[Congressional Record (Bound Edition), Volume 146 (2000), Part 11]
[Senate]
[Pages 16346-16348]
[From the U.S. Government Publishing Office, www.gpo.gov]



                   RUSSIAN WARHEADS/DOMESTIC SECURITY

  Mr. MURKOWSKI. Mr. President, I rise today to discuss two issues of 
great importance to our national security and our energy security--the 
agreement between the United States and the Russian Federation which 
provides for the conversion of Russian highly enriched uranium (HEU) 
derived from the warheads into fuel for civilian nuclear power plants, 
and the need for the United States to maintain a viable uranium 
enrichment capability.
  First, let me give you a bit of history.
  In 1992, the Energy Policy Act established the United States 
Enrichment Corporation as a wholly-owned government corporation to take 
over the Department of Energy's uranium enrichment enterprise. The 
Corporation was to operate as a business enterprise on a profitable and 
efficient basis and maximize the long-term valuation of the Corporation 
to the Treasury of the United States. The objective was to eventually 
privatize the Corporation as a viable business enterprise able to 
compete in world markets. Subsequently, the Corporation was selected as 
Executive Agent for, and entrusted with, the responsibility for 
carrying out the Russian HEU Agreement.
  Enactment of the 1992 Act was the culmination of a decade of 
bipartisan effort spearheaded by Senators Domenici and Ford. Extensive 
hearings were held in both the House and the Senate and the legislation 
garnered the strong support of the Bush Administration.
  Recognizing the complexity of privatization and the national security 
implications of the Russian HEU Agreement, Congress enacted the USEC 
Privatization Act of 1996. The Act provided the mechanics for 
privatization, clarified the relationship between a private USEC and 
the U.S. Government, and addressed concerns related to the 
implementation of the Russian HEU Agreement. The Corporation was sold 
in July of 1998.
  Implementation of the Russian HEU Agreement has been important for 
the government and USEC. This government-to-government agreement 
facilitates Russian conversion of highly enriched uranium taken from 
their dismantled nuclear weapons into fuel purchased by USEC and resold 
for use in commercial nuclear power plants. The program is financed as 
a commercial transaction.
  Every day, new warnings are heard about the ability of one rogue 
state or some well-financed terrorist to obtain weapons-grade nuclear 
materials on the black market. The Russian HEU Agreement addresses 
those concerns by converting thousands of nuclear warheads into fuel 
for electric power plants--the quintessential swords to plowshares 
concept. In spite of some start-up problems, implementation of the 
Agreement has resulted in the conversion of the equivalent of nearly 
4,000 nuclear warheads into fuel for U.S. commercial power plants. The 
process, as well as purchases and shipments to USEC, continues.
  From the outset, many felt there were built-in contradictions between 
the objectives of maintaining a viable domestic uranium enrichment 
capability while controlling the disposal of former Soviet nuclear 
weapons. But, all things considered, the program to date has been a 
success. Without question our Nation's national security--our most 
important charge as lawmakers--has been enhanced by implementation of 
this Agreement.
  Mr. President, the Russian HEU Agreement contributes to our Nation's 
security, but the Agreement also adversely affects the enterprise that 
makes this commercial solution to a national security problem possible. 
This difficulty was understood when the government adopted this 
program.

[[Page 16347]]

