By Geoffrey Sea
In a triple-whammy to uranium supplier USEC Inc., the last operating nuclear reactor in Japan was switched off for maintenance, Russia completed its final delivery of uranium to USEC under the 20-year Megatons to Megawatts program and USEC’s market capitalization fell below the minimum required for listing on the New York Stock Exchange (NYSE). Meanwhile, fission products of the fuel that USEC supplied for the Fukushima reactors continue to pour into the Pacific Ocean, a hot metaphor for the global dissolution of the dream of atomic power.
If the radioactive currents awaken Godzilla from his undersea lair, it would be the only scripted outcome.
The news does get worse for USEC. In contrast to Iran, which announced its centrifuge venture at the same time as USEC and has now opened a second cascade of over 3,000 third-generation machines, no USEC centrifuge has produced a gram of commercial uranium. Its untested AC-100 centrifuge machines, which are the be-all and end-all of the company, have just passed the 35th anniversary of their unfortunate invention under the Carter Administration. Meanwhile, General Electric’s state-of the-art SILEX enrichment technology is running rings around USEC’s antiquated nondeployed centrifuges by every measure.
And here’s the kicker: USEC’s eight-year overdue test array of showpiece centrifuges in Ohio, for which the federal government has had to pay 80 percent of costs, are not being tested with uranium, so they are producing no useful data. USEC cannot be trusted to run uranium after an embarrassing crash of six centrifuges at Piketon in June 2011. (USEC advertised that catastrophe as maintaining public safety with no release of radiation, failing to clarify that the machines had not been running uranium during the crash.)
The Department of Energy (DOE) loan guarantee program—fantasy material on which USEC relies at night like a castaway clutching pornography (USEC has already been turned down twice.)—is under renewed attack by even the most pronuclear conservatives. That means that the company has no imaginable way to fund construction of a new centrifuge plant, which USEC needs to remain in the enrichment industry since its old production plant in Paducah, KY, has permanently closed.
USEC should ditch the uranium enrichment business entirely and play to its demonstrated competence in fields like Internet gambling or telemarketing to members of Congress. That would be the company’s preference, too, if not for infernal federal laws and regulations that bind it to the pretense of uranium enrichment as justification for billions of federal dollars down the drain.
USEC’s stated financial plan is to supplement hypothetical DOE loan guarantee funding with a one or two billion-dollar loan from Japanese international banks, about as feasible as a fine arts grant from Bashar Al-Assad. With the Japanese defending themselves against cartoons of three-armed sumo wrestlers at the 2020 Olympics, they are not exactly hot to trot on funding a uranium enrichment plant in Ohio, the product of which has caused them only grief. Perhaps USEC will entice the Japanese by becoming an Olympic sponsor of the Hot Potato Throw or the Strontium-90 Meter Sprint?
Meanwhile, three competitors including Russian TENEX, French AREVA and Euro-American URENCO are spinning out uranium on centrifuges for old USEC customers, and even Iran may work a deal under new leadership to give up its A-Bomb aspirations in exchange for a slice of USEC’s old commercial market. Call it Atoms for Peace with a vengeance.
And it gets worse for USEC. Closure of the San Onofre and Vermont Yankee reactors, with more closures expected, means that the domestic market for enriched uranium on which USEC relies is shrinking, not expanding. That comes just as USEC’s old supply monopoly in that market has given way to a free-for-all, with the lifting of bans on the direct-marketing of Russian uranium and new domestic enrichment projects by competitors in New Mexico, Idaho and North Carolina. Since uranium supply contracts cover periods as long as a decade, USEC’s long delays in deploying new production will mean that even a hypothetical new USEC plant would come online with no market for its product. In addition, the shrinking domestic market undercuts the government’s rationale to support a new plant and invalidates the market forecasts that USEC used to obtain licenses and argue for denied federal loan guarantees. That opens up any renewed USEC commercial venture to serious legal challenges.
But it gets worse for USEC. USEC has had no quarter of net profit in years, accruing over a billion dollars in debt all told. The company’s only pockets of profit have depended on DOE-subsidized or Russian-supplied programs that now have ended.
