Background

This section describes nuclear fuel production and uranium enrichment,  DOE’s and USEC’s involvement in uranium enrichment, and cleanup of  uranium enrichment plants.

		Nuclear Fuel Production and Uranium Enrichment

Uranium enrichment is the process of raising the concentration of  uranium-235, which is the isotope of uranium that undergoes fission to  release enormous amounts of energy. Uranium is categorized by its  concentration of uranium-235, expressed as a percentage of weight or  “assay” level. DOE categorizes uranium in five general types, each of  which is characterized by a different assay level and has different uses  (see table 1).
Uranium undergoes a number of processing steps to produce LEU  nuclear fuel, beginning with the mining of uranium ore and ending with the  fabrication of LEU fuel for nuclear reactors (see fig. 1). The uranium  enrichment stage falls approximately in the middle of the nuclear fuel  cycle.
As can be seen in figure 1, the enrichment process results in two principal  products: (1) enriched uranium hexafluoride 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. Tails are generally considered an environmental liability. The  Nuclear Regulatory Commission (NRC) requires uranium enrichment  facility operators to provide financial assurance that funds will be  available when needed for the disposition of depleted uranium. To meet  these NRC requirements, USEC has used surety bonds—which  guarantee payment for the tails disposition costs by a third party, among  other things, in the event that USEC defaults on such obligations—to  guarantee the disposition of its depleted uranium and stored wastes.
LEU resulting from the enrichment process is valued based on two  components: (1) the value of the feed component, which is generally  natural uranium in the form of uranium hexafluoride, and (2) the value of  the enrichment component, or separative work units (SWU), which is the  industry standard for the measure of effort needed to transform a given  amount of natural uranium into LEU.

		DOE’s and USEC’s Involvement in Uranium Enrichment

According to DOE, the United States needs an assured source of tritium  to maintain the U.S. nuclear weapons stockpile. In October 2014, we  reported on DOE’s practice of using only unobligated LEU to meet  national security needs for tritium. To produce tritium, DOE has stated  that it can only use unobligated LEU. LEU is considered to be unobligated  when neither the uranium nor the technology used to enrich it carries an  “obligation” from a foreign country regarding its use, such as a  requirement that the material only be used for peaceful purposes. These  obligations are contained in international agreements to which the United  States is a party.
In the 1940s, DOE and its predecessor agencies began operating  government-owned uranium enrichment plants first to meet national  security needs for enriched uranium and later for use as fuel in  commercial nuclear reactors. In 1992, United States Enrichment  Corporation was established as a government corporation to, among  other things, provide uranium enrichment services for the U.S.  government and utilities that operate nuclear power plants and to take  over operations of DOE’s two GDPs in Portsmouth, Ohio, and Paducah,  Kentucky. Then, in 1996, the USEC Privatization Act authorized the  government corporation’s sale to the private sector. Two years later, the  government corporation was privatized through an initial public offering on  July 28, 1998, which resulted in proceeds to the U.S. government of  nearly $1.9 billion. Through privatization, United States Enrichment  Corporation became a subsidiary of the new private company USEC Inc.  USEC Inc. then changed its name to Centrus Energy Corp after it  emerged from bankruptcy in September 2014. Today, United States  Enrichment Corporation continues to be a subsidiary of Centrus.
The Energy Policy Act of 1992 required the President to transfer to United  States Enrichment Corporation, at its request, any intellectual and  physical property related to a type of next-generation uranium enrichment  technology called atomic vapor laser isotope separation (AVLIS). In 1973,  Lawrence Livermore National Laboratory began conducting research on  AVLIS—a technology that uses laser light to separate from natural  uranium the specific uranium atoms needed to sustain nuclear reactions.  Prior to transferring the technology to United States Enrichment  Corporation in 1995 for further research and development and for  eventual commercialization, DOE spent more than $1.7 billion developing  the technology, which, according to USEC, was expected to use  significantly less electricity than gaseous diffusion technology. In June  1999, USEC announced that it was suspending further development on  AVLIS technology—on which it had spent over $100 million since the  company was privatized—and would instead focus on developing other  commercially viable enrichment technologies. According to USEC’s 1999  Annual Report, USEC determined that the returns from AVLIS would not  be sufficient to outweigh the risks and costs of further development, and  centrifuge technology was a well-established enrichment process.
In 2002, DOE and USEC signed an agreement that committed USEC to  pursue the development of gas centrifuge technology. This technology,  which is now known as American Centrifuge, is based on gas centrifuge  technology originally developed by DOE from the 1960s to the 1980s,  after which DOE suspended development, in part due to budget  constraints. According to USEC documents, the American Centrifuge  technology would be significantly less energy intensive and more cost- efficient than the gaseous diffusion process used in the Portsmouth and  Paducah GDPs. Subsequently, in 2004, USEC announced its selection of  the Portsmouth plant as the future home of the American Centrifuge  Plant—the facility where the American Centrifuge technology would be  deployed—and received a license to operate the plant from NRC in 2007.  DOE and USEC signed a cooperative agreement in 2012 to share the  cost of supporting a research, development, and demonstration program  for the American Centrifuge technology. According to USEC, the program  ended in April 2014 and achieved all of its technical milestones on time  and within budget. In May 2014, USEC and UT-Battelle—the  management and operating contractor of DOE’s Oak Ridge National  Laboratory—signed an agreement to maintain the capability of the  American Centrifuge technology.