Purchases of large quantities of Russian weapons derived material 
result in growing effects on the companies in the private sector 
domestic nuclear fuel cycle. Our uranium mining, conversion, and 
enrichment industries have been affected. The result has been steadily 
declining market prices for all phases of the nuclear fuel cycle. USEC, 
its plant workers, and the communities dependent upon those plants are 
being hit especially hard. As Executive Agent, USEC has suffered 
substantial losses due to fixed price purchases from Russia as well as 
increased costs due to reduced levels of domestic production resulting 
from introduction of the Russian material into the market.
  Earlier this year, and with the support of the Administration, USEC 
had been negotiating with Russia to amend the Agreement to include 
market-based pricing. I have been advised that USEC closely coordinated 
its plans and intentions with the President's Interagency Enrichment 
Oversight Committee at all phases of its discussions with the Russians. 
Yet, as USEC and the Russians were meeting in Moscow to sign the new 
Agreement, the Department of Energy, a member of the Oversight 
Committee, prevented the signing at the last minute.
  I can not understand why the Energy Department would prevent the 
adoption of an amendment that would stabilize the Agreement through the 
remaining thirteen years of the program. Reportedly the terms were 
acceptable to both parties. In addition, the Agreement would have 
protected the interests of our own domestic nuclear fuel industry. As 
part of the Agreement, Russia wanted USEC to purchase commercially 
produced enrichment in addition to the weapons derived enrichment. USEC 
negotiated terms consistent with a previous Administration approved 
program making it mandatory that this additional quantity be matched 
with domestically produced enrichment. In addition, no additional 
natural uranium would be brought into the domestic market. The 
amendment to the Agreement was specifically crafted so that no damage 
would be inflicted upon the domestic nuclear fuel cycle as a result of 
purchasing the additional material.
  The Department of Energy's action threatens to destabilize the 
agreement. Who knows how long the Russians will sit by without this 
Agreement. The National Security Council and the State Department and 
others on the Enrichment Oversight Committee have endorsed the signing 
of this Agreement. I strongly urge that it be completed. I suggest that 
those of us in the Congress who believe in the vital importance of this 
Agreement express our concern to the Administration and demand that the 
Energy Department withdraw its objection and that the Agreement be 
speedily signed.
  As I mentioned, higher production costs, decreased demand, and lower 
world prices have hit USEC, our Nation's sole domestic uranium 
enricher, particularly hard. USEC's Form 10-Q filed with the Securities 
and Exchange Commission for the quarter ended March 31, 2000 noted 
that: ``In February 2000, Standard & Poor's and Moody's Investors 
Service revised their credit ratings of USEC's long-term debt to below 
investment grade. The revised rating gives USEC the ability to 
discontinue its uranium enrichment operations at a plant. USEC is 
evaluating its options; however, a decision has not been made as to 
whether to close a plant, which plant would be selected or the timing 
of any closure.'' Finally, on June 21, the Board of Directors of USEC 
Inc. voted to cease uranium enrichment operations in June 2001 at the 
Portsmouth gaseous diffusion plant in Piketon, Ohio, and to consolidate 
all enrichment operations at its Paducah, Kentucky production plant. 
USEC maintained that it could not sustain current operations at two 
production plants, each of which is currently operating at only 25 
percent of capacity. The company said that its production costs were 
too high and that the termination of operations at Portsmouth would 
save upwards of $55 million in fixed costs annually.
  USEC's decision to close a plant comes as no surprise. For over a 
year, there has been speculation within the Clinton Administration, the 
energy industry, the media and on Capitol Hill that USEC would be 
forced to consolidate its uranium enrichment production.
  Mr. James R. Mellor, Chairman of USEC's Board of Directors was quoted 
in a news release as saying: ``The decision to cease enrichment at one 
of our facilities was necessary given the business challenges facing 
the uranium enrichment industry . . . Mr. Mellor went on to say: 
``Choosing to close the Portsmouth plant was an extremely difficult 
decision because of the impact it will have on the lives of many of our 
workers, their families and the communities surrounding the plant.''
  USEC cited multiple factors in determining which plant would close. 
Key elements in USEC's analysis included ``long-term and short-term 
power costs, operational performance and reliability, design and 
material condition of the plants, risks associated with meeting 
customer orders on time, and other factors relating to assay levels, 
financial results, and new technology issues.''
  I know that my colleagues from Ohio are deeply disturbed by USEC's 
decision to close the Portsmouth plant. I also know that if the company 
had chosen to cease operations at Paducah, my friends from Kentucky 
would be equally distraught. Plant closures are serious matters, 
particularly when they are the mainstay of the local economy. The 
public record is clear that technological advances in uranium 
enrichment were rapidly overtaking the gaseous diffusion process as an 
economic method of enriching uranium. Make no mistake, the Portsmouth 
and Paducah gaseous diffusion plants were and continue to be 
extraordinary engineering, design, and construction achievements--
matched only by the dedication and skill of the men and women who have 
made the plants work--work, 24 hours a day--work, seven days a week--
work, continuously for over 45 years without a stop, without a break in 
service--until now. It was inevitable that this would happen someday, 
but knowing that it will happen does not make it any easier.
  The only person who seemed to be caught by surprise and unprepared to 
deal with the closure was the Secretary of Energy. Certainly, he must 
have known that USEC was preparing to make an announcement. He must 
have been aware that, as part of the 1996 USEC Privatization Act, the 
Department of Energy--not the company--would be responsible for 
decommissioning, decontamination and clean-up of the plants and the 
sites as well as for workforce disposition.
  In fact, in a June 19, 2000 letter to Mr. William H. Timbers, USEC's 
president and chief executive officer, the Secretary of Energy asked if 
the company was planning to close either one of its uranium production 
facilities. In response, Mr. Timbers wrote on June 20, 2000, that 
``during our last meeting, I indicated to you, and reiterated in 
subsequent meetings with your staff, that it is inevitable that USEC 
must close one of its enrichment facilities.'' Mr. Timbers added that 
``During the last eight months, we have presented numerous proposals--
still pending before you--to accomplish [transition]. But, DOE has yet 
to make a decision. We have also engaged in discussions with PACE union 
leadership aimed at advancing these efforts. We are still ready and 
eager to translate these discussions into actions and look forward to 
the prospect of working with DOE to adopt a program to minimize the 
employment disruption associated with ensuring a financially sound USEC 
under today's market conditions.''
  The next day, when USEC announced that its Board of Directors had 
voted to close the Portsmouth facility, the best the Nation's Secretary 
of Energy could come up with was the following statement: ``I am 
extremely disappointed by [USEC's] decision today to close the uranium 
enrichment plant at Portsmouth. First and foremost, I am very concerned 
about the effect this closure will have on USEC workers. Many of these 
men and women spent their entire working lives helping our nation win 
the Cold War. They deserve better treatment. . .''

