Saturday, June 9, 2007

EnergySolutions buys BNFL reactor business

What's next? Fish & Chips at Salt Lake's EnergySolutions Arena?

EnergySolutions, the big nuclear firm just down the road from Idaho Falls in Salt Lake City, bought itself a really big piece of the British nuclear industry this week. They might not be serving Fish & Chips just yet at EnergySolutions Arena in SLC, but the way things are going that's not outside the realm of the possible.

EnergySolutions announced it will buy British Nuclear Fuels (BNFL) Reactor Sites Management business that holds licenses to operate 10 nuclear sites and 22 reactors employing 3,500 people in the UK. The deal is worth $688M at this week's currency rates. EnergySolutions beat competition from another US firm, Jacobs Engineering, for the package.

Two of the facilities, Oldbury and Wylfa, are still producing electricity, but the rest are in the process of being dismantled and decommissioned. Oldbury in Gloucestershire is set to shut next year and Wylfa in Anglesey in 2010. The main role of EnergySolutions will be to decommission the bulk of the nuclear plants coming under its control.

EnergySolutions, based in Salt Lake City, UT, is a growing player in the field of nuclear decommissioning and has federal government contracts for nuclear waste cleanup, spent fuel management, and nuclear facility engineering services. The firm has submitted proposals to the US Department of Energy for GNEP sites in Idaho, New Mexico, and South Carolina.

It has not had sole operating responsibility for sites that generate electricity from nuclear energy. Steve Creamer, the chief executive, said,"We take on this responsibility with the same commitment to safety and the environment that has always characterized our company."

BNFL said the deal offered "good value" for its shareholder, the government. The Prospect trade union told the Guardian, a UK newspaper, it was aware that EnergySolutions did not have operating experience with nuclear plants, but believed the company's strong track record in safety and employee relations meant it was a welcome new owner for the business.

EnergySolutions recently announced plans for an IPO on the New York Stock Exchange. It is thought by some to be interested in becoming a partner in new nuclear reactors built in Britain.

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PS: Not that the food matters (Fish & Chips) . . . normally I'd root for the Utah Jazz, with a hot dog and a beer thank you, and based on geography. After all SLC is only 200 miles away, but this year I'm a Cleveland Cavaliers fan :-) Ah, the magic of television!

NRC "no bozos" rule issued for nuclear startups

Adm. Rickover would be proud of NRC chairman's policy

In a speech before a a large number of chief executives from the nuclear utility industry, Dale Klein, Chairman of the Nuclear Regulatory Commission, issued what may come to be called the "no bozos" rule for involvement in building a nuclear power plant. Klein said the NRC was watching to make sure that "inexperienced companies" don't jump on the nuclear bandwagon. He added that allowing "amateurs" to start up financing and construction of new plants "could threaten the resurgence of nuclear power in the US."

Klein's comments come right out of the tradition of US Navy Admiral Hyman Rickover who insisted that his officers be thoroughly qualified for the job. Shooting straight from the hip, Klein said;

My subject is something that each of the five Commissioners believe in, and have said before—which is this: owning a commercial nuclear reactor is not a business for amateurs. If the nuclear power business is treated with less than the seriousness it deserves—and people begin to think that anyone can just jump on the nuclear bandwagon—it opens up the very real danger of making the “wave” of the nuclear resurgence look more like a “bubble.” And bubbles have a tendency to pop.

It is not my function as a regulator to tell industry how to manage its capital investments or construct its business models. As a regulator, however, I do have a legitimate interest in seeing that the “captains” of the nuclear energy industry have a proper appreciation for the technical, engineering, and security challenges involved in operating commercial nuclear reactors. So when I observe utilities spinning off their nuclear energy components, or see plans for changes in the ownership of nuclear power companies, I think it is worth reiterating the basic point that the nuclear energy business is in many ways unique, and should be treated as such. Highly qualified technical leadership will continue to be essential—and so it needs to be developed and maintained.

