NuView says prospective partner could help company ‘start fresh’
The Texas-sized project came to Denton about 20 years ago.
Local scientists salvaged the linear accelerator from the abandoned, $2 billion Superconducting Super Collider project in Ellis County for $5 million. They re-engineered the atom smasher to produce medical isotopes. Their company, International Isotopes, got help from Denton taxpayers in 1997 to build a new road to a new manufacturing plant on Shady Oaks Drive.
The accelerator, still bearing the stamp from its creator, Los Alamos National Laboratory, has not made isotopes for more than five years. The Denton County Appraisal District, which sets property values for tax purposes, recently lowered its value to $200,000. Gone is the original company, too, yet Denton residents are still subsidizing the plant today.
The plant’s newest owner, Utah-based NuView Molecular Pharmaceuticals, stands as both the city’s and school district’s largest delinquent taxpayer, county records show. The company owes about $1.4 million in school, city and county property taxes. Some of the interest and penalties date from 2008. The amount NuView owes the city makes up 17 percent of Denton’s delinquent accounts since 2009, city staff said.
NuView faced foreclosure in state district court in December, but company president Paul Crowe filed for bankruptcy protection in a Utah federal court one day before the final hearing in the tax case was scheduled.
“I filed to protect the company’s assets, as any businessman would,” Crowe said.
In a July 23 interview, Crowe said that a global health care company was interested in a partnership with NuView that would not only pay off old debts but also reopen the plant. He and his associates decline to name that company.
The back story
Until early 2009, Trace Life Sciences made medical radioisotopes at the plant on Shady Oaks Drive and at another location on Jim Christal Road. Medical radioisotopes are used to diagnose and treat disease. Iodine-123, for example, helps doctors see a patient’s thyroid, and thallium-201, a patient’s heart. Iodine-131 can treat thyroid cancer. Copper-67 shows promise as a treatment for non-Hodgkin’s lymphoma. Trace Sciences International, of Canada, had acquired the Denton facilities from International Isotopes.
In September 2008, Trace’s financier, Medical Capital, put Crowe in charge of the plant. Soon after his arrival, Medical Capital collapsed, triggering an investigation by the U.S. Securities and Exchange Commission. A court-appointed receiver alleged that Medical Capital was a Ponzi-like scheme that had taken about $1 billion from 12,000 investors. Medical Capital’s president eventually pleaded guilty to wire fraud. Although the Denton plant was not implicated in the federal investigation, it was swept into federal receivership along with Medical Capital.
The plant closed in early 2009. Since then, NuView has been storing low-level radioactive waste in the warehouse on Shady Oaks Drive. The linear accelerator sits idle — radioactive, but contained — in a subterranean concrete tunnel in the building next door. Cyclotrons, also used to make medical isotopes, also sit idle, but radioactive, in the plant on Jim Christal Road.
Crowe secured the property out of federal receivership in December 2011. He hoped to reopen the plant by January 2013.
“No one anticipated it would take so long to get refinanced,” Crowe said.
He had trouble raising money. He blamed the weak economy, negative news stories and the fact that the plant isn’t currently making and selling isotopes.
During the last inspection in October 2013, state inspectors had to make two passes at the facility in order to complete the work. The first inspection report noted that the power was off and that inspectors were not able to get inside the building. A second report noted that inspectors took radiation readings in the waste storage area and checked on the accelerator.
Other inspections have shown that outside the concrete tunnel that holds the accelerator and along the company’s fence line, radiation was measured at “background levels,” which means they were in line with levels that naturally occur in the environment at large.
The wild card
NuView doesn’t hold a license to manufacture medical isotopes at the plant. That was issued to Trace. NuView holds only a license to store the old radioactive waste “temporarily.”
Carrie Williams, spokeswoman for the Texas Department of State Health Services, said the company’s temporary permit to store the radioactive waste has no defined term.
“The company is authorized to possess the materials at the facility during this transitional time [but not use it],” Williams wrote in an email. “They will be held to those conditions until either a new license for the facility is issued or the site is decommissioned.”
If NuView and Crowe are unable to secure a new manufacturing license, there are few options for the plant’s future without first decommissioning. To decommission the plant, a specially equipped crew must remove the contaminated waste and then ship it to a hazardous waste dump.
Cost estimates to decommission the plant have ranged from $2.2 million to $4 million, according to state documents. An informal estimate in 2009 came to $7 million, state records showed.
NuView’s senior vice president for operations, Ian Horn, said in a July 23 interview that he believed the decommissioning costs could be less because the original estimates calculated the waste and equipment being trucked to Utah.
