal site in Ohio, which comes with a raft of regulatory and legacy cleanup problems. Its technology straddles the line between outmoded, dysfunctional, and fictitious, as the belated small demonstration-scale cascade suffered a major crash last June [see part 3 in the series on USEC]. USEC is mired in debt and has no financing to speak of, denied twice for a DOE loan guarantee and delayed for a federal bailout that would be restricted to a technology demonstration that probably never will come to pass. While USEC uses the slogan "A Global Energy Company," its only production plant is in Paducah, Kentucky, scheduled to close next May. Its slogan should be: "Think Globally, Act in Paducah."
The only thing that USEC does bring to the table is the chief asset it acquired through privatization—its order book of utility customers awaiting shipments of nuclear fuel.
USEC already signaled it was looking to team with a foreign partner when it signed an agreement with Russia's TENEX last March, including a commitment to support a future TENEX centrifuge plant on U.S. soil. That agreement went over with USEC's political backers like a depleted uranium balloon. Many of those same politicians had spent their careers making Cold War justifications for additional Piketon funding on the argument that Piketon was needed to kill the Russians, not capitalize them. (Lenin's prediction that western capitalists would one day sell him the rope he would use to hang them comes to mind).
Under political pressure, USEC unceremoniously dropped its Russian Centrifuge project plans. AREVA was the last and most logical resort.
Therefore, it is clear what a USEC-AREVA partnership would look like. USEC would abandon the Piketon site and the long-running fiction of ACP, releasing the company from hefty NRC licensing fees and other expenses it can no longer afford to pay. Paducah can close on schedule or soon thereafter, and USEC's customers, those that remain, can be delivered to the AREVA-USEC joint venture in Bonneville County, Idaho. With full subscription for its product, Eagle Rock could be up and running within two years. That's just in time to cover for the expiration of the current agreement that supplies USEC customers with uranium downblended from old Soviet nuclear warheads.
The foreign ownership statutory restriction would not be violated, since USEC would retain its corporate identity. USEC would be buying into AREVA, not vice versa. And the supposed "national security" justification for ACP would fall away as the malarkey it always was. It had been said that only USEC could provide the fuel for TVA reactors that then produce tritium for U.S. nuclear weapons. The argument was simply fallacious—TVA has legally contracted for uranium fuel from both URENCO's plant in New Mexico, and from downblended U.S. weapons-grade uranium stockpiled at Savannah River, South Carolina. Both of those sources, and possibly material from Eagle Rock, would continue to be available to TVA.
Though only the first suggestion of USEC-AREVA partnership has been publicly aired, the logic of the confluence is overwhelming, and as the foregoing history reveals, discussions have actually been underway since 2007. The terrain has been well explored by both companies. The partnership will almost certainly happen, and it may be what the U.S. Department of Energy had in mind, when it responded to USEC's demands for a loan guarantee with a counter-demand described only vaguely for the public as "a restructuring."
In the post-Fukushima world, two new centrifuge plants in Idaho and Ohio made no sense. Yet it was also unrealistic to think that both projects would be canceled, leaving U.S. nuclear utilities partially dependent on foreign supply of uranium fuel.
Many will be unhappy with the unfolding outcome. Ohio politicians who mercilessly shilled and shoveled U.S. Treasury funds to USEC on the promise of creating American jobs will get their wish, but the jobs will be in Idaho, for the most part. Expect "overseas in Idaho" as a phrase to enter the Buckeye State boondocks vocabulary.
Some self-styled environmentalists, of the sort who don't imagine that sites east of the Mississippi can be worth saving, had counted on the success of ACP to generate a reciprocal failure at Eagle Rock. That won't be happening, and it's a good thing, because the Piketon site is located rather specially alongside one of the most important complexes of ancient Indian earthworks in the Americas.
Now there is the opportunity for consensus on the post-USEC redevelopment of the Piketon federal site. Attention and resources should focus on getting USEC removed, so redevelopment can begin without additional delay. The southern Ohio community has waited through vacuous boosterism and raucous hucksterism enough.
AREVAderci USEC indeed.
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.
"Operators...started the auxiliary standby generator. The operators then made repeated attempts to tie the generator to the faulted EMCC [essential motor control center] but were initially unsuccessful."
No, that's not a description of desperate attempts to restore power at the stricken Daiichi nuclear reactors in Japan, after the earthquake and tsunami of March 11, 2011. Rather, it's a just-released description of frantic efforts to restore power at the test nuclear fuel supply project near Piketon, Ohio, three months later to the day, on June 11, 2011. The facility is run by USEC, Inc., the same company that supplied the uranium fuel that melted down inside the reactors at Fukushima.
