After weeks of outrage over an ill-fated $535 million federal loan guarantee to Solyndra — a bankrupt, politically backed solar-energy company — you’d think Washington would back away from such boondoggles. Yet, there’s a good chance lawmakers will do it again, this time awarding a $2 billion loan guarantee to an Ohio nuclear-fuel project that, like Solyndra, is almost certain to fail. But rather than being a liberal project to promote “green” energy and enrich Democratic donors along the way, this loan guarantee is an attempt of Ohio politicians — of both parties — to bring the bacon home to their swing state.
Rejected for a loan guarantee once back in 2009, the troubled United States Enrichment Corporation (USEC), based in Maryland, has lobbied hard to get the Department of Energy (DOE) to reconsider their case. On October 21, USEC’s insistent pleading paid off: DOE announced it would spend up to $300 million to help USEC reduce the technical problems that forced DOE to reject USEC’s original application.
Never mind that Moody’s just gave USEC a junk-bond credit rating. Ohio’s Sen. Rob Portman (Republican and member of the Senate Energy Committee), Sen. Sherrod Brown (Democrat), and Rep. John Boehner (Republican and speaker of the House) all insist USEC deserves federal support and have urged the president to live up to his own pledge to back the project. That promise was made — you guessed it — during President Obama’s 2008 presidential bid to drum up Ohio votes.
That the massive uranium-enrichment machines that USEC is trying to deploy are still failing in demonstration tests doesn’t really seem to matter. Four months ago, the Nuclear Regulatory Commission reported that six of these machines, which are based on an exotic U.S. Department of Energy design, “crashed” in what was supposed to be a validation run. USEC has already spent nearly nine years and $2 billion to develop these machines but still needs $3 billion to complete the project.
It also doesn’t help that USEC has few, if any, firm contracts for the uranium-enrichment services the machines are supposed to afford. Like Solyndra, USEC has a customer problem. That, presumably, is a key reason why USEC wants federal taxpayers to guarantee the project. A quick review of USEC’s competition shows why the company will have a hard time penetrating the market.
First, there’s Louisiana Energy Services, which operates a large Dutch-designed plant in New Mexico. It secured enough fuel contracts that it didn’t have to ask for a federal loan guarantee. It also has sufficient cash flow to finance the plant’s expansion if needed.
Then there is Areva SA, a French-government-owned firm that just secured a $2 billion federal loan guarantee to build a large uranium-enrichment plant in Idaho. It needed the guarantee because, like USEC, it lacks any firm contracts for the services its plant would provide. However, unlike USEC, Areva SA’s plant is based on proven enrichment technology (the very same technology that is operating in New Mexico). Word on the street has it that this project is banking on USEC’s collapse.