		Cleanup of Uranium Enrichment Plants

In accordance with the USEC Privatization Act, the government is  responsible for all costs incurred by the uranium enrichment program  before July 1, 1993, when United States Enrichment Corporation began  operating the two GDPs. Due to decreased demand for enrichment  services and high costs of operating the GDPs, USEC ceased enrichment  operations at the Portsmouth GDP in 2001 and at the Paducah GDP in  2013. These plants, as well as the Oak Ridge GDP (now known as the  East Tennessee Technology Park), which was never operated by USEC,  are contaminated with hazardous industrial, chemical, nuclear, and  radiological materials. Cleanup activities, known as decontamination and  decommissioning, include assessing and treating groundwater or soil  contamination, disposing of contaminated materials, and making general  repairs to keep the plants in a safe condition until they can be fully  demolished. According to DOE’s 2010 Uranium Enrichment  Decontamination and Decommissioning Report, the decontamination and  decommissioning of the GDPs will cost billions of dollars and span  several decades. DOE is decontaminating and decommissioning the  three GDPs in the following phased approach:
Oak Ridge GDP: DOE began decontaminating and decommissioning  its Oak Ridge GDP in 1994 and estimates that it will be completed in  2024.
Portsmouth GDP: DOE began decontaminating and  decommissioning its Portsmouth GDP in 2009, announcing that it had  contracted with USEC for accelerated environmental cleanup work to  prepare the facility for decontamination and decommissioning. In  August 2010, DOE entered into a new contract with another  contractor (Fluor-B&W Portsmouth LLC) to decontaminate and  decommission the former facilities at Portsmouth. According to a  March 2014 DOE Office of Inspector General report, the  decontamination and decommissioning work at the Portsmouth GDP  is currently estimated to extend until 2044.
Paducah GDP: DOE has not yet started decontaminating and  decommissioning its Paducah GDP. After ceasing enrichment  activities in May 2013, Centrus returned full control of the Paducah  GDP to DOE in late October 2014. In July 2014, DOE contracted with  Fluor Federal Services, Inc., to conduct activities to prepare the facility  for eventual decontamination and decommissioning. According to a  March 2014 DOE Office of Inspector General report, the  decontamination and decommissioning work at the Paducah GDP is  currently estimated to extend until 2044. However, according to DOE  officials, the department is currently evaluating the projected lifecycle  cost and schedule estimates for the Paducah cleanup completion.

