Exclusive

Nuking the Budget

Secret Energy Dept. report says boondoggle to handle Cold War plutonium will cost billions more.

A confidential study by the U.S. Energy Department has concluded that completing a controversial nuclear fuel factory in South Carolina may cost billions of dollars more than the department has previously promised, according to government officials and industry sources briefed on its results.

The study, conducted for Energy Secretary Ernest Moniz, also found that finishing and then operating the factory to help get rid of Cold War-era plutonium as part of a nonproliferation arrangement with Russia would likely cost a total of $25 billion to $30 billion on top of the $4 billion spent on its construction so far, the sources said.

That amount is so high, the officials said, that Barack Obama's administration is leaning toward embracing what one described as "some other option" for dealing with the 34 tons of weapons plutonium that the so-called Mixed Oxide (MOX) Fuel Fabrication Facility at Savannah River was supposed to help eliminate. The problem is that walking away from the plant won't be easy, politically or diplomatically.

Many officials now agree that "it's time for a shifting of gears," said an administration official, who requested that he not be named because he was not authorized to speak about the report. He added that accommodating such an expensive project within federal budgets that will be constrained for years to come is not considered feasible.

But no clear alternative to the fuel factory has been chosen, much less announced. As a result, officials said, the administration will likely propose to keep funding the plant's construction in fiscal 2015, albeit at a level below the roughly $343 million appropriated in 2014. The plant's builders have sought $600 million to $700 million a year to keep construction on schedule.

This decision in turn means that in its forthcoming new budget proposal, the Energy Department will advocate spending hundreds of millions of dollars to continue work on a factory unlikely to fulfill its initial goal -- on top of the billions it has already spent.

Asked about the report, a spokesman for the contractor building the plant referred questions about it to the Energy Department. Keri Fulton, a spokeswoman for the National Nuclear Security Administration, the arm of the department responsible for the MOX project, said the agency would not comment.

Deputy Energy Secretary Dan Poneman declined to comment on the projected costs Friday, Feb. 14. But he told the Center for Public Integrity at a nuclear weapons conference in Arlington, Va., that "we are taking very, very seriously obviously the MOX program. We've had a hard look at it. We're going to continue to examine what all of our options are."

Kevin Bishop, a spokesman for Sen. Lindsey Graham (R-S.C.) -- the principal champion of keeping the MOX project alive -- said his office did not have a copy of the report and offered no comment.

Graham, who sits on the Senate Armed Services Committee, held up Moniz's confirmation in 2013 while demanding a new pledge from the White House that the plant, which employs 2,100 workers in his state, would be finished. His spokesman said any notion that he accepts the need to embrace an alternative would be "incorrect."

But senior administration officials have said they would support the completion and operation of the MOX plant only if its construction costs could be substantially reduced. Without new savings, a government official and an industry official said, the new report suggests that construction costs alone could reach $10 billion, or nearly 10 times the initial estimate and more than $2 billion higher than the department's most recent public tally.

As a result, the department has engaged in protracted private negotiations with Shaw Areva MOX Services, the French- and Dutch-owned consortium responsible for building and running the plant, to revise the contract in a way that would limit the company's profits and boost its responsibility for cost overruns.

"Areva should know that if it makes mistakes, it should suffer the consequences," one government critic of the program said, noting past construction problems that have boosted the project's costs. But the negotiations have so far stalemated, with the company refusing to accept Energy Department's demands, government and industry sources said. That's why the administration is now moving to embrace other solutions in the coming year, they said.

Initially, U.S. officials expected that Russia -- which committed years ago to a similar program to convert its plutonium into reactor fuel -- would object to any American decision to abandon the project. But one government official said that in private diplomatic discussions, the Russians had indicated they might support a U.S. decision to instead transform the plutonium metal into a less explosive powder -- partly through oxidization -- and then bury it deep underground in concrete containers. Among the alternatives that have been studied by the department over the past year, this idea was the cheapest, several sources said. One said it would cost only $6 billion and take only five years.

The speed with which that U.S. effort could be completed was attractive to the Russians, the official said.

The department's study was conducted by John MacWilliams, a Harvard University-trained lawyer and partner at a Boston-area private investment fund. He also has been studying other multibillion-dollar department programs plagued by cost overruns. MacWilliams did not respond to email and phone requests for an interview.

Moniz, who has spent most of his career as a professor of physics at the Massachusetts Institute of Technology, helped broker the agreement with the Russians that called for joint efforts to dispose of 34 tons each of plutonium, one of two principal fuels used to power nuclear arms. The plutonium came from tens of thousands of warheads dismantled at the end of the Cold War.

The MOX plant was designed to crush the plutonium cores, or "pits," of those warheads, bake the powder, and oxidize it -- but then do even more: It was to mix it with oxidized uranium to make a so-called "mixed oxide" fuel that would be burned in commercial reactors.

So far no commercial reactor operators have pledged that they would burn the fuel, however. And one reason the plant's lifetime operating costs were estimated in the department's report to be so high -- a total of up to $34 billion -- is that the Energy Department would have to pay the operators a fee to use the MOX fuel, officials said.