USEC’s long intentional delay in completing a technical demonstration of its AC-100 machines—a delay necessary to forestall conclusions that the ludicrous technology is not commercially viable—have run the company up against hard deadlines. This month, USEC must renew its credit facility with a consortium of banks led by J.P. Morgan, at a time when that institution is facing major allegations of failure to conduct proper risk-analysis of applicants in jeopardy of bankruptcy just like USEC.
On Oct. 1, USEC will have just twelve months to make good on $530 million of bond debt, incurred in 2007 on the promise that the funds would be used to complete a commercial centrifuge plant with time to generate enough income from the plant to pay off the bonds. Here we are at the twelve-month marker, however, and USEC has spent the cash it received from the bonds without financing the plant. With no other means to pay off the bonds, some kind of bankruptcy shield for USEC is a necessity, though the company uses the euphemism of “restructuring” to describe that coming process.
If USEC cannot renew its credit facility, it will lose the ability to pay bills and salaries, creating an interesting nuclear safety dilemma at Paducah, where USEC has continuing cleanup responsibilities. Likewise, if USEC’s general condition keeps its share price from rising, then the company will be delisted from the stock exchange, at which point the $530 million of bond debt becomes immediately due by terms of the issuance. That would necessitate an immediate bankruptcy filing. USEC has been using the threat of potential nuclear consequences to stave off the wolves at the door, but that kind of blackmail threat grows tiresome with age and with the realization that USEC’s radioactive messes are going to wind up on the public’s hands in any case.
Needless to say, the prospect of sudden unplanned insolvency did not occur to the congressional authors of the USEC Privatization Act, the regulators at the Nuclear Regulatory Commission (NRC), or the bureaucrats at the DOE, none of whom has a plan for what to do about the nuclear materials and facilities entrusted to USEC’s care given the company’s financial meltdown. Or perhaps the prospect did occur to them and they just didn’t care. “Financial capacity” requirements of NRC and DOE were paperwork hilarities, specifically waived to accommodate USEC as soon as the company headed into trouble.
USEC had intended to cure its crushing bond debt over the summer, but then something truly terrible happened to the company: Its stock shot up.
It started as a modest pump’n’dump operation, after the share price hit an all-time low of $2.60 on July 8 (down from $641 per share in 2007). USEC needed to edge its market capitalization above the $50 million NYSE minimum to avert immediate delisting. It accomplished that by tailoring the news to fool investors, with a robust report of cash on hand while neglecting to mention in news releases that USEC had not yet paid for the latest big shipment of Russian uranium. By such chicanery, USEC managed to triple its share price in mid-July.
But then over the weekend of July 27, the USEC-TEPCO partnership at Fukushima hit a wall, or failed to hit a wall, as the case may be. Massive uncontrolled radioactive seepage into the ocean raised fears that the worst may be ahead of us, at least in terms of nuclear public relations, and that was before a typhoon hit the Japanese site on Sept. 16, making matters even worse.
Prime Minister Shinzo Abe stepped in to announce that the government was taking control of the cleanup operation, and that was misinterpreted by delusional nuclear industry investors as meaning that a nuclear revival in Japan might be imminent and that TEPCO and USEC might escape some potential liabilities for the catastrophe.
By Monday, July 29, Asian investors unfamiliar with USEC’s scamming history were hot on the stock as it looked to be rising from rock-bottom prices. They started a buying stampede, which tripped a circuit breaker at NYSE, briefly halting trading in the security on Monday afternoon. That blockade only fed the frenzy as automated trades kept upping the virtual price of the stock in a frustrated machine attempt to out-buy other machines. It was a real-life nuclear escalation as depicted in the movie War Games, where stupendous competitive human error is magnified by computer programs.
USEC stock closed on July 29 at $29.02, up 1,016 percent over its recent all-time low. USEC ‘s “phenomenal surge” made it the rising star of Internet investment pseudo-journalism as traders assumed there was some there there, when all was naught but air.
A third of the share-price rise was rapidly corrected, creating the first of three meaningless spikes on USEC’s stock chart, each with a surge-plummet profile resembling the Empire State Building. That extreme volatility (a bad bad word in the normal investment community) attracted day-traders to the otherwise worthless company, on the premise that many bucks could be made by micro-forecasting when USEC stock would entertain its bombastic highs and lows. All of this vapid financial gaming was invited and subsidized by the Obama Administration with support of both Republicans and Democrats in Congress.