	Since 1998, DOE and USEC Have Been Involved in 23 Transactions

Since USEC was privatized in 1998 through June 1, 2015, DOE and  USEC have engaged in 23 transactions (see app. II for a detailed  description of the 23 transactions). Based on our analysis of documents  and interviews with DOE officials, we grouped these transactions into the  following six broad categories:
Establishment of USEC. DOE and USEC engaged in 3 transactions  to help establish the company as a private company. For example,  DOE transferred enriched uranium to USEC, as required by the USEC  Privatization Act, from 1998 to 2003. These transfers established  value for USEC in the marketplace. In addition, beginning in 1998,  DOE agreed to provide employment transition services to USEC for  employees affected by restructuring activities that occurred at the  Portsmouth and Paducah GDPs as a result of USEC’s privatization.
National security. DOE and USEC engaged in 6 transactions for  national security purposes. Specifically, DOE engaged in one  transaction in 2012 to secure unobligated LEU from USEC to meet  national security needs for the production of tritium for up to 18  months, and DOE engaged in a second transaction later in 2012 to  secure unobligated LEU from USEC to meet national security needs  for the production of tritium for up to 15 years. The other 4  transactions in this category supported the research and development  of the American Centrifuge technology to meet long-term national  security needs for unobligated LEU, such as for tritium production. For  example, in 2010, DOE and USEC signed a cooperative agreement to  share the cost of USEC’s development and demonstration of the  American Centrifuge technology for a year. To provide its share of the  cost, DOE took title to and financial responsibility for the disposal of  depleted uranium tails from USEC.
Facilities management. DOE and USEC engaged in 5 transactions  regarding the operation and management of various facilities,  including the Portsmouth and Paducah GDPs, as well as other  facilities associated with the development of the American Centrifuge  technology. For example, in one transaction, DOE signed a lease  agreement with United States Enrichment Corporation in 1993—when  it became a government corporation—and the lease was transferred  to the private corporation when the company was privatized. The  agreement included USEC’s lease of the Portsmouth and Paducah  GDPs, as well as an electric power agreement and an agreement  between DOE and USEC to provide certain services for each other  related to the use of the GDPs. In another transaction, after USEC  ceased enrichment activities at the Portsmouth GDP, DOE contracted  with USEC from 2001 through 2011 for several activities associated  with maintaining the facility in a dormant condition and preparing the  facility for decontamination and decommissioning.
Nuclear materials management and security. DOE and USEC  engaged in 3 transactions to support the management and security of  nuclear materials. In one transaction beginning in 1999, DOE agreed  to pay USEC to provide safeguards and security services for HEU that  DOE stored at the Portsmouth GDP. In another transaction beginning  in 1999, USEC contracted with DOE for the storage of enriched  uranium that exceeded the amount of material USEC could possess  in its facilities under NRC limits. In the third transaction, from 2005  through 2008, DOE contracted with a USEC subsidiary to manage the  U.S. government’s nuclear materials tracking system, called the  Nuclear Materials Management and Safeguards System.
Issues from prior transactions. DOE and USEC engaged in 3  transactions to address issues with previous transfers of uranium  when DOE had inadvertently provided USEC with uranium that did not  conform to industry standards or more uranium than originally agreed  on by the parties. For example, in March 2000, USEC discovered that  uranium that it had received from DOE prior to privatization was  contaminated with technetium, a radioactive metal that is considered  a contaminant by commercial specifications for nuclear fuel. In a 7- year transaction that began in 2002, DOE (1) contracted with USEC to  clean up some of the contaminated uranium, (2) provided  replacement uranium and monetary payment to USEC, and (3) took  title to some of USEC’s depleted uranium. In a second transaction, in  2003, DOE transferred HEU to USEC to replace other material that  DOE transferred to USEC prior to privatization that did not conform to  industry standards. In a third transaction, DOE and USEC addressed  the fact that they had underestimated the amount of material stored in  certain HEU cylinders that DOE had transferred to USEC prior to  privatization. Specifically, DOE had transferred to USEC about 0.8  metric tons of HEU more than initially agreed on. To address this  issue, in 1998, USEC agreed to pay DOE about $35 million more than  originally agreed on by the parties.
