Politics stands in the way of nuclear plant's future
By Gregory Korte, USA TODAY
IKETON, Ohio – Three dozen 43-foot-tall centrifuges swirl quietly in a cavernous building in southern Ohio, ready to turn uranium hexafluoride into the enriched fuel that can power America's nuclear power plants.
By Jay LaPrete, for USA TODAY
Geoffrey Sea, owner of 88 acres adjacent to the USEC project, walks next to the fence that separates his property from the USEC property on Friday with his dog Mweowa.
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They stand like stacks of poker chips on a table — the ante for what could be a $2 billion national gamble on nuclear energy.
Energy company USEC wants federal loan guarantees to allow it to build 11,000 centrifuges here, which would spin out enough fuel to power about three dozen nuclear power plants non-stop.
STORY: Nuclear centrifuge project to move ahead
STORY: USA TODAY review uncovers support for energy loans
But while plenty of politicians whose districts could benefit from the project support it, the Piketon plant remains stymied by a political standoff. Many Republicans who back the project — called the American Centrifuge Project — have savaged the Obama administration loan program that would pay for it, while the Obama Energy Department, burned by Republican criticism, has voiced tentative support for the plan but won't authorize federal money for it without congressional approval.
For almost a year, congressional Republicans have criticized the administration's $535 million loan guarantee to now-bankrupt solar panel maker Solyndra. The administration, they say, is unfairly picking "winners and losers" in energy.
Both sides say they want the project to move forward. Both support short-term "bridge" funding to keep the project going until the financing can be worked out. Both say the other side has to make the first move.
The stakes are high: It's an election year, and Ohio is a swing state. USEC estimates the project at its peak will generate 3,158 jobs in Ohio, and 4,284 elsewhere. Pike County, home to the centrifuges, has a 13% unemployment rate — the highest in Ohio. The median household income is about $40,000. The average job at USEC pays $77,316.
Centrifuge parts are stacked up in Piketon. "It's as shovel-ready as they come," says spokeswoman Angela Duduit.
Indeed, the project has enjoyed bipartisan support. A USA TODAY review of DOE records shows that no fewer than 46 members of Congress — 32 Republicans and 14 Democrats — have pressured the Obama administration to approve the loan guarantee for USEC. "Quick action is paramount," said one bipartisan letter. "It is imperative that this application move forward now," said another.
The congressional support comes from states such as Ohio, Pennsylvania, Tennessee, Kentucky, West Virginia, Missouri, Alabama, Indiana, Maryland, North Carolina and South Carolina— an almost exact overlay of the states that would benefit from the 7,442 jobs the company says would be created.
USEC executives have also funneled another $461,000 through its political action committee to members of Congress from both parties. Since 2005, when Congress first authorized the Department of Energy's loan guarantee program, USEC has invested $15.6 million on lobbying, congressional records show.
Intense security
USEC's Piketon campus, situated in a lush valley at the foothills of the Appalachian Mountains, is so vast that its perimeter security road is 7 miles long. The plant's operators — three-fourths of whom are recruited right offU.S. Navy nuclear warships — take golf carts or bicycles to move around the plant.
The centrifuges are surrounded by a barbed-wire fence — which sits inside an already secure building. Razor wire hangs like Christmas garland from the rafters.
What's remarkable about the American Centrifuge Project, USEC says, is that the process uses only 5% of the electricity of the old gaseous diffusion process formerly used at the site, and which USEC still uses at its sister plant in Paducah, Ky. That alone can reduce greenhouse gas emissions by 10 million tons a year, USEC says.
But the project has had setbacks.
Last June 11, a shift supervisor overseeing a test "cascade" of a few dozen centrifuges routinely started a water pump. That action tripped a circuit breaker, which shut down a motor control center. A backup generator failed to start promptly, and USEC — not immediately realizing the severity of the incident — didn't make a formal incident report to federal regulators until three weeks later.
That account of events was contained in a Nuclear Regulatory Commission report released April 12. The report found five violations, which it described as "less serious" issues with "relatively inappreciable potential safety or security consequences."
The immediate cost to USEC was $9 million, the cost of six centrifuges that had to be scrapped when they crashed during the power outage. The remaining centrifuges have been operating without uranium ever since.
USEC, which is spending $15 million a month just to keep the test project running, lost $540 million overall last year. Its stock price closed Thursday at 83 cents a share and near an all-time low, down from a high of $23.91 five years ago.
That means a company worth less than $120 million is seeking $2 billion in financing.
