Uranium Enrichment
Decontamination and Decommissioning Fund Is Insufficient to Cover Cleanup Costs Gao ID: GAO-04-692 July 2, 2004Decontaminating and decommissioning the nation's uranium enrichment plants, which are contaminated with hazardous materials, will cost billions of dollars and could span decades. In 1992, the Energy Policy Act created the Uranium Enrichment Decontamination and Decommissioning Fund (Fund) to pay for the plants' cleanup and to reimburse licensees of active uranium and thorium processing sites for part of their cleanup costs. This report discusses (1) what DOE has done to reduce the cleanup costs authorized by the Fund, and (2) the extent to which the Fund is sufficient to cover authorized activities.
The Department of Energy (DOE) has taken steps to reduce cleanup costs by taking actions that address recommendations made by the National Academy of Sciences and by pursuing an accelerated, risk-based cleanup strategy at the plants. In some cases, however, DOE has only partially addressed the Academy's recommendations. For example, one recommendation suggested that DOE develop three plans--namely, headquarters level, plant-complex level, and site level--that address and integrate the decontamination and decommissioning of the facilities. Only one plant has developed a plan, however. Additionally, DOE is pursuing an accelerated, risk-based cleanup strategy at the plants that it believes will reduce cleanup costs. According to DOE officials, an accelerated, risk-based strategy will accelerate time frames for cleanup, and establish "realistic cleanup criteria" in DOE's regulatory cleanup agreements. Despite DOE efforts to reduce costs, we found that based on current projected costs and revenues, the Fund will be insufficient to cover the cleanup activities at the three plants. Specifically, our Baseline model demonstrated that by 2044, the most likely time frame for completing cleanup of the plants, costs will have exceeded revenues by $3.5 billion to $5.7 billion (in 2004 dollars). Importantly, we also found that the Fund would be insufficient irrespective of which model we used, including models that estimated the final decommissioning at the plants under (1) accelerated time frames, (2) deferred time frames, or (3) baseline time frames, and with additional revenues from federal government contributions as authorized under current law. Because the Paducah and Portsmouth plants are now estimated to cease operations by 2010 and 2006, respectively, extending the Fund by an additional 3 years would give DOE an opportunity to develop plans, including more precise cost estimates, for the cleanup of these plants and to better determine if further Fund extensions will be necessary.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-04-692, Uranium Enrichment: Decontamination and Decommissioning Fund Is Insufficient to Cover Cleanup Costs
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Report to Congressional Committees:
July 2004:
URANIUM ENRICHMENT:
Decontamination and Decommissioning Fund Is Insufficient to Cover
Cleanup Costs:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-692]:
GAO Highlights:
Highlights of GAO-04-692, a report to congressional committees
Why GAO Did This Study:
Decontaminating and decommissioning the nation‘s uranium enrichment
plants, which are contaminated with hazardous materials, will cost
billions of dollars and could span decades. In 1992, the Energy Policy
Act created the Uranium Enrichment Decontamination and Decommissioning
Fund (Fund) to pay for the plants‘ cleanup and to reimburse licensees
of active uranium and thorium processing sites for part of their
cleanup costs.
This report discusses (1) what DOE has done to reduce the cleanup costs
authorized by the Fund, and (2) the extent to which the Fund is
sufficient to cover authorized activities.
What GAO Found:
The Department of Energy (DOE) has taken steps to reduce cleanup costs
by taking actions that address recommendations made by the National
Academy of Sciences and by pursuing an accelerated, risk-based cleanup
strategy at the plants. In some cases, however, DOE has only partially
addressed the Academy‘s recommendations. For example, one
recommendation suggested that DOE develop three plans”namely,
headquarters level, plant-complex level, and site level”that address
and integrate the decontamination and decommissioning of the
facilities. Only one plant has developed a plan, however.
Additionally, DOE is pursuing an accelerated, risk-based cleanup
strategy at the plants that it believes will reduce cleanup costs.
According to DOE officials, an accelerated, risk-based strategy will
accelerate time frames for cleanup, and establish ’realistic cleanup
criteria“ in DOE‘s regulatory cleanup agreements.
Despite DOE efforts to reduce costs, we found that based on current
projected costs and revenues, the Fund will be insufficient to cover
the cleanup activities at the three plants. Specifically, our Baseline
model demonstrated that by 2044, the most likely time frame for
completing cleanup of the plants, costs will have exceeded revenues by
$3.5 billion to $5.7 billion (in 2004 dollars). Importantly, we also
found that the Fund would be insufficient irrespective of which model
we used, including models that estimated the final decommissioning at
the plants under (1) accelerated time frames, (2) deferred time frames,
or (3) baseline time frames, and with additional revenues from federal
government contributions as authorized under current law. Because the
Paducah and Portsmouth plants are now estimated to cease operations by
2010 and 2006, respectively, extending the Fund by an additional 3
years would give DOE an opportunity to develop plans, including more
precise cost estimates, for the cleanup of these plants and to better
determine if further Fund extensions will be necessary.
Cleanup Costs Outweigh Fund Revenues:
[See PDF for image]
[End of figure]
What GAO Recommends:
GAO recommends that the Congress consider reauthorizing the Fund for an
additional 3 years and require DOE to reassess the Fund‘s sufficiency
before it expires to determine if further extensions will be necessary.
GAO also recommends that DOE develop plans for the Paducah and
Portsmouth plants that identify the most probable time frames and costs
for completing the cleanup. DOE generally agreed with our
recommendations, but stated its reluctance to develop plans for the
plants now. GAO believes that without these plans, DOE will be unable
to develop a more precise cost estimate or reassess the Fund‘s
sufficiency.
www.gao.gov/cgi-bin/getrpt?GAO-04-692.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Robin Nazarro at (202)
512-3841 or nazarror@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
DOE Has Taken Several Actions to Reduce Cleanup Costs:
Based on Current Projected Costs and Revenues, the Fund Will Not Be
Sufficient to Complete Cleanup at the Three Plants:
Conclusions:
Matters for Congressional Consideration:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Scope and Methodology:
Appendixes:
Appendix I: Fund Modeling Methodology, Assumptions, and Results:
Modeling Methodology:
Baseline Model Data, Assumptions, and Uncertainties:
Alternative Models:
Results:
Appendix II: DOE Actions Taken That Addressed the National Academy of
Sciences' Cost Reduction Recommendations:
Appendix III: Comments from the Department of Energy:
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Staff Acknowledgments:
Tables:
Table 1: Status of the Academy's Major Recommendations:
Table 2: Comparison of Models:
Table 3: Recommendations, Status, and Explanation of the Actions Taken
by DOE:
Figures:
Figure 1: Location of the Three Uranium Enrichment Plants:
Figure 2: The Decontamination and Decommissioning Process:
Figure 3: Total Fund Expenditures, Fiscal Years 1994-2003:
Figure 4: Baseline Model Results:
Figure 5: Accelerated Model Results:
Figure 6: Deferred Model Results:
Figure 7: Revenue Added Model Results:
Figure 8: Revenue Added Plus Interest Model Results:
Figure 9: Present Value of Fund Balance for Baseline, Accelerated, and
Deferred Models:
Figure 10: Present Value of Fund Balance for Baseline, Revenue Added,
and Revenue Added Plus Interest Models:
Abbreviations:
CERCLA: Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended:
D&D: decontamination and decommissioning:
DOE: Department of Energy:
RCRA: Resource Conservation and Recovery Act of 1976, as amended:
USEC: United States Enrichment Corporation:
Letter July 2, 2004:
Congressional Committees:
Decontaminating and decommissioning the Department of Energy's three
uranium enrichment plants--located near Oak Ridge, Tennessee; Paducah,
Kentucky; and Portsmouth, Ohio--will cost billions of dollars and could
span several decades. These plants, which encompass more than 30
million square feet of floor space, miles of interconnecting pipes, and
thousands of acres of land, are contaminated with radioactive and
hazardous materials. The Department of Energy's (DOE) Office of
Environmental Management is responsible for cleanup of the three
plants. Cleanup activities include assessing, treating, and disposing
of the contamination found at the plants and the decontamination and
decommissioning (D&D) of inactive facilities. DOE conducts its cleanup
activities under the requirements of several federal environmental laws
and compliance agreements with relevant regulatory authorities,
including the Environmental Protection Agency and state regulatory
agencies. While DOE estimates that all cleanup work at the Oak Ridge
plant will be complete by 2008, the Paducah and Portsmouth plants may
continue operations for the next several years,[Footnote 1] and DOE has
not determined when the final decontamination and decommissioning of
these two plants will begin.
In 1992, the Energy Policy Act, as amended,[Footnote 2] established the
Uranium Enrichment Decontamination and Decommissioning Fund (Fund) to
pay for the cleanup of the three plants. The Fund also covers the
reimbursement of a portion of the cleanup costs to licensees of active
uranium and thorium[Footnote 3] processing sites that previously sold
these materials to the federal government. The Congress authorized
annual contributions to the Fund for 15 years (ending in 2007), to be
made by government appropriations and payments from domestic utility
companies that utilized the enriched uranium produced by these plants
for nuclear power generation. The Congress specified that any unused
balances in the Fund be invested in Treasury securities and any
interest earned be made available to pay for activities covered under
the Fund. In creating the Fund, the Congress also required the National
Academy of Sciences (Academy) to undertake a study to assess the
opportunities for cost reduction in carrying out the D&D work at the
three plants. In response, the Academy issued a report in 1996 that
included 13 major recommendations to reduce D&D costs at the three
plants.[Footnote 4]
As directed by Public Law 107-222, we conducted a review of the
sufficiency of the Fund. This report discusses (1) what actions DOE has
taken to reduce the cleanup costs the Fund is authorized to support,
and (2) the extent to which the Fund is sufficient to cover authorized
activities.
To determine what actions DOE has taken to reduce the cleanup costs the
Fund is authorized to support, we reviewed the National Academy of
Sciences' report that identified major cost reduction recommendations
for the nation's three uranium enrichment plants. We met with Academy
officials to gain further information about the study, and with DOE and
its contractor officials at each of the plants to determine the extent
to which DOE has taken actions to address the recommendations. While we
were able to obtain information on actions taken to date, DOE could not
determine whether the actions were taken as a result of the Academy's
recommendations. DOE was also generally unable to provide information
regarding the cost savings, if any, achieved by implementing these
actions. To determine other steps DOE has taken to reduce cleanup
costs, we visited all three plants and interviewed DOE and contractor
officials from DOE headquarters, the Oak Ridge Operations Office, the
Lexington Office, and the site offices at each of the three plants.