As a tug of war between day-traders inflating the share price and short-sellers betting on the stock’s decline, USEC’s stock, which is supposed to be a market indicator of the company’s performance and worth, became totally detached from fundamentals. USEC itself is transforming into a company that sells only flimflam, producing and marketing no real product. Correspondingly, its stock has become a pure speculative instrument—like investing in modern art or pet rocks—a profit-making device for technologically-enabled traders, different from other financial scams only by its government endorsement and apparent immunity from securities laws. It’s Uncle Sam’s atomic unregulated cyber-casino. The theory of USEC’s 1998 privatization—that the “free market” would do a better job of guiding the enterprise than government planning—has been stood on its head, as USEC’s actual owners, its shareholders, have lost any real-world connection to the property they own.
The sentiment of investors was captured best by a one-word comment on the leading USEC shareholder message board in August: “FukUSECshima.”
Day-traders and short-sellers are the bottom-feeders of the stock market. They undermine the logic of capitalist markets since they profit off material dysfunction, and measures to restrict or ban both practices have occasionally been implemented. But USEC has become a target tool of these parasites, with short-sellers accounting for between 15 and 30 percent of all USEC shareholders in past years.
Day-traders make money not by long-term investment but by repeat trading to exploit micro-trends on a minute-by-minute basis. The extent to which they now dominate the trade in USEC stock is indicated by five days in late July when over three million shares were traded each day, although there are only 4.95 million shares of USEC stock outstanding. Were a majority of USEC shares changing hands? Of course not. Only a tiny percentage of shares were being bought and sold, over and over again, each day. The bizarreness of this pattern has become just one of USEC’s unique peculiarities, a sign that usual securities laws and rules are being violated flagrantly, with no sign of enforcement. Where are the U.S. Securities and Exchange Commission (SEC) investigations, the NYSE delisting crackdowns or the penalties imposed by USEC’s credit lenders?
Many are under the false impression that higher stock price necessarily helps a company. That is true for enterprises operating in some real marketplace with tangible assets, positive net worth and effective shareholder control. It is not true for USEC, which has crushing debts, no business plan and only paper assets, all of which remain controlled by the government despite titular privatization. USEC needed a small rise in share price to cure its NYSE listing deficiency, but the huge spike generated by forces internal to the trading world created an enormous problem for USEC on the ground.
USEC’s biggest hurdle staying in business is its bond debt. To eliminate that debt, USEC needed to buy out the bond holders with common shares in what is known as a debt-equity swap. But the July 29 share-price spike made it ten times as expensive to buy back those bonds with common shares, a price that USEC simply cannot afford. Ironically, by killing a debt-equity swap, the share-price rise may have killed the company. $530 million in bond debt that cannot be paid remains on the books, and the clock is ticking.
In this topsy-turvy environment, USEC managers probably have sat back hoping against fiduciary obligation that share price would fall, and they haven’t been disappointed. Other than two false-rumor day-trader spikes, the stock has lost all of its July 29 gains in perfect linear decline, zipping through the $16, $15, $14, $13, $12, $11 and $10 ranges to close at $9.55 per share on Tuesday, Sept. 17. That puts USEC in the worst of all possible worlds. Market capitalization is back below the $50 million minimum required for listing on NYSE, but the stock is still too expensive for USEC to afford a debt-equity swap, meaning that the bond debt along with coupon payments are coming due, imminently if the stock is delisted.
On a family trip to Puerto Rico when I was young, my father had booked discount rooms at a posh resort, as described in the advertisements, only for us to discover on arrival that the place was in dire financial distress and had been placed in foreclosure for tax non-payment, with a union picket-line in front. Its glitzy neon-mirror-ball casino, known as a hangout for local Mafiosi, was then technically owned by the U.S, government, a federally-sponsored crapshoot on the skids—perfect preparation for my current understanding of USEC.
Despite what was called privatization, the enrichment plants in Ohio and Kentucky always remained under government ownership. USEC’s centrifuges—built with a government technology license for which USEC owes an outstanding royalty of $100 million that will never be paid—were repossessed by the government in the summer of 2012, in preparation for the end of the USEC world. Even USEC’s depleted uranium waste cylinders have reverted to government ownership in a scheme that permitted USEC to cash in its waste disposal surety bonds so bills could be paid.
