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Elliott Negin

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Will Boehner's Pork Project Be the Next Solyndra?

Posted: 10/19/11 05:41 PM ET

Fox Business last month sat House Speaker John Boehner down for his take on the collapse of Solyndra, the California solar panel maker that squandered a $535-million federal loan guarantee. When asked if the government should be "gambling taxpayer money on green energy companies," the Ohio Republican replied that "new energy sources are going to have to stand on their own" and the "federal government should not ... be in the business of picking winners and losers."

New energy sources should "stand on their own"? Boehner apparently doesn't feel the same way about "old" energy sources--namely oil and gas, coal, and nuclear--which have been sucking on the federal teat for more than 50 years. And as far as picking winners and losers, he takes a very different tack when it comes to bringing home the bacon. Boehner has been pushing a $2-billion loan guarantee for a southwestern Ohio uranium enrichment plant that could wind up being a much worse bet than Solyndra--nearly four times worse.

Let's look at his "stand on their own" comment first. While Boehner is quick to condemn government support for new energy sources, he is just as quick to protect old energy subsidies. Earlier this year, for example, Boehner voted against two bills that would have cut tens of billions of oil subsidies, even when the industry is enjoying record-breaking profits. He did have a moment of clarity in April when he told ABC News that oil companies "ought to be paying their fair share," but the next day, after the White House applauded him, a Boehner staffer essentially retracted the remark.

A 2009 report by the Environmental Law Institute provides a snapshot of just how lopsided federal energy subsidies were during the last decade. Between 2002 and 2008, ELI estimated that fossil fuels received $72 billion in tax breaks, tax credits and other subsidies, with most going to oil and then to natural gas. Over that same time period, "new" renewable energy sources--wind, solar, biofuels and biomass, hydropower and geothermal--received $29 billion. However, more than half of that--$16.8 billion--went to corn-based ethanol. Only $12.2 billion--less than 20 percent of what fossil fuels received--went to wind, solar, geothermal, hydropower, and non-corn-based biofuels and biomass.

For a more historical perspective, we need to keep in mind that fossil fuels--the primary cause of global warming--have benefited from continuous federal subsidies since 1917. Intermittent commercial-scale subsidies for renewable technologies, meanwhile, go back only 20 years.

The ELI study did not include nuclear energy, which would not exist if it were not for federal subsidies. A February 2011 Union of Concerned Scientists report, "Nuclear Power: Still Not Viable Without Subsidies," found that subsidies have supported every stage of the nuclear fuel cycle, from uranium mining to long-term waste storage, since the beginning of commercial nuclear power in the 1950s. Added together, these subsidies have often exceeded the average market price of the power produced. In other words, if the government had purchased power on the open market and given it away free, it would have been less costly than subsidizing nuclear power plant construction and operation.

Which brings us to the point Boehner made in his September 19 interview with Fox Business about picking winners and losers. A week or so after that interview, he chastised the Department of Energy (DOE) for moving too slowly to provide a $2-billion loan guarantee to the U.S. Enrichment Corporation's (USEC) Piketon, Ohio, American Centrifuge Plant, under construction just east of his district. The facility, which would produce low-enriched uranium for nuclear reactors, would replace an older USEC enrichment facility in Kentucky.

Who's picking winners and losers now? In this case, Boehner--who has been joined by most of Ohio's congressional delegation, including Democratic Sen. Sherrod Brown--is picking a loser.

The USEC project has been in trouble for some time. In fact, the DOE asked the company to withdraw its loan guarantee application back in July 2009 because of its precarious financial situation and its inability to get its uranium-enriching centrifuges to work properly. After howls from the company and vigorous pushback by Ohio officials, however, the agency postponed its final application review to allow USEC more time to fix what the company euphemistically called "teething problems."

But even if the company works out its technological "teething problems," the bigger question is: Is this plant necessary?

Besides the fact that uranium prices are dropping, the demand USEC originally projected for enriched fuel is not going to materialize. Instead of 10 new U.S. reactors over the next decade, there will likely be only four or five built. Moreover, some nuclear plant owners may close existing reactors rather than invest in new safety systems required by the Nuclear Regulatory Commission after it completes its post-Fukushima review.

On top of that, the Piketon facility would face increased competition from two other new U.S.-based enrichment plants that are further along in development. One, being built in Idaho by the French public company Areva, has already received a $2-billion DOE loan guarantee. The other, in New Mexico, is being built by a British-Dutch-German consortium without DOE assistance.

So, if USEC builds the Piketon plant, who is going to buy the excess uranium fuel from three new enrichment facilities? The Chinese? That's unlikely, given they are building their own enrichment plants.

None of this bodes well for U.S. taxpayers. We can only hope that the Office of Management and Budget and the DOE properly evaluate the USEC project's market risk. It's clear that Speaker Boehner has not.

 
 
 

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