Additionally, we obtained and analyzed documentation regarding DOE's
accelerated cleanup strategy at the Oak Ridge and Paducah plants, as
well as each of the three plants' draft risk-based end state vision
documents, to better understand DOE's proposed options for
consideration. We also interviewed regulatory authorities responsible
for overseeing cleanup activities at the plants, including officials at
the Environmental Protection Agency and state regulatory agencies in
Kentucky, Ohio, and Tennessee.
To assess the sufficiency of the Fund to pay for the total projected
costs of the Fund's authorized activities, we interviewed DOE and
contractor officials responsible for the Fund's financial data and
obtained DOE's current estimates for uranium and thorium reimbursement
costs, the cleanup costs at the three plants, and the current and
likely revenue projections. We assessed the reliability of this data
and determined that the data were sufficient for the purposes of our
report. We used the data to develop a number of simulation models that
factored in the cost and revenue projections on an annual basis and
uncertainties surrounding inflation rates, interest rates, costs,
revenues, and the timing of the final D&D work at the Paducah and
Portsmouth plants. See appendix I for a detailed description of our
modeling methodology, assumptions, and results. We interviewed DOE and
contractor officials from DOE Headquarters, the Oak Ridge Operations
Office, the Lexington Office, and the site offices at each of the three
plants, as well as officials from the federal and state regulatory
offices party to the plants' cleanup agreements. We also toured the Oak
Ridge plant to identify the major uncertainties that could impact
future cleanup costs at the plants. Our scope and methodology are
presented at the end of this report. We performed our work between
September 2003 and March 2004 in accordance with generally accepted
government auditing standards.
Results in Brief:
DOE has attempted to reduce cleanup costs by taking actions consistent
with recommendations made by the National Academy of Sciences (Academy)
and by pursuing an accelerated, risk-based cleanup strategy at the
three plants. DOE has adopted measures that address many of the
Academy's recommendations, such as conducting focused technology
demonstrations to improve the decontamination and decommissioning
process. However, in some cases, DOE has only partially addressed the
Academy's recommendations. For example, one recommendation suggested
that DOE develop three plans--namely, headquarters level, plant-complex
level, and site level--that address and integrate the decontamination
and decommissioning of the facilities, among other cleanup activities
at the sites. DOE has not developed a headquarters-level or plant
complex-level plan that addresses and integrates the decontamination
and decommissioning of all three plants. Oak Ridge is the only plant
with an agreed-upon decontamination and decommissioning plan.
Additionally, DOE is pursuing an accelerated, risk-based cleanup
strategy at the plants that it believes will reduce cleanup costs.
According to DOE officials, an accelerated, risk-based strategy will
accelerate time frames for cleanup at the Oak Ridge and Paducah plants,
and establish "realistic cleanup criteria" in their regulatory cleanup
agreements. By implementing cleanup actions more quickly and ensuring
that its cleanup efforts are both cost effective and environmentally
sound, DOE hopes it can avoid unnecessary costs while reducing risks
posed to human health and the environment. However, some state and
federal regulators have suggested that if DOE proposes changes to
current cleanup agreements, renegotiating those agreements could delay
cleanup and, therefore, potentially increase costs.
Despite DOE efforts to reduce costs, we found that based on current
projected costs and revenues, the Fund will be insufficient to cover
the activities authorized under the Fund. We determined that while the
Fund is sufficient to cover reimbursements to uranium and thorium
licensees, the Fund is insufficient to cover the complete cleanup at
the three plants. Specifically, our Baseline model demonstrated that by
2044, the most likely time frame for completing all cleanup activities
at the plants, cleanup costs will have exceeded revenues by $3.5
billion to $5.7 billion (in 2004 dollars). Importantly, we found that
the Fund would be insufficient irrespective of what estimates were
used, including models that estimated the final decommissioning at the
plants under (1) accelerated time frames, (2) deferred time frames, or
(3) baseline time frames, and with additional revenues from government
contributions as authorized under current law. Further, until DOE has
more specific information about such factors as the dates for beginning
and completing the decommissioning work at the Paducah and Portsmouth
plants, it is not possible to more precisely determine the total
resources needed to cover the Fund's authorized activities. Because the
Paducah and Portsmouth plants are now estimated to cease operations by
2010 and 2006, respectively, DOE should be able to develop plans,
including more precise cost estimates, for the decontamination and
decommissioning of these plants. Extending the Fund by an additional 3
years would give DOE an opportunity to develop these plans and a better
estimate of the costs to clean up the plants. With this information,
DOE could better determine if further extensions to the Fund will be
necessary.
In order to better ensure that the Fund will be sufficient to cover the
projected costs for the authorized activities, we are recommending that
the Congress consider reauthorizing the Fund for an additional 3 years
to 2010, and require DOE to reassess the sufficiency of the Fund before
the expiration date to determine if additional extensions will be
necessary. To further reduce the uncertainty surrounding the
sufficiency of the Fund, we are also recommending that the Secretary of
Energy develop decontamination and decommissioning plans that would
identify the most likely time frames for completing the final work at
the Paducah and Portsmouth plants.
DOE generally agreed that our report accurately presents the current
status of the Fund and concurred with our recommendations that the
Congress consider reauthorizing the Fund for 3 additional years and
require DOE to reassess the sufficiency of the Fund before it expires
in 2010 to determine if additional extensions will be necessary. DOE
also stated that it would develop decontamination and decommissioning
plans for the remainder of the facilities at Paducah and Portsmouth "at
the appropriate time," but did not specify a date. We believe that
unless DOE develops decontamination and decommissioning plans that
include the most probable time frames and costs for completing final
work at Paducah and Portsmouth, DOE will not be able to develop a more
precise estimate of the total funds necessary to cover the authorized
cleanup activities or assess the Fund's sufficiency and determine if
further extensions are necessary.
Background:
The federal government has enriched uranium for use by commercial
nuclear power plants and for defense-related purposes for more than 40
years at three plants located near Oak Ridge, Tennessee; Paducah,
Kentucky; and Portsmouth, Ohio (see fig. 1). These uranium enrichment
plants are largely obsolete, however, due to the emergence of newer,
more efficient technologies and the globalization of the uranium
enrichment market. DOE now faces the task of decontaminating,
decommissioning, and undertaking other remedial actions[Footnote 5] at
these large and complex plants that are contaminated with hazardous
industrial, chemical, nuclear, or radiological materials.
Figure 1: Location of the Three Uranium Enrichment Plants:
[See PDF for image]
[End of figure]
In 1991, at the request of the House Subcommittee on Energy and Power,
GAO analyzed the adequacy of a $500 million annual deposit into a fund
to pay for the cost of cleanup at DOE's three uranium enrichment
plants.[Footnote 6] We reported that a $500 million deposit indexed to
an inflation rate would likely be adequate, assuming that deposits
would be made annually into the fund as long as cleanup costs were
expected to be incurred, which at the time of the study was until 2040.
Additionally, in a related report we concluded that the decommissioning
costs at the plants should be paid by the beneficiaries of the services
provided--in this case, DOE's commercial and governmental
customers.[Footnote 7]
In 1992, the Congress passed the Energy Policy Act, which established
the Uranium Enrichment Decontamination and Decommissioning Fund (Fund)
to pay for the costs of decontaminating and decommissioning the
nation's three uranium enrichment plants. The Energy Policy Act also
authorized the Fund to pay remedial action costs associated with the
operation of the plants to the extent funds are available and to
reimburse uranium and thorium licensees for the portion of their
cleanup costs associated with the sale of these materials to the
federal government. The Energy Policy Act authorized the collection of
revenues for 15 years to pay for authorized cleanup costs. The revenues
are derived from: (1) an assessment on domestic utilities of up to $150
million annually, based on a ratio of their purchases of enriched
uranium to the total purchases from DOE, including those for defense;
and (2) federal government appropriations for the difference between
the authorized funding under the Energy Policy Act and the assessment
on utilities.[Footnote 8] In addition, the Energy Policy Act provided
that balances in the Fund be invested in Treasury securities and any
interest earned be made available to pay for activities covered under
the Fund.
DOE's Office of Environmental Management is responsible for management
of the Fund and cleanup activities at the three plants, which, through
fiscal year 2003, were mostly carried out by its contractor, Bechtel
Jacobs. The department's Oak Ridge Operations Office in Oak Ridge,
Tennessee, had historically provided the day-to-day management of the
Fund and oversight of the cleanup activities at all three uranium
enrichment plants. However, in October 2003, DOE established a new
office in Lexington, Kentucky, to directly manage the cleanup
activities at the Paducah and Portsmouth plants. The Oak Ridge
Operations Office continues to manage the Fund and the cleanup
activities at the Oak Ridge plant.
Currently, the Fund is used to pay for the following activities:
* Reimbursements to uranium and thorium licensees. The Energy Policy
Act provides that the Fund be used to reimburse licensees of active
uranium and thorium processing sites for the portion of their
decontamination and decommissioning activities, reclamation efforts,
and other cleanup costs attributable to the uranium and thorium
materials they sold to the federal government.[Footnote 9]
* Cleanup activities at the three uranium enrichment plants.[Footnote
10] Cleanup activities at the plants include remedial actions, such as
assessing and treating groundwater or soil contamination; waste
management activities, such as disposing of contaminated materials; the
surveillance and maintenance of the plants, such as providing security
and making general repairs to keep the plants in a safe condition; the
decontamination and decommissioning (D&D) of inactive facilities by
either cleaning up the facilities so they could be reused or
demolishing them; and other activities, such as litigation costs at the
three plants and funding to support site-specific advisory
boards.[Footnote 11] See figure 2 for an example of the D&D process,
including before, during, and after D&D work is complete at a facility.
Figure 2: The Decontamination and Decommissioning Process:
[See PDF for image]
[End of figure]
From fiscal year 1994, when the Fund began incurring costs, through
fiscal year 2003, a total of $3.2 billion (in 2004 dollars) from the
Fund has been spent on the uranium and thorium reimbursement program
and cleanup activities--remedial actions, waste management,
surveillance and maintenance, decontaminating and decommissioning, and
other activities--at the three uranium enrichment plants (see fig. 3).
