Assuming Piketon, Ohio, officially lands USEC's gas centrifuge plant in December, there are financial and competitive issues that could affect construction plans.
By Joe Walker firstname.lastname@example.org
The company says the winner will be revealed in December and some observers think word will come as early as this week. Leon Owens, president of the Paducah nuclear workers union, isn't optimistic about Paducah's chances because Piketon already has two mothballed gas centrifuge buildings and lacks Paducah's earthquake hazards related to the New Madrid Fault.
"The state of Kentucky has done an admirable job in trying to level the playing field as much as possible," he said. "But my own personal opinion is there were obstacles that were just insurmountable."
A year ago, when USEC picked Piketon for a demonstration centrifuge plant, Chief Executive Officer William "Nick" Timbers was direct about Paducah's chances for the commercial plant.
"Those issues that apply today will be applicable in 2004," he said then. "One has to be realistic that the decisions made today do have a bearing on the evaluations that will occur in 2004."
Nuclear industry consultant John Longenecker figures Piketon's advantages are worth about $450 million — $250 million for the buildings and $200 million that Paducah must spend to make a centrifuge plant earthquake resistant. As Department of Energy deputy secretary of enrichment, he led the gas centrifuge program in 1985 when DOE aborted plans to commercialize a new centrifuge plant at Piketon. The plant was too costly to finish and the government wanted to study other technology.
Phil Potter, the union's Washington policy analyst, said the Kentucky centrifuge proposal "should have more or less leveled out" Paducah's added seismic costs. The Piketon buildings, which will house a test gas centrifuge plant, are far too small for the commercial plant so they would have to be expanded or a new plant built, he said.
Although the Kentucky package apparently included power incentives from the Tennessee Valley Authority, cheaper electricity is more vital to the continued operation of the outdated diffusion plant, Potter said. According to USEC, gas centrifuge uses about a tenth of the power of diffusion.
"Right now, USEC has a very favorable contract with TVA," he said. "If they can keep that, they can control costs at the Paducah plant until they replace it."
Even if Paducah loses, big questions loom about USEC's ability to finance the $1.5 billion centrifuge plant. Also, Senate action could hasten the schedule of USEC competitor Louisiana Energy Services, which intends to build a centrifuge plant in New Mexico, and lead to Paducah's recycling LES low-level hazardous waste, Potter said.
In September, the union detailed a possible "perfect storm" of market events over the next two years that could force USEC to shut down the Paducah plant and abandon plans for gas centrifuge. The study said USEC keeps paying $45 million a year in dividends while saddled with $500 million in privatization debt, $36 million in annual interest, a "junk bond" credit rating and low profitability for at least two more years under older, cheaper uranium contracts.
USEC called the study misguided and a continuation of public relations that began during an extended strike at the plant earlier this year.
A year ago, Longenecker figured USEC had no better than a 50-50 chance of building a centrifuge plant. He now says USEC's financial picture is getting worse, not better. Heavy debt and the huge cost of gas centrifuge will make it very difficult to find an investment partner, he said.
"There is nothing in the near- or mid-term to indicate the company is going to increase profitability," said Longenecker, a California consultant for nuclear firms that buy enriched uranium from USEC and other suppliers.
While the Kentucky delegation works to secure hundreds of millions in nuclear funding for Paducah, Sen. Pete Domenici, R-N.M., is doing the same for his home state. Domenici put language in an 1,100-page energy policy bill requiring the Energy Department to accept LES waste and greatly accelerating the Nuclear Regulatory Commission process of licensing the New Mexico plant.
The language drew complaints from USEC, whose schedule is ahead of LES, Potter said. He said financial analysts disagree whether the enrichment market can support two centrifuge plants, particularly if imports increase.
Domenici is chairman of the Energy and Natural Resources Committee, as well as the energy bill conference. Because of issues unrelated to centrifuge, the bill reached a stalemate Nov. 21 in the Senate, but Republican leaders say they will keep pushing.
The LES waste would be similar to that stored in 38,000 cylinders at the Paducah plant. DOE contractor Uranium Disposition Services is building 150-job factories at Paducah and Piketon to convert the hazardous waste, known as uranium hexafluoride "tails," into safer uranium oxide.
The company hopes to commercialize fluorine and other materials that are extracted.
Adding conversion waste from LES and putting more emphasis on plant cleanup could save hundreds of Paducah jobs "if (centrifuge) doesn't work out for Paducah, and I doubt that it will," Longenecker said.
But cleanup is controversial. Environmentalist Mark Donham of Brookport, Ill., and three plant neighbors have filed suit trying to block an accelerated cleanup agreement between the Energy Department and state environmental regulators.
The suit claims the pact will lead to some contaminated areas of the plant being ignored.
Donham, who questions whether conversion is safe, worries that Paducah will lose 1,200 enrichment jobs via the centrifuge decision and gain nuclear waste from New Mexico.
"What a deal," he said.