Due to cost overruns and funding shortages, the White House last spring slowed construction work on the fuel facility, which is about two-thirds finished, and submitted a budget that would have eliminated construction funding starting later this year. Just over $4 billion has already been spent on the facility, according to the department's latest public estimate.

Matthew Bunn, now at Harvard's Kennedy School of Government, was a White House official during Bill Clinton's administration, when he helped develop the plutonium disposal program, and has followed it closely ever since. Bunn hasn't seen the latest Energy agency report, but said that the cost of the Savannah River MOX plant has spun out of control.

"The things we're trying to accomplish aren't worth that amount of money," he said Feb. 13. "To me, in an environment of extreme budget constraints and sequesters, there has got to be a better way."

One of the other alternatives MacWilliams studied was disposing the plutonium in 3-mile-deep "boreholes" drilled deep into the bedrock. A second option, officials said, was mixing the plutonium with high-level radioactive waste and storing it in a future long-term storage facility.

If oxidized plutonium is to be buried, the most likely site is the department's Waste Isolation Pilot Plant near Carlsbad, N.M., a network of salt-lined caves deep underground. Doing so might require the site's expansion, several sources said, which in turn would require gaining local permission to do so. That creates some uncertainty about the political viability of that option, several sources said.

A version of this story was originally published by the Center for Public Integrity, ­a nonprofit, nonpartisan investigative news organization in Washington, D.C.

Flickr/Savannah River Site

National Security

White House v. Holder

The fight over the government’s top national security lawyer.

In September, President Obama nominated John Carlin, a career federal prosecutor, to run the Justice Department's National Security Division, a senior post whose occupant plays a key role in authorizing secret surveillance operations and managing national security investigations. It was a controversial pick. Not only did some of Carlin's peers think he wasn't the most qualified candidate. Attorney General Eric Holder -- the man who was supposed to be Carlin's boss -- hadn't supported him. Several former officials told Foreign Policy that the attorney general "strenuously" objected to nominating Carlin.

But Carlin had the backing of two senior officials in the White House, who had made it known that he was their preferred choice. In the end, their candidate won out, prompting several former law enforcement and national security officials to decry the nomination as an act of undue political influence over law enforcement decisions.

"I think it is extraordinary and unusual to have someone forced upon an attorney general over his objections," said one former law enforcement official. "The independence of the Justice Department from the White House is institutionally important." Decisions on which cases to prosecute and how to manage criminal investigations are supposed to be made free of political considerations.

Holder had his own list of candidates, which included another career prosecutor who had been his adviser on national security issues and had years more experience than Carlin working on terrorism and espionage cases, officials said. Holder didn't know Carlin well and hadn't worked closely with him.

Ultimately, the decision on whom to nominate for the position is the president's alone. And Holder has since embraced Carlin -- at least in public. But the rocky path to Carlin's nomination, described in interviews with a dozen current and former Justice Department and administration officials, reveals a tense personal and political struggle over one of the most important national security positions in the government.

Carlin's biggest advocates in the White House were Kathryn Ruemmler, the White House counsel, and Lisa Monaco, the president's homeland security and counterterrorism adviser, according to current and former officials. Ruemmler and Monaco had worked with Carlin at the Justice Department and in the U.S. Attorney's Office for the District of Columbia, where all three served at the same time as prosecutors.

Former officials said they are concerned that Carlin, who has been acting in the position since March, doesn't speak as an independent voice for the department, but rather is aligning his positions first with the White House, and particularly with Monaco, thus undermining Holder's authority. Two individuals drew comparisons to John Yoo, the controversial Justice Department attorney in the George W. Bush administration, who was known to have his own relationships with White House officials and was seen as operating outside channels meant to guard against political influence.

"It shouldn't be that way," said a former government official who doesn't support Carlin's nomination. "There should be some walls between the Justice Department and the White House. The White House should not have a direct feed."

Former officials could not point to a specific instance in which Carlin had bowed to White House influence or shared information with Monaco before talking to the attorney general. But they said his close relationship with Monaco has created an impression among many national security lawyers in Washington that Carlin is the White House's inside man at the Justice Department. Carlin became the acting director of the National Security Division after Monaco left the post and went to the White House. He was the chief of staff when she ran the division.

The concerns about Carlin's independence run deeper than that, however. Two former officials, citing conversations with current Justice Department employees, said that Carlin is avoiding taking documented positions before his Senate confirmation hearing. Instead, Carlin has requested that colleagues not copy him on emails about sensitive policy issues. Many of Carlin's communications are taking place by phone, former officials said. A date for a confirmation hearing hasn't been set.

Carlin is not without experience in national security, and he has some of the same credentials as his predecessors in the job for which he's been chosen. He was once chief of staff to former FBI Director Robert Mueller, for example. And he has held two senior posts in the National Security Division.

But several career prosecutors who know and have worked with Carlin say he does not have a firm enough grasp of national security and surveillance law, which is particularly important when approving applications for surveillance warrants in terrorism and espionage cases. Carlin has spent the bulk of his career on computer crime and intellectual property cases, and in prosecuting homicide, sexual offenses, and public corruption, according to his official resume.

