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Snafu: Situation Normal at DOE…

Private_Snafu_1 …but all fouled up at USEC, the company that enriches a lot of the uranium in the United States. The Department of Energy has turned down USEC’s loan guarantee application, making it difficult-to-impossible, says USEC, for it to acquire funding to finish its American Centrifuge project. This has led to a pair of dueling press releases that are fascinatingly disjunctive. Let’s look at USEC first:

“We are shocked and disappointed by DOE’s decision. The American Centrifuge met the original intent of the loan guarantee program in that it would have used an innovative, but proven, technology, reduced greenhouse gas emissions and created thousands of  immediate jobs across the United States.

The American Centrifuge is not a new idea. It was first ideated by the Department of Energy in the 1970s as a next generation enrichment facility and abandoned after a successful test in the 80s. USEC, which spun out of DOE as a private company, reactivated the project and, in its words, improved the original design using “modern materials, advanced computer-aided design, digital controls and state-of-the-art manufacturing processes.” You can read more about the project here.

And now, nothing. USEC said it will have to cease work on the facility, though it is close to finished. All fouled up.


But is it? From DOE’s perspective, it’s situation normal. There’s no reason for USEC to be shocked and disappointed:

The Department of Energy announced today that it will further expand and accelerate cleanup efforts of cold-war era contamination at the Portsmouth site in Piketon, Ohio – an investment worth about $150 to $200 million per year for the next four years that is expected to create 800 to 1000 new jobs. 

Well, that’s something. Here’s DOE Secretary Steven Chu on the centrifuge itself:

“While we believe USEC needs time to develop its technology and demonstrate that it can be deployed at a commercial scale, we’re moving forward with other investments that will create good, high-paying jobs in the community. USEC will have another chance to resubmit their application if they can overcome the technical and financial hurdles, but in the meantime we’ll put more people to work in the environmental cleanup effort.” 

And there’s more. Here’s Chu again:

Therefore, the Department is offering up to $45 million over the next 18 months to support ongoing ACP research and development activities.  Should USEC accept this offer, it would allow them to continue operations, maintenance, and research activities at Piketon and Oak Ridge, and give USEC additional time to strengthen the technical and financial aspects of the application should USEC decide to resubmit it.

“Should USEC accept this offer…” That sounds like a recognition that USEC might well not accept the offer.


Back to USEC:

“With DOE’s decision, we are now forced to initiate steps to demobilize the project. We deeply regret the impact this decision will have on all those affected, but as we have stated in the past, a DOE loan guarantee was the path forward to completing financing for the project.

That’s USEC’s President, John Welch. Here’s some more from him:

Instead of creating thousands of jobs across the country, we are faced with losing them. Instead of reducing our dependence on foreign sources of energy, we are now increasing it. President Obama promised to support the loan guarantee for the American Centrifuge Plant while he campaigned in Ohio. We are disappointed that campaign commitment has not been met.’

Disappointed – and shocked – and more than a little upset. Hard words. You would think DOE killed the project outright.

So does USEC have to mothball the project? There is money for it, for more research anyway, though clearly USEC thinks it is ready to move forward now. Equally clearly, DOE does not.

It’s a bit of a snafu.

Read through the material and see what you think. You would almost think DOE and USEC haven’t said two words to each other in years and still can’t directly communicate. That’s far from the truth.

(In fairness, here’s DOE’s fact sheet called “Job Creation in Piketon, Ohio,” the home of the centrifuge site – this was posted today. It seems as though DOE really doesn’t want to catch flak from USEC over potential job losses.)

Snafu, the word, emerged during World War II as an acronym for the phrase we’ve used here, though we bowderlized it for NNN’s family trade.

Speaking of World War II, Private Snafu is a cartoon character produced by Warner Bros. and created by Theodore Geisel (a.k.a. Dr. Seuss) but only seen by soldiers. Private Snafu’s goal was didactic, to show in amusing ways how hapless young soldiers could mess things up. For example, one of the entries is based on the idea, Loose Lips Sink Ships.

With no children present, the cartoons were a bit bawdier and with bluer language than common at the time, making them unusual cultural artifacts. You can find episodes at You Tube.


Iran has ultracentrifuges. Maybe we can import enriched uranium from Iran.
TheDash said…
Kind of hard to argue that spending $1 billion on a few hundred low-paying environmental cleanup jobs remotely compares to losing a few thousand high-paying nuclear manufacturing jobs b/c DOE was too afraid to back a $2 billion loan which would have to be paid back. The untold story here is what long-term effect this decision will have on nuclear manufacturers and the nuclear renaissance in general.

Has this Administration done anything supportive of nuclear energy yet?

Snafu, indeed.
Anonymous said…
I'm sending this as an anonymous post, but I'll identify myself: E. Michael Blake.

I have a few questions, some at least partly rhetorical:

Aren't there two other enrichment projects in the license application stage?

Was there expected to be a shortage of enrichment capacity, or of the availability of LEU, any time soon?

Doesn't USEC have a history of (at least) questionable corporate oversight?

Is a loan guarantee an endorsement by the federal government of its faith in an applicant, based on a rigorous screening process, or an entitlement to any large entity involved in nuclear energy?
Joffan said…
Michael, your point about the two other enrichment projects makes me wonder whether there will be any loan guarantees issued for enrichment, since LES aka Urenco went ahead with its construction project without this stimulus. Perhaps USEC has simply taken too long to get its reinvention of the centrifuge completed and now enrichment is no longer an industry that needs the support of federal loan guarantees.