DOE has kept the door open for the loan guarantee, but has questioned the company's capacity to complete the project and repay the loan. It is sensitive to the criticism brought on by the debacle with Solyndra, a California solar power maker that received $535 million in loan guarantees before going bankrupt.
The concern is echoed by at least one USEC investor.
Robert Clutterbuck, a Cleveland hedge fund manager who owns part of USEC's debt, said he doesn't doubt the political support. "The bad news is, we believe over the last seven months that it has become abundantly clear that the huge stumbling block to that is the size … or the lack thereof, of USEC," he told company executives in a conference call last month.
The DOE has supported other centrifuges. In 2010, it gave a conditional $2 billion loan guarantee to Areva, a conglomerate whose majority shareholder is the French government, to build centrifuges in Idaho. But that project is temporarily stalled because of a cash situation one executive called "growing pains."
"Basically, we went in with an application that was based on a proven technology that's been in use in Europe for nearly three decades," said Sam Shakir, president of Areva Enrichment Services. "There was no question about the technology, its viability or its economics."
That helped Areva sell $5 billion in preliminary orders for uranium, he said. Still, "The size of the market is large enough for multiple suppliers to be playing in."
But to critics, the USEC project doesn't make economic sense no matter who's running it.
Autumn Hanna of the Taxpayers for Common Sense calls it "another Solyndra" that "keeps getting handouts from the Hill."
Peter Bradford, a former member of the Nuclear Regulatory Commission who now teaches energy policy at Vermont Law School, said the project is unnecessary and expensive.
"It's not as though the world's uranium market is in scarcity, and it's not as though we're building new nuclear units at such pace that there's any conceivable possibility of a shortage," he said. He estimates global demand for uranium is down 5% to 15% since the March 2011 tsunami and partial meltdown at the nuclear plant in Fukushima, Japan.
USEC executives say the Japanese incident may depress uranium demand for two to four years. "That's been the trigger for a lot of weak-kneed people in Europe — and Japan, frankly — to say we don't need nuclear," Chairman James Mellor told shareholders at USEC's annual meeting Thursday.
But with 60 nuclear plants under construction worldwide, the long term outlook is positive, he said. "People aren't going to be able to maintain their lifestyles — their two TVs, their microwave ovens — without nuclear energy."
By Jay LaPrete for USA TODAY
Jeff Albrecht, owner of a Holiday Inn, invested $3 million to upgrade his hotel after President Obama's promise to support the USEC project.
The company controls 25% of the $8 billion global enriched uranium market, through its Paducah plant and an exclusive arrangement with DOE to enrich weapons-grade Russian uranium through the "Megatons to Megawatts" program.
Indeed, the Bethesda, Md.-based company and the federal government enjoy a close working relationship: USEC was once a part of the DOE until Congress privatized it in 1998, and the centrifuge technology is owned by the DOE and leased to USEC.
Rising hopes
Jeff Albrecht got the call at 5 a.m.: Sen. Barack Obamawas hungry. The Ramada didn't offer a hot breakfast, but Albrecht, the owner of the Portsmouth, Ohio, hotel where Obama was staying on a campaign swing through southern Ohio, whipped up something special.
"He had six eggs, a big, big, huge helping of home-fried potatoes, six strips of bacon, a bowl of oatmeal and two slices of wheat toast," Albrecht recalled. So he took the opportunity to bend the senator's ear.
"He looked me in the eye and said, 'I'm familiar with that project, and I support it,' " Albrecht recounted.
After Obama was elected president, Albrecht obtained a $3.5 million bank loan to renovate his hotel and convert it to a Holiday Inn.
Obama's 2013 budget proposes $150 million for the project, but Albrecht thinks that's not enough. "We don't want anymore welfare. We don't want unemployment subsidies. We want jobs."
Stopgap funding
With the loan guarantee in limbo, USEC has kept the test project running with stopgap funding. Last year, with support from key members of Congress, the DOE agreed to take title of the depleted uranium — a complicated transaction that freed up $44 million for the company.
USEC says it can't continue to keep the project operating after May 31 without more government money. "We've pulled rabbits out of the hat, but the hat's only so deep and there are only so many rabbits," said Paul Jacobson, a USEC vice president.
To keep the company afloat while it considers the loan guarantee, the Obama administration supports another $256 million in research grants over two years. That would help USEC move up to 120 centrifuges, a large enough test cascade that the company hopes will allow it to get either the loan guarantee or private financing.
The Democratic-controlled Senate approved that funding last year, but the Republican House rejected it. Obama has proposed $150 million in his 2013 budget, but that money won't be available until October. USEC says it will have to shut down the project by June without more money.