Figure 3: Total Fund Expenditures, Fiscal Years 1994-2003:
[See PDF for image]
Note: Total Fund expenditures for fiscal years 1994 through 2003 were
$3.2 billion, adjusted to fiscal year 2004 dollars.
[End of figure]
The Oak Ridge uranium enrichment plant, known as the East Tennessee
Technology Park, is located on 1,500 acres of land just outside of Oak
Ridge, Tennessee. It is the oldest of the three plants and has not
produced enriched uranium since 1985. According to DOE officials, while
most of the remedial actions and D&D work remain, the majority of the
key regulatory decision documents are in place and the agency is now
positioned to begin implementing the cleanup work. DOE currently plans
to complete all cleanup at the plant and close the site by the end of
fiscal year 2008.
The Paducah plant, located on about 3,500 acres of land west of
Paducah, Kentucky, continues to enrich uranium for commercial nuclear
power plants under a lease to a private company, the United States
Enrichment Corporation (USEC). According to USEC's director of
communications, for planning purposes USEC assumes that the plant will
continue operations until about 2010. Because the plant is still
operating, DOE has initiated a limited amount of D&D. However, it is
currently undertaking studies and implementing a series of remedial
actions while the plant is in operation, and estimates that it will
complete these actions by 2019. DOE has not yet determined when it will
begin D&D of the facilities currently in use (final D&D).
The Portsmouth plant, a 3,700-acre site located north of Portsmouth,
Ohio, ceased enriching uranium in May 2001, due to reductions in the
commercial market for enriched uranium. Later that year, the plant was
placed on cold standby, so that production at the facility could be
restarted in the event of a significant disruption in the nation's
supply of enriched uranium.[Footnote 12] Current plans call for
maintaining the plant in cold standby until September 2006, though a
recent DOE Inspector General's report found that DOE has not
established a well-defined endpoint for the cold standby program and
extensions to the program may be possible.[Footnote 13] While D&D of
the facilities currently on cold standby (final D&D) has not yet been
initiated, DOE has been working on remedial actions at several
contaminated areas. DOE has not yet determined when final D&D will
begin at the Portsmouth plant.
DOE Has Taken Several Actions to Reduce Cleanup Costs:
DOE has taken several steps to reduce cleanup costs by taking actions
consistent with the National Academy of Sciences' (Academy) cost
reduction recommendations and by pursuing an accelerated, risk-based
cleanup strategy at the uranium enrichment plants. DOE has adopted
measures that address most of the Academy's major cost recommendations,
such as conducting focused technology demonstrations to improve the
decontamination and decommissioning process. DOE is also pursuing an
accelerated cleanup strategy at the Oak Ridge and Paducah plants to
accelerate the time frames for conducting cleanup, which it expects
will reduce operational costs. In addition, DOE is revisiting each
plant's envisioned end state--the anticipated land use after the
completion of cleanup efforts--to determine if cleanup at each of the
plants is based on a technical risk assessment appropriate for the
sites' future land use. According to DOE, this risk-based end state
approach focuses DOE's environmental cleanup efforts in a way that is
both cost effective and protective of human health and the environment.
However, state and federal regulators have voiced concerns that if
cleanup agreements must be renegotiated, the cleanup could be delayed
and result in increased costs.
DOE Has Taken Actions That Address the National Academy of Sciences'
Cost Reduction Recommendations:
DOE has taken actions consistent with most of the 13 major cost
reduction recommendations made by the Academy in its 1996 report on
opportunities for D&D cost reductions at the three plants.[Footnote 14]
These recommendations suggested a variety of cost reduction measures,
including developing specific technologies and suggestions for
planning, management, and regulatory coordination. Table 1 shows the
focus and status of the Academy's recommendations.
Table 1: Status of the Academy's Major Recommendations:
Focus of recommendations: Management, including contract management,
development of D&D strategic plans, and security;
Number of recommendations: 5;
Status of recommendations: Addressed: 1;
Status of recommendations: Partially addressed: 4;
Status of recommendations: Not applicable: 0.
Focus of recommendations: Development of D&D technologies;
Number of recommendations: 4;
Status of recommendations: Addressed: 2;
Status of recommendations: Partially addressed: 1;
Status of recommendations: Not applicable: 1.
Focus of recommendations: Regulatory coordination and stakeholder
involvement;
Number of recommendations: 2;
Status of recommendations: Addressed: 1;
Status of recommendations: Partially addressed: 1;
Status of recommendations: Not applicable: 0.
Focus of recommendations: Recycling/waste disposal;
Number of recommendations: 2;
Status of recommendations: Addressed: 2;
Status of recommendations: Partially addressed: 0;
Status of recommendations: Not applicable: 0.
Total;
Number of recommendations: 13;
Status of recommendations: Addressed: 6;
Status of recommendations: Partially addressed: 6;
Status of recommendations: Not applicable: 1.
Source: GAO analysis of DOE information.
[End of table]
As table 1 shows, DOE took actions that address 6, or almost half, of
the Academy's 13 recommendations. For example, the Academy recommended
that DOE convert depleted uranium hexafluoride--a byproduct of the
uranium enrichment process--to a more stable chemical form for storage
or disposal. DOE recently awarded a contract to construct and operate
conversion facilities at both Paducah and Portsmouth. In March 2004,
DOE began shipping the cylinders of depleted uranium hexafluoride
stored at Oak Ridge to Portsmouth for conversion.
For another 6 recommendations, DOE took actions that partially
implemented the recommendations--either initially taking actions that
implemented the recommendation and then later modifying its approach,
or taking actions that addressed only a portion of the recommendation
or only one of the three plants. For example, the Academy recommended
that DOE develop three plans--namely, headquarters level, plant-complex
level, and site level--that address and integrate the D&D of the
facilities, environmental remediation activities, and the management of
depleted uranium hexafluoride. DOE has not developed a headquarters-
level or plant complex-level D&D plan that addresses and integrates D&D
of all three plants with other DOE activities. Oak Ridge is the only
plant with an agreed-upon D&D plan that incorporates D&D, other cleanup
activities, and the management of depleted uranium hexafluoride. The
Paducah plant currently has a plan that lays out DOE's approach for a
portion of its cleanup, but the plan does not address final D&D. DOE
does not have a D&D plan for the Portsmouth plant. However, the DOE
site manager said the agency is currently working to develop a
Portsmouth strategic plan that will address final D&D, other cleanup
activities, and management of depleted uranium hexafluoride.
DOE officials told us they have achieved cost savings as a result of
the actions they have taken that address the Academy's recommendations.
However, in most cases they were not able to quantify the cost savings
achieved because the actions taken were either improvements to
processes or procedures already in place or because they have not
quantitatively evaluated the savings. For example, the Academy
recommended that DOE consider the technical and management approaches
successfully used for the D&D of the Capenhurst uranium enrichment
plant in the United Kingdom. According to DOE officials, they
considered the technical and management approaches used at both the
Capenhurst plant and other U.S. D&D projects before beginning D&D
efforts at Oak Ridge and have, in several cases, contracted with
experienced environmental management contractors (who have
participated in decommissioning activities at these sites) to take
advantage of their expertise and knowledge. However, DOE has not
quantitatively evaluated the financial savings from these efforts.
In one instance, DOE has not taken action to implement the Academy's
recommendation because the recommendation made by the Academy is no
longer applicable. The Academy recommended that DOE establish a modest
research program to develop methods to decontaminate diffusion barrier
material[Footnote 15] effectively. According to DOE officials, such
research is no longer needed because the material is placed into an on-
site disposal facility, eliminating the need for decontamination. DOE
has constructed an on-site disposal facility at Oak Ridge, and similar
facilities are being considered for both Paducah and Portsmouth.
Appendix II provides additional details on the Academy's
recommendations and the actions that DOE has taken to address them.
DOE Is Pursuing an Accelerated, Risk-Based Cleanup Strategy at the
Plants to Reduce Costs:
DOE is pursuing an accelerated cleanup strategy at the Oak Ridge and
Paducah plants. Adopted after a 2002 review of DOE's environmental
management program found that only about one-third of the program's
budget went to actual cleanup work, this accelerated cleanup strategy
is intended to reduce the time needed to complete the cleanup of
sites.[Footnote 16] DOE says that by implementing cleanup actions more
quickly, it can reduce the amount it spends on maintenance, fixed
costs, and other activities required to support safety and security. At
the Oak Ridge plant, DOE plans to accelerate the plant's cleanup and
closure time frame from 2016 to 2008. DOE estimates that this
acceleration in cleanup and closure could achieve cost savings of $465
million.[Footnote 17] DOE has also proposed an accelerated cleanup plan
for the Paducah plant. This plan, submitted to state and federal
regulatory authorities for approval in November 2003 and approved in
April 2004, establishes (1) a series of prioritized response actions,
(2) ongoing site characterizations to support future response action
decisions, and (3) decontamination and decommissioning of the currently
operating gaseous diffusion plant once it ceases operations.[Footnote
18] DOE's plan reduces the time frame for completing the prioritized
response actions from 2030 to 2019 and could, according to DOE
estimates, save about $288 million. DOE is continuing negotiations with
state and federal regulatory authorities in hopes of further reducing
the time frame for completion of the prioritized response actions.
However, as we reported in April 2004, the total scope of the cleanup
at Paducah is unclear. Furthermore, DOE has not yet determined when D&D
of the plant facilities currently in use will begin.
DOE is also revisiting each plant's envisioned end state to determine
if cleanup at each plant is based on a technical risk assessment
appropriate for the sites' future land use. The 2002 environmental
management review found that the current cleanup approach and, in some
cases, interpretations of DOE's policy orders and requirements, as well
as laws, regulations, and cleanup agreements, were too conservative and
created obstacles to achieving the timely cleanup of the plants. As a
result, DOE required each of its environmental management sites,
including the three plants, to develop a risk-based "vision" to
identify acceptable risk levels consistent with the site's future land
use, including an analysis that identified the differences between the
current end state and one that is based on a risk assessment. Each of
the uranium enrichment plants has developed a draft risk-based end
state vision that is currently under review by DOE headquarters, state
and federal regulatory officials, and local stakeholders. Once these
visions are approved, the plants will re-evaluate their strategic
approaches and cleanup activities to determine if renegotiating cleanup
agreements is appropriate. According to DOE officials, if it is
determined that changes are necessary, any changes would be made in
accordance with all applicable requirements and procedures, including
public involvement and regulatory approval. However, state and federal
regulators with whom we spoke are concerned that if the plants are
required to renegotiate cleanup agreements as a result of proposed
changes, the cleanup process could be delayed, in turn resulting in
increased costs. For instance, federal and state regulatory officials
at Oak Ridge are concerned that, given the amount of work remaining and
the short time frame for the plant's closure, DOE might be unable to
meet its projected 2008 closure date if respective parties have to
renegotiate already agreed-upon cleanup standards.