In effect, USEC privatization has been undone by the DOE without congressional authorization, in explicit violation of the USEC Privatization Act, raising profound constitutional questions. Even though the federal government now owns the entire USEC operation, the company remains almost wholly unregulated as to its payment of lavish executive salaries and proprietary decisions about the disposition of government property, such as its unilateral decision to close the Paducah plant. No “government stake” in the company’s management has been granted, as in the automaker bailouts, because no politician on any level wants any part of USEC’s coming collapse.
The government will be left, however, with future use decisions about the Piketon and Paducah sites. What does the Obama administration or the Congress have planned for the big empty “American Centrifuge” buildings on expensive federal real estate in Ohio’s highest-unemployment county?
Not a thing. It’s too politically sensitive. Piketon is the epicenter of the most critical swing region in Ohio, with a history of tipping presidential and gubernatorial elections. Any move by any agency of the government to apply standing federal law to USEC would bring the roof down on the fraudulent enterprise, risking a backlash against the responsible political party, amounting to acknowledgement that the many billions of taxpayer dollars lavished on USEC have been a scandal and a waste. Or so goes the “off the record” fear.
Just the energy bill for maintaining USEC on artificial respiration has been enormous—the dirtiest energy from Ohio Valley coal plants to keep the smokestacks puffing at USEC’s Paducah and Piketon operations—while the amount of total atomic power produced by USEC’s fifteen-year “advanced technology” rigmarole will in the end be zero.
On the other hand, a lame-duck administration is the time to get this done, and Ohioans would welcome some political candor, since it’s not a state secret any longer that the thousands of centrifuge jobs promised a decade ago will not be coming ever.
USEC acknowledged as much in its last bombshell 10Q filing with the SEC, submitted appropriately on the 68th anniversary of the bombing of Hiroshima on Aug. 6. There, USEC finally admitted that various problems may (read “will”) necessitate that the “American Centrifuge” project be “demobilized “ (read “canceled”) at the end of its government-funded demonstration project (read “delay mechanism”) which is scheduled to terminate in December of this year.
Assuming it remains in business, USEC will not give up its cost-free lease of the Piketon site, however. It will retain that statutory lease-hold indefinitely in hopes that “market conditions” will someday improve. (Why not? The government foots the bills.) That would be at least a decade according to widely-available data, at which time the age of USEC’s technology will be approaching half a century.
Unless the company is killed-off by creditors or regulators who find their spines, alteration of that community-killing schedule would depend on repeal of the USEC Privatization Act by Congress. And with Rep. John Boehner (R-OH), a major USEC donee whose congressional district neighbors that of Piketon, as Speaker of the House, any move by Congress to pull the plug on “the American Centrifuge” will be thwarted, no matter how condemning of the whole American system that project has become.
All that remains of USEC’s centrifuge business is runaround.
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.
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
USEC Inc. has confirmed that today, May 31, is the last day of uranium enrichment at the Paducah Gaseous Diffusion Plant in Kentucky, marking the end of sixty-one years of operation. The monstrous facility was opened in 1952 as a last hurrah of the Truman Administration, representing one of the most egregious acts of political favoritism in American history. The plant was located in Paducah because that city was the hometown of Alben Barkley, who represented Kentucky’s First District in Congress and then became Truman’s vice president.
(Concurrently, the Piketon, Ohio, plant was located as a concession to Ohio Senator and presidential candidate Robert Taft. Barkley and Taft each boasted about how they had won these megaliths for their states—plants that produced modest employment for half a century along with site contamination that will last for thousands of years.)
Cessation of enrichment today comes as something of a predictable surprise, following the breakdown of extension talks between the U.S. Department of Energy (DOE), which owns the plant, and the privatized USEC Inc., which has leased the operation under the strange accord that has required no leasing fee, nor any continuing legal liability for the mess that USEC has made.
