Nuclear Material
DOE's Depleted Uranium Tails Could Be a Source of Revenue for the Government Gao ID: GAO-11-752T June 13, 2011Since the 1940s, the Department of Energy (DOE) has been processing natural uranium into enriched uranium, which has a higher concentration of the isotope uranium-235 that can be used in nuclear weapons or reactors. This has resulted in over 700,000 metric tons of leftover depleted uranium, also known as "tails," that have varying residual concentrations of uranium-235. The tails are stored at DOE's uranium enrichment plants in Portsmouth, Ohio and Paducah, Kentucky. Although the tails have historically been considered a waste product, increases in uranium prices may give DOE options to use some of the tails in ways that could provide revenue to the government. GAO's testimony is based on its March 2008 report (GAO-08-606R). GAO updated the analysis in its 2008 report to reflect current uranium prices and actions taken by DOE. The testimony focuses on (1) DOE's options for its tails and (2) the potential value of DOE's tails and factors that affect the value.
DOE's potential options for its tails include selling the tails "as is," re-enriching the tails, or storing them indefinitely. DOE's current legal authority to sell its depleted uranium inventory "as is" is doubtful, but DOE generally has authority to carry out the other options. (1) DOE's authority to sell the tails in their current unprocessed form is doubtful. Because of specific statutory language in 1996 legislation governing DOE's disposition of its uranium, DOE's authority to sell the tails in unprocessed form is doubtful, and under the rules of statutory construction, DOE likely lacks such authority. However, if Congress were to provide the department with the needed authority, firms such as nuclear power utilities and enrichment companies may be interested in purchasing these tails and re-enriching them as a source of nuclear fuel. (2) DOE could contract to re-enrich the tails. Although DOE would have to pay for re-enrichment, it might obtain more value from selling the re-enriched uranium instead of the tails if its re-enrichment costs were less than the discount it would have to offer to sell the tails as is. (3) DOE could store the tails indefinitely. This option conforms to an existing DOE plan to convert tails into a more stable form for long term storage, but storing the tails indefinitely could prevent DOE from obtaining the potentially large revenue resulting from sales at current high uranium prices. DOE issued a comprehensive uranium management plan in December 2008 that stated that the department would consider selling depleted uranium or re-enriching it to realize best value for the government and that it would begin selling or re-enriching depleted uranium in 2009. However, to date, DOE has not sold or re-enriched any of its depleted uranium and, according to DOE officials, has no current plans to do so. The potential value of DOE's depleted uranium tails is currently substantial, but changing market conditions could greatly affect the tails' value over time. Based on May 2011 uranium prices and enrichment costs and assuming sufficient re-enrichment capacity is available, GAO estimates the value of DOE's tails at $4.2 billion--about $3.4 billion less than GAO's March 2008 estimate. However, this estimate is very sensitive to changing uranium prices, which have dropped since GAO's March 2008 report was issued. GAO's estimate is also very sensitive to the availability of enrichment capacity. In particular, DOE would have to find a company with excess enrichment capacity beyond its current operations, which may be difficult if large amounts of enrichment processing were required. In its 2008 report, GAO suggested that Congress consider clarifying DOE's statutory authority to manage its tails. No action on this recommendation has been taken to date. Also, GAO recommended that DOE complete a comprehensive uranium management assessment. DOE issued a uranium management plan in December 2008 that addressed GAO's recommendation.
GAO-11-752T, Nuclear Material: DOE'S Depleted Uranium Tails Could Be a Source of Revenue for the Government
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United States Government Accountability Office:
GAO:
Testimony:
Before the Subcommittee on Energy and Power, Committee on Energy and
Commerce, House of Representatives:
For Release on Delivery:
Expected at 1:30 p.m. EDT:
Monday, June 13, 2011:
Nuclear Material:
DOE's Depleted Uranium Tails Could Be a Source of Revenue for the
Government:
Statement of Gene Aloise, Director:
Natural Resources and Environment:
GAO-11-752T:
GAO Highlights:
Highlights of GAO-11-752T, a testimony before the Subcommittee on
Energy and Power, Committee on Energy and Commerce, House of
Representatives.
Why GAO Did This Study:
Since the 1940s, the Department of Energy (DOE) has been processing
natural uranium into enriched uranium, which has a higher
concentration of the isotope uranium-235 that can be used in nuclear
weapons or reactors. This has resulted in over 700,000 metric tons of
leftover depleted uranium, also known as ’tails,“ that have varying
residual concentrations of uranium-235. The tails are stored at DOE‘s
uranium enrichment plants in Portsmouth, Ohio and Paducah, Kentucky.
