June 11, 2012
Honorable Steven Chu
Secretary of Energy, U.S. Department of Energy
1000 Independence Ave., SW
Washington DC 20585
ON THE FIRST ANNIVERSARY OF THE JUNE 11, 2011,
STOP THE USEC SCANDAL NOW
Today is the first anniversary of the accident at Piketon, Ohio, which caused six USEC centrifuges to crash and one to breach from a simple loss-of-power. Uranium release was averted only because most or all of the centrifuges were not running uranium at the time, but that circumstance itself raises grave questions about the so-called “American Centrifuge” project at Piketon.
Why, after forty years of AC-100 development, and many billions of dollars of U.S. government expense and subsidies, have only 38 centrifuges been manufactured, all of those now written off as a tax loss by USEC? Why did USEC fail to complete its NRC-licensed Lead Cascade demonstration over more than six years since the contractual deadline for completion, and what penalties has DOE imposed for that failure? Why did DOE allow and encourage USEC to obtain a construction and operating license for a full-scale commercial plant before any completion of even a small-scale demonstration project? How can USEC now claim to have completed “one million hours of centrifuge testing” when no uranium was being run for the majority of the testing period? Exactly what was being tested?
And most importantly, why is your Administration proposing to undo the USEC Privatization Act and effectively renationalize this long-failed project without any repeal or amendment of the UPA by the Congress of the United States? In October of 2011, after rejecting USEC's application for a $2 billion loan guarantee for a second time, you proposed a two-year program of “Research, Development, and Demonstration (RD&D)” by which the federal government would allegedly do what USEC has failed to do through its promised Lead Cascade. But your proposal is now nonsensical for the following reasons:
- You proposed a two-year RD&D program, obviously timed for completion not in regard to any technical plan but for when USEC will lose its principal source of uranium through the Megatons to Megawatts program, which expires at the end of 2013, and before USEC's $530 million debt to bondholders is due in 2014. But now at least a year will have elapsed without progress on the RD&D program. How can a planned two-year program be completed in only one year? Or was your initial proposal non-serious and intended only to delay a USEC bankruptcy but not to accomplish any material R&D objective? And even if magically completed and successful, how could a commercial plant then be financed since USEC's bond debt will immediately be due?
- You repeatedly stated that Congress would have to pass appropriations for the RD&D program for it to proceed, in response to pointed criticism from Congress and GAO about past DOE assistance to USEC accomplished outside of legal congressional appropriation channels. However, after Congress failed to pass such appropriations (no such appropriation has yet passed both chambers for 2012 or 2013), with congressional opposition mounting, you reneged on that reform commitment and gave USEC $44 million in liability waiver in March of this year. Then in May you gave USEC hundreds of millions of dollars of subsidy through the extra-legal 5-party Paducah deal. DOE has further posted a proposal to buy USEC's destroyed and worthless centrifuges for an unspecified amount. And according to statements by USEC this past week, DOE intends to award USEC an additional $82 million in liability waiver, in time to meet USEC's proprietary June 15 deadline with bank creditors, led by JP Morgan, which is now under its own congressional scrutiny for investing in bad risks. What is the legal basis for such extraordinary assistance to a private company outside of congressional mandate?
- When you proposed the RD&D program last October, you said in your letters to Congress that it would build “720 centrifuges” at the Piketon site. Without correcting yourself, that number was somehow altered by USEC and other parties to read 120 centrifuges, not 720. But given the elapsed time, the non-performance of R&D on new centrifuge improvements, and USEC's admissions of financial incapacity, it's very clear that no new centrifuge array will be constructed at Piketon in the foreseeable future. USEC is struggling just to stay in business. The debate in Congress over an RD&D expenditure foundered on different ideas of exactly how DOE would spend such an appropriation, especially with DOE stressing the “national security” and “defense-related” aspects of the program, as opposed to commercial viability. It's fair to say that RD&D now lacks any definition at all. What exactly is the current DOE proposal for centrifuge RD&D?
- During the review of USEC's loan guarantee application, DOE insisted on creation of a new subsidiary to receive any American Centrifuge publicly-backed funds with accounting controls. That subsidiary, American Centrifuge LLC., was created, and the NRC licenses for Lead Cascade and ACP were transferred to it. Now, however, all talk of that subsidiary has been abandoned and USEC suggests that RD&D funds will be paid either to the USEC parent company or to the United States Enrichment Corporation subsidiary, which holds most of USEC's assets, thus circumventing the accounting controls put in place to assure the integrity of publicly-backed funds. Will DOE insist that all RD&D funds, including proceeds from liability waivers and other forms of assistance, be paid to American Centrifuge LLC to assure accounting controls? If not, then isn't it obvious that that RD&D is simply an illegal conduit for pumping funds to USEC Inc. without resultant investment in centrifuge technology?
The Department of Energy commissioned an engineering investigation of the June 11 crash by Parsons Corporation, and that report was subsequently suppressed. A copy was not even shared with the Nuclear Regulatory Commission until after NRC secured the report from bootleg (not to imply illegal) sources. SONG has now made the report, obtained independently, available to the public.
Reasons for the report's suppression are readily apparent from the text, and explain why insiders with integrity insured that the report did come to the attention of NRC investigators, Congress, and the public. Aside from revealing that USEC's management practices, employee training, and safety culture were nowhere near the standards necessary for a commercial nuclear operation, the Parsons report reveals that the very concept of a commercial centrifuge project under construction at Piketon is dubious.
Specifically, the report discloses that the principal R&D facility for the USEC centrifuge program is not Piketon at all, but a federal facility in Oak Ridge, Tennessee, designated K-1600. Two prior USEC centrifuge crashes occurred at K-1600, earlier in 2011 – crashes that were undisclosed to NRC, Congress, and the public. Further, the Parsons report discloses how little uranium has been run through the Piketon Lead Cascade, raising the question of the purpose of the testing program, since running uranium is necessary to obtain the efficiency and cost data relevant to a commercial project.
Congress and the public have been hoodwinked into supporting “the American Centrifuge Plant” on the promise of a full-scale commercial plant in Ohio, one that will bring “4,000 Ohio jobs” along with an equal number of jobs in other states. It now appears, however, that both DOE and USEC have known for a long time that such a commercial plant will never materialize. Even the R&D phase will necessarily be based in Oak Ridge, not at Piketon, and that will be focused on whatever “national security” objectives DOE and its National Nuclear Security Administration hold dear, not on creation of a viable commercial plant.
Ohio workers, Ohio residents, and perhaps even Ohio politicians have been deceived.
The Great American Subterfuge
The scandal goes well beyond the loss of promised jobs and the wasted billions of dollars in federal expenditures. In order to maintain the ruse of a future commercial ACP, the Piketon “centrifuge buildings” built in the 1970s were contaminated for a second time, needlessly and probably at government cleanup expense. In 1985, the Reagan Administration allowed those same buildings to be contaminated by test runs of uranium in AC-100 machines, even though technicians and project planners already knew that the centrifuges employed would not be commercially viable.
After shutdown of the Gas Centrifuge Enrichment Plant program in 1985, DOE failed to make any public disclosure of why the program had failed or why the test run and contamination had been permitted with no viable plan for commercialization. In March of 2005, the DOE Inspector General found that DOE's PPPO office, under the direction of Bill Murphie, had authorized up to $250 million in proprietary USEC expenses to be paid by DOE in alleged cleanup of the GCEP buildings improperly. Again no public disclosure was made of why USEC was not then required to reimburse the U.S. Treasury for those expenses. Those lacks of disclosure preconditioned precise repetition of the scandal with USEC's phantom “Lead Cascade.”
And the tragedy underlying that vicious cycle is that throughout the period, from the initiation of GCEP in the 1970s, DOE has utterly failed to comply with environmental and historic preservation laws at the Piketon site. Such compliance would have required that DOE study the important ecological and cultural landscape largely destroyed to make room for the useless “centrifuge” buildings, and consult with knowledgeable and interested parties about the impacts of federal undertakings and how to mitigate them.
But DOE could not and did not disclose the real nature of its undertakings at that site, which were never to construct a commercial centrifuge enrichment plant. Rather, DOE has consistently pursued secret and dubious “national security” missions under no legal framework, or pure political political motives connected to Ohio's cherished electoral votes.
With regard to the latter, the USEC scandal should be compared to the Solyndra scandal. In the Solyndra case, improper White House influence on DOE decision-making was alleged but could not be proven. In the USEC case, on the other hand, political White House fingerprints are all over the place. DOE memorandums released under the Freedom of Information Act reveal that White House operative Joseph Aldy, with practically no experience in government, led the “rollout” of the USEC loan guarantee denial in 2009, along with Deputy Secretary of Energy Daniel Poneman. “Denial” in this instance is a misnomer, however, because the decision to turn down USEC for a loan guarantee was accompanied by other hurried decisions to award USEC $45 million in “technical assistance,” along with $150-$200 million for a no-bid contract to do cleanup work at Piketon, cleanup work of which there is no evidence of performance.
In other words, the political operative Aldy, along with Poneman and Assistant Secretary Inez Triay, crafted a “compensatory package” by which USEC was given up to $245 million as a gift, in place of a $2 billion loan guarantee, a pretty good bargain for USEC as any loan shark would opine. That appears to have been done only for the purpose of softening any blow to Ohio's fragile political sensibilities, a continuing scam that you sir, Mr. Secretary, have continued with additional gifts and favors for USEC.
Mr. Secretary, you were awarded a Nobel Prize in physics for your work on atomic laser isotope separation. Perhaps more than anyone, you know that USEC's forty-year-old centrifuge technology has no commercial future. Why then are you staking your name and reputation on this deception?
The assumption appears to be that Ohio voters want this cesspool of corruption dug deep into our state's soil, or that we shall reward those who steal from public coffers while lying to us with our votes. But I remind you, sir, that we have law-abiding citizens in Ohio, and even if parochial interests prevail, the USEC enrichment scheme has accrued to the benefit of Tennessee and Maryland, not Ohio. Ohio is stuck with no commercial jobs prospect, a double-time contaminated site, and no party coming forth with an offer to clean up the mess and redevelop. We are aware, sir, that USEC has pledged its collateral to its bank creditors, leaving the USEC D&D commitment at Piketon unsecured.
Where, Dr. Chu, will DOE obtain the funds to decontaminate, decommission, and redevelop the centrifuge site at Piketon after USEC is deeper in bankruptcy and it has skipped town?
Part of the tragedy of the abrogation of environmental and preservation law is that legal process would have permitted the consideration of alternative proposals for Piketon site development, which if they had been pursued, would have produced real jobs for this community, while saving the federal government a whole lot of money. In 1983, nearly thirty years ago, I was hired by the Piketon local of the Oil, Chemical, and Atomic Workers Union to negotiate potential alternate uses of the GCEP site (now the ACP site), should GCEP be canceled (which it was).
But DOE refused to so negotiate. During the Reagan Administration, the doors were shut. Though Piketon and Paducah workers then had support from the governors of Ohio and Kentucky and other public officials, DOE would not engage in any conversation about how any part of the Piketon and Paducah sites could be utilized following the end of enrichment activities.
I'm sorry to say that in 2012, the response of the Obama Administration, in regards to both Piketon and Paducah, is even worse. Not only has Deputy Secretary Poneman refused to engage in a conversation about alternate use of the ACP site, as the project clearly winds toward termination, but NNSA, which claims to manage the site, will not even provide a public point of contact.
This situation is unacceptable, and I might add, inadvisable, if your attention is focused on the coming commotion in November. In regard to the USEC shuffle, enough is enough.
In 2007, SONG provided to DOE petitions with the signatures of more than 5,000 area residents calling for a ban on spent nuclear fuel storage at Piketon, and for creation of a Citizens Advisory Board. DOE did respond to the SONG petition by creating, for the first time, a Site-Specific Advisory Board, though the SSAB is inadequate on two grounds. First, its members are riddled with conflicts of interest since numerous members are employed by site contractors including USEC. We got a Contractor Advisory Board not a Citizens Advisory Board. Second, the SSAB's mandate specifically excludes anything related to USEC or the ACP project and site. Thus there remains no CAB at Piketon exercising citizen oversight over the ACP project and site.
Now, SONG demands the following:
- RESPECT the land and history of the Piketon community and stop regarding this federal site as as some kind of national sacrifice area.
- ACKNOWLEDGE that the commercial ACP project is terminated and that there is no commercial component to any proposed RD&D project that may be continued at Oak Ridge.
- END illegal payments, subsidies, liability waivers, and transfers of material to USEC. Respect the USEC Privatization Act and end government involvement in the commercial uranium enrichment business. If USEC's management decisions lead it into bankruptcy, so be it.
- WITHDRAW the proposal for an RD&D program until such time as DOE can clarify the precise nature of a “national security” program needed at Oak Ridge.
- COMPLY with the National Environmental Policy Act, the National Historic Preservation Act, and all other federal environmental and preservation laws by engaging in required consultations studying impacts, and considering alternatives to federal undertakings BEFORE agency decisions about the commitment of funds or resources are made.
- REMOVE the USEC lease from management by NNSA and place that management in an office with normal civilian practices and compliance mechanisms.
- DISCLOSE all past federal funding, subsidies, transfers, waivers, no-bid contracts, and other forms of support for USEC, and the real purposes for that support. And disclose the details governing decontamination & decommissioning of ACP.
- ABOLISH the SSAB at Piketon, because it is riddled with conflicts of interest, and replace it with a true Citizens Advisory Board, on which salaried contractor employees cannot serve, with jurisdiction over the entire federal reservation at Piketon and all federal undertakings at the site.
- REPLACE the current “Community Reuse Organization” at Piketon with a public-interest non-profit entity responsive to real community needs and not attached to USEC and other site contractors.
- ENGAGE this community in a frank conversation about how to decommission the ACP project given USEC's financial situation, and in how to reconceptualize the general Piketon cleanup given the end of ACP.
- ANSWER the questions posed in this letter, questions begged by the long history of official deception and disinformation at Piketon.
- COME to Piketon. Mr. Secretary, it is time that you face this community in one or a series of town meetings that SONG offers to co-host.
- FIRE Bill Murphie's ass as quickly as you can say his name.
Please don't hesitate to contact me. You will find much more information about the USEC situation at http://ecowatch.org/gsea-articles/and at http://SONGSheetOhio.blogspot.com. It is high time for a new era at Piketon.
For Southern Ohio Neighbors Group,