Today's post is a bad news/good news story. The bad news is that deep in the fiscal year 2014 Energy and Water Development Appropriations bill currently being considered by the House of Representatives is a $48 million subsidy for the United States Enrichment Corporation .
Giving the company more federal subsidies is a bad idea on every level. It is struggling to remain afloat financially and recently issued a reverse stock split to avoid being delisted by the New York Stock Exchange (the stock price has fallen below $1 repeatedly over the past two years ). USEC's financials are so poor that the $48 million subsidy lawmakers are providing is three times greater than the company's current market capitalization, which is slightly more than $16 million today.
USEC has a complicated and troublesome history: it was established as a wholly owned and operated federal entity in 1992 and privatized in 1998, providing uranium enrichment services to both the Russian owned TENEX and the U.S. owned Tennessee Valley Authority and Energy Northwest. The services, performed largely at USEC's Paducah, Ky., gaseous diffusion plant, have been consistently inefficient and required substantial federal support.
Recently, USEC announced it would cease operations at the Paducah facility, and will bet its entire future on the American Centrifuge Project, an experimental facility located in Portsmouth, Ohio . Once again this plan has every marker of a bad business deal and is disproportionately reliant on federal support.
How bad is this investment? It is over budget (estimates for construction started at $1.7 billion; now it is nearly $5 billion), unproven, and the costs exceed the market capitalization of the company by more than 100 times. The Department of Energy first denied USEC a $2 billion loan guarantee in 2009 (because apparently this looked worse than Solyndra), but pressure from well connected friends on Capitol Hill helped keep the USEC loan guarantee alive. Four years later, USEC continues to pursue a loan guarantee, making it clear that it cannot proceed with the American Centrifuge Project without almost every form of federal support – direct appropriations, loan guarantees and assistance from DOE.
So what is the good news? The good news is that some people in Congress are trying to stop this folly. Rep. Michael Burgess, R-Texas, has sponsored an amendment to strip this funding from the Energy and Water appropriations bill, and groups from across the political spectrum are urging members to support it.
Passing an amendment like this one is an uphill battle in the House of Representatives, where once an appropriations bill comes out of committee, leaders usually want to see them pass without messy fights. But these amendments, and the members who sponsor them, are the only way we can make progress in eliminating wasteful spending and stop throwing good money after bad.
The story of USEC is one of the worst examples of piling layers of waste upon layers of waste: at some point it is important to recognize that we simply cannot continue to pay for things that don't work.
Ryan Alexander is the president of Taxpayers for Common Sense.