- The Washington Times - Monday, February 11, 2002

The Bush administration and the nation's only producer of fuel for nuclear power plants are nearing a deal aimed at ensuring a steady U.S.-produced stream of the crucial material, according to a senior administration official.
The Department of Energy and Bethesda-based USEC are negotiating how to preserve a domestic industry for enriching uranium into commercial fuel, which is used to generate 20 percent of the electricity in the United States.
In particular, the department wants USEC to develop new, more efficient technology for this process to avoid complete dependence on imports, which already account for 77 percent of the U.S. nuclear fuel market.
"It's an energy security question," a senior administration official said. "It's the same principle as not being reliant on all the Middle Eastern countries for our oil."
USEC is the company created through the privatization of the United States Enrichment Corporation in 1998. The move, heavily criticized at the time by national security analysts who feared overdependence on foreign uranium, resulted in a company that has faced repeated financial difficulties.
USEC spokesman Charles Yulish declined to comment on the negotiations with the government.
Its stock closed on Friday at $5.96, up 16 cents but well below the price of $14.25 in its June 1998 initial public offering. Standard & Poors rates USEC bonds as junk, severely limiting its ability to raise new funds.
USEC is also the sole steward of a program created by the American and Russian governments known as "Megatons to Megawatts" in which it markets uranium that has been converted into commercial reactor fuel from old Russian nuclear warheads. The plan was developed in the early 1990s to stop fissile material from falling into the hands of terrorists.
Importantly for USEC, the deal gives it access to cheap nuclear fuel that it can then resell to its American customers.
"They live off the cheap Russian material," the senior official said. "When it runs out, they're in trouble."
USEC and the government are close to resolving the main issues that had divided them, said sources close to the negotiation.
"We're progressing nicely," the official said. "It will happen."
The company's main problem is its technology for manfacturing nuclear fuel; it is outdated and much less efficient than its European competitors, the senior official said. But USEC has been reluctant to commit to a date by which it would develop new technology.
"If our technology is going to be competitive, we need to get it to market fast," the official said. "Otherwise, we're reliant on overseas suppliers."
To force USEC's hand, the Bush administration has told the company it will lose its role in administering the Russian program if it does not develop new ways to produce nuclear fuel in the United States by a date certain, the senior official said.
In the past, USEC has bitterly opposed attempts by the Bush administration to force the company to take these steps.
"No U.S. corporation could subject itself to such unprecedented and unnecessary government authority and remain accountable to its shareholders or remain in business," USEC Chief Executive Officer William Timbers wrote Undersecretary of Energy Robert Card in a Jan. 10 letter.
The department and USEC have reached a tenative agreement on allowing the Department of Energy to take over USEC's plant in Paducah, Kentucky if the company ceases production there. That facility, government-owned but operated by USEC, is currently the only operating plant in the United States for enriching uranium into nuclear fuel.
"We want to be able to step in before the plant is shut down and cannot be started up again," the senior official said.
The two sides are still haggling over how to dispose of excess uranium stocks that USEC inherited from the government when it was privatized, he said.


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