By Geoffrey Sea
High drama hits the world of the former U.S. Enrichment Corporation as a shareholder rebellion drubs the company stock price, restructuring and bankruptcy rumors swirl, safety issues delay USEC’s departure from Kentucky, a “left-right” anti-USEC coalition of Non-Governmental Organizations emerges and charges of USEC’s direct involvement in illegality proliferate.
USEC used to be a world giant in the supply of nuclear fuel. Once wielding monopoly power over the domestic supply and international pricing of enriched uranium, its motto touts “A Global Energy Company,” even as USEC struggles with the expense of closing its last production facility in the non-metropolis of Paducah, Kentucky. (Metropolis is over the river in Illinois.)
But in a spectacular sell-off signaling bizarre irregularities in the way the company has been managed and subsidized, USEC Inc.’s stock price has tumbled in a pattern known to market analysts as a “falling knife.” On the Friday after July 4, normally a sleepy trading day, the rush to sell USEC stock caused $2 gaps between ask and bid prices, ending with a 40 percent drop in value for the day. After double-digit percentage share-price declines at enormous volume on July 3, July 5 and July 8, (thirty times average volume on July 8), the total market valuation of the company is now about $16 million, ranking it as Lilliputian.
USEC’s bonds, which come due for payment in 2014, if not sooner, fell to about twenty cents on the dollar. The company’s common shareholders, including many past and current employees, have lost 99 percent of value since 2007, 80 percent of value since the start of 2013 and 67 percent of value since June 24, when the Paducah City Council and the McCracken County Fiscal Court met in joint session to cope with USEC’s abandonment of that community.
And let’s not forget that with its nose-thumbing at the Commonwealth of Kentucky, USEC may lose the lifeline shilling services of that state’s powerful congressional delegation, including Senate Minority Leader Mitch McConnell, presidential contender Rand Paul, House Appropriations Chairman Hal Rogers, and Energy and Commerce Chairman Ed Whitfield.
The hot betting at Kentucky tracks this season is on whether McConnell, Paul, Rogers and Whitfield will shun their former corporate sponsor in deference to western Kentucky voters before the 2014 appropriations cycle is complete.
USEC’s flirtation with a non-nuclear Apocalypse has profound implications for the safe completion of power-down at Paducah, for the long-term cleanup of the contaminated sites that USEC will leave behind, for the well-being of a region that came to depend on the company’s draw of unproductive federal spending, and for the viability of the U.S. nuclear industry as a whole.
The cliff-diving exhibition of USEC stock is pushed by fears of an impending bankruptcy filing or a stock-diluting debt-for-equity swap, two de-listing warnings from the New York Stock Exchange (NYSE), shock and horror over a reverse stock split at a monstrous ratio of 25-to-1 and growing realization that USEC stands as much chance of swinging a needed federal loan guarantee as George Zimmerman does of being voted Mister American Suave.
Even Frank Lewis of Ohio's Portsmouth Daily Times, who would report a nuclear disaster as a good-news opportunity for USEC, wrote last week that in announcing new loan guarantees, the Department of Energy is sullenly silent about USEC. No shit, Sherlock, the company is going broke.
At the pre-reverse split valuation rates in effect until July 1, USEC stock is now selling for thirteen cents per share. You can’t buy a doughnut-hole for that, but if you could, it might have more spin and enrichment potential than a USEC uranium centrifuge.
Yet even after the panicked sell-off of USEC stock, on the evening of July 10, the inestimable members of the U.S. House of Representatives, led by the very same characters who lambasted the Obama administration for its risky loan guarantee to the Solyndra Corporation, voted by nearly a three-to-one margin to make another $48 million of federal funds available to the USEC “centrifuge” venture in Ohio, at risk levels that would make a Carnival Cruise through the Bay of Beirut look like a safe bet by comparison.
So what is going on here?
The Un-American Centrifuge Plant
Created first as a government corporation in response to a mismanagement scandal at the U.S. Department of Energy (DOE) in the 1990s, USEC was privatized in 1998. The USEC Privatization Act, premised on delusional Thatcherite ideology, placed two solemn obligations on the respective parties in the split: The Department of Energy, though continuing to own the land and facilities with which USEC operates, had to stay out of the business of uranium enrichment; USEC, while free to conduct its business as a private corporation, had to use its free access to public land and resources to develop advanced uranium enrichment technology and improve the U.S. position in the global enrichment marketplace.
Now those statutory goals can only bring a ROFLMAO reaction. USEC has become a wholly-dependent ward of the Department of Energy, which effectively makes all the big “business” decisions that concern enrichment, and USEC has defaulted on any credible effort to deploy a domestic advanced enrichment technology. Yet the Privatization Act remains on the books, its provisions violated cavalierly but with no efforts at repeal, like metropolitan municipal laws about donkey carts and Sunday dancing.
The basic and shocking truth about USEC, which now ought to be celebrating the fifteenth anniversary of its privatization, is that the company, ballyhooed as “vital for national security” by members of Congress and local chambers of commerce, doesn’t produce anything anymore and it never will. It enriches no uranium, its government-granted sweetheart deal to market Russian warhead uranium expires at the end of this year, and its “American Centrifuge” project (ACP) at Piketon, Ohio, has become a parody of patriotism, so outpaced by Russian, European, Australian and Iranian competitors that the company can’t whip up enough whirl on a centrifuge machine to spin a cotton candy cone for the USEC anniversary.
ACP was scandalously licensed by the Nuclear Regulatory Commission (NRC) for construction and operation in 2007, and $520 million of bonds were issued to finance that construction, all premised on plant completion between 2011 and 2013. Now past the projected commercial opening date, not only has construction of a full-scale plant not neared completion, it hasn’t really been started, and estimated completion costs are now about twice what they were in 2007.
A supervisor on the project told me that most of the initial expenditure, affording USEC a hefty tax write-off it’s already taken, went to replace the roofs on the pre-existing buildings, apparently to ready those buildings for some use other than a centrifuge plant. That actually makes sense because USEC has never demonstrated possession of a commercially-competitive centrifuge technology ready for deployment, and has resisted that eight-year overdue demonstration like the legendary Count Dracula avoiding a mirror. And for precisely the same reason: If USEC were forced to complete a demonstration, it would only reflect the vacuity of the project. Imaginary monsters cast no reflection.
A so-called “Research, Development and Demonstration” (RD&D) projects, now being “completed” at Piketon with 80 percent federal funding, is only more smoke and mirrors, minus the mirrors, because the program involves no actual research, development, or demonstration of commercial viability. If completed, the project will only demonstrate that USEC centrifuges can spin without exploding, like a toaster demonstration that shows glowing coils but fails to produce any toast.
Despite public funding, no governmental process is contemplated for gathering or disseminating data on the commercial worthiness of USEC’s centrifuges, because that answer is already widely known: The technology at issue is forty years old and out of date, a fact confirmed by an active proposal from GE-Hitachi to use their molecular laser enrichment technology to extract usable uranium from USEC’s own old waste product at the Paducah site, a proposal that has brought no counter-offer from USEC. The real purpose of the “RD&D” project at Piketon is only to extend out the schedule of USEC’s galactically-embarrassing inevitable collapse.
This is no NIMBY attitude, though the centrifuge project is literally in my backyard. (My property has a one-mile long fence line with the USEC-leased portion of the DOE reservation). I’m the one who’s been telling anti-nuclear activists for nine years to stop directing their attacks at a centrifuge plant, because no centrifuge plant will ever happen here. I’d call the American Centrifuge Plant a pipe dream, if its pipes had any more reality than Bush’s “aluminum tubes.”
That other intended use of the so-called “centrifuge” buildings at Piketon became clear from the outset in 2007, when the Bush DOE, led by an assistant secretary who had formerly been Chief Operating Officer of USEC, pushed to make Piketon a storage center for the nation’s languishing stockpiles of spent nuclear fuel. USEC had purchased the leading American spent fuel storage company, and used its DOE-lease and NRC-license as Piketon place-holders, waiting to ditch its unviable centrifuge project for a far more lucrative federal contract warehousing nuclear waste. USEC had been given virtually unregulated and unconstitutional control of the federal sites at Piketon and Paducah, on the single condition that the company proclaims, with no means for verification, that it is developing an “advanced” uranium enrichment technology at those sites. Had John McCain won the 2008 election, USEC might have cashed in big by turning Piketon into the world’s largest nuclear dump.
That was not to be, however, and now USEC is stuck having to continually say it will build an enrichment plant that the company never had the technology, financing, or motivation to build. Politicians and the media have a hard time comprehending it, but the ACP project was never more than a false front, a mechanism for wrangling government bailout after government bailout, while the rock-red company waited for a Republican administration that would approve its audacious waste storage plans.
That was Plan A for the Piketon A-Plant, until the company just ran out of steam. False-front hi-tech deceptions can get expensive. ACP taxpayer funding was utilized as a bridge to USEC’s intended diversification, which is exactly the strategy that its 2002 team of new “strategic advisors” recommended. That team included Iraq War architect Richard Perle and a physics professor whose only claim to fame was in pushing centralized storage solutions for spent nuclear fuel. His name was Ernest Moniz.
U.S. Sen. Rob Portman (R-OH), whose old congressional district included Piketon, has invited the new Secretary of Energy to come and visit “the American Centrifuge Plant.” That’s a laugh, intended only so Republicans can berate the Obama Administration when Moniz, like his predecessors, fails to appear. If the former USEC “strategic advisor” and nuclear expert did come for a whizz-bang tour of the big empty buildings, he could be held criminally liable for the fraud. You can hear a swirling sound in those cavernous buildings, erected by the federal government at an alleged cost of $2 billion, but it’s the sound of U.S. Treasury bills going cyclonically down the drain. No one has actually added up the total amount of federal dollars wasted in subsidies, gifts and graft to USEC, but the Government Accountability Office is reportedly working on the task.
USEC has certainly achieved some record-setting milestones. The $5 billion price tag on a completed commercial centrifuge plant (an estimate USEC has not bothered to update) would be approximately 350 times the total current market value of the entire company. It’s like a kite-flying club saying that it will build a B-2 bomber. The annual salary of CEO John Welch is about a third of the total value of his company, a rate of compensation justified only by his ability to keep a straight face when saying that he expects the government to give him a $2 billion loan guarantee. Say “Solyndra” a hundred times slowly after setting off a stink-bomb to get some sense of the magnitude of the incipient scandal when USEC finally bites the dust.
But no, that really isn’t fair to Solyndra. Solyndra may have been a case of the government picking winners and losers unwisely. USEC is a case of the government picking a loser intentionally over and over again, only because the privatized cash recipient has strategically and falsely promised jobs in the states and districts of powerful Members of Congress.
Once described in the Financial Times of London as “the trust fund baby of the American nuclear industry,” USEC has squandered every sequential $50-million allowance check from the feds on posh executive salaries and luxurious lobbying. Therefore, the allegedly-private company still needs a couple of billions from the government, just to make ends meat and ward off investment-fraud litigation. The company’s loan guarantee application, repeatedly submitted in the run-up to key elections, has already been twice denied because “USEC had nothing, absolutely nothing,” in the words of a former aide to U.S. Sen. Sherrod Brown (D-OH).
