Congress skipped town, and so did many other readers, but that didn’t stop news from breaking during the ExchangeMonitor’s annual August publication break. As chronicled in the Weapons Complex Morning Briefing, here are a few stories that we’ve been following.
BWXT Revenue, Income Spike in 2Q
BWX Technologies on Monday reported revenue and income increases in the second quarter at the company-wide level and in the business segment that handles its Department of Energy contracts.
Revenue for the Lynchburg, Va., company came in at $410 million, 1.9 percent above the $402 million it collected in the same quarter of 2016, the company announced Aug. 7.
Generally accepted accounting principles (GAAP) quarterly operating income of $92.3 million rose from $88.5 million on a year-over-year basis; GAAP diluted earnings per share were up to $0.61 from $0.56 in that same time period. On a non-GAAP basis, earnings rose 16 percent from $72.4 million in second-quarter 2016 to $84.4 million in the latest reporting period. Non-GAAP earning per share rose 24 percent, from $0.45 to $0.56.
Segment revenue for BWXT Nuclear Services Group rose from $32.2 million in second-quarter 2016 to $44.8 million for 2017. Operating income grew from $4.4 million to $15.7 million. The company attributed the boost largely to the resolution of a contract dispute and higher activity in both domestic commercial nuclear maintenance outages and naval reactors decommissioning and decontamination. BWXT in May also picked up, with partners CH2M and Fluor, a contract worth up to $1.5 billion over a decade for cleanup of DOE’s Paducah Gaseous Diffusion Plant in Kentucky.
BWXT hiked its adjusted earnings projection for the year to $1.97 to $2.07 per share, from the prior $1.85 to $1.95.
Despite Tweets, Fire and Fury, Heavy Lifting Ahead for DOE Nuclear Programs
Notwithstanding President Donald Trump’s widely disputed tweet earlier this month regarding the strength of the U.S. nuclear arsenal, plenty of work remains at the Energy Department facilities that support the nation’s deterrent.
My first order as President was to renovate and modernize our nuclear arsenal. It is now far stronger and more powerful than ever before….
— Donald J. Trump (@realDonaldTrump) August 9, 2017
Today, DOE nuclear facilities and the arsenal they serve remain in the middle, rather than the end, of a modernization program started by the Barack Obama administration. The United States is also still working on the Nuclear Posture Review that Trump ordered in January, and which is expected to wrap up this year.
Modernization costs run into the hundreds of billions of dollars and, as the effort winds on, DOE’s National Nuclear Security Administration (NNSA) is grappling still with the evergreen issue of outmoded and excess facilities that sap money from active weapons programs, as well as the fallout of nuclear safety snafus at DOE’s prime plutonium production facility at the Los Alamos National Laboratory in New Mexico.
The Trump administration thought it had a straightforward plan for the excess facilities: start transferring them in fiscal 2018 to DOE’s Office of Environmental Management for cleanup. The White House requested $225 million for that effort, but Congress came in much lower in a pair of appropriations bills that made it out of committee before the August recess. The House provided $75 million and the Senate only $55 million. The upper chamber’s proposed budget would cover the early stages of cleanup for facilities at the Lawrence Livermore National Laboratory in Livermore, Calif., and the Y-12 National Security Complex in Oak Ridge, Tenn. The House’s proposal would add some work at the Idaho National Laboratory.
Of more immediate import to nuclear materials is Los Alamos National Laboratory’s PF-4 plutonium production facility, which is central to the present and future strength of the U.S. nuclear arsenal. The facility ensures the pits — or cores — of nuclear weapons remain potent. However, violations of criticality safety rules prompted DOE to shut the facility down in 2013, in which state it remained until October 2016.
The PF-4 shutdown provoked some bad press in June that last week led Sen. Claire McCaskill (D-Mo.) — ranking member on the Senate Homeland Security and Governmental Affairs Committee — to demand a long list of explanations from NNSA Administrator Frank Klotz.
After the 2013 incident and other high-profile safety lapses at the lab, the NNSA curtailed lab prime contractor’s Los Alamos National Security’s management contract. The agency released a draft request for proposals for the follow-on Los Alamos management contract in July. The final solicitation is expected in September.
So whatever the gauge of nuclear strength — total destructive potential of the arsenal’s fissile cores, raw numbers of missiles, the ability to hit the most sensitive targets — there is plenty of heavy lifting ahead before any weigh-in.
