The Paducah Sun
The Paducah Sun
Wednesday, June 14, 2000
Paducah, Kentucky

Privatization sponsor opposes uranium glut

By Joe Walker jwalker@paducahsun.com--270.575.8650
U.S. Sen. Pete Domenici, a New Mexico Republican who co-sponsored legislation to privatize USEC Inc., has asked the Clinton administration for tighter control over the receipt of 500 tons of uranium from Russia.

Domenici, who with former Sen. Wendell Ford of Kentucky wrote a bill to privatize USEC, said a depressed market in which USEC competes threatens the nuclear disarmament agreement with Russia, as well as the entire domestic enrichment industry.

As agent for Russian enriched uranium derived from nuclear warheads, USEC is paying more for the material than the production costs of USEC plants at Paducah and Portsmouth, Ohio. Trying to get Russia to lower prices, USEC has offered to buy natural uranium from Russia for resale in a glutted market.

On June 21, the USEC board is expected to vote to close one of the plants. The company is cutting about 625 jobs at the two facilities, and market conditions threaten the 330-employee Honeywell plant in Metropolis, Ill., this country's sole supplier of raw material to the USEC plants.

In a letter last month, Russian Minister for Atomic Energy Yevgeny Adamov said his country would halt uranium shipments to the United States as outlined under the agreement. On Monday, Domenici wrote Adamov and U.S. Energy Secretary Bill Richardson saying that development seriously jeopardizes disarmament.

"When Congress agreed to privatize USEC, it did not anticipate that the administration would effectively allow the (Russian) agreement to be privatized along with (USEC)," Domenici wrote. "Nor was Congress informed of transfers of huge inventories of natural uranium to USEC prior to privatization, transfers that could be predicted to drastically impact the global uranium market."

Domenici referred to about $746 million in stockpiled uranium that the Department of Energy gave USEC to help capitalize the company. USEC is now rapidly selling the inventory amid financial trouble. Coupled with potentially more uranium from Russia, that could depress the market even more.

Last week, Jim Graham, chief executive officer of ConverDyn, the marketing arm of the Honeywell plant, told a congressional subcommittee that the plant could close without government intervention. He cited the Russian and USEC inventory sales as key factors.

On July 20, 1998 two days before the USEC board authorized the sale of $1.9 billion in stock to privatize USEC Domenici wrote the Department of Treasury and the board saying the transfer of DOE uranium as part of privatization could "imperil" the Russian agreement. The board received a similar letter from Russia.

Domenici urged the board to stop privatization until the process was resolved. Despite his and the Russian concerns, and the objections of two board members, the board approved the stock sale, according to transcripts of the meetings.

Financial advisers told the board that stopping the stock offering would effectively kill it by scaring potential investors. USEC also promised the Treasury not to flood the market with the excess uranium.

After the vote, Domenici helped secure $325 million from Congress to keep the Russian deal afloat. In his letter to Adamov, he referred to the 1998 developments.

"My anticipation of these issues formed the basis of my efforts to propose re-evaluation of the national security implications of privatization actions before proceeding," he wrote. "Unfortunately, my strong advice on this issue was not heeded by the administration."

Domenici, chairman of the Energy and Water Development Appropriations Subcommittee, is urging the Clinton administration to save the Russian agreement, brokered in 1993. He said steps must be taken to establish sufficient government oversight and control, including legal protections; to ensure the deal is fully implemented at 30 metric tons of Russian uranium imported by USEC annually; and to create a "stable, fair and predictable" sale of the material to keep from hurting the market.

"If the administration can advance proposals meeting such criteria, you can be assured that I will seek their prompt and careful consideration by Congress," Domenici wrote.

On Tuesday, the Washington, D.C.-based International Trade Commission heard evidence about another serious market issue. The six-member commission is expected to rule by the end of July whether uranium from four countries once part of the Soviet Union could materially harm the U.S. enrichment industry.

In 1992, the countries agreed to limit exports of uranium in return for suspending charges they violated a U.S. "anti-dumping" law that imposes stringent duties on foreign countries selling cheap uranium here. Although the Department of Commerce imposed duties in 1993, the law requires that the penalties be revoked after five years unless material harm can be shown. That review began in July 1998.

If the trade commission finds material harm, the duties will continue. If not, they will be revoked by the Department of Commerce.