Even if USEC got that federal loan by some underworld device, criminal or demonic, it would need to raise at least an additional $3 billion to complete a new production plant, which Welch says, still straight-faced and with no supporting evidence, could come from a Japanese international bank. I suppose that would be in gratitude for USEC’s supply of nuclear fuel to the three reactors at Fukushima that melted down and are still leaking. Those silly Japanese and their short memories and spare cash.
Recent developments at Piketon and Paducah make no sense at all without understanding that the working national plan for how to deal with the outmoded gaseous diffusion plants and their massively contaminated sites has been to convert both into “national sacrifice” waste repositories. But you won’t find that plan in any Federal Register notices or Environmental Impact Reports. Rather, it’s the subtext of a hundred different records of decision and formal notifications. The new way to evade those nuisance environmental compliance requirements is for federal agencies and funded corporations to simply not announce what they intend to do.
Exploiting exclusive lease provisions arising from the USEC Privatization Act, aided by exceptionally lousy government negotiating under the Clinton and G.W. Bush administrations, the anticipated waste enterprises at Piketon and Paducah were to be operated at a profit by USEC and its subsidiaries as they “diversified” away from the overly-competitive enrichment business back toward lucrative federal contract work. In accord with this master plan, a “Uranium Center of Excellence” or UCE was established at Piketon in the early 2000s, which collected uranium scrap waste from all over the country, including large shipments from the “cleanup” projects at Paducah, KY; Fernald, OH; and Hanford, WA.
The “excellence” of this facility was that the radioactive garbage was green-washed as “recyclable,” and Ohio voters were also duped by the promise that it would bring hundreds of jobs, when the final tally was only two full-time inventory managers. I suppose that if spent fuel storage had been added, it would have been called the Center for Real Awesomeness with Plutonium.
But when the spent fuel storage plan was ditched quietly by the Obama Administration as an impediment to future electoral success in the Buckeye State, the Uranium Center of Excellence stuck out like a radioactive thumb. Many of the same contractors who had been paid to haul the excellent garbage in were then paid a second time to haul the excellent garbage out in a less-than-excellent shell game that meant lucre for an elite group of crappy corporations. Some of the uranium that had been trucked from Paducah to Piketon has been trucked back to Paducah, just as that facility was being readied for closure and alleged “cleanup.” The mother-lode of excellent uranium trash has been moved en masse to a new UCE at Oak Ridge, TN, which curiously seems to have not much going on in the way of human activity.
USEC had intended to be the chief beneficiary of all this excellent wastefulness, but found itself sidelined by dual rulings of the DOE General Counsel that barred the company from bidding on Piketon or Paducah cleanup contracts due to unspecified conflicts of interest. (Why the text of those rulings remains undisclosed is clear: The conflicts of interest that legally impede USEC involvement in cleanup also apply to Babcock and Wilcox, the lead strategic investor in USEC, and to Fluor Corporation, which signed a one-billion-dollar manufacturing contract with USEC for ACP in 2008. However, Fluor and B&W jointly were granted the principal $2.2 billion cleanup contract at Piketon in 2009, which USEC had hoped to acquire.)
Barred from major cleanup contracts and unable to swap its centrifuge lemon for a lucrative waste storage project, USEC found itself cock-blocked at the very sites it was supposed to control by virtue and vice of the USEC Privatization Act. The company then resorted to an extortion caper as its business plan. The Piketon gaseous diffusion plant had been closed in 2001, but Paducah remained in operation, losing money for USEC every day it did so, not counting the patronage payoffs to USEC provided by the Kentucky congressional delegation. (USEC made what little profit it did off the sale of Russian uranium, offsetting Paducah losses.)
That left USEC with a single card to play, and the company played it. Leveraging its precarious financial situation, USEC threatened the Department of Energy with a sudden shutoff of power at Paducah at the end of May, on strict interpretation of the clause in the Privatization Act that limits USEC responsibilities to the business of enrichment, ignoring a lease provision that requires return of the facility to DOE “in safe condition.” That was intended to wrangle additional subsidies from DOE or get the government to bend on the conflict-of-interest exclusion from “cleanup.” Instead, the explicit extortion drove home USEC’s conflict of interest, angered the new Secretary of Energy, and erased years of community relations work. USEC was telling the people of the Paducah area that the company was willing to place their lives and health in immediate jeopardy in order to make an immediate extra buck and temporarily keep itself out of bankruptcy.
What USEC probably wasn’t counting on was that current and former USEC employees, who include many Paducah area residents and account for a large percentage of investors clinging to USEC common shares, would dump the stock in defiance. And that’s what apparently happened around Independence Day, giving new meaning to the holiday in the context of the end of dependence of the Paducah community on its old gaseous diffusion plant and the company that ran it into the ground.
The grotesqueness of USEC’s financial mismanagement has led to ideas among the company’s own current and former employees that they could do a better job of running the enterprise and preserving jobs. Groups of employees at both Piketon and Paducah have schemed about USEC takeover or replacement, likewise running into the hurdles of the company’s staggering debts and its statutory authority—amending or repealing the USEC Privatization Act in this Congressional gridlock would be tantamount to a Texas secession. Everybody knows it ought to happen, but don’t hold your breath. I asked one such schemer, off the record, why he thought his group would have a leg up over current USEC management and he said: “We wouldn’t be a billion dollars in debt or pay our CEO six million dollars.” He has a point.
USEC stock has nose-dived before, especially when the company’s “Atomic Vapor Laser Isotope Separation” technology was revealed in 1999 to be vaporously fraudulent and inexcusably wordy. (“We will see Elvis before we see AVLIS” became a common saying in the USEC-dependent communities). However, the most recent plunge puts USEC stock into territory of dire consequence for the company’s survival.
The 25-to-1 reverse stock split accomplished on July 1 was intended resolutely to cure USEC’s stock price deficiency, which was cause for a de-listing warning from NYSE in May of 2012, after the company’s share price fell below the one dollar mark for thirty days. By multiplying stock value by a whopping twenty-five, USEC wanted to extinguish any chance of falling back again into deficiency. But by July 8, only four trading days after the reverse split, USEC stock already hit a low of $2.60, raising the definite specter that it will soon be back in deficiency territory.
Any reverse stock split is widely regarded by investors as a prelude to bankruptcy. The size of this one resulted in some really funny glitches on market websites unprepared for such a radical revaluation. GoogleFinance gave up and reported the July 1 market move for USEC as a flat-line at zero, while YahooFinance took an opposite approach, neglecting to apply the split ratio of 25, showing the stock value as rising more than 2100 percent on the day when the adjusted value in fact had fallen. Investors were none too pleased when receiving brokerage bills for the mandatory swap.
Meanwhile, USEC received a second de-listing warning from NYSE in April of 2013, after market capitalization fell below the required minimum of $50 million. The reverse stock split was expected to worsen that problem by taking some toll on equity value, but USEC hoped to rectify that problem by soon employing a debt-for-equity swap that would involve an issuance of many new common shares. That solution, however, exacerbates two other problems in the manner common to sinking companies.
With common shares already trading at such low value, their dilution by a large amount of newly-issued stock would reduce share value to near zero. And to implement a near-term debt-for-equity swap effectively would undo the reverse stock split just employed—a one-two punch clearly aimed at squeezing common shareholders just to pay for extended executive salaries prior to liquidation. Since publicly-traded companies are, by law, supposed to act for the benefit of their shareholders, such transparent abuse of them would likely raise SEC violation issues and serve as a basis for a new round of shareholder litigation.
Moreover, the magnitude of the Independence Day plunge brought USEC’s market capitalization below yet another de-listing threshold. On July 8, the market cap fell to just $14 million, a level which, if sustained, would bring immediate de-listing from the stock exchange, with no allowance for time to cure the deficiency by a corporate restructuring. Since July 8, the market cap has been hovering close to the $15 million threshold. If USEC were to be de-listed from NYSE, the company’s bonds would become immediately due for payment, and that would necessitate a swift filing for bankruptcy.
If the last three paragraphs were gobbledygook to you, here’s a kind of Idiot’s Guide to USEC: USEC has virtually no sellable assets (its facilities, equipment, and uranium inventories are almost all owned or subject to seizure by the government); USEC has no business plan (its enrichment business and Russian-uranium marketing venture are rapidly winding down and its diversification dreams never materialized); USEC has no reason for existing (it survives as a statutory creation of the Privatization Act but it fulfills no mission for the nation beyond the orderly decommissioning of its projects); USEC’s equity value is on a glide-path to worthlessness; USEC continues to accrue debt at an alarming rate.
Judging by recent votes, the entire Congressional leadership, led by Ohio’s least-favored son John Boehner, and solid majorities in both houses of Congress, believe the above attributes make USEC an excellent candidate for billions of dollars in new federal loan guarantees. Idiot’s guides are way above the heads of most members of Congress.
On July 10, the House of Representatives voted by solid majorities to defeat two proposed amendments that would have killed future funding for USEC’s Piketon charade. The amendments were sponsored by conservative Republican Michael Burgess of Texas, and co-sponsored by Democrat Ed Markey of Massachusetts, who will have the odd distinction of voting again on the same appropriations measure after he is sworn in as a U.S. Senator on July 16. (USEC, however, may not survive out of bankruptcy until the time the Senate votes.)
Reflecting the spectrum-spanning diversity of USEC fed-uppedness in the House, a “left-right” DC coalition of five conservative economic groups (including the National Taxpayers Union and the National Enterprise Institute) and four progressive environmental groups (including the Natural Resources Defense Council and Friends of the Earth) issued a letter supporting the Burgess-Markey amendments.
Calling upon Congress to “Stop USEC Giveaways,” that letter stresses the crash of six USEC demonstration centrifuges in June of 2011, and the legal incorrectness of “national security” justifications for continuing USEC bailout. (USEC’s congressional defenders, like freshman Congressman Brad Wenstrup from Portman’s old district in Ohio, repeatedly claim (as seen in the below video) that USEC’s future centrifuge facility is needed to make tritium for nuclear weapons. That argument is patently false—TVA’s nuclear reactors that produce tritium as a by-product have received and may receive uranium fuel from non-USEC sources, including down-blended U.S. stockpile material or URENCO’s centrifuge plant in New Mexico. Ohio is not more “domestic” than New Mexico, except in the minds of John Boehner’s minions.)
How soon will the end come for USEC Inc.?
On July 29, USEC is scheduled to report its second quarter losses, including the large yet-undisclosed cash hemorrhage caused by DOE’s insistence that USEC pay for the power-down procedure at Paducah, rather than simply turn out the lights and leave. The first round of substantial Paducah layoffs will occur around A-Bomb day, the anniversary of the Hiroshima bombing, on Aug. 6. Look for the financial bombshell before or during that week, signaled also by cash-strapped USEC’s hiring of a prominent lobbying firm last week to negotiate terms of the company’s dissolution (or as they prefer to put it, “restructuring”) on Capitol Hill.
According to Politico Morning Energy on July 3, USEC has hired Cozen O’Connor Public Strategies (COPS) to lobby on issues related to closure of the Paducah plant, following a little PR snafu when the governor and attorney general of Kentucky announced they may initiate lawsuits to compel safe shutdown and cleanup of the closing plant. But the admittedly-impoverished USEC doesn’t really need high-priced help running away from responsibilities at Paducah. The company’s predicament is far more dire than that. In actuality, COPS is being employed to consort with the robbers in Congress (hat tip to Senator Portman) to craft a last taxpayer-funded going-away gift for USEC Inc.