The news is cause for celebration by environmentalists, because the Paducah plant has been powered by three gigawatts of dirty coal in the Ohio Valley. According to the Times Free Press of Tennessee, the Paducah plant was by far the largest buyer of TVA electricity, accounting for $600 million in sales or 5 percent of TVA power last year. And sadly, USEC’s gigantic Freon coolers won’t qualify for TVA’s old-appliance scrap rebate program, because they are radioactive.
The Paducah plant has reputedly emitted more chlorofluorocarbons (CFCs), the worst ozone-depleting and global warming gasses, than all other global sources of CFCs combined in recent years. The plant had been granted a “national security” exemption from the ban on Freon, even though the enriched uranium USEC produced is not used to make nuclear weapons.
Today’s end of operations also has some profound consequences for USEC as it struggles to maintain minimum listing requirements on the New York Stock Exchange. USEC can no longer claim to be the only “American-owned uranium enrichment company,” a claim of dubious veracity anyway since Toshiba became a principal holder of USEC equity, and since federal regulations define a “domestic” producer as one located in the U.S., not according to ownership. URENCO, the European enrichment company, has been enriching uranium at its centrifuge plant in New Mexico since 2010, effectively edging USEC out of the market for centrifuge enrichment in the U.S.
Tomorrow, USEC will be just a broker for uranium obtained from other suppliers, which technically places the company in statutory violation of the USEC Privatization Act of 1996, which made many federal subsidies and concessions available to the company, only on condition that it meets its obligation to enrich uranium. Whether the federal government will demand repayment of the funds transferred to USEC under false pretenses remains to be seen. But don’t hold your breath.
In today’s announcement USEC also says it is issuing WARN Act termination notices to all 1,034 of its Paducah employees, expecting the first round of layoffs to affect about 160 workers between Aug. 5 and Aug. 19. That’s just in time to commemorate the anniversaries of the bombings at Hiroshima and Nagasaki, which fall on Aug. 6 and Aug. 9.
Layoffs are staggered because USEC had attempted to cajole the government into making an additional $13 million payment in material to extend operations and make it look like the plant was doing something. Preparations for property transfer to DOE were therefore delayed. USEC has also utilized Paducah facilities for managing an inventory of Russian uranium, under a separate U.S. government concession called the Megatons to Megawatts Program. That program, however, terminates in December of this year.
The complicated process of transferring leased facilities back to DOE control, and out of regulation by the Nuclear Regulatory Commission, is known as “de-leasing.” In all ways it is comparable to delousing, only the hosts and parasites are smellier.
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.
A leading Republican and a leading Democrat in the U.S. House of Representatives have slammed the proposed congressional bailout of USEC Inc. and its so-called "American Centrifuge Plant" or ACP. In a letter to members of the Transportation Conference Committee dated May 7, Steve Pearce (R-NM) and Ed Markey (D-MA) recount the excruciating history of USEC since its ill-fated privatization in 1997, and call upon colleagues to "stop the expenditure of taxpayer dollars on USEC's failed ACP."
Among the many digs the congressmen take at backers of the USEC bailout, Pearce and Markey identify the spending proposal from the top as an earmark. Bailout backers, including most especially south Ohio congressman and Speaker of the House John Boehner, have bent over backwards to argue that the explicit earmark isn't an earmark. Boehner is supposed to be enforcing a House rule against any earmarks.
The letter at the links above is addressed to Representative Henry Waxman (D-CA), a member of the Conference Committee. Identical letters were sent to all other House conferees who will be meeting to craft a Transportation bill, and the Pearce-Markey letter is being otherwise widely circulated in both chambers of Congress.
The Transportation Conference Committee is considering an amendment authored by U.S. Senators from Ohio Sherrod Brown and Rob Portman, advertised as making up to $150 million available to USEC in 2012 appropriations. It is widely regarded as the last chance USEC has to obtain 2012 congressional appropriations, which are needed to implement a proposed two-year "Research, Development and Demonstration" (RD&D) project, itself seen as a last-ditch effort to salvage the flagging eleven-year ACP endeavor.
If 2012 appropriations are not secured before May 31 of this year, USEC will miss a number of critical deadlines, and it's unlikely that any part of ACP then could be salvaged even with future federal funding. USEC executives themselves acknowledged on a May 2 webcast conference call that the May 31 deadline is an inflexible term of the company's new credit facility. USEC investors, creditors and shareholders have all strongly soured on ACP, since it has mired the company in expenses and debts with no productive outcome.