Based on Current Projected Costs and Revenues, the Fund Will Not Be
Sufficient to Complete Cleanup at the Three Plants:
Despite DOE efforts to reduce costs, we found that based on current
projected costs and revenues, the Fund will be insufficient to cover
authorized activities. We determined that the Fund will be sufficient
to cover the reimbursements to the uranium and thorium licensees.
However, our Baseline model demonstrated that by 2044, the most likely
time frame for completion of cleanup at the three plants, cleanup costs
will have exceeded revenues by $3.5 billion to $5.7 billion (in 2004
dollars). Importantly, we found that the Fund would be insufficient
irrespective of which estimates we used, including models that
estimated the final cleanup work at the plants under (1) accelerated
time frames, (2) deferred time frames, or (3) baseline time frames, and
with additional contributions to the Fund equaling the difference
between the amounts that have been appropriated to date and the total
amount authorized under the Energy Policy Act. Given the numerous
uncertainties surrounding the cleanup work at the nation's three
uranium enrichment plants, it is not possible to more precisely
determine the total resources needed to cover the Fund's authorized
activities until DOE has better information about such factors as the
dates for beginning and completing the decommissioning work at the
Paducah and Portsmouth plants.
Our Baseline model demonstrated that by the time all cleanup at the
plants is completed, costs will have exceeded revenues by $3.5 billion
to $5.7 billion (in 2004 dollars). The Baseline model was developed
using cost estimates that assumed cleanup, including the
decontamination and decommissioning of all facilities (final D&D),
would occur by 2044. This time frame was developed in consultation with
DOE officials about what the most likely cleanup time frames would be.
It is important to note, however, that DOE has not yet made a decision
about when the final D&D will occur at the Paducah and Portsmouth
plants.
Because DOE has not determined when final D&D will begin at the Paducah
and Portsmouth plants, we also developed two alternative models--
Accelerated and Deferred--to assess whether the timing of the final D&D
work at these plants would have a significant impact on the total
costs. Total cleanup time was reduced by 20 years in the Accelerated
model and increased by 8 years in the Deferred model. The timing of D&D
can affect total cleanup costs because, among other things, each plant
must pay significant annual security and maintenance costs that will be
incurred as long as DOE maintains facilities on the sites. For example,
at the Paducah plant, the safeguarding and security costs after the
plant is shut down are projected to be more than $26 million annually
(in 2004 dollars).
We found that irrespective of what model we used--Accelerated or
Deferred--the Fund will be insufficient to cover the projected cleanup
costs at the uranium enrichment plants. In present value, the Fund
deficiency would range from a high of $3.8 billion in the Accelerated
model to a low of $0.63 billion in the Deferred model.[Footnote 19]
Thus, while accelerating or deferring the cleanup at the Paducah and
Portsmouth plants could affect overall costs, the Fund would still be
insufficient to cover the total cleanup costs irrespective of the time
frames of final D&D at the Paducah and Portsmouth plants.
Because federal contributions to the Fund have been less than the
authorized amount, we also developed two models to assess the affect of
additional contributions from government appropriations.[Footnote 20]
First, we developed a model--Revenue Added--that continued government
contributions to the Fund until they equaled the total amount
authorized under the Energy Policy Act. Building on this model, we
developed an additional Revenue Added Plus Interest model that
calculated and added to the Fund the interest that would have been
earned if all authorized government contributions had been made. We
found that under both models, despite additional revenues, the Fund
would still be insufficient to cover all cleanup costs. In present
value, the Fund deficiency would range from a high of $2.6 billion in
the Revenue Added model to a low of $0.09 billion in the Revenue Added
Plus Interest model. Even if the full amount of funds authorized by law
were appropriated, and interest accrued on this additional amount,
cleanup costs would still exceed revenues.
While our analysis was able to capture several uncertainties
surrounding the Fund--including interest rates, inflation rates, cost
and revenue variances, and the timing of final D&D--there are
additional uncertainties we were unable to capture, including
uncertainties due to possible changes in the scope of the cleanup;
whether the Fund will be required to pay for additional activities,
such as long-term groundwater monitoring once the plants are closed; as
well as potential litigation costs the Fund would have to support.
Significant changes in the scope of the cleanup work could impact the
costs of cleanup activities at the plants. For example, a recent risk
analysis exercise completed by DOE for the Paducah plant indicated that
such changes could increase cleanup costs by more than $3 billion and
extend the time frame for cleanup to more than 30 years past the
original scheduled end date of 2019.[Footnote 21] Additionally,
uncertainties surrounding waste disposal at the Paducah and Portsmouth
plants could significantly impact cleanup costs. Current DOE cost
estimates assume that on-site disposal facilities will be built, which
would minimize waste transportation costs. These facilities have yet to
be constructed at the plants or agreed upon by regulatory authorities.
However, if DOE is not able to build these on-site facilities, waste
disposal costs could increase substantially. For example, at the
Portsmouth plant, contractor officials estimated that if they have to
ship all of the waste off site, disposal would cost at least $515
million (in 2002 dollars) more than the projected cost of disposing of
the waste in an on-site facility.
Further, there may be additional activities the Fund is required to
support that are not currently included in DOE's cost projections. For
example, after each site has completed all of the necessary cleanup
work, there will be long-term stewardship costs at the plants, such as
continual groundwater monitoring. Currently, DOE officials assume these
long-term stewardship costs will be covered by a separate funding
source. Similarly, the costs to store and dispose of each plant's
depleted uranium hexafluoride are currently covered by a separate
appropriation. However, DOE officials acknowledge that if another
funding source is not available for these costs, they may be required
to use resources from the Fund.
Finally, litigation costs supported by the Fund are another source of
uncertainty. Future litigation costs could vary depending on the extent
to which lawsuits are pursued and whether the actions are decided in
favor of the federal government. Various legal claims related to
domestic utility company assessments have been made against the Fund.
All of the actions decided to date have been in favor of the federal
government. However, additional claims may be filed. Additionally,
there have been litigation costs associated with lawsuits against DOE
by workers and adjoining landowners at the Paducah and Portsmouth
plants, often concerning allegations of property or human health
damages.
Conclusions:
Based on DOE's current estimates, and the most likely time frame for
completing cleanup, costs will exceed revenues in the Fund by $3.5
billion to $5.7 billion (in 2004 dollars). However, DOE has yet to make
a number of decisions that will impact the costs of cleanup, including
when decontamination and decommissioning at the Paducah and Portsmouth
plants will occur. Until DOE resolves some of these uncertainties and
has more specific information, it is impossible to more precisely
determine the total funds necessary to cover the authorized cleanup
activities. While the precise amount of additional revenue needed
cannot be determined, our analysis shows that additional contributions
to the Fund beyond its current 2007 expiration date will be necessary
to cover the costs of authorized activities irrespective of when DOE
decides to undertake D&D of the Paducah and Portsmouth plants. Because
the Paducah and Portsmouth plants are now estimated to cease operations
by 2010 and 2006, respectively, DOE should be able to develop plans,
including more precise cost estimates, for D&D of these plants.
Extending the Fund by an additional 3 years would give DOE an
opportunity to develop these plans and a better estimate of the costs
to clean up the plants. With this information, DOE could better
determine if further extensions to the Fund will be necessary.
Matters for Congressional Consideration:
In order to better ensure that the Fund will be sufficient to cover the
projected costs for authorized activities, the Congress should
consider:
* reauthorizing the Fund for an additional three years to 2010, and:
* requiring DOE to reassess the sufficiency of the Fund before the
expiration date to determine if extensions beyond 2010 will be
necessary.
Recommendations for Executive Action:
To help reduce uncertainty regarding the sufficiency of the Fund, we
are recommending that the Secretary of Energy take the following two
actions:
* develop a decontamination and decommissioning plan for the Paducah
plant that would identify the most probable time frames and costs for
completing final D&D, and:
* develop a decontamination and decommissioning plan for the Portsmouth
plant that would identify the most probable time frames and costs for
completing final D&D.
Agency Comments and Our Evaluation:
We provided a draft of this report to DOE for review and comment. DOE
generally agreed that our report accurately presents the current status
of the Fund and concurred with the report's matters for congressional
consideration. DOE also stated that it would develop decontamination
and decommissioning plans for the remainder of the facilities at
Paducah and Portsmouth "at the appropriate time," but did not indicate
when would be an "appropriate time." We recognize that the
decontamination and decommissioning of the Paducah and Portsmouth
plants may not occur for years and that any plans developed by DOE
would have to be periodically updated. However, many of the
uncertainties that currently exist and could have significant impact on
the costs of DOE efforts will not be resolved until DOE develops D&D
plans for the Paducah and Portsmouth plants that identify the most
probable time frames and costs for completing final D&D. We recommended
that the Congress consider extending the Fund for 3 years, in part, to
provide DOE with an opportunity to develop these plans. Until DOE does
so, it will not be able to develop a more precise estimate of the total
funds necessary to cover the authorized cleanup activities or to
reassess the sufficiency of the Fund and determine if further
extensions are necessary.
DOE also provided technical comments that we incorporated, as
appropriate. DOE's written comments on our report are included in
appendix III.
Scope and Methodology:
To determine what actions DOE has taken to reduce the cleanup costs the
Fund is authorized to support, we reviewed the National Academy of
Sciences' 1996 report that identified 13 major cost reduction
recommendations for the nation's three uranium enrichment
plants.[Footnote 22] We met with Academy officials to gain further
information about the study and with DOE and its contractor officials
at each of the plants to determine the extent to which DOE has taken
actions to address the recommendations. While we were able to obtain
information on actions taken to date, DOE could not determine whether
the actions were taken as a result of the Academy's recommendations.
