$115 million nuclear contract draws scrutiny on Perry

Energy Secretary Rick Perry is seen testifying at a hearing of the Senate Appropriations Committee Subcommittee on Energy and Water Development last year. Energy Secretary Rick Perry is seen testifying at a hearing of the Senate Appropriations Committee Subcommittee on Energy and Water Development last year. Photo: Alex Brandon, STF / Associated Press Photo: Alex Brandon, STF / Associated Press Image 1 of / 3 Caption Close $115 million nuclear contract draws scrutiny on Perry 1 / 3 Back to Gallery

WASHINGTON — Energy Secretary Rick Perry’s decision to award a $115 million no-bid contract to develop an advanced nuclear enrichment facility in Ohio is drawing scrutiny from Senate Republicans.

The Department of Energy said this month it would award the contract to Centrus Energy, a former government-owned contractor that ceased enrichment operations in 2013 before declaring Chapter 11 bankruptcy.

In a letter to Perry this week, Sen. John Barrasso, R-Wyo., chairman of the Senate Environment and Public Works Committee, said the company had a mixed history in fulfilling federal contracts for nuclear fuel and questioned whether the money it received would end up supporting the Russian state-owned firm TENEX, from which Centrus buys enriched uranium.

“This contract appears to use American taxpayer funding to bailout Centrus, an unsuccessful business that relies on commercial relationships with Russian state-owned corporations to stay in business,” Barrasso wrote. “Congress did not authorize or fund this project.”

Both the Department of Energy and Centrus declined to comment for this story.

When uranium comes out of the ground, it has a relatively low concentration of radioactive isotopes. In order to fuel nuclear power plants or produce weapons, the uranium must be enriched, or processed to increase the concentration of isotopes.

Foreign sources

Centrus, the Maryland-based successor to the former United States Enrichment Corp., which was privatized in 1998, operated enrichment plants in Ohio and Kentucky until 2013, when uranium prices crashed following a tsunami that caused the shutdown of nuclear plants in Japan.

In 2017, Centrus counted revenues of less than $200 million, down from more than $1.9 billion in 2012, according to U.S. Securities and Exchange Commission filings. With its enrichment facilities shuttered, the company’s business primarily centers on importing enriched uranium from abroad, including Russia, a common practice in the U.S. energy sector.

Nuclear plants here get more than 90 percent of their fuel supply from abroad, with Russia the third largest supplier behind Canada and Australia, according to the Department of Energy.

The Energy Department pitched the Ohio contract as a step toward developing a U.S. supply chain for the more concentrated form of uranium required by some advanced nuclear reactors, which have potential for both commercial and military use.

For now it is a small-scale demonstration project with 16 centrifuges, to be located on the 600-acre former Portsmouth Gaseous Diffusion Plant in Piketown, Ohio, which was once operated by Centrus and is in the midst of a government cleanup estimated to cost $17.5 billion.

But it could just be the beginning, Deputy Energy Secretary Dan Brouillette tweeted of the contract this month. The department is “on its way to creating fuel for the next generation of advanced reactors critical to our future.”

The announcement drew accolades from Democrats and Republicans alike in Ohio, likely to be a critical battleground state for President Donald Trump in his re-election bid in 2020.

“Getting Piketon back to its full potential benefits the skilled workforce here, the surrounding local economy, and strengthens national energy and defense security,” Sen. Rob Portman, R-Ohio, said in a statement at the time of the announcement. “I want to thank the Department of Energy and the Trump administration for reconsidering the Obama administration’s decision to end the domestic uranium enrichment demonstration program.”

The Obama administration canceled its contract for a similar demonstration project with Centrus in 2015, after the Department of Energy determined their work was of “minimal incremental value,” according to Barrasso’s letter.

Industry interest

But within the nuclear energy sector, interest persists to develop a more enriched form of uranium for advanced reactors, in particular smaller advanced reactors to potentially be used on military bases or in remote communities.

Right now, the only companies capable of producing that fuel are in Russia, said Everett Redmond, a senior technical adviser at the trade group Nuclear Energy Institute.

“I’ve heard from the Russian companies they can provide it,” he said. “We would like to see a domestic source, for fuel security and national security. With the political tensions worldwide, as you’re trying to get a new market going, it would make sense to have a source in the U.S.”

While there are other enrichment companies with the capability to perform the demonstration project, the Energy Department said in a notice earlier this month that Centrus subsidiary American Centrifuge Operating was the only firm that qualified. The department noted that Centrus is U.S.-owned and controlled, a requirement for enrichment contracts to supply the military, and was the only firm with a current license from the Nuclear Regulatory Commission to perform the work.

Barrasso’s letter, however, said Centrus failed to pay the annual fee for that NRC license last year, “as required by law” to maintain that status.

james.osborne@chron.com

Twitter: @osborneja