And to make sure there are fully qualified people running the industry, the NRC is ramping up to meet the expected growth in nuclear power. Klein gave these highlights of the NRC's response to the resurgence of the industry.
  • We’ve been told by industry to expect license applications for 27 new reactors in the next two years... and every day our Executive Director of Operations warns me to prepare for an even higher number.
  • The NRC expects to add 1,200 people to the agency's staff.
  • To do that, we had to create an entirely new inspection office in Atlanta.
  • We are scrambling to increase our workforce by a net of 600 employees
  • With uranium at $100 a pound, we are hearing from a dozen companies expressing an interest in new mining operations in the U.S.
  • We are dealing with a huge increase in public inquiries from people wanting more information about the expansion of nuclear power.
  • Our office in charge of international programs is in overdrive to deal with the fact that nuclear energy has become, in almost every respect, a multinational business.
  • And all of that is on top of our regular workload of overseeing the safety of the 104 plants already operating in the U.S. and a large number of licensees using radioactive materials.
The NRC is busy, but it doesn't want to be more busy than it has to policing people who have no business in the business of building nuclear power plants.

India nuclear deal falls apart, again

Nobody is surprised the two countries did not come to terms

Negotiations to produce a landmark deal for cooperation between the US and India over nuclear energy technologies have fallen apart for a second and perhaps final time. According to the Hindustan Times, Nicholas Burns, the US lead negotiator, highlighted two issues - US insistence that India not reprocess nuclear fuel to recover plutonium and that India not conduct any further underground nuclear weapons tests. Under US law no nuclear material can be sold or transferred to a country that has conducted a nuclear weapons test and has not signed the Nuclear Non-proliferation Treaty. India checks the boxes on both counts.

India says it must have terms in the agreement that allow it to extract plutonium from reactor fuel and the flexibility to test another nuclear device without sanctions that cut it off from nuclear fuel and technology exchanges with the US. For its part India has taken a hard line saying that if Europe (Euratom) and Japan can reprocess fuel it should have the same rights. Indian government officials, speaking to wire services, said that reprocessing fuel is needed to support its fast-breeder program and to develop reactors based on thorium. India has more than 30% of the global reserves of the metal.

At the G8 summit taking place in Berlin, in a bid to break the logjam over the civil nuclear deal with the US, India offered to set up a dedicated safeguarded facility for reprocessing of spent fuel. India's Prime Minister Manmohan Singh met briefly with US president George W Bush to promote the idea. India National Security Adviser MK Narayanan and his US counterpart Stephen Hadley met to discuss the proposal to establish a separate facility in India to reprocess of spent nuclear fuel. This looks like a classic political fig leaf covering up the fact that India would still get to reprocess fuel which is contrary to US objectives for seeking the deal in the first place. Nothing was announced as a result of the meetings despite the usual diplomatic platitudes. A G8 declaration on non-proliferation called upon India to do more to make itself eligible for multilateral help with its civilian nuclear program.

India's loss is China's gain

Significantly, for India, an Australian government official said that Australia will not sell uranium to India until it signs the treaty. Australian Prime Minister John Howard effectively ruled out selling uranium to India as he headed for New Delhi on June 4th. India wants to expand its nuclear power industry but Howard indicated there would be no uranium deal as the Asian country had not signed the United Nations treaty on the non-proliferation of nuclear weapons. "We don't have any plan to change our current policy," he told reporters ahead of his departure.

Howard said a pact signed by US President George W Bush and Indian Prime Minister Manmohan Singh on the sharing of nuclear technology would not change Australia's stance. "We're certainly not going to suddenly change our policy just because the Indians and Americans have reached an agreement," he said.

Australia, which has around 40 per cent of the world's known uranium deposits, does not sell uranium to countries which are not signatories to the Non-Proliferation Treaty. Uranium mining companies in Australia have been pressuring Prime Minister John Howard to shift the government's policy and allow yellowcake to be exported to India. This latest announcement slams the door shut, but not in terms of selling uranium to other countries.