DOE was also generally unable to provide information regarding the cost
savings, if any, achieved by implementing these actions. To determine
other steps DOE has taken to reduce cleanup costs, we visited all three
plants and interviewed DOE and contractor officials from DOE
headquarters, the Oak Ridge Operations Office, the Lexington Office,
and the site offices at each of the three plants. Additionally, we
obtained and analyzed documentation regarding DOE's accelerated cleanup
strategy at the Oak Ridge and Paducah plants, including the plants'
planning documents and other DOE management reports. We also obtained
and reviewed each of the three plants' draft risk-based end state
vision documents, to understand DOE's proposed options for
consideration. Additionally, we attended a public meeting in Paducah,
where DOE presented a draft risk-based end state vision to the
community, to better understand the proposal. We also interviewed
regulatory authorities responsible for overseeing cleanup activities at
the plants, including officials at the Environmental Protection
Agency's Region IV and Region V, the Commonwealth of Kentucky's
Department for Environmental Protection, the Tennessee Department of
Environment and Conservation, and the Ohio Environmental Protection
Agency.
To assess the sufficiency of the Fund to pay for the total projected
costs of the Fund's authorized activities, we interviewed DOE and
contractor officials responsible for the Fund's financial data and
obtained DOE's current estimates for uranium and thorium reimbursement
costs, the cleanup costs at the three plants, and the current and
likely revenue projections. We used these data to develop a number of
simulation models that factored in the cost and revenue projections on
an annual basis and uncertainties surrounding inflation rates, interest
rates, costs, revenues, and the timing of the final D&D work at the
Paducah and Portsmouth plants. See appendix I for a detailed
description of our modeling methodology, assumptions, and results. We
interviewed DOE and contractor officials from DOE Headquarters, the Oak
Ridge Operations Office, the Lexington Office, and the site offices at
each of the three plants, as well as officials from the federal and
state regulatory offices party to the plants' cleanup agreements. We
also toured the Oak Ridge plant to identify the major uncertainties
that could impact future cleanup costs at the plants.
In addition, we assessed the reliability of the data used to develop
our simulation models. We obtained, from key DOE and contractor
database officials, responses to a series of data reliability questions
covering issues such as data entry access, quality control procedures,
and the accuracy and completeness of the data. Follow-up questions were
added whenever necessary. We also interviewed DOE and contractor
officials and reviewed relevant documentation to determine how cost
estimates for future cleanup, including the final D&D work, were
developed at each of the plants. We obtained historical cost estimates
for several D&D projects completed at the Oak Ridge plant and compared
them with updated or actual costs. We also interviewed and obtained
relevant work papers from KPMG, a private accounting firm hired by the
DOE Inspector General's Office to conduct annual financial audits of
the Fund, to understand and incorporate their audit findings. KPMG's
annual financial audits have concluded that the cost and revenue data
related to the Fund appear to be complete and accurate, that internal
controls are operating effectively, and that Fund managers have
complied with all significant provisions of laws, regulations, and
compliance agreements. Based on our own work, in conjunction with that
of KPMG, we determined that the financial data provided were
sufficiently reliable for the purposes of our report.
We are sending copies of this report to the Secretary of Energy. We
will also make copies available to others upon request. In addition,
the report will be available at no charge on the GAO Web site at
[Hyperlink, http://www.gao.gov].
If you or your staff have any questions on this report, please call me
at (202) 512-3841. Other staff contributing to this report are listed
in appendix IV.
Signed by:
Robin M. Nazzaro:
Director, Natural Resources and Environment:
List of Congressional Committees:
The Honorable Pete V. Domenici:
Chairman:
The Honorable Jeff Bingaman:
Ranking Minority Member:
Committee on Energy and Natural Resources:
United States Senate:
The Honorable Joe Barton:
Chairman:
The Honorable John D. Dingell:
Ranking Minority Member:
Committee on Energy and Commerce:
House of Representatives:
[End of section]
Appendixes:
Appendix I: Fund Modeling Methodology, Assumptions, and Results:
This appendix describes the methodology, assumptions, and results of
the models we developed to evaluate the sufficiency of the Uranium
Enrichment Decontamination and Decommissioning Fund (Fund).
Specifically, this appendix contains information on the following:
* the simulation technique and the Baseline model we developed to
estimate the balance of the Fund by the time all cleanup activities are
scheduled to be completed;
* the data sources, assumptions, and uncertainties we used for the
Baseline model;
* the additional models--Accelerated, Deferred, Revenue Added, and
Revenue Added Plus Interest--that we developed to analyze the effects
of additional uncertainties associated with decontamination and
decommissioning time frames and revenues to the Fund;
* our simulation results for individual models as well as a comparison
of results from the alternative models.
Modeling Methodology:
To conduct our analysis, we first developed an Excel spreadsheet
simulation model that annually tracked all estimated contributions to
and payments from the Fund starting in fiscal year 2004 and extending
out until all cleanup activities are scheduled to be completed. We also
estimated the interest that could be earned by unused balances of the
Fund each year, and included these earnings in the annual Fund
balance.[Footnote 23] Our analysis began with the Fund balance at the
end of fiscal year 2003 and continued until all cleanup work at the
three uranium enrichment plants was projected to be completed. The
completion date for the Baseline model and Revenue models was set at
fiscal year 2044--the most likely date for the completion of all
cleanup activities at the three plants. However, for the Accelerated
and Deferred models, the completion dates were set at fiscal year 2024
and fiscal year 2052, respectively.
Building on the Excel spreadsheet model, we used a commercially
available forecasting and risk analysis software program called Crystal
Ball to model the uncertainties associated with cost and economic
assumptions used in the model. Using the Crystal Ball program in
concert with the Excel model, we were able to expand our capability to
explore a wide range of possible values, instead of one single value,
for such variables as interest rates, inflation rates, and cleanup
costs. The Crystal Ball program uses a process called Monte Carlo
simulation. That is, it repeatedly and randomly selects values for
interest rates, inflation rates, and costs from distribution ranges
that we prespecified for these variables. Using these values for the
appropriate cells in the spreadsheet model, Crystal Ball then makes the
calculations and forecasts the results. Repeating the same process,
Crystal Ball can calculate the results based on hundreds or thousands
of such trials. Our simulation results were based on 1,500 different
trials. The Crystal Ball program produces the entire range of forecasts
for the given model and shows the confidence level for, or the
likelihood associated with, any specific forecast.
Baseline Model Data, Assumptions, and Uncertainties:
The Department of Energy (DOE) and its contractor was our primary
source for all the cost data used to develop our Baseline model. For
Fund revenues, we generally assumed the Fund would receive
contributions as authorized by current legislation. DOE also provided
us with the time frames for completing the cleanup work at each of the
plants and, when possible, contingency estimates for the costs. Since
DOE's cost data were provided in different dollar values, we converted
all cost data to 2004 dollars using either the inflation rates used by
DOE or the Consumer Price Index. More specific sources of data and
assumptions to the modeling work were as follows:
Revenues to the Fund. To construct the Baseline model, we assumed
contributions to the Fund would come from three sources: federal
government appropriations, payments from domestic utility companies,
and interest earned on investments of Fund balances. We assumed that
government contributions would continue from fiscal years 2004 through
2007, as authorized by the Energy Policy Act. However, for the federal
government contributions in fiscal years 2004 and 2005, we used actual
appropriations and the President's budget request, respectively; for
the remaining years, we assumed contributions would be at the level
authorized in the current legislation. For payments from domestic
utility companies, we assumed the assessment would remain unchanged at
the fiscal year 2004 level, and assumed payments would continue through
fiscal year 2007, as authorized by the Energy Policy Act. Additionally,
as required by law, the Fund can accrue interest income from investing
the unused balance of the fund in government securities. Therefore, we
estimated the investment earnings of the Fund annually and included it
in the available Fund balances. To calculate investment earnings, we
used a range of different interest rates based on the Fund's previous
earnings. We assumed that the real interest rate earned on the Fund
investment has a triangular distribution, with minimum and maximum
values based on historical performance of the Fund's investments since
1994. Similarly, we used the performance of the Consumer Price Index
since 1994 to develop a triangular distribution for price indices to
adjust the data where necessary.
Costs of the Fund. DOE, in conjunction with its contractor officials
responsible for conducting the cleanup work at the three uranium
enrichment plants, provided cost estimates for all anticipated
activities that will be paid for from the Fund starting in fiscal year
2004, and that will carry forward until all cleanup activities have
been completed at each of the three plants. Cost estimates included (1)
reimbursements to uranium and thorium licensees and (2) costs to
complete the cleanup at the three uranium enrichment plants.
1. Reimbursements to uranium and thorium licensees. The Energy Policy
Act authorized reimbursements to uranium licensees not to exceed $350
million and reimbursements to the thorium licensee not to exceed $365
million for the portion of their cleanup costs associated with the sale
of these materials to the federal government. The remaining unused
authorized amounts are adjusted annually based upon the Consumer Price
Index. We assumed that the annual reimbursement amount will be fixed at
the fiscal year 2004 level and will carry forward until the total
amount authorized by law has been allocated. Based on the current
balance of the Fund, anticipated revenues, and the total available
reimbursement amount remaining, we determined that the Fund would be
sufficient to cover the reimbursements to the uranium and thorium
licensees.[Footnote 24]
2. Cleanup costs at the three uranium enrichment plants. Cleanup costs
for decontamination and decommissioning (D&D) work were kept separate
from all other cleanup cost activities, which include remedial actions,
waste management, surveillance and maintenance, and other (including
all other activities the Fund supports such as litigation fees and
funds to support site-specific advisory boards). Cleanup costs were
broken out annually and by each plant. Due to the different
uncertainties surrounding these costs, D&D costs were then further
segregated for process buildings (the large buildings where uranium is
enriched) and all other remaining D&D costs. The Baseline model costs
for the cleanup activities at the three plants were developed under the
assumption that the final D&D (all D&D and other required cleanup
actions at the plants once the facilities cease operations) would occur
between 2004 and 2008 at the Oak Ridge plant; between 2018 and 2032 at
the Paducah plant; and between 2010 and 2044 at the Portsmouth plant.
These are the most likely time frames for completing the final D&D
work, based on discussions with DOE and contractor officials.
Cost Uncertainties. To capture uncertainties inherent in the data, we
used the Crystal Ball program in concert with the Baseline model we
developed. With the Crystal Ball program, we could assign a range of
values, rather than a single value, to each cell of the spreadsheet
model. We developed the range of values for each cost category based on
extensive discussions with DOE and its contractor staff who provided
the cost estimates. After considering their recommendations and input,
we assumed that all cleanup costs at the three uranium enrichment
plants, with the exception of D&D of the process buildings at the
Paducah and Portsmouth plants, could increase by a uniform probability
of up to 20 percent.[Footnote 25] Given the considerable uncertainty
associated with costs for D&D of the process buildings and the
experience to date at the Oak Ridge plant, we assumed, based on the
values provided by DOE, the costs for this work at Paducah and
Portsmouth could increase by a uniform probability of up to 85
percent.[Footnote 26]
Alternative Models:
Because not all uncertainties could be incorporated into one model, we
developed several alternative models to our Baseline model.