For years, USEC has touted its whiz-zinger gargantuan uranium centrifuges, while pleading for likewise enormous federal bailouts to save the company from bankruptcy. But now it is documented that the project is more whiz than zing. The Nuclear Regulatory Commission (NRC) has extended a ban on USEC's use of uranium in test machines, following the crash of six centrifuges, with attendant safety violations, last June.
The order comes in a Nov. 15 letter and Nov. 21 report from NRC, following an inspection of mid-September that found three serious uncorrected conditions. NRC had barred USEC from using uranium in its demonstration "Lead Cascade" at the Department of Energy (DOE) site near Piketon as soon as NRC had been formally notified of the safety breaches on July 1.
This was kept exceptionally quiet, since USEC has needed to demonstrate the commercial viability of its technology, to qualify for a $2 billion federal loan guarantee. Running the centrifuges without uranium cannot yield the required data—namely yield, efficiency, cost and reliability. All summer and fall, with no uranium running and without public acknowledgment, USEC has literally been spinning its wheels.
USEC has misled investors and the public by implying that the purpose of its Lead Cascade was only to demonstrate that "the technology works," meaning that the centrifuges spin. My blender spins, the machines at the laundromat spin—spinning is no big whoop. USEC had to prove that its technology can beat the commercial competition, and that effort has now spun to a stop.
U.S. Senator Rob Portman (R-OH) belittled the June centrifuge crash as a "hiccup" back in July, when the story broke: "The hiccup at the plant a few weeks ago, I think that has been addressed...We believe all the technology questions about the refinements have been answered. Those should be behind us now."
Not so fast, Senator. According to NRC technical staff four months after your statement, despite the nuclear scare, it's a case of hiccups that hasn't gone away. Portman speaks about USEC using the first-person plural because as congressman from the district and as U.S. Trade Representative, he created the USEC financial mess by temporarily shielding USEC from foreign competition.
[This report is the third in a series on USEC's "American Centrifuge Plant." The first two installments are: Is Privatized Uranium Company Too Rigged to Fail? and Uranium Barter Revealed as USEC Bailout Scam]
Lead, Follow, or Collect $2 Billion
Based on conversations I had with NRC staff last summer, it was expected that the Lead Cascade would be back running hot immediately after a September inspection verified corrective actions. But now USEC has failed that inspection, and the ban on uranium use has been extended at least until after a follow-up review scheduled to begin in mid-January.
This might seem inconvenient for USEC, since Jan. 15 was set by USEC as the alleged final deadline for DOE's award of a "conditional commitment" on a loan guarantee, a deadline which, if not met, could cause withdrawal of the project's two remaining major investors—Toshiba and Babcock & Wilcox.
On the other hand, the January inspection date may have been set precisely with the financial deadline in mind, since NRC's report and findings were not shared with the investors or other interested parties (as is standard practice), and public notice was limited to unadvertised electronic posting on NRC's document system. That is, one had to guess it was there.
According to the NRC letter, it was USEC project manager Dan Rogers who set the "mid-January" date—an awfully long time from the June crash occurrence—even though the new date coincides with USEC's crucial financing deadline. Having been denied a second time for a DOE loan guarantee in mid-October, USEC has been intensely lobbying for both a $300 million bailout package that must be approved by Congress, and also for a "conditional commitment" on a loan guarantee, even if USEC knows it cannot meet the conditions set for an award. Could USEC be postponing its safety compliance, with attendant publicity of the uranium ban, until after hoped-for decisions by Congress, DOE, and investors?
If so, it would fit USEC's consistent delay pattern for the "Lead Cascade." On paper, the Lead Cascade, licensed by NRC in early 2004, was supposed to be a demonstration array of 240 centrifuges, data from which would justify full-scale commercialization of the so-called "American Centrifuge Plant" or ACP. That idea, however, remained only on paper, as USEC endlessly postponed the project, with the claim it had to "tweak" its machines for optimality. Indications now are that USEC intentionally put off the demonstration because it would reveal the technology as unworthy of pursuit, while the company continued to lobby for bailouts and collect government fees for contract services.
Crony Capitalism or Baloney State Socialism
By August of 2004, USEC had already submitted the license application for a commercial-scale plant of 11,000 centrifuges. NRC granted a commercial scale license for ACP in the spring of 2007, before the Lead Cascade even was initiated, over vocal protest on the point in question by yours truly.
I argued in a petition of intervention to NRC filed in 2005 that if NRC licensed a commercial plant before completion of the demonstration project, it would be a formula for project collapse, leaving the site contaminated and unavailable for alternative use. The "Lead Cascade" would have to be renamed "the Follow Cascade," as its purpose would be rendered moot.
That logic evaded the sharp minds of U.S. government regulators. By 2009, when USEC was demanding a DOE decision on a $2 billion loan guarantee, the Lead Cascade had a total of ten centrifuges running. That's ten, as in you could count them on your fingers.