Although the tails have historically been considered a waste product,
increases in uranium prices may give DOE options to use some of the
tails in ways that could provide revenue to the government.
GAO‘s testimony is based on its March 2008 report (GAO-08-606R). GAO
updated the analysis in its 2008 report to reflect current uranium
prices and actions taken by DOE. The testimony focuses on (1) DOE‘s
options for its tails and (2) the potential value of DOE‘s tails and
factors that affect the value.
In its 2008 report, GAO suggested that Congress consider clarifying
DOE‘s statutory authority to manage its tails. No action on this
recommendation has been taken to date. Also, GAO recommended that DOE
complete a comprehensive uranium management assessment. DOE issued a
uranium management plan in December 2008 that addressed GAO‘s
recommendation.
What GAO Found:
DOE‘s potential options for its tails include selling the tails ’as is,“
re-enriching the tails, or storing them indefinitely. DOE‘s current
legal authority to sell its depleted uranium inventory ’as is“ is
doubtful, but DOE generally has authority to carry out the other
options.
* DOE‘s authority to sell the tails in their current unprocessed form
is doubtful. Because of specific statutory language in 1996
legislation governing DOE‘s disposition of its uranium, DOE‘s
authority to sell the tails in unprocessed form is doubtful, and under
the rules of statutory construction, DOE likely lacks such authority.
However, if Congress were to provide the department with the needed
authority, firms such as nuclear power utilities and enrichment
companies may be interested in purchasing these tails and re-enriching
them as a source of nuclear fuel.
* DOE could contract to re-enrich the tails. Although DOE would have
to pay for re-enrichment, it might obtain more value from selling the
re-enriched uranium instead of the tails if its re-enrichment costs
were less than the discount it would have to offer to sell the tails
as is.
* DOE could store the tails indefinitely. This option conforms to an
existing DOE plan to convert tails into a more stable form for long
term storage, but storing the tails indefinitely could prevent DOE
from obtaining the potentially large revenue resulting from sales at
current high uranium prices.
DOE issued a comprehensive uranium management plan in December 2008
that stated that the department would consider selling depleted
uranium or re-enriching it to realize best value for the government
and that it would begin selling or re-enriching depleted uranium in
2009. However, to date, DOE has not sold or re-enriched any of its
depleted uranium and, according to DOE officials, has no current plans
to do so.
The potential value of DOE‘s depleted uranium tails is currently
substantial, but changing market conditions could greatly affect the
tails‘ value over time. Based on May 2011 uranium prices and
enrichment costs and assuming sufficient re-enrichment capacity is
available, GAO estimates the value of DOE‘s tails at $4.2 billion”-
about $3.4 billion less than GAO‘s March 2008 estimate. However, this
estimate is very sensitive to changing uranium prices, which have
dropped since GAO‘s March 2008 report was issued. GAO‘s estimate is
also very sensitive to the availability of enrichment capacity. In
particular, DOE would have to find a company with excess enrichment
capacity beyond its current operations, which may be difficult if
large amounts of enrichment processing were required.
View [hyperlink, http://www.gao.gov/products/GAO-11-752T] or key
components. For more information, contact Gene Aloise at (202) 512-
3841 or aloisee@gao.gov.
[End of section]
Chairman Whitfield, Ranking Member Rush, and Members of the
Subcommittee:
Thank you for the opportunity to discuss our work on the Department of
Energy's (DOE) inventory of depleted uranium as you consider options
for using this inventory in ways that could benefit the U.S.
government. As you know, since the 1940s the government has been
processing natural uranium into enriched uranium. This increases the
concentration of the isotope uranium-235, which is necessary to make
the material useful in nuclear weapons or reactors. The generation of
enriched uranium over many decades has resulted in approximately
700,000 metric tons of leftover depleted uranium, also known as
"tails," that have varying residual concentrations of uranium-235
remaining. DOE stores these tails at its uranium enrichment plants in
Portsmouth, Ohio, and Paducah, Kentucky. DOE is assessing its options
on how to best manage this large accumulation of tails. Although the
tails have historically been considered a waste product and an
environmental liability, increases in uranium prices may give DOE
options to use that portion of the tails with the highest residual
concentrations of uranium-235 in ways that could be a source of
revenue to the government.