Specifically, since DOE has not determined when final decontamination
and decommissioning of the Paducah and Portsmouth plants will begin, we
developed two alternative models--Accelerated and Deferred--to show the
effects of different timing assumptions on the sufficiency of the Fund.
Further, because federal contributions to the Fund have been less than
the authorized amount, we developed two additional models--Revenue
Added and Revenue Added Plus Interest--to include additional
contributions to the Fund based on revenues from federal government
appropriations. These alternative models were built using the same
data, assumptions, and uncertainties that were used for the Baseline
model, except for specific changes discussed below.
Accelerated and Deferred Models:
Because DOE has not determined when the final decommissioning and
decontamination work for the Paducah and Portsmouth uranium plants will
begin and when it will be completed, DOE, in conjunction with its
contractor officials, developed two additional cost series for the
Paducah and Portsmouth plants that varied in the start and completion
dates for the final D&D work, which we then incorporated into our
Accelerated and Deferred models. The completion of all D&D activities
in the Accelerated model was reduced by 20 years from 2044 to 2024, and
increased by 8 years in the Deferred model to 2052.
The Accelerated cost series was developed under the assumption that
final D&D could be completed faster than under the Baseline model,
given unconstrained funding. For the Accelerated approach, Paducah's
final D&D work would begin in 2010 and end by 2024; Portsmouth's final
D&D work would begin in 2007 and be completed by 2024. These time
frames were determined in consultation with DOE and contractor
officials. They represent the soonest the D&D work would most likely
start, according to DOE and its contractor officials, and represent the
earliest likely time frame that the total D&D and other associated
cleanup work could be completed.
The Deferred cost series was developed under the assumption that given
current funding constraints, it may not be realistic for two major D&D
projects to be carried out concurrently. Thus, Deferred time frames
were determined by DOE, assuming that all work would be completed at
the Portsmouth plant first and then initiated at the Paducah plant. For
the Deferred model, Portsmouth's final D&D work was estimated to be
completed from 2010 to 2037 and Paducah's from 2038 to 2052.
Revenue Added Models:
According to DOE's records, by the start of fiscal year 2004, when our
analysis begins, the government's actual contributions to the Fund were
$707 million less than authorized under the Energy Policy Act. To
capture the effect of the government meeting its total authorized
annual contributions on the balance of the Fund, we developed two
additional models--a Revenue Added and a Revenue Added Plus Interest
model. For the Revenue Added model, we assumed that government
contributions to the Fund would continue annually at the authorized
level until the total government contributions as authorized by law had
been met, which would occur in fiscal year 2009. For the Revenue Added
Plus Interest model, we built on the Revenue Added model to include the
effect of forgone interest that the Fund could have earned if the
government had contributed the full authorized amount. In other words,
we continued government payments into the Fund until the total amount
authorized (regardless of amounts actually appropriated), as well as
interest on the unpaid portion of the authorized amount, is paid to the
Fund. We assumed these additional payments would be made to the Fund in
the same amounts as the 2004 annual authorized amount, which extended
payments through fiscal year 2010.
Results:
The balance of the Fund at the projected completion of all cleanup work
indicated whether the Fund will be sufficient to cover all costs
identified by DOE. We estimated the Fund balance in current (year of
completion) dollars and constant 2004 dollars. However, to compare the
results of various models with different completion dates, we also
estimated the present value of the Fund's balance in 2004. For each
model, the Crystal Ball program produced not only a range of possible
values, but also the probability associated with that value, as well as
the expected mean for the range. Figures 4 through 8 provide an overall
illustration of the results produced by the models in constant 2004
dollars. In the figures, each bar shows the value by which costs could
exceed revenues in billions of 2004 dollars. The height of each bar is
the probability that the costs would exceed the revenues by that exact
amount. Even though the probability of one specific amount is low,
there is a 100 percent probability that the actual amount will fall
somewhere within the range (e.g. for the Baseline model, minus $3.5
billion to minus $5.7 billion). As shown in figures 4 through 8,
regardless of the model we used, the revenue going into the Fund will
not be sufficient to cover all of the projected cleanup costs at the
uranium enrichment plants.
Figure 4: Baseline Model Results:
[See PDF for image]
Note: The values on the horizontal axis of the figure are to provide a
scale and do not correspond exactly to the ranges of the Fund balance,
which are provided in table 2.
[End of figure]
Figure 5: Accelerated Model Results:
[See PDF for image]
Note: The values on the horizontal axis of the figure are to provide a
scale and do not correspond exactly to the ranges of the Fund balance,
which are provided in table 2.
[End of figure]
Figure 6: Deferred Model Results:
[See PDF for image]
Note: The values on the horizontal axis of the figure are to provide a
scale and do not correspond exactly to the ranges of the Fund balance,
which are provided in table 2.
[End of figure]
Figure 7: Revenue Added Model Results:
[See PDF for image]
Note: The values on the horizontal axis of the figure are to provide a
scale and do not correspond exactly to the ranges of the Fund balance,
which are provided in table 2.
[End of figure]
Figure 8: Revenue Added Plus Interest Model Results:
[See PDF for image]
Note: The values on the horizontal axis of the figure are to provide a
scale and do not correspond exactly to the ranges of the Fund balance,
which are provided in table 2.
[End of figure]
The figures show the results for the individual models in constant 2004
dollars in the year DOE projected that all cleanup work will be
completed. Because of the difference in the completion dates, the
comparison of the Fund balances across the different models will not be
meaningful. To make the comparison of the balances possible, we also
estimated the present value of the Fund in 2004 dollars. Figure 9 shows
in present value how the Fund balance of the Baseline model compares
with the Accelerated and Deferred models; Figure 10 shows in present
value how the Fund balance of the Baseline model compares with the two
Revenue Added models.
Figure 9: Present Value of Fund Balance for Baseline, Accelerated, and
Deferred Models:
[See PDF for image]
Notes: In order to compare the results of various models with different
completion dates, we estimated the present value of the Fund's balance
in 2004 dollars, as represented here.
[End of figure]
The values on the horizontal axis of the figure are to provide a scale
and do not correspond exactly to the ranges of the Fund balance, which
are provided in table 2.
Figure 10: Present Value of Fund Balance for Baseline, Revenue Added,
and Revenue Added Plus Interest Models:
[See PDF for image]
Notes: In order to compare the results of various models with different
completion dates, we estimated the present value of the Fund's balance
in 2004 dollars, as represented here.
The values on the horizontal axis of the figure are to provide a scale
and do not correspond exactly to the ranges of the Fund balance, which
are provided in table 2.
[End of figure]
The specific values for which the Fund could be insufficient under the
various models are shown in table 2. Though the Deferred model showed
the greatest insufficiency in the year the cleanup work is projected to
be completed, once the timing of expenditures is considered as in the
present value analysis, the deficiency of the Deferred alternative was
not significantly different from other models. On the other hand, the
deficiency of the Fund, as measured in present value mean, was the
lowest in the Revenue Added Plus Interest model. In this model, cleanup
costs would exceed revenues by $0.09 billion to $2.3 billion.
Table 2: Comparison of Models:
Dollars in billions.
Completion date (fiscal year);
Baseline model (range): 2044;
Accelerated model (range): 2024;
Deferred model (range): 2052;
Revenue Added model (range): 2044;
Revenue Added Plus Interest model (range): 2044.
Fund balance at completion of all cleanup: Constant: 2004 dollars;
Baseline model (range): -$5.7 to -$3.5; (mean): (-$4.8);
Accelerated model (range): -$5.2 to -$4.0; (mean): (-$4.6);
Deferred model (range): -$6.2 to -$4.0; (mean): (-$5.2);
Revenue Added model (range): -$4.7 to -$1.8; (mean): (-$3.6);
Revenue Added Plus Interest model (range): -$4.2 to -$.43; (mean):
(-$2.7).
Fund balance at completion of all cleanup: Current;
dollars;
Baseline model (range): -$18.5 to -7.6; (mean): (-$12.5);
Accelerated model (range): -$9.8 to -5.7; (mean): (-$7.6);
Deferred model (range): -$26.4 to -8.8; (mean): (-$16.7);
Revenue Added model (range): -$15.1 to -4.3; (mean): (-$9.3);
Revenue Added Plus Interest model (range): -$13.3 to -1.0; (mean):
(-$7.1).
Fund balance at completion of all cleanup: Present value;
2004 dollars[A];
Baseline model (range): -$3.1 to -.77; (mean): (-$1.7);
Accelerated model (range): -$3.8 to -1.8; (mean): (-$2.7);
Deferred model (range): -$3.1 to -.63; (mean): (-$1.5);
Revenue Added model (range): -$2.6 to -.39; (mean): (-$1.3);
Revenue Added Plus Interest model (range): -$2.3 to -.09; (mean):
(-$1.0).
Source: GAO analysis of DOE data.
[A] Because of the difference in completion dates, the comparison of
the Fund balance in constant 2004 dollars would not be meaningful. To
make the comparison of the various models possible, we estimated the
present value of the Fund's balance in 2004 dollars. Because present
value analysis reflects time value of money--that costs are worth more
if they are incurred sooner and worth less if they occur in the future,
the present value under the deferral model declines more than the other
options. However, in reality the net effect would depend on many other
factors. If, for example, deferral would add substantially to such
costs as safeguarding and security or costs associated with increased
health risks then the reduction due to adjusting for time value of
money could be more than offset by increases in other costs.
[End of table]
[End of section]
Appendix II: DOE Actions Taken That Addressed the National Academy of
Sciences' Cost Reduction Recommendations:
This appendix describes the actions taken by DOE that address the
National Academy of Sciences' (Academy) cost reduction recommendations.
The Energy Policy Act directed the Academy to conduct a study and to
provide recommendations for reducing the decontamination and
decommissioning costs at the three uranium enrichment plants. In 1996,
after convening a committee of academic and technical experts to carry
out the study, the Academy released a report highlighting 13 major
recommendations entitled Affordable Cleanup? Opportunities for Cost
Reduction in the Decontamination and Decommissioning of the Nation's
Uranium Enrichment Facilities. The recommendations address a variety of
cost reduction approaches, including developing specific technologies
and suggestions for planning, management, and regulatory coordination.
