Saturday, May 3, 2008

Areva clams up about US project

Update 2008 05 08 Areva selected Idaho Falls as the location for the plant.

Still in the dark about the location of a $2 billion uranium enrichment plant clamshell

Idaho Falls TV station KIFI took a run this week at trying to find out what's happening with Areva's plans to locate a $2 billion uranium enrichment plant in the U.S. The company has been silent for nearly a month since its executive committee met. The results of some extensive use of shoe leather by KIFI - nothing. No one from any of the Areva's offices in Idaho would talk to the TV station's reporter citing instructions from management not to discuss the project with the news media. KIFI is not alone in coming up dry trying to figure out what's happening with Areva. A reporter for the Idaho Statesman told me late this week he's got zip, nada, and flat out nothing about Areva.

Linda Martin, head of the local economic development group Grow Idaho Falls, put in her two cents to KIFI. She said the decision is taking so long because, "it really is a global decision, we're dealing with a French uranium company and an expansion that will affect our country no matter where it's put in."

So let's take that insightful comment as our springboard and see where it goes.

Five sites, no waiting

When Areva was checking out five potential sites in the U.S. it operated like it had a free hand to make the decision. In fact, Areva's choice of a location for the plant will likely require some level of agreement at the highest levels of the U.S. government. Areva is a state owned organization with 85% of its shares held by the French government. This makes it an instrument of a foreign power.

It isn't that the French are unhappy with the U.S. or vice versa these says. After all French President Nicholas Sarkozy took a vacation last year in New Hampshire and has worked hard to renew ties between the two countries.

One site, 104 customers

The issue could be that no matter where Areva puts the plant in the U.S., it will in a few years control a third of the supply of enriched uranium needed by 104 U.S. nuclear power plants that generate 20% of the electricity used by nearly 300 million people. This means the price charged by Areva for the nuclear fuel will drive the cost of electricity for a lot of customers of these utilities, who are also voters.

That's a lot of impact and leverage so it should come as no surprise that it could be getting a lot of attention in terms of U.S. energy policy. This suggests that once Areva chooses a site, it still has to get a policy nod from the Department of Energy and the White House not to mention the congressional delegations in the winning and losing states.

Two big competitors already in motion

Then there is the matter of current competition in the U.S. Louisiana Energy Services (LES) is building a similar uranium enrichment plant in far southeast New Mexico, but Areva is one of the investors in the plant through its relationship with Urenco, the parent firm of the project. So that makes LES something less than a direct competitor.

The other player is U.S. Enrichment Corp, (USEC) based in Ohio, and which has a challenging financial situation trying to raise money to build the American Centrifuge facility, a $3.5 billion uranium enrichment plant. The firm is a potential recipient of a $2 billion loan guarantee for the facility, but so far the Department of Energy hasn't inked the deal. If there is anyone who has a bone to pick with Areva as a competitor it is USEC. Whether the firm has the political throw weight to gum up government's approval of Areva's site selection process is anyone's guess.

Politics abhors a vacuum

Meanwhile, what we've got is a vacuum in terms of information about Areva. If we take a look at the five sites that the company said it considered, (ID, NM, WA, TX, and OH), only two IMHO appear to make it to the top of the list, Idaho and New Mexico.

  • In Hobbs, NM, the economic development team there came up with an attractive set of incentives.
  • In Idaho the state legislature leveled the playing field by offering tax breaks that would benefit the company.
  • In Washington the governor's ho hum endorsement of the plant, coupled with a lecture to an Areva executive about waste issues, may have moved that site down a notch or two on the list.
  • In Ohio people upset about cleanup problems at the Piketon plant came out, metaphorically speaking, with pitch forks and pruning hooks over the mere mention of the plant by Ohio Gov. Ted Strickland. Areva has said it will not go where it is not wanted, which probably puts Ohio at the bottom of the list.
  • The folks in Texas have aligned themselves with the Hobbs site.

So what's the hang up?

It can't be fiances, despite the current international meltdown, because as a state-owned entity, Areva can finance anything Sarkozy's government approves. Is it something we ate? Maybe it was the scallops?

There are a couple of possibilities, but none are compelling and there are no news media reports to suggest any of them are real. What I'm going to do here is set up a couple of straw men for the two leading sites, New Mexico and Idaho, and then knock them down. Reader comments are welcome.

  • New Mexico

If we look at possible site specific issues, in New Mexico, you have the obvious question of whether you want to put two-thirds of the U.S. manufacturing capability for enriched uranium within the same state. During the cold war the U.S. tried hard to disperse the core of the U.S. machine tool & die industry centralized in eastern Ohio because it was such an attractive target for Soviet missiles. In the current era would two uranium enrichment plants located within spitting distance of each other be an attractive target for terrorists?

That's not something I want to dwell on, and it may be an 'oh never mind,' but concentration of critical infrastructure is a new wrinkle in the industrial fabric of the nation given the types of security threats that face the country.

  • Idaho

In eastern Idaho the Department of Energy and the State of Idaho are trying to negotiate a new cleanup strategy following the "all is all" ruling on buried waste from the 9th Circuit Court of Appeals. A $13 billion cleanup bill for the feds hangs in the balance. A more reasonable approach to cleanup of buried waste by the State of Idaho could significantly reduce that claim on federal dollars.

However, this issue is unrelated to Areva's plans, and it makes no sense that it would influence the location of a new facility on private land even if it does involve uranium enrichment. The Bush Administration has way too much on its plate with France to let a regional environmental issue weigh in the balance here.

Of course these two possibilities are all just speculation.

Eight ball in the side pocket?

Most likely the delay in an announcement has nothing to do with any of the five sites, or the states, on Areva's list. Like a three bank shot in a game of pool, one more possibility is that some international issue has got Areva's socks tied up in a knot. This is Ms. Martin's take on the situation, and it still makes sense to me.

If we take a look at French President Sarkozy's world travels as a nuclear salesman, it's possible one of his potential customers has the U.S. worried. It could be our government is trying to apply some international leverage about the latest potential French nuclear deal before it turns Areva loose to publicly select a site for the enrichment plant in the U.S.

Finally, the French government is nearly as byzantine as the Turks which means that a site decision for a $2 billion uranium enrichment plant in the U.S. most likely gets due diligence reviews that simply take time. Given the firm's effective clam shell strategy about its plans, we're just going to have to wait for them to open up about it.


Anonymous said...

> If we take a look at the five sites that the company said it considered, (ID, NM, WA, TX, and OH),...

Minor point, but they also (seriously) considered VA and SC, as you've said:

Joffan said...

... and also as you mentioned elsewhere, there's always the dark horse in the north... Saskatchewan.

Which would be a good option for Areva to at least pretend to have under consideration, in case the states get difficult.