The Energy Department announced Tuesday it had signed an agreement with USEC Inc., of Bethesda, Md., for the company to build a new high-tech uranium enrichment plant in either Kentucky or Ohio within a decade.
The new plant would replace the company's 50-year-old facility in Paducah, Ky. USEC will continue producing 30 percent of the nation's nuclear fuel at the old facility until the new, more efficient plant is able to produce that amount of enriched uranium.
If USEC fails to live up to the deal, the Energy Department could take over the Paducah facility's enrichment operations.
The Energy Department used to run that plant, but the government privatized its enrichment activities in 1998. That led to the formation of USEC Inc. in a $1.9 billion stock deal.
If USEC doesn't abide by the agreement, the Energy Department could recommend that the company lose its status as the government's only purchaser of uranium fuel from Russia.
Through the "megatons to megawatts" program, designed to keep bomb-grade uranium out of the hands of terrorists, USEC buys enriched uranium taken from old Soviet bombs and sells the fuel to U.S. utilities.
The recycled Russian fuel accounts for roughly half the enriched uranium used by U.S. nuclear plants. Nuclear power supplies about 20 percent of the nation's electricity
It's a profitable arrangement for USEC. Earlier this year, USEC signed an agreement with its Russian counterpart allowing the U.S. company to buy the Russian fuel at a lower price than it previously paid.
Russia gets roughly $500 million annually from the program, which has destroyed 5,600 warheads.
Critics question the wisdom of placing the future of a key U.S.-Russian agreement with a company that has had a troubled financial record recently.
Since USEC was privatized in 1998, it has seen its credit rating slide to junk-bond level and its stock price cut in half. USEC also faced heavy criticism last year when it ceased enrichment activities at an Ohio plant, eliminating roughly 500 jobs.
By Nancy Zuckerbrod