It remains very unclear whether USEC can avoid bankruptcy or other acute financial distress long enough to join in any new public-private partnership as envisioned in the RD&D proposal, whether the terms of a congressionally-authorized bailout would be sufficient or acceptable for USEC, and whether the federal interest in RD&D could not be met by partnership with other companies in Oak Ridge, Tennessee, leaving the Piketon, Ohio, site to decommissioning, cleanup and redevelopment.
Steve Pearce, a former minority whip, is chairman of the Congressional Western Caucus which advocates for uranium mining interests and energy independence, a member of the Financial Services Committee, vice-chair of the Native American Caucus, and a member of the Tea Party Caucus. Ed Markey, serving his 36th year in the House, is ranking member on the Natural Resources Committee, a member of the Energy and Commerce Committee, former chairman of the Select Committee on Energy Independence, current co-chair of the Bipartisan Caucus on Nonproliferation, and a member of the Progressive Caucus.
Uranium miners are enraged that continuous Department of Energy (DOE) handouts to USEC, not authorized by Congress, have been accomplished through the extra-legal mechanism of "uranium barter," which dumped government stockpiles of uranium onto the market, depressing prices and increasing unemployment among miners. USEC uranium enrichment competitors, including companies with projects in New Mexico, Idaho and North Carolina, are enraged that three successive administrations have shoveled federal subsidies, gifts, and no-bid contracts to USEC, in flagrant violation of the USEC Privatization Act and despite USEC's non-performance in creating a viable enrichment project in Ohio. Communities in Ohio and Kentucky are enraged that USEC broke numerous agreements regarding the shutdown of its gaseous diffusion plants at Piketon and Paducah, while simultaneously maintaining its lease-hold on the two federal sites, preventing the planning of alternative development.
That Pearce and Markey have joined to lead an unlikely full-spectrum coalition to end federal support of USEC Inc., is perhaps the worst news the company has received in a string of very very bad news. Just this week, Japan shut down its last operating nuclear reactor, and Francois Hollande was elected president of France, on a platform calling for a one-third reduction of French reliance on nuclear power. France and Japan have been the second and third largest markets for enriched uranium fuel after the U.S. On Monday, May 7, shares of USEC hit a new all-time low of 75 cents, 97 percent off of the 2007 high of $23.91.
Ninety-seven percent losers are generally frowned-upon by the investment community.
As the dismal financial outlook is summarized in the Pearce-Markey letter:
The company's stock has been trading at under $1/share for weeks and is at risk of being de-listed from the stock exchange. There is substantial uncertainty USEC can generate future taxable income and this is reflected in its last publicly-reported credit rating of CCC+. In addition to its dismal credit rating, USEC's default rating was downgraded to Caa1, poor standing and high credit risk. Decline in profit and income is not the only concern; the world-wide demand for uranium enrichment services, which had been expected to increase, is down sharply. The $150 million in support contemplated by the Senate is almost $60 million higher than the current total market capitalization of the company. Any further taxpayer support for this company thus would carry with it a stunningly high level of risk that the entire investment would be lost.
Compared to USEC, Solyndra looks as rock solid as a Christmas account in an FDIC-backed savings bank.
Readers of the Pearce-Markey letter will note a striking parallel with predictions I made in my petition of intervention against ACP licensing in 2005, elaborated more recently in a series of articles at Ecowatch.org and SONGSheetOhio.blogspot.com. It is sad that it's taken seven years for public officials to take action on the massive corruption scandal that was already in full flower in the south Ohio hills at the time I began to sound the alarm in 2005. On the other hand, it is gratifying to learn that sometimes, some elected officials in Washington do take seriously their duty of public trust.
Let's hope that we hear no more about shoveling U.S. Treasury funds and government inventories toward USEC Inc. But I'm here to tell you that hope won't be enough. We'll have to work for it.
Also posted on the blog of Southern Ohio Neighbors Group.
