South Carolina plutonium plant plagued by cost overruns, poor planning

Center for Public IntegrityJune 27, 2013 

— Scattered among the pine forests of this 310-square-mile federal reservation are five mothballed nuclear reactors where tens of thousands of people once worked feverishly to create as much plutonium as they could.

By the time production ended in 1988, the site was a horrendous mess. Today, about 36 million gallons of radioactive liquid wastes sit in underground tanks, and most federal spending at the site is devoted to nuclear-related cleanup, not production.

So when U.S. and Russian officials in 2005 helped turn the first shovels of dirt for a new plant to produce reactor fuel from weapons-grade plutonium it seemed like an entirely new industry with a vital international purpose was coming to Savannah River.

Eight years later, that optimism has given way to exasperation.

The cost of the plant has ballooned, while its goals have contracted. After a federal expenditure of $3.7 billion, the incomplete facility is on the brink of being canceled. “Cost growth and fiscal pressure may make the project unaffordable,” according to the Energy Department’s latest budget proposal to Congress.

The initiative for the Savannah River plant had the most altruistic of motives – to secure plutonium left stranded by the end of the Cold War and keep it out of the hands of terrorists. The plant was meant to transform 34 metric tons of U.S. weapons-grade plutonium – 40 percent of the U.S. stockpile – into commercial reactor fuel that could be burned to provide electricity for homes, schools and factories. A similar plant in Russia would do the same.

But that noble goal has now turned into a classic Washington disaster.

A close look at the history of the project reveals major planning errors, little Washington oversight and shoddy contracting practices. The plant’s piping may be flawed, and the customers once projected for its plutonium-laced fuel may not exist.

In 2002, the Energy Department said the plant would cost $1 billion to design and construct. It was to start operating in 2007.

In August 2012, the lead contractor, Shaw AREVA MOX Services LLC, told the Department of Energy that the true cost was likely to be $7.37 billion – a fact that the Energy Department kept hidden from the public for months.

Since then, the Energy Department has told auditors the construction cost will be at least $7.7 billion and the plant won’t begin operations until 2019, about 12 years late.

The process the plant is designed to use, known as mixed oxide or MOX, also is expensive – $243,000 a pound to take shredded plutonium and mix it with uranium oxide, according to Matthew Bunn, a nuclear expert at Harvard University. The resulting powder would be compressed into pellets, baked and hardened in furnaces, then machined into nuclear fuel rods. Those rods would then be loaded into nuclear reactors where the plutonium would help heat water to run steam turbines as it burned.

The cost of doing that for 15 to 20 years is likely to be another $8 billion to $12 billion, bringing the total price to $20 billion.

Energy officials told Congress in 2002 that the design of the plant was 60 percent complete, and that its technology had been proven by decades of operations by two MOX facilities in France. AREVA, which owns 30 percent of Shaw AREVA, is a French government-owned, nuclear behemoth with more than 46,000 employees that has a huge financial stake in pushing related technology.

But building the plant turned out to be far more complicated than its supporters predicted.

By the time of the 2005 groundbreaking, the MOX project was already in deep trouble.

Its designers had discovered that using weapons-grade plutonium instead of reactor-grade plutonium to make fuel posed special challenges. Energy Department Inspector General Gregory Friedman’s review of the MOX plant construction that year disclosed that the project had eaten up 45 percent of its budget while the design was still only 70 percent complete.

According to his report, the Energy Department’s National Nuclear Security Administration had assigned only one technical person to the project. No one from headquarters was stationed at the site until around 2003, although the contractor was spending $13 million a month. Progress reports were misleading and budgets lagged months behind the actual work, Friedman said.

A $39 million cost ceiling on part of the project somehow was set 15 months after the contractor had already spent $47 million to complete the work, his report said.

The design, moreover, proved flawed: The facility needed nearly 1,400 miles of electrical cabling, not 735 miles; it also required engineering supports that were stronger and more costly to install than anticipated.

In April 2007, the estimated cost had jumped to $4.8 billion, according to an internal Energy Department memo. Meanwhile, the government began scaling back the project’s scope.

The anticipated cost more than doubled for a related factory that would tear apart and grind up plutonium weapons cores, so it was canceled and the work spread among existing DOE facilities. The Senate Appropriations Committee supported cancelation but expressed frustration that Energy Department administrators had spent $700 million before “determining that existing facilities could be used to meet mission needs.”

Kelly Trice, president of Shaw AREVA MOX Services, a partnership between AREVA and the Shaw Group that manages the MOX construction work, blamed the cost overruns primarily on the difficulty of finding and retaining qualified workers at a time when other nuclear plants were being started in the Southeast, and on the need to get regulatory approval for “every piece of equipment, every piece of pipe, the concrete, even the dirt under the facility.”

Speaking at an industry conference on Feb. 22, he also cited the rising cost of fuel and materials, including a spike in the price of concrete caused by the 2008 Beijing Olympics.

But some of the project’s problems resulted from cutting corners, according to an April 2009 report by Friedman, the Energy Department’s watchdog.

When someone at the construction site tried to hammer a steel bar into a needed shape, it broke when it should have bent. That incident led to AREVA’s return of 935 tons of rebar, supplied by a subcontractor whose work had not been inspected and didn’t meet federal standards for nuclear construction.

Another 135 tons of improper rebar were diverted to other uses, while 14 tons embedded in concrete were allowed to remain in place after special inspections by the Nuclear Regulatory Commission. Fixing the problem cost more than $680,000.

Three years later, Shaw AREVA fired construction supervisor Jeffrey Derrick of South Carolina after he complained about inconsistent or missing instructions for the installation of the plant’s 80 miles of piping. In a whistleblower complaint Derrick filed with the Energy Department, he alleged that half of the work might have to be ripped out and redone.

“This will be costly and time consuming. . . . We can not (sic) continue to ignore this issue,” Derrick told a Shaw AREVA vice president on March 15, 2012, six days before Derrick says he was fired. DOE’s Office of Hearings and Appeals, in a ruling in October, rejected Shaw AREVA’s bid to have the complaint dismissed. Derrick declined to discuss it, and the Energy Department did not respond to a request for comment.

Last month, Friedman faulted the project’s managers again, this time for approving millions of dollars in “temporary living expenses” for workers who did not qualify.

AREVA declined to address the construction problems in detail, but spokeswoman Kelly Cousineau said in a statement that “MOX is one of the first NRC-regulated, new nuclear construction projects in the U.S. in over 20 years; helped to revive a dormant nuclear industry by standing-up a national supply network; (and) has reached nearly 60 percent completion of major facilities.”

Neither the contractor nor the Energy Department have been able to resolve another problem: Although the plant is supposed to make nuclear fuel for power plants, no utilities have agreed to buy it. That could leave the plutonium in unused fuel rods, where it could be more readily diverted to dangerous uses.

Charlotte, N.C.-based Duke Energy was interested in using the plutonium-based fuel until 2005, when it was granted a license to burn French-made MOX in a trial run at its Catawba Nuclear Station in York County, S.C. The company abandoned the testing after part of the structure holding the fuel in the reactor core expanded more than expected.

Since then, Shaw AREVA has been unable to find a utility committed to buying the MOX plant’s product.

The Center for Public Integrity is a non-profit, independent investigative news outlet.

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