Other. DOE and USEC engaged in 3 other transactions since 1998.
One transaction—which occurred from 2005 through 2006 and  involved DOE, USEC, and a third party—was intended to determine  the feasibility and benefits of re-enriching a portion of DOE’s depleted  uranium inventory for potential use as nuclear fuel in a commercial  reactor. In the other two transactions, USEC and its subsidiaries paid  a fee for access to DOE restricted data related to the centrifuge  technology. Access to this data allowed USEC to utilize DOE  centrifuge technology in the development and design of the American  Centrifuge technology.
See appendix III for a table of the 23 transactions organized by category.
Figure 2 shows how the transactions were distributed over the 17-year  period that we reviewed. Our analysis shows that the general nature of  the transactions evolved over time. Immediately following USEC’s  privatization, the majority of the transactions were of the establishment of  USEC category. In the middle part of the 17-year period, most of the  transactions were of the facilities management and nuclear materials  management and security categories. In recent years, the majority of the  transactions were of the national security category. DOE and USEC have  been continuously involved in transactions since 1998. Of the 23  transactions, at least 6 have spanned a decade or longer, while the other  transactions were of shorter duration.
In addition to the transactions described above, there were at least three  other significant arrangements involving DOE and USEC, which were  noteworthy because, in each case, DOE or USEC received something of  value as part of the arrangement, even though the arrangement did not  meet our definition of a transaction. These arrangements were as follows:
Before it was privatized, the U.S. government selected United States  Enrichment Corporation as the U.S. government’s executive agent for  the HEU Purchase Agreement—a 1993 nuclear arms reduction  agreement between the United States and Russia. USEC continued  its role as sole executive agent after its privatization, and activities  under the agreement continued through 2013. Under the agreement,  United States Enrichment Corporation, and later USEC, purchased  LEU from the Russian government’s executive agent, which had  produced it by downblending HEU taken from dismantled Soviet-era  nuclear warheads. Centrus officials told us that USEC used its large  backlog of contracts with commercial utilities to place the LEU in the  market. According to Centrus officials, this agreement provided a  significant source of supply of LEU to USEC over a 20-year period  and resulted in the destruction of the equivalent of 20,000 nuclear  warheads. We did not identify any exchange of funds between DOE  and USEC related to USEC’s service as the executive agent.
In a December 2006 agreement, DOE granted USEC a nonexclusive  patent license for the use or manufacture of the American Centrifuge  technology. In this 2006 agreement, USEC agreed to pay DOE a  royalty for the use of the American Centrifuge technology. According  to DOE and Centrus officials, DOE has never received royalties from  USEC or Centrus under this license. According to Centrus officials,  the company has not made any payments because it has not yet  commercialized the American Centrifuge Plant or sold any material  produced by the centrifuge technology.
In 2012, USEC granted to DOE (1) an irrevocable, nonexclusive,  royalty-free license, for use by or on behalf of the United States, in all  centrifuge intellectual property for government purposes and (2) an  irrevocable, nonexclusive license in all centrifuge intellectual property,  with the right to sublicense to other parties, for commercial  purposes. This arrangement was made at a time when there was  uncertainty surrounding the future of the American Centrifuge  technology. According to Centrus officials, USEC has transferred title  to DOE for more than 30 existing centrifuges, built at USEC’s  expense, as well as all new machines built during the research,  development, and demonstration program.

