The Paducah Sun
The Paducah Sun
Paducah, Kentucky
Friday, December 06, 2002

Patton: Seismic factor swayed USEC decision

By Bill Bartleman bbartleman@paducahsun.com--270.575.8650

The big factor that Kentucky couldn't overcome in trying to convince USEC Inc. to build its test gas centrifuge plant in Paducah was the city's proximity to the New Madrid earthquake fault, Gov. Paul Patton said.

The state offered what Patton termed a generous financial incentive package that included never-before-used tax rebates that would have required legislative approval.

The package was worth "well over $100 million," according to J.R. Wilhite, commissioner of the state Department of Community Development. He called it one of the largest economic development incentive packages ever offered by the state.

The biggest incentive was giving USEC annual payments equal to state income taxes paid by plant workers for 10 years. The state also proposed to refund corporate income taxes paid by USEC.

Patton said despite the decision to locate the test plant near Portsmouth, Ohio, Kentucky should not give up efforts to attract USEC's bigger prize: the new production plant that will be built after centrifuge testing is completed.

That plant, which will replace the Paducah Gaseous Diffusion Plant by 2011, will cost up to $1.5 billion and create 500 permanent jobs. After it opens, production will end at the Paducah plant.

Patton said Nick Timbers, chief executive officer and president of USEC, called early Wednesday to inform him of the decision. "He was very complimentary of the community leaders and the work force, and said the state's proposal was very competitive," Patton said. "In the end, he said the seismic costs and building that already is in place at Portsmouth were just insurmountable odds for Paducah to overcome."

Wilhite said timing also was a factor. Having a building already in place could reduce construction time by a year or more.

Timbers told Patton that Kentucky is still in the running for the production plant, but made it clear that Ohio has the edge. "He also said he didn't want to raise expectations because the same obstacles will remain for Paducah," Patton said. "The next governor will have time to search for a way to overcome those issues." Patton's term ends in December 2003.

Wilhite said he was disappointed but not discouraged. "We still have an opportunity for the commercial plant, which is the true prize and creates the permanent jobs," he said.

Between now and the commercial plant site selection in 2004, Wilhite said, Kentucky has an opportunity to rework its incentive package and try to overcome the issues that benefited Ohio this time.

One benefit could be the results of a new seismic study, which might show Paducah doesn't need to meet stricter earthquake building codes because there have been no major quakes here for more than 200 years, and because the area could be outside the primary New Madrid danger zone.

Patton said the state attempted to overcome the advantage of the existing Portsmouth buildings, built 20 years ago when the U.S. Department of Energy planned to implement gas centrifuge technology but didn't follow through.

"We put extra money in the package to cover the cost associated with the building," Patton said.

Kentucky's incentive package was in two parts: the first part aimed at the test plant and the second at the production plant. While the production plant incentives remain, Patton said, they should be reviewed and enhanced by the next governor.

Unique to the state's offer was to give USEC income tax revenue from its current employees, "beginning with the day they break ground" for the production plant, Patton said. He said that is different from other incentive packages that usually give industrial prospects tax revenue from jobs created.

Also included in the package was a promise to give USEC tax revenue from workers and companies involved in the construction. He said that also is a new incentive that the General Assembly would have to approve.

"We had letters of commitment from the leaders of the General Assembly that the incentive package would be approved," he said.

McCracken County was willing to give USEC the payroll tax revenue paid by employees of the new plant. "That would have been a hefty sum over 20 years," Judge-Executive Danny Orazine said. Local construction union leaders submitted a written promise that there would be no strikes during construction of the plant. They also offered to pay the cost of required drug screening of construction workers and pay the cost to certify craftsmen for specialized work.

Another incentive was to offer USEC facilities in the Information Age Park to help train workers for new jobs.