THE WEEKLY STANDARD received the following letter from Paul Jacobson, Vice President of Corporate Communications at USEC Inc.:
U.S. Nuclear Leadership at Risk
Mr. Henry Sokolski’s January 31 blog post “National Security and Crony Nuclear Capitalism” contains numerous errors, misleading statements and unfounded conclusions. As spokesman for USEC Inc., the nation’s only domestic uranium enrichment provider, I wish to set the record straight.
Let’s start in Piketon, Ohio, not Pinkerton, as Mr. Sokolski twice incorrectly asserts, where construction of the American Centrifuge Plant (ACP) will create up to 4,000 jobs in Ohio. Thousands more high-tech manufacturing jobs will be created in Tennessee, Alabama, Indiana, Pennsylvania and several other states, as USEC and its industry partners build more than 11,500 state of-the-art centrifuges, the most productive uranium enrichment centrifuge technology the world has ever seen.
The centrifuge machines are based on technology developed during a multi-decade DOE demonstration program that operated 1,300 centrifuges for 10 million hours. USEC has improved the machine technology with digital control systems, upgraded materials, and enhanced design. Since 2007, we have operated centrifuges for nearly one million hours with a high degree of reliability in a demonstration configuration in Piketon.
Mr. Sokolski dismisses these accomplishments and uses inflammatory language to describe an event this past summer at our demonstration facility where plant support systems failed, damaging some machines. First, the commercial plant’s design includes redundant support systems that are designed to prevent such incidents. Second, there was no release of any nuclear material. Third, USEC is working with the Nuclear Regulatory Commission and the Department of Energy to implement the lessons learned from the incident into our operation of the demonstration facility. The very purpose of a demonstration facility is to identify issues and address them before commercial operations begin.
Mr. Sokolski is also off base when arguing that national security needs do not merit a domestic enrichment technology.
In a notice of intent posted January 20th the Department of Energy said “For defense and DOE programmatic purposes, DOE needs LEU (low enriched uranium) that is unencumbered by peaceful use assurances” (e.g., made in the USA using U.S. technology) “and thus can be used for defense purposes” and that “USEC is uniquely qualified” for such needs.
Secretary of Energy Chu, former national security advisor General Jim Jones and former science advisor to two presidents and Lockheed Martin CEO Norman Augustine have written recently, either in letters to Congress (Secretary Chu) or in nationally published opinion pieces (Jones and Augustine), that an indigenous source of enrichment capacity is vital to U.S. national security.
On the financial side, in addition to investing $2 billion of its own private capital in the ACP project to date, USEC has attracted major investments from nuclear industry leaders Toshiba Corporation and The Babcock and Wilcox Company. And despite Mr. Sokolski’s assertions, the $2 billion loan guarantee is hardly a bailout. If the loan guarantee is provided, USEC would pay the money back with interest plus a license fee that could reach $100 million and an up-front fee to pay the budget cost of the guarantee. Here again Mr. Sokolski completely misses the point as the issue before Congress is not the $2 billion loan guarantee.
As was announced last October, the Department of Energy (DOE) has chosen to seek a cooperative Research, Development, and Demonstration program as the next step to advance this important technology. USEC’s application for a loan guarantee will remain pending during implementation of this program. The DOE proposed cost-shared demonstration program will involve manufacturing and operating a full cascade of 120 centrifuges in a configuration that will be replicated 96 times in the final commercial plant. In his recent letter to Congress, Secretary Chu said, “I continue to believe ACP offers an innovative technology approach to uranium enrichment that offers both national security and economic benefits. . . Because the project has strong commercial potential and because its success would strengthen and protect America’s national security interests, we want to continue working with Congress to secure approval for this research effort.”
Today, this country faces a stark choice about its global nuclear leadership. Without the American Centrifuge the U.S., for the first time since the dawn of the nuclear age, will lack a U.S.-controlled source of enriched uranium. That absence will undermine our energy security, threaten our national security and erode our standing in global nonproliferation initiatives.
WEEKLY STANDARD contributor Henry Sokolski responds:
Bailing Out USEC Risks Our Government's Credibility
USEC's Mr. Jacobson gets one thing right: My original piece, "National Secuirty and Crony Nuclear Capitalism" had a typo that resulted in a misspelling of Piketon, the location of USEC's proposed new uranrium centrifuge enrichment plant. Although this was corrected immediately, Mr. Jacobson leads with this and gives it considerable play. Given the balance of his effort to "set the record straight" it is easy to see why.
Mr. Jacobson's main contention is that I was wrong to refute USEC's key national security arguments for securing more government subsidies for its centrifuge uranium enrichment project. What's awkward here is that it was not I who made the point-by-point refutation, but Department of Energy analysts in a detailed, official internal memo that my piece cited and provided a hyperlink to.
For some reason, Mr. Jacobson ignores this memo's existence and instead tries to prove his case by quoting the Department of Energy's public statements and those of Secretary of Energy, Dr. Chu. There's no denying that they have publicly parroted the national security talking points that USEC makes. What's worrisome and what should be a matter of Congressional investigation, though, is that given the internal Department of Energy memo I cite, each of their statements appears to be dead wrong.
Finally, although a few hundred permanent (and many more short-term construction) jobs might be created if the USEC project sorts out its technical glitches (which include a recent "system failure" that prompted the destruction of several centrifuges), getting this project completed and profitable enough to avoid going bust is super unlikely. That's why USEC cannot get any private investors to cover the project's remaining costs and why it desperately needs a $2 billion federal loan guarantee.
As for the proposed recipient paying the loan back, we've heard this before: It was called Solyndra, it was supposed to be a major money maker, and it too had Department of Energy's and Secretary Chu's public backing. The U.S. taxpayers are now being forced to bailout those who invested in it. As I noted in my piece, on this score, once is more than enough.