	DOE Identified Various Costs and Benefits of Some of the Transactions

DOE identified various monetary and nonmonetary costs and benefits of  the 23 transactions. For most transactions that occurred since 2005, DOE  officials provided us with information through documents and interviews  about the costs and benefits of each transaction. However, for  transactions occurring prior to 2005, DOE officials were not always able  to provide definitive information about the costs and benefits of the  transactions independent of that which was stated in the transactional  documents.
For transactions occurring after 2005—which mostly fell into the national  security category—the costs DOE identified were incurred through the  transfer of appropriated funds to USEC, transfer of various types of  uranium, and acceptance of responsibility for the future disposition of  depleted uranium tails. The benefits DOE identified were both monetary  (i.e., payments or a reduction in obligations for the disposal of depleted  uranium) and nonmonetary (e.g., LEU, national security benefits such as  the development of the American Centrifuge technology).
For transactions prior to 2005, DOE officials were not always able to  provide definitive information on the costs and benefits to DOE  independent of that which was stated in the transactional documents. In  some cases, for example, DOE officials told us that key officials familiar  with the transactions had since retired or were deceased, and therefore  information on the costs and benefits of these transactions was not  available. In addition, DOE officials told us that the department changed  accounting systems in 2004, and therefore the officials could not always  access definitive cost and benefit information prior to 2005. For  example, DOE officials provided us with information on USEC’s payments  to DOE for the lease of the Portsmouth and Paducah GDPs from 2005 to  2014, but they could not provide us with information on USEC’s payments  prior to 2005.

	Agency Comments and Our Evaluation

We provided a draft of this report for comment to the Secretary of Energy  on July 29, 2015. DOE provided technical comments that were  incorporated, as appropriate. We also provided a technical statement of  facts to Centrus Energy Corp. We received technical comments from  Centrus and incorporated them, as appropriate.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Energy, and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.
If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  this report are listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

The objectives of our review were to (1) identify transactions involving the  Department of Energy (DOE) and USEC Inc. (USEC, now known as  Centrus Energy Corp.) since USEC was privatized in 1998 and (2)  describe the costs and benefits, if any, of these transactions to DOE, as  identified by DOE.
For the purpose of our review, we define a transaction as a contract or  agreement providing for an exchange of funds, uranium of any type, or  services between or involving DOE and USEC. We included in our scope  any transactions that occurred between USEC’s privatization on July 28,  1998, and present (July 1, 2015), as well as transactions that commenced  before July 28, 1998, but that continued to be executed after USEC was  privatized. We excluded interactions involving DOE and USEC if no  exchange of monetary payment, uranium, or services occurred.
To conduct this work, we reviewed and analyzed documents identifying  these transactions and collected information regarding the type, purpose,  costs, and benefits of the transactions. These documents include annual  DOE budget justification materials for fiscal years 1999 through 2016,  USEC/Centrus Energy Corp.’s annual reports and corporate filings with  the U.S. Securities and Exchange Commission from 1998 through 2015,  contracts and agreements between DOE and USEC, and prior GAO  reports. Once we identified a preliminary list of transactions involving  DOE and USEC, we asked DOE to review the list. DOE officials amended  the list and provided documentation for additional transactions to include.  Based on our analysis of DOE documents, and through interviews with  DOE officials, we added and consolidated certain transactions and  removed others that were inconsistent with our definition of a transaction.  We ultimately developed a final list of 23 transactions. We also  interviewed Centrus Energy Corp. officials and provided an opportunity to  review and confirm the final list of transactions to ensure that the list was  comprehensive and accurate, and they concurred with the list. We then  provided DOE with a standard set of questions regarding the purpose,  costs, and benefits of each of the transactions in the list. In two cases,  DOE was able to fully complete the standard set of questions. For the  other transactions, DOE officials told us that documentation was not fully  available to answer the standard question sets for reasons we discuss in  the report. Instead, we conducted interviews with DOE officials to collect  information that they did know about each transaction, and we reviewed  available DOE and USEC documentation to obtain additional information  on the costs and benefits of each transaction. See appendix IV for an  example of the standard set of questions we provided to DOE officials on  each transaction.
For the purpose of this review, in cases where data were available, we  are reporting DOE-identified costs and benefits of each transaction. To  assess the reliability of the costs and benefits that DOE identified for each  transaction, we reviewed documents to corroborate DOE-identified costs  and benefits. Such documents included contracts, memorandums of  agreement, lease agreements, and summary information from DOE/NRC  Form 741. Based on these steps, we determined that the information we  are reporting on DOE-identified costs and benefits is sufficiently reliable  for the purposes of this review.
We conducted this performance audit from November 2014 to September  2015 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.