Missed opportunities and a closing window of time

The failure of the latest round of negotiations because of India's hard-line lobbying against US conditions for the deal, means China gets open invitation to buy uranium from Australia now that India is locked out out of that market. China is eligible to buy uranium from Australia. It signed the Nuclear Nonproliferation Treaty in 1992. With a clearer path to acquire uranium for nuclear fuel, China announced it is opening its nuclear industry to foreign investment. Clearly, India's loss will be an opportunity for China's gain.

Critics of the India deal point out the US has missed several opportunities to strengthen the Nuclear Nonproliferation Treaty. Writing in the Washington Post in May, Sharon Squassoni of the Carnegie Endowment said the India nuclear establishment was given an inch in the deal and took a mile.

An Indian agreement to stop production of fissile material for nuclear weapons would have strengthened the nonproliferation regime and U.S. leadership, but U.S. officials didn't press hard for that. An Indian agreement to place all of its electricity-producing reactors under international inspections would have made the Indian plan to separate its military from its civilian nuclear programs meaningful, but the U.S. retreated from that. The next phase of Indian nuclear development the construction of fast breeder reactors could take place entirely outside of international safeguards.

The window of opportunity for a deal will close in September as the US Congress races to finish funding bills and Bush's lame duck status becomes even more apparent with escalation of the 2008 presidential campaign.

The side discussions at the G8 Summit over India's nuclear ambitions were dwarfed by controversy over Iran's defiance of UN Security Council sanctions demanding it stop uranium enrichment. If India and the US are going to cut a deal, they need to realize they are on their own. As the famous comic strip character Pogo once said, "we have met the enemy and they are us." No dates have been set for the next round of negotiations.

House Appropriations Committee Markup for Energy

The full House Appropriations Committee reported out its FY2008 markup for the Department of Energy's funding. Highlights include;
  • Increased funding for the Next Generation Nuclear Plant (NGNP) by $79M at the Idaho National Laboratory (INL). It appears the Democrats have no problems with high temperature gas-cooled reactor technologies (HTGR) that are still in the R&D phase. The South African nuclear engineers building the PBMR might have a thing or two to say on that subject. Also, the committee directed DOE to boost the priority for NGNP over GNEP and to make Idaho the site for a demonstration facility.

  • Reduced funding for the Global Nuclear Energy Partnership (GNEP). This is a major cut of $285M from the President's budget to $120M. The committee's skepticism about the program is clear in the markup language. It's almost too painful to read so I'll spare you the actual sound bite. Instead, the committee allocated $100M to the International Atomic Energy Agency (IAEA) to support a nuclear fuel bank.

  • Added nearly $360M to the DOE environmental cleanup program spreading the funds over 23 sites in 14 states. Yucca Mountain, the national geologic repository for spent nuclear fuel, was funded at just under $500M.

  • Nuclear weapons labs, including Los Alamos and Sandia, fared worst of all with a $632M cut to 37 programs prompting strong responses from the New Mexico congressional delegation.

  • The Nuclear Regulatory Commission (NRC) got an additional $15M, as part of a total of $926M, for educational scholarships and fellowships. Congress must have figured out you can't build nuclear power plants, much less regulate them, unless you start producing nuclear engineers at the nation's universities.
House Democrats hope to pass a number of appropriations bills, including this one, prior to the July 4th recess. There is no corresponding markup yet in the Senate.

Sunday, June 3, 2007

USEC wants free uranium from the government

Rep. John Dingell calls it a "bailout" for a company in financial trouble

Anyone who thinks that nuclear energy is not headed for a major league revival needs to take a look at the price of uranium and the multi-billion dollar investments in uranium enrichment facilities in Ohio and New Mexico needed to make nuclear fuel.

The issue is clouded by a request from the Ohio plant's operator for a windfall of free uranium from the government at a time when the price of the metal (U3O8) has soared from $7/lb in 2001 to $120/lb this month because of demand from current and new nuclear reactors. Some in Congress see the request as a bad deal because the firm, USEC, has "not demonstrated fiscal responsibility."

