The Paducah Sun
The Paducah Sun
Thursday, June 22, 2000
Paducah, Kentucky

Even with big victory, Paducah's future gray

By Bill Bartleman bbartleman@paducahsun.com--270.575.8650
Although Paducah won the battle Wednesday when the USEC Inc. board decided to close the Portsmouth Gaseous Diffusion Plant in Ohio, the long-term future of the Paducah plant remains uncertain.

Some state and local officials think that when more efficient technology is deployed in five to seven years, Paducah will again face the prospect that its plant will be closed.

Issues affecting the future range from the price of weapons-grade enriched uranium purchased from Russia to the development of technology that will significantly reduce production costs.

"This is a temporary victory," said U.S. Rep. Ed Whitfield, R-Hopkinsville. "We all know that the technology used at the Paducah plant is not efficient, is not competitive and is obsolete. We have to look at new technology."

Tom Osborne, a Paducah lawyer whose efforts to save the Paducah plant included meetings with Energy Secretary Bill Richardson and with top USEC officials, agreed with Whitfield.

"We won the battle, and it is time for us to be grateful for that, but it is a temporary victory," Osborne said. "Gaseous diffusion technology is almost at the end of its viable lifetime. There is new technology under development, and all indications are that it won't be located in Paducah."

USEC is pursuing development of gas centrifuge technology, which uses about one-third of the electricity used in the gaseous diffusion process developed more than 50 years ago and currently used at the Paducah plant.

USEC is planning to build a pilot plant in Oak Ridge, Tenn. After testing is complete, it plans to deploy the technology in a $1.2 billion plant in Portsmouth. One of the attractions to Portsmouth is a building that was constructed 20 years ago for centrifuge units. The plant development was scrapped in the mid-1980s when officials decided to pursue what they thought would be an even more efficient process known as AVLIS.

But two years ago, USEC scrapped AVLIS as the technology of the future, contending that it was not viable in commercial production.

David Fuller, president of the atomic workers' union at the Paducah plant, is skeptical even that USEC will actually deploy gas centrifuge at Portsmouth.

"Centrifuge is an old technology that will require huge capitalization to deploy," Fuller said. "They have to decide if it is worth the huge capital investment to develop something that is not cutting edge." He said he doubted they would be willing to make such an investment when other new technological advances are being tested.

Another issue that could affect centrifuge is whether the U.S. Department of Energy helps pay the development costs. Richardson sent a letter to top USEC officials Wednesday saying many questions needed to be answered before DOE would help USEC.

Richardson said USEC has never justified or fully explained its decision to abandon the AVLIS technology. He said the federal government invested hundreds of millions of dollars in early AVLIS testing before turning it over to USEC in 1998.

"DOE is now being asked to start down a new path of public investment but has yet to receive a comprehensive proposal from USEC, let alone a strategic plan on its proposed path forward for centrifuge technology development," Richardson said.

He said USEC has asked DOE for $50 million to build the centrifuge pilot plant, a $1.2 billion loan guarantee to finance the centrifuge plant and use of the Portsmouth building that would save USEC $300 million but cost DOE $150 million in costs of transferring the building for USEC's use.

"USEC's list of wants from the federal government is a long one and is not backed up by a reasoned plan to justify such a significant investment of the public's money," Richardson said.

Richardson issued a statement late Wednesday in which he was critical of USEC's decision to close Portsmouth. "The decision is just the latest in a series of short-sighted decisions aimed at bolstering the corporation's near-term standing on Wall Street," Richardson said. "The decision ... leaves unanswered fundamental questions affecting the employees, the corporation's future and USEC's ability to carry out important national security obligations to the United States."

He said that when USEC became a private company in 1998, "it inherited a healthy business with a bright future." However, he said poor business decisions by management and the failure to develop a long-term business strategy "have led to this unfortunate outcome that will result in several hundred Ohioans' being put of out work."

U.S. Sen. Jim Bunning, R-Fort Thomas, said federal agencies such as DOE must work closely with USEC to help save the uranium enrichment industry and the Paducah plant. He said USEC is facing financial problems because of an agreement between Russia and the United States that requires USEC to buy weapons-grade enriched uranium at prices higher than it can be sold for on the open market.

"That agreement has to change, or USEC as we know it will go away," Bunning said. "The federal government must cooperate and realize that a private firm can't continue to operate at a loss."

He said the federal government may have to subsidize USEC, the same as governments in other countries subsidize their uranium enrichment industries.

Whitfield said the prospect of importing commercial grade nuclear fuel from Russia is a threat to the Paducah plant that must be dealt with in the near future. USEC wants a new contract with Russia to buy low-priced commercial fuel that it could sell. Such an agreement would further reduce the production needs in Paducah, which could eventually lead to an end to all domestic production.

"I am uneasy about depending on Russia for our nuclear fuel supply," Whitfield said. "I don't think it would be a stable source of supply."

Whatever the future holds, state, local and federal officials must work together to save USEC and the jobs in Paducah, Whitfield said. Paducah must battle for the new technology, whether it be centrifuge, SILEX or something else. "There is a lot of uncertainty about the industry and the future of Paducah, but we must be committed to working together."

Osborne said Paducah should not give up on attracting future technology, even though he thinks Portsmouth may have an advantage. Osborne said the region must prepare itself in case the Paducah plant closes and its 1,300 remaining jobs are lost.

"I hope this serves as a wake-up call so that all of us in this region work together on economic development," he said. "We have to use this temporary victory as a springboard for more and more economic development success."

He said one key to keeping the USEC jobs may be western Kentucky's political strength. He said it appears that the federal government will still be involved in enrichment. He said Paducah could be successful in landing new technology with the help of politicians at the federal level.

Gov. Paul Patton, who said he was notified by USEC Chief Executive Office William "Nick" Timbers that the Paducah plant would remain open, agreed Wednesday that while it was good news, the battle to save the jobs in Paducah isn't over.