Lead Cascade was "demobilized" (shut down) in August of 2009 for financial reasons, and its "remobilization" two months later was, again, only on paper. By 2011, when USEC was back demanding reconsideration of the loan guarantee, the number of centrifuges had been raised to a whopping 38, 16 percent of the required 240. Six of those 38 machines crashed (and will never again operate) in the loss-of-power incident on June 11, 2011. If such an incident were to affect a completed commercial-scale plant, it could mean the crash of more than 1,700 large centrifuges, with breaches of their housings, an eventuality never contemplated in 2007, when NRC granted USEC a 30-year construction and operation license.
Meanwhile, USEC has adamantly refused to disclose the reliability and efficiency data gleaned so far from its Lead Cascade, even though it asserts with no evidence that performance merits at least $2,300,000,000.00 in public assistance. Twice so far, DOE reviewers with access to the data have disagreed. Originally, USEC was contractually committed to complete the 240-machine test cascade by October, 2005. Six years later, the company is not close to completion, acknowledged by a proposed deal with DOE to initiate now a "Research, Development and Demonstration" (RD&D) project with $300 million of federal money.
RD&D was the precise definition of what the Lead Cascade was supposed to have accomplished six years ago, using company funds derived from many years of substantial federal subsidy. In the highly competitive business of uranium enrichment, with three domestic enrichment projects that all use newer more-efficient technology, no logical case for continued USEC support has been made.
The USEC Crash
As to what occurred on June 11, 2011, the belated NRC inspection report has disturbing echoes of Three Mile Island, Chernobyl and Fukushima, all rolled into one, albeit on a miniature scale.
As in the Fukushima disaster, a power outage precipitated a cascading sequence of adverse consequences, with standby generators not available on demand. As at Chernobyl, workers intentionally disabled safety systems as an emergency bypass. And as with Three Mile Island, control instrumentation had been poorly designed, confusing the operators and making them commit grave errors and second-guess the instruments. Though the nuclear industry likes to tout "lessons learned" from major accidents, the USEC Crash demonstrates that some nuclear operators, at least, are very poor learners.
One line from the inspection report eerily recapitulates descriptions of what precipitated the meltdowns at Fukushima:
"Operators...started the auxiliary standby generator. The operators then made repeated attempts to tie the generator to the faulted EMCC [essential motor control center] but were initially unsuccessful."
Likewise, at Fukushima, backup generators were successfully delivered by truck, but they could not be connected to the reactor complex system. Typically for nuclear disaster scenarios, one unforeseen circumstance led to others, worsened by insufficient or improper training of personnel:
"During the efforts to re-energize the EMCC, the shift supervisor at the scene responded to the UPS [uninterrupted power supply] panel to acknowledge a general trouble alarm. However, instead of acknowledging the alarm, the individual mistakenly;y opened a protective cover and actuated the UPS shutdown pushbutton."
That resulted in a direct interruption of power, which caused "multiple casing breaches" on the centrifuges, and "loss of all process indications, and operator controls in the main control room." Manual bypass of some safety systems in order to restore power then had the effect of disabling certain vital mechanisms, including the ventilation fan that disperses hydrogen gas from the battery room, which could have led to an explosion.
Throughout the "incident," employees displayed inadequate training and lack of familiarity with instruments and equipment. In discussions with NRC, USEC management showed a profound lack of appreciation for the severity of the problems, and for the steps necessary to correct them. That is why NRC has extended the ban on USEC's use of uranium in the Lead Cascade.
If the USEC Crash was a "hiccup" then Bhopal was a burp. And the gas release most conspicuous is Senator Rob Portman's unregulated emission of July, by which he claimed that USEC merits a federal loan guarantee, because its "technology questions...have been answered."
As damning as the NRC inspection report may be, the Commission failed to investigate or address the three most important questions raised by the USEC Crash:
1. Did USEC have foreknowledge of the shortcomings of its centrifuge technology, and was that foreknowledge the reason that USEC postponed deployment of the Lead Cascade, until DOE loan application reviewers forced a token deployment?
2. Has USEC's financial condition degenerated to the point where the company cannot afford adequate safety measures, and cannot be entrusted to handle nuclear materials or deploy sensitive nuclear technology? (USEC has had negative earnings throughout 2011, a debt-to-earnings ratio of a whopping 51.5, and a total market capitalization of $155 million, only 3 percent of the estimated total cost of a commercial-scale plant.)
3. Has USEC delayed reporting and investigation of the June crash in order to dupe government officials, investors, and the public into the award of a federal loan guarantee or other forms of financial bailout?
The seriousness of June 11, 2011 categorized it as a "24-hour event" under NRC regulations, requiring formal notification of the Commission within 24 hours, notification that would result in public posting. Indeed, USEC did immediately inform its chief political backers on Capitol Hill—Senators Rob Portman and Sherrod Brown (D-OH). Yet USEC waited 19 days, until July 1, before sending formal written notification to NRC, thus postponing any public posting of the event, scheduling of an inspection or restrictions on continued testing.