Until recently, Texas, by law, never kept more than $500,000 in its decommissioning account, which would not have been enough to clean up the Denton plant. A recent report showed the Department of State Health Services has used the account only three times. The largest expenditure came when the agency contributed $400,000 toward a Texas Railroad Commission cleanup of a well in Chambers County after a radioactive logging device ruptured, threatening the well-being of residents in the nearby Gulf Coast town of Winnie.
In 2012, the state agency seized the $216,870 deposit Trace had paid for decommissioning the plant and placed it in the decommissioning account, state records showed.
To get a manufacturing license, NuView must provide another deposit for a future cleanup, should the company go out of business again. NuView is working with the state for its license because in 1963 the Nuclear Regulatory Commission delegated some of its regulatory authority to a number of states, including Texas. The state’s obligations include making sure its licensees put up enough money — whether through a bond, letter of credit or other financial assurance — to clean up a work site, if it becomes necessary. Commission spokeswoman Lara Uselding said the federal agency was monitoring the state’s performance to make sure it meets national standards for public health and safety.
Last year, the Texas Legislature raised the cap for the account to $100 million. Williams said the state agency estimates it will take years to reach the cap as it raises additional money through licensing and fees.
Currently, there is $3.8 million in the account, Williams said.
Similar to the state’s lack of funds for decommissioning, NuView has had trouble paying all the plant’s bills. Community leaders have been concerned about the ramifications in trying to collect those bills for some time.
Denton Municipal Electric wrote state regulators 2009 that the company owed $175,000. DME asked for reassurance that, if the city turned off the power, there would be no threat to the public. The federal receiver paid the electric bill. DME kept the power on at the plant through 2011. That year, DME again sought reassurance from the state regulators over consequences for nonpayment — this time whether turning off the power would trigger the loss of the company’s license.
NuView’s bankruptcy filing showed that the company still owed DME $35,990 and the city’s Solid Waste Department $300. Its largest creditors however, were local governments owed back taxes and Fort Worth-based Interstate Restoration, which was owed $1.2 million.
Crowe acknowledged the company didn’t notify the state of the bankruptcy filing at the time he filed. Under state law, companies that hold radiation licenses are typically required to make such notification.
The bankruptcy case was dismissed in February, but not before the U.S. Department of Justice and the bankruptcy trustee recommended that NuView’s case be converted from a Chapter 13 reorganization to Chapter 7, dissolution.
Crowe said he avoided closing the company down after he said he secured agreements for more time from the company’s creditors.
Thus far, the state appears to have made no moves to decommission the plant.
A way out
Until Crowe filed for bankruptcy protection, NuView had been making tax payments. Each time the company made a payment — in March, June and September of 2013 — Denton District Judge Jonathan Bailey granted a continuance in the tax case. But the company has made no payments this year, county records show, and no new court dates have been scheduled.
Gilbert Bragg, the Austin-based tax collection attorney for Denton County, said that some tax cases fall into delinquent status and can be a real problem for the taxing district. When his firm forecloses on a vacant lot, people line up to buy it, Bragg said.
But that’s not the case with properties that have low-level radioactive waste, like NuView does, or other environmental concerns, Bragg said.
“The taxing jurisdictions can come into possession of properties they really don’t want,” Bragg said.
Mark Burroughs, the city’s and school’s tax collection attorney, said last month that he hopes the case will be settled in the next few weeks since NuView is no longer under bankruptcy protection.
“We are still in litigation and that makes it tougher to talk in detail,” said Burroughs, who had been Denton’s mayor until May.
Crowe said NuView needs $17 million to reopen the Denton plant. He said his long search for a new partner to help reopen the plant will be finished soon. NuView has developed isotopes that promise better diagnosis of breast and prostate cancer, he said. He declined to name the global health care company that is interested in licensing the rights to the new diagnostic technology. But he said he expects the deal with NuView’s new partner to be consummated this month.
Once the deal is signed, he plans to pay about $750,000 of the $1.4 million in property taxes, interest and penalties owed by the company. The rest of the tax bill, he said, the company will pay in the next 90 to 120 days.
Some of that new capital will be used to provide the financial assurances to secure a new state license, Crowe said. The Texas Department of State Health Services has been holding NuView’s licensing application for several years, waiting for answers to questions about a number of items, including the company’s finances.
Crowe said a deal with a new partner will make the difference.
“It raises the capital the company needs to start fresh,” he said.
PEGGY HEINKEL-WOLFE can be reached at 940-566-6881 and via Twitter at @phwolfeDRC.