Appendix II: Information from Department of Energy on Its Transactions Involving USEC Inc. or Centrus Energy Corp. since 1998

	Transaction Details

The Energy Policy Act of 1992 directed the newly created United States  Enrichment Corporation to lease DOE’s two gaseous diffusion plants  (GDP) in Ohio and Kentucky. On July 1, 1993, DOE and United States  Enrichment Corporation entered into an initial 6-year lease for the GDPs.  When USEC was privatized in 1998, the lease was transferred to the  private corporation and eventually renewed through July 1, 2016.  However, USEC returned both GDPs to DOE prior to 2016.
Portsmouth GDP: On December 23, 2010, USEC notified DOE of its  intent to return the leased areas of the Portsmouth GDP to DOE. After  ceasing uranium enrichment operations in 2001, USEC maintained  the Portsmouth plant in cold standby at DOE’s request and  subsequently cold shutdown status until 2011.
Paducah GDP: On August 1, 2013, USEC notified DOE of its intent to  return the leased areas of the Paducah GDP to DOE on October 21,  2014.

	Transaction Details

	Transaction Details

	Transaction Details

	Transaction Details

	Transaction Details

	Transaction Details

	Transaction Details

	Transaction Details

	Transaction Details

	Transaction Details

DOE and USEC were involved in a 10-year transaction related to the  closure of the Portsmouth GDP. Activities related to the closure were  performed under one contract and represented two phases at the  Portsmouth GDP: (1) cold standby and (2) cold shutdown.
Cold standby: In June 2000, USEC announced its decision to cease  uranium enrichment operations at the Portsmouth GDP in June  2001. On March 1, 2001, the Secretary of Energy announced that  DOE would place the Portsmouth GDP in cold standby mode—a  dormant condition that would allow operations to be resumed within  18 to 24 months if needed. In August 2001, DOE and USEC signed  an agreement for USEC to provide certain services, including those  necessary for maintaining the GDP in cold standby mode. Specifically,  beginning in 2001, USEC provided a number of services for DOE  related to cold standby, including winterization and removal of  deposits of uranium hexafluoride from equipment.
Cold shutdown: In 2006, DOE and USEC modified the Portsmouth  GDP cold standby contract to begin transitioning the GDP to cold  shutdown mode. Cold shutdown mode involved work to maintain and  prepare the GDP for eventual decontamination and decommissioning.

	Transaction Details

Under this transaction, which spanned 7 years, DOE and USEC  contracted for USEC to clean up contaminated uranium; in exchange,  DOE provided replacement uranium and payments to USEC and also  took title to some of USEC’s depleted uranium. Specifically, in early 2001,  USEC notified DOE that up to 9,550 metric tons of about 45,000 metric  tons of natural uranium that it had received from DOE prior to privatization  was contaminated with technetium—a radioactive metal that is produced  as a by-product of fission in a nuclear reactor—at levels exceeding the  commercial specification for nuclear fuel. After USEC notified DOE of its  contaminated uranium, DOE determined that about 5,517 metric tons of  uranium in DOE’s inventory was also contaminated with technetium.
According to USEC, replacing the 9,550 metric tons of contaminated  uranium would have cost USEC approximately $238 million in 2001.  USEC requested that DOE replace USEC’s contaminated uranium with  clean uranium from DOE’s inventory. DOE did not admit legal liability for  compensating USEC for the contaminated uranium. In addition, according  to DOE officials, DOE did not have enough available clean uranium in its  excess uranium inventory to replace all of USEC’s contaminated uranium.
However, starting in 2002, DOE and USEC signed a series of  agreements to decontaminate or replace USEC’s contaminated inventory  (see fig. 3 for a summary of the uranium decontamination process). In  June 2002, DOE and USEC agreed that, among other things, USEC  would process some of the contaminated uranium at the Portsmouth plant  for 15 months to remove the technetium. USEC would initially pay about  half of the costs associated with decontamination, and DOE would  compensate USEC by taking title to some of USEC’s depleted uranium,  reducing USEC’s costs for eventual disposal of this material. As part of  the June 2002 agreement, USEC agreed to formally release DOE from  any potential claims of liability as USEC decontaminated the uranium.  USEC decontaminated about 2,900 metric tons of uranium under this  agreement. DOE and USEC signed two subsequent agreements in  September and November 2003 that extended USEC’s decontamination  work through December 2003.
In 2004, DOE and USEC signed additional agreements for USEC to  decontaminate uranium. Specifically, under an April 2004 work  authorization, DOE paid USEC using appropriated funds for  decontamination work conducted from December 2003 to December  2004. USEC decontaminated about 2,050 metric tons during this time. In  October 2004, DOE replaced 2,116 metric tons of USEC’s contaminated  uranium with the same amount of uncontaminated uranium. Two months  later, in December 2004, USEC agreed to decontaminate an additional  amount of contaminated uranium. In June 2006, we reported that DOE  had provided USEC about 1,100 metric tons of uncontaminated uranium,  which USEC sold on the commercial market for $84.4 million. In addition,  in April 2006, DOE sold uranium to obtain funding to compensate USEC  for decontamination services that were expected to last from July 2006  through November 2006. According to DOE officials, uranium cleanup  activities continued through 2009.