The notification of July 1, which was posted on July 6, was extraordinarily deficient. It failed to make any mention of the crash of six centrifuges, involving casing breach or even that the centrifuges were running uranium hexafluoride gas at the time.
The timing delay was critical, because USEC had set June 30 as the widely-publicized deadline for DOE to award a conditional commitment on a loan guarantee. It appears that USEC hoped that DOE would meet the deadline and grant an award, before the facts of the centrifuge crash became known.
On the deadline day, June 30, USEC issued a news release announcing a postponement of financing arrangements with investors and DOE, but giving no hint of the extraordinary occurrences earlier that month. And both U.S. Senators kept USEC's silence, maintaining their public support for a loan guarantee, while failing to inform their constituents of the accident sequence that had occurred on Piketon's public land.
Public knowledge of the USEC crash did not come until a news release was issued by the watchdog Southern Ohio Neighbors Group on July 7. The severity of the incident remained unreported at that time.
Throughout the summer and fall, USEC continued to press for a $2 billion loan guarantee and other forms of public and private investment, all the while withholding the details of what had happened in Piketon in June, and even while meeting with NRC inspectors to schedule follow-up that coincides with the next USEC-set financing deadline. USEC's last scheduled conference call with investors was canceled with no explanation. News that the Lead Cascade has been running, or not, with no uranium, and that the uranium ban has been extended indefinitely, has not made it into local or national media, and that information has not been part of the public debate about whether USEC should be given a federal loan guarantee.
I am reminded of the dictionary definition of chutzpah as the quality possessed by one who murders both his parents, then pleads for mercy from the court on grounds that he is an orphan. USEC's request for a $300 million federal grant for completion of its Lead Cascade now rests with the leaders of the U.S. Congress as they haggle over appropriations for 2012. Central to the decision-making is Speaker of the House John Boehner, whose congressional district neighbors that of Piketon.
The inestimable Jean Schmidt (D-OH), whose district includes Piketon, summarized the USEC situation by saying: "It's a duh." The word is dud, Ms. Schmidt, with a 'd.'
In the Cold War satire The Mouse that Roared—a 1955 novel also titled The Wrath of Grapes and a 1959 film starring Peter Sellers—the potentates of the Duchy of Grand Fenwick (all played by Sellers) realize that their best chance to avert economic collapse would be to declare war on the U.S., so to become a recipient of lavish U.S. aid to the vanquished. By a series of plot twists involving the holding of Q-Bomb technology for ransom, Grand Fenwick inadvertently wins the war, but is saved by American largesse anyway, not to mention government capitulation to nuclear extortion.
USEC Inc., is a so-called nuclear company, the real product of which is perpetual threatened bankruptcy. It has remained afloat thanks to periodic huge infusions of federal assistance, despite an attitude of overt belligerence toward its governmental patrons. The Financial Times of London called USEC "the trust fund baby of the nuclear industry," and that was in 2006, before its wresting of bailouts became a racket. USEC seems to have adopted The Mouse that Roared as its corporate strategy bible.
Twice in the past three years, USEC has demanded rather than ask for a $2 billion loan guarantee from the Department of Energy (DOE), set its own "deadlines" for award of the federal assistance, been denied for said loan guarantee as unqualified, lashed out at the Obama Administration for the temerity of due diligence and then "negotiated" for lavish material aid as compensation for its troubles. Both times, in 2009 and 2011, DOE capitulated to USEC's extortion, offering aid packages worth up to $595 million, $60 million more than was lost to the U.S. Treasury from the actual award of a loan guarantee to Solyndra.
Now, documents released by DOE under the Freedom of Information Act and made publicly available for the first time here reveal that claimed investments in viable centrifuge technology and nuclear cleanup were actually designed as nothing more than USEC bailout packages.
Unlike the Solyndra debacle, which was packaged as what it was, a public investment gone sour, the USEC bailouts, perpetrated by a small group of highly-placed federal officials with discretionary control of agency funds and government material stockpiles, have constituted a fraud on Congress and the American people. Central to this group was DOE's Assistant Secretary for Environmental Management, Ines Triay, who left the government suddenly last summer in a manner that has sparked intrigue.
With shades of the Reagan Administration's Iran-Contra Affair, let's call this one the Uranium-Triay Affair. Iran-Contra, which broke exactly a quarter century ago, centered on an inter-agency rogue outfit, with involvement of the White House and the U.S. Department of Defense, that planned to "use residuals" from the black-market sale of arms to Iran to fund the Contra guerillas battling the elected government of Nicaragua. Both the arming of Iran and support of the Contras violated the laws of the U.S.
