Herald investigates: How Washington lost the $2 billion Areva plant and at least 400 jobs to Idaho

June 29, 2008 

OLYMPIA - Gov. Chris Gregoire was repeatedly pressed to support Areva's $2 billion uranium enrichment plant and told her help was critical to luring its 400 high-paying jobs to the Tri-Cities, according to e-mail and other communications obtained by the Herald.

She also was warned the company's existing fuel fabrication plant in Richland and its more than 600 jobs could be lost if Washington didn't beat four other states in the competition for the new plant - raising the potential stakes to more than 1,000 jobs and about $80 million in annual payroll.

But rather than champion a project she feared would be controversial in some environmental circles, Gregoire deployed a "balanced approach" of not publicly promoting or opposing the project.

Gregoire repeatedly was invited by Areva supporters and her staff to consider an agreement with the company to restrict in-state storage of the plant's low-level waste of depleted uranium.

But that wasn't enough assurance for her to woo the company personally - as backers had hoped.

And while Areva, through the Tri-City Development Council, repeatedly sought Gregoire's personal engagement, the governor's office offered "a professional approach, not a political approach" that minimized her involvement.

The governor's office also refused to believe intelligence indicating the plant could be Washington's if Gregoire would embrace it.

In the final weeks of the recruitment effort, the governor's office was warned that Washington appeared to be running second. As forecast, on May 5 Areva announced it would build its new plant in Idaho Falls, Idaho, where the state and the governor had put out the welcome mat.

Gregoire's unwillingness to play a more active role in recruiting what would have been a major economic development score for the state, Eastern Washington and the Tri-Cities has left even some of her strongest supporters shaken.

"There is a real disconnect between many of us in the Tri-Cities, including your friends and supporters, and you concerning your effort in support of siting the Areva plant in Richland," wrote Pacific Northwest National Laboratory's Mike Lawrence, a longtime friend of the governor, in a May 7 e-mail.

In the aftermath, Gregoire's office now says questions about her involvement became a substitute for confronting tough questions about the project and that the Areva issue at times simply fell victim to other priorities for a busy governor.

"I think there was an overstatement about her role in this," Marc Baldwin, Gregoire's economic development policy adviser and lead staffer on the Areva issue, recently told the Herald.

"In retrospect, it appears obvious to the community it's, 'Why didn't the governor call sooner?' " Baldwin said. "In the press of time something is going to not happen. There are a compilation of things that's not very flattering, but there isn't anything sinister about it."

In an interview Friday, Gregoire said her support was unambiguously stated in her direct communications with the company, which she said never raised concerns about her personal involvement.

"We don't want these companies to think this is all about politics with us," she said.

Seeking assurances

Areva never demanded tax incentives or other enticements to build its plant in Washington, which would have added an annual payroll of nearly $30 million to the Tri-City economy. But it did want assurances the project wouldn't be scuttled in the permit process and sought political support from the highest levels of state government.

"Rarely is that a criteria. but it clearly was very important to this company and this project," said Carl Adrian, TRIDEC's chief executive officer, who served as a liaison between Areva and the governor's office.

That's how it worked in New Mexico, where Gov. Bill Richardson personally intervened in the permit process for Louisiana Energy Service's proposed uranium enrichment facility.

Worried about the plant's waste stream, Richardson helped craft a waste storage agreement with the company that set limits on how much waste could be stored in-state for how long. He wound up speaking at the ground breaking ceremony in 2006.

From the outset last summer, Areva expected a more difficult political climate in Washington. It appears the involvement of the governor's staff and a March call from the governor herself helped keep Areva on the line before the company slipped off the hook and swam to Idaho.

The new facility would enrich uranium for use in nuclear fuel assemblies for commercial nuclear power reactors. Putting it near Areva's existing fuel fabrication plant in Richland would allow the company to avoid steep transportation costs.

But the uranium enrichment process would produce a waste stream of depleted uranium. Though a dangerous chemical, depleted uranium contains only low levels of radioactivity. Still, with the state already struggling to keep the federal government on schedule to clean up its World War II and Cold War-era wastes at Hanford, creation of new wastes of any variety is a touchy subject.

"Waste of any kind in the Washington context warrants significant attention," Baldwin said.

'Recipe for disaster'

Jane Hedges, who manages the state nuclear waste program for the Department of Ecology, was immediately concerned the project would fly in the face of a 2004 citizens initiative - invalidated last month by the U.S. Ninth District Court of Appeals - that required existing wastes to be cleaned up before new wastes could be allowed in.

