The Paducah Sun
The Paducah Sun
Paducah, Kentucky
Tuesday, January 13, 2004

Paducah already has new-industry efforts Head start eases loss

By Joe Walker
BARKLEY THIELEMAN/The Sun Bad news: McCracken County Judge-Executive Danny Orazine (left) and Paducah Mayor Bill Paxton collect their thoughts before a news conference Monday announcing the loss of a new gas centrifuge uranium enrichment project to Piketon, Ohio.

Community leaders have a big head start trying to offset the loss of the Paducah Gaseous Diffusion Plant, a 52-year-old monument to the Cold War, now that they know it will close starting in 2010.

"How many communities lose a plant and have six or seven years to keep it and have the benefits of a work force here while they can go out and diversify and bring new industry in?" Mayor Bill Paxton asked.

Counterparts in Oak Ridge, Tenn., and Piketon, Ohio, which lost diffusion plants earlier, say Paducah's biggest ally is time — something they had little of when they received word of shutdown. Through Department of Energy money, Tennessee and Ohio have replaced some of their lost uranium-enrichment jobs with a mix of plant cleanup work, business lured to industrial parks and abandoned enrichment buildings dotted with other employers.

The Paducah Area Community Reuse Organization has used DOE money to construct ready-for-occupancy buildings in several county industrial parks, to develop the regional industrial park in north Graves County, and to help laid-off enrichment workers find jobs. But annual Energy Department funding of reuse organizations nationwide has been cut from $40 million to $14.5 million since 1999, and the Paducah group's share has sunk from $8 million to $300,000.

Some in Congress want to do away with the program, said PACRO Director John Anderson, who is meeting with DOE officials this week trying to stop the bleeding.

"We think if we can hold onto DOE funding, we'll be as well positioned as we can be to try to be of assistance," he said. "For the sake of this community, it appears that our delegation has to fight to prevent sunsetting the program."

Anderson said PACRO and the nuclear workers' union have saved 335 jobs by helping plant workers find other employment. The $7,456 administrative cost of holding onto each of those jobs is among the lowest among reuse groups nationwide, he said.

Aside from big financial questions, PACRO's ability to market plant assets depends on how fast they are cleaned up and whether they are safe enough for replacement industry. One near-term project — to create jobs by cleaning and recycling contaminated scrap nickel at the plant — depends on Energy Department willingness to lift a safety-related ban on recycling scrap metal.

The six-year head start also gives the 1,270 plant employees ample time to look for other work in cleanup or elsewhere. The number who will actually need jobs in 2010 is uncertain, but nearly three-fourths would be eligible for full or partial retirement if they stay that long.

Another huge question is whether USEC can actually pay for the $1.5 billion centrifuge plant. In September, and again Monday, the nuclear workers' 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 calls the study misguided and a continuation of public relations that began during an extended strike at the plant that began a year ago. William "Nick" Timbers, company president and chief financial officer, expressed confidence Monday that USEC will have the money in place when gas centrifuge plant construction begins in two years. He would not elaborate on financing options.

USEC faces heavy competition, and analysts disagree whether the market can support two new uranium enrichment plants. Louisiana Energy Services has sought regulatory approval to build a $1.2 billion gas centrifuge plant in New Mexico and signed contracts with several nuclear utilities to buy half the plant’s first 10 years of production.

Led by Urenco, a European firm that has used gas centrifuge for decades, LES includes three of the nation’s largest nuclear power companies — Exelon, Entergy and Duke Energy. Exelon is USEC’s biggest customer and the largest nuclear utility in the United States. Fuel fabricator Westinghouse Corp. also is part of the consortium.

The LES plant has heavy support from Sen. Pete Domenici, R-N.M., chairman of the powerful Senate Energy Committee. Late last year, he put language in a 1,100-page energy policy bill to greatly accelerate regulatory approval and require the Energy Department to accept LES waste. The bill failed for unrelated reasons, but is again being debated.

Urenco also could win a federal trade case within a year, allowing it to export "any excess supply" of enriched uranium to the United States, said Phil Potter, Washington-based policy analyst for the nuclear workers' union. That would afford USEC stiff competition from both existing foreign enrichment and new domestic enrichment, he said.

"Urenco is kind of a double-edged sword," Potter said. "There are still some threats to Paducah that the government, USEC and the union, for that matter, have to keep trying to address."

The Tennessee Valley Authority will support efforts to offset losing the Paducah plant, said Mark Medford, executive vice president of customer service and marketing. From 1998 to 2002, TVA helped attract or retain 16,000 jobs and leverage in capital investments in 28 counties in Kentucky, he said. "Paducah has a fair amount of lead time between now and 2010, and we're intent to bring all those resources to bear to help."

TVA officials met with USEC senior managers last fall at USEC headquarters in Bethesda, Md., to learn what the company needed in power cost savings, he said. "We worked with the state and USEC to make the best offer we could, not only for the gas centrifuge plant but also for the remainder of the gaseous diffusion plant operation."

Medford declined to say how much TVA offered, but pointed out that Ohio's advantages — having existing gas centrifuge buildings and lacking Paducah's seismic hazards — amounted to "hundreds of millions" of dollars, too much to overcome.