The Uranium-Triay Affair centers on an inter-agency rogue outfit, with involvement of the White House and the U.S. Department of Energy, that has used the barter of government uranium stockpiles to fund politically-motivated programs to bail out USEC, in contravention of various U.S. laws.
By giving concessions like no-bid contracts to USEC, along with stockpiled uranium, which USEC then sells at a profit, DOE has met USEC's needs for emergency float funds, without the time-consuming hindrances of congressional appropriations, budgetary accountability or regulatory oversight.
It's in the sense of lacking those niceties of democracy that the uranium barter operation can be considered rogue. As in the Iran-Contra case, "national security" served as a false shield to keep illegal operations covert, with minimal or fraudulent disclosure to Congress and the public.
In September, the Government Accountability Office (GAO) issued a report finding this arrangement illegal and unconstitutional. According to GAO's summary:
DOE’s uranium transactions with USEC were sales authorized by the USEC Privatization Act, but they did not comply with federal fiscal law.... By not depositing an amount equal to the value of the uranium into the Treasury, DOE has inappropriately circumvented the power of the purse granted to Congress under the Constitution.
DOE's response to GAO, provided in an appendix to the report, has so far quashed investigation and law enforcement by arguing, essentially, that the funded purposes were independently authorized by Congress. Even if the funding mechanism represented a shortcut, according to DOE, it was a shortcut commonly employed by federal agencies in order to make ends meat. If arming Iran and supporting the Contras had been legal and worthy aims, in other words, then the rogue maneuvers and black-market accounting used to accomplish them would hardly have made for a scandal.
The legality and worthiness of the aims of the uranium barter, however, are now called into question by a previously non-public memo to Secretary of Energy Steven Chu, sent by then-Assistant Secretary Ines Triay. (The memo is undated but based on references in the text, it had to be issued between Aug. 4 and Aug. 12 of 2009.)
The memo reveals that the real purposes of the uranium barter were not the advertised ones of accelerating cleanup at the Superfund site near Piketon, Ohio. Rather, the purpose was to assist USEC with its proprietary personnel management problems, in the wake of DOE's denial of a $2 billion loan guarantee. The memo lists its first two "assumptions" as:
USEC could begin to lay off the expected 300-400 workers within the next month; those workers typically have a broad experience in working in the nuclear industry.
The only significant work the Department has at Portsmouth [Piketon] is the current EM [Environmental Management] work involving deactivation/shutdown and environmental cleanup of the diffusion plant and the planned decontamination and decommissioning (D&D) of the facilities, including the environmental cleanup of the site.
Triay went on to argue that this was the only "short-term" work for which the uranium could be bartered. In other words, USEC had to be given an infusion of resources immediately, and so-called cleanup was the only way to do it, even though the managerial and regulatory apparatus for the cleanup work was not in place.
This shifting of funds from one congressionally-mandated purpose to another purpose is illegal under the Antideficiency Act. DOE was acting as if it still is responsible for personnel management decisions at the Piketon site, but the point of the USEC Privatization Act had been to take that management out of the hands of government, precisely so that local politics and employment considerations would not adversely impact national interests at the two gaseous diffusion sites in Ohio and Kentucky.
The Triay memo acknowledges that the decision to deny a loan guarantee for construction of a new enrichment plant at Piketon was conveyed to USEC on July 27, 2009, and a decision to accelerate cleanup at the neighboring site of the old enrichment plant at Piketon was made on July 28, one day later.
While the goal of accelerating cleanup at a Superfund site sounds admirable, one day was hardly enough time to make that work "shovel-ready," especially given the complex procedural requirements of CERCLA, the statute governing Superfund cleanup. Indeed, the CERCLA decision-making process at Piketon is only getting in gear now at the close of 2011.
Workers reassigned or hired-on in 2009 wound up sitting idle on paid time, waiting for the necessary technical and regulatory assessments, while huge contract fees for the make-work employment accrued to USEC. Perhaps worst of all, those expenses may be counted toward the total Piketon cleanup budget, meaning that fewer funds will be available to complete the cleanup when work is most needed years from now.
Pike is indeed the county with Ohio's highest unemployment rate. But employing large numbers of temporary workers in a spurt followed by a dearth of jobs because no careful cleanup strategy is employed is hardly good for the region's revitalization. To date there has been no public assessment or accounting for USEC's slap-dash cleanup work, for fear that it would damage USEC's remaining if vanishing chances to secure a $2 billion loan guarantee.
Indeed the logic of the Triay memo was that a one or two-year acceleration of the Piketon cleanup would coincide perfectly with the coerced extension of time for review of USEC's loan guarantee application. About four hundred workers from USEC's on-again off-again centrifuge project could be retained locally, even if there was little immediate cleanup work to be done, so that they'd be ready to transfer back to the construction project, when the loan guarantee was obtained, as Triay was sure it would be.
