By Steven Mufson
Washington Post Staff Writer
Wednesday, July 29, 2009
Bethesda-based USEC on Tuesday accused President Obama of reneging on a campaign pledge after the Energy Department turned down the company's request for $2 billion in loan guarantees for a new uranium enrichment project in Piketon, Ohio.
USEC, which operates the nation's only uranium enrichment facility, said it would "demobilize" the new project, which it said could not obtain private financing without the federal loan guarantee. The company has already spent $1.5 billion on what it calls the American Centrifuge Plant, but USEC says the final price tag could reach $3.5 billion, 1 1/2 times as much as it estimated two years ago.
"We are shocked and disappointed by DOE's decision," USEC chief executive John K. Welch said in a statement. "President Obama promised to support the loan guarantee for the American Centrifuge Plant while he campaigned in Ohio. We are disappointed that campaign commitment has not been met."
The company's stock yesterday plunged $2.14, or 35 percent, to $4.05 a share, erasing $240 million of market value.
The Energy Department said that the proposed plant, which would use a series of giant centrifuges to enrich uranium for nuclear power plants, was not ready for commercial production and therefore ineligible for the loan guarantees. The department said that if USEC withdraws its application, it will receive $45 million over the next 18 months to conduct further research.
In a nod to the state, however, the Energy Department said it would expand cleanup efforts at the now-closed Portsmouth enrichment site in Piketon. It said it would spend $118 million of stimulus funds and an additional $150 million to $200 million a year on decontamination over the next four years. The department said that would create over 1,000 jobs, more than twice as many as would be lost at USEC's centrifuge project. The announcement brings total spending on the Portsmouth cleanup to $850 million over the next two years.
Sen. Sherrod Brown (D-Ohio), who has urged greater spending to clean up old government nuclear sites, said the administration had shown "commitment" to the region.
While campaigning in southern Ohio last August, Obama praised the USEC project. "Under my administration, energy programs that promote safe and environmentally sound technologies and are domestically produced, such as the enrichment facility in Ohio, will have my full support," he said later in a letter to Ohio Gov. Ted Strickland (D). "I will work with the Department of Energy to help make loan guarantees available for this and other advanced energy programs that reduce carbon emissions. "
White House spokesman Benjamin LaBolt said Tuesday that "the president remains fully committed to ensuring that the United States maintains domestic uranium enrichment technology and the capacity to meet our nuclear energy needs and national security priorities." But he added that the USEC technology "is not commercially viable today, according to an independent engineering review, and therefore not eligible for DOE's loan guarantee program at this time." He said the administration thinks the technology "holds promise."
USEC said that the technology was developed by the Energy Department during the 1970s and 1980s and that it uses a small fraction of the electricity used by the plant USEC currently operates in Paducah, Ky. USEC says it has improved the technology and tested it over "235,000 machine hours."
"It is unclear how DOE expects to find innovative technologies that assume zero risk, but the American Centrifuge clearly meets the energy security and climate change goals of the Obama administration," Welch said in Tuesday's statement.
Matt Rogers, who oversees grants and loan guarantees at the Energy Department, said that USEC finalized designs only three months ago and that the company had tested only 38 centrifuges while 11,000 would be needed to run the plant. "The project runs the risk of either major cost overruns or reliability problems or both," Rogers said. "Given the problems they have had on the run time, we decided they needed more time before it went to mass production."
A loan guarantee would carry a risk of default, other government sources said. USEC, a federal agency privatized in 1998, in May had a B-minus rating from Standard & Poor's and a B3 rating from Moody's. It borrowed $775 million to help fund the centrifuge plant; it had $78 million in cash at the end of the second quarter.
USEC is also facing pressure because half the enriched uranium it sells comes from decommissioned Russian nuclear warheads. Under contract with the government, USEC has blended down material from more than 14,000 out of 20,000 warheads due to be eliminated. The program will end in 2013.
The 2005 Energy Policy Act gave the Energy Department $2 billion for loan guarantees for uranium enrichment projects. The only other applicant is Areva, a firm partly owned by the French government; it would build a plant in Idaho. General Electric is also researching uranium enrichment, using a laser technology it acquired from USEC. Rogers said GE just started a pilot project and will collect data over the next year.