Many other indicators also point to some form of USEC liquidation in coming months. According to financial experts who prefer to remain anonymous, USEC has arranged its subsidiary structure in order to fend off potential litigation by various claimants, in anticipation of bankruptcy proceedings. Last year, President Obama signed an executive order aimed at protecting Russian uranium in USEC’s possession from potential seizure by a bankruptcy court in case of the kind of rapid unraveling now underway.
Rumors are rampant in Piketon and Paducah about how remaining USEC projects will be divvied up in the assumed liquidation. Five months remain of the Megatons to Megawatts program with Russia, but USEC’s role in that was never more than one of an easily replaceable reseller. It is widely speculated that Babcock & Wilcox, a USEC “strategic partner,” has been prepped to take over USEC’s role in the Piketon centrifuge RD&D project, but following USEC’s collapse, that project would lose its potential commercial application, and along with that it’s reason for existence. The last thing that DOE wants is to be back in the saddle running a centrifuge project at Piketon, Ohio. It’s been thrown from that horse too many times.
The only big outstanding questions are how the completion of power-down procedures at Paducah will be paid for, and how the massive “centrifuge” buildings at Piketon with new USEC roofs will be disposed of. Dennis Carr, now the project manager of Fluor-B&W’s cleanup venture at Piketon, told me in 2010 that he had already made plans to demolish those buildings and include the debris in a 100-acre on-site waste cell. That’s how foregone the conclusion of a USEC liquidation has been.
Payment for these ignominious ends of the USEC empire is further complicated by the fact that in recent years, DOE has assumed liability for some USEC decommissioning responsibilities, allowing USEC to cash in posted surety bonds, thus postponing bankruptcy a little longer. The extent to which DOE has subsidized USEC in this manner, nullifying the Privatization Act with dubious legal authority and adding substantially to taxpayer liabilities, is a subject of ongoing investigation. DOE is mum on such questions. “National security,” the Fifth Amendment, and all that.
Legal matters too remain outstanding. For at least four years, USEC has been shipping contaminated process equipment – converters, compressors, and motors—salvaged from the defunct gaseous diffusion plant at Piketon to the Paducah site, where the material has been stored inside the process buildings of that plant. These shipments were made under the rubric that USEC needed “spare parts” at Paducah. But why so many “spare parts” were required at a plant being prepped for closure, and high contamination levels on the shipped equipment (both radioactivity and toxic chemicals) raise substantial questions about what USEC intended to accomplish, how much USEC’s partners Fluor and B&W gained by the acceleration of Piketon cleanup, and whether the shipments were the quid pro quo for extra-legal DOE payments to USEC.
I’ll give the last word to a long-time commenter on USEC investor message boards, who posted the following message on July 8:
“Cannot believe an energy company with a monopoly market died. Oh well see you all. USEC is "dead to me." Anybody working at this company best get resume updated.”
EcoWatch Daily Newsletter
By Geoffrey Sea
The Commonwealth of Kentucky may sue the federal government to compel cleanup of the now-closing uranium enrichment site at Paducah, according to the governor and the state attorney general. The quasi-privatized operator of the facility, USEC Inc., filed suit against the Department of Energy (DOE) in May. Shareholders and/or bondholders of USEC may sue the company for a third or fourth time over its current financial collapse, and the feds may have to sue USEC if it defaults on its obligation to properly restore the Paducah plant to safe status before it departs.
Whistleblowers allied with the Natural Resources Defense Council have filed suit against Paducah contractors over past fraud and legal violations in waste handling at the site, a new round of litigation after fraud claims joined by the federal government about a decade ago. Paducah workers will likely sue to recover their vanishing pension benefits, and heck, if you don’t sue somebody, then you’re just not a member of the Paducah nuclear club.
It’s a litigious self-sustaining chain reaction, a post-atomic parody of the old Tom Lehrer A-Bomb song “Who’s Next?” Yesterday I visited “Future City,” an empty developer’s dream town adjacent to the hulking Paducah Gaseous Diffusion Plant, and I saw the Paducah mural wall along the lovely Ohio River, which includes one depicting the incoming traffic of the “A-Boom” of 1952. But there’s an ominous empty mural space after it, ripe for depiction of the rear-ends of automobiles in the A-Bust of 2013, and it’s clear that Future City belongs now only to the lawyers.
The Week the USEC World Ended
USEC, the company whose bust-up operations and the cessation thereof included no serious planning for impacts on the community, is only midway through a nuclear week of woe.
On Monday, June 24, a special joint session of the Paducah City Council and the McCracken County Fiscal Court, chaired by mayor Gayle Kaler, was called to respond to the crisis of USEC’s precipitous departure, resulting in a joint resolution demanding federal insurance of safe power-down and recognizing united community opposition to a planned on-site 100-acre waste cell following plant demolition.
Representatives of Neighbors for an Ohio Valley Alternative (NOVA) attended, presented comments, and announced the launch of a nationwide petition-drive to transfer responsibility for nuclear cleanup from the Department of Energy to the U.S. Environmental Protection Agency. The NOVA petition also calls for a transfer of federal funds from USEC’s failed “American Centrifuge” program to urgent safety and cleanup work at the Paducah and Piketon, Ohio, sites. Media attention has focused on my revelation at the Monday meeting that for years USEC has been moving contaminated equipment from the Piketon site to Paducah, under the rubric of “spare parts,” but with many outstanding questions as to why contaminated spare parts would be required for a facility scheduled to be shut down.
On Tuesday, June 25, Kentucky Governor Steve Beshear came to Paducah for meetings with Mayor Kaler and other officials mobilizing community response, after which the governor announced that the state is contemplating a lawsuit against DOE. Such a suit would be modeled on the massive successful litigation brought by the states of Washington and Oregon against DOE, to increase the funding and alter the action plan for cleanup of the Hanford nuclear reservation, near the border of those two states.
At issue in the potential Kentucky case would be DOE’s failure to plan for and fund safe power-down at Paducah. Instead, DOE relied on a weak lease provision that requires USEC to accomplish that work, but DOE apparently failed to take cognizance of USEC’s financial collapse, rendering the company incapable of incurring additional expenses without pushing itself into bankruptcy. That eventuality would bring a raft of other problems of unanticipated consequence, including the potential disappearance of worker pension benefits at the same time workers lose the remaining value of their USEC stock holdings.
Enron All Under Again
USEC stock value has flat-lined at about 30 cents per share, creating a radioactive penny-stock, making a mockery of USEC’s “Stock Up” program of partial employee compensation. It’s Enron all under again, with economic impact highly concentrated in the communities of Paducah and Piketon, far less capable of absorbing the impacts than was Houston.
Also on Tuesday, Edward Markey was elected to the U.S. Senate in a special election in Massachusetts. Markey has been USEC’s arch-foe in the House, dubbing it “the United States Earmark Corporation,” a jab at the House Committee chairmen from Kentucky, Hal Rogers and Ed Whitfield, who claimed credit for the Republican “No Earmark Rule” even as they shoveled new federal subsidies to USEC. In its carefree days, the company would dutifully kick back some of those subsidies in the form of campaign contributions, with Rogers and Whitfield near the top of that list. They, along with Paducah point man Mitch McConnell, will have to explain to constituents, if not the Justice Department, why USEC took the federal money and ran.
This would be a propitious time to review just one of Congressman Markey’s prophetic anti-USEC rants in House committee deliberations, this one in opposition to USEC’s eligibility for a federal loan guarantee.
Now, Congressman Markey will move to the U.S. Senate, where he will caucus with the majority, just as USEC is preparing to submit a third revision of its loan guarantee application, or so the company says.
Quadruple Back-Flip Split?
But the week is far from over. On Thursday, June 27, USEC shareholders are meeting at the company’s beltway-bandit hideout in Bethesda, Maryland. They will stare straight into the double-barrels of doomsday de-listing warnings from the New York Stock Exchange (NYSE), one because USEC’s stock price has failed to meet the one-buck minimum for over a year, and another because the company’s total market capitalization is only 75% of the $50 million minimum NYSE requirement. If USEC is de-listed for either or both reasons, half a billion dollars of bond debt becomes immediately due.
To ward off that Apocalypse, USEC shareholders will vote on a no-choice proposal for a reverse stock split, whereby current shares will be traded in for new ones at a ratio of between ten-to-one and thirty-to-one. It’s a Wikipedia understatement that “a reverse stock split is often an indication that a company is in financial trouble,” even when the swap ratio is lower than double-digits. But USEC has a number of additional problems. While the reverse split will likely cure the share price deficiency at least temporarily, it will also likely worsen the market capitalization deficiency, which USEC suggests in a disclosure statement. That’s not just because reverse splits have the stench of dead flesh, but because odd shares that cannot be swapped at the selected ratio must be cashed out. (If the swap ratio is thirty-to-one but you only own twenty-nine shares, the company has to buy your shares.)
NYSE just was not cut out for micro-cap companies that make a meager living by extorting illegal subsidy payments from corrupt politicians. Maybe USEC needs a quadruple back-flip split on the balance beam as its final substitution for a legal business plan?
And it gets worse for USEC. The company needed to cut its losses at Paducah, after paying about half a billion dollars each year just in power costs to TVA. However, the company banked on being able to pack-up and leave Paducah cost-free. It had intended to shut out the lights, and “de-lease” the facility, using any threat of nuclear safety calamity from a rapid power-down as a way to extract yet more federal payments for subsidized “extension.”
When the Department of Energy said no to that plan in May, according to reliable sources, it also informed USEC that it would hold the company to a lease provision that the plant be returned in “safe condition.” The possibility of federal aid for that project is negated by USEC’s own scheming that Paducah power-down costs not be included in the 2013 federal budget (even in theory, such funds will not be available until October at the earliest).
There is ongoing wrangling between the litigants even now as to what exactly “safe condition” means. USEC is meeting a minimal standard of its own determination, simply blowing air through the system as diffusion cells are powered down, but leaving substantial residues of solidified uranium and transuranic crap inside the pipes and compressors. That will be a costly nightmare for future cleanup workers. (Workers report about two inches of residue coating the insides of all process equipment). Imagine a gigantic sixty-year-old sewerage installation that’s never been Roto-Rooted.
That leaves a horrid legacy for future cleanup workers, as Terra Hays testified at Monday night’s governmental meeting. She is the wife of a Paducah worker who became seriously ill after only 23 months of removing and packaging contaminated materials at Paducah, and Ms. Hays cited the statistic that there are now 19,128 active claims for work-related illness compensation at Paducah.
DOE was able to compel USEC to take minimal safety precautions at Paducah because USEC’s continuing investment scam is to say that it will apply for and receive a $2 billion loan guarantee from DOE, a loan guarantee that is inexplicably supposed to enable USEC to build a new centrifuge plant with undemonstrated technology that will cost a minimum of $5 billion. Thus, USEC did not terminate its TVA power contract at the end of May as threatened, and to date has shut down about 60 percent of the Paducah cascade, with the remainder to be shut down over the next month or two. Power consumption has been reduced from about 1500 MW per year to about 350 MW or lower.
