U.S. denies loan guarantee for Ohio fuel-production plant

The Energy Department has asked USEC Inc. to withdraw its loan-guarantee application for construction of a plant to produce uranium fuel for nuclear reactors.

The Bethesda, Md.-based company was told last night to withdraw its $2 billion loan-guarantee request, as it is "not technically or financially ready to complete," Matt Rogers, a DOE senior adviser, said in a teleconference today. Congress provided $2 billion of the more than $40 billion in loan guarantee authority created in the 2005 energy bill for front-end nuclear facilities such as the one proposed by USEC.

USEC applied last year for loan guarantee authority to help it complete construction of the American Centrifuge Plant in Piketon, Ohio. The plant would be the only fuel-fabrication plant that uses U.S. gas centrifuge technology.

The French company, Areva, also submitted a loan guarantee application for $2 billion to build a gas-centrifuge facility near Idaho Falls, Idaho, based on technology developed by Areva and Urenco, a United Kingdom-based company. That application is still pending, DOE said. Urenco, through its U.S. subsidiary, Louisiana Energy Services, is building an enrichment plant in New Mexico.

DOE could not verify that USEC had sufficient financial resources to finish building the facility and was not convinced that the technology was commercially ready, Rogers said.


Rogers said he advised USEC to withdraw the application so there would be no prejudice if the company submits another application in 12 to 18 months, which DOE encouraged USEC to do. "We are convinced the technology has promise," Rogers said.

"We are cautiously optimistic that these technical designs can be resolved in the next 15 to 18 months," Rogers said. If there is more confidence in the technology and there are better data, it may help the financial outlook, which currently is increasing faster than the company can cover, he said.

DOE is providing $45 million to USEC through nuclear energy research and development and nuclear nonproliferation funding, to help continue the research, Rogers said.

USEC is "shocked and disappointed" by the decision and plans to "demobilize" the project, John Welch, USEC's president and CEO, said in a statement. The company only learned today about the $45 million R&D cash "thirdhand" and had no comment on it, said Elizabeth Stuckle, a USEC spokeswoman said.

"Our application has been pending for a year, and we have addressed any concerns the department raised," Welch said. He said USEC tested the technology for about 235,000 machine hours, invested $1.5 billion and offered an additional $1 billion.

"It is unclear how DOE expects to find innovative technologies that assume zero risk, but the American Centrifuge clearly meets the energy security and climate change goals of the Obama administration," Welch said.

The project created more than 5,000 new jobs and was expected to create more than 8,000 in total as manufacturers added new employees across the United States, USEC said. There are about 750 people employed directly at the American Centrifuge plant.

The USEC loan guarantee is the latest wrinkle in the much-criticized loan guarantee program. Congress have been critical of the time it has taken DOE to distribute loan guarantee authority, and the House and Senate energy committees have passed legislation to create a "Clean Energy Deployment Administration" to take over the DOE program.

Separately, DOE announced it will provide the equivalent of $150 million to $200 million per year for the next four years to clean up legacy contamination at the Portsmouth site in Piketon. The funds will be provided through DOE's excess uranium inventory. The $150 million to $200 million, along with $118 million provided by the economic stimulus law, should provide 800 to 1,000 jobs, DOE said.

Hill reaction

DOE's loan-guarantee decision drew quick criticism from Rep. Jean Schmidt (R-Ohio), whose district includes the proposed USEC plant.

"It's death. It cannot wait another 18 months," said Schmidt's chief of staff, Barry Bennett.

"It is interesting that Iran has the technology and it seems to be working fine, but the Department of Energy can't find a way to do it here in the United States," Bennett said. Schmidt will be sending President Obama a letter urging him to reverse the decision, he said.

In a floor discussion, when the House took up the Energy and Water Development 2010 Appropriations bill last week, Schmidt specifically pointed out the USEC application as an example of how slowly the loan guarantee program is progressing.

"The Department of Energy must finish its review and issue a conditional commitment with reasonable terms and conditions by the end of this month. If it doesn't, we can expect to see layoffs beginning in early August," Schmidt said.

Rep. Ed Pastor (D-Ariz.), vice chairman of the Energy and Water Development Subcommittee, promised to work with Schmidt to make sure the program is working efficiently and fairly. "I will be happy to work with everyone to ensure the program is run efficiently and effectively. The management and effectiveness of this program is a priority of the subcommittee. We must ensure that it is fair to all applicants," he said.

Sen. Sherrod Brown (D-Ohio) said it is positive that DOE is providing the extra funding for the cleanup, providing immediate jobs, and that DOE is willing to continue to help USEC with its application.

"For too long, the Piketon community was overlooked by previous administrations in Washington," Brown said in a statement. "The Department of Energy's willingness to work with USEC on technical issues is a positive step."

Senior reporter Ben Geman contributed.

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