I will yield to no man in my support for nuclear power in this country, but recent news makes me think that we've gone a bit too far in government involvement in the nuclear business. Call it my "what the heck?" moment. Further reflection revealed specifics on the inner workings of political power over the economy and over public debate.
The issue is the new U.S. government loan guarantees to the front end of the civilian nuclear power industry. The "front end" is the processes that prepare the uranium fuel for delivery to nuclear power plants. Separately, there is a legitimate and persuasive case for loan guarantees for the construction of new nuclear reactors, owned by American companies and serving American electric customers.
These reactor guarantees have been in the works since 2005, but they have yet to be finalized. The projects are massive investments in U.S. infrastructure, and in the past, the owners and lenders have lost billions of dollars from capacious government actions. Once construction starts, that investment is sunk in place, unmovable, and unrecoverable. Without financial guarantees against governments changing the rules or withdrawing the permits, investors are rightfully leery of putting up money for the reactors. Note that these guarantees cover only events outside the project participants' control, like withdrawal of permits and licenses, changing government regulations, or congressional changes of heart. Screw up the design or construction and the owners eat it, not the taxpayers. The Department of Energy is now considering a billion-dollar-plus loan guarantee application for a new uranium enrichment facility to be located in Idaho, called the Eagle Rock plant. Isotopic enrichment is required for the uranium fuel used by almost all commercial nuclear power plants and is the most capital-intensive part of the process. Commercial enrichment services are available in a number of countries, but U.S. and global demand is expected to outstrip supply once the Russians stop selling us their surplus warheads in a few years and the new reactors being planned come online. The classic definition of socialism is "government ownership of the means of production." Such ownership on a local scale sometimes seems to work, as in municipal utilities where the citizens are close to the organization and have ways to influence and control management. However, in this case, the Eagle Rock project is being developed by a company that is majority-owned by the French government (warning: 2.44 meg file; see page 45). That company, Areva, is a major player in world nuclear businesses, starting at the beginning -- with uranium mining. It was the Areva uranium mine in Niger that Ambassador Joe Wilson famously went to check on during the Bush Administration. Areva's activities extend from mining through enrichment to fuel fabrication, new plants, and fuel reprocessing. It makes a handsome profit for the French government and its minority owners. Why we taxpayers would want to be on the hook for this project I can't fathom. First, there are two other companies with centrifuge enrichment plant plans that have begun construction already within the U.S. One has already spent $1.5 billion, even as its loan application was denied. The other is being built without government guarantees. Another prototype plant using laser enrichment technology has been licensed and should be starting operation shortly, with plans for a full-scale plant to follow.
Second, enriched uranium at commercial reactor levels is an article of longstanding international commerce. Barring government restrictions, it can easily be transported to and fro between countries that have been steadfast allies of the US. Third, the French government already stands behind the equity capital (and maybe the borrowed capital too) as owner of Areva and intends to collect the profits from the facility. Finally, while uranium enrichment facilities are regulated at all levels of government, the degree of regulatory risk and technical scrutiny is much lower than for nuclear power plants.
True, the U.S. benefits from having adequate uranium enrichment capacity within our borders to serve our nuclear power plants. That is a valid, if weak, national-security and balance-of-payments argument. True, the Eagle Rock project would create jobs. But so would any uranium enrichment plants built or expanded here. Ultimately, demand will increase prices for enrichment services, risk-taking companies will put up their capital in search of profits, and worldwide supply will match worldwide demand.
The really appalling part of this loan guarantee program is that probably only one new enrichment plant will be subsidized, given their expense and the amount of money authorized ($2 billion). Companies that don't get the government guarantee will most likely be shut out of the market. That means that Mr. Jonathan Silver, new executive director of the DoE loan program, will make the decision on which companies will serve the U.S. market and which ones won't. I've nothing against Areva. I'm confident that they will build an efficient and productive plant that will be a good neighbor -- but so would their competitors.
But we will be right to suspect that the competition won't be won on price, efficiency, financial strength, or good engineering. Indeed, it is our duty as free citizens to search for such failings in our government. It is too easy to imagine that some czar in the White House will drop a line in a conversation with Mr. Silver that "we like the position that Company X is taking in support of the president's stand on cap-and-trade." Maybe the words will be "Company Y is just not a team player with the president on climate change." Mr. Silver is certainly smart enough to take such hints. Knowing this, what company in any market subject to federal financing would dare speak out against the president? Ask the U.S. Chamber of Commerce about the perils there.
While our government has a role in encouraging adequate energy infrastructure for U.S. citizens, and I admire Areva on the professional level and welcome their nuclear expertise in our country, offering U.S. government cheese to the French government is stretching the nuclear renaissance to the point of indigestion.
Joseph Somsel is a nuclear engineer who works for a foreign-owned company that is a competitor to Areva in most nuclear businesses except uranium enrichment.