Setting some sort of record for the number of botched attempts to enact bad legislation, the U.S. Congress has now struck out a fourth time in as many months, failing to bail out the desperately dysfunctional uranium enrichment company, USEC Inc. USEC and the U.S. Department of Energy (DOE) issued fresh threats that the company would terminate its long-dying "American Centrifuge" uranium enrichment project, if not go belly up, without a new federal cash infusion by March 31. But the Senate and the House ignored those threats and left for two-week recess on March 29, after passing a 90-day Transportation holdover bill absent any USEC provision.
In reaction, USEC stock hit a low of $1.00 per share on March 29, eight cents below its previous all-time low. That represents a loss of 96 percent of equity value from the high of nearly $24 per share reached in 2007, after USEC was awarded a construction and operating license for a centrifuge plant by the Nuclear Regulatory Commission (NRC). NRC awarded the license for a commercial-scale plant near Piketon, Ohio, even though USEC had failed to even initiate a supposedly-mandatory testing program called the Lead Cascade, and even though USEC had no financing plan for building a commercial plant.
This week's developments demonstrate that an elaborate stock speculation swindle has been conducted, supported by DOE, NRC and those members of Congress who took large amounts of campaign cash from USEC and then proposed federal payouts to the privatized company. Accusations of corruption involving USEC campaign contributions also emerged from congressional candidates this week, explaining the otherwise-mysterious retreat of the USEC caucus in Congress.
USEC's empty belly began to growl when the company was denied a $2 billion loan guarantee by the Department of Energy for a second time in October of 2011. Secretary of Energy Steven Chu then requested of Congress two annual installments of $150 million each for an ill-defined and unjustified "Research, Development and Demonstration" program (RD&D), to accomplish the Lead Cascade viability test that USEC had failed to perform on its own, despite contractual obligations and thirteen years of heavy federal subsidy.
The Chu-Chu Train
But something was very strange about the Chu request, something revealing the RD&D project as a phantom, something glaringly obvious but not publicly discussed until now. In Chu's October 2011 letters to the Senate and the House, he requested funds for the construction of "one train of centrifuges (720 centrifuges)" and that number was never publicly altered or retracted.
However, in February of 2012, in writing off the costs of 38 centrifuges damaged in the 6-11-11 crash event at Piketon, USEC placed the cost of the centrifuges at $120 million, or $3.16 million per centrifuge. At that price, 720 centrifuges would cost almost $2.3 billion, not including R&D, far more money than what was being requested of Congress by Chu.
After the tax write-off, USEC and DOE began discussing the proposed RD&D project as involving 120 centrifuges, not 720. Apparently, the 720 figure had been a misprint, but the misprint in an official funding request to Congress was never corrected, and Congress was left for the duration of the bailout effort believing that it could buy 720 centrifuges for an investment of only $300 million in federal money.
No fuss was made about the huge disparity in numbers, because the inside players understood that the RD&D program was an imaginary device from the get-go. In actuality, funds were being requested to pay USEC corporate expenses and keep the company out of bankruptcy court, where court-appointed accountants might reveal the full odoriferous history of under-the-table federal funding for USEC.
No "train of centrifuges" ever would materialize, for the very same reason that USEC never completed the Lead Cascade on its own. In the words of Piketon workers, the USEC forty-foot centrifuges based on forty-year-old technology are big "hunks o' junk." There's nothing worth testing, if the machines could survive operational performance at all. The number of phantom centrifuges that Congress would be buying is therefore like the number of proverbial angels on the head of a pin. So Secretary of Energy Chu did not labor over the nonsensical number he included in his official request to Congress.
These kinds of smelly considerations certainly came into play when congressional leaders axed USEC bailout money from the Omnibus appropriations bill passed in December. Strike 1.
Before Christmas, Congresswoman Jean Schmidt, representing the Ohio district that includes Piketon, submitted a stand-alone bill that would have permitted DOE to transfer $150 million to USEC in 2012 without specific congressional oversight or accounting controls. This was considered "too stupid" for committee consideration, in the words of a congressional staffer, so the planned January hearing on the measure was canceled without ceremony. Just as unceremoniously, Ms. Schmidt was then dumped by the voters in the Ohio Republican primary. Strike 2.
