FRANKFORT, Ky. -- The operator of a Cold War-era plant in western Kentucky that supplies enriched uranium to nuclear power plants said Friday it plans to cease production after failing to reach a deal with federal energy officials to extend operations at the beleaguered Paducah Gaseous Diffusion Plant. The decision to idle the sprawling operation will put more than 1,000 people out of good paying jobs with benefits.
The Paducah plant is the only U.S.-owned and operated uranium enrichment facility in the country, said USEC Inc. The company operates the government-owned plant under a lease deal with the U.S. Department of Energy.
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Soft demand for enriched uranium, stemming partly from the disaster in Japan when a tsunami crippled a nuclear plant, coupled with steep production costs triggered the decision to stop production after a deal couldn't be reached on a short-term extension, USEC spokesman Jeremy Derryberry said. Production will be phased out in the next month, he said.
"We've been telegraphing for a long time that the plant had a limited lifetime," Derryberry said in a phone interview. "That was only accelerated by what happened in Japan."
Japan was an important market for the Paducah plant's enriched uranium, but nearly all of Japan's workable reactors have been offline since the March 2011 earthquake and tsunami triggered multiple meltdowns at the Fukushima Dai-ichi plant.
"What that essentially does is take a huge chunk of demand out of the market, at least in the near term," Derryberry said. "With no demand, there's an excess of supply. Prices go down. We just haven't been able to find additional customers for the plant's capacity."
Calls to the local union president for comment weren't immediately returned.
The Paducah plant also was beset by high production costs mostly because of electricity prices, Derryberry said.
Last May, the plant faced closure until officials reached a deal that gave it a reprieve for another year. Under that deal, the plant enriched depleted uranium for Tennessee Valley Authority and Energy Northwest, a utility in Washington state.
No such last-minute salvation was reached this time for the plant, which opened in 1952 to develop enriched uranium for military reactors and to produce nuclear weapons. The plant began selling uranium for commercial reactors in the 1960s, and has been operated since the late 1990s by Bethesda, Md.,-based USEC.
The company plans to turn the plant site back over to the Energy Department sometime in 2014. Until then, some workers will remain to manage inventory and meet customer orders and to prepare the site for the handover.
DOE will try to locate another company to operate the facility, said department spokesman Tim Echelard.
"Right now there are a couple of different options out there," he said.
It's anticipated that plant workers will receive severance packages, Derryberry said. The average salary for plant workers, including benefits, is $125,000, he said.
Paducah Mayor Gayle Kaler said the Kentucky plant deserves the same treatment given by DOE to similar enrichment facilities, where she said millions have been spent on cleanup to make the sites viable for future work.
"We strongly urge that our economic development team be given the opportunity to secure property for future use for our trained workforce," she said.
Reaction to the plant's imminent closure was swift among Kentucky top political leaders.
U.S. Senate Republican Leader Mitch McConnell and Democratic Kentucky Gov. Steve Beshear lamented the DOE's decision.
Beshear called the news disappointing and painful even though he said it had been expected.
"We know there are 1,100 very talented and hardworking people at that facility, and we had hoped that an alternative might have been found to keep it open," the governor said. "As disheartening as this news is, we pledge our full assistance and support to the employees and community to absorb this loss and find new opportunities for those skilled and experienced workers."
The plant stores 40,000 cylinders of depleted uranium.
"Paducah is a strong, resilient city full of dependable, creative people," Beshear said. "We are confident that those characteristics will carry citizens through this difficult time."
McConnell released a joint statement with fellow Kentucky Republicans U.S. Sen. Rand Paul and U.S. Rep. Ed Whitfield expressing disappointment that the DOE had been unable to reach an agreement to extend operations at the Paducah plant for another four months.
"We will work to ensure that DOE fulfills its responsibility to sufficiently clean up the site and determine a long-term solution to utilize the facility and its assets," their statement said.
The three have requested a meeting with Secretary of Energy Ernest Moniz.
USEC had applied to the federal government in February to keep the facility operating beyond May 31.
DOE owns 3,556 acres on the property 15 miles west of Paducah.