In a July 31, 2007, e-mail to the governor's office, Hedges said the Areva project "sounds like a recipe for disaster."

Gregoire advisers reviewed the project and scheduled a Sept. 6 phone call between Gregoire and Areva President Michael McMurphy.

In a memo to Gregoire before the phone call, Baldwin reported staff had decided that "short of your involvement, Areva should at least know that Washington wants to be considered for this expansion."

"This project will draw attention because it involves radioactive material," he wrote. "But the materials, procedures and products involved are not fundamental departures from existing Washington practices."

Baldwin referred to the project's "mostly low activity waste product" and to the waste agreement reached in New Mexico.

"An agreement from Areva that waste products from the facility will not remain in Washington longer than necessary for processing would be a huge step toward making this project palatable across the state," he wrote.

Lawrence, in delivering a white paper outlining plant processes and a stream of "low level waste" in a Sept. 18 e-mail, mentioned the New Mexico waste agreement and wrote, "It certainly seems feasible that Washington state could obtain a similar agreement with Areva."

The paper was sent to Hedges and to Gary Robertson at the Department of Health for analysis. The next day Robertson reported that while they might suggest some additions, "we do not disagree with anything in the paper."

Ultimately, however, the mere invitation to explore a restrictive waste agreement wouldn't be enough to ease concerns in the governor's office as Areva backers had hoped.

"At some time they didn't internally look at it and say, 'We have a fail safe, so it is OK for the governor to become more engaged,' " Adrian said.

The governor's office believed it wouldn't have been appropriate to begin negotiating such details until after Washington had been named the preferred site.

Pulling back

Gregoire never placed the planned Sept. 6 call to Areva's McMurphy.

Baldwin said Gregoire was concerned that not enough was known about the project and how it would be received outside the Tri-Cities. "She had some questions, and we had to pull back," he said.

"I simply said 'not yet. Work it up. Work through the issues with the company,' " Gregoire recalled.

A meeting was scheduled Oct. 22 with representatives from the governor's office, several state agencies and Areva to get some answers and to show the company a "professional approach" from state government.

That evening, Areva officials who participated in the meeting had dinner with state Sen. Jerome Delvin, R-Richland.

"Their comment was, 'Well, we didn't feel welcomed over there,' " Delvin told the Herald.

In an e-mail to Gregoire several days later, Baldwin reported, "There are still several unanswered areas, including waste level and disposition."

"We said it would be important, as they develop their project plans, to be very clear about waste levels and assurances," he wrote.

"We let them know that they would need to do some constituency work in order to assess the political context (i.e., that seeking elected official statements would not be enough)."

Tri-City officials on several occasions asked about a meeting with Gregoire to discuss the project but got the same answer: "She was really busy. We couldn't get in," Adrian said.

On Nov. 15, Lawrence wrote Gregoire's newly minted Chief of Staff Cindy Zehnder "to express my extreme disappointment that the Governor will not even meet with representatives from the Tri-Cities," to discuss Areva and "implications not readily apparent."

A day later, Baldwin wrote Gregoire to say, "Clearly, this would be a major project for the local area, but we need to work with the company around waste issues and other issues that may cause problems for them with some constituencies in the state."

Baldwin again referred to the waste agreement in New Mexico, writing, "It's one of the things you'll want to look at."

He also noted, "The company continues to want direct contact from you."

Through an assistant, Gregoire wrote back, "No - I have not agreed to talk with them," a message Baldwin promised to share with senior staff when they discussed Areva several days later.

On Nov. 19, former PNNL lab director Lura Powell, whom Gregoire had named to lead a state board that doles out life sciences grants, appealed to Baldwin in an e-mail and warned that Areva's existing fuel fabrication plant might be at risk.

She asked Baldwin to "strongly encourage the Governor to make a call to Areva top management encouraging them to expand in Washington."

Gregoire's senior staff met that day to discuss the project, and a day later Adrian wrote Baldwin to ask how it was received and if Gregoire was going to call Areva.

"I came away with a bunch of valid questions," Baldwin wrote back. "I think a call is very unlikely at this point."

Adrian pressed for a position from the governor, writing, "You have been around long enough to understand that from an economic development standpoint this is like not showing up to play game seven of the World Series."