Or perhaps as I have seen suggested elsewhere, the government is saving the guarantee for the laser enrichment process, although such a decision might struggle to be consistent with their reasons for demurral on the USEC project.
Bill said…
"... we bowderlized it ..."

sp: bowdlerized
Pete said…
I sure hope the Russian HEU source keeps providing the US with fuel-grade uranium. That's a bottomless well, right?
Anonymous said…
What is an interesting "coincidence" is that Obama's DOE approved a loan guarantee for a boondoggle solar project in Chicago (imagine that!) and refused a loan guarantee for a nuclear project in Ohio. The waste of money in Chicago is a 10 MW nameplate plant with a price tag of about $6000/installed kilowatt. Any guesses on capacity factor for a solar plant in Chicago? I think if they get 20% they'll be lucky. That makes the 10 MW effectively 2 MW.

I just hope people remember this kind of stuff when it comes time to vote. But I have my doubts they will. Takes too much effort.
Joffan said…
30 July Anon: People remember events, and non-events, selectively. Like, for example, you may not remember the complete non-issuance of any energy loan guarantees at all by Bush's DOE. I may be dubious about their power contributions but I think the solar project will pay its loan back - which was not so certain for USEC - and at least there is some sign of life at DOE.
Anonymous said…
Joffan, you are wrong, wrong, wrong. These are NOT loans. These are loan guarantees. They are not the same thing.

USEC would build a facility to produce a product for existing power plants. The market is there. It is certain. The solar project is to provide solar energy in a place where the weather is usually pretty gloomy, and there is this natural phenomenon called "night" that also tends to have an impact. Now, of those, which one poses less risk, a proven technology providing a product for an existing market, or a project of unproven economic feasibility in a region of the country ill-suited to it's needs?

What everyone refuses to see is the elephant in the living room. Obama's bureaucrats turn down a nuclear project in Ohio, but give the nod to a solar project in Chicago. What national political figure do we know who is from Chicago? Does that same political figure depend on votes from special-interest environmentalist groups for a significant share of his political support? Can you connect the dots?
Joffan said…
You need to work on your reading skils, Anon. Which part of my comment is wrong? I talk about loan guarantees - which only incur taxpayer cost if the loan is defaulted.

I know the limitations of solar. I also know that the loan guarantee process itself will fail unless something gets the first guarantee. Looking around the web, I cannot actually see any report of the particular (relatively small) loan guarantee that you are getting so upset about - do you have a link? Is it a real issued loan guarantee or just the product of someone's overheated indignation?
Brian Mays said…
At the risk of adding fuel to this fire, I'll point out that I think Anonymous is talking about the plan by Exelon and SunPower to build the "nation's largest urban solar power plant" on the South Side of Chicago. This is a $60 million project to build 10 MW photovoltaic array.
Joffan said…
Got it, here...
I see no sign that a DOE loan guarantee has been issued for this plant.
Anonymous said…
Your post was at best confusing. You blamed Bush for not issuing any loan guarantees, and in a following sentence talked about a solar project paying back it's loan and USEC not doing so, and somehow that inferred life at DOE, as if DOE were issuing the loan and taking the risk. They aren't. The company is on the hook for the money they borrow. USEC has laid out a plan which keeps a billion dollars of inventory off to the side as collateral. The DOE's objections to the USEC plan are baseless, and everyone with any knowledge of the situation knows it. This is political through and through. Obama is a liberal's liberal Democrat, and they owe allegiance to special-interest environmental groups.

As far as the Chicago solar plant goes, well, I think their chances are pretty good even if nothing is signed, yet. And it isn't because of financial assets or potential, it's because of political connections. I mean, guess where the current occupant of the WH claims to be from? We know Piketon isn't getting a loan guarantee, that's for certain, as of this writing. The Chicago solar project is still in the running. I'd guess Obama owes more to them than he does Piketon.
Joffan said…
Anon. When in a hole, you should stop digging.

Issuing a loan guarantee does indeed assume risk. Loan default would mean that the DOE would have to pay off the balance to the lender. The negative DOE financial assessment, while possibly harsh, was certainly not "baseless".

And give the synthetic outrage a rest on the Chicago solar plant. The loan guarantee is not approved. Compain about it if it happens and not before.
Anonymous said…
The point is that it is not an assumption of debt obligation at the time of the agreement. No payments are committed up front. Only if there is a default is there is an obligation to assume responsibility, but you are not without recourse even then. You likely have access to whatever assets you are assuming the debt obligation for, just as if you cosigned a loan. I know. I did that. I made one payment on the asset whose debt I assumed and then sold it and came out with a substantial profit because of the equity. So while you assume liability IF the original debtor defaults, you aren't necessarily stuck with a pig in a poke. Which is why a loan guarantor is not necessarily in a bad position, if they choose their "investment" wisely.

I just get tired of the false "outrage" on this blog about so-called "subsidies" to the nuclear industry, and this loan guarantee program is another example that is misused to illustrate that (although as another post showed, the so-called "renewables" have a much larger share of the guarantee dollars and few seem to notice or express "outrage" about those). This isn't a subsidy. It isn't a bailout. It isn't even a loan in the classic sense.

And no, I won't give the Chicago Project a "rest", because they are still in the running, like AREVA, whereas the Piketon loan guarantee, something Obama promised during the campaign to support, is not (as of this writing). IOW, Obama lied. He said he'd support the project and it's loan guarantee application, then his DOE stabbed us in the back. If for no other reason than that, I won't let it go unchallenged.

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