While we were able to obtain information on actions DOE has taken that
are consistent with the recommendations, DOE could not determine
whether any actions to date were taken directly in response to the
Academy's recommendations. Table 3 shows each of the Academy's major
recommendations, the status of the recommendation, and an explanation
of the actions taken by DOE that addressed the recommendation.
Table 3: Recommendations, Status, and Explanation of the Actions Taken
by DOE:
Focus of recommendation: management;
Recommendation: Rather than constructing a new administration building,
existing facilities should be used to house the management and
professional D&D staff;
Status: Addressed;
Action taken: At the Oak Ridge plant, all DOE and contractor staff are
housed in existing facilities. At the Paducah and Portsmouth plants,
DOE plans to use existing structures to house staff when D&D efforts
begin.
Focus of recommendation: management;
Recommendation: DOE should develop three plans--namely, headquarters
level, plant-complex level, and site level--that address and integrate
D&D of the facilities, environmental remediation activities, and the
management of the depleted uranium hexafluoride;
Status: Partially addressed;
Action taken: DOE has not developed a headquarters-level D&D plan that
addresses and integrates D&D of all three plants with other DOE
activities. While DOE's strategic plan discusses overall environmental
management strategies and objectives, the plan does not specifically
address D&D of the three plants as described by the Academy's
recommendation. DOE also has not developed a complex-level D&D plan for
the three plants. Oak Ridge is the only plant with an agreed-upon D&D
plan that incorporates D&D, other cleanup activities, and the
management of depleted uranium hexafluoride (a byproduct of the
uranium enrichment process). The Paducah plant currently has a plan
that lays out DOE's approach for a portion of its cleanup, but the plan
does not include details for final D&D. DOE does not have a D&D plan
for the Portsmouth plant. However, the DOE site manager said the agency
is currently working to develop a Portsmouth strategic plan that will
address final D&D, other cleanup activities, and management of depleted
uranium hexafluoride.
Focus of recommendation: management;
Recommendation: An independent contractor should be selected through
open competition and should be assigned total responsibility and
accountability for all aspects of the assigned D&D work;
Status: Partially addressed;
Action taken: In 1997, DOE awarded a contract to Bechtel Jacobs for
cleanup work at the Oak Ridge, Paducah, and Portsmouth plants. Bechtel
Jacobs was responsible for the planning and execution of remedial
action, D&D, and waste management at the three plants (with the
exception of three of the Oak Ridge plant's process buildings). In
September 2003, DOE awarded a new contract to Bechtel Jacobs for
completing the cleanup work at the Oak Ridge plant. Although the
contract awarded in 1997 included all aspects of the cleanup at the
Paducah and Portsmouth plants, DOE is currently in the process of
bidding for two separate contracts at each plant--one for remedial
actions and one for infrastructure and site maintenance--because of new
federal contract initiatives.
Focus of recommendation: management;
Recommendation: A prioritized cost-and risk-reduction approach should
be used as the basis for developing the D&D plan. This approach should
be used to accomplish D&D activities prior to the completion of the
entire plan;
Status: Partially addressed;
Action taken: In the 1990s, DOE developed a risk-based prioritization
system to rank projects on the basis of overall risk reduction. DOE has
now transitioned to a prioritization approach that maximizes the use of
available resources while addressing near-term concerns first. The
current prioritization criteria used by DOE, in order of importance,
consist of the following: (1) imminent human health or safety risks,
(2) compliance with existing enforceable regulatory agreements, (3)
actions required to mitigate risks under current land use, and (4)
activities that are on the critical path for efficient completion of
the Environmental Management Program. While DOE has used this approach
in developing the Oak Ridge plant's D&D plan, D&D plans, including the
approach DOE will take, have not yet been developed for the Paducah and
Portsmouth plants.
Focus of recommendation: management;
Recommendation: To reduce costs without compromising information
security for the gaseous diffusion technology, DOE should try to define
physical security requirements that allow uncleared workers under
adequate supervision to conduct D&D operations. In addition, DOE should
conduct an in-depth evaluation of the safeguards and security
requirements during D&D to determine how their impact on D&D costs
could be reduced;
Status: Partially addressed;
Action taken: DOE is evaluating steps to allow access, under adequate
supervision, to workers conducting D&D at the Oak Ridge plant who do
not have clearances. For example, DOE recently approved a new security
plan for the large process buildings at Oak Ridge. According to DOE
officials, by taking actions such as reducing the number of times
security forces search employees and constructing a perimeter fence
around the outskirts of buildings to eliminate the need for searches
each time employees enter or exit a building, they will not need to
increase the security staff. Without these changes, DOE would have had
to significantly increase the security staff on-site to handle the
increased D&D activity. Additionally, the Oak Ridge plant has a
sitewide safeguards and security plan that outlines security
requirements across the site during D&D. According to DOE, this plan is
continually updated to reduce security requirements as projects are
completed, in order to reduce costs. The Paducah and Portsmouth plants
do not have D&D plans that specify the security requirements that will
be necessary during D&D operations. However, the DOE site manager said
that at the Portsmouth plant, officials are actively looking at ways to
reduce their security requirements as a part of an effort to develop a
strategic plan for D&D of the site.
Focus of recommendation: development of D&D technologies;
Recommendation: The high-assay decontamination facility should be
eliminated;
the low-assay decontamination facility should be simplified to focus
primarily on aqueous decontamination and should be housed in existing
buildings;
Status: Addressed;
Action taken: Development of high-assay and low- assay decontamination
facilities (facilities to disassemble and decontaminate equipment
contaminated with enriched uranium) is no longer part of DOE's plans
for D&D. DOE abandoned the construction of these facilities after an
evaluation revealed how costly the process would be and instead has
opted to dispose of the material into on-site landfills, which do not
require aqueous decontamination. At Oak Ridge, this process is already
under way. DOE officials assume a similar approach will be taken at
the Paducah and Portsmouth plants when D&D is initiated at these
plants. If DOE plans change or it is unable to obtain approval for on-
site disposal cells at these sites, DOE may need to re-evaluate its
approach.
Focus of recommendation: development of D&D technologies;
Recommendation: A few highly focused D&D demonstrations should be
undertaken to verify the cost and effectiveness of specific
technologies, including the following two:
1. Optimization of aqueous decontamination to remove radioactive
surface contamination from materials and process equipment, with
special attention to Tc-99; and;
2. Support of current DOE robotics programs, with highly focused
demonstrations to verify potential cost savings and safety benefits;
Status: Addressed;
Action taken: DOE has hosted several demonstrations and workshops to
assess the effectiveness of specific D&D technologies. For example,
DOE's contractor recently held a workshop to evaluate dismantlement
technologies for removing specific buildings at the Oak Ridge plant;
1. According to DOE officials, there is no longer a need to utilize
aqueous decontamination technology. The current waste acceptance
criteria allow DOE to dispose of the materials into an on- site
disposal facility whole, without first decontaminating the material;
2. DOE has evaluated different types of robotics for use at the Oak
Ridge plant and the agency is currently using a quasi-robotics
program. For example, a worker can sit in the cab of a robotic device
and extend a mechanical arm to cut or sheer piping, cables, or wire,
precluding the need to manually cut the materials.
Focus of recommendation: development of D&D technologies;
Recommendation: The technical and management approaches used
successfully for D&D of the United Kingdom's Capenhurst gaseous
diffusion plant and for recently completed D&D projects with U.S. power
reactors should be carefully considered by DOE to reduce costs for D&D
of the U.S. plants;
Status: Partially addressed;
Action taken: According to DOE officials, DOE has considered the
technical and management approaches used at both the Capenhurst plant
and other U.S. D&D projects, such as at the Hanford, Washington, site,
to learn from their experiences and reduce costs. Specifically, at the
Oak Ridge plant, DOE selected contractors who participated in D&D
activities at other sites. For example, DOE awarded a contract to D&D
several large process buildings at the Oak Ridge plant to British
Nuclear Fuels Limited, based, in part, on its experience at the
Capenhurst plant. DOE has not yet initiated final D&D at the Paducah
and Portsmouth plants. However, the site manager for both of these
plants acknowledged that it will be important to identify lessons
learned from DOE's experiences at Oak Ridge and adopt best practices
once D&D begins at the plants.
Focus of recommendation: development of D&D technologies;
Recommendation: A modest research program should be established to
develop methods to decontaminate diffusion barrier material
effectively;
Status: Not applicable;
Action taken: DOE is currently not pursuing methods to decontaminate
diffusion barrier material (the material used to separate and enrich
uranium during the enrichment process). According to DOE officials, it
is not necessary to decontaminate this material at the Oak Ridge plant
because the material is placed directly into an on-site disposal cell,
eliminating the need for decontamination. DOE assumes a similar
approach will be taken at the Paducah and Portsmouth plants.
Focus of recommendation: regulatory and stakeholder involvement;
Recommendation: A stakeholder involvement program should be pursued to
obtain timely and substantive public participation and input to ensure
that social values are reflected in policy decisions;
Status: Addressed;
Action taken: DOE has generally sought stakeholder involvement at each
of the plants. DOE established Site Specific Advisory Boards at the Oak
Ridge and Paducah plants that are staffed by local stakeholders. The
boards' charters include providing input on cleanup policies and
strategies and reviewing work plans and activities. While the
Portsmouth plant does not have a Site Specific Advisory Board, DOE is
currently working with the community to establish a stakeholder group
to address DOE's new risk-based end state policy. DOE officials told us
that they also regularly hold public meetings to present cleanup
project plans and progress reports to Oak Ridge, Paducah, and
Portsmouth city government organizations. Additionally, DOE has
established information centers open to the public in or near all
three communities. The centers provide information on each of the
plant's respective cleanup activities, in addition to general
information about its activities at other sites. The Portsmouth
information center is located within the secure perimeter of the site,
however, making public access somewhat less convenient than at the
other two centers.