Kentucky congressman Ed Whitfield attempted a different kind of USEC bailout by mandating that DOE should "re-enrich" depleted uranium from government stockpiles at USEC's decrepit gaseous diffusion plant at Paducah, Kentucky. USEC itself put a stop to that one, declaring that extended operation of the plant is just too expensive, and so it intends to shut Paducah down. Announcement of the closure date as soon as this May is expected shortly. Strike 3.
USEC then should have been called out. But the two U.S. Senators from Ohio—Rob Portman and Sherrod Wannabe-Portman Brown, both recipients of large amounts of campaign contributions from USEC and other Piketon contractors—collaborated on a Schmidt-like USEC bailout amendment, snuck into the Senate Transportation bill that appeared to be headed to passage. But then House Republicans revolted as has become their fashion, opting instead for another 90-day extension, minus any USEC provision. That extension, which runs until July 1, is far too long to suit USEC, which has been operating on extended financing deadlines of its own since June 30, 2011.
Chu's Alternative Universe
By July 1, there won't be enough of USEC left to bail out. The total market valuation of the company now is only $130 million, meaning that USEC could not afford its 50-50 cost-share for a proposed RD&D program for which the government kicks in $300 million. USEC has about $500 million in debt due to bondholders coming due in 2014, long before any new commercial plant could be completed. And USEC is operating at a loss, which has been running at an average of $135 million per quarter. By July 1, two more loss quarters in 2012 will have elapsed. At current valuation, USEC's net worth is less than half of the proposed federal bailout of $300 million. That doesn't cut the mustard, much less atoms, in the Age of Solyndra where Tea Party rules apply.
Plus there are timing problems. In 2011, Chu proposed a two-year RD&D program, which on paper could have been completed before USEC goes to the hock shop in 2014. If the start of the RD&D program is now delayed, as it must be, until the third quarter of 2012, at the earliest, then there isn't enough time to complete the program, even in theory. That's assuming the proposed project were real, in some alternative universe within Steven Chu's brain.
And the administration has requested $150 million for the second year of USEC RD&D in 2013, bizarrely taken, without explanation, from the "nuclear nonproliferation" budget. That request is premised on completion of the first year in 2012, which now cannot happen. Congress will be asked to consider funding the second year of a two-year program before the first year is funded.
Simply put, the PR logic of the RD&D program proposed slap-dash last October has defeated itself by virtue of the congressional delay. Republican Portman and his Democratic sidekick Brown could yet preempt their own amendment by introducing the measure as a stand-alone, or by trying yet another slip-in circumvention. The former strategy, however, would necessitate committee hearings, which would do to a USEC bailout what sunlight does to vampires. And further slushing around in the USEC stock swindle pits might do unsavory things to Brown's 2012 reelection campaign, ranked as one of the most competitive Senate contests this year. November is approaching and Schmidt's primary loss forewarns.
All of which is highlighted by the emergence of USEC corruption as a major issue in Tennessee's fourth congressional district race. Eric Stewart, the Democratic challenger, is charging that incumbent Republican Scott DesJarlais timed his support for a USEC bailout to a $1,000 contribution to DesJarlais from the USEC PAC, an example of crony capitalism at work, according to Stewart.
That's small potatoes compared to the suspicious timing of federally-subsidized USEC politicking in Ohio, where then-Governor Ted Strickland had to return one USEC contribution (but kept many others) because that contribution was timed too closely to a 2010 meeting at which Strickland and Brown together lobbied Chu to circumvent Congress in giving funds to USEC. In early 2011, Sherrod Brown publicly called on the Department of Energy to forgo further testing of USEC centrifuges and simply award the company a $2 billion loan guarantee. Up to the third quarter of 2011, according to FEC records, Brown received $58,500 from USEC and related corporate PACs including USEC nuclear utility customers and Piketon site contractors.
Republican Rob Portman may also find some aspirations dashed upon the USEC shoals. He has been considered a top contender for Romney’s running-mate. But Portman is nearing the two-decade mark as a USEC shill, and continued allegiance to the Enron of 2012 might see more vocal protest from the slap-happy anti-Solyndra GOP base.
Therefore, we may not see more clandestine Portman-Brown maneuvers. They say that USEC and its "American Centrifuge Plant" have nine lives. Excuse the mixed metaphor, but now it's the bottom of the tenth, USEC is down, and even the fans are weary of the game.
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.
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.
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.