DOE denies USEC loan for uranium enrichment plant

The US Department of Energy has informally denied USEC Inc . a loan guarantee to build an uranium enrichment facility called the American Centrifuge Plant in Piketon Ohio, but has given the company an option to withdraw and resubmit their application at a later date.

“We are shocked and disappointed by DOE’s decision.- The ACP 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 US” says USEC’s President and Chief Executive Officer John K. Welch.

Matt Rogers, a senior advisor to Energy Secretary Steven Chu disagrees. “Primarily the cost of the project has increased significantly since USEC’s initial proposal,” he says. “At this point in time there are not enough available funds to complete the project.”

The proposed Piketon plant would have used thousands of centrifuges in a cascade arrangement to enrichment uranium, a technique that hasn’t been used in the US for decades.

Over the last five years USEC had been working on some small test centrifuges and had been testing a production ready-cascade for the last couple of months. Although the prototype has been running for 235,000 machine hours, the failure of the prototype cascade during its initial test run seems to have given DOE’s review board second thoughts about funding the plant.

USEC was originally formed to buy weapons-grade uranium from Russia in the 1990s and blend it down to be burned in civilian reactors. It also owns the Paducah uranium gas diffusion plant. The ACP was to have replaced Paducah, which is due to close sometime in the next 5-10 years.

USEC gambled heavily to the tune of $1.5 billion in researching and constructing ACP as it supplies more than half the US reactors with fuel, and a quarter of the world market. On top of another $1 billion USEC expected to spend, the project needed more than $2 billion in loan guarantees from DOE to finish the plant.

“It is unclear how DOE expects to find innovative technologies that assume zero risk, but the ACP clearly meets the energy security and climate change goals of the Obama administration,” says Welch.

Rogers says DOE believes USEC should withdraw its application and continue to work on the prototypes for the next 12-18 months before re-submitting its application. As part of this deal, DOE will provide USEC with a detailed review of why their initial application failed. If the company agrees to withdraw, DOE will give USEC $45 million towards R&D.

“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,” he adds.

If USEC does not withdraw their application then DOE’s review board will formally reject the loan later this week, and USEC would not be able to reapply at a later date.

Welch says that USEC has not yet made a decision over what action to take, and has hired outside consultants to evaluate their next move, which may include selling a stake to the French nuclear company Areva, Inc.—which has also applied for a DOE loan guarantee to build an US enrichment plant. The $2 billion Areva plant—scheduled to be built at Idaho Falls—is still going through the licensing procedures and does not expect to start construction until 2011. Another plant in New Mexico by the international group URENCO under the name Louisiana Energy Services is still on target to go operational later this year.

The most immediate impact at USEC will be redundancies. “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.” USEC says that the plant was expected to create more than 8,000 jobs.

Paul Guinnessy