As NNSA Marks Stewardship Anniversary, Program Budget Looks (Mostly) Good
Amid fiery and furious fact-checking and blame-chucking in the general press over the credit President Donald Trump appeared to take for modernizing the U.S. nuclear deterrent, the National Nuclear Security Administration recently observed the 22nd anniversary of the White House prohibition on explosive nuclear-weapons testing.
The steward of the national nuclear deterrent marked the milestone in an Aug. 11 note posted to its Facebook page.
As the post went up, fiscal 2018 budget prospects for the computer-driven NNSA stockpile stewardship program precipitated by the end of explosive testing remained uncertain — even though appropriations bills pending in Congress show the White House and lawmakers agree the program should eventually get a raise.
As part of the big boost it wants to give NNSA weapons programs, the Trump administration requested about $735 million in 2018 for Advanced Simulation and Computing programs: one of the linchpins of the non-explosive testing performed at the Lawrence Livermore National Laboratory in California; the Los Alamos and Sandia national laboratories in New Mexico; and Rochester University in New York.
The Senate Appropriations Committee approved that increase — more than 10 percent higher than the 2017 appropriation — as part of an energy and water bill it voted to the floor before Congress’ August recess. The House, on the other hand, approved about $710 million for Advanced Simulation and Computing as part of an appropriations package approved in that chamber in late July. The lower chamber’s total is roughly 3.5 percent less than the White House request, but still about 7 percent more than the 2017 appropriation.
The current appropriation, though, could still figure big into the NNSA’s immediate future. For one thing, after lawmakers return from break, they will have less than a month to hammer out a budget compromise acceptable to both the House, the Senate, and the White House. If they cannot, they would have little choice but to extend the 2017 budget via a stopgap spending bill known as a continuing appropriation. Not only do such stopgap measures freeze spending levels and prevent budget boosts, they also forbid agencies from starting work on new programs.
Meanwhile, the House appropriations package sent to the Senate exceeds the federal budget caps set in place by the Budget Control Act of 2011. That means even if both chambers accept it and the president signs it into law, it would trigger automatic across-the-board cuts known as sequestration for discretionary defense and civilian spending. In that case, the NNSA would be among the agencies to get a haircut.
Congress is due back in Washington, D.C., on Sept. 5.
NNSA Touts Anti-Nuclear Smuggling Training as Budget Cuts Loom
The National Nuclear Security Administration (NNSA) in July sent a small delegation to Turkey to train the Turkish National Police to use radiation detectors, the agency said in a mid-August press release.
“The recently completed training with the Turkish National Police is an important step toward expanding our relationship with a key partner in a strategically significant region of the world,” David Huizenga, acting deputy administrator for the NNSA’s Defense Nuclear Nonproliferation branch, said in the release. “We look forward to continuing to work with the Turkish government to prevent nuclear and radiological smuggling.”
The NNSA’s efforts to “improve partner countries’ abilities to deter, detect, and investigate illicit trafficking” in nuclear materials is nested in the Global Material Security budget within Defense Nuclear Nonproliferation. The Trump administration, citing a large amount of unspent funding remaining from the 2017 appropriation, is seeking roughly an 8-percent cut for the Global Material Security budget for fiscal 2018, to just over $335 million.
A spending packaged approved by the House before the August recess would go even further, slashing Global Material Security by almost 20 percent to slightly more than$255 million. Within the total, the House would provide just over $100 million for Nuclear Smuggling Detection and Deterrence, rather than the roughly $145 million the White House requested. The request was about in line with the 2017 appropriation.
“Due to the delays in executing agreements with foreign nations, the NNSA has sufficient prior-year balances to support fiscal year 2018 needs” within Global Material Security, House lawmakers wrote in a detailed bill report that accompanied their spending package.
A bill approved last month by the Senate Appropriations Committee, on the other hand, would provide more than $355 million for Global Material Security for the budget year beginning Oct. 1, including the roughly $145 million for Nuclear Smuggling Detection and Deterrence the White House seeks.
For NNSA Defense Nuclear Nonproliferation writ large, the Donald Trump administration requested almost a 5-percent year-over-year funding cut in fiscal 2018. That would bring the budget to just just over $1.79 billion. The House appropriations package would cut that part of NNSA ever more, by about 5.5 percent to some $1.77 billion. The Senate Appropriations Committee’s bill would raise the overall nonproliferation budget almost 4 percent to roughly $1.84 million.