Adrian wrote in a Nov. 28 e-mail to Baldwin that local Areva sources were telling him Washington had been eliminated as a prospective site and that "it now appears that the fuel fab plant (now in Richland) will likely follow this new plant."

He wrote frustration continued to build in the Tri-Cities because "the Governor wouldn't engage" and because local backers weren't allowed to make their pitch to Gregoire in person.

"I am not saying that a face to face would have changed things, but by staying aloof she vetoed the project and never gave anyone a reason," Adrian wrote.

'Elephant in the room'

But Washington didn't fall out of the running, perhaps because of a phone call Gregoire's chief of staff placed to Sam Shakir, who manages Areva's Strategic Enrichment Program, in the following weeks.

And in a Dec. 19 meeting with TRIDEC and unions supporting the project, Zehnder said, "While the Governor couldn't get out in front publicly, the state would like to have this plant located here," according to meeting notes obtained by the Herald taken by TRIDEC's Gary Petersen.

Those notes quoted a union representative saying, "There's an elephant in the room that we aren't talking about. That being, the governor wants to get re-elected."

The notes indicate Zehnder acknowledged as much and mentioned Gregoire's 143-vote margin of victory in 2004 over Republican Dino Rossi, whom she's facing again this year. In an interview, Zehnder recalled being surprised by the question and believed it to be inappropriate.

"I'm sure I said, 'We're all concerned about the governor being re-elected, but that's not the point,' " Zehnder said.

In a recent interview, Petersen recalled that "it was clear from my standpoint it was a political issue."

Mike Keizer from the Central Washington Building Trades Council participated in the meeting but said he couldn't recall details of the discussion about the project's effect on Gregoire's campaign.

"I'm not saying it didn't occur," said Keizer, who noted that he had thanked Gregoire for her efforts while riding her campaign bus in April.

Going public

The governor's office cited a number of factors that kept it from being more active in the recruitment of Areva, including getting a new chief of staff up to speed and this year's legislative session. But before late February, the office also believed taking a more active role would violate the company's request for confidentiality.

"That didn't seem to stop the other governors," Adrian said.

"That was the only site that was not made public," he added. "None of the other sites were taking it very seriously."

Indeed, Areva was making the news in other states and at one point it even credited TRIDEC for keeping the company out of the headlines, a note that made it to Baldwin's desk.

"Interesting the company actually dislikes the press coverage they have gotten in Idaho, reinforcing our run silent strategy," Baldwin wrote in an e-mail to other governor's office staffers.

At TRIDEC, officials joked that they'd be willing to buy a cell phone for Gregoire to place the often-requested call to Areva so no public record of it would exist.

But things changed with a Feb. 27 letter from Areva Chief Executive Officer Anne Lauvergeon to Gregoire reporting what already had been known for months - that the company had narrowed its list to sites in Washington, Idaho, Texas, New Mexico and Ohio. That letter would force things into the open.

In an e-mail to Petersen the day the letter was signed, Keith Klein, the U.S. Department of Energy's former Richland Operations manager who was working as a consultant for TRIDEC, wrote that he recently had been told of the letter by an Areva official.

"He confirmed we will get a letter, but he also said that we will have to do something politically that would counterbalance the very strong political support they are getting from other sites," Klein wrote in a note that was forwarded to the governor's office. "He still thinks that will be the main factor and the other states' attractiveness in that area will outweigh our attractiveness in other areas."

"Personally, I'm looking forward to the letter coming out, getting this out in the open, and seeing what we can do politically," Klein wrote.

Two days later, James Yu, Areva's congressional relations manager, sent the letter to TRIDEC with an invitation to "disseminate the letter and the news to the Tri-Cities community."

"Public communications are now a 'go,' " he wrote.

News of the letter broke March 5, and for many it was the first they'd heard of it.

"We obviously need to learn more," Jay Manning, director of the state Department of Ecology, wrote to the governor's office, unaware it had been involved for months. "We can all be confident, however, that this will be a tremendously controversial project if the Richland site is selected."

"I recommend caution," he wrote.

Pressure mounts

With the governor's "run silent" strategy no longer viable, public pressure for her to take a stand on Areva began to mount.

State Sen. Delvin on March 6 asked for a "public statement saying they will get a fair shake at permitting the site." He didn't get it.