With USEC’s financial situation, however, that creates a whole separate set of issues. USEC did not anticipate having to pay the costs of that work, and so did not disclose those costs to its investors or the SEC. In a Form 8-K filed with the SEC on May 31, USEC says only that “USEC is in discussions with DOE regarding the timing of USEC’s de-lease of the Paducah GDP and is seeking to minimize its transition costs, which could be substantial.” By my estimation, the unanticipated power costs alone will total in the tens of millions of dollars.
And that raises the question of whether USEC has been forthcoming with its investors and federal regulators headed into its shareholders meeting on June 27. A cornucopia of new potential lawsuits!
Scores of World War II ammunition bunkers cluster around the Paducah plant. I think they may find a new use sooner than the gaseous diffusion plant, warehousing the litigation files about to be generated in a case of uncontrolled nuclear proliferation. As for the massively contaminated plant site itself, how could we do better than a new federal penitentiary for the white-collar perpetrators of these hazmat-orange crimes?
The security fences and guard stations are already in place for the nuclear chain gang, and the plant was prophetically organized by cell-block. Consider the government cost savings on convict transportation alone.
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By Geoffrey Sea
Southern California Edison (SCE) has abandoned plans to restart its two nuclear reactors at San Onofre. The announcement this morning comes exactly one week after termination of operations at the Paducah, Kentucky, uranium enrichment plant, which for decades had provided the fuel for San Onofre. It drops the number of operating nuclear reactors in the U.S. below one hundred for the first time since the early 1980s.
The San Onofre decision ends 18 months of wrangling between the utility and environmental opponents, after serious leaks were detected in a steam generator that had been newly installed. The news release by SCE has a detectable tone of relief that the company will no longer have to defend the indefensible. Similar tones have emanated from the Washington headquarters of the Department of Energy (DOE) around the Paducah decision, sending a message that the era of illegalities involving USEC privatization may be nearing an end.
The Paducah and San Onofre shutdowns have a number of important connections beyond that the former facility provided the latter with fuel, and that the two sites are located in earthquake red zones. In both cases, the Nuclear Regulatory Commission (NRC) proved itself incompetent and incapable, unable to take the most basic actions to insure nuclear safety. NRC should have flatly denied the San Onofre reactors permission to restart, and NRC should have revoked USEC’s operating license at Paducah after the company clearly could not meet financial capacity requirements. But the NRC failed in both cases, locked up in a kind of containment cell of quantum indeterminacy. Schrodinger’s cat, dead or alive, could do a better job of regulating the nuclear industry than the NRC as now constituted.
The news in both the California and Kentucky cases also goes to show that the Attorney Age has banished the Atomic Age. The most important line in the SCE news release is the last one: “SCE intends to pursue recovery of damages from Mitsubishi Heavy Industries, the supplier of the replacement steam generators … ” Likewise, USEC filed suit against the Department of Energy on May 30. Nuclear energy, once billed as providing unlimited power, is fulfilling its promise—the power of lawyers. “Don’t radiate: Litigate!” may be coming soon to a button or bumper-sticker near you.
And then there is the future marketing linkage. USEC has long been in financial decline, but its fortunes took a precipitous plunge after its star customer, TEPCO—the utility that had headlined demand for new nuclear fuel services—had that little mishap in Japan, a mishap that might have been worsened, by the way, by contaminants in the USEC-supplied uranium fuel. With Japanese customers gone down the uranium drain, USEC fell back on the booming American market. Booming in a virtual-reality gaming way, that is. The San Onofre decision lowers the boom on demand for future sources of enriched uranium, just when USEC says it will apply for a new $2 billion federal loan guarantee to build a new enrichment plant.
Good luck with that.
By Geoffrey Sea
The United States Enrichment Corporation, the contracting subsidiary of USEC Inc.—the company that now produces nothing—has filed a lawsuit in the Court of Federal Claims seeking $38 million in back-bill payment from the U.S. Department of Energy (DOE). The complaint was filed on May 30 with no publicity, as it reveals that the entities running uranium enrichment projects at the Paducah, KY, and Piketon, OH, federal sites are more antagonists than partners.
The filing came exactly one week after DOE rejected USEC’s $13 million demand for extended payments at Paducah, and one day before USEC ceased enriching uranium at Paducah, making good on a long-time extortion threat. The legal action heralds the end of the “American Centrifuge” project at Piketon and of the uranium enrichment privatization experiment.
For this litigation, USEC has retained McKenna, Long & Aldridge, the leading firm specializing in government contracts that counts all of the top five U.S. defense contractors as clients.
A congressional staffer who has followed USEC dealings closely commented on the news: “It is outrageous.” USEC is displaying more chutzpah than its old mouthpiece, former Congresswoman from Ohio Jean Schmidt, when she called for making flag desecration a felony while draped in a Captain America suit.
This official transition from the Atomic Age to the Attorney Age makes obvious what has long been known to industry observers: The USEC Privatization Act of 1996 created a very stormy marriage between USEC and DOE. That marriage led the parties to commit unnatural acts at Paducah and Piketon, but without clear markers of mattress territory, and with irreconcilable differences between governmental and proprietary predilections. Virtual screaming matches between USEC and DOE at closed-door sessions have become something of a scandal unto themselves.
The Privatization Act created USEC as a non-governmental company with unprecedented (and unconstitutional) control over federal assets at two prime industrial production sites. The condition was that USEC shut down the existing antiquated power-hungry facilities and replace them with technology of its own development, free of political interference (insert laugh-track here). But the Privatization Act gave USEC no financial incentive to do the R&D, so the company didn’t, becoming a nagging ward of the bureaucracy from which it was supposed to be liberated. Before he won the Nobel Prize in Economics, Joseph Stiglitz opposed the privatization as chairman of the Council of Economic Advisors, and in an op-ed piece in The Wall Street Journal, he quoted a Republican Senator calling privatized USEC “a threat to national security.”
Now fifteen years into the marriage of inconvenience, the divorce will not be easy or amicable. As I wrote on May 28, the “negotiations” between DOE and USEC, advertized as concerning extended Paducah operations, were in fact about “timing, bill payment and where the political blame for job loss could be cast.”
To keep up public appearances, the squabbling spouses intentionally failed to make preparations or secure the congressional funding for clean plant power-down, because as every divorce lawyer knows, the chief strategic objective is to get the other side to blink. Each party had to show that it was ready to split the child of nuclear safety down the middle, attempting to win spiteful custody of whatever treasure remained. And in the real world of the nuclear complex, there was no King Solomon. They don’t call it a complex for nothing.
Legal considerations did come into play, however. Attempts by USEC to ditch the competitive uranium enrichment business in favor of lucrative no-bid nuclear cleanup contracts were partially thwarted by decisions of the DOE General Counsel that such contracts at either Piketon or Paducah are barred by federal conflict-of-interest rules. The absence of preparations for power-down at Paducah was in part an attempt by USEC to force DOE to waive those rules, since no other company besides USEC would be ready on the spot when power-down occurred. According to reporting in the Lexington Herald-Leader, DOE has now reasserted that conflict-of-interest rules will bar USEC from cleanup at Paducah.
The Government Accountability Office (GAO) determined in September of 2011 that DOE “discretionary” payments and uranium “barters” with USEC, to the tune of some $194 million, were in violation of federal fiscal laws. The $13 million additional gift of uranium from the national stockpile that USEC demanded as payment for a non-performing Paducah extension would have violated these same laws after the illegality had been identified by federal investigators, and would have been the most explicit nullification of the USEC Privatization Act yet on record. That act aimed at closure of the gaseous diffusion plants, and relegated the necessary shutdowns to USEC “business decisions” removed from political influence. Government payment to USEC for alteration of that decision would have defeated the main aim of the statute.
Duking It Out at Paducah
Other federal agencies aren’t done with their scrutiny of the strange transactions between DOE and USEC. Last week, GAO investigators quizzed both DOE and USEC about the apparent absence of plans for clean power-down at Paducah, despite intense negotiations between the parties that have reportedly been underway for more than a year. The results are some of the first public indications of how the Paducah shutdown will transpire, though correct interpretation of the responses relies on our ability to invert the given answers to get at the real truth, the way readers in the former Soviet Union learned to read the party newspaper Pravda.
According to informed sources who wish to remain anonymous, both USEC and DOE told GAO that USEC will return the Paducah plant site to DOE control in parcels gradually, with only the initial phase of “de-leasing” accomplished by the spring or summer of 2014. Similar gradual transfer of the Piketon site delayed cleanup substantially, provided endless opportunities for USEC to extort new payments from DOE, and generated hoax “redevelopment” projects with no more than PR value, such as the phony-baloney media event in 2009 at which USEC claimed it would build a nuclear reactor on a site with no body of cooling water. For these prerogatives, USEC paid no fees of any kind for retention of “leased” facilities, and was subject to no financial penalties for contractual violations. Kind of a sweet “leasing” deal you might want to ask John Boehner and Mitch McConnell to write into legislation on your behalf.
USEC’s exercise of its lease option to retain control of parts of the Piketon or Paducah sites indefinitely and without explanation or payment warrant against the wishful-nonsense proposal now being hawked by Paducah local media.
That proposal, spearheaded by former Paducah manager Jim Thomas, mischaracterizes USEC’s occupancy as DOE contract work for which there should be a successor, when in reality USEC was given control of the site by statute, and it may use that control to knock enrichment competitors out of the box, as it did when USEC slammed the door on competitor AREVA’s interest in building a centrifuge plant at Piketon. (AREVA subsequently went to a private site in Idaho). Briefly put, the Thomas proposal to continue government enrichment at Paducah, even if technically possible, would require repeal of the USEC Privatization Act, which will happen when pigs fly over a national monument honoring Julian Assange.
Whistle-blower Joe Carson addresses a meeting of sick Paducah workers and whistle-blowers. Meeting and
video arranged by Commonwealth Environmental Services of Paducah.
DOE and USEC reportedly also told GAO that the reason there is no federal budget line for purging of the diffusion cells at Paducah is that USEC will perform that work itself, before it cedes control of the site. That is utter lunacy. First, that is work barred to USEC under the conflict-of-interest rule. Second, USEC did not perform that service at Piketon, though it had nine years to do it, even though USEC was being paid hundreds of millions of dollars by DOE to do precisely that.
In fact, that constitutes much of the contract work for which USEC now claims it is owed back over-budget reimbursement in its new lawsuit. And though DOE has not yet commented on the lawsuit, the reason that DOE did not pay those over-charges when billed is that USEC failed to accomplish the assignment. Only now are the cells at Piketon being purged, with many problems encountered, under a $2.2 billion contract to Fluor-B&W.
Moreover, USEC is now in such financial distress, with $500 million each owed to bondholders and to pension obligations, with stock exchange delisting warnings in effect, that the company need not worry about being around long enough to make good on cleanup commitments at Paducah. The company’s total market valuation is down to $43 million. USEC might just as well represent to federal investigators that it will pay the billion-dollar cleanup costs at Paducah, since it’s never paid a penalty for making false promises, and covering for DOE corruption might help settle the current lawsuit and collect on fraudulent bills.