[[Page 16348]]

  For once, Secretary Richardson and I agree. The workers do deserve 
better. But rather than threatening USEC, as the Secretary of Energy 
did when he recommended ``serious consideration of replacing USEC as 
executive agent'' for the Russian HEU Agreement, he should have been 
drafting a plan to assist the workers in Portsmouth to make the 
transition from operating the Department of Energy owned gaseous 
diffusion plant to cleaning up the site. This is an environmental 
restoration mission that is likely to take many years. We are all aware 
of the environmental contamination at the plants and the desperate need 
for action to restore them to reasonable environmental condition.
  When Congress created the United States Enrichment Corporation as 
part of the 1992 Energy Policy Act, and when we later passed the 1996 
USEC Privatization Act, we recognized that a privately owned USEC could 
better respond to the needs of the marketplace and thereby sustain a 
viable domestic uranium enrichment capability. Now that USEC has taken 
what it believes is a necessary step to ensure that it can compete in 
the world uranium enrichment marketplace, the first response by the 
Secretary of Energy is to second-guess the company's intentions and 
actions. Apparently the Secretary would keep facilities open regardless 
of the fundamental laws of economics that are evident to even the most 
modest businesses.
  It has been suggested that the solution is to nationalize USEC--to 
have the government buy it back. I have no sympathy for such a 
proposal. While I am sympathetic to those who will be affected by the 
closure of Portsmouth, I do not believe that a return to the past is 
the remedy that will provide for a competitive domestic uranium 
enrichment capability in the future. I do not favor an appropriation of 
substantial sums, perhaps well over a billion dollars to buy USEC back, 
nor do I favor the then obligatory commitment to annually appropriate 
funds to make up for uneconomic operations.
  It has been only two years since we privatized USEC. On the one hand 
the Congress and the Administration made an extraordinary effort to 
provide a private USEC with a strong foundation for a successful 
private enterprise competing in world markets--in the words of the '96 
Act `` . . . in a manner that provides for the long-term viability of 
the Corporation . . .'' But at the same time, contradictory restraints 
imposed on the Corporation detract from its ability to compete. In 
retrospect, perhaps Congress and the Administration should not have 
placed so many burdens on USEC as it faced private sector dynamics and 
demands. Ensuring that the vital national security interests of the 
United States are protected is paramount, but preserving the 
competitiveness of our domestic uranium enrichment capability--at 
minimal costs to the federal government--is important too. We need to 
stop thinking of USEC as a Federal agency and respect it for what it 
is--a private business enterprise.
  Challenges remain in the implementation of the Russian HEU Agreement 
and the long-term viability of the domestic uranium enrichment 
enterprise. These have proven to be complex, and at times conflicting 
tasks, but I believe that the National interest more than justifies our 
continued efforts to see these programs through to a successful 
conclusion. As part of these efforts we should encourage the Clinton 
Administration to approve the market-based pricing amendment to the 
Russian HEU Agreement. Now is also the time to secure a future for the 
workers in Portsmouth who face plant closure. We need to help them 
achieve their third transition--from Cold War patriots, to peacetime 
producers of fuel, to the task of environmental restoration
  Thank you, Mr. President.

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