My testimony today is based on our March 31, 2008, report to the House
Committee on Energy and Commerce, the Senate Committee on Energy and
Natural Resources, and the Chairman of the Subcommittee on Oversight
and Investigations, House Committee on Energy and Commerce.[Footnote
1] We also testified on this subject before the Subcommittee on
Oversight and Investigations, House Committee on Energy and Commerce
on April 3, 2008.[Footnote 2] In our March 2008 report, we recommended
that the Secretary of Energy develop a comprehensive uranium
management assessment that should contain detailed information on the
types and quantities of depleted, natural, and enriched uranium the
department manages and an assessment of DOE's options for this
material. Consistent with our recommendation, DOE issued a
comprehensive uranium management plan in December 2008. This plan
stated, among other things, that DOE would consider selling depleted
uranium or re-enriching it to realize best value for the government
and that it would begin selling or re-enriching depleted uranium in
2009. However, to date, DOE has not sold or re-enriched any of its
depleted uranium, and, according to DOE officials, has no current
plans to do so.
My testimony today discusses (1) DOE's potential options for
beneficially reusing or indefinitely storing its tails and (2) the
potential value of DOE's tails and factors that affect the value.
In preparing this testimony, we updated information from our prior
report. Specifically, we obtained the most recent data on the
quantities and uranium-235 concentrations of tails in DOE's inventory
and uranium price data to update our model of the potential value of
DOE's tails. We developed this model for our March 2008 report. The
model uses standard formulas to determine the amounts of enriched
uranium and tails produced from given quantities of uranium and
enrichment services. The model also uses uranium price data that we
obtained from nuclear industry trade publications. These data are
commonly used in the nuclear industry as standard measures of the
market price for uranium. We interviewed knowledgeable DOE officials
to determine the extent to which these data are used by the department
and the industry and determined that the data were sufficiently
reliable for the purposes of our report. Our prior work on DOE's
depleted uranium, as well as the work conducted for this statement,
was performed in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit
objectives.
Background:
Since the 1940s, one mission of DOE and its predecessor agencies has
been processing uranium as a source of nuclear material for defense
and commercial purposes. A key step in this process is the enrichment
of natural uranium, which increases its concentration of uranium-235,
the isotope of uranium that undergoes fission to release enormous
amounts of energy. Before it can be enriched, natural uranium must be
chemically converted into uranium hexafluoride. The enrichment process
results in two principal products: (1) enriched uranium hexafluoride,
which can be further processed for specific uses, such as nuclear
weapons or fuel for nuclear power plants; and (2) leftover "tails" of
uranium hexafluoride. These tails are also known as depleted uranium
because the material is depleted in uranium-235 compared with natural
uranium.[Footnote 3]
Since 1993, uranium enrichment activities at DOE-owned uranium
enrichment plants have been performed by the U.S. Enrichment
Corporation (USEC), formerly a wholly owned government corporation
that was privatized in 1998. However, DOE still maintains over 700,000
metric tons of depleted uranium tails in about 63,000 metal cylinders
in storage yards at its Paducah, Kentucky, and Portsmouth, Ohio,
enrichment plants (see figure 1). It must safely maintain these
cylinders because the tails are dangerous to human health and the
environment. Uranium hexafluoride is radioactive and forms extremely
corrosive and potentially lethal compounds if it contacts water. In
addition, DOE also maintains large inventories of natural and enriched
uranium that are also surplus to the department's needs.
Figure 1: Uranium Cylinder Storage Yard at DOE's Paducah Uranium
Enrichment Plant:
[Refer to PDF for image: photograph]
Source: DOE.
[End of figure]
Tails have historically been considered a waste product because
considerable enrichment processing is required to further extract the
remaining useful quantities of uranium-235. In the past, low uranium
prices meant that these enrichment services would cost more than the
relatively small amount of uranium-235 extracted would be worth.
However, an increase in uranium prices--from approximately $21 per
kilogram of uranium in the form of uranium hexafluoride in November
2000 to about $160 per kilogram in May 2011--has potentially made it
profitable to re-enrich some tails to further extract uranium-235.
Even with the current higher uranium prices, however, only DOE's tails
with higher concentrations of uranium-235 (at least 0.3 percent) could
be profitably re-enriched, according to industry officials.
