As the Uranium One scandal unfolds and
North Korea nukes up, Americans rightly worry about the integrity of our
regulatory and approval mechanisms related to fissionable material. It
appears that members of the Obama Administration may have used the extensive
regulation and secrecy integral to US uranium operations to bankrupt a $3
billion private firm, and civil litigation, with very different and often more
permissive rules of discovery and deposition, may be feasible as a mechanism of
getting at the rot. Some questionable federal government actions reported here in
American Thinker in 2009 could be the basis for a civil suit against former
Obama Administration officials.
A good thing happened at the close of the Cold War and the
collapse of the Soviet Union back in 1991. The Soviets had tons of highly
enriched uranium (90%+ U-235) that the Russians had little use for with the end
of Cold War. Some of it was in the form of nuclear warheads and
bombs. The other extensive inventory was reactor fuel from scrapped
nuclear submarines. A big worry for nuclear experts was how the weak and
unstable Russian government was to maintain effective security on this near-ideal
bomb making material. The first nuclear weapon used on Hiroshima used
highly enriched uranium. This type is also considered the easiest to
design and implement – the perfect terrorist weapon.
US lawmakers recognized the problem and came up with a
solution. Buy the excess enriched uranium from the Russian government,
“down-blend” it with normal uranium to low levels suitable for commercial
reactor fuel (about 5% U-235) and use it to power American electricity
supplies. The Russian government got some needed cash and the world had
less to worry about from terrorist nuclear weapons. They called the
program “Megatons to Megawatts.” For much of the 1990s and 2000s,
somewhere between 10 and 20% of American electricity came from Russian warheads
and submarine fuel.
The US had another problem – our own uranium enrichment
facilities. We, too, had a greatly reduced need for enriched uranium for
our military and the production facilities built for the Cold War were looking
like they were obsolete technologies. The gaseous diffusion process first
used at Oak Ridge by the Manhattan Project was much less efficient and
economical compared to the new centrifuge technology coming on-line.
Future demand would come from the price-sensitive commercial nuclear power
industry.
To solve both problems the two government gaseous diffusion plants
(Oak Ridge, Tennessee and Paducah, Ohio) were privatized. These plants
were originally constructed by the Manhattan Project and its successor, the
Atomic Energy Commission, to meet US military and later commercial needs for “separative
work units” or “SWU” . This upgrades the U-235 concentration of in
natural uranium from 0.711% to a more usable level that could reach 90+% for
nuclear weapons (like the bomb that destroyed Hiroshima) and for nuclear naval
reactor fuel. Commercial reactor fuel makes do with less than 5%
U-235. The balance is the more abundant isotope U-238.
The US government ultimately reaped $3 billion from the sale to a
new firm, the US Enrichment Corporation (USEC) by some reports. Their 1998
IPO set the per-share price at $14.25. But to sweeten the deal for
what looked like soon-to-be white elephants, USEC was made principal agent for
the commercial sale of Russian down-blended uranium. The US government
retained responsibility for the decommissioning and cleanup of the plants once
they closed for good. At their IPO, they claimed to supply 75% of the US
market for enrichment services and 40% of the world market. Assets
totaled over $3 billion.
USEC worked great as a commercial business “flipping warheads”
until the Russians decided they had sold enough of their highly enriched
uranium. President
Obama terminated the “Megatons to Megawatts” program by executive
order in 2015. The US and Russia tried to cut a deal to take over
commercial sales of Russian plutonium, but a lack of commercial interest in
reactor fuel using plutonium was probably a factor – the extra security
required is not worth the hassle for power reactor operators. Besides,
the US government already has 33 tons of surplus weapon-grade Pu-239 it planned
on burying at Yucca Mountain in Nevada.
So without a stream of Russian uranium to sell and two obsolete
enrichment facilities, USEC decided it needed to build a new
centrifuge plant of its own. It had the infrastructure and
experience required already for shipping and handling so there were some
savings to be had plus access to US government technology.
The Nuclear Renaissance was flowering and with new plants, a big increase in
enrichment services would be needed. Other players jumped into the US
market with the announced construction of several new plants. As was discussed
in our earlier
article in 2009, USEC applied for a loan guarantee for construction of
the new centrifuge plant. Its application was repeatedly denied while a $1.2
billion loan guarantee for a corporation wholly owned by the French government
for a plant in Idaho was approved. A Dutch/UK/German company started
construction on a plant in Louisiana with no guarantee from the US government
at all! USEC had to show signed contracts for the output before loan
approval. If only Solyndra had had to meet that condition for its $535
million government loan.
Even more suspicious was that the “safety” of the USEC centrifuge
design was questioned by the US government with resulting project delays.
What struck one as funny about this decision was that the reasons for the
rejection were reported as secret in the industry press at the time.
Ultimately, this was dismissed as theUS Nuclear
Regulatory Commission concluded no nuclear safety issues. Of course,
an actual centrifuge design is considered a secret for proliferation concerns,
like the ones that A. Q. Khan stole from the Dutch for
Pakistan. A small demonstration plant using the USEC design is now
completing a three year test run, so some level of scale model approval must
have occurred. In the meantime, the market
for SWUs has collapsed with the price per SWU falling from $140 in
2011 to less than $50 today.
USEC went bankrupt in 2012, although it has reorganized itself and
emerged a shadow of its former self under the name of Centrus Energy.
Its principal business is as a sales agent for TENEX, the Russian
enrichment concern. But even that is limited by a 2008 law restricting
Russian imports of enrichment services. A perusal of the latest
SEC 10-K filing for 2016 suggests Centrus may be worth more dead than
alive, what with net loss carry-forwards exceeding their assets and non-trivial
unfunded pension liabilities. The market value of their stock bottomed
out at about $9,000,000 but is at this writing showing at $32 million.
So where are the claims? Since it went public for about $3
billion in 1998 and is now worth maybe $30 million, somebody has taken a
serious haircut. Toshiba Corporation and Babcock & Wilcox Company
bought in for $200 million, for example. Assets went from $3 billion in 1998
to $716
million on a net operating loss of $67 million at the end of 2016.
Today its core business is as agent for the Russian enrichment company
TENEX. USEC once served 40% of the world market from its own production –
today it handles 4% of the world market simply as agent for SWUs from
TENEX. Employment went from 4,400 in 1998 to 338 today.
That haircut can be traced, in large part, to US government
decisions which oft times made little or no sense to an outside observer.
First, USEC has been denied federal loan guarantees that were granted to
agencies of foreign governments in direct competition. Second, their
technology was delayed in “nuclear safety” evaluations that were considered
secret. Granted, “Megatons to Megawatts” gravy train had to come to an
end someday and was formally ended by Obama by executive order. It looks to me
that the USEC was deliberately killed by the Obama Administration.
Chants of “Lock Her Up” would set a very risky precedent for
criminal prosecution of losing presidential candidates as would throwing
outgoing administration appointees in jail. But going the O.J. Simpson
route of civil cases by private citizens stripping ill-gotten gains from bad
actors in government could a meaningful deterrent to future wrong doing.
The shareholders of USEC could band together to look deeper into what role the
people in the Obama Administration misused their power to affect the
evaporation of their capital and the ruination of USEC. The Clinton
Foundation has deep pockets, deep enough to motivate most lawyers in private
practice. Perhaps the civil courts can affect justice faster than the
Congress or federal prosecutors.
Joseph Somsel is a 45 year veteran of the commercial
nuclear power industry. He has no financial interest in the subjects of
this article.