The date at which USEC and DOE represent they will finish the first stage of de-leasing at Paducah—between April and July of 2014—is quite coincidental, as is everything in this business. June of 2014 is the contractual date at which USEC must decide go or no go on the commercial scale version of its “American Centrifuge Project” at Piketon. That would be the project currently estimated as costing a minimum of $5 billion, more than a hundred times USEC’s current market valuation, and for which there is no financing plan that doesn’t read exactly like the investment-fraud plot device of The Producers.
Financially, USEC must ditch the centrifuge project by end of summer in 2014, because on Oct. 1 of that year, assuming it’s still around, half a billion dollars of bond debt becomes due.
In other words, “truther” gibberish aside, the twin towers of USEC operations at Piketon and Paducah are programmed for self-demolition in the summer of 2014, after maximum extraction of illegal payments from the government, but before USEC is required to pay off its investors. USEC will say “no go” on its long-suffering centrifuge runaround, and simultaneously surrender its site control at Paducah, leaving nothing of the company but chemtrails in the sky and in the water and on the ground. That is how the USEC Privatization Act will be repealed, without Congress needing to lift or point a finger. Only all the little people will get screwed.
Today, June 4, the Secretary and Deputy Secretary of Energy traveled to Capitol Hill to meet with members of Kentucky’s congressional delegation about the future of the Paducah site. USEC was conspicuously uninvited to those meetings.
The Leaser of Evils
One might wonder who the nutcases were who negotiated the USEC privatization agreement, who authored the screwy single USEC “lease” for Piketon and Paducah that requires no leasing fee and that levies no penalties for any order of malfeasance, who “negotiated” with USEC on behalf of the government when hundreds of millions of dollars were transferred to the private company in exchange for nothing at all (and that was called “barter”).
Well, some of the mid-level people who sat around the negotiating table and witnessed these atrocities also wondered, and some of them did some research, which they shared with me. Turns out it was pretty much all one guy. William A. Murphie, manager of the “Porstmouth/Paducah Project Office” of DOE, was the principal author of the USEC no-fee, no-penalties “lease.” Then he was also the guy who complained that his hands were tied by lease provisions when DOE could not get USEC to relinquish control of the Piketon site for cleanup, and now Murphie is the guy who intentionally failed to secure a budget line to pay for clean power-down at Paducah, on the empty assertion that USEC itself will pay for it.
The Department of Energy should open an interest office in Khabarovsk, as a place to which Murphie can be transferred; on the off chance he is not incarcerated.
Some will claim that the new litigation is routine and nothing but another bump on the road of USEC triumphalism. But consider that USEC has claimed that its fortunes depend entirely on winning a $2 billion federal loan guarantee, an award which has already twice been denied, the application for which has not yet been submitted. Consider that USEC has less than 1 percent of the equity required for the project for which it seeks the loan guarantee.
Now if you were approaching a mortgage lender with less than 1 percent of equity in your portfolio and a record of defaults and explicit threats against the lender, would you, just before you submit your application, try to swing the deal by filing a federal lawsuit against the lender on old claims that have already been denied?
By Geoffrey Sea
Last week on EcoWatch, I predicted that negotiations between USEC Inc. and the Department of Energy (DOE) over extension of operations at the Paducah uranium enrichment plant would fail, and that principal power-down would happen as scheduled around May 31. Bowing to my prophetic powers, those negotiations in fact broke down irreparably just one day later, and on Friday both DOE and USEC announced that the plant will close imminently.
Inconsistent statements about the exact timing of the shutdown are due to confusion among the major players, because closure of a gaseous diffusion plant is a costly and complicated business, and neither USEC nor DOE has the resources or the plan to know exactly how this inevitability is going to happen. According to USEC, “the company will begin ceasing uranium enrichment at the end of May.”
The scandal of the situation is that, despite a very long lead-up to the inevitable plant closure (termination notices to employees were sent in December of 2011), no party moved to make detailed plans for the power-down, as DOE and the privatized USEC Inc. engaged in mutual extortion ploys over timing, bill payment and where the political blame for job loss could be cast. In the stalemate, DOE funding for the major work of powering down the enormous facility was put off until the 2014 fiscal year, at least five months after the power-down will actually occur. This insures a dirty procedure with the diffusion cells not evacuated of process gas.
On May 26, after the link to my article was widely circulated and the failure of an extension made headlines, a flurry of email communications among west Kentucky community leaders transpired, which included a terse statement by Paducah mayor Gayle Kaler: “Our priority as a community is first and foremost demanding clean up dollars. We cannot accept a dirty shut down.”
An honorable sentiment, but a dirty shutdown it shall be, not only because of the five month funding gap, but because all DOE discretionary dollars were pumped into saving USEC from immediate financial collapse—up to half a billion dollars in the past few years alone. And that money is mostly gone from the corporate coffers in the form of Gigantor salaries for USEC upper management. As his company sunk in the nuclear muck, CEO John Welch pulled down a cool $6.5 million salary in 2011 alone. If nothing else of energy consequence has come from privatized USEC, the super-speed siphon of funds from the U.S. Treasury to the private accounts of USEC corporate agents truly has been atomic-powered.
The Power-Down Gap
Even if the five month gap were bridged by some ungodly miracle of Mitch McConnell, it would not avert a dirty power-down at Paducah. That’s because William A. Murphie, manager of DOE’s Portsmouth/Paducah Project Office, did not want to hasten USEC’s demise by suggesting in federal budget dealings that the closure of Paducah was anything more than “potential.”
It was as if failing to allocate funds for the closure would force the government into making extortion payments to USEC that would keep up the appearance that the plant was producing something of value, mainly by churning uranium waste to build nuclear fuel stockpiles of dubious future value, with gargantuan releases of CFC ozone-depleting gasses as the main result. (According to David Manuta, former science director at the gaseous diffusion plant near Piketon, Ohio, these plants were “the largest industrial users of Freon,” the largest emitters of CFC gasses, and the stock of special Freon needed to keep Paducah in operation is already gone or nearly so.)
Neither the 2014 budget request of the Obama Administration nor any proposal by the Kentucky Republicans who control congressional appropriations includes funds to evacuate the diffusion cells at Paducah. The pending 2014 funds are only enough to place the facility into what Murphie has termed “cold storage” —mafia-speak for a factory on ice. The term implies a dirty power-down, because if the complex work of cell evacuation were undertaken, the facility would not be in “storage” at all. Bipartisan budget proposals do, however, include more wasted financial bailout money for USEC, which will be long gone from Paducah by the time the loot is pocketed.
Closure of the Paducah plant isn’t a disaster waiting to happen. The observable disaster has been cooking slowly for fifteen years, since privatization of the former “U.S. Enrichment Corporation” in 1998. It has reached a frothing boil right now, and it will continue to burn the residents of western Kentucky for many decades to come.
Of greatest safety concern in a dirty power-down is the “slow-cooker” phenomenon, so-called by engineers, though the term itself is considered classified, and workers at the gaseous diffusion sites in Tennessee, Ohio and Kentucky have been ordered not to utter it. As a nuclear engineer for the Navy in the early 1950s, Jimmy Carter was assigned to work on gaseous diffusion design and may have contributed to invention of the term.
Consider the physical slow-cooker as metaphor for the privatization debacle or vice versa as you please.
Gaseous diffusion plants are unique creatures in the world of industry. The principal designer was the brilliant Manhattan-Project scientist Harold Urey, who was so horrified by his creation that he quit government employ to warn of nuclear and ecological dangers. (Urey’s wife Frieda spearheaded the first antinuclear referendum drive in California.) Urey’s gaseous diffusion cascade is an enormous integrated system, on the explicit analogy of a living organism—its “cells” so interconnected by gaseous and liquid arteries that once sparked to life in a Frankensteinian manner, the monster has to be juiced with power and product continuously. By design, a dead gaseous diffusion plant cannot be revived, because the gaseous uranium hexafluoride hardens in its veins.
A “slow cooker” is a critical mass of uranium and transuranic elements that forms inside the process equipment of a gaseous diffusion plant due to injudicious operation or a loss of power that causes process gas to crystallize. An undisclosed number of slow-cookers has occurred at the gaseous diffusion plants, mostly at the X-326 high-assay building at Piketon, Ohio, where the Criticality Accident Alarm Safety System (CASS) activated on May 22, causing building evacuation during cleanup, according to reliable informants. Ironically, that was the same day that my post about Paducah closure appeared.
The phenomenon was first theorized by the physicist Edward Teller, father of the American H-Bomb, when he visited Oak Ridge during the Manhattan Project. Though the piping in diffusion plants has been designed to prevent any normal critical mass of uranium, as in an atomic bomb, from forming, Teller worried that the combined neutron flux from bringing many hundreds of tons of uranium into relative proximity could yield unanticipated criticality effects.
That possibility has been magnified at Paducah because, in the 1960s and 1970s, recycled uranium containing significant amounts of plutonium, americium and neptunium, was fed into the Paducah diffusion cascade, resulting in worker and environmental exposures that made headlines in the 1980s. Plutonium and other transuranic elements intensify the possibility of critical mass formation, in ways that cannot be entirely predicted because no gaseous diffusion plant contaminated with transuranics has ever been powered down dirty before.
Yes, this is a big science experiment. But hey, kids, don’t try this at home!
The unpredictability is magnified by the fact that USEC, which has operated the facility since the 1990s, followed its proprietary interest and did little maintenance required to keep equipment operable past the date when USEC knew it would depart the premises with no continuing legal liabilities. According to Paducah workers who prefer to not be identified, seals on the thousands of miles of piping are leaking, transuranic contamination is widespread and imported radioactive waste has been packed into the process buildings that are about to be shuttered.
Follow the Moniz
Media coverage of the closure news that was long predictable is getting the story multiply wrong. The venerable New York Times suggests that Paducah closure “could pose a problem for the American nuclear weapons arsenal over time,” which is poppycock, because enriched uranium has not been used in U.S. nuclear weapons since the early 1960s.
Politico leads with the strange observation that USEC is not quite omnipotent, when in fact the company has been struggling just to stay out of liquidation. Some news outlets are reporting that the Obama Administration “rejected a proposal” to keep the plant open, with “1,000 jobs lost” when the truth is that there was no such proposal. USEC has run the plant to a condition of inoperability, and the negotiations that did take place were only about the timing, procedure and payments for the shutdown.
What DOE in fact rejected, according to the Capitol Hill rumor, was the idea that it should give USEC another gift of $13 million dollars’ worth of free uranium, for the service of USEC defaulting on every major promise it’s made. TV and radio in Kentucky are somehow shocked, shocked over a closure overdue by years, as lead-in to the desired editorial position that this, too, should be blamed on President Obama.
That reaction was seeded in USEC’s ridiculous posture of demanding continued government payments for an enterprise that was privatized by statute in 1998. The billions of dollars in federal slush funds already diverted to USEC by the powerful Ohio and Kentucky congressional delegations have been in explicit violation of the USEC Privatization Act. And if anything in my writing contributed to the final decision to cut the cord, it was that I pointed out what the law clearly states—that discretionary payments to USEC by government officials are criminal acts given terms of the Privatization Act as now on the books, and Congress had to amend or repeal the Act if they wanted to make such payments legal.