S.C. Files New MOX Lawsuit Seeking $100M From Energy Department
The state of South Carolina has filed a new lawsuit against the Department of Energy seeking another $100 million it says the federal government owes for missing a deadline to remove 1 ton of plutonium from the Savannah River Site.
The lawsuit, filed Monday in U.S. Court of Federal Claims, represents half of the total amount the state is seeking in the dispute. The other $100 million is covered in a suit South Carolina filed early last year.
“This lawsuit seeks the recovery of the $100 million the United States currently owes South Carolina for the economic and impact assistance payments that DOE has failed and refused to pay for calendar year 2017,” according to the latest lawsuit.
In a 2003 deal with the state, DOE agreed to remove 1 ton of plutonium from South Carolina by Jan. 1, 2016, or to process it at the Mixed Oxide Fuel Fabrication Facility that remains under construction at the Savannah River Site. A congressionally mandated stipulation directed the federal agency to pay $1 million per day, up to a maximum of $100 million annually, upon breaching the deadline.
When payments did not begin early last year, state Attorney General Alan Wilson in February 2016 sued DOE and its semiautonomous National Nuclear Security Administration (NNSA) in U.S. District Court. The lawsuit requests that DOE remove plutonium from SRS and pay the penalty, which reached the full $100 million in April 2016. The state added another $100 million to that pot this year.
In February of this year, U.S. District Judge J. Michelle Childs ruled South Carolina should pursue the money in the Court of Federal Claims. Childs also ruled that the sides should hash out the plutonium removal issue, but the parties told her last week they were unable to resolve their differences on the process. The parties are required to issue separate statements detailing what they want out of the negotiations; the state submitted its statement last week, and DOE has until Friday to do the same.
In a press release Tuesday, Wilson said his office also intends to pursue the court case for the first $100 million from 2016.
Air Force’s Nuclear Command, Control, and Communications Face Challenges, GAO Says
The U.S. Air Force does not have adequate resources to address the long-term needs of its nuclear command, control and communications (NC3) systems, the Government Accountability Office (GAO) said Aug. 15.
“We found that the Air Force has continued to take steps to provide an Air Force-wide NC3 oversight structure for the NC3 Weapon System, but its focus has mainly been on short-term issues to sustain the current systems as it added personnel for its new NC3 oversight structure,” the GAO wrote in a new report. “According to Air Force officials, the Air Force has built up its understanding of the short-term sustainment needs for the 62 component systems that currently make up the NC3 weapon system, but has not had the resources to focus on the long-term needs for NC3.”
The Department of Defense’s overall NC3 system consists of air, land, sea and space components that allow the president to communicate with nuclear forces. The Air Force is responsible for a majority of those assets.
In a February report, the Congressional Budget Office estimated that operating, maintaining and modernizing DoD’s NC3 systems over the next decade will cost $34 billion. Modernization efforts include replacing the aging Boeing [BA] E-4B National Airborne Operations Center aircraft.
The GAO, which reviewed eight NC3 acquisition programs, found that each has made progress toward meeting its goals but that most still have challenges. Four programs have tight schedules that could cause delays if problems arise, and two programs plan to move into development without ensuring their requirements are affordable and feasible.
The Family of Advanced Beyond Line of Sight Terminal (FAB-T), one of the programs the GAO reviewed, recently received a jolt of bad news. Two House members revealed in late July that a full-rate production decision has been delayed a year (Defense Daily, Aug. 1). Raytheon [RTN] is the prime contractor the FAB-T program, which is supposed to field terminals to use the Air Force’s Advanced Extremely High Frequency protected-communication satellites.
The GAO report is a relatively short six pages. The watchdog agency said it gave more details to congressional defense panel staff in classified briefings in May and June.
DoD declined to comment on a draft of the report, according to the GAO.
Nuke-Hand Peery Taking New Role at Oak Ridge
Former nuclear-weapons hand James Peery has been appointed chief scientist of the Oak Ridge National Laboratory’s Global Security Directorate, the Department of Energy facility in Tennessee said.
Peery, whose career has included stops at the Sandia and Los Alamos national laboratories in New Mexico, will work primarily on cybersecurity efforts to protect the U.S. electric grid, according to an Aug. 7 Oak Ridge press release.
Peery was most recently vice president of defense systems and assessments at Sandia: a position he held from 2015 until his recently announced move east.
Peery has previously worked on Energy Department nuclear programs, including as principal deputy associate director of the Los Alamos National Laboratory’s nuclear weapons program. He spent about five years at Los Alamos, departing in 2007 to return to Sandia, where he began his career in 1990.