The problem with that logic was that USEC's centrifuge project had been an empty shell all along, a vehicle for obtaining more lucrative contract service work from DOE, not an end in itself. After two more years elapsed, USEC was, by intention, no closer to demonstrating the commercial viability of its centrifuges than it had been in 2009, and certainly the company is much worse off financially. Thus, Ines Triay was helping USEC retain employees on payroll at government expense for a re-transfer that never was a possibility.
Conflicts of Interest
In addition, Triay's memo completely contradicted the earlier decision by the DOE General Counsel barring USEC from bidding on the general cleanup contract at Piketon, due to conflict of interest. While the reasoning behind the order was not released to the public, it may be inferred that USEC, as purveyor of a new enrichment plant project at the site and as a sponsor of other nuclear projects, had demonstrated interests against those of cleanup—that is, in biasing future site development toward continued nuclear use, for example by intentionally failing to remove contamination. Though it's federal land, USEC has long regarded Piketon as its own proprietary site to do with as it pleases: the Sovereign Grand Duchy of USEC in Ohio.
The general cleanup contract was subsequently given to Fluor Corporation, but the changeover from USEC to Fluor, originally scheduled for March, 2011, was extended at least through September, in yet another apparent effort to offer contract work that would keep USEC from going belly-up.
In 2009, and again in October of 2011, the DOE Loan Programs Office determined that USEC was far from meeting the performance and risk requirements of the Energy Policy Act of 2005 and its Title XVII loan guarantee regulations. A Solyndra-like loan default was thus avoided. But a group of high-level DOE and White House officials arranged to substitute two compensatory packages for USEC, funded extra-legally, principally through the uranium barter.
In short, the Loan Programs Office, with its unappreciated review requirements, turned down USEC flat, actually requesting that USEC withdraw its application in July of 2009. Immediately, an ad-hoc bipartisan group of officials scurried to ensure that USEC did not sink, even though USEC is a private company, the federal supports for which supposedly had been cut by statute in 1996—the USEC Privatization Act.
That group, in addition to Ines Triay, included Chu's Deputy Secretary of Energy Daniel Poneman, formerly of the high-powered Scowcroft Group; Obama energy adviser and Special Assistant to the President in the White House, Joseph Aldy; and Assistant Secretary for Nuclear Energy Dennis Spurgeon, who had come to DOE during the G.W. Bush Administration after serving as Executive Vice President and Chief Operating Officer of USEC, the company being extraordinarily assisted.
Of that group, only Poneman remains at his post, though a letter to the White House from 2008 Obama campaign adviser Dan Carol, reported by Politico on Nov. 11 called for his ouster as early as 2009: "At a minimum, Poneman and Kelly need to leave" as they are "scaring away the talent we need," wrote Carol. The leak of this letter now, by an anonymous government source, bodes ill for Mr. Poneman.
Spurgeon was removed by President Obama at the start of 2010. Aldy left the Obama White House later in 2010, after serving for only one year.
In September of 2010, Poneman and Triay visited Piketon for a gala event with state and local politicians, in tents outside the black-glass USEC office building. Ines Triay resigned her post over the July 4, 2011, holiday, citing the proverbial "family reasons," but the timing of her unexpected departure coincided with DOE's receipt of the scathing draft GAO report, which declared her uranium barter arrangement illegal.
Apparently, Poneman and Triay worked together as a regular nuclear disaster squad—not addressing disasters but worsening them. On Nov. 22, Congressman Ed Markey (D-MA) sent a letter to Secretary Chu about the horrendous situation at Hanford, Washington, including an accusation that Poneman and Triay collaborated in suppressing Hanford whistleblowers.
I'm beginning to understand why Rick Perry might want to block the Department of Energy from his memory.
The Trouble with Triay
One of the highest-level appointments of a Hispanic woman of the incoming Obama Administration, Ines Triay was assumed by many to be a harbinger of new progressive environmental leadership. Triay was placed in charge of the multi-billion dollar program to clean up the nation's Cold War-era nuclear sites, including notorious radio-toxic messes at Hanford and Piketon.
In fact, Triay represented the most right-wing elements of American shadow government. She had come to the U.S. in 1961 at age three as a boat-person refugee from revolutionary Cuba, and achieved academic prominence within the Cuban exile community of south Florida—the same community in which support for the Nicaraguan Contras was organized in the 1980s. With a Florida PhD. in physical chemistry, she rose through the ranks at the nuclear weapons laboratory at Los Alamos, New Mexico. Her confirmation as an Assistant Secretary of Energy was marred by accusations of political influence from the right, owing to large campaign contributions she had made to the Republican Senator from New Mexico and powerful Chairman of the Senate Appropriations Subcommittee on Energy and Water, Pete Domenici.