Energy Secretary Steven Chu has all the authority he needs to make that immediate grant, Republicans say. Chu has said he wants a strong signal from Congress before releasing the money.
Republican House Speaker John Boehner, who as a member of the Ohio delegation has personally pleaded with Obama to green-light the project, hasn't given that signal. "The speaker believes the president should keep his word to the people of Ohio," said Boehner spokesman Michael Steel.
The fallout from Solyndra has some in Congress doing some soul searching about their involvement in those decisions.
"A cloud, a big black cloud came over after Solyndra," said Rep. Mike Simpson, R-Idaho, at a recent congressional hearing. He admitted that he put "undue influence" on DOE to approve a $2 billion conditional loan guarantee for Areva and said members of the Ohio delegation were doing the same thing.
The Solyndra question has put some USEC supporters in a pickle. Facing congressional scrutiny over Solyndra, Chu pointed out that many in Congress had supported loan guarantees for projects benefiting their districts.
Among them is Rep. Scott DesJarlais, R-Tenn., whose district abuts USEC's Oak Ridge operations. DesJarlais had written Chu to support the USEC loan guarantees but has now withdrawn that support, saying USEC should seek alternative funding.
USEC's biggest champion in Congress, Rep. Jean Schmidt, R-Ohio, was defeated in a primary election last month. Her likely successor in the heavily Republican district, Brad Wenstrup, hasn't made up his mind. "Certainly there's short-term value, but he wants to make sure there's long-term value as well," said Matt Dole, a Wenstrup consultant.
Nuclear centrifuge project to move ahead
WASHINGTON – By Gregory Korte, USA TODAY
A giant nuclear centrifuge project in southern Ohio will move forward despite a setback in Congress this week, uranium enrichment company USEC said Friday.
By Nicolas Asfouri, AFP/Getty Images
Energy Secretary Steven Chu has said he wants a signal that he has the authority to decide on a grant for the American Centrifuge Project.
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Congress' failure to act on a long-term transportation bill means that a $106 million research and development grant for the American Centrifuge Project remains in limbo. That provision was included in the Senate version, but it faces some resistance in the House, which has stricter rules on "earmarks."
The grant is a stopgap measure while the company seeks $2 billion in Department of Energy loan guarantees to expand the project, which it says will support 2,000 jobs in Ohio and a half-dozen other states.
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Other loan guarantees have come under congressional scrutiny after the bankruptcy of solar panel maker Solyndra despite $535 million in federal loan backing. USA TODAY reported this month that some Republican critics of the Solyndra project had urged "immediate action" on USEC's loan guarantee even after Solyndra's failure became known.
USEC had told investors and analysts that it needed federal action on the grant by March 31, or it would be forced to start winding down operations.
The project, once completed, would provide the only domestically owned source of enriched uranium for commercial and military use when USEC's Paducah, Ky., plant — which uses 60-year-old gaseous diffusion technology — closes.
In a regulatory filing this month, the company said it had renegotiated the terms of its credit, allowing it to borrow $15 million a month to operate the project through May. In June, that drops to $1 million.
That's important because the short-term transportation extension, signed by the president today, runs for 90 days— meaning Congress won't have to pass a final bill until the end of June.
"Federal funding needs to be in place in the very near term," USEC CEO John K. Welch said in a statement. Still, he said the government talks have made enough progress for its board to justify "continued limited spending" on the project.
The project is in the district of Rep. Jean Schmidt, R-Ohio, who was defeated in the Republican primary this month. She and other members of a bipartisan, multistate delegation of project supporters are pushing Energy Secretary Steven Chu to award the grant out of existing funds.
Chu has told lawmakers he wants a clear signal from Congress that he has the authority.
"We're continuing to work with Congress, and we're hopeful that the House picks up the language in the Senate transportation bill," said DOE spokeswoman Jen Stutsman. "We are, beyond that, looking at whatever potential options are available."
President Obama supported the project when he campaigned in southern Ohio in 2008 and has included an additional $150 million in research funding in his 2013 budget. Even if approved by Congress, that funding won't be available at least until the new fiscal year starts Oct. 1. All told, $300 million in grant funding would allow USEC to update its loan guarantee application in 2013, Welch said.
"The administration has been incredibly clear from the secretary up to the White House," Stutsman said. "We've done everything that we can to move this project forward. We are trying to take steps to make sure the U.S. has a domestic enrichment capability that is necessary for national security while protecting taxpayer dollars."
Mystery super PAC may have violated election law
By Gregory Korte and Fredreka Schouten, USA TODAY
WASHINGTON – Four days before Ohio's primary election, Democratic voters in the 2nd Congressional District received a blitz of automated telephone calls supporting William R. Smith, a candidate who didn't campaign, raised no money and gave no media interviews before the election.