	Transaction Details

	Transaction Details

	Transaction Details

	Transaction Details

In 2005, DOE’s Office of Environmental Management, the Bonneville  Power Administration, Energy Northwest, and USEC executed a series  of agreements to carry out a pilot project to determine whether a portion  of DOE’s depleted uranium inventory could be used to produce nuclear  fuel for Energy Northwest’s Columbia Generating Station, a nuclear  power reactor near Richland, Washington, the generating capacity of  which Bonneville Power Administration had purchased. The depleted  uranium tails would be re-enriched and used instead of natural uranium- based feed to produce LEU for the Columbia Generating Station.

	Transaction Details

	Transaction Details

	Transaction Details

	Transaction Details

In March 2012, USEC’s financial condition was weakening and, according  to DOE officials, USEC was struggling to support the development of the  American Centrifuge technology. DOE requested authority to transfer  $150 million from existing funds in fiscal year 2012 to support USEC’s  development of the American Centrifuge technology, but Congress did  not provide this authority. Subsequently, DOE entered into a transaction  with USEC in March 2012, under which it accepted title to 13,073 MTU of  low-assay tails, along with the responsibility for their disposal, from  USEC. This enabled USEC to free up $44 million in previously  encumbered funds that were being used as collateral for surety bonds to  satisfy NRC’s financial assurance requirements for the tails’ future  disposal.

	Transaction Details

	Transaction Details

	Transaction Details

In the wake of USEC’s bankruptcy filing in April 2014, the Secretary of  Energy tasked its Oak Ridge National Laboratory with maintaining the  operability of the American Centrifuge technology. As operator of Oak  Ridge National Laboratory, UT-Battelle signed an agreement—called the  “Domestic Uranium Enrichment – Centrifuge Information and Analysis”  agreement—with USEC on May 1, 2014, to maintain the capability of  and, where possible, advance the American Centrifuge technology in  furtherance of DOE’s national security objectives. According to Oak Ridge  officials, this agreement provides for the collection of data and provides  reports related to the cascade operations and research and development  activities. As of January 23, 2015, UT-Battelle had provided USEC $64.5  million in funding. These costs are funded by DOE through UT-Battelle’s  contract with DOE.

Appendix III: Department of Energy Transactions Involving USEC Inc. or Centrus Energy Corp. by Category

Appendix III: Department of Energy  Transactions Involving USEC Inc. or Centrus  Energy Corp. by Category Category  Establishment of USEC Inc.  (USEC)

Appendix IV: Example of Standard Question Set Provided to Department of Energy Officials on Each Transaction

Appendix V: GAO Contact and Staff Acknowledgments

	GAO Contact

	Staff Acknowledgments

In addition to the individual named above, Allison B. Bawden (Assistant  Director), Eric Bachhuber, Antoinette Capaccio, Amanda K. Kolling, and  Karen Villafana made key contributions to this report. Also contributing to  this report were Doreen Eng, Ellen Fried, Risto Laboski, Mehrzad Nadji,  Alison O’Neill, Dan C. Royer, and Rebecca Shea.