That same subcommittee, under the chairmanship of Diane Feinstein (D-CA), is now deciding on round two of the USEC bailout package along lines originally proposed by Triay—a $300 million additional federal outlay, funded partly through the uranium barter. The Energy and Water Appropriations bill was scheduled for a Senate vote on Nov. 17, but now is delayed until after Thanksgiving.
In both the first and second rounds of the USEC bailout scheme, Secretary of Energy Chu has acted like an automaton, implementing the orders given by his inferiors. Within days of receiving the Triay memo in 2009, relayed to him through Daniel Poneman, Chu sent letters mimicking the memo, informing Congress of his determination to bail out USEC through the uranium barter, but failing to ask for congressional authority or an appropriation to do so.
He also failed to tell Congress that the cleanup work being funded was premature in the regulatory process, or that the centrifuge technology in development had already been pegged as lacking commercial potential.
Likewise, when the loan office turned down USEC for the second time in October of 2011, the company's agents at the second-rung of the Department of Energy struck a deal for a second infusion of funding that need not be paid back like a loan. Once again, Chu relayed the package as negotiated to Congress—half to be funded through the uranium barter already found to be illegal, and half through a new congressional appropriation, requested on an emergency basis to make 2012 budget deadlines.
At the end of October, when USEC announced a new deal with DOE, including $150 million to come from mysterious "existing funds" at the agency—existing funds that DOE refused to identify—the reference was to the uranium barter, claimed as outside the realm of congressional appropriations.
Broke and Broker
So let's total up the recent government bailout packages for private company USEC Inc. Not counting the billions of dollars dumped on USEC in gifts of uranium, transferred assets, no-bid contracts, and various federal subsidies attending its privatization, USEC was offered a $45 million payment for "technology development" in 2009 (not all of it paid), along with a no-bid cleanup contract for up to $200 million. In its 2011 third-quarter 10-Q statement filed with the SEC, USEC also acknowledged receiving an additional $50 million from DOE for unspecified and previously unanticipated contract services. USEC is requesting $150 million in uranium, immediately, to fund a "Research, Development and Demonstration" project that it had previously committed to complete on its own, for a hypothetical plant that has no chance of ever opening for business. On top of that, DOE and USEC are asking for another $150 million from 2012 congressional appropriations, at a time when federal funding is suspected of being kinda tight.
That's a recent total of up to $595 million, none of it to be repaid. A pretty good percentage on turn-down of a $2 billion loan! The modus operandi, as the potentates of Grand Fenwick would appreciate, is to continually demand a federal loan guarantee, and insure through belligerence that you get rejected!
All this for a company that produces shockingly little. Half or more of the enriched uranium fuel that USEC provides to utility customers comes from old Soviet nuclear warheads, with the uranium downblended to reactor-grade at Russian facilities. USEC only acts as a broker for that uranium, a service it used to provide at substantial profit as a sweetheart concession from the U.S. government, until the Russians threatened to withdraw from the treaty arrangement if USEC's profits weren't radically cut. The deal terminates entirely in 2013.
A declining share of USEC's uranium product is enriched at the government-owned gaseous diffusion plant at Paducah, Kentucky, which consumes an enormous amount of electricity, for which USEC cannot afford to keep paying. Paducah is scheduled to close next May, a deadline that Steven Chu has defended in verbal engagement with Kentucky's Senator, Mitch McConnell.
Meanwhile, all the uranium bartered to bail USEC out of its difficulties has dramatically distorted the uranium market, constituting a form of dumping, artificially lowering the price of uranium. This has had negative feedback effects on USEC earnings, mired deep in negative territory throughout 2011. The barter has also worsened unemployment among American uranium miners, outweighing any jobs maintained on the USEC payroll. Only 8% of the uranium fuel used in U.S. nuclear reactors is currently mined in the United States, due largely to USEC's dependence on raided U.S. stockpiles and Russian supply.
Since USEC will have access to no enrichment facility as soon as May, and since its new plant remains a pipe dream with cracked pipes, it is generally expected that USEC, which inherited a uranium supply monopoly, will soon be nothing more than a uranium broker, entirely an office operation. The billions of federal dollars spent on USEC bailouts will have netted a few extended cubicle jobs in beltway Maryland.
The USEC Hustle
The hustle for a new USEC bailout aims at staving off a pre-election bankruptcy (stock price down 78% in 2011), though the FOIA documents reveal a deeper problem: DOE staff acting like naive facilitators for an insider corporation judged too rigged to fail.
A 2009 memo by DOE Public Affairs director Dan Leistikow demonstrates that DOE was well-aware that USEC was inflating if not fabricating jobs numbers associated with the proposed "American Centrifuge Plant." Despite that awareness, DOE allowed USEC to continue using the "4,000 Ohio jobs" sales pitch uncorrected, even while USEC has attacked DOE for denying a loan guarantee. The baseless 4,000 number is still the one commonly cited by the news media today, on the assumption that DOE would have long ago corrected it, if it weren't true.
