Situation Could be Made Worse Over Pending Legal Action Over Uranium Transfers
Mike Nartker and Kenneth Fletcher
WC Monitor
6/27/2014
D&D efforts at the Portsmouth Gaseous Diffusion Plant are facing the threat of significant layoffs in Fiscal Year 2015 that could see the project’s workforce cut by approximately one-third. The situation at Portsmouth could be further exacerbated by a recent lawsuit filed to block the Department of Energy’s ability to continue to use its stock of excess uranium to help fund cleanup activities at the site. WC Monitor has learned DOE and Fluor-B&W Portsmouth, LLC, the site’s D&D contractor, are projecting a potential workforce reduction of as many as 675 employees next fiscal year due to funding challenges. There are currently approximately 1,900 workers at the Portsmouth D&D project, of which 1,400 are FBP employees and the remainder subcontractors.
A spokesman for the DOE Portsmouth/Paducah Project Office said in a written response, “Until DOE determines the amount of uranium barter that will be available to support cleanup work at Portsmouth, all appropriate options for aligning costs with available funding must be considered. Based on the uncertainty on the total amounts to be transferred and the market price of uranium, DOE continues to evaluate options. Any decisions based on site employment levels would be made by the contractors, not DOE. DOE will continue to ensure that transfers of uranium continue to comply with the law and are transparent.” For its part, FBP declined to comment this week.
The Portsmouth D&D project is funded through annual Congressional appropriations, as well as by DOE providing FBP with stocks of surplus uranium, which the contractor then sells and uses the proceeds for work. In its FY 2015 budget request, DOE sought $160 million for D&D work at Portsmouth, an increase of approximately $22 million from current funding levels. However, uranium prices have been steadily declining, decreasing the value of the material provided to FBP to help augment funding. In addition, DOE has announced plans to reduce the amount of excess uranium to be made available to help fund cleanup activities. While the Department had previously planned to provide up to 2,400 metric tons of material per year, DOE is now looking to provide up to 2,055 metric tons for cleanup purposes annually from 2014 through 2021. Some additional material may be available, though, if the National Nuclear Security Administration doesn’t use its full annual allotment of up to 650 metric tons per year.
Even before DOE announced that it would be making less excess uranium available to help fund cleanup at Portsmouth, contractor officials were acknowledging that the anticipated funding situation in FY 2015 would make it unlikely that FBP would be able to meet a goal to have the X-326 Building—one of the three former enrichment process buildings at the site—ready for demolition by the time its initial five-year contract is set to end in March 2016. “The current funding request, given the current state of the barter [program], will not get us there,” FBP Site Project Director Dennis Carr told WC Monitor in late May.
ConverDyn Asks for Temporary Injunction on Uranium Transfers
FBP could soon be facing the possibility of having no uranium materials at all to help pay for the Portsmouth D&D project. While DOE was set to conduct its next transfer at the end of July, ConverDyn this week filed a request in federal court for a temporary injunction to block the transfers while a lawsuit it recently filed against the Department over its excess uranium management plans is pending—a suit that could take as long as 18 months to resolve. Other industry officials have shown support for the injunction, including officials from miners group Uranium Producers of America, enrichment firm URENCO and nuclear fuel company Fuelco. The suit also comes after earlier this month a Government Accountability Office report raised several legal questions with four DOE transfers that took place in 2012 and 2013 in support of USEC’s American Centrifuge Plant, claiming that they did not meet all requirements under the USEC Privatization Act and the Atomic Energy Act.
ConverDyn Expects $40.5 million in Lost Revenue
ConverDyn runs the sole domestic uranium conversion plant, which converts “yellowcake” uranium oxide into uranium hexafluoride gas in preparation for the enrichment process. The company expects DOE uranium transfers planned in the coming months to result in a loss of $40.5 million in revenue for Converdyn between 2014 and 2016, according to filings in the U.S. District Court for D.C. This week ConverDyn asked the court to take swift action. “Plaintiff ConverDyn respectfully moves for a preliminary injunction to prevent unlawful and imminent transfers of uranium from the United States Department of Energy inventory,” states ConverDyn’s June 23 motion for a preliminary injunction. It adds: “DOE has authorized, and is poised to make, uranium transfers that will roil the fragile domestic conversion market by displacing sales, depressing prices, increasing costs, and eliminating jobs.” DOE has already agreed to push back the first transfer two weeks from July 15 to July 31 “in order to give DOE’s counsel more time to respond to this motion,” the filing states.
DOE Boosted Transfers Last Year
A major factor is DOE’s decision last year to boost its uranium transfers to up to 15 percent of the domestic fuel market, a significant increase from a previous self-imposed cap of 10 percent. “As a direct result of DOE’s changed policy, ConverDyn has lost the valuable protection provided by the 10 percent limit and already is facing significant and unrecoverable losses, all without any opportunity to weigh in on DOE’s irresponsible about face,” the motion for injunction state. In a separate court filing, Converdyn President and CEO Malcom Critchley said the company’s long-term viability “is challenged” by DOE’s plans. “The domestic conversion industry, given a level playing field, can compete economically with other international suppliers. But, Converdyn cannot effectively compete in the marketplace against DOE, which has an inventory of essentially “no cost” uranium that it intends to transfer over the next 20 years,” he said.
ConverDyn claims that under federal law DOE is required to ensure that its uranium transfers will not have an adverse material impact on the U.S. nuclear industry. “ConverDyn, which is the only domestic supplier of conversion services, has repeatedly provided information to DOE demonstrating that the transfers would and do have a substantial adverse impact on the domestic conversion industry, in part because the government will receive less than fair market value,” company spokesman Peter Dalpe said in a written response. “Even though ConverDyn’s position is supported by economic analyses prepared by DOE’s own expert consultants, DOE elected to proceed with the transfers without explanation.”
DOE this week said it could not comment on pending litigation. “We would note that these authorized transfers are intended to support important environmental cleanup programs at the former Portsmouth and Paducah Gaseous diffusion plants and National Nuclear Security Administration programs for down-blending highly enriched uranium to low enriched uranium," a DOE spokesperson said in a written response.