"I think a statement would only re-ignite interest and elicit calls from the press," Pearse Edwards, Gregoire's communications and external relations director, wrote in a note to Zehnder and Baldwin.

Edwards later said he didn't want to encourage such calls because the governor's communications officers were unfamiliar with the project.

U.S. Sen. Patty Murray, D-Wash., jumped into the fray by announcing her support for the project. She "will now come out as strongly encouraging the Governor to engage in this," Mark Rupp from Gregoire's Washington, D.C., office warned colleagues in Olympia in a March 20 e-mail.

In a meeting that same day with the Herald's editorial board, Murray was dismissive about any potential political fallout from anti-nuclear groups.

Calls for the governor to clearly state or clarify her position on Areva or for her to support the project then followed from Murray, Franklin County, a Tri-City labor official and Benton County Commissioner Claude Oliver.

The governor's office agreed to help reach out to environmental interests and to offer them a briefing from Areva or TRIDEC. The Washington Environmental Council, the Bullitt Foundation and Hanford watchdog Heart of America Northwest were contacted. Only Heart of America responded, raising worries about new wastes.

Areva's February letter also appears to have prompted the governor to call company President McMurphy in Maryland. In a note to Zehnder suggesting Gregoire make the call, Baldwin wrote that it's "important to be consistent with our 'open for business' approach even when it's a tougher call." He wrote that it's "better to call them than to put something in writing" and referred to it as a "negotiation call not a promotion call."

"Opponents know we are not promoting this project and advocates want to see at least minimal Governor engagement," Baldwin wrote. "Consistent with what we have said to enviros: we are still in fact finding mode."

Decision time near

Meanwhile, it was becoming increasingly clear Areva was nearing a decision.

On March 13, Adrian wrote Baldwin to say a local Areva source had met recently with McMurphy and that "what he is getting from private conversations is that re-occurring theme that it is highly unlikely we will end up on top without the Governor's direct involvement (probably support)."

"It continues to be his feeling that the Gov. can make the difference," Adrian wrote.

Adrian wrote again a week later to say his local Areva source "called today to tell us that he had confirmed from a high level authoritative source that the Richland site is No. 2. He also confirmed that his source believed a call from our Governor would move us to No. 1."

The next day TRIDEC sent a formal letter to Gregoire asking for her "personal involvement."

On March 27, almost seven months after her original call had been canceled, Gregoire called McMurphy. It was the first conversation she had with an Areva representative and the last before the company announced its decision.

Conditional support

When asked at an April 1 news conference about her stand on Areva, Gregoire was strikingly cautious, calling Areva "a good corporate citizen" without endorsing or rejecting the uranium enrichment project when referencing her conversation with McMurphy.

"I reiterated my concern about disposal of waste and that I wanted to make sure that they were in compliance with all rules and regulations and so on," Gregoire said.

Asked directly if she would support the project under those conditions, Gregoire replied, "It depends on whether they're able to deal with that, but, yes, they've been a good corporate citizen."

A subsequent Herald editorial criticized Gregoire for her "conditional support," a characterization Baldwin called "EXACTLY the right message, actually," in an e-mail to a fellow staffer.

But Gregoire didn't care for the characterization and called the Herald to clarify her statement.

In a later interview with the Herald, she acknowledged trying not to appear too warm or too cold toward the project for fear of stirring up opponents or sending an overconfident message to Tri-City supporters of Areva.

But by then mixed messages already were floating around Washington, D.C., where TRIDEC accused Heart of America Director Gerry Pollet of saying Gregoire opposed the project.

Pollet denied using such strong language, but the dispute ended efforts between TRIDEC and Heart of America to reach an agreement on a list of common interests that might remove the environmental group's opposition to the project.

Asked repeatedly for its position, the governor's office developed a formal three-pronged "message" on Areva. It stated that to be considered by the company spoke well of the state's "open for business approach," assured the company the state would offer a "professional staff and predictable regulatory environment," and encouraged the company to reach out to the environmental community.

Gregoire's office also developed two messages to respond to constituent inquiries on Areva.

Replies to "pro" Areva messages were to end with "but all indications are that Washington is still under consideration by AREVA for this project."

Replies to "anti" messages would replace that language with "our state has consistently raised the importance of environmentally appropriate waste disposal for any project to be considered."

An early draft of the response stated that Gregoire believed an "abundant, affordable, environmentally responsible and diverse energy supply is imperative to Washington's economic and environmental health."