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On election night, Smith won by 59 votes against a well-known, better funded and harder working candidate who had the endorsement of major Democratic groups.
So who gets credit for helping Smith secure the Democratic nomination to Congress? No one knows.
The "Victory Ohio Super PAC" claimed credit for the "robocalls," but it is not registered with the Federal Election Commission and hasn't disclosed any contributions or spending to federal regulators.
Campaign-finance experts say the group probably has violated federal election law. Under federal rules, groups must report last-minute activity to the FEC if they spend more than $1,000 on automated calls, mailings or advertising that directly advocate the election or defeat of a federal candidate. Such spending must be reported within 24 hours.
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"This activity does require disclosure," said Kenneth Gross, a former Federal Election Commission official and a leading campaign-finance lawyer in Washington.
Smith now faces Cincinnati podiatrist and Army Reserve Lt. Col. Brad Wenstrup, who pulled off an upset of his own against four-term Rep. Jean Schmidt.
Wenstrup got a boost from conservative anti-tax groups and a legally registered super PAC, the Campaign for Primary Accountability, which is working to defeat congressional incumbents in several states. The group reported spending $66,836 against Schmidt in the week before the election.
A 61-year-old former postal worker from the small town of Waverly, Smith says he made less than $15,000 last year driving a truck. His reasons for running are a "long complicated story," he said.
His issues: the mistreatment of veterans by the Department of Veterans Affairs, tighter regulation of the mortgage industry, and federal rules on how long truckers can drive before they have to rest. All, he said, are informed by his family's own experiences.
"If you had to produce a prototype for the absolute common man, that's what you get. He drives a truck. He lives with his mother," said Blaine Beekman, a Pike Countycommissioner who helped circulate Smith's nominating petitions. "People call him the 'mystery candidate.' He's really the impossible candidate."
Victory Ohio "clearly exists somewhere, because it spent a lot of money," Beekman said. But he said he has no idea who it could be. "To be frank with you, there's no one in Pike County that would have the money to do these things. We have the highest unemployment rate in Ohio."
Smith defeated David Krikorian, a three-time candidate who ran with the endorsement of major Democratic groups in the district. Krikorian's campaign spent $64,356, according to the FEC, though he said only about $5,000 of that was for the current election cycle.
Krikorian has a longstanding feud with Schmidt over her support from Turkish causes. Krikorian, an ethnic Armenian, has accused Schmidt of denying the Armenian genocide during and after World War I, and their battles escalated into a $6.8 million libel suit by Schmidt still pending in Ohio courts.
Her legal fees — about $500,000 — were paid by Turkish interests, which led to a House Ethics Committee investigation because she failed to disclose the source. The committee ordered her to repay the money but didn't sanction her because the panel concluded she did "not knowingly" violate ethics rules that prevent such gift-giving.
One version of the robocall took aim at Krikorian: "William Smith has an opponent that describes himself as a Reagan conservative. … Please don't make a mistake and embarrass the party. Vote for William Smith, the real Democrat for Congress."
The recorded call ended with the disclosure, "This has been paid for by the Victory Ohio Super PAC." Neither the FEC nor Ohio's Secretary of State have any record of such a group. A call receipient's caller ID system generated a non-working phone number from the Cleveland suburbs.
"Honestly, the more I think about this, the more mysterious it becomes. Something is fishy," said Clermont County Democratic Chairman David Lane.
"Robocalls are pretty cheap, but they did enough of them I have a hard time believing they spent less than $1,000," said Caleb Faux, the director of the Hamilton CountyDemocratic Party who, like Lane, has never met Smith. " Who are they, what is their motivation, where did their money come from?"
Republicans agree. "If a Republican did it, I don't know about it," said Alex Triantafilou, the GOP chairman in Hamilton County. "Somebody should put a stop to it. That kind of thing should not occur in politics. Transparency is crucial. I hope someone fully investigates it."
Paul Ryan, a lawyer with the Campaign Legal Center watchdog group, said the group broke the rules if it spent more than $1,000.
"Ohio voters seemingly had no information about who was trying to influence their election with last-minute robocalls," Ryan said. "Ohio voters deserve that information."
Smith told USA TODAY that he's as surprised as anyone that he won, but he credits the robocalls — and perhaps his prayers. In only his second media interview, he said he doesn't know the source of the help but suspects Republicans who "were looking at my inactivity and my access to no funding" and figured he was less of a threat to the Republican nominee.
"Whatever the source of that is, I'll take it," he said.