Focus of recommendation: regulatory and stakeholder involvement;
Recommendation: DOE should seek coordination of all regulatory aspects
of D&D with the appropriate state and federal agencies early in
planning to provide consistency during D&D planning and execution;
Status: Partially addressed;
Action taken: DOE coordinates all of its cleanup planning activities
through specific agreements with relevant state and federal regulatory
officials. While mechanisms are in place to coordinate the regulatory
aspects of its work, early coordination and planning between DOE and
its regulatory entities have not always taken place. For example, at
the Paducah plant, regulators have recently expressed concern that DOE
has excluded them from the planning process for both the overall
cleanup approach and specific projects.
Focus of recommendation: recycling/waste disposal;
Recommendation: DOE should develop an integrated, optimized waste
management plan that encompasses material reuse, recycling, packaging,
transport, and waste disposal. Consistent with cost reduction and
public health and environmental protection, materials should be cleaned
to free-release standards and released to the commercial sector for
recycling. Material that cannot be cleaned to free-release standards
should be considered for recycling within DOE or Department of Defense
complexes in applications where slightly contaminated materials are
acceptable, such as for shield blocks or waste containers;
Status: Addressed;
Action taken: In 1997, DOE established the National Center of
Excellence for Metals Recycle as a DOE complexwide resource for
pursuing recycling and reuse alternatives for scrap equipment and
surplus materials. The center has reported a reuse savings for the
three plant sites of approximately $28 million since its establishment.
However, in 2000, DOE suspended the release of scrap metals, such as
nickel, copper, and aluminum, for recycling because of public concern
that radioactive contamination might remain on or in the scrap metal.
As a result, the plants are currently stockpiling or disposing of
potentially valuable metals. For example, about 15,500 tons of scrap
nickel--a valuable industrial commodity--salvaged from the Oak Ridge
and Paducah plants have been stockpiled and are awaiting disposition.
If recycled, DOE could earn between $42 million to $108 million, while
disposal of the Oak Ridge plant's nickel stocks alone are estimated to
cost DOE about $10 million in transportation and disposal costs. DOE is
currently reassessing its recycling policies to determine if scrap
metals can be safely recycled.
Focus of recommendation: recycling/waste disposal;
Recommendation: The committee recommends that, if consistent with the
prioritized cost-and risk-reduction process, the depleted uranium
hexafluoride should be converted to the more stable chemical form,
uranium oxide, for storage or disposal;
Status: Addressed;
Action taken: DOE recently awarded a contract to construct and operate
depleted uranium hexafluoride conversion facilities at the Paducah and
Portsmouth plants. DOE has begun shipping the depleted uranium
hexafluoride cylinders currently stored at the Oak Ridge plant to
Portsmouth for conversion.
Source: GAO analysis of DOE information.
[End of table]
[End of section]
Appendix III: Comments from the Department of Energy:
The Under Secretary of Energy
Washington, DC 20585:
June 15, 2004:
Ms. Robin M. Nazzaro:
Director, Natural Resources and Environment:
United States General Accounting Office:
Washington, DC 20548:
Dear Ms. Nazzaro:
We have reviewed your draft report entitled URANIUM ENRICHMENT -
Decontamination and Decommissioning Fund is Insufficient to Cover
Cleanup Costs. The report, with some corrections, accurately presents
the current status of the Fund. Due to the complexity of the Government
Accounting Office (GAO) financial models, the Department of Energy
(DOE) was unable to independently validate the results. The DOE's
agreement, therefore, with the recommendations contained in this report
is based upon the assumption that the financial analysis is accurate.
The Department concurs with the GAO's recommendation that Congress
consider the reauthorization of the Fund for an additional three years
and requires DOE to reassess the Fund's sufficiency before it expires
to determine if further extensions will be necessary.
DOE does have in place appropriate cleanup plans for the current
requirements. DOE will at the appropriate time, develop plans for the
Decontamination and Decommissioning of the remainder of the facilities
at Paducah and Portsmouth. Enclosed are our specific comments to
clarify statements within the report.
If you have any further questions, please call me at (202) 586-7709 or
Ms. Barbara Heffernan, Acting Deputy Assistant Secretary for Business
Operations, (202) 586-5314.
Sincerely,
Signed by:
David K. Garman:
Acting Under Secretary for Energy, Science and Environment:
Enclosure:
cc: S. McDonald, GAO:
[End of section]
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Robin M. Nazzaro, (202) 512-3841 Sherry L. McDonald, (202) 512-8302:
Staff Acknowledgments:
In addition to the individuals named above, John W. Delicath, Jason
Holsclaw, Alyssa M. Hundrup, Mehrzad Nadji, Judy Pagano, Michael
Sagalow, and Barbara Timmerman also made key contributions to this
report.
(360381):
FOOTNOTES
[1] In 2001, enrichment operations were ceased at the Portsmouth plant,
but the plant was placed on cold standby--a status that maintains the
plant in a usable condition.
[2] All further references to the Energy Policy Act refer to the Energy
Policy Act, as amended.
[3] Thorium is a naturally occurring, slightly radioactive metal that
can be used as a nuclear fuel.
[4] National Academy of Sciences, Affordable Cleanup? Opportunities for
Cost Reduction in the Decontamination and Decommissioning of the
Nation's Uranium Enrichment Facilities (Washington, D.C., 1996).
[5] Remedial actions refer to environmental cleanup activities directed
at eliminating or reducing contaminate sources and contaminated soil
and groundwater.
[6] U.S. General Accounting Office, Uranium Enrichment: Analysis of
Decontamination and Decommissioning Scenarios, GAO/RCED-92-77BR
(Washington, D.C.: Nov. 15, 1991).
[7] U.S. General Accounting Office, Comments on Proposed Legislation to
Restructure DOE's Uranium Enrichment Program, GAO/T-RCED-92-14
(Washington, D.C.: Oct. 29, 1991).
[8] The following revenue amounts are authorized: $480 million for
fiscal years 1992-1998; $488.3 million for fiscal years 1999-2001; and
$518.2 million for fiscal years 2002-2007. Both domestic utility
assessments and government appropriations are to be adjusted annually
for increases in the Consumer Price Index.
[9] The Energy Policy Act authorizes reimbursements to uranium
licensees not to exceed $350 million and reimbursements to the thorium
licensee not to exceed $365 million for the portion of their cleanup
costs associated with the sale of these materials to the federal
government. The remaining unused authorized amounts are adjusted
annually based upon the Consumer Price Index.
[10] Cleanup activities are conducted under the requirements of the
Resource Conservation and Recovery Act of 1976, as amended (RCRA); the
Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended (CERCLA); and compliance agreements with regulatory
authorities, which include the Environmental Protection Agency and
state regulatory agencies in Kentucky, Ohio, and Tennessee.
[11] There are additional activities being carried out at the uranium
enrichment plants that are not currently paid for by the Fund. For
example, the costs to dispose of each plant's depleted uranium
hexafluoride (a byproduct of the uranium enrichment process) are
currently paid for by a separate appropriation within DOE's budget.
Some of these activities could be paid for by Fund resources in the
future.
[12] USEC was responsible for uranium enrichment before operations
ceased and was awarded the contract to maintain the plant in cold
standby condition.
[13] U.S. Department of Energy, Office of Inspector General, Cold
Standby Program at the Portsmouth Gaseous Diffusion Plant (Washington,
D.C., December 2003).
[14] National Academy of Sciences, Affordable Cleanup? Opportunities
for Cost Reduction in the Decontamination and Decommissioning of the
Nation's Uranium Enrichment Facilities (Washington, D.C., 1996).
[15] Diffusion barrier material is the material used to separate and
enrich uranium during the enrichment process.
[16] Department of Energy, A Review of the Environmental Management
Program (Washington, D.C., Feb. 4, 2002).
[17] DOE estimates that accelerating the cleanup at the Oak Ridge plant
will reduce the overall cleanup cost by $866,176,000. However, this
amount includes other activities not covered by the Fund. The savings
to the Fund is an estimated $465,072,000.
[18] As we reported in our April 2004 report, DOE has had and continues
to have difficulty in reaching stakeholder agreement on its cleanup
plans. U.S. General Accounting Office, Nuclear Waste Cleanup: DOE Has
Made Some Progress in Cleaning Up the Paducah Site, but Challenges
Remain, GAO-04-457 (Washington, D.C.: April 2004).
[19] Because of the difference in completion dates, the comparison of
the Fund balance in constant 2004 dollars would not be meaningful. To
make the comparison of the various models possible, we estimated the
present value of the Fund's balance in 2004 dollars. Because present
value analysis reflects time value of money--that costs are worth more
if they are incurred sooner and worth less if they occur in the future,
the present value under the deferral model declines more than the other
options. However, in reality the net effect would depend on many other
factors. If, for example, deferral of D&D would add substantially to
such costs as safeguarding and security or costs associated with
increased health risks then the reduction due to adjusting for time
value of money could be more than offset by increases in other costs.
[20] According to DOE's records, at the start of fiscal year 2004, the
government's actual contributions to the Fund were $707 million less
than the amount authorized under the Energy Policy Act.
[21] This end date does not include final D&D of the plant, but only
includes the major remedial actions currently planned at the site.
[22] National Academy of Sciences, Affordable Cleanup? Opportunities
for Cost Reduction in the Decontamination and Decommissioning of the
Nation's Uranium Enrichment Facilities (Washington, D.C., 1996).
[23] The Energy Policy Act provided that balances in the Fund be
invested in Treasury securities and any interest earned be made
available to pay for activities covered under the Fund.
[24] At the end of fiscal year 2003, the Fund balance was $3.4 billion,
whereas the total remaining balance for reimbursements was about $400
million--a total of $214 million had been paid to uranium licensees and
$171 million had been paid to the thorium licensee.
[25] Uniform probability of up to 20 percent indicates costs could
increase by any factor between 0 and 20 percent, with all values having
equal likelihood of occurring.
[26] We found that the cost to D&D the major process buildings at the
Oak Ridge plant is now estimated to be about 85 percent higher than the
cost estimate that was developed in 2000. The Paducah and Portsmouth
plants' process buildings cost estimates were also developed in 2000,
and were largely based on the same assumptions used to develop the Oak
Ridge cost estimate. In general, officials with whom we spoke agreed
that based on the experience at Oak Ridge, costs could increase in a
similar fashion at Paducah and Portsmouth.
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To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: fraudnet@gao.gov
Automated answering system: (800) 424-5454 or (202) 512-7470:
Public Affairs:
Jeff Nelligan, managing director, NelliganJ@gao.gov (202) 512-4800 U.S.
General Accounting Office, 441 G Street NW, Room 7149 Washington, D.C.
20548:
