Centrifuge Update

16 Oct (NucNet): The US Department of Energy (DOE) has said it will not be providing technology demonstration funding for the American Centrifuge Plant

(ACP) project in Piketon, Ohio “at this time”.

The US enrichment corporation USEC warned last month of difficulties facing the project, saying that it may need to make further cuts in the project and could even be forced to terminate the programme.

In July 2009, the DOE said it was willing to invest up to 45 million US dollars (USD) (about 30 million euro) over the next 18 months for USEC to support ongoing ACP technology demonstration activities, starting with USD 30 million the DOE requested from the US Congress for financial year 2010. However, the DOE said yesterday that Congress has not provided the funds.

“In addition, USEC announced on 28 September that the centrifuges in Piketon had to be taken offline and disassembled due to a flaw in their manufacturing process,” the DOE said.

“USEC has indicated that it will be several months before the centrifuges can be rebuilt with new parts and testing can start over. For both of these reasons, the department does not see a path to providing the USD 30 million in technology demonstration funding at this time.”

USEC said previously that its suppliers assembled about 40 AC100 series centrifuge machines over the summer and initial AC100 cascade operations were planned for the third quarter of this year. However, the company said its project team “determined that at least some of the machines were not assembled in full compliance with the specified drawings and procedures”.

USEC and the DOE agreed in August 2009 to delay a final review on the company’s loan guarantee application until a set of technical and financial milestones have been met. The DOE says that agreement remains in place.

DECISION TO DELAY REVIEW ON USEC LOAN GUARANTEE MUDDIES WATERS The future of domestic uranium enricher USEC’s American Centrifuge plant—and the federal loan guarantee needed to finance it—got murkier last week as the Department of Energy backed off of its plan to deny USEC’s loan guarantee application in favor of delaying a decision for at least six months. After calling for USEC to withdraw its loan guarantee application July 28, citing “technical and financial” problems with the project, DOE and USEC agreed Aug. 4 “to delay a final review on the company’s loan guarantee application,” according to a statement from DOE. During that time, USEC can “fully address issues DOE has identified relating to the readiness of the company’s uranium enrichment technology,” according to DOE. Among other issues, an independent review by engineering firm Parsons predicted that USEC would have to reduce the cost to build its centrifuges for the plant by a factor of three in order to make the project viable, NNB Monitor has learned. ‘Milestones,’ Delay Time Unidentified Both DOE and USEC declined to predict how long a loan guarantee decision would be delayed last week, with DOE spokesman Tom Reynolds telling NNB Monitor that a decision will take “at least six months.” The time frame hardly seems firm, given that DOE said that the review would be deferred “until a series of specific technology and financial milestones have been met,” according to a DOE statement. Neither USEC nor DOE would identify those milestones last week. “USEC’s operating experience on its lead cascade must demonstrate high confidence that machine reliability is commensurate with its facility operating plan. We have discussed with USEC specific test results that would give such confidence, and we look forward to working with them to that end,” DOE Undersecretary for Science, Dr. Steven Koonin, said in a statement Aug. 4. USEC spokeswoman Elizabeth Stuckle said only that “the milestones relate to run time for the AC100 machines recently installed in the lead cascade testing program.” USEC has been working furiously to increase the efficiency of the centrifuges—as well as the actual manufacture of the machines—and entered into a joint venture with partner B&W earlier this year to work toward streamlining the process. But Stuckle could not say last week if the centrifuges could be produced at a cost in line with USEC’s most recent cost estimate of $3.5 billion for the plant (NNB Monitor, Vol. 28 No. 30). Stuckle also acknowledged that that cost estimate is probably no longer valid due to schedule delays. It also was not clear last week whether the milestones will mirror, or build from, those previously established in the 2002 Omnibus Agreement which governs USEC’s use of the American Centrifuge technology. USEC has missed or renegotiated several of those milestones since 2002—including one to allow for further testing of the centrifuges—with thenegotiation occurring early in 2009. According to an updated milestones agreement, USEC is expected to show that its financing is in place for the full 3.5 million separative-work-unit plant by November of this year—a benchmark that seems unlikely at this point. Those milestones also require USEC to begin operations at the plant by August 2010, which could be difficult given that the loan guarantee delay has forced USEC to de-mobilize work at the Piketon, Ohio, plant and at its centrifuge manufacturing site in Oak Ridge, Tenn. Funding Still in Flux Whether USEC will take DOE up on its offer to contribute $45 million in research and development funding to the continued development of the centrifuge technology had not been determined last week, according to Stuckle. DOE told Congressional staffers in a briefing that the funding would be divided over the next two fiscal years—with $30 million in FY 2010 and $15 million in FY 2011. USEC could also not say where it will be looking for additional financing options for the American Centrifuge Project, due to the fact that those discussions “are proprietary,” Stuckle said, adding, “We are exploring strategic alternatives.” In the meantime, USEC predicted in its second quarter financial report that the company has enough cash on hand to finish out the year. Cash flow generation from operations over the first six months of 2009 was $222 million and the company finished Q2 with $78 million of cash on hand, according to the filing. Net income for the second quarter was $17.3 million, slightly above USEC’s net income for the same quarter in 2008 of $10.8 million. Producers Question Plan to Transfer Uranium Meanwhile, U.S. uranium producers are concerned over the Department of Energy’s recently announced plan to transfer hundreds of millions of dollars worth of uranium to help fund new cleanup work at Portsmouth. Although DOE did not further elucidate any details about the transfer plan last week, the Uranium Producers of America (UPA) called on DOE to provide more information about its intentions, warning of the significant potential market impacts that could occur because of the plan in an Aug. 4 letter to Secretary of Energy Steven Chu. “The serious uncertainty in the global uranium market created by unfettered DOE sales that could occur outside the [Department’s 2008] Excess Uranium Inventory Management Plan will make it impossible to attract the investment needed to keep current and future operations producing this important element,” the producers state in the letter. Plan to Offset Job Losses From USEC Project When DOE indicated it could not grant USEC a loan guarantee at this time, the agency also offered to use $150- 200 million worth of excess uranium annually over the next four years to “expand and accelerate” the cleanup of the Portsmouth Gaseous Diffusion Plant in Ohio (NNB Monitor, Vol. 28 No. 30). While USEC has begun demobilizing the project’s workforce in Ohio, DOE has said it plans to transfer uranium for new cleanup work at Portsmouth is expected to create between 800 and 1,000 new jobs at the site to help offset the projected jobs losses. Despite DOE’s more recent back tracking on the loan guarantee decision, all construction work on the ACP plant at Portsmouth and some manufacturing work will come to an end until further funding is obtained, Stuckle said, declining to provide estimates as to how many jobs may still be lost at Portsmouth. The move to defer a final decision on USEC’s loan guarantee will have no impact on the plans for the new cleanup work at Portsmouth, Reynolds said late last week. “We’re moving ahead aggressively with that plan,” he said. Reynolds declined to provide further details on the uranium transfer plan, saying they would be finalized “as soon as possible.” Questions Swirling Around Plan So far, DOE has been vague on the details of its plan, including what contractor would do the additional cleanup work at Portsmouth, how transfers of excess uranium to fund the work would be carried out and what material would be transferred. Among the information sought by the UPA in its letter last week is whether the planned transfer or sale would be conducted in accordance with the Department’s own uranium inventory management plan, which limits sales and/or transfers of excess uranium to no more than 10 percent of annual U.S. nuclear fuel requirements. That limit could be exceeded, however, for “certain special purposes,” such as initial cores for new nuclear reactors. The UPA’s lengthy set of questions also included those pertaining to what authority DOE would use conduct the planned transfers, how the excess uranium would be valued, how the Department will ensure that the sale or transfer “will optimize the value” of the excess uranium and whether DOE would seek appropriations authority from Congress for the sale or transfer. The lack of detail on DOE’s uranium transfer plan has raised concern that it was hastily conceived. The UPA letter appears to add the group’s voice such concerns, noting that the proposal was not discussed during a July 20 meeting between UPA representatives and DOE officials, just days before it was announced. “No mention of possible DOE sales or transfer of excess uranium from the Department’s excess inventories to any other non-government entity, other than those that had been previous announced and were being managed under the plan, was mentioned at this meeting, even when the UPA asked specifically regarding this prospect,” the letter says, adding, “DOE staff insisted that no additional transfers or sales, other than those previously announced, would be contemplated until direction was received from the Assistant Secretary of Nuclear Energy once that appointment was confirmed.” The Obama Administration’s nominee to serve as Assistant Secretary of Nuclear Energy, Warren F. “Pete” Miller, was confirmed by the Senate Aug. 7. Reynolds largely declined to comment on the UPA letter last week, saying only, “We’ve received the letter and are in the process of reviewing it.” UPA Warns of Market Impacts, Job Losses In its letter, the UPA noted the “devastating impacts” past DOE sales of uranium have had on the domestic uranium production industry. The 70 million pounds of uranium provided to USEC in 1998 when the company was created “effectively destroyed the uranium market and drove nearly every domestic producer out of business at that time,” the UPA said. More recently, a 2008 DOE sale of uranium “played a major role” in the drop of the spot market price of uranium from $136 per pound to $80 per pound, the UPA claimed, adding, “This sale essentially stopped the robust private investment in new and current domestic uranium projects that are vital to assuring a reliable source of fuel for the domestic civilian nuclear fleet.” The UPA also warned of the job losses that could occur if DOE’s latest plan has similar market impacts. “UPA recognizes that cleanup of the Portsmouth facility and 800 to 1,000 jobs for Piketon, Ohio are important. However, if DOE excess uranium sales result in reducing the price of uranium, it is a reasonable expectation that an equal or larger number of existing and potential new uranium producing jobs will be lost in Wyoming, Utah, Texas, Nebraska, New Mexico, Colorado, South Dakota and Arizona,” the UPA letter says, adding, “A balance must be achieved and sales must be conducted in accordance with the December 2008 DOE plan.”