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Piketon plant is seeking bailout

Enrichment company threatening to halt arms-control work

Wednesday, November 17, 1999

By Jonathan Riskind
Dispatch Washington Bureau

WASHINGTON -- Desperate for a taxpayer bailout before Congress adjourns this week, the corporation that runs southern Ohio's uranium-enrichment plant has threatened to walk away from a Russian arms- control deal.

United States Enrichment Corp., a private federal corporation created in 1993 to run the nation's uranium-enrichment operations, originally asked Congress for as much as $200 million to offset losses it says it is suffering on the sales of Russian enriched uranium. The request was lowered to $135 million yesterday and -- in negotiations that continued last night -- USEC appeared ready to settle for $108.5 million, according to memos obtained by The Dispatch.

Federal officials, however, are balking at the deal because USEC won't guarantee it will protect jobs in return, Clinton administration and congressional officials said. As the company in charge of carrying out an $8 billion deal to sell low-enriched Russian uranium culled from thousands of nuclear warheads, USEC sells the material to commercial nuclear-power plants for use as fuel. It also produces enriched uranium at its own plants.

USEC also wants the government to spend an additional $175 million to speed the cleanup of the no-longer-used areas of the Portsmouth Gaseous Diffusion Plant in Piketon, Ohio, and a sister plant in Paducah, Ky. That effort could employ laid-off plant workers, USEC has said. The memo USEC circulated last night indicated that the company wanted the government to spend $15 million to shift 850 workers in Ohio and Kentucky from USEC plant jobs to government cleanup jobs.

A top administration official said the government is taking USEC's threat to abandon the Russian deal seriously enough to begin discussions with potential replacements.

"We don't want to be stuck if they walk away,'' the administration official said, speaking on condition of anonymity.

With enriched-uranium prices dropping, the company says it has been selling the material at a loss.

"As a direct result of the unanticipated declines in the market price of (enriched uranium) since USEC was privatized in July 1998, USEC has been forced by its legal obligations to its shareholders to consider whether to exercise its contractual right to terminate its status as executive agent,'' reads a memo from lobbyist Thomas Hale Boggs to White House Chief of Staff John D. Podesta.

An addendum to the memo from "Tom'' to "John'' says Boggs is working with Greg Simon, a former top adviser to Vice President Al Gore, on the issue. Boggs and Podesta did not return calls yesterday.

Simon said USEC will keep pushing for a bailout if the money isn't included in the final budget bill, which Congress is expected to approve today or Thursday.

"This is an important issue,'' Simon said. "If it doesn't happen in this cycle, then all these issues will be addressed next year.''

Critics who have denounced privatization say a government corporation wouldn't need to make a profit on the deal, and they contend that USEC is exaggerating its harm. Congress, which is investigating the privatization, may hold hearings.

When privatized, USEC was required to limit job cuts to 500 workers over two years. But that requirement ends July 31, and Boggs' memo alluded to layoffs next year involving hundreds of additional employees at the Piketon and Paducah plants, where USEC produces its own low- enriched uranium.

In the memo, Boggs said the laid- off workers could be "transitioned to cleanup activities'' at the plants if more government cleanup money were appropriated. He added that that would save the government about $30 million in severance pay.

But Rep. Ted Strickland, D-Lucasville, and Secretary of Energy Bill Richardson want USEC to guarantee that it will continue to operate the plants at current levels until at least 2005.

"If we're going to go ahead and do something to help USEC now that it is a privatized company, we want to see something that would protect jobs and continue plant operations in Kentucky and Ohio,'' said Gary Falle, Richardson's chief of staff.

A USEC spokesman said company directors are to meet before Dec. 1 to discuss the Russian deal and the request for government assistance. If USEC notifies the government it wants to pull out by Dec. 1, it can stop accepting shipments of Russian material after 2000. If it does so after Dec. 1, it will be committed to carrying out the deal through 2001.

The government can replace USEC with 30 days' notice.

"We're fully engaged with the administration and the Hill on trying to seek a solution to this problem,'' said Charles Yulish, USEC's spokesman. "We have every hope that there can be a speedy conclusion to it. It's in everyone's interests to do so.''

But Yulish said it is only fair for USEC, as a private company, to receive help with the Russian deal. Without assistance, job cuts would be necessary, he said.

"We want to continue as executive agent (of the Russian deal), but we're also responsible to shareholders,'' Yulish said. "It's no mystery that USEC needs to reduce its costs. If the cost of the Russian contract isn't viable commercially, we have to reduce the costs somewhere. You can't reinvent Economics 101.''






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