Summary:
Why GAO Did This Study

DOE has had a long and complex relationship with USEC Inc. and its successor, Centrus Energy Corp. Until 2013, USEC, a government corporation that was privatized in 1998, was the only company enriching uranium that, according to DOE, could meet DOE's LEU needs for tritium production. However, USEC ceased enrichment operations in May 2013, and the future of its planned next-generation American Centrifuge enrichment facility is uncertain. GAO has previously reported on financial and other transactions involving DOE and USEC, including transactions that involved the transfer of uranium.
GAO was asked to report on the history of the financial relationship between DOE and USEC. This report (1) identifies transactions involving DOE and USEC since USEC was privatized and (2) describes the costs and benefits, if any, of these transactions to DOE, as identified by DOE. GAO defines a transaction as a contract or agreement providing for an exchange of monetary payments, uranium of any type, or services between or involving DOE and USEC occurring from USEC's privatization on July 28, 1998, through July 1, 2015. GAO analyzed key DOE and USEC documents and interviewed DOE and Centrus Energy Corp. officials.

What GAO Found

The Department of Energy (DOE) has engaged with USEC Inc. (USEC) in 23 transactions since USEC was privatized in 1998 through July 1, 2015. The 23 transactions fall into the following six categories:
Establishment of USEC . DOE engaged with USEC in 3 transactions to help establish the company as a private company. For example, from 1998 to 2003, DOE transferred enriched uranium, as required by the USEC Privatization Act, to USEC to establish commercial value for USEC.
National security . DOE engaged with USEC in 6 transactions for national security purposes. For example, DOE engaged in several transactions to secure domestic low-enriched uranium (LEU), used in nuclear reactors, for the production of tritium—a radioactive isotope of hydrogen used to enhance the power of nuclear weapons—and support the development of USEC's next-generation American Centrifuge uranium enrichment technology.
Facilities management . DOE engaged with USEC in 5 transactions regarding the operation and management of various facilities. For example, after USEC ceased enrichment operations at the Portsmouth Gaseous Diffusion Plant (GDP)—which it leased from DOE—DOE contracted with USEC from 2001 to 2011 to maintain the facility in a dormant condition and prepare it for future decontamination and decommissioning.
Nuclear materials management and security . DOE engaged with USEC in 3 transactions to support nuclear materials management. For instance, in a transaction beginning in 1999, DOE agreed to pay USEC to provide safeguards and security services for highly enriched uranium (HEU), which is used in nuclear weapons, that DOE stored at the Portsmouth GDP.
Issues from prior transactions . DOE engaged with USEC in 3 transactions to address issues with previous transfers of uranium. For example, in 2003, DOE transferred HEU to USEC to replace previously transferred material that turned out to be contaminated and that did not conform to industry standards.
Other . In 2 other transactions, USEC and its subsidiaries paid a fee for access to DOE restricted data related to the centrifuge technology. A third transaction involved a pilot project to determine the usability of certain uranium as nuclear fuel.
DOE identified various monetary and nonmonetary costs and benefits of the 23 transactions. DOE was able to identify the costs and benefits for most transactions that have occurred since 2005. For these transactions, DOE incurred costs through the transfer of appropriated funds and various types of uranium, as well as acceptance of responsibility for the future disposition of certain uranium. The benefits DOE received include monetary payments, LEU, and nonmonetary national security benefits. For transactions that occurred or began occurring prior to 2005, DOE was not always able to provide definitive information on its costs and benefits, in part because the agency's accounting system changed in 2004, and agency officials were not able to access information on certain transactions occurring prior to that time.

What GAO Recommends

GAO is not making recommendations in this report. DOE reviewed a draft of this report and provided technical comments that GAO incorporated as appropriate.