DOE Potentially Has Options for the Tails but Has Not Implemented Its
December 2008 Plan for Selling or Re-Enriching Them:
DOE's potential options for its tails include selling the tails "as
is," re-enriching them, or storing them indefinitely. However, DOE's
legal authority to sell the tails in their current form is doubtful.
We found that DOE generally has authority to carry out the re-
enrichment and storage options. As we said earlier, DOE issued a
comprehensive uranium management plan in December 2008 in response to
a recommendation in our March 2008 report. In this plan, DOE stated
that it would begin selling or re-enriching depleted uranium in 2009.
However, to date, DOE has not done so and, according to DOE officials,
has no current plans to sell or re-enrich this material.
DOE's Legal Authority to Sell the Tails in Their Current Form Is
Doubtful:
While selling the tails in their current unprocessed form is a
potential option, we believe that DOE's authority to conduct such
sales is doubtful because of specific statutory language in
legislation governing DOE's disposition of its uranium. In 1996,
Congress enacted section 3112 of the USEC Privatization Act,[Footnote
4] which limits DOE's general authority, under the Atomic Energy Act
[Footnote 5] or otherwise, to sell or transfer uranium. In particular,
section 3112 explicitly bars DOE from selling or transferring "any
uranium"--including but not specifically limited to certain forms of
natural and enriched uranium--"except as consistent with this
section." Section 3112 then specifies conditions for DOE's sale or
transfer of natural and enriched uranium of various types, including
conditions in section 3112(d) for sale of natural and low-enriched
uranium from DOE's inventory. To ensure the domestic uranium market is
not flooded with large amounts of government material, in section
3112(d), Congress required DOE to determine that any such inventory
sales will not have a material adverse impact on the domestic uranium
industry. Congress also required in section 3112(d) that DOE determine
it will receive adequate payment--at least "fair market value"--if it
sells this uranium and that DOE obtain a determination from the
President that such materials are not necessary for national security.
However, neither section 3112(d) nor any other provision of section
3112 explicitly provides conditions for DOE to transfer or sell
depleted uranium. Because section 3112(a) states that DOE may not
"transfer or sell any uranium—except as consistent with this section,"
and because no other part of section 3112 sets out the conditions for
DOE to transfer or sell depleted uranium, we believe that under rules
of statutory construction, DOE likely lacks authority to sell the
tails. While courts have not addressed this question before and thus
the outcome is not free from doubt, this interpretation applies the
plain language of the statute. It also respects the policy
considerations and choices Congress made in 1996 when presented with
the disposition of DOE's valuable uranium in a crowded and price-
sensitive market. This reading of DOE's authority is consistent with
how courts address changes in circumstances after a law is passed:
Statutes written in comprehensive terms apply to unanticipated
circumstances if the new circumstances reasonably fall within the
scope of the plain language. Thus, under the current terms of section
3112, DOE's sale of its tails would be covered by the statute's
general prohibition on sale of uranium, even if tails were not part of
the universe Congress explicitly had in mind when it enacted the
statute in 1996.[Footnote 6]
Should Congress grant DOE the needed legal authority by amending the
USEC Privatization Act or through other legislation, firms such as
nuclear power utilities and enrichment companies would be interested
in purchasing at least that portion of the tails with higher
concentrations of extractable uranium-235 as a valuable source for
nuclear fuel. For example, our March 2008 report stated that officials
from 8 of 10 U.S. nuclear utilities indicated tentative interest in
such a purchase. Individual utilities were often interested in limited
quantities of DOE's tails because they were concerned about depending
upon a single source to fulfill all of their uranium requirements.
Multiple utilities acting together as a consortium could mitigate
these concerns and purchase larger quantities of tails. The report
also noted that some enrichment firms also told us of some interest in
purchasing portions of the inventory, but their anticipated excess
enrichment capacity to process the tails into a marketable form
affected both the quantity of tails they would purchase and the timing
of any purchase.
Our March 2008 report noted that potential buyers suggested various
commercial arrangements, including purchasing the tails through a
competitive sale, such as an auction, or through negotiations with
DOE. However, industry officials told us that buyers would discount,
perhaps steeply, their offered prices to make buying tails attractive
compared with purchasing natural uranium on the open market. That is,
DOE might get a discounted price for the tails to compensate buyers
for additional risks, such as rising enrichment costs or buyers'
inability to obtain sufficient enrichment services. In addition,
potential buyers noted that any purchase would depend on confirming
certain information, such as that the tails were free of contaminants
that could cause nuclear fuel production problems and that the
cylinders containing the tails--some of which are 50 years old and may
not meet transportation standards--could be safely shipped.
DOE Could Re-enrich Its Tails:
Although DOE's legal authority to sell the tails in their current form
is doubtful, DOE has the general legal option of re-enriching the
tails and then selling the resulting natural or enriched uranium. DOE
would have to contract for enrichment services commercially because
the department no longer operates enrichment facilities itself.
Furthermore, DOE would have to find a company with excess enrichment
capacity beyond its current operations, which may be particularly
difficult if large amounts of enrichment processing were required.
Within the United States today, for example, there are only two
operating enrichment facilities: DOE's USEC-run Paducah, Kentucky,
plant and the URENCO USA facility located near Eunice, New Mexico. In
the case of the Paducah plant, almost all of its enrichment capacity
is already being used through 2012, when the plant may stop operating.
In the case of URENCO USA, the facility is still under construction
and it is not yet operating at full capacity. Other companies are also
constructing or planning to construct new enrichment facilities in the
United States that potentially could be used to re-enrich DOE's tails.
Although DOE would have to pay for re-enrichment, it might obtain more
value from selling the re-enriched uranium instead of the tails if its
re-enrichment costs were less than the discount it would have to offer
to sell the tails as is. Representatives of enrichment firms with whom
we spoke at the time of our 2008 report told us they would be
interested in re-enriching the tails for a fee. The quantity of tails
they would re-enrich annually would depend on the available excess
enrichment capacity at their facilities.
Additionally, as noted above, prior to selling any natural or enriched
uranium that results from re-enriching tails, DOE would be required
under section 3112(d) of the USEC Privatization Act to determine that
sale of the material would not have a material adverse impact on the
domestic uranium industry and that the price paid to DOE would provide
at least fair market value. Section 3112(d) also would require DOE to
obtain the President's determination that the material is not needed
for national security.
DOE Could Store the Tails:
DOE also has the general legal option to store the tails indefinitely.
In the late 1990s, when relatively low uranium prices meant that tails
were viewed as waste, DOE developed a plan for the safe, long-term
storage of the material. DOE has constructed new facilities at its
Paducah plant and its closed Portsmouth uranium enrichment plant to
chemically convert its tails into a more stable and safer uranium
compound that is suitable for long-term storage. The facilities are
currently undergoing system checks and once they begin operating in
2011, DOE estimates it will take approximately 25 years to convert its
existing tails inventory.
As our March 2008 report noted, storing the tails indefinitely could
prevent DOE from taking advantage of the large increase in uranium
prices to obtain potentially large amounts of revenue from material
that was once viewed as waste. DOE would also continue to incur costs
associated with storing and maintaining the cylinders containing the
tails. These costs amount to about $4 million annually. Sale (if
authorized) or re-enrichment of some of DOE's tails could also reduce
the amount of tails that would need to be converted and, thereby, save
DOE some conversion costs.
Moreover, once the tails were converted into a more stable form of
uranium oxide, DOE's costs to re-enrich the tails would be higher if
it later decided to pursue this approach. This is because of the cost
of converting the uranium oxide back to uranium hexafluoride, a step
that would be required for re-enrichment. However, according to DOE
officials, after the conversion plants begin to operate, the plants
would first convert DOE's lower concentration tails because they most
likely would not be economically worthwhile to re-enrich. This would
give DOE additional time to sell or re-enrich the more valuable higher-
concentration tails.
DOE Has Not Implemented Its December 2008 Plan to Sell or Re-enrich
Some of Its Tails:
Our March 2008 report noted that DOE had been developing a plan since
2005 to sell excess uranium from across its inventories of depleted,
natural, and enriched uranium to generate revenues for the U.S.
Treasury. In March 2008, DOE issued a policy statement that
established a general framework for how DOE plans to manage its
inventories. However, we noted that the March 2008 policy statement
was not a comprehensive assessment of the sales, re-enrichment, or
storage options for DOE's tails. The policy statement lacked specific
information on the types and quantities of uranium that the department
has in its inventory. Furthermore, the policy statement did not
discuss whether it would be more advantageous to sell the higher-
concentration tails as is (if authorized) or to re-enrich them. It
also did not contain details on when any sales or re-enrichment may
occur or DOE's legal authority to carry out those options under
section 3112 of the USEC Privatization Act. It also lacked information
on the uranium market conditions that would influence any DOE decision
to potentially sell or re-enrich tails. Further, it did not analyze
the impact of such a decision on the domestic uranium industry, and it
did not provide guidance on how a decision should be altered in the
event that market conditions change. Although the policy statement
stated that DOE would identify categories of tails that have the
greatest potential market value and that the department would conduct
cost-benefit analyses to determine what circumstances would justify re-
enriching and/or selling potentially valuable tails, it did not have
specific milestones for doing so. Instead, the policy statement stated
that this effort will occur "in the near future."
Our March 2008 report therefore recommended that DOE should complete
the development of a comprehensive uranium management assessment as
soon as possible. We stated that the assessment should contain
detailed information on the types and quantities of depleted, natural,
and enriched uranium the department currently manages and a
comprehensive assessment of DOE's options for this material, including
the department's authority to implement these options. Furthermore, we
stated that the assessment should analyze the impact of each of these
options on the domestic uranium industry and provide details on how
implementation of any of these options should be adjusted in the event
that market conditions change.
In December 2008, DOE issued an "Excess Uranium Inventory Management
Plan." Among other things, the plan states that DOE would begin
selling or re-enriching depleted uranium in 2009. However, the
department has not, to date, sold or re-enriched any of its depleted
uranium. According to DOE officials, the department currently has no
plans to sell or re-enrich this material.
DOE's Depleted Uranium Inventory Is Potentially Worth Billions of
Dollars, but Many Factors Could Greatly Change Its Value:
At current uranium prices, we estimate DOE's tails to have a net value
of $4.2 billion; however, we would like to emphasize that this
estimate is very sensitive to changing uranium prices, which recently
have been extremely volatile, as well as to the availability of
enrichment capacity. This estimate assumes the May 2011 published
uranium price of $160 per kilogram of natural uranium in the form of
uranium hexafluoride and $153 per separative work unit--the standard
measure of uranium enrichment services. Our model also assumes the
capacity to re-enrich the higher-concentration tails and subtracts the
costs of the needed enrichment services. It also takes into account
the cost savings DOE would realize from reductions in the amount of
tails that needed conversion to a more stable form for storage, as
well as the costs to convert any residual tails.
As noted above, this estimate is very sensitive to price variations
for uranium as well as to the availability of enrichment services.
Uranium prices are very volatile, and a sharp rise or fall in prices
could greatly affect the value of the tails. For example, our March
2008 report estimated the tails had a net value of $7.6 billion. This
estimate was based on the February 2008 published uranium price of
$200 per kilogram of natural uranium and $145 per separative work
unit. Prices for uranium have since fallen from $200 per kilogram of
natural uranium to $160 per kilogram. There is no consensus among
industry players whether uranium prices will fall or rise in the
future or on the magnitude of any future price changes. Furthermore,
the introduction of additional uranium onto the market by the sale of
large quantities of DOE depleted, natural, or enriched uranium--
assuming DOE obtains authority to sell depleted uranium--could also
lead to lower uranium prices. Therefore, according to DOE's uranium
management plan, DOE is limited to selling no more than 10 percent of
the domestic demand for uranium annually. This is intended to help
achieve DOE's goal of minimizing the negative effects of DOE's sales
on domestic uranium producers. However, this limit lengthens the time
necessary to market DOE's uranium, increasing the time the department
is exposed to uranium price volatility. These factors all result in
great uncertainty of the valuation of DOE's tails.
In addition, the enrichment capacity available for re-enriching tails
may be limited, and the costs of these enrichment services are
uncertain. For example, at the time of our March 2008 report, USEC
only had a small amount of excess enrichment capacity at its Paducah
plant. If it used the spare capacity, USEC would only be able to re-
enrich about 14 percent of DOE's most economically attractive tails
between now and the possible closing of the plant in 2012. Although
USEC officials told us at the time of our March 2008 report that the
company was willing to explore options to extend the Paducah plant's
operations beyond 2012 and dedicate Paducah's capacity solely to re-
enriching DOE's tails after this point, negotiations between the
company and DOE would be needed to determine the enrichment costs that
would be paid by DOE. The Paducah plant uses a technology developed in
the 1940s that results in relatively high production costs. Even if
the Paducah plant were to be dedicated entirely to re-enriching DOE
tails after 2012, over a decade would be required to complete the work
because of limitations on the annual volume of tails that can be
physically processed by the plant. This lengthy period of time would
expose DOE to risks of uranium price fluctuations and increasing
maintenance costs.
USEC and other companies are constructing or planning to construct
enrichment plants in the United States that utilize newer, lower-cost
technology. However, these facilities are not expected to be completed
until some time over the next decade. It is unclear exactly when these
facilities would be fully operating, the extent to which they will
have excess enrichment capacity to re-enrich DOE's tails, and what
enrichment costs DOE could expect to pay. For example, the size of the
fee DOE may have to pay an enrichment company to re-enrich its tails
would be subject to negotiation between DOE and the company.
In summary, as was the case when we reported in March 2008, the U.S.
government has an opportunity to gain some benefit from material that
was once considered a liability. Under current law, however, one
potential avenue for dealing with DOE's depleted uranium tails--sale
of the material in its current form--is likely closed to the
department. Obtaining legal authority from Congress to sell depleted
uranium under USEC Privatization Act section 3112 or other legislation
would provide the department with an additional option in determining
the best course of action to obtain the maximum financial benefit from
its tails. Our March 2008 report therefore suggested that Congress
consider clarifying DOE's statutory authority to manage depleted
uranium, under the USEC Privatization Act or other legislation,
including explicit direction about whether and how DOE may sell or
transfer the tails. Depending on the terms of such legislation, a sale
of DOE's tails could reap significant benefits for the government
because of the potentially large amount of revenue that could be
obtained. In any event, enacting explicit provisions regarding DOE's
disposition of depleted uranium would provide stakeholders with
welcome legal clarity and help avoid litigation that could interrupt
DOE's efforts to obtain maximum value for the tails.
DOE's issuance of a comprehensive uranium management plan in December
2008 provided welcome clarity on the department's plans for marketing
its uranium. Unfortunately, DOE has failed to follow-through with the
actions laid out in its plan. By not following its plan to sell or re-
enrich some its tails beginning in 2009, DOE has increased uncertainty
in the uranium market about its ultimate plans for its depleted
uranium tails. In addition, DOE continues to be unable to quickly
react to changing market conditions to achieve the greatest possible
value from its uranium inventories.
Chairman Whitfield, Ranking Member Rush, and Members of the
Subcommittee, this completes my prepared statement. I would be happy
to respond to any questions you or other Members of the Subcommittee
may have at this time.
GAO Contact and Staff Acknowledgments:
If you have any questions or need additional information, please
contact Gene Aloise at (202) 512-3841 or aloisee@gao.gov. Contact
points for our Offices of Congressional Relations and Public Affairs
may be found on the last page of this statement. Major contributors to
this statement were Ryan T. Coles (Assistant Director), Antoinette
Capaccio, Karen Keegan, and Susan Sawtelle.
[End of section]
Footnotes:
[1] GAO, Nuclear Material: DOE Has Several Potential Options for
Dealing with Depleted Uranium Tails, Each of Which Could Benefit the
Government, [hyperlink, http://www.gao.gov/products/GAO-08-606R]
(Washington, D.C.: Mar. 31, 2008).
[2] GAO, Nuclear Material: Several Potential Options for Dealing with
DOE's Depleted Uranium Tails Could Benefit the Government, [hyperlink,
http://www.gao.gov/products/GAO-08-613T] (Washington, D.C.: Apr. 3,
2008).
[3] Uranium is categorized by concentration of uranium-235, expressed
as a percentage "assay." Natural uranium has an assay of about 0.7
percent uranium-235. For use in a nuclear reactor or weapon, natural
uranium must be enriched to increase its assay to a level required for
its ultimate use. For example, low enriched uranium (LEU), which is
used in commercial nuclear power reactors, typically has an assay of
between 3 and 5 percent uranium-235. Highly enriched uranium (HEU),
which is used in nuclear weapons, has an assay of greater than 20
percent uranium-235 and can have an assay of greater than 90 percent.
The depleted uranium tails have varying assays below the 0.7 percent
assay of natural uranium. DOE's tails range from less than 0.15 to
about 0.66 percent uranium-235.
[4] USEC Privatization Act, Pub. L. No. 104-134, § 3112, 110 Stat.
1321-344, 42 U.S.C. § 2297h-10.
[5] Atomic Energy Act of 1954, as amended, 42 U.S.C. §§ 2011 et seq.
[6] GAO's detailed legal analysis can be found in appendix I of
[hyperlink, http://www.gao.gov/products/GAO-08-606R].
[End of section]
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