Kentucky and Ohio Republicans are suddenly huffy-puffy about Paducah closure, which is pretty ludicrous since they control the key levers of legislative power that could have amended the Privatization Act or passed appropriations to pay for safe shutdown of the facility, but they didn’t. Not only do Kentucky’s Mitch McConnell and Ohio’s John Boehner head the Republican caucuses in both chambers of Congress, but Kentucky’s Hal Rogers chairs the House Appropriations Committee and takes personal credit for the “no-earmarks rule”—that would be the rule that prohibits special appropriations for pet private companies like USEC.
Meanwhile, the Republican congressman from the district that includes Paducah is Ed Whitfield, chairman of the House Committee on Energy and Commerce—that would be the committee that should have initiated 2013 funding for safe shutdown of the Paducah plant but failed to do so. These men assailing the Obama Administration for funding deficiencies at Paducah is like Geoffrey the Giraffe lecturing: “Don’t stick your neck out!”
The reason for the shunning campaign against Paducah funding by Bluegrass State politicians is quite apparent. USEC has longed for the closure of Paducah to avoid the huge power bill, and has advertised the closure to investors as a necessary boost to profitability. At the same time, USEC has been a major campaign contributor to the GOP congressional delegation from Kentucky, recycling the federal dollars it receives in a feint to eco-awareness.
If the certainty of Paducah closure had served as the basis for congressional hearings or a federal budget line, it would have undercut USEC's corporate strategy of extorting federal payments on the possibility of indefinite extension of operations. USEC has consistently demanded DOE “discretionary” funding and extra-legal gifts of uranium by threatening to abandon Paducah before DOE had attained the necessary closure funding, precipitating a nuclear crisis. What DOE headquarters in Washington has finally done is to call USEC’s bluff.
It is probably also true that Ernest Moniz, just confirmed as the new Secretary of Energy by the U.S. Senate on May 17, likely did not want his first major act as Secretary to be an illegal giveaway to USEC. Moniz can be called an architect of the USEC catastrophe. He helped design the disastrous USEC privatization for the Clinton Administration in the 1990s, he defended that privatization in testimony to Congress in 2000, he served as a “strategic advisor” to USEC starting in 2002, when USEC undertook its “diversification” away from uranium enrichment, and his ties to USEC were one stumbling block in his confirmation as Energy Secretary.
USEC executives bubbled over with glee that their man was appointed to be the new Secretary of Energy. But if only Richard Nixon could have reached out to Communist China, then only Ernest Moniz may have the cred to tell USEC to shove it.
Unfortunately, USEC shoving it means that the workers and community of Paducah will continue to get reamed.
Neighbors for an Ohio Valley Alternative will be announcing educational and organizing events in Paducah shortly.
By Geoffrey Sea
Disaster is about to strike in western Kentucky, a full-blown nuclear catastrophe involving hundreds of tons of enriched uranium tainted with plutonium, technetium, arsenic, beryllium and a toxic chemical brew. But this nuke calamity will be no fluke. It’s been foreseen, planned, even programmed, the result of an atomic extortion game played out between the U.S. Department of Energy (DOE) and the most failed American experiment in privatization, the company that has run the Paducah plant into the poisoned ground, USEC Inc.
As now scheduled, main power to the gargantuan gaseous diffusion uranium plant at Paducah, Kentucky, will be cut at midnight on May 31, just nine days from now—cut because USEC has terminated its power contract with TVA as of that time [“USEC Ceases Buying Power,” Paducah Sun, April 19, page 1] and because DOE can’t pick up the bill.
DOE is five months away from the start of 2014 spending authority, needed to fund clean power-down at Paducah. Meanwhile, USEC’s total market capitalization has declined to about $45 million, not enough to meet minimum listing requirements for the New York Stock Exchange, pay off the company’s staggering debts or retain its operating licenses under financial capacity requirements of the Nuclear Regulatory Commission.
The Paducah plant cannot legally stay open, and it can’t safely be shut down—a lovely metaphor for the end of the Atomic Age and a perfect nightmare for the people of Kentucky.
If the main power to the diffusion cascade is cut as now may be unavoidable, the uranium hexafluoride gas inside thousands of miles of piping and process equipment will crystallize, creating a very costly gigantic hunk of junk as a bequest to future generations, delaying site cleanup for many decades and risking nuclear criticality problems that remain unstudied. Unlike gaseous uranium that can be flushed from pipes with relative ease, crystallized uranium may need to be chiseled out manually, adding greatly to occupational hazards.
The gaseous diffusion plant at Oak Ridge, TN, was powered-down dirty in 1985, in a safer situation because the Oak Ridge plant did not have near the level of transuranic contaminants found at Paducah. The Oak Ridge catastrophe left a poisonous site that still awaits cleanup a quarter-century later, and an echo chamber of political promises that such a stupid move would never be made again. But that was before the privatization of USEC.
Could a dirty power-down at Paducah—where recycled and reprocessed uranium contaminated with plutonium and other transuranic elements was added in massive quantities—result in “slow-cooker” critical mass formations inside the process equipment?
No one really knows.
Everybody does know that the Paducah plant is about to close. Its technology is Jurassic, requiring about ten times the energy of competing uranium enrichment methods around the world. The Paducah plant has been the largest single-meter consumer of electric power on the planet, requiring two TVA coal plants just to keep it operating, and it’s the largest single-source emitter of the very worst atmospheric gasses—chlorofluorocarbons (CFCs).
The plant narrowly escaped the selection process that shuttered its sister plants in Tennessee and Ohio long ago. A 2012 apocalypse for Paducah workers was averted only by a last-second, five-party raid on the U.S. Treasury involving four federal entities pitching together to bail out USEC financially, a deal so arcane that knowledge of Mayan astrological codices would be required to grasp its basic principles. The plot would make for a great super-crime Hollywood movie in which Kentucky’s own George Clooney and Ashley Judd could star, if only the crafting lawyers and bureaucrats had made the Code of Federal Regulations as easy to decipher as bible code, or half as interesting.
“The deal” that saved Paducah operations for a year, past one crucial election non-coincidentally, probably consumed more net energy than it produced by stupidly paying USEC to run depleted uranium waste back through the inefficient Paducah plant—like a massive government program paying citizens to drink their own pee as a way to cut sewerage costs and keep medics employed prior to a Presidential contest. The deal never would have passed muster if it had been subjected to environmental or economic reviews of any kind, but it wasn’t. The “jobs” mantra was chanted, and all applicable laws from local noise-control ordinances to the Geneva Conventions were waived.
But the deal expires on May 31, in nine days. USEC and DOE have both said that discussions for a new extension deal continue, but rumors of a new deal were dashed on May 7, sending USEC stock into a flip-flop, when in an investor conference call, the company announced that no extension had been agreed, with very pessimistic notes about even a “short-term” postponement. That accompanied news that USEC had suffered a $2 million loss in the first quarter of 2013, largely attributable to the power bill at Paducah, which USEC says it’s under no obligation to keep paying.
Showing no enthusiasm whatsoever, USEC CEO John Welch said on May 7:
“While we continue to pursue options for a short-term extension of enrichment at Paducah beyond May 31, we also continue to prepare to cease enrichment in early June.”
Meanwhile, the Kentucky DOE field office in charge, managed by William A. Murphie, has advertised a host of companies “expressing interest” in future use of the Paducah site, with no explanation of how the existing edifice of egregiousness will be made to disappear. “Off the record,” the Kentucky field office has floated dates like 2060 for the completion of Paducah cleanup.
That’s two generations from now and kind of a long time for the skilled workforce and other interested parties to hang around. Even the 2060 date assumes that costs can be minimized by evacuating the diffusion cells before power-down—the scenario that seems certain not to happen because no one has the funding for it. Flushing the cells of uranium hexafluoride gas is the only sensible way to power-down, but it’s costly and time-consuming. At the Piketon, Ohio, plant a semi-clean power-down has cost billions of dollars and has taken twelve years and counting to accomplish. (Murphie will have to explain why he paid USEC so much money for the extended power-down at Piketon, while simultaneously asserting that a Paducah power-down can be accomplished swiftly and cheaply). Clean power-down also requires that workers and supplies be available on demand, and in the Paducah case, there simply isn’t time.
According to reliable sources, contracts are being prepared for the work of placing the plant into what Murphie calls “cold storage”—a term of his invention. But those contracts won’t take effect until October when fiscal 2014 funds are available. “Cold storage” at that point means closing the doors, posting guards outside, and otherwise walking away.
Can there yet be an extension deal to hold over the plant until 2014 funds are available? Probably not, because USEC may not last that long, the equipment in the plant has been run to decrepitude with no attention to maintenance, there isn’t sufficient time to make the arrangements, and a second end-run around environmental compliance would likely generate lawsuits.
Captains Log: A Heck of a Long Time
As to when the site might be cleaned up for “future use” under a “cold storage” scenario, nothing has even been rumored. I think we are talking Star Trek dates. Or consider the half-life of natural uranium, which is about four and a half billion years.
Until such time, the Paducah plant will either sit like a massive metallic boil on the planet, or be demolished and scavenged for semi-precious metals like the Oak Ridge facility. But the plutonium, americium and neptunium at Paducah may nix the latter possibility. The dirty power-down arranged by Murphie would make it impossible to prevent transuranic atmospheric release during demolition.
I propose a bronze encasement for the whole fandango, with a plaque that reads:
WRECK OF THE U.S. USEC
GREATEST FAILURE OF GOVERNMENT PRIVATIZATION IN WORLD HISTORY
At least that would help Murphie comply with the National Historic Preservation Act. Call it a learning experience.
Interested observers are still awaiting some rabbit to be pulled from Murphie’s hat, as he produced one year ago in 2012. To gauge that possibility I sent Murphie an e-mail on May 10, asking him where he was going to get the money to pay for clean power-down with the cut-off date only weeks away as reported by USEC. Specifically, I wrote: “What’s up with that?”
And, within hours I received a reply, probably because I had copied Mitch McConnell’s chief of staff on my correspondence. Murphie wrote:
“As you are likely aware, the Paducah procurement process has begun involving the USEC facilities. I suggest you look at the DOE CBC home page regarding the proposed IDIQ business opportunities and keep an eye on it for updates. As for the funding question, the DOE did submit a request to Congress that includes language regarding the potential USEC facilities return [a fiscal year 2014 request].”
That’s a very interesting reply because, aside from the vacuous PR about fantastic “business opportunities” at a site of nuclear catastrophe (maybe a lollipop factory!), it confirms that DOE does not have some secret stash of funds to evacuate the diffusion cells at Paducah, at least until fiscal year 2014, at least five months too late. Murphie is still calling the certain closure of the Paducah monstrosity “potential,” meaning he can’t yet pay for it. I asked Murphie to resolve that dilemma in a follow-up e-mail, but alas I had used up my entitlement to one response per five years and so got none.
I admit that some pretty cool proposals for Paducah “future use” have been cooked up by Murphie and his PR people. In mid-2012, Kentucky state legislators sought an exemption from the state’s moratorium on nuclear power (a giveaway to coal interests), so that Paducah could become a research center exploring the use of nuclear explosives in fracking for oil and gas. Hot diggity!
“Discussions” between DOE and USEC about extension may indeed be ongoing. But I imagine they are like the proverbial separation negotiations between the gold-miner and the gold-digger. The gold-digger demands maintenance for the lifestyle to which she’s become accustomed, or she’ll walk. The gold-miner looks at the lump of iron pyrite he’s been left with and says: “You already got everything I had.”
So how did it come to this? Since the plant was originally scheduled to cease operations on May 31, 2012, why didn’t USEC and DOE have plenty of time to plan for orderly and funded clean power-down, which was precisely what the sleazy one-year extension deal was supposed to give time to accomplish.
The answer is that the entire uranium enrichment enterprise of the U.S. has become a sham operation, a sham designed to funnel U.S. Treasury funds to private companies including USEC and its partners, a sham designed to convert any problem or scandal into additional contractor award fees, a sham designed to keep the fig-leaf of a privatized USEC Inc. from blowing away and exposing all the naughty bits.
Those became the goals of the operation, not enriching uranium, developing new technology or achieving safe operations or cleanup of the sites. Murphie’s Law is that if anything can go wrong, it will boost contractor award fees, for a select group of companies hand-picked by Murphie himself. Thus, the principal “cleanup” contractors at Piketon are Fluor and Babcock & Wilcox (B&W), both of which are suppliers to USEC’s fake “American Centrifuge Project,” and B&W is a strategic partner of USEC with a large share of USEC preferred stock, poised to take over USEC’s operations if the latter goes under.
And USEC is going under, by design, leaving its bondholders, pensioners and U.S. taxpayers holding one very empty bag. USEC stock has now lost 99% of value since its bubble peak in 2007. USEC’s auditors issued a “going concern” letter in March of this year, warning that the company appears to have no viable business plan moving forward. The New York Stock Exchange issued a delisting warning to USEC in May of 2012, and a second warning on a separate deficiency in May of 2013.
If USEC is delisted, about half a billion dollars of debt to bondholders becomes due immediately, and at least $100 million in pension obligations are owed in Ohio and Kentucky each. But the entire company is only worth about a twentieth of its debts, or about 1 percent of the cost of the new commercial plant it pretends it will build. USEC’s 2013 shareholders meeting, at which the crisis might come to a precipitous conclusion, was postponed from April to June, presumably to give the company a chance to depart from Paducah without adding a nuclear crisis to its public liabilities. USEC is now an empty shell about to be shucked: the company’s dissolution and the Paducah plant’s decommissioning have been timed to coincide.
Once USEC has departed Paducah, it will no longer be in the uranium enrichment business, as it will operate no enrichment facilities. The company, which was created by statute for the sole purposes of enriching uranium and developing new technology, will be doing neither. It will only be an international uranium broker, ironically a front for Russian uranium interests. Imagine if the U.S. Postal Service decided to hoard its U.S. government subsidies, exit the mail delivery business and become only a marketing agent for Russian stamps. That analogy precisely applies to what USEC is doing, in stark violation of the USEC Privatization Act.
But USEC has had two quite powerful politicians in its service, from the states in which it has operated, men who control the Republican caucuses in both chambers of Congress—John Boehner of southern Ohio and Mitch McConnell of Kentucky. If Congress had appropriated the funds to pay for Paducah power-down in a timely fashion, for fiscal year 2013, then the USEC house of cards would have come down one year earlier. There could not have been rumors of federally-financed extension deals, or stock speculation runs premised on talk of a USEC buyout, or shipments of “spare parts” from Piketon to Paducah just to make it look like USEC is a going concern.
In short, if Bill Muphie’s office had secured the funds and let the contracts to do a clean power-down of Paducah starting June 1, then the jig would have been up for USEC months ago, the company might already be in liquidation, and hundreds of millions of dollars in continuing federal subsidies to USEC might not have been wasted. For its part, USEC has even now failed to announce a date certain for Paducah closure, although cancellation of its power contract was an effective extortion tactic for wheedling additional dollars from federal coffers.
So Murphie didn’t secure the funds and didn’t issue the contracts, and kept right on doing federally-paid PR work to falsely suggest there could be a smooth economic conversion at Paducah. Boehner and McConnell ate it all up while chanting the “jobs” mantra, for it reinforced their narrative that USEC Inc. is the best thing since sliced atoms. To keep a large campaign contributor out of bankruptcy court for a few more months, the Paducah plant was permitted to reach the current crisis state. And the people of Kentucky were sent straight to nuclear hell.
Environmentalists should be jubilant as the dinosaurian uranium enrichment plant at Paducah, Kentucky, nears expiration as soon as May. Based on antiquated gaseous diffusion technology, the facility is the largest single-meter power consumer on the planet, eating as much electricity as the city of St. Louis. It is likely the largest point-source emitter of the worst ozone-depleting greenhouse gases in the world, chlorofluorocarbons, as well. Paducah has a notorious history as a generator of occupational illness, since worker-whistleblower Joe Harding compiled lists of cancer-stricken co-workers:
It should have been shut down long ago. Yet no government agencies or environmental groups are clamoring for closure, because the event will generate as many problems as it solves.
The shutdown has been foreseeable and even scheduled for many years. Privatization of the U.S. Enrichment Corporation (now USEC Inc.) in the 1990s aimed at closing Paducah and its sister plant near Piketon, Ohio, with plausible deniability for incumbent politicians. (The pols could huff and puff about the loss of jobs, while throwing up their hands at USEC's unchallengeable "business decisions.") But now, with cessation of production imminent in the run-up to a presidential election, the dark clouds of the most precipitous failure of privatization in U.S. history are gathering into a perfect storm of policy breakdown.
The Paducah plant's closure will end all USEC production of nuclear fuel, effectively terminating the company for its established purposes, undoing years of taxpayer-subsidized PR hawking USEC as the sole domestically-owned enrichment company. (USEC may continue as what the CEO calls "a smaller company," devoted to the importation of Russian uranium and peripheral businesses.)
Neither USEC nor the Department of Energy (DOE) have the funds to keep the plant open, nor have the parties cooperated on a plan to pay for the expensive process of shutting it down, redirecting the workforce, or cleaning up the radiotoxic mess. Decades of lax or unregulated dumping and maintenance neglect have left an industrial witch's brew of asbestos, PCBs, TCE, fluorides, beryllium, nickel carbonyl, plutonium and classified materials unknown or unrevealed.
The Piketon enrichment plant closed in May of 2001, on the theory that staggered cleanup of the grossly abused sites, which remain government-owned, would be more affordable. But for all eight years of G.W. Bush's tenure at the White House, Piketon cleanup was postponed, while USEC was paid exorbitant fees, a hidden form of subsidy, to maintain Piketon in mothball status. The expensive part of Piketon decontamination and decommissioning (D&D), involving tear-down of process buildings that cover almost a hundred acres and disposal of millions of cubic yards of waste has yet to begin. But now there isn't the money to pay for that either.
For decades of U.S. monopoly on the western world's supply of commercial enriched uranium, nuclear utility companies were charged a surtax on uranium fuel supplied from the gaseous diffusion plants to pay for ultimate D&D of the facilities. But with privatization and the rise of new generations of cheap centrifuge enrichment technology abroad, along with pressure from the utilities, the surtax was waived in yet another subsidy for USEC, to keep the company's product cost-competitive.
That was engineered principally by USEC's captive Ohio congressman, who became the Bush administration's trade representative and budget director, now U.S. Senator, Rob Portman. The future of the Piketon and Paducah sites for literally thousands of years to come was mortgaged to pay for a perceived transient business boost to USEC Inc. in the decade following 1998.
Make a mental note, because when Portman runs for POTUS at the end of his Senate term in 2016, the USEC catastrophe will be the most radioactive skeleton in his closet.
As a result of Portman's concessions to USEC, the D&D Fund languished with inadequate and non-accumulating balances, and now it has been all but shelved as a bipartisan embarrassment. In 2004, the Government Accountability Office warned that the fund is "insufficient to cover cleanup costs," but that warning was so dire and so implicitly condemnatory of rising stars in both of the major political parties (i.e. Mitch McConnell, Mr. Portman and the latter's south Ohio bedfellow rival Ted Strickland, not to mention the Clinton and Bush clans), the consensus action was to bury the report's conclusions.
Supposedly—no updated accounting is available—the fund has stood at about $4.4 billion. But in 1996, the National Academy of Sciences cited various estimates for the total costs of gaseous diffusion cleanup ranging from $8 billion to $46 billion, meaning that the D&D Fund, which has also been diverted to non-decommissioning activities, cannot now even pay for inflation adjustments on the bill.
Steps taken by the ensuing Obama administration to rectify the situation and prepare for the inevitable D&D operations remain undisclosed as if classified for national security. The Department of Energy has been wracked by paralysis born of the seriousness and magnitude of the problems, and internal divisions caused by top deputy and assistant secretary positions left in the hands of Bush administration holdovers, whose agenda has been to sabotage the current administration. Add wildly irrational antagonism from Republicans in Congress, including especially from the top two Republicans, Ohio's John Boehner and Kentucky's Mitch McConnell, who have made the inherent competition for funds between Piketon and Paducah into a kickball between the chambers of Congress, providing total assurance that nothing legislative can get done.
Until recently (too late to make a difference) all three officials at DOE with lead responsibility for the Piketon and Paducah sites were holdover Republicans: Deputy Secretary Daniel Poneman, a transfer from the neocon Scowcroft Group, whose chief prior portfolio in and outside of government had been unsuccessful attempts to persuade Australians and Mongolians to accept high-level nuclear waste from the U.S. for disposal; Assistant Secretary for Environmental Management (resigned last July amidst suspicions of misconduct) Ines Triay, who invented the illegal method of bartering uranium with USEC to fund cleanup operations; and Assistant Secretary for Nuclear Energy (replaced in 2011) Dennis Spurgeon, the former Chief Operating Officer for USEC.
The revolving door at the Department of Energy's Forrestal Building in Washington spins a whole lot more reliably than USEC uranium centrifuges.
With Triay and Spurgeon gone, the non-saboteurs at the Department of Energy had only ten months to come up with tens of billions of dollars in legal funds for cleanups at Piketon and Paducah, over the contradictory objections of congressional leaders, in an election year of Tea Party austerity.
Duck and Cover
Meanwhile, McConnell and the rest of the powerful Kentucky delegation launched a political offensive, insisting that DOE find a way to keep the Paducah environmental monstrosity open as a jobs program, although those temporarily-saved jobs would come at an exorbitant expense to U.S. taxpayers, and undo every vestigial benefit of privatization. (For the savings of closure, the government could hire many times the number of workers to sit and "watch waste," as one Piketon employee has described his second career.) Sen. McConnell even crossed territorial lines to verbally assault Secretary of Energy Steven Chu at a hearing in the House of Representatives.
In response, Chu and his subordinates followed the "Duck and Cover" guidance of their atomic agency predecessors:
And never has ducking and covering been done with more ardor and non-aplomb than by Chu's DOE. No less than three groups of senators and representatives from both parties barraged Chu with interrogatory letters in early 2012, seeking answers to basic questions about continuing stated DOE support for USEC Inc.'s fantasy-land centrifuge spin-doctoring, matched with a non-compos-mentis (not mentally competent) policy regarding real-world cleanup matters at Paducah and Piketon. Not one of the congressional inquiries has yet drawn a written response. Nobel-winner Chu is going for the gold now in Olympic ball-dropping.
The Kentucky delegation has pushed a proposal originally advocated by USEC called "re-enrichment," which would involve a sweetheart no-bid contract for USEC to run some depleted uranium "tails," now stored in thousands of cylinders at the Paducah and Piketon sites, back through the Paducah enrichment cascade, squeezing out some additional Uranium-235, staving off a total shutdown.
But all at once, this would violate the laws of economics, jurisprudence and thermodynamics. It could never be more profitable to "re-enrich" tails than it would be to enrich new natural uranium, and the latter course would employ now-underemployed uranium miners, if the objective were to save jobs. If tails were re-enriched, it would never make sense to employ the least-efficient technology on earth, rather than to send the tails to a super-efficient centrifuge plant like the one operating in New Mexico, if the objective were to make money to fund site cleanup. Current legal agreements aimed at protecting the uranium mining industry limit the amount of government uranium stockpiles that can be released in any year to ten percent of the domestic market for commercial uranium. But that allowance is already at quota, owing to the Triay caper of using uranium barters to funnel extra-legal funds to USEC for various and nefarious purposes beyond congressional scrutiny. Plus, any such legislated market intervention would explicitly contradict the USEC Privatization Act, the rationale for which, after all, was to shut Paducah down with hands-off by the politicians.
One can almost sympathize, however, with Mitch McConnell in this spring 2011 exchange with Steven Chu at a Senate Appropriations hearing:
Aside from the disingenuous posturing about the decrepit Paducah plant and the desperate re-enrichment proposal, McConnell makes a simple point:
"Let's assume we don't do that [re-enrichment], then the question is, do we have the funds in the 2012 budget to safely and securely idle the [Paducah] plant after it closes and returns to the government?...There's apparently no plan in your budget for cleanups after the operations cease."
Chu then evades the cleanup issue entirely. A bit later in the transcript:
Chu: We would have an obligation to clean up that plant
McConnell: When will we see the plan?
Chu: Well, um, we can get back to you and your staff on that.
McConnell: ...What I think I hear you saying is, you've got no plans for either contingency at the moment.
Chu never got back to McConnell or any other legislator on funding for Paducah cleanup.
The Wreck of the USS USEC
Ten months later, additional uranium transfers have been made to USEC for no purpose other than to keep the company out of bankruptcy, and with closure of Paducah only sixty days away, still no shutdown management or site cleanup plans have been disclosed by DOE. Worse, cleanup funding for the Piketon site has been slashed in the president's 2013 budget proposal, and it's become clear that DOE lacks the funds for legally-compliant cleanup of even one of the gaseous diffusion sites, much less two at one time.
The Senate exchange between Chu and McConnell does reveal what has happened. Asked about cleanup, Chu can't even train his scientific mind on the subject. Instead, he digresses to off-topic technobabble about a project he doesn't quite want to specify, intended to replace gaseous diffusion. That is a feint to USEC's own corporate PR, which, since the company's creation, justified all manner of end-runs around constitutional and statutory law for the sake of a yet-unfulfilled promise that USEC would develop an "advanced" enrichment technology, and deploy it in such a way as to replace the aged plants at Piketon and Paducah.
That proprietary pitch never worked out well for the impoverished communities of Piketon and Paducah, which were pitted against one another in USEC-incited competition. An "advanced" plant would employ relatively few people—a few hundred as opposed to a few thousand—leaving the jobs problem unaddressed. The national security dimensions of a new enrichment plant would prohibit any other form of more gainful reindustrialization at the selected site. And a new plant would not magically clean up the legacy contamination, though it might allow DOE to escape high costs by lower contamination standards through the rubric of "nuclear reuse."
And that's exactly how USEC sold its "American Centrifuge" charade to DOE budget bureaucrats. For more than a decade, DOE has funneled federal dollars to "privatized" USEC by the billions, on the ever-extended promise that by building some new kind of nuclear facility at either Piketon or Paducah or both, the major nuclear cleanup costs would be avoided, even if the political promise of saved jobs were as phony as the spin on a USEC centrifuge.
Which turned out to be pretty phony, indeed. On June 11, 2011, only weeks after Steven Chu's Senate dissembling about how a new enrichment technology might answer the cleanup question, six USEC centrifuges crashed in a covered-up accident at the Piketon test facility, where, after a decade of alleged development, USEC had managed to get only thirty-eight centrifuges running. The June 11 debacle led to a second denial of a federal loan guarantee to USEC, now under Solyndra-like scrutiny, which in turn left USEC barely able to stay out of bankruptcy court, much less build a new nuclear facility, as the company entered the cataclysmic year of 2012.
Half a Billion with a B
In its annual report filed March 14, 2012, USEC acknowledges a net loss for 2011 of $540.7 million. That's half a billion dollars, including a $127 million write-off for all of the operable centrifuges it had produced so far, a fair chunk of change. Virtually all of those lost moneys came from accrued federal subsidies, including a $50 million mystery payment to USEC from DOE in the third quarter of 2011.
Moreover, the Obama administration has proposed giving USEC an additional $300 million over the next two years for an alleged "Research, Development & Demonstration" centrifuge project—the same crashed program that USEC was contractually bound to complete with private financing by 2005 but never did. Congress has so far not consented to that appropriation, as the request lacks any hint of transparency or accounting controls.
Circumventing committee debate on the issue, Ohio's two Senators, Sherrod Brown and Rob Portman, inserted a provision for the funding as a last-minute amendment to the unrelated Transportation bill passed by the Senate, but in a rather stunning display of corporate-shill cynicism, Portman voted against the bill that contained his own USEC amendment.
The House has delayed action on the Transportation bill to at least mid-April and more likely to the ninety-day limit of a continuing bill introduced on March 22, which itself contains no bailout language for USEC. That means Congress will almost certainly miss the March 31 "deadline" set by both USEC and DOE as the last date by which the "American Centrifuge" project could be saved from termination by congressional action. USEC had less than $38 million in cash at the end of 2011, per its annual report.
USEC's bailout prospects have been further damaged by the sound defeat of incumbent congresswoman Jean Schmidt, whose district includes Piketon, in the Republican primary election on Super Tuesday. Schmidt sits on the Transportation Committee, and the T-bill strategy for accomplishing a USEC bailout had been premised on her influence.
Republicans in the congressional delegation from Kentucky may be a bailout's biggest opponents, since they are being asked to support a new unexplained payment to USEC that is cockamamie, as they may or may not say in Kentucky, just a month before the Paducah plant is scheduled for shutdown, with no management or cleanup plan revealed. That's a lot to swallow for a state that's shown no particular love for federal lawmaking.
Kentucky lawmakers are so exasperated, they have fallen back on demanding the re-enrichment scheme just to avert a catastrophic closure with no advance preparations whatsoever. But USEC has put the kibosh on that kind of talk, since the company is in no kind of shape to keep Paducah operating at a loss.
In a webcast conference call that attended release of its annual report, USEC managers emphasized that of three conditions all needed to extend operations at Paducah, none have been met, none are likely to be met by May, and one—sufficient market demand for low-enriched uranium—is virtually impossible given post-Fukushima conditions. Mandatory six-month plant closure notices were issued to Paducah employees last November.
In a concurrent filing with the SEC, USEC made plain:
"...we do not believe there is sufficient uncommitted demand for LEU [Low-Enriched Uranium] to support a Paducah extension, even with an agreement with DOE for tails re-enrichment to absorb a significant portion of the plant production capacity. Therefore, at some point in the next 18 months, we expect to cease commercial enrichment at the Paducah GDP [Gaseous Diffusion Plant] but the facility may remain operational to meet other requirements."
"Operational" means that USEC will continue non-enrichment activities at the site, to prevent its being replaced by some other managerial contractor. According to Weapons Complex Monitor, USEC has also expressed interest in obtaining the multibillion-dollar D&D contract for Paducah. But when USEC attempted to secure the equivalent contract at Piketon, it was barred from bidding by a conflict-of-interest ruling from the DOE General Counsel. There is no reason to think that the ruling would not apply equally to Paducah.
The Writing on the Wall
The Paducah plant will close in May or soon thereafter, reverting to U.S. government control through a process called deleasing (similar in all ways to delousing). USEC simply can't afford to keep Paducah open. Following pure profit motive, as it is supposed to do by virtue of the Privatization Act, USEC has calculated that the company loses money every day that Paducah remains in operation, whereas, precisely because DOE has not prepared any contingency plan for D-Day (deleasing day), DOE will be forced to retain USEC as a managerial agent for the shuttered facility. Just as it did at Piketon for a decade, USEC can then collect cushy contract fees, producing nothing, free of any risk or marketplace rough and tumble.
Exit from the internationally-competitive and shrinking (outside of China and India) uranium enrichment industry, and entry into the world of big-time contract services for the U.S. government and other companies, is exactly the corporate strategy that USEC has pursued for the last eight years, since 2004. In that year, USEC purchased NAC International, a company that provides transportation and storage services for spent nuclear fuel, on contract.
So while the Department of Energy has been hawking and funding USEC's centrifuge technology as the best thing since sliced atoms, USEC has been plotting its exit from the enrichment industry altogether, which partially accounts for why its "American Centrifuge" shadow play has been such a non-starter. There is no "American Centrifuge Plant," as the signs on the highway advertise. It's an American subterfuge project, nothing but a high-tech siphon for emptying the U.S. Treasury.
Has Chu's Department of Energy been fooled by this? I don't think so. DOE has rationally concluded that as long as it can maintain the pretense of a coming "advanced" enrichment facility, it can avoid billions of dollars in otherwise mandatory cleanup costs, by setting aside all or portions of the Piketon site for "future nuclear use," with attendant lower cleanup standards.
And that's what we've seen at Piketon—a succession of hoax promised nuclear projects (spent fuel storage, nuclear reprocessing, nuclear reactors, and what not)—together with accelerated "cleanup" schedules to sweep up the site on the cheap, before the future nuclear uses are revealed as phantoms. The latest announced schedule for Piketon D&D, premised on USEC running a completed centrifuge plant on a portion of the site, calls for conclusion of an on-site waste disposal decision, opposed by an overwhelming majority of the community, before this fall, coincidentally enough.
DOE appears to have calculated that it's cheaper to keep paying USEC in $50 million under-the-table installments—to save the company from bankruptcy court and to keep up the appearance that the "American Centrifuge" project is ongoing—rather than publicly acknowledge that DOE is on the hook legally for tens of billions of dollars of post-nuclear cleanup costs at both the Piketon and Paducah sites, with not even the prospect of funding to pay for it. That logic holds at least until the November election. After that, atomic bombs might as well drop.
But both Mitch McConnell and John Boehner are on to that caper. They know there will be no deus ex machina to prevent a catastrophic closure of the Paducah plant, or a final curtain draw on the "American Centrifuge" stage act, all before Barack Obama stands before the voters in November. The Republicans are planning one helluva summer and fall offensive in the heartland Ohio Valley.
And that is why Steven Chu, winner of the Nobel Prize in Physics, in continuing to shovel federal funds to USEC Inc., while simultaneously playing possum on cleanup of the Piketon and Paducah sites, may turn out to be the highest-ranking idiot savant of all time.
Re-posted on the Southern Ohio Neighbors Group blog.
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.
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.
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.