"I would drop the diverse energy sections," Baldwin wrote to a staffer drawing up the message. "She is not committed to a nuclear future."

One last plea

The governor's March 27 call to Areva didn't stop Areva supporters from asking for Gregoire's involvement.

"Then it became, 'Other states have the company on speed dial,' " Baldwin recalled. The governor's office found it difficult to believe any company would make a multibillion-dollar decision based on how many times it was called by a governor.

"It just strains the bands of credibility," Baldwin said later.

On April 24, it once again appeared a decision from Areva was imminent and that Idaho was the favored site.

TRIDEC board member Fran Forgette, a Gregoire supporter whom the governor appointed to Washington State University's Board of Regents, wrote her chief of staff, pleading for a call to Areva CEO Lauvergeon in France.

"Our state grades out very competitively on all criteria, but one," Forgette wrote. "AREVA corporate (i.e. overseas) senses that our Governor has not been out front & supportive of this project."

"This is critical to our post-Hanford economy," he wrote. "Let's not let this slip away for lack of a willingness to simply communicate."

Adrian made a similar plea that day, noting Idaho Gov. Butch Otter already had called Lauvergeon.

On the morning of April 28, Adrian again wrote Baldwin to ask if a call had been made or was in the works. About 90 minutes later, he wrote again to report that Klein had heard Areva was "about to make the calls" to all sites to announce its decision.

Baldwin forwarded the message to Gregoire's scheduler Barb Winkler.

Winkler placed a call and left a message for Lauvergeon that afternoon, losing a couple of hours due to confusion on how to place an international call.

A briefing paper prepared by Baldwin and Zehnder for Gregoire in advance of the call again referred to the New Mexico waste agreement and suggested she encourage Areva to talk with Heart of America about the waste issue.

Just before noon, TRIDEC's Petersen wrote Adrian, who forwarded the message to the governor's office, that he'd just spoken with Klein.

"He said the Areva manager said the problem with the Tri-Cities site was that the political support was 'tepid' in comparison to three of the other sites," Petersen wrote. "He told Keith that not only was the Governor of Idaho calling regularly, but that the New Mexico Governor and (U.S. Sen. Pete) Domenici had been placing calls weekly!"

Two days later, Gregoire's scheduler wrote Baldwin to say her message for Lauvergeon hadn't been returned. It never would be.

'Nice letter!'

On the morning of May 5, Adrian sent a note to Baldwin asking, again, if the governor planned to call Areva. But within a few hours, word began leaking out that it was too late. Areva had chosen Idaho.

Areva President McMurphy called Gregoire and sent her a letter commending Gregoire for "your own work to make Washington the most attractive host" and referred to "political leadership's support at federal, state and local levels."

"Nice letter!" Gregoire communications director Edwards wrote in an e-mail to Baldwin.

Gregoire's staff distributed the letter along with her own statement saying she was "disappointed" Areva did not choose the Richland site.

Adrian sent an e-mail to Baldwin that evening saying that "regardless of what McMurphy said," TRIDEC had seen e-mail suggesting Areva's fuel fabrication plant in Richland would soon be paired with its new uranium enrichment facility.

"So the 625 jobs are at high risk," Adrian wrote. "So as we have warned, the loss to (Idaho) is significant. Gov. needs to be prepared for that."

Upon seeing the note, Zehnder wrote Baldwin, "Looks like they will try to blame her. I hope the more rational voices will prevail."

After speaking with Gregoire the following day, Baldwin sent a note to fellow staffers highlighting McMurphy's letter.

"Although TRIDEC now talks about the local and federal support the COMPANY highlights the state role," he wrote. "If they had a problem with us, they would have at least stayed silent on the topic."

Gregoire appeared at a fundraiser in the Tri-Cities that evening and PNNL's Lawrence introduced her.

The next morning, Lawrence sent Gregoire an e-mail citing her "real disconnect" with community leaders in the Tri-Cities. At the bottom he pasted what he called "several of the many communications with your staff regarding the need for your involvement."

"Based upon press reports, the emphasis isn't on Washington losing the plant, but your efforts in support of it," Lawrence wrote. "It is likely that issue will grow."

In a recent interview, Baldwin said there just wasn't time to get answers to all the questions the governor's office had about the project.

"It's got to work local, it's got to work statewide," he explained. "We assumed we would have a chance to answer what it means statewide, and we didn't get there."

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