By contrast, one of the candidates that former officials say ranked high on Holder's list is Amy Jeffress, who until recently was the department's legal attache in London. From 2009 to 2010, Jeffress was Holder's counselor on national security and international matters, advising him on some of the highest-profile cases in the Justice Department. She worked with Holder to bring a criminal case against Khalid Sheikh Mohammed, the accused mastermind of the Sept. 11 attacks, whom Holder wanted to try in a federal court. (Congress later blocked the move.) Jeffress also set up three inter-agency task forces that reviewed cases of detainees at Guantanamo Bay. She worked for thirteen years in U.S. Attorney's Office for the District of Columbia, where she was chief of the National Security Section overseeing terrorism and espionage cases.

In the contentious nomination process, the balance finally tipped in Carlin's favor when Holder received a phone call from FBI Director Robert Mueller, Carlin's former boss. "Director Mueller weighed in both at [the Justice Department] and at the White House in strong support of John's nomination," said a senior administration official. After the call, Holder dropped his objections to Carlin. President Obama announced his nomination on September 10.

The tussle over Carlin's nomination has had more than just political or personal consequences. In the eight months he has been serving in an acting capacity, Carlin has not been legally able to sign off on surveillance requests before the Foreign Intelligence Surveillance Court, the body that approves secret intelligence-gathering conducted by the FBI and the National Security Agency. Until Carlin is confirmed, Holder and James Cole, the deputy attorney general, have to pick up the slack, because they are the only other department officials authorized to review and sign off on the orders.

Surveillance operations have not lapsed as a result, but given the pressing demands of their jobs, it has been harder to find time to sit down with Holder or Cole to get their approvals, a Justice Department official said. One of them has to review and receive a briefing on each application, which can take as little as five to ten minutes. But those minutes add up. Last year, the government made 1,856 requests to the court for permission to conduct electronic surveillance or physical searches for foreign intelligence purposes. Figures for this year have not been compiled.

But Carlin is still able to perform many of the duties of the position, including consulting with the White House, the FBI, and intelligence agencies. The National Security Division was created in 2006 to tear down barriers between law enforcement and intelligence personnel that had kept them from working together. Today, the law allows White House officials to stay in closer contact with career prosecutors than they would on criminal cases, where barriers are placed to ward against political influence.

"Of course the President's Counterterrorism Advisor and all of her operational counterparts, including at DOJ and FBI, are in regular touch," said Caitlin Hayden, a White House spokesperson. "It is the CT [counterterrorism] Advisor's job to make sure that the interagency is coordinated."

Kenneth Wainstein, who served as the head of the National Security Division and the White House counterterrorism adviser during the Bush administration, said, "It's absolutely critical that the assistant attorney general for national security, who is the head of the intelligence and national security element of the Justice Department, be centrally involved in the interagency process that is run out of the White House."

Wainstein, who knows both Monaco and Carlin, said he could not speak to the nature of their communications today. But he said it would be expected that they'd have frequent conversations and correspondence, including about criminal investigations and intelligence operations, as well as policy. "It's critical for both the effectiveness and the constitutional integrity of our national security program that the Justice Department have a strong voice in the policymaking process," Wainstein said. 

In the months since he's been nominated, whatever distance there may have been between Carlin and Holder seems to have shrunk a bit. Another Justice Department official said that the week before Thanksgiving, Carlin invited Holder to address an all-hands meeting at the National Security Division. The attorney general praised Carlin's leadership and the work of its employees. The division has been under unusual pressure and scrutiny amid investigations of global surveillance operations by the NSA and the FBI, revealed by Edward Snowden.  

The official also said that Holder brings Carlin with him to weekly principals meetings in the White House Situation Room, where the top members of the president's national security team are allowed to bring one member each from their staff.

"He's a tremendous attorney and a strong leader, and is highly regarded in the intelligence community," Matthew Olsen, the director of the National Counterterrorism Center, told Foreign Policy. "He brings a wealth of legal, policy, and national security expertise to the position, and I think he's a terrific choice to lead the [National Security Division]," added Olsen, a former general counsel at the NSA, who was also the acting head of the National Security Division during the presidential transition in 2008.

Among those who have written letters to the Senate Judiciary Committee in support of Carlin's nomination are Tim Murphy, the former deputy director of the FBI; Pat Rowan, the former head of the national security division under President George W. Bush; and Michael Morrell, the former deputy director of the Central Intelligence Agency. Morrell wrote that he'd mostly worked with Carlin during meetings of deputy officials on the National Security Council at the White House, where Carlin was a "backbencher" or stood in for Monaco when she couldn't attend. "He was always prepared, he was articulate and persuasive when he spoke, and he asked excellent questions of the other participants," Morrell wrote. "In addition to his performance, Mr. Carlin certainly has the experience required to do the job."

Hayden, the White House spokesperson, said "We look forward to the Senate confirming [Carlin] as soon as possible." 

Olivier Douliery - Pool/Getty Images)