USEC Inc., a formerly government-operated uranium-processing company that was sold to investors last year, has told the Clinton administration and members of Congress that it may quit its role as the government's executive agent in a nuclear nonproliferation deal with Russia unless it gets assurances of federal financial aid.
But the administration has responded to this apparent threat by negotiating with potential USEC competitors to take over the job if the company walks. Moreover, lawmakers from both parties are discussing whether to revoke USEC's protection until mid-2001 from a takeover, a key part of the legislation that privatized USEC.
"If USEC threatens to bail out on the uranium deal, we'll find other avenues," Energy Secretary Bill Richardson said yesterday in a telephone interview from Turkey. "That's not a threat that will go very far with me."
According to another senior administration official, negotiations are underway with several firms that might be interested in taking over the obligation if USEC terminates.
What amounts to a high-stakes game of poker involving the administration, Congress and the Bethesda-based company emerged out of several days of intense behind-the-scenes bargaining as USEC sought help for its financial problems in last-minute budget negotiations.
USEC had been seeking as much as $200 million in relief, arguing that a deal in which it buys what was formerly weapons-grade uranium from Russia is causing losses for the company and its shareholders. So far, however, the administration has offered only approximately $40 million in aid, which would be delivered by having the federal government assume liability for uranium waste products. Nothing was included in the budget for USEC.
USEC spokesman Charles Yulish said the company has not used the possibility of resigning as the executive agent in the Russian deal as a threat. "What we have said is that the company cannot continue to subsidize the U.S. government," he said. "I want to be clear that we have not and will not threaten the U.S. government. We have not and would not do that."
But USEC's board will consider whether the company should resign as the executive agent when it meets Wednesday, Yulish said.
USEC, once under the umbrella of the Department of Energy, became the executive agent as part of a historic agreement between the United States and Russia to help rid the world of nuclear weapons. USEC's role was created in a 1993 accord designed to convert highly enriched uranium from dismantled Soviet nuclear warheads into low-enriched uranium to be used as fuel in nuclear power plants. Under that accord the equivalent of more than 3,000 Russian nuclear warheads have been converted into fuel.
The five-year agreement requires USEC to pay the Russians $88 per unit of processing, which the company says it now sells at the market price of $80. Hence, USEC estimates it will lose $200 million to $300 million under the two years remaining in the contract. Even so, administration officials say, the contract may still be valuable to another company if USEC drops out.
Under the contract, USEC may resign as executive agent. But the contract requires USEC to give 30 days' notice and then to continue as executive agent for the balance of the year after that 30 days expires, plus another year. It is those terms that make Dec. 1 a key date. If the company were to give notice after that, it would need to continue until the end of 2001 rather than 2000.
In addition to saying that it might resign as executive agent, USEC has also raised the possibility of laying off workers at its uranium-processing plants in Paducah, Ky., and Portsmouth, Ohio. The company has said it may lay off "several hundred" workers to help reduce its costs.
Richardson said USEC must keep both plants open and operating at current levels if it hopes to win federal financial backing. That position also has been pushed by Rep. Ted Strickland (D-Ohio), Rep. Edward Whitfield (R-Ky.) and the Paper, Allied-Industrial, Chemical & Energy Workers International Union, which represents the workers at the plants.
Strickland said that he believes that USEC won't give up its executive agent status because he believes it can't meet its long-term contractual obligations to provide fuel to utilities without at least a portion of the uranium from Russia.
"I don't have a lot of sympathy for USEC," Strickland said, noting that the company knew what it was getting into when it was privatized. He also noted that the company has spent about $100 million buying back its stock in order to improve per-share prices and is paying approximately $100 million in dividends to shareholders.
In fact, USEC's lobbying appears likely to create problems for the company. House Commerce Committee Chairman Thomas J. Bliley Jr. (R-Va.) wrote National Security Adviser Samuel R. "Sandy" Berger earlier this week, raising questions about the manner in which the company was privatized and subsequent oversight and asking for more information. He also wrote House Speaker J. Dennis Hastert (R-Ill.), urging that no last-minute aid be provided, saying that he wants to explore the circumstances surrounding USEC's current situation next year.