USEC breaks ground on new plant in Piketon, OH

USEC began construction last week of its American Centrifuge uranium enrichment plant in Piketon, OH. The Nuclear Regulatory Commission (NRC) granted a construction and operating license for the plant in April. The company plans to begin commercial operations in late 2009 with full operations targeted for 2012. The new plant could cost between $2.5 and $3.0 billion when completed and fully operational.

USEC operates the only uranium enrichment facility in the US at the gaseous diffusion plant in Paducah, KY. The new plant in Piketon, OH, is expected to use much less electricity. This week USEC also signed a five year contract with the Tennessee Valley Authority (TVA) for the Paducah plant to "manage the risk of rising prices." USEC said in its first quarter earnings statement that the cost of electricity had a negative impact on profits.

There's ain't no such thing as a free lunch

Meanwhile USEC has asked the government to transfer title to it of 25 million kilograms of uranium hexafluoride which is sitting at the Paducah plant. The New York Times reports,

"furious lobbying has broken out over who should end up with the prize, which will eventually end up as nuclear reactor fuel after being run through an enrichment plant. And though the material’s market value has been estimated at $750 million to $3 billion, USEC has been vocal in making its case saying it deserves the uranium — without paying a cent for it."

USEC makes the case that the government should give the uranium to the firm for free. Some of the uranium is left over from the atomic weapons Manhattan Project of the 1940s. USEC says the title to the metal could be changed with the stroke of a pen and insure the new plant, which badly needs investment capital, would be American owned.

USEC request called a "bailout"

Rep. John Dingell (D-Mich), who is chairman of the House Energy and Commerce Committee, calls the request for $3B in uranium a "bailout," and charges the USEC "squandered resources in multimillion-dollar golden parachutes, stock buybacks, and dividend payments that frequently exceeded their earnings." The company denied the charges.

Dingell asked the General Accounting Office (GAO) to give Congress an assessment of how to deal with the surplus uranium. But just before Dingell sent the GAO request, USEC President John Welch , who is a formidable power in the nuclear industry, wrote Dingell saying use of the spent uranium would last no longer than 4 years. After production costs, the net value of the enriched uranium could range from $750 million to $1 billion, Welch said. The company says it needs help from private investors, the government or both to fund the new plant at Piketon, OH.

What's interesting about Dingell's efforts to put controls on who gets the uranium and how is that over the years his political campaign contributions have come from major nuclear utilities and USEC itself. Is Dingell's protest just window dressing to avoid the appearance of a giveaway or is he really biting the hand that feeds him? The nuclear utilities would very much like to see the price of uranium go down.

USEC lacks investors, but faces new competition

According to the New York Times for 05/29/07, USEC says it does not have investors lined up for the new plant. The NYT also reports that USEC's future is uncertain and, if it is broken up and the assets sold off, the same issues about free uranium could be raised by the next firm to run the plants.

There's competition for USEC's plants and it lives right here in the US. The NRC issued a license in June 2006 to a European consortium to build a uranium enrichment plant in New Mexico. Urenco, a consortium owned by British Nuclear Fuels Ltd., the Dutch government and several German utilities, plans build a plant nearly identical to one operating in the Netherlands.

It will use centrifuge technology that requires only about 5 percent as much electricity as plants using gaseous diffusion systems, which have been used in the United States since World War II.

The New Mexico plant is scheduled to start enriching uranium in 2008, said Marshall Cohen, vice president of the consortium's American subsidiary, Louisiana Energy Services. It will reach full capacity in 2012 or 2013, Mr. Cohen said, and could be expanded later if new nuclear reactors are ordered.

At $1.5 billion, it is the largest civilian nuclear project in the United States in about a decade. It will be built near Eunice, N.M., not far from the Texas border.

With regard to USEC's request, the Urenco consortium has also asked for a piece of the action in terms of using the government's uranium. The sticking point will be whether giving the uranium away will depress the price of the metal and discourage investments in new uranium mines.

The government's decision about what to do with the surplus uranium will inevitably include a debate over the impact on USEC. Whether the company can make the case for new investment in its Piketon, Oh, plant, fueled by free uranium, remains to be seen.