After the loan guarantee denial decision was finalized on July 27, 2009, the "rollout" process for announcement of that decision was turned over to Administration operatives—principally Joseph Aldy and Daniel Poneman--who did not work in the Loan Programs Office and had not been part of the due-diligence review. Aldy did not even work for DOE and had only a few months experience in government. Aldy and Poneman shuttled drafts of DOE's rollout statement between them, in stages removing harsh explanations for the denial decision, and replacing them with booster comments about USEC's shining future. This undercut the denial decision, making it seem irrational, while forestalling realistic planning for project failure in Ohio.
DOE's statement underwent major revision after a tip-off allowed USEC to preempt DOE with the media, as USEC would do yet again with the second denial in October of 2011. According to a July 27, 2009, e-mail by Matt Rogers of DOE, USEC CEO John Welch delayed DOE's denial announcement: "[Welch] needs some time with his board to define the path forward and how they announce to the market." DOE thus timed its denial announcement to considerations of effects on USEC stock price. But Welch wasn't so concerned about stock price, he was stalling for time to get a jump with the media and Ohio politicians.
The Loan Programs Office asked USEC to withdraw its application on July 27, as the lack of evidence for qualification was painfully apparent. It stymied the DOE staff that USEC did not automatically comply, as any loan applicant would if told that the alternative to withdrawal was denial. But USEC played a shrewder game, using the crucial week of agreed postponement to marshal lobbying forces , including Ohio Democrats Governor Strickland and Senator Sherrod Brown, for an immediate compensatory aid package.
By the time USEC delivered its answer of a refusal to withdraw, the political operatives outside the loan office—Poneman, Aldy, and Triay—were ready to give USEC everything it wanted: a $245 million aid package plus an indefinite extension of the loan guarantee review, so the scam could be run all over again. Triay's August memo to Chu concretized the government capitulation. Not a peep of protest came from Chu.
And the scam was run all over again, in 2011, with a string of deadlines for DOE decision issued by the applicant USEC, a final demand for material compensation, a preemptive release to the media, and DOE's mimicry of the deal as USEC had described it, with a total take upped to $300 million in federal funds, half to be provided immediately through the uranium barter. The loan guarantee review has also been left open, to permit endless future iterations.
USEC re-framed both denial decisions as positive DOE commitments to move forward with the technology, when that was not at all the result of DOE technical and financial reviews. In both cases, perhaps for political reasons connected to that old Ohio electoral magic, DOE felt compelled to play to USEC's lead with the media. Don't try this at home with a mortgage lender: Preempting a home loan denial with a news release that alleges the bank's commitment to future approval is not guaranteed to bring positive results.
For U.S. Aid, Wage War on the U.S.
It's not that the Obama Administration "could not say no" to applicants, as has been the accusation. When the Administration did say no, in USEC's case, the message was massaged to sound like a yes, with hundreds of millions of dollars in compensatory payments attached.
Many have misread the Solyndra problem as one of the Obama Administration's commitment to "green energy," or a failure to foresee changes in energy markets. The Washington Post editorial board gets it right when it says "the Department of Energy's loan guarantee program is the real Solyndra scandal."
But the Uranium-Triay Affair reveals that the scandal reaches far beyond the Loan Programs Office. Twice, after that office accurately assessed USEC's commercial non-viability and refused to award the company a loan guarantee, the Deputy and Assistant Secretaries of Energy, with direct White House involvement, intervened to offer USEC huge compensatory packages which would never have to be repaid.
And to date, despite reports by watchdog agencies like the Government Accountability Office, the scandal has received virtually no attention by either the media, Congress, or law enforcement agencies.
GAO, it must be said, pulled its punch. It only accused DOE of violating the Miscellaneous Receipts Act, which sounds practically like a misdemeanor. More explicitly, DOE personnel violated the Antideficiency Act, aimed at protection of the U.S. Treasury, which forbids an official from diverting federal funds from one congressionally authorized purpose to another. That's exactly what Ines Triay and her companeros did. The Antideficiency Act carries penal sanctions, meaning jail time, a fact which I have reason to believe was brought to the attention of Ines Triay just prior to her July resignation.
Other laws were callously broken. Of lasting impact on the stakeholders at Piketon, budgets were blown and major cleanup decisions were made before any of the mandatory public participation processes could be implemented. And so this Appalachian community will likely be stuck with a massive 90-acre waste cell, placed to please the tenant who won't be around—USEC Inc.
When Solyndra requested a second loan guarantee to stave off bankruptcy, it was flatly denied. It seems they should have taken a page from The Mouse that Roared, waged war on the U.S. government, and made a set of extortionist demands. Then, like USEC, they might have gotten some material aid from the U.S. government, if not cold hard cash.